-----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, GtibxY1l0a1qnkD00kQQnPFMs2KOqav8ayLjoclwJFfzRju/oraT3WZj27VBEe0y TB0jJGECuY6HHsCAbZAbhg== /in/edgar/work/20000705/0000861361-00-000010/0000861361-00-000010.txt : 20000920 0000861361-00-000010.hdr.sgml : 20000920 ACCESSION NUMBER: 0000861361-00-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000527 FILED AS OF DATE: 20000705 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BE AEROSPACE INC CENTRAL INDEX KEY: 0000861361 STANDARD INDUSTRIAL CLASSIFICATION: [2531 ] IRS NUMBER: 061209796 STATE OF INCORPORATION: DE FISCAL YEAR END: 0222 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-18348 FILM NUMBER: 667753 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-Q 1 0001.txt 10-Q BE AEROSPACE, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended May 27, 2000 Commission File No. 0-18348 BE AEROSPACE, INC. (Exact name of registrant as specified in its charter) Delaware 06-1209796 (State of Incorporation) (I.R.S. Employer Identification No.) 1400 Corporate Center Way Wellington, Florida 33414-2105 (Address of principal executive offices) (561) 791-5000 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES[X] NO[ ] The registrant has one class of common stock, $0.01 par value, of which 25,172,613 shares were outstanding as of July 3, 2000. PART I - FINANCIAL INFORMATION Item 1. Financial Statements CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except share data)
May 27, February 26, 2000 2000 (Unaudited) ASSETS Current Assets: Cash and cash equivalents $ 32,441 $ 37,363 Accounts receivable - trade, less allowance for doubtful accounts of $3,659 (May 27, 2000) and $3,883 (February 26, 2000) 100,067 103,719 Inventories, net 120,499 127,230 Other current assets 35,053 35,291 ----------- ----------- Total current assets 288,060 303,603 ----------- ----------- Property and equipment, net 150,372 152,350 Intangibles and other assets, net 419,877 425,836 ----------- ----------- $ 858,309 $ 881,789 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 56,741 $ 60,824 Accrued liabilities 92,058 109,143 Current portion of long-term debt 3,697 3,723 ----------- ----------- Total current liabilities 152,496 173,690 ----------- ----------- Long-term debt 617,317 618,202 Other liabilities 26,242 25,400 Stockholders' Equity: Preferred stock, $0.01 par value; 1,000,000 shares authorized; no shares outstanding - - Common stock, $0.01 par value; 25,150,459 (May 27, 2000) and 24,931,307 (February 26, 2000) issued and outstanding 252 249 Additional paid-in capital 251,282 249,682 Accumulated deficit (170,436) (174,874) Accumulated other comprehensive loss (18,844) (10,560) ----------- ----------- Total stockholders' equity 62,254 64,497 ----------- ----------- $ 858,309 $ 881,789 =========== ===========
See accompanying notes to condensed consolidated financial statements. CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) (Dollars in thousands, except per share data)
Three Months Ended May 27, May 29, 2000 1999 Net sales $ 169,125 $ 185,032 Cost of sales 107,572 118,445 ----------- ----------- Gross profit 61,553 66,587 Operating Expenses: Selling, general and administrative 24,041 22,028 Research, development and engineering 12,981 11,245 Amortization 5,868 5,696 ----------- ----------- Total operating expenses 42,890 38,969 ----------- ----------- Operating earnings 18,663 27,618 ----------- ----------- Equity in losses of unconsolidated subsidiary - 727 Interest expense, net 13,731 12,622 ----------- ----------- Earnings before income taxes 4,932 14,269 Income taxes 494 2,854 ----------- ----------- Net earnings $ 4,438 $ 11,415 =========== =========== Basic net earnings per common share $ 0.18 $ 0.46 =========== =========== Diluted net earnings per common share $ 0.18 $ 0.46 =========== ===========
See accompanying notes to condensed consolidated financial statements. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Dollars in thousands)
Three Months Ended May 27, May 29, 2000 1999 CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 4,438 $ 11,415 Adjustments to reconcile net earnings to net cash flows provided by operating activities: Depreciation and amortization 10,819 10,052 Deferred income taxes - (42) Non-cash employee benefit plan contributions 581 611 Changes in operating assets and liabilities: Accounts receivable 2,001 12,359 Inventories 3,333 (12,363) Other current assets 840 (3,000) Accounts payable (4,195) (1,023) Accrued liabilities (14,470) (4,673) ----------- ----------- Net cash flows provided by operating activities 3,347 13,336 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (4,994) (14,237) Change in intangible and other assets (2,870) (218) ----------- ----------- Net cash flows used in investing activities (7,864) (14,455) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Net payments under bank credit facilities (885) (2,634) Proceeds from issuances of stock 1,020 307 ----------- ----------- Net cash flows provided by (used in) financing activities 135 (2,327) ----------- ----------- Effect of exchange rate changes on cash flows (540) (17) ----------- ----------- Net decrease in cash and cash equivalents (4,922) (3,463) Cash and cash equivalents, beginning of period 37,363 39,500 ----------- ----------- Cash and cash equivalents, end of period $ 32,441 $ 36,037 =========== =========== Supplemental disclosures of cash flow information: Cash paid during period for: Interest, net $ 20,451 $ 20,107 Income taxes, net $ 476 $ 716
See accompanying notes to condensed consolidated financial statements. Notes to Condensed Consolidated Financial Statements May 27, 2000 and May 29, 1999 (Unaudited - Dollars in thousands, except share data) Note 1. Basis of Presentation The condensed consolidated financial statements of BE Aerospace, Inc. and its wholly-owned subsidiaries (the "Company" or "B/E") have been prepared by the Company and are unaudited pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information related to the Company's organization, significant accounting policies and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. In the opinion of management, these unaudited condensed consolidated financial statements reflect all material adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results of operations and statements of financial position for the interim periods presented. These results are not necessarily indicative of a full year's results of operations. Certain reclassifications have been made to the prior year financial statements to conform to the May 27, 2000 presentation. Although the Company believes that the disclosures provided are adequate to make the information presented not misleading, these unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended February 26, 2000. Note 2. Comprehensive Earnings (Loss) Comprehensive earnings (loss) is defined as all changes in a company's net assets except changes resulting from transactions with shareholders. It differs from net earnings (loss) in that certain items currently recorded to equity would be a part of comprehensive earnings (loss). The following table sets forth the computation of comprehensive earnings (loss) for the periods presented:
