UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The unaudited pro forma combined statements of operations and unaudited pro
forma combined balance sheet give effect to the acquisition of Burns Aerospace
Corporation ("Burns") (the "Acquisition") by BE Aerospace, Inc. ("BEA" and,
together with Burns, the "Company") on a purchase accounting basis, the
offering of $75 million of unsecured senior subordinated debt (the "Offering")
and the application of the net proceeds therefrom. The pro forma combined
statement of operations for the fiscal year ended February 25, 1995 is
comprised of the results of BEA for the fiscal year ended February 25, 1995 and
the results of Burns for the year ended December 31, 1994. The pro forma
combined statement of operations for the six months ended August 26, 1995 is
comprised of the results of BEA for the six months ended August 26, 1995 and
the results of Burns for the six months ended June 30, 1995. The pro forma
combined balance sheet as of August 26, 1995 has been prepared by combining the
consolidated balance sheet of BEA as of August 26, 1995 with the balance sheet
of Burns as of June 30, 1995.
The pro forma combined statements of operations for the fiscal year ended
February 25, 1995 and the six months ended August 26, 1995 assume that the
Acquisition and the Offering occurred on February 27, 1994. The pro forma
combined balance sheet as of August 26, 1995 assumes that the Acquisition and
the Offering occurred on August 26, 1995. The pro forma combined statements of
operations and balance sheet do not purport to represent the results of
operations or financial position of the Company had the transactions and events
assumed therein occurred on the dates specified, nor are they necessarily
indicative of the results of operations that may be achieved in the future.
Certain of the pro forma adjustments represent estimates of costs to be
incurred and cost savings expected to be realized in connection with the
Acquisition. No assurance can be given as to the amount of costs that will
actually be incurred or cost savings that will actually be realized. The pro
forma adjustments are based on management's preliminary assumptions regarding
purchase accounting adjustments. The actual allocation of the purchase price
will be adjusted to the extent that actual amounts differ from management's
estimates in accordance with FAS No. 38, "Accounting for Preacquisition
Contingencies of Purchased Enterprises."
The pro forma combined financial information is based upon certain
assumptions and adjustments described in the notes to the pro forma financial
statements.
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PRO FORMA COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
FISCAL YEAR ENDED FEBRUARY 25, 1995
------------------------------------------------------
ADJUSTED
BEA BURNS COMBINED ADJUSTMENTS PROFORMA
-------- ------- -------- ----------- --------
(DOLLARS IN THOUSANDS)
Net sales............... $229,347 $93,494 $322,841 $ -- $322,841
Cost of sales........... 154,863 75,880 230,743 (5,389)(a) 221,081
(968)(b)
(3,305)(c)
-------- ------- -------- --------
Gross profit............ 74,484 17,614 92,098 101,760
Operating expenses:
Selling, general and
administrative....... 31,787 10,729 42,516 (5,321)(a) 37,195
Management fees....... -- 3,359 3,359 (3,359)(d) 750
750 (d)
Research and develop-
ment................. 12,860 1,615 14,475 (1,223)(a) 16,557
3,305 (c)
Amortization ......... 9,954 1,509 11,463 (109)(b) 11,354
Other expenses........ 23,736 738 24,474 -- 24,474
-------- ------- -------- --------
Total operating ex-
penses................. 78,337 17,950 96,287 90,330
-------- ------- -------- --------
Operating earnings
(loss)................. (3,853) (336) (4,189) 11,430
Interest expense, net... 15,019 6,374 (e) 21,393 (6,374)(e) 21,507
6,488 (f)
-------- ------- -------- --------
Loss before income taxes
(benefit).............. (18,872) (6,710) (25,582) (10,077)
Income taxes (benefit).. (6,806) (2,200) (9,006) 4,975 (g) (4,031)
-------- ------- -------- --------
Net loss ............... $(12,066) $(4,510) $(16,576) $ (6,046)
======== ======= ======== ========
Net loss per share...... $ (.75) $ (.38)
======== ========
Weighted average shares
outstanding............ 16,021 16,021
======== ========
- --------
(a) The Company has specifically identified cost reductions resulting from a
business integration plan which is expected to be implemented following
the Acquisition. The business integration plan contemplates (i) the
elimination of duplicate executive, sales and marketing, research and
engineering and administrative functions at Burns, (ii) shifting Burns'
seat assembly operations to BEA's facilities and (iii) shifting certain of
BEA's seating fabrication operations to Burns. The cost reductions
presented below for cost of sales, selling, general and administrative
expenses and research and development expenses are comprised of labor and
overhead expenses that are expected to be eliminated in conjunction with
the implementation of the business integration plan. The Company's
business integration plan provides for the events generating the cost
reductions to occur in phases, beginning in the initial year. Therefore,
the pro forma expected cost savings for the fiscal year ended February 25,
1995 reflect only a portion of the expected ongoing annual savings.
