1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 8-K
------------------------
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): AUGUST 10, 2001
BE AEROSPACE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
<Table>
DELAWARE 0-18348 06-1209796
(STATE OR OTHER (COMMISSION (I.R.S. EMPLOYER
JURISDICTION OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
</Table>
<Table>
1400 CORPORATE CENTER WAY, WELLINGTON, FLORIDA 33414
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</Table>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (561) 791-5000
EXHIBIT INDEX APPEARS ON PAGE 2.
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2
ITEM 5. OTHER EVENTS.
In August 2001, BE Aerospace, Inc., a Delaware corporation ("B/E"), entered
into an agreement to acquire M&M Aerospace Hardware, Inc. pursuant to an
Acquisition Agreement dated August 10, 2001 among B/E and the shareholders of
M&M Aerospace Hardware, Inc. ("M&M") for an initial purchase price of $177
million. A copy of the Acquisition Agreement is attached to this report as
Exhibit 2.1. The $177 million purchase price will consist of $152 million in
cash and $25 million in B/E common stock. The selling shareholders have the
opportunity to earn an additional amount of up to $23 million in B/E common
stock based on M&M's performance. The acquisition remains subject to closing
conditions and regulatory approvals and there can be no assurance that this
transaction will occur. Closing is expected in approximately one month, at which
time about $80 million of the purchase price will be used to repay all of M&M's
existing borrowings. M&M Aerospace Hardware, Inc. has a strong competitive
position, currently ranking as one of the top five distributors of aerospace
fasteners worldwide, and the world's leading independent aftermarket distributor
of such products. The company generates nearly 70 percent of its sales from the
aftermarket and has more than 3,700 customers worldwide. Offering a broad
product line of over 93,000 separate items, M&M is a distributor for virtually
every leading manufacturer of aerospace fasteners. The company was established
in 1974 and is based in Miami, Florida, near B/E's corporate headquarters and
several of B/E's principal manufacturing facilities.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business to be Acquired.
The following historical consolidated financial statements and notes
thereto are of M&M Aerospace Hardware, Inc. and are attached hereto at pages
F-1-F-18.
- Report of Independent Certified Public Accountants.
- Consolidated Balance Sheets as of December 31, 2000 and December 31,
1999.
- Consolidated Statements of Income for the years ended December 31, 2000,
1999 and 1998.
- Consolidated Statements of Stockholders' Equity for the years ended
December 31, 2000, 1999 and 1998.
- Consolidated Statements of Cash Flows for the years ended December 31,
2000, 1999 and 1998.
- Notes to Consolidated Financial Statements.
- Consolidated Balance Sheets as of March 31, 2001 and March 31, 2000
(unaudited).
- Consolidated Statements of Income for the three months ended March 31,
2001 and 2000 (unaudited).
- Consolidated Statements of Cash Flows for the three months ended March
31, 2001 and 2000 (unaudited).
- Notes to Consolidated Financial Statements.
- Consolidated Balance Sheets as of June 30, 2001 and June 30, 2000
(unaudited).
- Consolidated Statements of Income for the six months ended June 30, 2001
and 2000 (unaudited).
- Consolidated Statements of Cash Flows for the six months ended June 30,
2001 and 2000 (unaudited).
- Notes to Consolidated Financial Statements.
(b) Pro Forma Financial Information
The following unaudited pro forma consolidated and combined financial
statements and notes thereto are attached hereto at pages PF-1 to PF-6.
- Pro Forma Combined Condensed Statement of Earnings for the year ended
February 24, 2001 and Notes.
2
3
- Pro Forma Combined Condensed Statement of Earnings for the three months
ended May 26, 2001 and Notes.
- Pro Forma Combined Condensed Balance Sheet as of May 26, 2001 and Notes.
(c) Exhibits.
<Table>
<Caption>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
2.1 Acquisition Agreement dated as of August 10, 2001 among BE
Aerospace, Inc., a Delaware Company and the shareholders of
M&M Aerospace Hardware, Inc.
23.1 Consent of PricewaterhouseCoopers, LLP dated August 21,
2001.
</Table>
3
4
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 hereunto duly authorized.
BE AEROSPACE, INC.
By: /s/ THOMAS P. MCCAFFREY
------------------------------------
Name: Thomas P. McCaffrey
Title: Corporate Senior Vice
President of
Administration and Chief Financial
Officer
Date: August 21, 2001
4
5
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders and the Board of Directors of
M&M Aerospace Hardware, Inc.:
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, stockholders' equity, and cash flows
present fairly, in all material respects, the financial position of M&M
Aerospace Hardware, Inc. and its subsidiaries as of December 31, 2000 and 1999,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 2000 in conformity with accounting
principles generally accepted in the United States of America. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
April 12, 2001, except for
Note 9, as to which the
date is August 10, 2001
F-1
6
M&M AEROSPACE HARDWARE, INC.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2000 AND 1999
<Table>
<Caption>
2000 1999
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents................................. $ 78,270 $ 510,973
Accounts receivable, net of allowance for doubtful
accounts of $150,000 in 2000 and $100,000 in 1999...... 13,774,414 10,976,967
Inventory, net............................................ 93,551,349 96,247,311
Prepaid expenses and other................................ 38,457 46,902
------------ ------------
Total current assets.............................. 107,442,490 107,782,153
Property and equipment, net................................. 27,865,874 22,247,435
Property and equipment held for sale........................ 7,326,471 --
Other....................................................... 750,792 329,266
------------ ------------
Total assets...................................... $143,385,627 $130,358,854
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 3,960,993 $ 4,299,627
Accrued expenses.......................................... 1,436,754 1,304,989
Current maturities of long-term debt...................... 8,025,365 59,252,253
------------ ------------
Total current liabilities......................... 13,423,112 64,856,869
------------ ------------
Long-term debt, less current portion........................ 73,271,535 13,917,588
------------ ------------
Commitments (Note 6)
Stockholders' equity:
Common stock, par value $.01 per share; 100,000 shares
authorized, issued and outstanding..................... 1,000 1,000
Capital contributed in excess of par value................ 2,319,500 2,319,500
Retained earnings......................................... 54,370,480 49,263,897
------------ ------------
56,690,980 51,584,397
------------ ------------
Total liabilities and stockholders' equity........ $143,385,627 $130,358,854
============ ============
</Table>
The accompanying notes are an integral part of these financial statements.
