EXHIBIT 99.1
NEWS RELEASE
CONTACT: Jay Jacobson
FOR IMMEDIATE RELEASE Financial Relations
(914) 722-2737
B/E AEROSPACE, INC. ANNOUNCES IN-FLIGHT ENTERTAINMENT
JOINT VENTURE WITH SEXTANT AVIONIQUE;
PLANNED RESTRUCTURING OF OPERATIONS
AND REVISED EXPECTATIONS FOR FY2000-2004
Wellington, Florida, January 25, 1999 ---- B/E Aerospace, Inc.
(Nasdaq-NMS: BEAV) today announced that it has signed a definitive agreement to
sell a 51-percent interest in its In-Flight Entertainment (IFE) business to a
wholly owned subsidiary of Sextant Avionique, S.A. (Sextant). Sextant, which
supplies complete avionics systems for both military and civil aircraft, is one
of the world's leading suppliers of aircraft avionics systems and the largest
supplier of such systems to Airbus Industrie.
Terms of the agreement provide for Sextant to acquire a 51-percent
interest in B/E's IFE business for an initial cash purchase price of $62
million. The final purchase price for the 51-percent interest will be determined
on the basis of operating results for the joint venture over its initial two
years of operations and could range from $47 million to $87 million. Completion
of the transaction, which is subject to regulatory approvals, is expected by
February 28, 1999. The Company intends to use 100-percent of the proceeds from
this transaction to reduce its bank borrowings.
The new company, named Sextant In-Flight Systems, LLC, will be
headquartered in B/E Aerospace's existing 120,000-square-foot state-of-the-art
facility in Irvine, California. The in-flight entertainment products
manufactured, tested, and certified at this facility include the MDDS
(Multimedia Digital Distribution System) advanced interactive individual-
passenger video entertainment systems; the BE2000 multi-channel, distributed,
individual-passenger video systems; passenger control units (noise-canceling,
digital, analog, and telephone); and individual-passenger audio systems. In
addition, the company manufactures, in conjunction with Harris Corporation, a
direct-broadcast satellite television system called LiveTV(TM).
B/E Chief Executive Officer Robert J. Khoury stated, "We are very
pleased to have Sextant as our partner in the in-flight entertainment business.
We believe this venture will bring tangible benefits to our customers and the
venture partners. B/E Aerospace has a tremendous installed base and world-class
expertise in video distribution systems onboard aircraft. It has been our vision
to couple that capability with a partner possessing technological capabilities,
financial resources, marketing credibility and a strong product support
infrastructure. We are pleased to have Sextant as that partner."
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"Sextant Avionique is one of only three major international
manufacturers capable of delivering complete avionics systems. Sextant's
expertise in systems integration spans the entire avionics field, including
flight control and navigation systems, computers and information processing,
man-machine interfaces and displays, sensors and instruments. We fully expect
that their leadership position in commercial and military avionics systems will
enable Sextant to contribute significantly to our new IFE venture."
Khoury continued, "The benefits of this new business relationship are
powerful. The venture's logistics and product support organization can draw on
resources and assets of both B/E Aerospace and Sextant. This means added
flexibility to the customer. The company's engineers will exchange best-of-breed
technologies, complementary resources and design practices. This will provide
the customer with an expanded set of product offerings that are designed from
the outset to integrate into seamless solutions for the cockpit or cabin
interior. Finally, the added financial and marketing resources will make this
one of the strongest teams in the industry, bringing a reaffirmed commitment to
an evolving product line with a world-class product support infrastructure to
back it up."
"The monetization of a portion of our in-flight entertainment business
will benefit B/E by sharing Sextant's strong technical capabilities and
outstanding relationship with not only the world's airlines, but also the major
OEM's and, in particular, Airbus Industrie. We believe the joint venture company
has the capability of becoming the clear market leader for the in-flight
entertainment industry."
Separately, B/E announced that it will take a charge to restructure its
operations, including the consolidation of a number of facilities, a substantial
reduction in employment and rationalization of its product offerings. The cost
of restructuring, along with costs to rationalize its product offerings and
costs associated with new product introductions, the latter of which are
expected to decline over the course of the next several quarters, is expected to
be approximately $70 million. The Company also announced that a new accounting
standard by the American Institute of Certified Public Accountants, which
requires start-up and organization costs associated with acquisitions to be
expensed rather than amortized, and which is effective for years beginning after
December 15, 1998, will be adopted as of the beginning of the Company's current
fiscal year.