Assuming the Acquisition occurred on February 27, 1994 and the phase-in of
the business integration plan commenced as of such date, the expected cost
reductions, on a pro forma basis, for the fiscal year ended February 25,
1995 are as follows:
Cost of sales.................................................... $5,389
Selling, general and administrative.............................. 5,321
Research and development......................................... 1,223
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Upon full implementation of the integration plan, the Company estimates
aggregate annualized cost of sales savings from the business integration
plan as follows:
Cost of sales................................................... $10,368
Selling, general and administrative............................. 5,514
Research and development........................................ 1,482
See Note (b) to the pro forma combined balance sheet for purchase reserves
established related to the cost of the business integration plan.
(b) Reflects adjustments to depreciation and amortization based on the
preliminary purchase accounting allocation related to property, plant and
equipment and intangible assets acquired in connection with the
Acquisition and the difference between depreciation expense recorded by
Burns and that determined under the methods used by the Company. The
Company uses periods of 20 years for manufacturing facilities, five to
seven years for machinery and equipment and 20 years for intangible
assets.
(c) Reflects adjustments to reclassify certain Burns expenses in a manner
consistent with BEA's financial presentation, in which BEA classifies
certain engineering related expenditures as a component of research and
development as compared to a component of cost of sales.
(d) Reflects the elimination of management fees allocated from Eagle of $3,359
which is partially offset by the addition of $750 of incremental selling,
general and administrative expenses. Such incremental expense amounts are
related to legal, accounting, tax, auditing, purchasing, human resources
and management information services, which are the portion of the
allocated selling, general and administrative expenses that are estimated
by the Company as necessary to operate Burns as a division of the Company.
The balance of the remaining allocated selling, general and administrative
expenses that is being eliminated generally reflects indirect cost
allocations from Eagle for which no direct benefit was received.
(e) Burns participates in its parent's cash management system under which its
cash funding requirements are met by its parent and, therefore, Burns
itself did not have any indebtedness to nonaffiliates. Interest expense
appearing on the Burns Financial Statements is attributable to interest on
intercompany indebtedness.
(f) Represents the additional interest expense for the year ended February 25,
1995 that would have been incurred had the Acquisition and the Offering
taken place on February 27, 1994, offset by the elimination of
intercompany indebtedness of Burns owed to Eagle which will be forgiven
upon consummation of the Acquisition.
(g) Adjustments to reflect income tax effects assuming a combined state and
federal statutory income tax rate of 40%.