F-2
7
M&M AEROSPACE HARDWARE, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
<Table>
<Caption>
2000 1999 1998
------------ ----------- ------------
Sales, net........................................ $100,206,322 $97,740,892 $102,292,118
Cost of sales..................................... 55,161,853 52,980,633 54,452,884
------------ ----------- ------------
Gross profit.................................... 45,044,469 44,760,259 47,839,234
Operating expenses................................ 22,396,366 19,602,376 18,567,882
------------ ----------- ------------
Income from operations.......................... 22,648,103 25,157,883 29,271,352
Other income (expense):
Miscellaneous income............................ 15,330 2,716 42,773
Interest expense, net of capitalized interest... (5,556,850) (4,478,027) (3,688,016)
------------ ----------- ------------
Net income.............................. $ 17,106,583 $20,682,572 $ 25,626,109
============ =========== ============
</Table>
The accompanying notes are an integral part of these financial statements.
F-3
8
M&M AEROSPACE HARDWARE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
<Table>
<Caption>
CAPITAL
COMMON STOCK CONTRIBUTION TOTAL
----------------- IN EXCESS OF RETAINED STOCKHOLDERS'
SHARES AMOUNT PAR VALUE EARNINGS EQUITY
------- ------ ------------ ------------ -------------
Balance at December 31, 1997... 100,000 $1,000 $2,319,500 $ 29,955,216 $ 32,275,716
Distributions................ -- -- -- (12,000,000) (12,000,000)
Net income................... -- -- -- 25,626,109 25,626,109
------- ------ ---------- ------------ ------------
Balance at December 31, 1998... 100,000 1,000 2,319,500 43,581,325 45,901,825
Distributions................ -- -- -- (15,000,000) (15,000,000)
Net income................... -- -- -- 20,682,572 20,682,572
------- ------ ---------- ------------ ------------
Balance at December 31, 1999... 100,000 1,000 2,319,500 49,263,897 51,584,397
Distributions................ -- -- -- (12,000,000) (12,000,000)
Net income................... -- -- -- 17,106,583 17,106,583
------- ------ ---------- ------------ ------------
Balance at December 31, 2000... 100,000 $1,000 $2,319,500 $ 54,370,480 $ 56,690,980
======= ====== ========== ============ ============
</Table>
The accompanying notes are an integral part of these financial statements.
F-4
9
M&M AEROSPACE HARDWARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
<Table>
<Caption>
2000 1999 1998
----------- ----------- ------------
Cash flows from operating activities:
Net income....................................... $17,106,583 $20,682,572 $ 25,626,109
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................. 853,320 731,275 765,554
Bad debt expense.............................. 253,807 103,288 82,980
Inventory obsolescence provision.............. 300,000 1,300,000 --
Changes in operating assets and liabilities:
Accounts receivable........................... (3,051,254) 3,123,789 (1,919,130)
Inventory..................................... 2,395,962 (14,493,096) (28,628,980)
Prepaid expenses.............................. 8,445 (24,696) 2,271
Other assets.................................. (421,526) (154,610) (30,865)
Accounts payable.............................. (338,634) (3,897,836) 5,890,542
Accrued expenses.............................. 131,765 182,903 322,851
----------- ----------- ------------
Net cash provided by operating
activities............................. 17,238,468 7,553,589 2,111,332
----------- ----------- ------------
Cash flows from investing activities:
Purchase of property and equipment............... (13,798,230) (8,071,281) (6,268,646)
----------- ----------- ------------
Net cash used in investing activities.... (13,798,230) (8,071,281) (6,268,646)
----------- ----------- ------------
Cash flows from financing activities:
Proceeds from notes.............................. 15,738,215 11,727,216 5,083,000
Principal payments on notes...................... (572,949) (5,418,782) (425,040)
Principal (payments) proceeds on revolving line
of credit, net................................ (7,038,207) 9,264,228 11,582,063
Distributions.................................... (12,000,000) (15,000,000) (12,000,000)
----------- ----------- ------------
Net cash (used in) provided by financing
activities............................. (3,872,941) 572,662 4,240,023
----------- ----------- ------------
(Decrease) increase in cash and cash equivalents... (432,703) 54,970 82,709
Cash and cash equivalents at beginning of year..... 510,973 456,003 373,294
----------- ----------- ------------
Cash and cash equivalents at end of year........... $ 78,270 $ 510,973 $ 456,003
=========== =========== ============
Supplemental disclosure:
Cash paid during the year for interest, net of
amount capitalized............................ $ 5,588,917 $ 4,321,846 $ 3,578,403
=========== =========== ============
</Table>
The accompanying notes are an integral part of these financial statements.
F-5
10
1. NATURE OF BUSINESS
M&M Aerospace Hardware, Inc. and its wholly owned subsidiaries (the
"Company") are primarily engaged in the wholesale distribution of aerospace
fasteners throughout the world. Foreign sales represent approximately 36% of
sales in 2000, 32% of sales in 1999 and 25% of sales in 1998.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of M&M Aerospace
Hardware, Inc. and its wholly owned subsidiaries: M&M Aerospace Hardware Ltd.,
M&M Aerospace Hardware GmbH and M&M Aerospace Hardware SarL. All significant
intercompany balances and transactions have been eliminated.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.
Inventory
Inventory consists primarily of aerospace fasteners held for sale and is
recorded at the lower of average cost or market. The Company provides a reserve
for potentially excess and obsolete inventory based on management's estimates.
The inventory and related reserve is reviewed periodically and as adjustments
become necessary, they are reported in earnings in the periods in which they
become known. Reserves for potentially excess and obsolete inventory was
approximately $1,600,000 and $1,300,000 at December 31, 2000 and 1999,
respectively.