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Specifically, the Company's restructuring plans provide for the
elimination of seven manufacturing sites and an estimated net reduction of 500
employees (or eight-percent of the Company's workforce) over the next 12 months.
The Company also anticipates the successful completion of business process
reengineering and Y2K system compliance initiatives that have been refocused to
include all acquisitions. The scope of these efforts builds in top-to-bottom
revamping of operating practices, systems and personnel, and targets the
incorporation of industry-wide "best practices" and lean manufacturing concepts
at all B/E operations, including the recent acquisitions.
With respect to the outlook for the next several years, the Company
announced that it expects that the recession in Asia and the severe cutbacks in
Boeing widebody aircraft production will have a dampening effect on its growth
rate. Nevertheless, the Company expects continued revenue growth during fiscal
year 2000 and for the next several years despite the planned reduction in new
aircraft deliveries. This revenue growth is expected to be driven by the
aftermarket and is reflective of the Company's strong backlog, the large number
of new orders expected as a result of fleet refurbishment programs that have
been awarded to B/E, the continued growth of B/E's General Aviation and VIP
Products Group and the growing demand for reconfiguration and conversion
services consistent with a slowdown in new aircraft deliveries.
Mr. Khoury stated, "B/E is committed to Company-wide, fully reengineered
business processes and upgraded systems. The seven acquisitions completed over
the last nine months, together with the unprecedented number of new product
introductions and the success of those new products, have prompted the need for
our reengineering to be refocused and intensified. The success that we have
achieved during the three years ended February 1998 in improving our
Corporate-wide gross margin by 550 basis points will not continue unless we
redouble our efforts. The restructuring plan we have announced today is intended
to significantly lower our cost structure and further improve our productivity
and long-term competitive position."
"The aforementioned acquisitions and new product development activities
have effectively obsoleted products inventories and have resulted in a
misalignment of our manufacturing, research and development, and engineering
capacities. We believe the steps we are taking are consistent with our strategy
of pursuing the highest level of quality and productivity in every facet of our
operations, from the factory floor to customer support."
Khoury concluded, "The growth in our backlog has been driven by new
product introductions, many of which are just now being produced in volume for
the first time. The learning curve associated with the large number of new
product introductions is currently putting pressure on our gross and
operating margins. We expect that we will continue to encounter this margin
pressure over the next several quarters and that we will experience gross
margins during the fourth quarter and throughout next year that are somewhat
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lower than those realized recently as the large number of new products are
introduced in volume for the first time. However, as a result of the actions we
are announcing today, the Company expects to reinitiate margin improvements over
the next several years, beginning in FY2001."
B/E Aerospace, Inc. is the world's leading manufacturer of cabin
interior products, serving virtually all the world's airlines and aircraft
manufacturers. B/E designs, develops, manufactures, sells and services a broad
line of passenger cabin interior products for both commercial and general
aviation aircraft and provides interior design, reconfiguration and conversion
services to its customers throughout the world.
This Report contains forward-looking statements that involve risks and
uncertainties. The Company's actual experience may differ materially from that
anticipated in such statements. Factors that might cause such a difference
include, but are not limited to, those discussed in the Company's filings with
the Securities and Exchange Commission, including its most recent Form 10-Q,
proxy statement and Form 10-K/A, and in "Risk Factors" in both its Form S-3
filed on December 28, 1998, relating to the registration of the Company's common
stock, and S-4 filed on January 13, 1999, relating to the registration of the
Company's senior subordinated notes, as well as future events that have the
effect of reducing the Company's available operating income and cash balances,
such as unexpected operating losses, delays in the integration of the Company's
acquired businesses, conditions in the airline industry, delivery of the
Company's MDDS interactive video system, delays in the implementation of the
Company's Year 2000 readiness program, customer delivery requirements, new or
expected refurbishments or capital expenditures or cash expenditures related to
possible future acquisitions.