-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SR9Opws/A1/Aw8diqwHEHvJ2AMUWfJ9STdslfFVI7XYO1LntCyDNHk9SbcUwUjCJ tg2BNnmfeXwBOP465uwZxg== 0000861361-98-000027.txt : 19981222 0000861361-98-000027.hdr.sgml : 19981222 ACCESSION NUMBER: 0000861361-98-000027 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980228 FILED AS OF DATE: 19981221 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BE AEROSPACE INC CENTRAL INDEX KEY: 0000861361 STANDARD INDUSTRIAL CLASSIFICATION: PUBLIC BUILDING AND RELATED FURNITURE [2531] IRS NUMBER: 061209796 STATE OF INCORPORATION: DE FISCAL YEAR END: 0222 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 000-18348 FILM NUMBER: 98772520 BUSINESS ADDRESS: STREET 1: 1400 CORPORATE CTR WY CITY: WELLINGTON STATE: FL ZIP: 33414 BUSINESS PHONE: 5617915000 MAIL ADDRESS: STREET 1: 1300 CORPORATE CENTER WAY STREET 2: 1300 CORPORATE CENTER WAY CITY: WELLINGTON STATE: FL ZIP: 33414 FORMER COMPANY: FORMER CONFORMED NAME: BE AVIONICS INC DATE OF NAME CHANGE: 19920608 10-K/A 1 10/KA-2 AMENDMENT TO 10/KA SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A 2 [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended February 28, 1998 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 0-18348 BE AEROSPACE, INC. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 06-1209796 (I.R.S. Employer Identification No.) 1400 Corporate Center Way, Wellington, Florida 33414 (Address of principal executive offices) (Zip Code) (561) 791-5000 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01 Par Value 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 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.[ ] The aggregate market value of the registrant's voting stock held by non-affiliates was approximately $696,357,028 on May 20, 1998 based on the closing sales price of the registrant's Common Stock as reported on the Nasdaq National Market as of such date. The number of shares of the registrant's Common Stock, $.01 par value, outstanding as of December 16, 1998 was 24,447,963 shares. DOCUMENTS INCORPORATED BY REFERENCE None. INDEX ITEM 5. Market for the Registrant's Common Equity and Related Stockholder Matters ITEM 8. Financial Statements and Supplementary Data Index to Consolidated Financial Statements and Schedule.........................................F-1 ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's common stock is quoted on the Nasdaq National Market under the symbol "BEAV." The following table sets forth, for the periods indicated, the range of high and low per share closing prices for the Common Stock as reported by Nasdaq.
High Low Fiscal Year Ended February 24, 1996 First Quarter 8 5/8 5 1/4 Second Quarter 9 1/4 7 1/2 Third Quarter 9 1/4 7 1/4 Fourth Quarter 13 5/8 8 7/8 Fiscal Year Ended February 22, 1997 First Quarter 16 1/4 9 7/8 Second Quarter 16 3/4 12 3/8 Third Quarter 25 1/8 15 1/2 Fourth Quarter 29 22 3/4 Fiscal Year Ended February 28, 1998 First Quarter 27 1/2 19 1/2 Second Quarter 37 23 5/8 Third Quarter 41 1/2 27 1/8 Fourth Quarter 32 1/4 20 1/2
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA This information required by this section is set forth on pages F-1 through F-20 of this report. ITEM 8. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE.
PAGE ---- Independent Auditors' Report F-2 Financial Statements: Consolidated Balance Sheets, February 28, 1998 and February 22, 1997. F-3 Consolidated Statements of Operations for the Years Ended February F-4 28, 1998, February 22, 1997 and February 24, 1996. Consolidated Statements of Stockholders' Equity for the Years Ended F-5 February 28, 1998, February 22, 1997 and February 24, 1996. Consolidated Statements of Cash Flows for the Years Ended February F-6 28, 1998, February 22, 1997 and February 24, 1996. Notes to Consolidated Financial Statements for the Years Ended F-7 February 28, 1998, February 22, 1997 and February 24, 1996. Financial Statement Schedule: Schedule II - Valuation and Qualifying Accounts for the Years Ended F-20 F-20 February 28, 1998, February 22, 1997 and February 24, 1996.
[Remainder of page intentionally left blank] INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders B/E Aerospace, Inc. Wellington, Florida We have audited the accompanying consolidated balance sheets of B/E Aerospace, Inc. and subsidiaries as of February 28, 1998 and February 22, 1997, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended February 28, 1998. Our audits also included the financial statement schedule on page F-20. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of B/E Aerospace, Inc. and subsidiaries as of February 28, 1998 and February 22, 1997 and the results of their operations and their cash flows for each of the three years in the period ended February 28, 1998, in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. DELOITTE & TOUCHE LLP Costa Mesa, California April 15, 1998 CONSOLIDATED BALANCE SHEETS, FEBRUARY 28, 1998 AND FEBRUARY 22, 1997 (Dollars in thousands, except share data)
ASSETS 1998 1997 - ------ ---- ---- CURRENT ASSETS: Cash and cash equivalents $ 164,685 $ 44,149 Accounts receivable - trade, less allowance for doubtful accounts of $2,190 (1998) and $4,864 (1997) 87,931 73,489 Inventories, net 121,728 92,900 Other current assets 7,869 2,781 ---------- ---------- Total current assets 382,213 213,319 -------- -------- PROPERTY AND EQUIPMENT, net 103,821 87,888 INTANGIBLES AND OTHER ASSETS, net 195,723 189,882 ---------- ------- $ 681,757 $ 491,089 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 47,858 $ 42,889 Accrued liabilities 38,566 43,837 Current portion of long-term debt 33,285 4,419 --------- --------- Total current liabilities 119,709 91,145 ---------- -------- LONG-TERM DEBT 349,557 225,402 DEFERRED INCOME TAXES 1,207 1,667 OTHER LIABILITIES 14,509 7,114 COMMITMENTS AND CONTINGENCIES - - STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value; 1,000,000 shares authorized; no shares outstanding - - Common stock, $.01 par value; 50,000,000 shares authorized; 22,891,918 (1998) and 21,893,392 (1997) shares issued and outstanding 229 219 Additional paid-in capital 240,289 228,710 Accumulated deficit (40,724) (62,286) Cumulative foreign exchange translation adjustment (3,019) (882) ------------ -------------- Total stockholders' equity 196,775 165,761 ---------- ------------ $ 681,757 $ 491,089 ========== ===========
See notes to consolidated financial statements. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED FEBRUARY 28, 1998, FEBRUARY 22, 1997 AND FEBRUARY 24, 1996 (Dollars in thousands, except per share data)