Property and Equipment
Property and equipment placed in service are recorded at cost and includes
interest on funds borrowed to finance major capital additions. Capitalized
interest was $1,350,000 and $476,000 for the years ended December 31, 2000 and
1999, respectively. Depreciation and amortization are computed using the
straight-line method over the shorter of the estimated useful lives of the
related assets or lease terms. Repair and maintenance costs are charged to
expense as incurred; improvements and betterments are capitalized. Upon the sale
or retirement of property and equipment, the accounts are relieved of the cost
and accumulated depreciation, and any resulting gains or losses are recognized.
Property and equipment, once deemed to be held for sale, are no longer
depreciated and are recorded as property and equipment held for sale at the
lesser of their net book value at the time or their estimated selling price, net
of selling costs.
Revenue Recognition
Sales are recorded upon shipment of the product and when all conditions of
the sale are met. Adjustments to arrive at net sales are primarily allowances
for discounts and returns.
Income Taxes
The Company has elected to be taxed as an S Corporation. In lieu of
corporation income taxes, the stockholders of an S Corporation are liable for
individual income taxes on their share of the Company's taxable income.
Accordingly, no provision for income taxes has been made in the accompanying
statements of income and retained earnings.
Interest rate swap agreements
The Company accounts for interest rate swap agreements outstanding on the
accrual basis. Under accrual accounting, interest payments receivable and
payable under the terms of the interest rate swap agreements are accrued over
the period to which the payments relate. Interest payments accrued on the swap
contracts and
F-6
11
any swap fees paid at the inception of the contracts are treated as an
adjustment of interest expense on the underlying liability.
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133 "Accounting for Derivative Instruments and Hedging Activities", as
amended by SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities -- Deferral of the Effective Date of FASB Statement No. 133" and by
SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities". The effective date of SFAS 133, as amended, is all fiscal quarters
of fiscal years beginning after June 15, 2000 (January 1, 2001 for the Company).
SFAS No. 133, as amended, requires that all derivative instruments be recorded
on the balance sheet at their fair value, with changes in fair value recorded
each period in current earnings or comprehensive income, depending on whether
the derivative is designated as part of a hedge transaction and, if it is, the
type of hedge transaction.
The Company has only limited involvement in derivatives, represented by
interest rate swap agreements on certain variable rate debt. Under this
standard, the Company is required to record the change in fair value of the swap
agreements on the balance sheet as an asset or liability with the corresponding
gain or loss recorded in other comprehensive income. Amounts accumulated in
other comprehensive income are reclassified as earnings when the related
interest payments affect earnings. Management believes that the adoption of this
statement will not have a significant effect in the Company's financial position
and results of operations.
Concentration of Risk
Credit to customers is extended based on an evaluation of the customer's
financial condition. Credit losses are provided for in the statement of income
and retained earnings through a charge to operations. Credit terms are
consistent with the industry and losses from credit sales have consistently been
within management's expectations.
Use of Estimates
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 of
assets and liabilities and disclosure of contingent assets and liabilities at
the dates of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Such estimates consist primarily of the
allowance for doubtful accounts, the estimated useful lives of the property and
equipment and accrued expenses. Actual results could differ from those
estimates.
3. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 2000 and 1999, consist of the
following:
<Table>
<Caption>
ESTIMATED
LIFE 2000 1999
--------- ----------- -----------
Land........................................... -- $ 7,878,882 $ 8,170,523
Parking lot.................................... 15 232,804 232,804
Buildings...................................... 30 22,699,691 5,875,485
Construction in Progress....................... -- -- 7,723,284
Furniture and equipment........................ 5-10 9,472,478 4,484,661
Leasehold improvements......................... 2-7 35,338 34,206
Transportation equipment....................... 5 94,426 94,426
----------- -----------
40,413,619 26,615,389
Less: accumulated depreciation and
amortization................................. (5,221,274) (4,367,954)
----------- -----------
$35,192,345 $22,247,435
=========== ===========
</Table>
At December 31, 2000, the Company has certain land, building, and furniture
and equipment for sale. The adjusted net book value of these items is $7,326,471
at December 31, 2000.
F-7
12
4. LONG-TERM DEBT
Long-term debt at December 31, 2000 and 1999, consists of the following:
<Table>
<Caption>
2000 1999
----------- ------------
Revolving line of credit, interest payable at LIBOR plus
1.7%, adjusted monthly, principal due June 30, 2000......... $ -- $ 57,502,207
Syndicated revolving line of credit, interest payable at
prime plus 1.0% or the Eurodollar Rate plus 2.50% (9.27% at
December 31, 2000), principal due at June 2003.
Collateralized by certain property.......................... 48,400,000 --
Syndicated term note, interest payable at prime plus 1.15%
or the Eurodollar Rate plus 2.65% (9.29% at December 31,
2000). Principal payments of $166,667 are due monthly
through June 2003 at which time the remaining principal
balance is due. Collateralized by certain property.......... 9,000,000 --
Swingline loan, interest payable at LIBOR plus 2.50% (9.15%
at December 31, 2000), principal due at June 2003.
