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 March 31, 2006
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[ ]
Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (check
one): Large accelerated filer [X] Accelerated filer [ ] Non-accelerated
filer [ ]
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). YES [ ] NO [X]
The registrant has one class of common stock, $0.01 par value, of which
77,445,476 shares were outstanding as of May 5, 2006.
1
BE AEROSPACE, INC.
Form 10-Q for the Quarter Ended March 31, 2006
Table of Contents
Page
Part I Financial Information
Item 1. Condensed Consolidated Financial Statements (Unaudited)
a) Condensed Consolidated Balance Sheets
as of March 31, 2006 and December 31, 2005...................3
b) Condensed Consolidated Statements of Earnings for the
Three Months Ended March 31, 2006 and March 31, 2005.........4
c) Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2006 and March 31, 2005.........5
d) Notes to Condensed Consolidated Financial Statements.........6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................12
Item 3. Quantitative and Qualitative Disclosures About Market Risk......20
Item 4. Controls and Procedures.........................................20
Part II Other Information
Item 1. Legal Proceedings...............................................21
Item 1A. Risk Factors....................................................21
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.....21
Item 3. Defaults Upon Senior Securities.................................21
Item 4. Submission of Matters to a Vote of Security Holders.............21
Item 5. Other Information...............................................21
Item 6. Exhibits........................................................21
Signatures......................................................22
2
PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
BE AEROSPACE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in millions, except share data)
March 31, December 31,
2006 2005
--------------------- ----------------------
ASSETS
Current assets:
Cash and cash equivalents $ 140.5 $ 356.0
Accounts receivable - trade, less allowance for doubtful accounts
($3.2 at March 31, 2006 and $2.8 at December 31, 2005) 149.8 131.9
Inventories, net 249.4 223.7
Deferred income tax asset, net 17.5 17.5
Other current assets 17.5 15.1
---------- ----------
Total current assets 574.7 744.2
---------- ----------
Property and equipment, net 95.1 95.0
Goodwill 363.4 362.9
Identifiable intangible assets, net 137.7 139.9
Deferred income tax asset, net 57.1 62.0
Other assets, net 19.4 22.5
---------- ----------
$ 1,247.4 $ 1,426.5
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 203.8 $ 169.3
Current maturities of long-term debt 1.5 1.5
---------- ----------
Total current liabilities 205.3 170.8
---------- ----------
Long-term debt, net of current maturities 427.5 677.4
Deferred income tax liabilities, net 1.8 1.8
Other non-current liabilities 6.8 6.9
Commitments, contingencies and off-balance sheet arrangements (Note 4)
Stockholders' equity:
Preferred stock, $0.01 par value; 1.0 million shares
authorized; no shares outstanding -- --
Common stock, $0.01 par value; 100.0 million shares
authorized; 77.1 million (March 31, 2006) and
74.3 million (December 31, 2005) shares issued
and outstanding 0.8 0.7
Additional paid-in capital 915.1 894.0
Accumulated deficit (306.6) (320.4)
Accumulated other comprehensive loss (3.3) (4.7)
----------- -----------
Total stockholders' equity 606.0 569.6
---------- ----------
$ 1,247.4 $ 1,426.5
========= =========
See accompanying notes to condensed consolidated financial statements.
3
BE AEROSPACE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(Dollars in millions, except per share data)
THREE MONTHS ENDED
-------------------------------------
March 31, March 31,
2006 2005
------------------- -----------------
Net sales $ 247.2 $ 196.5
Cost of sales 160.7 128.5
-------- --------
Gross profit 86.5 68.0
Gross profit percentage 35.0% 34.6%
Operating expenses:
Selling, general and administrative 37.0 31.7
Research, development and engineering 18.4 16.4
-------- --------
Total operating expenses 55.4 48.1
-------- --------
Operating earnings 31.1 19.9
Operating earnings percentage 12.6% 10.1%
Interest expense, net 9.5 15.1
Loss on debt extinguishment 1.8 --
-------- --------
Earnings before income taxes 19.8 4.8
Income taxes 6.0 0.7
-------- --------
Net earnings $ 13.8 $ 4.1
======== ========
Net earnings per common share:
Basic $ 0.18 $ 0.07
========= =========
Diluted $ 0.18 $ 0.07
========= =========
Weighted average common shares:
Basic 75.2 56.8
Diluted 76.8 59.4
See accompanying notes to condensed consolidated financial statements.
4
BE AEROSPACE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in millions)
THREE MONTHS ENDED
----------------------------------------------
March 31, March 31,
2006 2005
-------------------- ----------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 13.8 $ 4.1
Adjustments to reconcile net earnings to net cash flows
provided by (used in) operating activities:
Depreciation and amortization 7.0 7.2
Provision for doubtful accounts 0.5 0.2
Non-cash employee benefit plan contributions 0.2 0.7
Deferred income taxes 5.0 --
Loss on debt extinguishment 1.8 --
Changes in operating assets and liabilities:
Accounts receivable (17.9) (17.6)
Inventories (25.6) (17.9)
Other current assets and other assets (0.9) 1.2
Payables, accruals and other liabilities 35.0 11.1
------- -------
Net cash flows provided by (used in) operating activities 18.9 (11.0)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (4.4) (3.2)
Proceeds from sale of property and equipment -- 0.2
------- -------
Net cash flows used in investing activities (4.4) (3.0)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common stock issued 19.8 1.8
Repayment of long-term debt (250.0) (0.1)
-------- -------
Net cash flows (used in) provided by financing activities (230.2) 1.7
-------- -------
Effect of foreign exchange rate changes on cash and cash equivalents 0.2 (0.6)
------- -------
Net decrease in cash and cash equivalents (215.5) (12.9)
Cash and cash equivalents, beginning of period 356.0 76.3
------- -------
Cash and cash equivalents, end of period $ 140.5 $ 63.4
======= =======
Supplemental disclosures of cash flow information:
Cash paid during period for:
Interest, net $ 7.4 $ 10.2
Income taxes, net $ 0.5 $ 0.3
See accompanying notes to condensed consolidated financial statements.