YEAR ENDED ------------------------------------------------------ February 28, February 22, February 24, 1998 1997 1996 NET SALES $ 487,999 $ 412,379 $ 232,582 COST OF SALES 309,094 270,557 160,031 -------- --------- --------- GROSS PROFIT 178,905 141,822 72,551 OPERATING EXPENSES: Selling, general and administrative 58,622 51,734 42,000 Research, development and engineering 45,685 37,083 58,327 Amortization of intangible assets 11,265 10,607 9,499 Other expenses 4,664 - 4,170 --------- -------- -------- Total operating expenses 120,236 99,424 113,996 --------- -------- -------- OPERATING EARNINGS (LOSS) 58,669 42,398 (41,445) INTEREST EXPENSE, net 22,765 27,167 18,636 -------- -------- -------- EARNINGS (LOSS) BEFORE INCOME TAXES, EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 35,904 15,231 (60,081) INCOME TAXES 5,386 1,522 - ------- ------- ----------- EARNINGS (LOSS) BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 30,518 13,709 (60,081) EXTRAORDINARY ITEM 8,956 - - ---------- ----------- ------------ EARNINGS (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 21,562 13,709 (60,081) CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE - - (23,332) ------------ ------------ ----------- NET EARNINGS (LOSS) $ 21,562 $ 13,709 $(83,413) ========= =========== ========= BASIC EARNINGS (LOSS) PER SHARE: Earnings (loss) before extraordinary item and cumulative effect of change in accounting principle $ 1.36 $ .77 $ (3.71) Extraordinary item (.40) - - Cumulative effect of change in accounting principle - - (1.44) ----------- ----------- ------------ Net earnings (loss) $ .96 $ .77 $ (5.15) ========== ========== ============ Weighted average common shares 22,442 17,692 16,185 ========== ========== ============ DILUTED EARNINGS (LOSS) PER SHARE: Earnings (loss) before extraordinary item and cumulative effect of change in accounting principle $ 1.30 $ .72 $ (3.71) Extraordinary item (.38) - - Cumulative effect of change in accounting principle - - (1.44) ----------- ----------- ------------ Net earnings (loss) $ .92 $ .72 $ (5.15) =========== =========== ============ Weighted average common shares 23,430 19,097 16,185 ========== =========== ============
See notes to consolidated financial statements. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED FEBRUARY 28, 1998, FEBRUARY 22, 1997 AND FEBRUARY 24, 1996 (in thousands)
Additional Retained Currency Total Common Stock Paid-in Earnings Translation Stockholders' Shares Amount Capital (Deficit)Adjustment Equity Balance, February 25, 1995 16,096 $160 $119,209 $7,418 $(1,456) $125,331 Sale of stock under employee stock purchase plan 74 1 403 - - 404 Exercise of stock options 121 2 896 - - 898 Employee benefit plan matching contribution 102 1 858 - - 859 Net loss - - - (83,413) - (83,413) Foreign currency translation adjustment - - - - 78 78 -------- --------- --------- -------- -------- -------- Balance, February 24, 1996 16,393 164 121,366 (75,995) (1,378) 44,157 Sale of stock under employee stock purchase plan 58 - 482 - - 482 Exercise of stock options 1,362 14 11,650 - - 11,664 Employee benefit plan matching contribution 75 1 1,316 - - 1,317 Sale of common stock under public offering 4,005 40 93,896 - - 93,936 Net earnings - - - 13,709 - 13,709 Foreign currency translation adjustment - - - - 496 496 ---------- --------- -------- ------ ------ -------- Balance, February 22, 1997 21,893 219 228,710 (62,286) (882) 165,761 Sale of stock under employee stock purchase plan 88 1 1,796 - - 1,797 Exercise of stock options 852 9 8,106 - - 8,115 Employee benefit plan matching contribution 59 - 1,677 - - 1,677 Net earnings - - - 21,562 - 21,562 Foreign currency translation adjustment - - - - (2,137) (2,137) ------- ------- -------- -------- -------- --------- Balance, February 28, 1998 22,892 $ 229 $240,289 $(40,724) $(3,019) $196,775 ======== ======= ======== ========= ======== =========
See notes to consolidated financial statements. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED FEBRUARY 28, 1998, FEBRUARY 22, 1997 AND FEBRUARY 24, 1996 (Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES: 1998 1997 1996 ---- ---- ---- Net earnings (loss) $ 21,562 $ 13,709 $ (83,413) Adjustments to reconcile net earnings (loss) to net cash flows provided by (used in) operating activities: Extraordinary item 8,956 - - Cumulative effect of accounting change - - 23,332 Depreciation and amortization 24,160 24,147 18,435 Deferred income taxes (460) 410 (3,453) Non cash employee benefit plan contributions 1,677 1,317 859 Changes in operating assets and liabilities, net of effects from acquisitions: Accounts receivable (14,665) (19,366) 6,068 Inventories (28,597) (19,536) (11,929) Other current assets (5,141) 5,059 (638) Accounts payable 3,972 (4,767) 3,008 Accrued and other liabilities (1,866) (11,564) 13,169 ------- -------- -------- Net cash flows provided by (used in) operating activities 9,598 (10,591) (34,562) ------ -------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Payments for purchase of property and equipment (28,923) (14,471) (13,656) Change in intangibles and other assets (15,686) (1,331) (5,914) Acquisitions - - (42,500) -------- ------- --------- Net cash flows used in investing activities (44,609) (15,802) (62,070) -------- -------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings (repayments) under revolving lines of credit 5,450 (38,882) 2,000 Proceeds from issuance of stock, net of expenses 11,611 106,082 1,302 Principal payments on long-term debt (101,808) (11,968) (942) Proceeds from long-term debt 240,419 - 101,252 ------- --------- ------- Net cash flows provided by financing activities 155,672 55,232 103,612 ------- -------- ------- Effect of exchange rate changes on cash flows (125) (66) 77 ---------- ----------- ---------- Net increase in cash and cash equivalents 120,536 28,773 7,057 Cash and cash equivalents, beginning of year 44,149 15,376 8,319 --------- --------- -------- Cash and cash equivalents, end of year $ 164,685 $ 44,149 $ 15,376 ========= ========= ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid (received) during year for: Interest, net $ 25,065 $ 26,097 $ 16,967 Income taxes 5,012 1,209 (3,292) SCHEDULE OF NON-CASH TRANSACTIONS: Liabilities assumed and accrued acquisition costs incurred in connection with the acquisitions - - 27,532