Collateralized by certain property.......................... 2,064,000 --
Mortgage note, interest payable monthly at prime or LIBOR
plus 2% adjusted daily, (8.82% at December 31, 2000) at the
Company's option Principal payments of $55,925 to begin on
April 2001 through April 2006 at which time the remaining
principal balance is due. Collateralized by certain
property.................................................... 11,844,459 7,235,478
Mortgage note, interest payable monthly at LIBOR plus 1.7%,
adjusted daily (8.26% at December 31, 2000). Principal
payments of $54,167 due through October 2004 at which time
the remaining principal balance is due. Collateralized by
certain property............................................ 2,545,833 --
Notes payable to certain related parties, interest payable
quarterly at rates ranging from 7-8%, principal due at
various dates through January 2004.......................... 402,000 591,500
----------- ------------
74,256,292 65,329,185
----------- ------------
MORTGAGES RELATED TO ASSETS HELD FOR SALE:
Mortgage note, interest payable monthly at prime or LIBOR
plus 2%, adjusted daily, (8.82% at December 31, 2000), at
the Company's option Principal and interest due April 2001,
collateralized by certain property.......................... 3,397,000 3,397,000
Mortgage note, interest plus $10,420 principal payable
monthly through October 2003, at which time the remaining
principal balance is due Interest payable monthly at prime
or LIBOR plus 2%, adjusted daily, (8.56% at December 31,
2000), at the Company's option, collateralized by certain
property.................................................... 2,093,620 2,218,660
Mortgage note, interest plus $25,000 principal payable
monthly through April 2001, at which time the remaining
principal balance is due. Interest payable at either prime
or LIBOR plus 2%, adjusted monthly, (8.73% at December 31,
2000), at the Company's option, collateralized by certain
property.................................................... 950,000 1,225,000
Mortgage note, interest plus $33,304 principal payable
monthly through April 2002, at which time the remaining
principal balance is due. Interest payable monthly at prime
or LIBOR plus 2% adjusted daily, (8.82% at December 31,
2000), at the Company's option, collateralized by certain
property.................................................... 599,988 999,996
----------- ------------
7,040,608 7,840,656
----------- ------------
81,296,900 73,169,841
Less current portion........................................ (8,025,365) (59,252,253)
----------- ------------
$73,271,535 $ 13,917,588
=========== ============
</Table>
F-8
13
The Company's syndicated revolving line of credit (the "Revolver") expires
June 30, 2003. The Revolver provides for borrowings not to exceed $70,000,000
(the Revolver at December 31, 1999 provided for borrowings not to exceed
$65,000,000). Advances made under the Revolver are based on a formula of
eligible inventories and trade receivables. At December 31, 2000, the Company
had availability under the Revolver of approximately $3,131,000. The Revolver
contains an unused line fee of .125% per annum, payable quarterly on the
unutilized portion.
The Company's swingline loan (the "Swingline") expires June 30, 2003. The
Swingline provides for borrowings not to exceed $5,000,000 or, in combination
with outstanding balances under the Revolver, the maximum allowable under the
Revolver. The Swingline functions in combination with the Company's operating
account whereby all deposits made are applied against any outstanding balance
and checks/withdrawals presented are paid with proceeds from the Swingline.
Interest on the Swingline is payable monthly, and at maturity, at the one month
LIBOR rate plus an applicable percentage. Through March 30, 2001 the applicable
percentage for the Swingline is initially set at 2.50%. After March 30, 2001,
the applicable percentage for the Swingline is adjusted quarterly based on the
Company's Leverage Ratio, as defined by the lenders, ranging from 1.95% to
2.75%.
The Company's syndicated term note (the "Term Note") is due to the same
lenders as the Revolver and Swingline (collectively, the "Debt"). The Debt is
collateralized by substantially all the assets of the Company and contains
covenants requiring the Company, among other things, to comply with certain
financial ratios, as defined by the lenders, and limit distributions to its
stockholders. As of December 31, 2000 the Company received a waiver from the
lenders for certain violations of financial ratios. The Revolver and Term Note
allows the Company to have advances charged interest at either (i) the greater
of the Federal Funds Rate plus 0.5% plus an applicable percentage or Prime plus
an applicable percentage or (ii) the Eurodollar Rate (the quotient of LIBOR
divided by one less the Eurodollar Reserve Percentage) plus an applicable
percentage. Through March 30, 2001, the applicable percentage for the Revolver
is initially set at 1.00% and 2.50% for methods (i) and (ii) above,
respectively. After March 30, 2001, the applicable percentages for the Revolver
are adjusted quarterly based on the Company's Leverage Ratio, as defined by the
lenders, ranging from .45% to 1.25% for method (i) and from 1.95% to 2.75% for
method (ii). The applicable percentages for the Term Note are fixed at 1.15% and
2.65% for methods (i) and (ii) above, respectively.
Under method (i) above, interest is payable monthly. Under method (ii)
above, interest is payable at contract maturity which is not to exceed six
months or June 30, 2003.
The aggregate maturities of long-term debt at December 31, 2000 are as
follows:
<Table>
<Caption>
YEAR ENDING
DECEMBER 31,
- ------------
2001..................................................... $ 8,025,365
2002..................................................... 3,846,139
2003..................................................... 58,628,651
2004..................................................... 1,468,944
2005..................................................... 671,111
Thereafter.................................................. 8,656,690
-----------
$81,296,900
===========
</Table>
At December 31, 2000 and 1999, the Company had outstanding interest rate
swap agreements with a commercial bank, having a total notional principal amount
of approximately $36,247,000 and $26,280,000, respectively. These amounts
decrease over time. These agreements effectively fix the Company's interest rate
exposure on the respective notional principal amounts of its floating rate debt
to rates ranging from 6.0% to 7.5%. These agreements terminate at various times
through December 29, 2003. The Company is exposed to credit loss in the event of
nonperformance by the counter-parties to the interest rate swap agreement.
However, the Company does not anticipate nonperformance by the counter-parties.
F-9
14
5. EMPLOYEE BENEFIT PLAN
The Company has a contributory profit sharing plan (the "Plan") which
qualifies under section 401(k) of the Internal Revenue Code for employees
meeting certain eligibility requirements. Contributions to the Plan are
determined by the Board of Directors prior to the last day of each calendar
year. The Company's contribution was approximately $345,000, $266,000 and
$292,000 for the years ended December 31, 2000, 1999 and 1998, respectively.
6. COMMITMENTS
The Company leases sales offices in California, Kansas and Texas and
warehouse space in Oklahoma, all pursuant to non-cancelable operating leases.
These lease agreements generally require that the Company pay applicable
property taxes, insurance, and maintenance costs. Rental expense for the years
ended December 31, 2000, 1999 and 1998 was approximately $164,000, $132,000 and
$69,000, respectively.
Future minimum rental payments required under the above operating leases at
December 31, 2000 are as follows:
<Table>
<Caption>
YEAR ENDING
DECEMBER 31,
- ------------
2001..................................................... $171,584
2002..................................................... 80,321
2003..................................................... 45,052
--------
$296,957
========
</Table>
The Company is subject to legal proceedings and claims that arise in the
ordinary course of business. In the opinion of management, the amount of the
potential liability, if any, with respect to these matters will not have a
material effect on the financial statements of the Company.
7. RELATED PARTY TRANSACTIONS
The Company sold and purchased certain of its products to and from M&M
Manufacturing Corporation (MFG), principally at competitive prices. MFG was
owned by one of the stockholders of the Company until its sale in February 1999.