5
BE AEROSPACE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited - Dollars In Millions, Except Per Share Data)
Note 1. Basis of Presentation
The accompanying condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and are unaudited
pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements. All adjustments which,
in the opinion of management, are considered necessary for a fair
presentation of the results of operations for the periods shown, are of a
normal recurring nature and have been reflected in the condensed
consolidated financial statements. The results of operations for the periods
presented are not necessarily indicative of the results expected for the
full fiscal year or for any future period. The information included in these
condensed consolidated financial statements should be read in conjunction
with the consolidated financial statements and accompanying notes included
in the BE Aerospace, Inc. (the "Company" or "B/E") Annual Report on Form
10-K for the fiscal year ended December 31, 2005.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts and related disclosures. Actual results could differ from those
estimates.
Note 2. Goodwill and Intangible Assets
In accordance with SFAS No. 142, "Goodwill and Other Intangible Assets,"
the Company has completed the fair value analysis for goodwill and other
intangible assets as of December 31, 2005, and concluded that no impairment
existed. As of March 31, 2006, the Company believed that no indicators of
impairment existed. Aggregate amortization expense on identifiable
intangible assets was approximately $2.4 and $2.4 for the three months ended
March 31, 2006 and 2005, respectively. Amortization expense is expected to
be approximately $10.0 in each of the next five fiscal years.
Note 3. Long-Term Debt
The Company's $50.0 credit facility with JPMorgan Chase Bank (the
"Amended Bank Credit Facility") has no maintenance financial covenants other
than an Interest Coverage Ratio (as defined in the Amended Bank Credit
Facility) that must be maintained at a level equal to or greater than 1.15:1
for the trailing 12-month period. The Amended Bank Credit Facility, which
expires in February 2007, is collateralized by substantially all of the
Company's assets and contains customary affirmative covenants, negative
covenants and conditions precedent for borrowings, all of which were met as
of March 31, 2006.
At March 31, 2006, indebtedness under the Amended Bank Credit Facility
consisted of letters of credit aggregating approximately $9.0. The Amended
Bank Credit Facility bears interest ranging from 250 to 400 basis points
over the Eurodollar rate. As of March 31, 2006, the interest rate on any
outstanding borrowings was approximately 6.8%. The amount available for
borrowing under the Amended Bank Credit Facility was $41.0 as of March 31,
2006.
Long-term debt consists principally of the $175 8-1/2% senior notes due
2010 and $250 8-7/8% senior subordinated notes due 2011. The $175 8-1/2%
senior notes mature on October 1, 2010, and the $250 8-7/8% notes mature on
May 1, 2011. The senior subordinated notes are unsecured senior subordinated
obligations and are subordinated to all senior indebtedness. The senior
notes are unsecured obligations and are senior to all subordinated
indebtedness, but subordinate to the Amended Bank Credit Facility to the
extent the Company's assets collateralize borrowings under the Amended Bank
Credit Facility. Each of the 8-1/2% senior notes and 8-7/8% senior
subordinated notes contains restrictive covenants, including limitations on
future indebtedness, restricted payments, transactions with affiliates,
liens, dividends, mergers and transfers of assets, all of which were met as
of March 31, 2006. A breach of these covenants, or the covenants under the
Company's current Amended Bank Credit Facility or any future bank credit
facility, that continues beyond any grace period
6
can constitute a default, which can limit the ability to borrow and can
give rise to a right of the lenders to terminate the applicable facility
and/or require immediate repayment of any outstanding debt.
The 8% Senior Subordinated Notes (the "8% Notes") were senior unsecured
obligations of the Company. In January 2006, the Company redeemed the 8%
Notes at a redemption price equal to 100% of the principal amount, together
with the interest accrued through the redemption date, with the net proceeds
of the December 2005 common stock offering. The Company recorded in the
first quarter of 2006 a loss on debt extinguishment of $1.8 related to
unamortized debt issue costs and fees and expenses related to the redemption
of the 8% Notes.
Note 4. Commitments, Contingencies and Off-Balance Sheet Arrangements
Lease Commitments -- The Company finances its use of certain facilities
and equipment under committed lease arrangements provided by various
institutions. Since the terms of these arrangements meet the accounting
definition of operating lease arrangements, the aggregate sum of future
minimum lease payments is not reflected on the consolidated balance sheet.
At March 31, 2006, future minimum lease payments under these arrangements,
the majority of which related to the long-term real estate leases, totaled
approximately $97.4.
Indemnities, Commitments and Guarantees -- During its normal course of
business, the Company has made certain indemnities, commitments and
guarantees under which it may be required to make payments in relation to
certain transactions. These indemnities include non-infringement of patents
and intellectual property indemnities to the Company's customers in
connection with the delivery, design, manufacture and sale of its products,
indemnities to various lessors in connection with facility leases for
certain claims arising from such facility or lease, and indemnities to other
parties to certain acquisition agreements. The duration of these
indemnities, commitments and guarantees varies, and in certain cases is
indefinite. The Company believes that substantially all of these
indemnities, commitments and guarantees provide for limitations on the
maximum potential future payments the Company could be obligated to make.
However, the Company is unable to estimate the maximum amount of liability
related to its indemnities, commitments and guarantees because such
liabilities are contingent upon the occurrence of events which are not
reasonably determinable. Management believes that any liability for these
indemnities, commitments and guarantees would not be material to the
accompanying condensed consolidated financial statements. Accordingly, no
amounts have been accrued for indemnities, commitments and guarantees.