See notes to consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED FEBRUARY 28, 1998, FEBRUARY 22, 1997 AND FEBRUARY 24, 1996 (Dollars in thousands, except per share data) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization and Basis of Presentation -- B/E Aerospace, Inc. ("B/E" or the "Company") operates in a single business segment and designs, manufactures, sells and services a broad line of commercial aircraft cabin interior products consisting of a broad range of aircraft seating products, passenger entertainment and service systems, and interior systems products, including structures as well as all food and beverage storage and preparation equipment. The Company's customers are the world's commercial airlines. As a result, the Company's business is directly dependent upon the conditions in the commercial airline industry. Consolidation -- The accompanying consolidated financial statements include the accounts of B/E Aerospace, Inc., its wholly owned and majority owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Use of Estimates -- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets an liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Income Taxes -- In accordance with Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes," the Company provides deferred income taxes for temporary differences between amounts of assets and liabilities recognized for financial reporting purposes and such amounts recognized for income tax purposes. Warranty Costs -- Estimated costs related to product warranties are accrued at the time products are sold. Revenue Recognition -- Sales of assembled products, equipment or services are recorded on the date of shipment or, if required, upon acceptance by the customer. Revenues and costs under certain long-term contracts are recognized using contract accounting. The Company sells its products primarily to airlines worldwide, including occasional sales collateralized by letters of credit. The Company performs ongoing credit evaluations of its customers and maintains reserves for potential credit losses. Actual losses have been within management's expectations. Cash Equivalents -- The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. Intangible Assets -- The Company accounts for the impairment and disposition of long-lived assets in accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." In accordance with SFAS No. 121, long-lived assets to be held are reviewed for events or changes in circumstances which indicate that their carrying value may not be recoverable. The Company periodically evaluates the carrying value of the intangible assets versus the cash benefit expected to be realized and adjusts for any impairment of value. Research and Development -- Research and development expenditures are expensed as incurred. Stock-Based Compensation -- In October 1995, the Financial Accounting Standards Board ("FASB") issued SFAS No. 123, "Accounting for Stock-Based Compensation," which became effective for the Company beginning during fiscal 1997. SFAS No. 123 requires extended disclosures of stock-based compensation arrangements with employees and encourages (but does not require) compensation cost to be measured based on the fair value of the equity instrument awarded. Companies are permitted, however, to continue to apply Accounting Principles Board ("APB") Opinion No. 25, which recognizes compensation cost based on the intrinsic value of the equity instrument awarded. The Company continues to apply APB Opinion No. 25 to its stock-based compensation awards to employees and discloses the required pro forma effect on net income and earnings per share. See Note 12. Earnings (Loss) Per Share -- In fiscal 1998, the Company adopted SFAS No. 128, "Earnings Per Share." Basic earnings per common share calculations are determined by dividing earnings available to common shareholders by the weighted average number of shares of common stock. Diluted earnings per share are determined by dividing earnings available to common shareholders by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding (all related to outstanding stock options discussed in Note 12). The Company's reported primary earnings per share for fiscal 1997 have been restated to comply with the requirements of SFAS No. 128. The effect on previously reported earnings per share for fiscal 1997 was as follows: Primary earnings per share as reported $ .72 Effect of SFAS No. 128 .05 ------- Basic EPS as restated $ .77 ======= SFAS No. 128 had no impact on the Company's reported loss per share for fiscal 1996. Comprehensive Income - During 1997 the FASB issued SFAS No. 130, "Reporting Comprehensive Income," which established standards for the reporting and displaying of comprehensive income. Comprehensive income is defined as all changes in a Company's net assets except changes resulting from transactions with shareholders. It differs from net income in that certain items currently recorded to equity would be a part of comprehensive income. Comprehensive income must be reported in a financial statement with the cumulative total presented as a component of equity. This statement will be adopted by the Company in its fiscal 1999 quarterly financial statements. Segment Information - In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," which will be effective for the Company beginning March 1, 1998. SFAS No. 131 redefines how operating segments are determined and requires disclosure of certain financial and descriptive information about a company's operating segments. The Company believes the segment information required to be disclosed under SFAS No. 131 will be more comprehensive than previously provided, including expanded disclosure of income statement and balance sheet items. The Company has not yet completed its analysis of which operating segments it will report on. Pensions and Other Postretirement Benefits -- In February 1998, FASB issued SFAS No. 132, "Employers' Disclosure about Pensions and Other Postretirement Benefits," which is effective for annual and interim periods beginning after December 15, 1997. This statement standardizes the disclosure requirements for pensions and other postretirement benefits to the extent practicable, requires additional information on changes in the benefit obligations and fair values of plan assets that will facilitate financial analysis and eliminates certain disclosures that are no longer as useful as they were under previous statements. Foreign Currency Translation -- In accordance with the provisions of SFAS No. 52, "Foreign Currency Translation," the assets and liabilities located outside the United States are translated into U.S. dollars at the rates of exchange in effect at the balance sheet dates. Income and expense items are translated at the average exchange rates prevailing during the period. Gains and losses resulting from foreign currency transactions are recognized currently in income, and those resulting from translation of financial statements are accumulated as a separate component of stockholders' equity. 