Purchases from MFG for the years ended December 31, 1999 and 1998 were
approximately $188,000 and $4,347,000, respectively.
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company has a number of financial instruments, none of which are held
for trading purposes. The Company estimates that the fair value of all financial
instruments at December 31, 2000 and 1999 does not differ materially from the
aggregate carrying values of its financial instruments recorded in the
accompanying consolidated balance sheet.
The estimated fair value amounts have been determined by the Company using
available market information and appropriate valuation methodologies.
Considerable judgment is necessarily required in interpreting market data to
develop the estimates of fair value and, accordingly, the estimates are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange.
9. SUBSEQUENT EVENTS
In June and July 2001, the Company sold certain land, building and
furniture and equipment for approximately $8,855,000, before selling costs. The
net proceeds of the sale were used to reduce debt.
In August 2001, the stockholders of the Company entered into a stock
purchase agreement to sell the Company to BE Aerospace, Inc.
F-10
15
M&M AEROSPACE HARDWARE, INC.
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2001 AND 2000
(UNAUDITED)
<Table>
<Caption>
2001 2000
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents................................. $ -- $ --
Accounts receivable, net.................................. 15,543,821 13,716,095
Inventory, net............................................ 91,172,965 96,888,737
Prepaid expenses and other................................ 128,028 29,506
------------ ------------
Total current assets.............................. 106,844,814 110,634,338
Property and equipment, net................................. 28,479,580 25,729,302
Property and equipment held for sale........................ 7,326,471 --
Other....................................................... 686,327 294,226
------------ ------------
Total assets...................................... $143,337,192 $136,657,866
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 2,172,107 $ 3,545,303
Bank Overdraft............................................ 779,667 1,620,120
Accrued expenses.......................................... 1,834,086 1,551,166
Current maturities of long-term debt...................... 8,118,140 60,401,273
------------ ------------
Total current liabilities......................... 12,904,000 67,117,862
------------ ------------
Long-term debt, less current portion........................ 70,876,831 16,148,797
------------ ------------
Commitments
Stockholders' equity:
Common stock, par value $.01 per share; 100,000 shares
authorized, issued and outstanding..................... 1,000 1,000
Capital contributed in excess of par value................ 2,319,500 2,319,500
Retained earnings......................................... 57,235,861 51,070,707
------------ ------------
59,556,361 53,391,207
------------ ------------
Total Liabilities and Stockholders' Equity........ $143,337,192 $136,657,866
============ ============
</Table>
The accompanying notes are an integral part of these financial statements.
F-11
16
M&M AEROSPACE HARDWARE, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED
MARCH 31, 2001 AND MARCH 31, 2000
(UNAUDITED)
<Table>
<Caption>
2001 2000
------------ ------------
Sales, Net.................................................. $ 30,311,646 $ 24,971,883
Cost of Sales............................................... (16,558,186) (13,466,497)
------------ ------------
Gross Profit...................................... 13,753,460 11,505,386
Operating Expenses.......................................... (6,256,544) (5,466,143)
------------ ------------
Income from Operations............................ 7,496,916 6,039,243
Other Income (expense):
Miscellaneous income...................................... 74,803 3,403
Interest expense (net of capitalized interest)............ (1,706,338) (1,235,836)
------------ ------------
Net Income........................................ $ 5,865,381 $ 4,806,810
============ ============
</Table>
The accompanying notes are an integral part of these financial statements.
F-12
17
M&M AEROSPACE HARDWARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
MARCH 31, 2001 AND MARCH 31, 2000
(UNAUDITED)
<Table>
<Caption>
2001 2000
----------- -----------
Cash flows from operating activities:
Net income................................................ $ 5,865,381 $ 4,806,810
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 431,858 184,698
Bad debt expense....................................... 8,883 5,074
Changes in operating assets and liabilities:
Accounts receivable.................................. (1,778,290) (2,744,201)
Inventory............................................ 2,378,384 (641,426)
Prepaid expenses..................................... (89,571) 17,395
Other assets......................................... 64,465 35,040
Accounts payable..................................... (1,788,886) (754,324)
Accrued expenses..................................... 397,332 246,177
----------- -----------
Net cash provided by operating activities......... 5,489,556 1,155,243
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment........................ (1,045,564) (3,666,565)
----------- -----------
Net cash used in investing activities............. (1,045,564) (3,666,565)
----------- -----------
Cash flows from financing activities:
Bank overdraft............................................ 779,667 1,620,120
Proceeds from notes....................................... -- 2,262,467
Principal payments on notes............................... (2,301,929) (106,260)
Principal proceeds from revolving line of credit, net..... -- 1,224,022
Distributions............................................. (3,000,000) (3,000,000)
----------- -----------
Net cash (used in) provided by financing
activities..................................... (4,522,262) 2,000,349
----------- -----------
(Decrease) Increase in cash and cash equivalents............ (78,270) (510,973)
Cash and cash equivalents at beginning of period............ 78,270 510,973
----------- -----------
Cash and cash equivalents at end of period.................. $ -- $ --
=========== ===========
</Table>
The accompanying notes are an integral part of these financial statements.
F-13
18
M&M AEROSPACE HARDWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of M&M
Aerospace Hardware, Inc. (the "Company") presented herein do not include all
disclosures required by accounting principles generally accepted in the United
States of America for a complete set of financial statements. In the opinion of
management, these financial statements include all adjustments, including normal
recurring adjustments, necessary for a fair presentation of the results of
interim periods.
The results of operations for the three months ended March 31, 2001 are not
necessarily indicative of the results of operations to be expected for the year
ended December 31, 2001. The unaudited consolidated financial statements should
be read in conjunction with the consolidated financial statements and footnotes
thereto included in the Current Report on Form 8-K as filed by BE Aerospace,
Inc. with the Securities and Exchange Commission on August 21, 2001.
2. SUBSEQUENT EVENTS
In June and July 2001, the Company sold certain land, building and
furniture and equipment for approximately $8,855,000, before selling costs. The
net proceeds of the sale were used to reduce debt.