Product Warranty Costs - Estimated costs related to product warranties
are accrued at the time products are sold. In estimating its future warranty
obligations, the Company considers various relevant factors, including the
Company's stated warranty policies and practices, the historical frequency
of claims and the cost to replace or repair its products under warranty. The
following table provides a reconciliation of the activity related to the
Company's accrued warranty expense:
THREE MONTHS ENDED
---------------------------------------------
March 31, March 31,
2006 2005
-------------------- --- --------------------
Beginning balance $ 14.3 $ 13.2
Accruals for warranties issued during the period 2.0 1.9
Settlements made (1.5) (3.2)
-------------------- --------------------
Ending balance $ 14.8 $ 11.9
==================== ====================
Note 5. Accounting for Stock Based Compensation
Effective January 1, 2006, the Company began accounting for share-based
compensation arrangements in accordance with the provisions of Financial
Accounting Standard Board (FASB) Statement No. 123(R), "Share-Based Payment"
(SFAS 123(R)). Under SFAS 123(R), share-based compensation cost is measured
on the date of grant, based on the fair value of the award, and is
recognized over the requisite service period.
The Company uses the Black-Scholes valuation method to measure fair
value. The Black-Scholes valuation calculation requires the Company to
estimate key assumptions such as expected term,
7
volatility and forfeiture rates to determine the award's fair value. The
estimate of these key assumptions is based on historical information and
judgment regarding market factors and trends. The expected term of options
granted is derived from historical data on employee exercise and
post-vesting employment termination behavior. The risk-free rate for
periods within the contractual life of the option is based on the U.S.
Treasury yield curve in effect at the time of grant. Expected volatility
is based on both the implied volatilities from traded options on our stock
and historical volatility on our stock.
The Company previously applied Accounting Principles Board (APB) Opinion
No. 25, "Accounting for Stock Issued to Employees," and related
Interpretations and provided the required pro forma disclosures of SFAS No.
123, "Accounting for Stock-Based Compensation" (SFAS 123). For options
granted prior to January 1, 2006 and valued in accordance with SFAS 123, the
expected volatility used to estimate the fair value of the options was based
solely on the historical volatility on our stock. The Company used the
graded vested method for expense attribution and recognized options
forfeitures as they occurred as allowed by SFAS 123.
The Company adopted the fair value recognition provisions of SFAS 123(R)
using the modified prospective transition method. Under the modified
prospective transition method, prior periods are not restated for the
effects of adopting SFAS 123(R). Commencing with the first quarter of fiscal
year 2006, compensation cost includes all share-based payments granted
subsequent to January 1, 2006, based on the grant date fair value estimated
in accordance with the provisions of SFAS 123(R). No compensation cost has
been recognized for share-based payments granted prior to January 1, 2006 as
the vesting of all remaining unvested awards were accelerated in December
2005.
The Black-Scholes option valuation model requires the input of highly
subjective assumptions, including the expected life of the stock-based award
and stock price volatility. The assumptions utilized represent management's
best estimates, but these estimates involve inherent uncertainties and the
application of management's judgment. As a result, if other assumptions had
been used, the Company's recorded and pro forma stock-based compensation
expense could have been materially different from that depicted below. In
accordance with SFAS 123(R), the Company is required to estimate the
expected forfeiture rate at the grant date and recognize expense for those
shares expected to vest. The expected forfeiture rate is periodically
updated to reflect actual forfeitures.
No options were granted during the fiscal quarters ended March 31, 2006
and 2005. The following table illustrates the effects of options outstanding
prior to January 1, 2005 and employee purchase rights granted in January
2005 on net income and earnings per share if the Company had applied the
fair value recognition provisions of SFAS 123(R) in the first quarter of
fiscal 2005.
Three Months Ended
March 31, 2005
------------------
As reported
Net earnings $ 4.1
Add: APB 25 share-based compensation
expense included in reported net
earnings, net of tax effects --
Deduct: Share-based employee
compensation, fair value method, net
of related tax effects (1.5)
-----
Pro forma net earnings $ 2.6
-----
Basic and diluted net earnings per share:
Net earnings
Per share - basic
As reported $ 0.07
Pro forma $ 0.05
Net earnings
Per share - diluted
As reported $ 0.07
Pro forma $ 0.04
8
The Company has established a qualified Employee Stock Purchase Plan.
Prior to January 1, 2006, the terms of this plan allowed for qualified employees
(as defined) to participate in the purchase of designated shares of the
Company's common stock at a price equal to the lower of 85% of the closing price
at the beginning or end of each semi-annual stock purchase period. Subsequent to
January 1, 2006, the purchase price is equal to 85% of the closing price at the
end of each semi-annual stock purchase period. The -average fair value
of employee purchase rights granted pursuant to the Company's Employee Stock
Purchase Plan during the first quarter of fiscal 2005 was $3.10. The fair value
of those purchase rights at the date of grant was estimated using the
Black-Scholes option pricing model with the following weighted-average
assumptions: risk-free interest rate of 2.6%, dividend yield of 0%, volatility
of 46%, and expected life of 0.5 years.
The following tables set forth options granted, canceled, forfeited and
outstanding:
March 31, 2006
--------------
Weighted
Average
Options Price Per Share
------- ---------------
(in thousands)
Outstanding, beginning of period 4,806 $ 8.83
Options granted -- --
Options exercised (2,765) 6.93
Options forfeited (4) 6.83
------
Outstanding, end of period 2,037 11.67
======
Exercisable at end of period 2,037 $11.67
======
Options Outstanding at March 31, 2006
Weighted
Average Weighted
Range of Options Exercise Price Average
Exercise Outstanding Outstanding and Remaining
Price and Exercisable Exercisable Contractual Life
----- --------------- --------------- ----------------
(in thousands) (years)
$ 3.39 - $5.59 516 $ 5.05 7.14
6.59 - 9.70 381 7.26 6.20
10.42 - 10.42 442 10.42 8.65
10.59 - 20.81 450 15.85 4.64
21.50 - 30.25 248 26.80 3.98
The Company issues new shares of common stock upon exercise of stock
options. During the first quarter of fiscal year 2006, 2.8 million stock
options were exercised with an aggregate intrinsic value of $48.5 million
determined as of the date of option exercise. The aggregate intrinsic value
of outstanding options as of March 31, 2006 was $28.1 million.
Prior to the adoption of SFAS 123(R), the Company presented all tax
benefits resulting from the exercise of stock options as operating cash
flows in the Statement of Cash Flows. SFAS 123(R) requires the cash flows
resulting from the tax benefits from tax deductions in excess of deferred
tax asset (hypothetical and actual) recorded for stock compensation costs
(excess tax benefits) to be classified as financing cash flows.