2. ACCOUNTING CHANGE In fiscal 1996, the Company undertook a comprehensive review of the engineering capitalization policies followed by its competitors and others in its industry peer group. The results of this study and an evaluation of the Company's policy led the Company to conclude that it should adopt the accounting method that it believes is followed by most of its competitors and certain members of its industry peer group. Previously, the Company had capitalized precontract engineering costs as a component of inventories, which were then amortized to earnings as the product was shipped. The Company now expenses such costs as they are incurred. While the accounting policy for precontract engineering expenditures previously followed by the Company was in accordance with generally accepted accounting principles, the changed policy is preferable. 3. ACQUISITIONS On January 24, 1996, the Company acquired all of the outstanding capital stock of Burns Aerospace Corporation, which designs, manufactures, sells and services aircraft seating products to commercial airlines worldwide. The aggregate acquisition cost of $70,032 includes the payment of $42,500 to the seller and the assumption of approximately $27,532 of liabilities, including related acquisition costs and certain liabilities arising from the acquisition. Funds for the acquisition were obtained from proceeds of the long-term debt issuance described in Note 8. The aggregate purchase price for the Burns acquisition has been allocated to the net assets acquired based on appraisals and management's estimates as follows:
Receivables $ 11,396 Inventories 12,624 Other current assets 806 Property and equipment 21,695 Intangible and other assets 23,511 --------- $ 70,032
4. INVENTORIES Inventories are stated at the lower of cost or market. Cost is determined using the weighted average cost method. Finished goods and work in process inventories include material, labor and manufacturing overhead costs. Inventories consist of the following:
1998 1997 ---- ---- Raw materials $ 56,100 $ 45,947 Work-in-process 59,036 39,024 Finished goods 6,592 7,929 ---------- --------- $ 121,728 $ 92,900 ========= ========
5. PROPERTY AND EQUIPMENT Property and equipment are stated at cost and depreciated and amortized generally on the straight-line method over their estimated useful lives of two to thirty years (term of lease as to leasehold improvements). Property and equipment consist of the following:
Years 1998 1997 ----- ---- ---- Land, buildings and improvements 10-30 $ 45,951 $ 42,966 Machinery 3-13 54,178 45,444 Tooling 3-10 24,771 17,179 Furniture and equipment 2-10 26,815 18,327 ---------- --------- 151,715 123,916 Less accumulated depreciation and amortization (47,894) (36,028) ---------- --------- $ 103,821 $ 87,888 ========= =========
6. INTANGIBLES AND OTHER ASSETS Intangibles and other assets consist of the following:
Straight-line Amortization Period (Years) 1998 1997 -------------- ---- ---- Covenants not-to-compete 14 $ 10,195 $ 10,198 Product technology, production plans and drawings 7-20 60,577 59,484 Replacement parts annuity 20 29,652 29,778 Product approvals and technical manuals 20 22,942 18,331 Goodwill 30 77,452 78,913 Debt issue costs 10 16,789 13,431 Trademarks and patents 20 10,491 10,820 Other intangible assets 5-20 16,540 7,527 Other assets 4,277 6,744 ------- --------- 248,915 235,226 Less accumulated amortization (53,192) (45,344) ---------- ---------- $ 195,723 $ 189,882 ========= =========
7. ACCRUED LIABILITIES Accrued liabilities consist of the following:
1998 1997 ---- ---- Accrued product warranties $ 4,353 $ 5,231 Accrued salaries, vacation and related benefits 17,022 12,868 Accrued acquisition expenses 1,190 5,488 Accrued interest 2,995 6,585 Accrued income taxes 5,373 6,563 Other accrued liabilities 7,633 7,102 ----------- ---------- $ 38,566 $ 43,837 ========== =========
[Remainder of page intentionally left blank] 8. LONG-TERM DEBT Long-term debt consists of the following:
1998 1997 ---- ---- 8% Senior Subordinated Notes $ 249,375 $ - 9 7/8% Senior Subordinated Notes 100,000 100,000 9 3/4% Senior Notes 23,192 124,411 Revolving lines of credit 10,093 4,419 Other long-term debt 182 991 ---------- --------- 382,842 229,821 Less current portion of long-term debt (33,285) (4,419) ----------- ---------- $ 349,557 $ 225,402 ========== ==========
8% SENIOR SUBORDINATED NOTES In February 1998, the Company sold $250,000 of 8% Senior Subordinated Notes, priced to yield 8.02% (the "8% Notes"). In conjunction with the sale of the 8% Notes, the Company initiated a tender offer for its 9 3/4% Notes. The net proceeds from the offering of approximately $240,419 were used for the tender offer (which expired on February 25, 1998) in which approximately $101,808 of the 9 3/4% Notes were retired; the remaining $23,192 of the 9 3/4% Notes were called on March 16, 1998. The Company incurred an extraordinary charge of $8,956 for unamortized debt issue costs, tender and redemption premiums and fees and expenses related to the repurchase of the 9 3/4% Notes. The 8% Notes are unsecured senior subordinated obligations of the Company, subordinated to all senior indebtedness of the Company and mature on March 1, 2008. Interest on the 8% Notes is payable semi-annually in arrears on March 1 and September 1 of each year. The 8% Notes are redeemable at the option of the Company, in whole or in part, on or after March 1, 2003 at predetermined redemption prices together with accrued and unpaid interest through the date of redemption. In addition, at any time prior to March 1, 2001, the Company may, at predetermined prices together with accrued and unpaid interest through the date of redemption, redeem up to 35% of the aggregate principal amount of the Notes originally issued with the net proceeds of one or more equity offerings, provided that at least 65% of the aggregate principal amount of the 8% Notes originally issued remains outstanding after the redemption. Upon a change of control (as defined), each holder of the 8% Notes may require the Company to repurchase such holder's 8% Notes at 101% of the principal amount thereof, plus accrued interest to the date of such purchase. The 8% Notes contain certain covenants, all of which were met by the Company as of February 28, 1998, including limitations on future indebtedness, restricted payments, transactions with affiliates, liens, dividends, mergers and transfers of assets. 