In August 2001, the stockholders of the Company entered into a stock
purchase agreement to sell the Company to BE Aerospace, Inc.
F-14
19
M&M AEROSPACE HARDWARE, INC.
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2001 AND JUNE 30, 2000
(UNAUDITED)
<Table>
<Caption>
2001 2000
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents................................. $ 2,217,006 $ 310,581
Accounts receivable, net.................................. 15,147,472 14,230,684
Inventory, net............................................ 92,952,413 96,399,346
Prepaid expenses and other................................ 249,393 36,753
------------ ------------
Total current assets................................... 110,566,284 110,977,364
Property and equipment, net................................. 28,473,237 29,548,263
Property and equipment held for sale........................ 4,069,597 --
Other....................................................... 637,139 866,851
------------ ------------
Total assets........................................... $143,746,257 $141,392,478
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 3,530,459 $ 5,334,438
Accrued expenses.......................................... 3,158,275 1,394,685
Current maturities of long-term debt...................... 6,621,727 7,453,839
------------ ------------
Total current liabilities.............................. 13,310,461 14,182,962
------------ ------------
Long-term debt, less current portion........................ 68,119,340 71,454,767
------------ ------------
Commitments
Stockholders' equity:
Common stock, par value $.01 per share; 100,000 shares
authorized, issued and outstanding..................... 1,000 1,000
Capital contributed in excess of par value................ 2,319,500 2,319,500
Retained earnings......................................... 59,995,956 53,434,249
------------ ------------
62,316,456 55,754,749
------------ ------------
Total Liabilities and Stockholders' Equity............. $143,746,257 $141,392,478
============ ============
</Table>
The accompanying notes are an integral part of these financial statements.
F-15
20
M&M AEROSPACE HARDWARE, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND JUNE 30, 2000
(UNAUDITED)
<Table>
<Caption>
2001 2000
------------ ------------
Sales, Net.................................................. $ 59,545,456 $ 50,346,871
Cost of Sales............................................... (32,395,238) (27,357,820)
------------ ------------
Gross Profit........................................... 27,150,218 22,989,051
Operating Expenses.......................................... (12,547,342) (10,371,605)
------------ ------------
Income from Operations................................. 14,602,876 12,617,446
Other Income (expense):
Miscellaneous income...................................... 81,795 11,774
Interest expense (net of capitalized interest)............ (3,396,546) (2,458,870)
Gain on sale of assets.................................... 337,351 --
------------ ------------
Net Income............................................. $ 11,625,476 $ 10,170,350
============ ============
</Table>
The accompanying notes are an integral part of these financial statements.
F-16
21
M&M AEROSPACE HARDWARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND JUNE 30, 2000
<Table>
<Caption>
2001 2000
------------ ------------
Cash flows from operating activities:
Net income $ 11,625,476 $ 10,170,350
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 869,486 353,250
Bad debt expense 50,572 48,268
Gain on sale of building (337,351) --
Changes in operating assets and liabilities:
Accounts receivable (1,423,630) (3,301,984)
Inventory 598,936 (152,035)
Prepaid expenses (210,936) 10,148
Other assets 113,653 (537,585)
Accounts payable (430,534) 1,034,811
Accrued expenses 1,721,521 89,697
------------ ------------
Net cash provided by operating activities 12,577,193 7,714,920
------------ ------------
Cash flows from investing activities:
Purchase of property and equipment (1,476,849) (7,654,078)
Proceeds from sale of property 3,594,225 --
------------ ------------
Net cash provided by (used in) investing
activities 2,117,376 (7,654,078)
------------ ------------
Cash flows from financing activities:
Proceeds from notes -- 63,453,492
Principal payments on notes (6,555,833) (212,520)
Principal payments to revolving line of credit, net -- (57,502,206)
Distributions (6,000,000) (6,000,000)
------------ ------------
Net cash used in financing activities (12,555,833) (261,234)
------------ ------------
(Decrease) Increase in cash and cash equivalents 2,138,736 (200,392)
Cash and cash equivalents at beginning of period 78,270 510,973
------------ ------------
Cash and cash equivalents at end of period $ 2,217,006 $ 310,581
============ ============
</Table>
The accompanying notes are an integral part of these financial statements.
F-17
22
M&M AEROSPACE HARDWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of M&M
Aerospace Hardware, Inc. (the "Company") presented herein do not include all
disclosures required by accounting principles generally accepted in the United
States of America for a complete set of financial statements. In the opinion of
management, these financial statements include all adjustments, including normal
recurring adjustments, necessary for a fair presentation of the results of
interim periods.
The results of operations for the six months ended June 30, 2001 are not
necessarily indicative of the results of operations to be expected for the year
ended December 31, 2001. The unaudited consolidated financial statements should
be read in conjunction with the consolidated financial statements and footnotes
thereto included in the Current Report on Form 8-K as filed by BE Aerospace,
Inc. with the Securities and Exchange Commission on August 21, 2001.
2. ASSETS HELD FOR SALE
On June 6, 2001, the Company sold certain land, building and furniture and
equipment held for sale for $3,605,000, before selling costs, recording a gain
of approximately $317,000. From the proceeds of the sale the Company paid off
outstanding debts totaling approximately $3,327,000.
3. SUBSEQUENT EVENTS
In July 2001, the Company sold certain land, building and furniture and
equipment for approximately $5,250,000, before selling costs. The net proceeds
of the sale were used to reduce debt.
In August 2001, the stockholders of the Company entered into a stock
purchase agreement to sell the Company to BE Aerospace, Inc.
F-18
23
BE AEROSPACE, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The unaudited pro forma combined condensed statements of earnings and
unaudited pro forma combined condensed balance sheet give effect to the
acquisition of M&M Aerospace Hardware, Inc. (the "Acquisition") by BE Aerospace,
Inc. ("B/E") on a purchase accounting basis. Following is a summary of the
Acquisition's estimated aggregate purchase price (in thousands):
<Table>
Cash........................................................ $152,000
Market value of B/E stock to be issued to M&M
stockholders.............................................. 48,000
Assumed liabilities......................................... 12,006
--------
$212,006
========
</Table>
$23 million of the purchase price, payable in B/E stock, is contingent upon
M&M's operating results for calendar 2001, which management assumes will be met.