9
Note 6. Segment Reporting
The Company is organized based on the products and services it offers.
Under this organizational structure, the Company has three reportable
segments: Commercial Aircraft, Distribution and Business Jet. The Company's
Commercial Aircraft segment consists of eight principal operating units
while the Distribution and Business Jet segments consist of one and two
principal operating units, respectively. Such operating units have been
aggregated for segment reporting purposes due to their similar nature. The
Company evaluates segment performance based on segment operating earnings or
loss.
Each segment reports its results of operations and makes requests for
capital expenditures and acquisition funding to the Company's chief
operational decision-making group. This group is presently comprised of the
Chairman and Chief Executive Officer, the President and Chief Operating
Officer, and the Senior Vice President of Administration and Chief Financial
Officer. Each operating segment has separate management teams and
infrastructures dedicated to providing a full range of products and services
to their customers.
The following table presents net sales and other financial information
by business segment:
THREE MONTHS ENDED
--------------------------------
March 31, March 31,
2006 2005
---------------- ---------------
Net sales
Commercial Aircraft $ 153.7 $ 127.6
Distribution 53.7 43.0
Business Jet 39.8 25.9
---------------- ---------------
$ 247.2 $ 196.5
================ ===============
Operating earnings
Commercial Aircraft $ 15.5 $ 9.0
Distribution 11.8 8.8
Business Jet 3.8 2.1
--------------- ---------------
$ 31.1 $ 19.9
=============== ===============
Note 7. Net Earnings Per Common Share
Basic net earnings per common share is computed using the weighted
average common shares outstanding during the period. Diluted net earnings
per common 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:
THREE MONTHS ENDED
----------------------
March 31, March 31,
2006 2005
---------- ----------
Net earnings $ 13.8 $ 4.1
========== ==========
Basic weighted average common shares (in millions) 75.2 56.8
Effect of dilutive stock options and stock purchases
under the employee stock purchase plan (in millions) 1.6 2.6
---------- ----------
Diluted weighted average common shares 76.8 59.4
========== ==========
Basic and diluted net earnings per share $ 0.18 $0.07
========== ==========
Note 8. Comprehensive Earnings
Comprehensive earnings is defined as all changes in a company's net
assets except changes resulting from transactions with shareholders. It
differs from net earnings in that certain items currently recorded to equity
would be a part of comprehensive earnings. The following table sets forth
the computation of comprehensive earnings for the periods presented:
THREE MONTHS ENDED
-------------------------
March 31, March 31,
2006 2005
-------------------------
Net earnings $ 13.8 $4.1
Other comprehensive earnings:
Foreign exchange translation adjustment 1.4 (3.4)
------ ----
Comprehensive earnings $ 15.2 $0.7
====== ====
10
BE AEROSPACE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited - Dollars In Millions, Except Per Share Data)
Note 9. Recent Accounting Pronouncements
In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain
Hybrid Financial Instruments - An Amendment of FASB Statements No. 133 and 140"
(SFAS 155). SFAS 155 is effective for all financial instruments acquired or
issued after the beginning of an entity's first fiscal year that begins after
September 15, 2006. The adoption of SFAS 155 is not expected to have a material
impact on the Company's financial statements.
[Remainder of page intentionally left blank]
11
BE AEROSPACE, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Dollars In Millions, Except Per Share Data)
OVERVIEW
The following discussion and analysis addresses the results of our
operations for the three months ended March 31, 2006, as compared to our
results of operations for the three months ended March 31, 2005. In
addition, the discussion and analysis address our liquidity, financial
condition and other matters for these periods.
Based on our experience in the industry, we believe that we are the
world's largest manufacturer of cabin interior products for commercial
aircraft and for business jets and a leading aftermarket distributor of
aerospace fasteners. We sell our manufactured products directly to virtually
all of the world's major airlines and airframe manufacturers and a wide
variety of business jet customers. In addition, based on our experience, we
believe that we have achieved leading global market positions in each of our
major product categories, which include:
o commercial aircraft seats, including an extensive line of first class,
business class, tourist class and regional aircraft seats;
o a full line of aircraft food and beverage preparation and storage
equipment, including coffeemakers, water boilers, beverage containers,
refrigerators, freezers, chillers and microwave, high heat convection
and steam ovens;
o both chemical and gaseous aircraft oxygen delivery systems and
protective breathing equipment;
o business jet and general aviation interior products, including an
extensive line of executive aircraft seats, direct and indirect
overhead lighting systems, oxygen delivery systems, air valve systems,
high-end furniture and cabinetry; and
o a broad line of aerospace fasteners, covering over 140,000 stock
keeping units (SKUs).
We also design, develop and manufacture a broad range of cabin interior
structures and provide comprehensive aircraft cabin interior reconfiguration
and passenger-to-freighter conversion engineering services and component
kits.
We conduct our operations through strategic business units that have been
aggregated under three reportable segments: Commercial Aircraft,
Distribution and Business Jet.