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PRO FORMA COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED AUGUST 26, 1995
------------------------------------------------------
ADJUSTED
PRO
BEA BURNS COMBINED ADJUSTMENTS FORMA
-------- ------- -------- ----------- --------
(DOLLARS IN THOUSANDS)
Net sales................ $113,045 $49,461 $162,506 $ -- $162,506
Cost of sales............ 76,071 40,472 116,543 (5,184)(a) 109,428
(484)(b)
(1,447)(d)
-------- ------- -------- --------
Gross profit............. 36,974 8,989 45,963 53,078
Operating expenses:
Selling, general and
administrative........ 16,743 5,969 22,712 (2,757)(a) 19,955
Management fees........ -- -- -- 350 (c) 350
Research and develop- 7,980 1,210 9,190 (741)(a) 9,896
ment.................. 1,447 (d)
Amortization........... 4,693 750 5,443 (54)(b) 5,389
-------- ------- -------- --------
Total operating ex-
penses.............. 29,416 7,929 37,345 35,590
-------- ------- -------- --------
Operating earnings....... 7,558 1,060 8,618 17,488
Interest expense, net.... 8,149 3,831 (e) 11,980 (3,831)(e) 11,369
3,220 (f)
-------- ------- -------- --------
Earnings (loss) before
income taxes (benefit).. (591) (2,771) (3,362) 6,119
Income taxes (benefit)... (216) (905) (1,121) 3,569 (g) 2,448
-------- ------- -------- --------
Net earnings (loss)...... $ (375) $(1,866) $ (2,241) $ 3,671
======== ======= ======== ========
Net earnings (loss) per
share................... $ (.02) -- -- $ .23
======== ======= ======== ========
Weighted average shares
outstanding............. 16,108 -- -- 16,108
======== ======= ======== ========
- --------
(a) The Company has specifically identified cost reductions resulting from a
business integration plan which is expected to be implemented following
the Acquisition. The business integration plan contemplates (i) the
elimination of duplicate executive, sales and marketing, research and
engineering and administrative functions at Burns, (ii) shifting Burns'
seat assembly operations to BEA's facilities and (iii) shifting certain of
BEA's seating fabrication operations to Burns. The cost reductions
presented below for cost of sales, selling, general and administrative
expenses and research and development expenses are comprised of labor and
overhead expenses that are expected to be eliminated in conjunction with
the implementation of the business integration plan. Assuming the
acquisition occurred on February 27, 1994 and the phase-in of the business
integration plan commenced as of such date, the expected cost reductions,
on a pro forma basis, for the six months ended August 26, 1995 are as
follows:
Cost of sales.................................................... $5,184
Selling, general and administrative.............................. 2,757
Research and development......................................... 741
Upon full implementation of the business integration plan, the Company
estimates aggregate annualized cost of sales savings from the business
integration plan as follows:
Cost of sales................................................... $10,368
Selling, general and administrative............................. 5,514
Research and development........................................ 1,482
See Note (b) to the pro forma combined balance sheet for purchase reserves
established related to the cost of the business integration plan.
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(b) Reflects adjustments to depreciation and amortization based on the
preliminary purchase accounting allocation related to property, plant and
equipment and intangible assets acquired in connection with the
Acquisition and the difference between depreciation expense recorded by
Burns and that determined under the methods used by the Company. The
Company uses periods of 20 years for manufacturing facilities, five to
seven years for machinery and equipment and 20 years for intangible
assets.
(c) Reflects incremental associated selling, general and administrative
expenses which are estimated by the Company as necessary to operate Burns
as a business unit of the Company.
(d) Reflects adjustments to reclassify certain Burns expenses in a manner
consistent with BEA's financial presentation, in which BEA classifies
certain engineering related expenditures as a component of research and
development as compared to a component of cost of sales.
(e) Burns participates in its parent's cash management system under which its
cash funding requirements are met by its parent and, therefore, Burns
itself did not have any indebtedness to nonaffiliates. Interest expense
appearing on the Burns financial statements is attributable to the
intercompany indebtedness.
(f) Represents the additional interest expense for the six months ended August
26, 1995 that would have been incurred had the Acquisition and the
Offering taken place on February 27, 1994, offset by the elimination of
intercompany indebtedness of Burns owed to Eagle which will be forgiven
upon consummation of the Acquisition.
(g) Adjustments to reflect income tax effects assuming a combined state and
federal statutory income tax rate of 40%.