The pro forma combined condensed statement of earnings for the fiscal year
ended February 24, 2001 is comprised of B/E's results for the fiscal year ended
February 24, 2001 and M&M's results for the year ended December 31, 2000. The
pro forma combined condensed statement of earnings for the three months ended
May 26, 2001 is comprised of the B/E's results for the three months ended May
26, 2001 and M&M's results for the three months ended March 31, 2001. The pro
forma combined condensed balance sheet as of May 26, 2001 has been prepared by
combining B/E's consolidated balance sheet as of May 26, 2001 with M&M's balance
sheet as of March 31, 2001.
The pro forma combined condensed statements of earnings for the fiscal year
ended February 24, 2001 and the three months ended May 26, 2001 assume that the
Acquisition occurred on February 27, 2000. The pro forma combined condensed
balance sheet as of May 26, 2001 assumes that the Acquisition occurred on May
26, 2001. The pro forma combined condensed statements of earnings and balance
sheet do not purport to represent the results of operations or financial
position of B/E 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 in connection with the
Acquisition. No assurance can be given as to the amount of costs that will
actually be incurred. The above pro forma allocation of the purchase price to
the acquired assets and liabilities is based on management's estimate of the
respective fair values at this early stage of the valuation process. However,
such allocation is preliminary and is subject to the completion of a
comprehensive valuation process. Accordingly, the final allocation of the
purchase price could differ materially from the pro forma allocation reflected
herein. In addition, although B/E has entered into an agreement in connection
with the Acquisition, the proposed transaction is subject to various closing
conditions and receipt of regulatory approvals. Accordingly, there can be no
assurance that this proposed transaction will occur or, if it occurs, there can
be no assurance that the terms will not change.
The pro forma combined condensed financial information is based upon
certain other assumptions and adjustments described in the notes to the pro
forma condensed financial statements.
The unaudited pro forma combined condensed statements of earnings and
unaudited pro forma combined condensed balance sheet, in accordance with the
Securities and Exchange Commission regulations, exclude acquisitions which
individually and in the aggregate were not significant to the periods in which
they were consummated.
In July 2001, the Financial Accounting Standard Board issued SFAS No. 141
and SFAS No. 142. SFAS No. 141 applies to all business combinations completed
after June 30, 2001 and requires the use of the purchase method of accounting.
SFAS No. 141 also establishes new criteria for determining whether intangible
assets should be recognized separately from goodwill. SFAS No. 141 is not
expected to have a significant impact on the results of operations or financial
position of B/E. SFAS No. 142 provides that goodwill and intangible assets with
indefinite lives will not be amortized, but rather will be tested for
PF-1
24
impairment on an annual basis. SFAS No. 142 is effective for B/E's fiscal year
beginning February 24, 2002. While B/E has not fully evaluated all the
provisions of SFAS No. 142, it is expected that applying the provisions of SFAS
No. 142 would eliminate a portion of amortization expense. During the year ended
February 24, 2001, amortization of intangible assets was approximately $23
million.
PF-2
25
BE AEROSPACE, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS
(UNAUDITED)
<Table>
<Caption>
YEAR ENDED FEBRUARY 24, 2001
------------------------------------------------
B/E M&M ADJUSTMENTS PRO FORMA
-------- -------- ----------- ---------
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
Net sales...................................... $666,444 $100,206 $ -- $766,650
Cost of sales.................................. 416,626 55,162 -- 471,788
-------- -------- -------- --------
Gross profit................................... 249,818 45,044 -- 294,862
Operating expenses:
Research, development and engineering........ 48,898 -- 48,898
Selling, general and administrative.......... 92,541 22,381 114,922
Amortization expense......................... 23,408 -- 2,286(a) 25,694
Acquisition and initial public offering
costs..................................... 8,276 -- -- 8,276
-------- -------- -------- --------
Total operating expenses............. 173,123 22,381 2,286 197,790
-------- -------- -------- --------
Operating earnings............................. 76,695 22,663 (2,286) 97,072
Interest expense, net.......................... 54,170 5,556 4,958(b) 64,684
-------- -------- -------- --------
Earnings before income taxes................... 22,525 17,107 (7,244) 32,388
Income taxes................................... 2,253 -- 986(c) 3,239
-------- -------- -------- --------
Net earnings................................... $ 20,272 $ 17,107 $ (8,230) $ 29,149
======== ======== ======== ========
Basic earnings per share..................... $ 0.80 $ 1.03
======== ========
Weighted average common shares............... 25,359 2,824(d) 28,183
Diluted earnings per share................... $ 0.78 $ 1.02
======== ========
Weighted average common shares............... 25,889 2,824(d) 28,713
OTHER DATA:
Depreciation................................. $ 19,347 $ 853 $ 20,200
EBITDA(e).................................... 127,726 23,516 151,242
</Table>
- ---------------
(a) In accordance with SFAS No. 142, reflects amortization expense associated
with identified intangible assets acquired in connection with the
Acquisition over estimated lives of 7 - 10 years.
(b) Represents the additional interest expense for the year ended February 24,
2001 after giving effect to the acquisition of M&M and the increase in
borrowings.
(c) Adjustments to reflect income tax effects based on B/E's combined state and
federal statutory rate of 10%. Upon completion of the acquisition, M&M will
be included in B/E's consolidated income tax return and the effective tax
rate will approximate B/E's effective tax rate.
(d) Reflects shares of common stock to be issued in connection with the
Acquisition.
(e) EBITDA represents earnings before deducting interest expense, income tax
expense, acquisition and initial public offering costs, and depreciation and
amortization expense. EBITDA is not a measurement in accordance with GAAP
and is presented to facilitate a further analysis of B/E's financial
condition. These data are not intended to be a substitute for net earnings
or operating cash flow as a measure of B/E's profitability.