Net sales by line of business for the three-month periods ended March 31,
2006 and March 31, 2005 were as follows:
THREE MONTHS ENDED
---------------------------------------------------
March 31, 2006 March 31, 2005
--------------------- ---------------------------
Net % of Net % of
Sales Net Sales Sales Net Sales
-------- ---------- ----------- -----------
Commercial aircraft $153.7 62.2% $127.6 64.9%
Distribution 53.7 21.7% 43.0 21.9%
Business jet 39.8 16.1% 25.9 13.2%
--------- ---------- ----------- -------------
Net sales $247.2 100.0% $196.5 100.0%
========= ========== =========== =============
12
Net sales by domestic and foreign operations for the three-month periods
ended March 31, 2006 and March 31, 2005 were as follows:
-----------------------------------------------
THREE MONTHS ENDED
-----------------------------------------------
March 31, 2006 March 31, 2005
--------------------- ----------------------
Domestic $170.2 $140.3
Foreign 77.0 56.2
------ ------
Total $247.2 $196.5
====== ======
Net sales by geographic area (based on destination) for the three-month
periods ended March 31, 2006 and March 31, 2005 were as follows:
-----------------------------------------------
THREE MONTHS ENDED
-----------------------------------------------
March 31, 2006 March 31, 2005
--------------------- ----------------------
Net % of Net % of
Sales Net Sales Sales Net Sales
-------- ----------- -------- ------------
United States $103.2 41.7% $102.1 52.0%
Europe 72.1 29.2% 44.6 22.7%
Asia 58.7 23.7% 40.3 20.5%
Rest of World 13.2 5.4% 9.5 4.8%
-------- ----------- -------- ------------
$247.2 100.0% $196.5 100.0%
======== =========== ======== ============
Between 1989 and 2001, we substantially expanded the size, scope and
nature of our business through 24 acquisitions, for an aggregate purchase
price of approximately $1 billion. Since 2001, we made two insignificant
acquisitions. Essentially all of our revenue growth since 2001 has been
organic.
New product development is a strategic initiative for our company. Our
customers regularly request that we engage in new product development and
enhancement activities. We believe that these activities will protect and
enhance our leadership position. We believe our investments in research and
development over the past several years have been the driving force behind
our ongoing market share gains. Research, development and engineering
spending have been approximately 7%- 8% of sales for the past several years,
and are expected to remain at approximately that level for the next year.
We also believe in providing our businesses with the tools required to
remain competitive. In that regard, we have invested, and will continue to
invest, in property and equipment that enhances our productivity. Over the
past three years, annual capital expenditures ranged from $11 - $17. Taking
into consideration our record backlog, targeted capacity utilization levels,
recent capital expenditure investments and current industry conditions, we
anticipate capital expenditures of approximately $20 - $22 over the next
twelve months.
International airline competition for higher margin international
travelers and improving worldwide industry conditions have resulted in
increasing demand for our products and services, as demonstrated by record
bookings of approximately $500 during the first quarter of fiscal 2006,
which were up 90% as compared to the same period in fiscal 2005. At March
31, 2006, backlog was in excess of $1.3 billion, an increase of
approximately 70% as compared to our March 31, 2005 backlog. We expect
demand to further increase as industry conditions continue to improve over
the course of the next several years. As worldwide air traffic grows and
airlines add capacity and upgrade the cabin interiors of existing active
aircraft, we expect our aftermarket activities to continue to grow.
According to IATA, during the year ended December 31, 2005, the global
airline industry expanded airline capacity by approximately 6% in response
to an approximately 8% increase in global air traffic. In addition, as a
result of the severity of the post-September 11, 2001 downturn, many
carriers, particularly in the United States, have deferred interior
maintenance and upgrades. The U.S. carriers have just begun the process of
upgrading their international fleets and we believe there are substantial
additional growth opportunities with domestic airlines for retrofit
programs, particularly for the twin-aisle aircraft that service
international routes.
13
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2006, AS COMPARED TO
THE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2005 (Dollars In
Millions, Except Per Share Data)
Sales for each of our segments are set forth in the following table:
NET SALES
-----------------------------------------------------
Three Months Ended March 31,
-----------------------------------------------------
Percent
2006 2005 Change Change
------------- ---------- ------------ ---------------
Commercial aircraft $153.7 $127.6 26.1 20.5%
Distribution 53.7 43.0 10.7 24.9
Business jet 39.8 25.9 13.9 53.7
------------- ---------- ------------ ---------------
Total $247.2 $196.5 50.7 25.8%
============= ========== ============ ===============
The commercial aircraft segment ("CAS") generated revenues of $153.7 in the
first quarter of 2006, up 20.5% versus the same period in the prior year,
primarily due to a higher volume of commercial aircraft passenger cabin
equipment. The distribution segment delivered strong revenue growth of 24.9% in
the first quarter of 2006, versus the same period in the prior year, driven by a
broad based increase in aftermarket demand for aerospace fasteners and continued
market share gains. In the business jet segment, revenues increased by 53.7% in
the first quarter of 2006, versus the same period in the prior year, reflecting
a substantial increase in shipments of super first class products and the strong
recovery in the business jet industry.
Gross profit for the first quarter of 2006 of $86.5, or 35.0% of sales,
increased by $18.5, or 27.2% of revenues. First quarter 2006 gross margin
expanded by 40 basis points as compared to the same period of the prior year.
The increase in gross margin was primarily driven by ongoing manufacturing
efficiencies offset somewhat by a higher level of shipments of our super first
class products. The margin on super first class products is improving as we gain
more experience on this new product line, but we are still below our overall
average product gross margin for the business jet segment.
Selling, general and administrative expenses in the first quarter of 2006 of
$37.0, or 15.0% of sales, were up $5.3 versus selling, general and
administrative expenses in the same period in the prior year of $31.7, or 16.1%
of sales, primarily due to the higher level of commissions and sales incentives
in the current period, as well as selling and marketing costs associated with
the 25.8% increase in revenues and the 70% increase in backlog from March 31,
2005.
Research, development and engineering expenses of $18.4, or 7.4% of sales,
were up $2.0 versus the same period in the prior year due to a higher level of
spending associated with customer specific engineering, the super first class
product offering, and new product development activities associated with the
B787 Dreamliner and the A380 aircraft.
Operating earnings for the first quarter of 2006 of $31.1 increased by
$11.2, or 56.3%, as compared to the same period last year. The operating margin
of 12.6% in the current quarter was 250 basis points greater than the operating
margin realized in the first quarter of 2005. The substantial increase in
operating earnings was driven primarily by continued revenue growth, earnings
growth and margin expansion in each of our commercial aircraft, distribution and
business jet segments.