9 7/8% SENIOR SUBORDINATED NOTES The 9 7/8% Senior Subordinated Notes (the "9 7/8% Notes") are unsecured senior subordinated obligations of the Company, subordinated to all senior indebtedness of the Company and mature on February 1, 2006. Interest on the 9 7/8% Notes is payable semi-annually in arrears on February 1 and August 1 of each year. The 9 7/8% Notes are redeemable at the option of the Company, in whole or in part, at any time after February 1, 2001 at predetermined redemption prices together with accrued and unpaid interest through the date of redemption. Upon a change of control (as defined), each holder of the 9 7/8% Notes may require the Company to repurchase such holder's 9 7/8% Notes at 101% of the principal amount thereof, plus accrued and unpaid interest to the date of such purchase. The 9 7/8% Notes contain certain restrictive covenants, all of which were met by the Company as of February 28, 1998, including limitations on future indebtedness, restricted payments, transactions with affiliates, liens, dividends, mergers and transfers of assets. 9 3/4% SENIOR NOTES The 9 3/4% Senior Notes (the "9 3/4% Notes") are senior unsecured obligations of the Company, ranking equally with any future senior obligations of the Company. As described above, at February 28, 1998, $101,808 of the 9 3/4% Notes had been repurchased; the balance of the 9 3/4% Notes were redeemed in March 1998. CREDIT FACILITIES In April 1998, the Company amended its credit facilities with the Chase Manhattan Bank by increasing the aggregate principal amount that may be borrowed thereunder to $200,000 (the "Bank Credit Facility"). The Bank Credit Facility consists of a $100,000 revolving credit facility and an acquisition facility of up to $100,000. The acquisition facility is amortizable over five years beginning April 1999; the revolving facility expires in April 2004. The Bank Credit Facility is collateralized by the Company's accounts receivable and inventories and by substantially all of its other personal property. The Bank Credit Facility contains customary affirmative covenants, negative covenants and conditions of borrowing, all of which were met by the Company as of February 28, 1998. At February 28, 1998, indebtedness under the then-existing Bank Credit Facility consisted of letters of credit amounting to approximately $4,500. Borrowings under the Bank Credit Facility currently bear interest at LIBOR plus 1.25% or prime (as defined). The interest to be charged on the Bank Credit Facility can increase or decrease based upon specified operating performance criteria set forth in the Bank Credit Facility Agreement. Amounts may be borrowed or repaid in $1,000 increments. FEEL, a subsidiary of the Company, has a short-term revolving line of credit agreement (the "FEEL Credit Agreement") which is collateralized by substantially all of the assets of FEEL. Aggregate borrowings outstanding under the FEEL Credit Agreement were approximately $10,093 as of February 28, 1998. The Company has guaranteed a portion of the indebtedness outstanding under the FEEL Credit Agreement. Inventum, another subsidiary of the Company, has a revolving line of credit agreement for approximately $1 million (the "Inventum credit agreement"). The Inventum Credit Agreement is collateralized by substantially all of the assets of Inventum. There were no borrowings outstanding under the Inventum Credit Agreement as of February 28, 1998. Maturities of long-term debt are as follows: Fiscal year ending February: 1999 $ 33,285 2000 182 2001 - 2002 - 2003 - Thereafter 349,375 --------- $ 382,842 ========= Interest expense amounted to $25,834, $28,369 and $18,788 for the years ended February 28, 1998, February 22, 1997 and February 24, 1996, respectively. 9. INCOME TAXES Income tax expense consists of the following:
1998 1997 1996 ---- ---- ---- Current: Federal $ (920) $ - $ 1,972 State - - 818 Foreign 6,766 1,112 663 -------- --------- -------- 5,846 1,112 3,453 Deferred: Federal (3,666) 2,703 (2,635) State (716) 1,550 (818) Foreign (460) 410 - --------- --------- --------- (4,842) 4,663 (3,453) Change in Valuation Allowance 4,382 (4,253) - --------- --------- --------- $ 5,386 $ 1,522 $ - ========= ========= ==========
The difference between income tax expense and the amount computed by applying the statutory U.S. federal income tax rate (35%) to the pretax earnings before extraordinary item and change in accounting principle consists of the following:
1998 1997 1996 ---- ---- ---- Statutory U.S. federal income tax expense (benefit) $ 9,432 $ 5,331 $ (21,028) Operating loss (with)/without tax benefit (6,114) (6,164) 14,569 Foreign tax rate differential 1,309 1,267 3,324 Goodwill amortization 537 566 558 Penalties 1,050 - - Other, net (828) 522 2,577 --------- --------- ---------- $ 5,386 $ 1,522 $ - ========== =========== ==========
The tax effects of temporary differences and carryforwards that give rise to the Company's deferred income tax assets and liabilities consist of the following:
1998 1997 ---- ---- Accrued vacation $ 1,172 $ 1,117 Inventory reserves 3,987 3,145 Acquisition reserves (1,220) (1,740) Inventory costs capitalized for tax purposes 1,327 1,236 Bad debt reserves 579 948 Warranty reserve 2,440 1,452 Other 1,731 1,723 --------- --------- Net current deferred income tax asset 10,016 7,881 --------- --------- Intangible assets (12,576) (13,565) Depreciation (1,853) (2,074) Net operating loss carryforward 27,462 26,309 Research credit carryforward 3,285 2,941 ---------- --------- Net noncurrent deferred income tax asset 16,318 13,611 ---------- ------- Valuation allowance (27,541) (23,159) ---------- --------- Net deferred tax liabilities $ (1,207) $ (1,667) ========== =========
The Company has established a valuation allowance of $27,541 related to the utilization of its deferred tax assets because of uncertainties that preclude it from determining that it is more likely than not that it will be able to generate taxable income to realize such asset during the operating loss carryforward period, which expires in 2012. Such uncertainties include recent cumulative losses by the Company, the highly cyclical nature of the industry in which it operates, economic conditions in Asia which are impacting the airframe manufacturers and the airlines, the Company's high degree of financial leverage and risks associated with the integration of acquisitions. The Company monitors these as well as other positive and negative factors that may arise in the future, as it assesses the necessity for a valuation allowance for its deferred tax assets As of February 28, 1998, the Company had approximately $66,104 of federal operating loss carryforwards, which expire at various dates through 2011, federal research credit carryforwards of $3,285, which expire at various dates through 2011, and alternative minimum tax credit carryforwards of $410, which have no expiration date. Approximately $15,000 of the Company's net operating loss carryforward related to non-qualified stock options will be credited to additional paid-in-capital rather than income tax expense when utilized. The Company has not provided for any residual U.S. income taxes on the approximately $6,005 of earnings from its foreign subsidiaries because such earnings are intended to be indefinitely reinvested. Such residual U.S. income taxes, if provided for, would be immaterial. The Company's federal tax returns for the years ended February 24, 1996 and February 25, 1995 are currently under examination by the Internal Revenue Service. Management believes that the resolution of this examination will not have a material adverse effect on the Company's results of operations or its financial condition. 