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PRO FORMA COMBINED BALANCE SHEET (UNAUDITED)
BEA AS OF BURNS AS OF PRO FORMA
AUGUST 26, JUNE 30, COMBINED
1995 1995 ADJUSTMENTS BALANCE
---------- ----------- ----------- ---------
(DOLLARS IN THOUSANDS)
ASSETS:
Current Assets:
Cash .......................... $ 7,490 $ 129 $ -- $ 7,619
Accounts receivable............ 44,249 1,825 15,637 (c) 61,711
Inventories.................... 91,885 17,770 -- 109,655
Deferred income taxes.......... 5,779 -- -- 5,779
Other current assets........... 7,608 2,758 -- 10,366
-------- -------- --------
Total current assets......... 157,011 22,482 195,130
Net property and equipment...... 64,466 18,776 (7,500)(b) 75,742
Intangibles and other assets.... 173,372 56,020 7,000 (a) 206,342
18,500 (b)
(48,550)(c)
-------- -------- --------
$394,849 97,278 $477,214
======== ======== ========
LIABILITIES & STOCKHOLDERS' EQ-
UITY:
Liabilities:
Accounts payable............... $ 38,614 $ 10,056 $ -- $ 48,670
Other current liabilities...... 20,939 6,621 7,000 (b) 34,560
Income taxes payable........... 385 -- -- 385
Current portion of long-term
debt.......................... 5,090 -- -- 5,090
-------- -------- --------
Total current liabilities.... 65,028 16,677 88,705
Long-term bank revolver......... 63,435 -- (25,500)(a) 37,935
Long-term debt.................. 125,000 -- 75,000 (a) 200,000
Deferred income taxes........... 10,953 -- -- 10,953
Advances from affiliate......... -- 81,331 (81,331)(c) --
Other long-term liabilities..... 4,234 5,188 4,000 (b) 13,422
-------- -------- --------
Total Liabilities............ 268,650 103,196 351,015
Stockholders' equity
Preferred stock................ -- -- -- --
Common stock................... 161 1 (1)(c) 161
Additional paid-in capital..... 119,719 -- -- 119,719
Retained earnings (deficit)..... 7,045 (5,919) 5,919 (c) 7,045
Cumulative currency translation
adjustment..................... (726) -- (726)
-------- -------- --------
Total stockholders' equity... 126,199 (5,918) 126,199
-------- -------- --------
$394,849 $ 97,278 $477,214
======== ======== ========
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- --------
(a) Reflects the incurrence of debt required to finance the Acquisition and
the net cash resulting from such borrowings after payment of the purchase
price and acquisition costs as follows:
Gross proceeds from the Offering.................................. $75,000
Offering discount, consent, bank amendment and acquisition related
fees.............................................................. (7,000)
Repayment of unsecured bank borrowings and a portion of the exist-
ing bank credit facility.......................................... (25,500)
Cost of Acquisition............................................... (42,500)
(b) The Acquisition will be accounted for as a purchase pursuant to APB
Opinion No. 16, "Business Combinations." The purchase cost will be
allocated to the assets and the liabilities of the Burns based on their
relative fair values. Such allocations are subject to final determination
based on valuations and other studies to be performed prior to the
Closing. The final values may differ from those set forth below.
Purchase cost:
Cash.............................................................. $ 42,500
Purchase accounting reserves...................................... 11,000
Less estimated book value of net assets to be purchased........... (42,500)
--------
Excess of purchase cost over book value........................... $ 11,000
========
Allocation of excess of purchase cost over book value to assets of
the Company:
Property, plant and equipment, net................................ $ (7,500)
Other assets, primarily patents, processes, trademarks and other
intellectual properties.......................................... 18,500
--------
Total............................................................. $ 11,000
========
Purchase accounting reserves include the costs to implement the business
integration plan, including severance, relocation, systems conversion and
other business acquisition related costs.
(c) Eliminates advances from affiliates and Burns' intangible assets as of the
Closing and reflects the purchase of Burns' trade accounts receivable held
in trust pursuant to Eagle's existing asset securitization program.
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