The following is a summary of the change in operating earnings by segment:
OPERATING EARNINGS
----------------------------------------------------
Three Months Ended March 31,
----------------------------------------------------
Percent
2006 2005 Change Change
----------------------------------------------------
Commercial aircraft $15.5 $9.0 $6.5 72.2%
Distribution 11.8 8.8 3.0 34.1
Business jet 3.8 2.1 1.7 81.0
----------------------------------------------------
Total $31.1 $19.9 $11.2 56.3%
====================================================
14
CAS operating earnings of $15.5 increased by 72.2% versus the same period in
the prior year. CAS operating margin for the current quarter expanded to 10.1%,
a 300 basis point improvement over the same period in the prior year. This
margin expansion was primarily a result of ongoing manufacturing efficiencies
and operating leverage at the higher level of sales as well as a somewhat
improved product mix. CAS backlog during the first quarter of 2006 reached
record levels.
The distribution segment generated revenues of $53.7 in the first quarter of
2006, which were 24.9% greater than the same period in the prior year. Operating
earnings at the distribution segment in the first quarter of 2006 were $11.8, or
34.1% higher than the same period last year, and represented a 22.0% operating
margin.
The business jet segment generated first quarter revenues of $39.8, up 53.7%
as compared to the first quarter of 2005. Operating earnings at the business jet
segment during the quarter of $3.8 were $1.7 higher than operating earnings
reported in the same period last year. The substantial increase in operating
earnings reflects the higher level of revenues associated with increased
production volumes as well as improving operations in the new super first class
product and the strong recovery in the business jet industry.
Interest expense for the first quarter of 2006 of $9.5 was $5.6 lower than
interest expense recorded in the same period in the prior year as a result of
the early retirement of $250 of senior subordinated notes during the first
quarter of 2006. We recorded a $1.8 charge in the first quarter of 2006 related
to this debt prepayment.
Earnings before income taxes was $19.8, as compared prior year's earnings
before income taxes of $4.8.
Income taxes for the current quarter were $6.0 or $5.3 greater than income
taxes in the same period in the prior year. The effective income tax rate was
approximately 30% during the first quarter of 2006 compared to approximately 15%
during the same period in the prior year. The increase in the effective income
tax rate was primarily due to the reversal of a significant portion of the
valuation allowance on certain domestic deferred tax assets during the fourth
quarter of 2005.
Net earnings for the first quarter of 2006 were $13.8, or $0.18 per diluted
share, an increase of $9.7, or $0.11 per diluted share, versus $0.07 per diluted
share in the same period of the prior year.
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15
LIQUIDITY AND CAPITAL RESOURCES
Current Financial Condition
Our liquidity requirements consist of working capital needs, ongoing capital
expenditures and payments of interest and principal on our indebtedness. Our
primary requirements for working capital are directly related to the level of
our operations. Working capital consists primarily of accounts receivable and
inventories, which fluctuate with the sales of our products. Our working capital
was $369.3 as of March 31, 2006, as compared to $573.4 as of December 31, 2005.
The decrease in working capital from December 31, 2005 to March 31, 2006 was
primarily due the $250.0 prepayment of 8% senior subordinated notes in January
2006 with the net proceeds of an issuance of common stock in December 2005.
Other factors impacting the change in working capital include an increased level
of accounts receivable related to our recent revenue growth, a higher level of
inventories to support the 70% year-over-year increase in backlog, offset
somewhat by a higher level of accounts payable and accrued liabilities arising
from the higher revenue volume and the timing of interest payments. We currently
have no bank borrowings outstanding and no debt principal payments due on our
senior or senior-subordinated notes until 2010. Our Amended Bank Credit
Facility, under which we have no borrowings, expires in February 2007.
At March 31, 2006, our cash and cash equivalents were $140.5, as compared to
$356.0 at December 31, 2005. The decrease in cash and cash equivalents from
December 31, 2005 to March 31, 2006 was primarily due to the $250.0 prepayment
of 8% subordinated notes in January 2006 with the net proceeds of an issuance of
common stock in December 2005. Other factors impacting the change in our cash
balances during the three months ended March 31, 2006 were net earnings during
the period, proceeds from common stock issued and somewhat higher level of
accounts payable and accrued liabilities arising from the higher revenue volume
and the timing of interest payments, offset by an increased level of accounts
receivable related to our recent revenue growth and a higher level of
inventories to support the 70% year-over-year increase in backlog.
Cash Flows
At March 31, 2006, our cash and bank credit available under our Amended Bank
Credit Facility was $181.5 compared to $394.4 at December 31, 2005. Cash
generated by operating activities was $18.9 for the three months ended March 31,
2006, as compared to cash used by operating activities of $11.0 in the same
period in the prior year. The primary sources of cash during the three months
ended March 31, 2006 were net earnings of $13.8, non-cash charges of $14.5
primarily related to amortization and depreciation and a higher level of
accounts payable and accrued liabilities arising from the higher revenue volume
and the timing of interest payments. These sources of cash were offset by an
increased level of accounts receivable ($17.9) related to our recent revenue
growth and a higher level of inventories ($25.6) to support expected the 70%
year over year increase in backlog.
Capital Spending
Our capital expenditures were $4.4 and $3.2 during the three months ended
March 31, 2006 and 2005, respectively. We anticipate capital expenditures of
approximately $20 - $22 for the next twelve months. We have no material
commitments for capital expenditures. We have, in the past, generally funded our
capital expenditures from cash from operations and funds available to us under
bank credit facilities. We expect to fund future capital expenditures from cash
on hand, from operations and from funds available to us under our Amended Bank
Credit Facility or any future bank credit facility, although there can be no
assurance that future bank credit facilities will be available. Between 1989 and
2001, we completed 24 acquisitions for an aggregate purchase price of
approximately $1 billion. Following these acquisitions, we rationalized the
businesses, reduced headcount by approximately 4,500 employees and eliminated 22
facilities. We have financed these acquisitions primarily through issuances of
debt and equity securities, including our outstanding 8-1/2% senior notes due
2010 and 8-7/8% senior subordinated notes due 2011 and our bank credit
facilities.