10. COMMITMENTS AND CONTINGENCIES Leases -- The Company leases certain of its office, manufacturing and service facilities and equipment under operating leases, which expire at various times through February 2007. Rent expense for fiscal 1998, 1997 and 1996 was approximately $8,848, $7,021 and $2,943, respectively. Future payments under operating leases with terms currently greater than one year are as follows: Year ending February: 1999 $ 7,658 2000 6,398 2001 5,079 2002 2,495 2003 2,041 Thereafter 796 ---------- $ 24,467 Litigation -- The Company is a defendant in various legal actions arising in the normal course of business, the outcome of which, in the opinion of management, neither individually nor in the aggregate are likely to result in a material adverse effect to the Company's financial statements. Employment Agreements -- The Company has employment and compensation agreements with two key officers of the Company. One of the agreements provides for an officer to earn a minimum of $550 adjusted annually for changes in the consumer price index (as defined) per year through 2002, as well as a deferred compensation benefit equal to the aggregate annual compensation earned through termination and payable thereafter. Such deferred compensation will be payable in equal monthly installments over the same number of years it was earned. The other agreement provides for an officer to receive annual minimum compensation of $550, and an incentive bonus not to exceed 100% of the officer's then-current salary through 2001. In addition, when the officer terminates his employment, the Company is obligated to pay the officer annually, as deferred compensation, an amount equal to 100% of the officer's annual salary (as defined) for a period of ten years from the date of termination. Such deferred compensation has been accrued at the present value of the obligation at February 28, 1998. The Company has other employment agreements with certain key members of management that provide for aggregate minimum annual base compensation of $1,825 expiring on various dates through 1999. Supply Agreement -- The Company had a supply agreement with Applied Extrusion Technologies, Inc. ("AET"), a related party by way of common management. Under this agreement, which was terminated in September 1997, the Company agreed to purchase its requirements for certain component parts through March 1998 at a price that results in a 33 1/3% gross margin to AET. The Company's purchases under this contract for the years ended February 28, 1998, February 22, 1997 and February 24, 1996, were $1,743, $1,642 and $1,301, respectively. 11. EMPLOYEE RETIREMENT PLAN In August 1988, the Company established a non-qualified contributory profit-sharing plan. This plan was amended to incorporate a 401(k) Plan which permits the Company to match a portion of employee contributions. Commencing in 1995, the Company's 401(k) Plan, was amended to permit the Company's matching contribution to be made in common stock of the Company. The Company recognized expenses of $1,677, $1,317 and $859 related to this plan for the years ended February 28, 1998, February 22, 1997 and February 24, 1996, respectively. 12. STOCKHOLDERS' EQUITY Earnings (Loss) Per Share. The Company adopted No. SFAS No. 128 Earnings Per Share during fiscal year 1998. SFAS No. 128 establishes standards for computing and presenting basic and diluted earnings (loss) per share. All prior period earnings (loss) per share data have been restated to conform with SFAS No. 128. The following table sets forth the computation of basic and diluted earnings (loss) per share for the years ended February 28, 1998, February 22, 1997 and February 24, 1996:
1998 1997 1996 ---- ---- ---- Numerator - Net earnings (loss) $21,562 $13,709 $(83,413) ======= ======= ========= Denominator: Denominator for basic earnings (loss) per share - Weighted average shares 22,442 17,692 16,185 Effect of dilutive securities - Employee stock options 988 1,405 - -------- ------- --------- Denominator for diluted earnings (loss) per share - Adjusted weighted average shares 23,430 19,097 16,185 ======== ====== ====== Basic earnings (loss) per share $ .96 $ .77 $ (5.15) ======== ======= ======== Diluted earnings (loss) per share $ .92 $ .72 $ (5.15) ======== ====== ========
Stock Option Plans. The Company has various stock option plans, including the 1989 Stock Option Plan, the 1991 Directors Stock Option Plan, the 1992 Share Option Scheme and the 1996 Stock Option Plan (collectively, the "Option Plans"), under which shares of the Company's Common Stock may be granted to key employees and directors of the Company. The Option Plans provide for granting key employees options to purchase the Company's common stock. Options are granted at the discretion of the compensation and stock option committee of the Board of Directors. Options granted generally vest at the rate of 25% per year from the date of grant and are exercisable to the extent vested and the option term cannot exceed ten years. The following table sets forth options granted, canceled, forfeited and outstanding:
February 28, 1998 February 22, 1997 February 24, 1996 --------------- ----------------- ----------------- Option Price Option Price Option Price Per Share Per Share Per Share Options (in dollars) Options (in dollars) Options (in dollars) Outstanding, beginning of 2,447,425 .081 - 24.93 2,720,350 0.81 - 13.00 2,871,287 0.81 - 13.00 period Options granted 1,394,250 21.50 -31.50 1,313,500 10.25 -24.94 731,925 7.37 - 10.37 Options exercised (852,174) 0.81 - 29.875 (1,361,925) 0.81 - 16.125 (139,750) 0.81 - 8.75 Options forfeited (58,000) 7.63 - 28.875 (224,500) 7.38 - 16.13 (743,112) 7.00 - 13.00 -------- ------------- ----------- ------------ ---------- ----------- Outstanding, end of period 2,931,501 7.00 - 13.50 2,447,425 0.81 - 24.93 2,720,350 0.81 - 13.00 ========= ============ ============ ============ ========= ============ Exercisable at end of year 1,317,503 7.00 - 31.50 1,374,927 0.81 - 24.93 2,223,225 0.81 - 13.00 ========= ============ ========= ============ =========== ============
At February 28, 1998, options were available for grant under each of the Company's option plans.