PF-3
26
BE AEROSPACE, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS
(UNAUDITED)
<Table>
<Caption>
THREE MONTHS ENDED MAY 26, 2001
-----------------------------------------------
B/E M&M ADJUSTMENTS PRO FORMA
-------- ------- ----------- ---------
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
Net sales....................................... $176,833 $30,311 $ -- $207,144
Cost of sales................................... 110,927 16,558 -- 127,485
-------- ------- ------- --------
Gross profit.................................... 65,906 13,753 -- 79,659
Operating expenses:
Research, development and engineering......... 12,080 -- -- 12,080
Selling, general and administrative........... 24,883 6,180 -- 31,063
Amortization expense.......................... 6,349 -- 571(a) 6,920
-------- ------- ------- --------
Total operating expenses........................ 43,312 6,180 571 50,063
-------- ------- ------- --------
Operating earnings.............................. 22,594 7,573 (571) 29,596
Interest expense, net........................... 13,974 1,708 506(b) 16,188
-------- ------- ------- --------
Earnings before income taxes and extraordinary
item.......................................... 8,620 5,865 (1,077) 13,408
Income taxes.................................... 862 -- 479(c) 1,341
-------- ------- ------- --------
Earnings before extraordinary item.............. $ 7,758 $ 5,865 $(1,556) $ 12,067
======== ======= ======= ========
Basic earnings (loss) per share:
Net earnings before extraordinary item........ $ 0.26 $ 0.37
======== ========
Weighted average common shares................ 29,562 2,824(d) 32,386
Diluted earnings per share:
Net earnings before extraordinary item........ $ 0.25 $ 0.36
======== ========
Weighted average common shares................ 30,903 2,824(d) 33,727
OTHER DATA:
Depreciation.................................. $ 5,796 $ 432 $ 6,228
EBITDA(e)..................................... 34,739 8,005 42,744
</Table>
- ---------------
(a) In accordance with SFAS No. 142, reflects amortization expense associated
with identified intangible assets acquired in connection with the
Acquisition over estimated lives of 7 - 10 years.
(b) Represents the additional interest expense for the three months ended May
26, 2001 after giving effect to the acquisition of M&M and the increase in
borrowings.
(c) Adjustments to reflect income tax effects based on B/E's combined state and
federal statutory rate of 10%. Upon completion of the acquisition, M&M will
be included in B/E's consolidated income tax return and the effective tax
rate will approximate B/E's effective tax rate.
(d) Reflects shares of common stock to be issued in connection with the
acquisition.
(e) EBITDA represents earnings before deducting interest expense, income tax
expense, acquisition and initial public offering costs, and depreciation
and amortization expense. EBITDA is not a measurement in accordance with
GAAP and is presented to facilitate a further analysis of B/E's financial
condition. These data are not intended to be a substitute for net earnings
or operating cash flow as a measure of B/E's profitability.
PF-4
27
BE AEROSPACE, INC.
PRO FORMA COMBINED CONDENSED BALANCE SHEET
(UNAUDITED)
<Table>
<Caption>
AS OF MAY 26, 2001
-----------------------------------------------------
COMBINED
B/E M&M ADJUSTMENTS PRO FORMA
---------- -------- ----------- ----------
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
Current assets:
Cash and cash equivalents............... $ 143,322 $ -- $ 67,000(a) $ 58,322
(152,000)(c)
Accounts receivable -- trade, net....... 101,204 15,543 -- 116,747
Inventories, net........................ 138,200 91,173 (40,000)(e) 189,373
Other current assets.................... 51,203 128 -- 51,331
---------- -------- --------- ----------
Total current assets............ 433,929 106,844 (125,000) 415,773
Property & equipment, net................. 152,573 35,806 -- 188,379
Intangible & other assets, net............ 451,453 687 60,669(d) 560,809
8,000(b)
40,000(e)
---------- -------- --------- ----------
$1,037,955 $143,337 $ (16,331) $1,164,961
========== ======== ========= ==========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................ $ 53,373 $ 2,952 $ (780)(d) $ 55,545
Accrued liabilities..................... 68,808 1,834 8,000(b) 78,642
Current portion of long-term debt....... 826 8,118 (8,118)(d) 826
---------- -------- --------- ----------
Total current liabilities....... 123,007 12,904 (898) 135,013
Long-term debt............................ 701,506 70,877 (70,877)(d) 768,506
67,000(a)
Other liabilities......................... 26,922 -- -- 26,922
---------- -------- --------- ----------
Total liabilities............... 851,435 83,781 (4,775) 930,441
---------- -------- --------- ----------
Stockholders' equity:
Common stock............................ 321 1 (1)(d) 349
28(c)
Additional paid-in capital.............. 368,090 2,320 (2,320)(d) 416,062
47,972(c)
Retained earnings (deficit)............. (156,153) 57,235 (57,235)(d) (156,153)
Cumulative foreign exchange translation
adjustment........................... (25,738) -- -- (25,738)
---------- -------- --------- ----------
Total stockholders' equity...... 186,520 59,556 (11,556) 234,520
---------- -------- --------- ----------
$1,037,955 $143,337 $ (16,331) $1,164,961
========== ======== ========= ==========
</Table>
PF-5
28
- ---------------
(a) Reflects the incurrence of an aggregate $67,000 of indebtedness, and the
proceeds therefrom.
(b) For pro forma purposes the Acquisition has been accounted for as a purchase
pursuant to SFAS No. 141, "Business Combinations." Accordingly, the purchase
price has been allocated to the assets and liabilities based on their
relative fair values. Such allocations are subject to final determination
based on valuations and other studies to be performed subsequent to closing.
The final values may differ from those set forth below.
<Table>
Accounts receivable......................................... $ 15,543
Inventories................................................. 51,173
Other current assets........................................ 128
Property and equipment...................................... 35,806
Intangible & other long term assets......................... 109,356
--------
Aggregate purchase price.................................... 212,006
Accounts payable & accrued liabilities...................... (12,006)
--------
Net consideration paid...................................... $200,000
========
</Table>
(c) Reflects the $152,000 cash payment and the issuance of common stock used to
fund the remainder of the Acquisition purchase price, $23,000 of which is
contingent upon M&M's operating results through December 31, 2001, which
management assumes will be met.
(d) To eliminate stockholders equity and record repayment of note payable by
selling shareholders at closing.
(e) To reclassify M&M inventory balances consistent with B/E's accounting
policies.
PF-6