Outstanding Debt and Other Financing Arrangements
Under our $50.0 amended and restated bank credit facility with JPMorgan
Chase Bank there are no maintenance financial covenants, other than maintaining
an interest coverage ratio (as defined in the
16
bank credit facility) of at least 1.15:1 for the trailing 12-month period. The
bank credit facility expires in February 2007, is collateralized by
substantially all of our assets and bears interest at rates ranging from 250 to
400 basis points over the Eurodollar rate, as defined in the bank credit
facility (approximately 7.0% at March 31, 2006). At March 31, 2006, indebtedness
under the bank credit facility consisted of letters of credit aggregating
approximately $9.0, and the amount available under the bank credit facility was
$41.0 as of March 31, 2006. The bank credit facility contains customary
affirmative covenants, negative covenants and conditions of borrowings, all of
which were met as of March 31, 2006.
Long-term debt at March 31, 2006 consisted principally of our 8-1/2% senior
notes due 2010 and 8-7/8% senior subordinated notes due 2011. The $175 of 8-1/2%
senior notes mature on October 1, 2010, and the $250 of 8-7/8% notes mature on
May 1, 2011. The senior notes are unsecured obligations and are senior to all of
our subordinated indebtedness, but subordinate to any secured borrowings under
our bank credit facility to the extent the Company's assets collateralize the
bank credit facility. The senior subordinated notes are unsecured senior
subordinated obligations and are subordinated to all of our senior indebtedness.
Each of the 8-1/2% senior notes and 8-7/8% senior subordinated notes contains
restrictive covenants, including limitations on future indebtedness, restricted
payments, transactions with affiliates, liens, dividends, mergers and transfers
of assets. A breach of these covenants, or the covenants under our current or
any future bank credit facility, that continues beyond any grace period can
constitute a default, which can limit our ability to borrow and can give rise to
a right of the lenders to terminate the applicable bank credit facility and/or a
right of the debt holders to require immediate repayment of any outstanding
debt.
Contractual Obligations
During the three-month period ended March 31, 2006, there were no material
changes in the contractual obligations specified in our Annual Report on Form
10-K for the fiscal year ended December 31, 2005 other than the repayment of the
8% senior subordinated notes in January 2006.
We believe that our cash flows, together with cash on hand; provide us with
the ability to fund our operations, make planned capital expenditures and make
scheduled debt service payments for at least the next twelve months. However,
such cash flows are dependent upon our future operating performance, which, in
turn, is subject to prevailing economic conditions and to financial, business
and other factors, including the conditions of our markets, some of which are
beyond our control. If, in the future, we cannot generate sufficient cash from
operations to meet our debt service obligations, we will need to refinance such
debt obligations, obtain additional financing or sell assets. We cannot assure
you that our business will generate cash from operations, or that we will be
able to obtain financing from other sources, sufficient to satisfy our debt
service or other requirements.
Off-Balance Sheet Arrangements
Lease Arrangements
We finance our use of certain equipment under committed lease arrangements
provided by various financial institutions. Since the terms of these
arrangements meet the accounting definition of operating lease arrangements, the
aggregate sum of future minimum lease payments is not reflected on our
consolidated balance sheet. Future minimum lease payments under these
arrangements aggregated approximately $97.4 at March 31, 2006.
Indemnities, Commitments and Guarantees
During the normal course of business, we made certain indemnities,
commitments and guarantees under which we may be required to make payments in
relation to certain transactions. These indemnities include non-infringement of
patents and intellectual property indemnities to our customers in connection
with the delivery, design, manufacture and sale of our products, indemnities to
various lessors in connection with facility leases for certain claims arising
from such facility or lease, and indemnities to other parties to certain
acquisition agreements. The duration of these indemnities, commitments and
guarantees varies, and in certain cases, is indefinite. We believe that
substantially all of our indemnities, commitments and guarantees provide for
limitations on the maximum potential future payments we could be obligated to
make. However, we are unable to estimate the maximum amount of liability related
to our indemnities, commitments and guarantees because such liabilities are
contingent upon the occurrence of
17
events which are not reasonably determinable. Management believes that any
liability for these indemnities, commitments and guarantees would not be
material to our accompanying consolidated financial statements.
Deferred Tax Assets
We reversed a significant portion of our previously recorded valuation
allowance on our domestic deferred tax assets during the fourth quarter of 2005.
The deferred tax asset was recorded as a result of our improving financial
performance and outlook, as well as the $20.0 reduction in interest expense
arising from the redemption of $250.0 of our 8% senior subordinated notes, which
occurred in January 2006.
We maintained a valuation allowance of $40.8 as of March 31, 2006 related to
our foreign net operating loss carryforward and our domestic capital loss
carryforward because of uncertainties that preclude us from determining that it
is more likely than not that we will be able to generate sufficient taxable
income to realize such assets during the applicable carryforward periods.
RECENT ACCOUNTING PRONOUNCEMENTS
For a discussion of Recent Account Pronouncements, refer to Note 9 of our
Condensed Consolidated Financial included in Part 1, Item 1 of this report.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of
operations is based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
us to make estimates and judgments that affect the reported amount of assets and
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities at the date of our financial statements. Actual results may
differ from these estimates under different assumptions or conditions.
Critical accounting policies are defined as those that are reflective of
significant judgments and uncertainties, and potentially result in materially
different results under different assumptions and conditions. We believe that
our critical accounting policies are limited to those described Note 1 to Notes
to the Consolidated Financial Statements included in our Annual Report on Form
10-K for the fiscal year December 31, 2005. There have been no changes to our
critical accounting policies since December 31, 2005.
DEPENDENCE UPON CONDITIONS IN THE AIRLINE INDUSTRY
The September 11, 2001 terrorist attacks, SARS and the onset of the Iraq war
severely impacted conditions in the airline industry. According to industry
sources, in the aftermath of the attacks most major U.S. and a number of
international carriers substantially reduced their flight schedules, parked or
retired portions of their fleets, reduced their workforces and implemented other
cost reduction initiatives. U.S. airlines further responded by decreasing
domestic airfares. As a result of the decline in both traffic and airfares
following the September 11, 2001 terrorist attacks, and their aftermath, as well
as other factors, such as increases in fuel costs and heightened competition
from low-cost carriers, the world airline industry lost a total of approximately
$42 billion in calendar years 2001-2005, including approximately $7.4 billion in
2005. The airline industry crisis also caused 22 airlines worldwide to declare
bankruptcy or cease operations in the last four years.