Options Outstanding at February 28, - ----------------------------------------------------------------------------------------------------------------------- Weighted Weighted Options Range of Options Average Average Exercisable Weighted Exercise Price Outstanding Exercise Remaining at February 28, Average Price Contractual Life 1998 Exercise Price ----- ------------ ---- -------------- $ 7.00 - $8,875 691,800 $ 8.36 5.82 623,675 $ 8.35 $ 10.00 - $19.00 798,826 $ 17.27 8.45 313,328 $ 18.14 $ 21.50 - $25.8125 511,625 $ 23.02 9.41 149,125 $ 23.38 $ 29.87 - $31.50 929,250 $ 29.89 9.46 231,375 $ 29.89
The estimated fair value of options granted during fiscal 1998 was $13.56 per share. The estimated fair value of options granted during fiscal 1997 was $16.60 per share. The Company applies APB Opinion No. 25 and related Interpretations in accounting for its stock option and purchase plans. Accordingly, no compensation cost has been recognized for its stock option plans and its stock purchase plan other than that described above. Had compensation cost for the Company's stock option plans and its stock purchase plans been determined consistent with SFAS No. 123, the Company's net earnings and net earnings per share for the year ended February 28, 1998 and February 22, 1997 would have been reduced to the pro forma amounts indicated in the following table:
1998 1997 ---- ---- Net earnings - as reported $ 21,562 $ 13,709 Net earnings - pro forma $ 13,232 $ 10,709 Net earnings per share - as reported $ 92 $ .72 Net earnings per share - pro forma $ .56 $ .56 Weighted average and pro forma weighted average common shares 23,430 19,097
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for options granted in 1998 and 1997: risk-free interest rates of 7.0% and 6.4%; expected dividend yields of 0.0%; expected lives of 3 years and 4 years; and expected volatility of 40% and 43%, respectively. The impact of outstanding non-vested stock options granted prior to fiscal 1997 has been excluded from the pro forma calculation; accordingly, the 1998 and 1997 pro forma adjustments are not indicative of future period pro forma adjustments, when the calculation will apply to all applicable stock options. 13. EMPLOYEE STOCK PURCHASE PLAN The Company has established a qualified Employee Stock Purchase Plan, the terms of which allow 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. The Company issued 87,561 and 58,490 shares of common stock during fiscal 1998 and 1997 pursuant to this plan at an average price per share of $20.52 and $9.70, respectively. 14. EXPORT SALES AND MAJOR CUSTOMERS Export sales from the United States to customers in foreign countries amounted to approximately $132,831, $153,423 and $61,717 in fiscal 1998, 1997 and 1996, respectively. Total sales to all customers in foreign countries amounted to approximately $232,691, $203,388 and $124,469 in fiscal 1998, 1997 and 1996, respectively. Total sales to Europe amounted to 23%, 29% and 18% in fiscal 1998, 1997 and 1996, respectively. Total sales to Asia amounted to 18%, 16% and 20% in fiscal 1998, 1997 and 1996, respectively. Major customers (i.e., customers representing more than 10% of total sales) change from year to year depending on the level of refurbishmentactivity and/or the level of new aircraft purchases by such customers. During the fiscal year ended February 28, 1998, one customer accounted for approximately 18% of the Company's sales. There were no major customers in fiscal 1997 or 1996. 15. OTHER EXPENSES In January 1998, the Company resolved a long-running dispute with the U.S. Government over export sales between 1992 and 1995 to Iran Air. The dispute centered on shipments of aircraft seats and related spare parts for five civilian aircraft operated by Iran. Iran Air purchased the seats in 1992 and arranged for them to be installed by a contractor in France. At the time, Iran was not the subject of a U.S. trade embargo. In connection with its sale of seats to Iran Air, B/E applied for and was granted a validated export license by the U.S. Department of Commerce. Other expenses for the year ended February 28, 1998 relate to fines, civil penalties and associated legal fees arising from the settlement. Other expenses for the year ended February 24, 1996 relate to costs associated with the integration and consolidation of the Company's European seating business. 16. FOREIGN OPERATIONS Geographic Area -- The Company operated principally in two geographic areas, the United States and Europe, during the years ended February 28, 1998, February 22, 1997 and February 24, 1996. There were no significant transfers between geographic areas during the period. Identifiable assets are those assets of the Company that are identified with the operations in each geographic area. The following table presents net sales and operating income for the years ended February 28, 1998, February 22, 1997 and February 24, 1996, and identifiable assets as of February 28, 1998, February 22, 1997 and February 24, 1996 by geographic area.
1998 1997 1996 ---- ---- ---- Net Sales: United States $365,957 $312,497 $ 169,830 Europe 122,042 99,882 62,752 ------- --------- ---------- Total: $487,999 $412,379 $ 232,582 ======== ======== ========= Operating Earnings (Loss): United States $ 38,928 $ 33,834 $ (35,822) Europe 19,741 8,564 (5,623) -------- --------- --------- Total: $58,669 $ 42,398 $(41,445) ======= ======== ========= Identifiable Assets: United States $ 541,675 $ 380,273 $ 332,832 Europe 140,082 110,816 100,754 -------- --------- --------- Total: $681,757 $ 491,089 $ 433,586 ======== ========= =========
17. FAIR VALUE INFORMATION The following disclosure of the estimated fair value of financial instruments at February 28, 1998 and February 22, 1997 is made in accordance with the requirements of SFAS No. 107, "Disclosures about Fair Value of Financial Instruments." The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. The carrying amounts of cash and cash equivalents, accounts receivable-trade, and accounts payable are a reasonable estimate of their fair values. At February 28, 1998, the Company's 8% Notes have a carrying value of $249,375 and fair value of $248,750, while the Company's 9 7/8% Notes have a carrying value of $100,000 and fair value of $107,500. Additionally, at February 28, 1998, the Company's 9 3/4% Notes have a carrying value of $23,192 and fair value of $24,410. The carrying amounts of other long-term debts approximate fair value because the obligations either bear interest at floating rates or compare favorably with fixed rate obligations that would be available to the Company. The fair value information presented herein is based on pertinent information available to management as of February 28, 1998. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these consolidated financial statements since that date, and current estimates of fair value may differ significantly from the amounts presented herein. 18. SELECTED QUARTERLY DATA (Unaudited) Summarized quarterly financial data for fiscal 1998 is as follows:
Year Ended February 28, 1998 First Second Third Fourth Quarter Quarter Quarter Quarter Sales $ 113,846 $ 119,843 $ 128,998 $ 125,312 Gross profit 41,063 44,149 46,650 47,043 Earnings before extraordinary item 6,943 8,077 9,432 6,066 Extraordinary item - - - (8,956) --------- ---------- ---------- ---------- Net earnings (loss) $ 6,943 $ 8,077 $ 9,432 $ (2,890) ========== ========== ========== ========= Basic net earnings (loss) per share: Before extraordinary item $ .32 $ .36 $ .41 $ .27 Extraordinary item - - - (.40) ---------- ---------- ---------- ---------- Net earnings (loss) per share $ .32 $ .36 $ .41 (.13) ========== ========= ========= ========= Diluted net earnings (loss) per share: Before extraordinary item $ .30 $ .34 $ .40 $ .26 Extraordinary item - - - (.38) ----------- ---------- ---------- ---------- Net earnings (loss) per share $ .30 $ .34 .40 $ (.12) ========== ========= ========== ==========
Summarized quarterly financial data for fiscal 1997 is as follows:
Year Ended February 22, 1997 ---------------------------------------------------------------- First Second Third Fourth Quarter Quarter Quarter Quarter ------- ------- ------- ------- Sales $97,302 $ 103,026 $ 107,823 $ 104,228 Gross profit 32,547 34,439 36,510 38,326 Net earnings 1,433 1,863 4,131 6,282 Net earnings per share - Basic .09 .11 .24 .30 Net earnings per share - Diluted .08 .10 .22 .29
19. SUBSEQUENT EVENTS (Unaudited) On April 13, 1998, the Company completed its acquisition of Puritan Bennett Aero Systems Co. ("PBASCO") for approximately $69,700 in cash and the assumption of liabilities aggregating approximately $2,810. PBASCO is the leading manufacturer of commercial aircraft oxygen delivery systems and "WEMAC" air valve components and in addition supplies overhead lights and switches, crew masks and protective breathing devices for both commercial and general aviation aircraft. On April 21, 1998, the Company acquired substantially all of the assets of Aircraft Modular Products ("AMP") for approximately $117,300 in cash and assumed certain liabilities aggregating approximately $2,840. AMP is a leading manufacturer of cabin interior products for general aviation (business jet) and commercial - type VIP aircraft, providing a broad line of products including seating, sidewalls, bulkheads, credenzas, closets, galley structures, lavatories, tables and sofas; along with related spare parts. As a result of the acquisitions of PBASCO and AMP, the Company will record a charge of $32,253 for the write-off of acquired in-process research and development and acquisition-related expenses associated with these and other transactions. In-process research and development expenses arose from new product development projects that were in various stages of completion at the respective acquired enterprises at the date of acquisition. In-process research and development expenses for products under development at the date of acquisition that had not established technological feasibility and for which no alternative use was identified were written off. The in-process research and development projects have been valued based on expected net cash flows over the product life, costs to complete, the stage of completion of the projects, the result of which has been discounted to reflect the inherent risk associated with the completion of the projects, and the realization of the efforts expended. New product development projects underway at PBASCO at the date of acquisition included, among others, modular drop boxes, passenger and flight crew oxygen masks, oxygen regulators and generators, protective breathing equipment, on board oxygen generating systems, reading lights, passenger service units, external viewing systems for executive and commercial aircraft and cabin monitoring systems. In-process research and development and acquisition-related expenses associated with PBASCO were approximately $13,000. The Company has determined that these projects were approximately 28% complete at the date of acquisition, and estimates that the cost to complete these projects will aggregate approximately $11,800, and will be incurred over a four year period. New product development projects underway at AMP at the date of acquisition included, among others, executive aircraft interior products for the Bombardier Global Express, Boeing Business Jet, Airbus Corporate Jet, Cessna Citation 560XL, Cessna Citation 560 Ultra, Visionaire Vantage and Lear 60, as well as other specific executive aircraft seating products. In-process research and development and acquisition related expenses associated with AMP were approximately $19,253. The Company has determined that these projects were approximately 25% complete at the date of acquisition, and estimates that the cost to complete these projects will aggregate approximately $4,800, and will be incurred over a two year period. Uncertainties that could impede progress to a developed technology include (i) availability of financial resources to complete the development, (ii) regulatory approval (FAA, CAA, etc.) required for each product before it can be installed on an aircraft, (iii) continued economic feasibility of developed technologies, (iv) customer acceptance and (v) general competitive conditions in the industry. There can be no assurance that the in-process research and development projects will be successfully completed and commercially introduced. SIGNATURE Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, threunto duly authorized. BE Aerospace, Inc. By: /s/ THOMAS P MCCAFFREY ---------------------------------- Title: Corporate Senior Vice President of Administration and Chief Financial Officer Date: December 18, 1998 -----END PRIVACY-ENHANCED MESSAGE-----