As a result of the foregoing, the domestic U.S. airlines have been seeking
to conserve cash in part by deferring or eliminating cabin interior
refurbishment programs and deferring or canceling aircraft purchases. This,
together with the reduction of new business jet production, caused a substantial
contraction in our business during the 2001 through 2003 period. Although the
global airline industry began to recover in late 2003 and conditions continue to
improve, and the business jet industry is improving as well, additional events
similar to those described above or other events could cause a deterioration of
conditions in our industry or end the current business cycle. The rate at which
the business jet industry recovers is dependent on corporate profits, the number
of used jets on the market and other factors, which could slow the rate of
recovery.
18
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 31E of the Securities
Exchange Act of 1934. Forward-looking statements include all statements that do
not relate solely to historical or current facts, including statements regarding
implementation and expected benefits of lean manufacturing and continuous
improvement plans, our dealings with customers and partners, the consolidation
of facilities, reduction of our workforce, integration of acquired businesses,
ongoing capital expenditures, the impact of the large number of grounded
aircraft on demand for our products and our underlying assets, the adequacy of
funds to meet our capital requirements, the ability to refinance our
indebtedness, if necessary, the reduction of debt, the potential impact of new
accounting pronouncements, the impact on our business from the September 11,
2001 terrorist attacks, SARS outbreak and war in Iraq and the impact on our
business of the recent increases in passenger traffic and projected increases in
passenger traffic and the size of the airline fleet. These forward-looking
statements include risks and uncertainties, and our actual experience may differ
materially from that anticipated in such statements. Factors that might cause
such a difference include those discussed in our filings with the Securities and
Exchange Commission, under the heading "Risk Factors" in our Annual Report on
Form 10-K, as well as future events that may have the effect of reducing our
available operating income and cash balances, such as unexpected operating
losses, the impact of rising fuel prices on our airline customers, outbreaks in
national or international hostilities, terrorist attacks, prolonged health
issues which reduce air travel demand (e.g., SARS), delays in, or unexpected
costs associated with, the integration of our acquired or recently consolidated
businesses, conditions in the airline industry, conditions in the business jet
industry, problems meeting customer delivery requirements, our success in
winning new or expected refurbishment contracts from customers, capital
expenditures, cash expenditures related to possible future acquisitions,
facility closures, product transition costs, labor disputes involving us, our
significant customers or airframe manufacturers, the possibility of a write-down
of intangible assets, delays or inefficiencies in the introduction of new
products or fluctuations in currency exchange rates.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
You are cautioned not to unduly rely on such forward-looking statements when
evaluating the information presented herein. These statements should be
considered only after carefully reading the risk factors in our Annual Report on
Form 10-K and this entire Form 10-Q.
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19
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to a variety of risks, including foreign currency
fluctuations and changes in interest rates affecting the cost of our
variable-rate debt.
Foreign currency - We have direct operations in Europe that receive revenues
from customers primarily in U.S. dollars, and we purchase raw materials and
component parts from foreign vendors primarily in British pounds or euros.
Accordingly, we are exposed to transaction gains and losses that could
result from changes in foreign currency exchange rates relative to the U.S.
dollar. The largest foreign currency exposure results from activity in
British pounds and euros.
From time to time, we and our foreign subsidiaries may enter into foreign
currency exchange contracts to manage risk on transactions conducted in
foreign currencies. At March 31, 2006, we had no outstanding forward
currency exchange contracts. In addition, we have not entered into any other
derivative financial instruments.
Interest Rates - At March 31, 2006, we had no adjustable rate debt and fixed
rate debt of $429.1. The weighted average interest rate for the fixed rate
debt was approximately 8.72% at March 31, 2006. If interest rates on
variable rate debt were to increase by 10% above current rates, the impact
on our financial statements would be to reduce pretax income by a negligible
amount. We do not engage in transactions intended to hedge our exposure to
changes in interest rates.
As of March 31, 2006, we maintained a portfolio of securities consisting
mainly of taxable, interest-bearing deposits with weighted average maturities of
less than three months. If short-term interest rates were to increase or
decrease by 10%, we estimate interest income would increase or decrease by
approximately $0.6.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our principal executive officer and our principal financial officer, after
evaluating, together with management, the effectiveness of the design and
operation of our disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) as of March 31, 2006, the end of the period
covered by this report, have concluded that, as of such date, our disclosure
controls and procedures were effective.
Internal Control over Financial Reporting
There were no changes in our company's internal control over financial
reporting that occurred during the first quarter of 2006 that have materially
affected, or are reasonably likely to materially affect, our company's internal
control over financial reporting.
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20
PART II - OTHER INFORMATION
Item 1. Legal Proceedings Not applicable.
Item 1A. Risk Factors
There have been no material changes in our risk factors from those
discussed in our Annual Report on Form 10-K for the fiscal year ended December
31, 2005.
Item 2. Unregistered Sales of Equity Securities
and Use of Proceeds 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 Not applicable.
Item 6. Exhibits
Exhibit 31 Rule 13a-14(a)/15d-14(a) Certifications
31.1 Certification of Chief Executive Officer*
31.2 Certification of Chief Financial Officer*
Exhibit 32 Section 1350 Certifications
32.1 Certification of Chief Executive Officer pursuant
to 18 U.S.C. Section 1350*
32.2 Certification of Chief Financial Officer pursuant
to 18 U.S.C. Section 1350*
- ---------------
*Filed herewith.
21
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: May 9, 2006 By: /s/ Amin J. Khoury
--------------------------------
Amin J. Khoury
President and
Chief Executive Officer
Date: May 9, 2006 By: /s/ Thomas P. McCaffrey
---------------------------------
Thomas P. McCaffrey
Senior Vice President of
Administration and Chief Financial Officer
22