Three Months Ended May 27, May 29, 2000 1999 Net earnings $ 4,438 $ 11,415 Other comprehensive earnings: Foreign exchange translation adjustment (8,284) (1,651) ----------- ----------- Comprehensive earnings (loss) $ (3,846) $ 9,764 =========== ===========
[Remainder of page intentionally left blank] Note 3. Segment Reporting The Company is organized based on customer-focused lines of business operating in a single segment. Each operation reports its results of operations and makes requests for capital expenditures and acquisition funding to the Company's chief operations decision-making group. This group is presently comprised of the Chairman, the Vice-Chairman and the Chief Executive Officer, and the Corporate Senior Vice President of Administration and Chief Financial Officer. Under this organizational structure, the Company's operations are aggregated into one reportable segment -- the Aircraft Cabin Interior Products and Services segment ("ACIPS"). The ACIPS is comprised of five lines of business: Seating Products, Interior Systems Products, Flight Structures and Engineering Services, Business Jet and VIP Products and Global Customer Service and Product Support, each of which have separate management teams and infrastructures dedicated to providing a full range of products and services to their commercial and general aviation operator customers. Each of these lines of business demonstrates similar economic performance and utilizes similar distribution methods and manufacturing processes. All of B/E's customers are supported by a single worldwide after-sale service organization. The Company sold a 51% interest in its In-Flight Entertainment ("IFE") subsidiary on February 25, 1999 and its remaining 49% interest in IFE on October 5, 1999. IFE was a separate, reportable segment. Note 4. Earnings Per Common Share Basic net earnings per common share is computed using the weighted average common shares outstanding during the period. Diluted net earnings per common share is computed by using the average share price during the period when calculating the dilutive effect of stock options. Shares outstanding for the periods presented were as follows:
Three Months Ended May 27, May 29, 2000 1999 Weighted average common shares outstanding 25,091 24,631 Dilutive effect of employee stock options 4 269 ----------- ----------- Diluted shares outstanding 25,095 24,900 =========== =========== [Remainder of page intentionally left blank]
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Dollars in thousands, except per share data) The following discussion and analysis addresses the results of the Company's operations for the three months ended May 27, 2000, as compared to the Company's results of operations for the three months ended May 29, 1999. The discussion and analysis then addresses the liquidity and financial condition of the Company and other matters. Three Months Ended May 27, 2000, as Compared to the Results of Operations for the Three Months Ended May 29, 1999 Net sales for the fiscal 2001 three-month period were $169,125, or 8.6% lower than net sales of $185,032 for the comparable period in the prior year. The year over year decrease in net sales is attributable to a lower volume of seating and galley structures revenues during the first quarter of fiscal 2001 and our previously announced decision to discontinue certain low-margin products and services. Seating revenues declined year over year as a result of last year's seat manufacturing problems that adversely impacted new orders for seating products last year whereas the decline in galley structures revenues is consistent with the year over year decline in new aircraft deliveries to our customers. Gross profit was $61,553 or 36.4% of net sales for the three months ended May 27, 2000 as compared to $66,587 or 36.0% of net sales in the comparable period in the prior year. The Company's gross margin improved by 1,180 basis points compared to the immediately preceding quarter, from 24.6% to 36.4%. This gross margin improvement was due to a return to on-plan performance in the seating business. Lean manufacturing and continuous improvement programs are enabling the seating business to reduce costs, improve quality and productivity and accelerate the order fulfillment cycle. The year over year decrease in gross profit was directly related to the lower level of revenues as compared to the prior year. Selling, general and administrative expenses were $24,041 or 14.2% of net sales for the three months ended May 27, 2000 as compared to $22,028 or 11.9% of net sales in the comparable period in the prior year and as compared to $24,315 in the Company's fourth quarter in fiscal 2000, which represented 13.4% of net sales. The year over year increase in selling, general and administrative expenses was primarily attributable to costs associated with the lean manufacturing initiatives now underway at each operating plant, along with the costs associated with the implementation of shared platforms for information management and increased depreciation expense associated with the Company's new Enterprise Resource Planning system which was placed into service during fiscal 2000. Research, development and engineering expenses were $12,981 or 7.7% of net sales for the three months ended May 27, 2000, as compared with $11,245 in the comparable period in the prior year and as compared with $13,739 in the preceding quarter. The year over year increase in research, development and engineering expenses is primarily attributable to costs incurred for new product development activity for two of the world's leading airlines and increased depreciation expense resulting from our shared engineering design platforms recently placed into service. Amortization expense for the quarter ended May 27, 2000 of $5,868 was $172 greater than the amount recorded in the first quarter of fiscal 2000. The Company generated operating earnings of $18,663 or 11.0% of net sales as compared to operating earnings of $27,618 or 14.9% of net sales during the comparable period in the prior year. The decrease in operating earnings in the current period is primarily the result of a lower sales volume. Interest expense, net was $13,731 for the three months ended May 27, 2000, or $1,109 greater than interest expense of $12,622 for the comparable period in the prior year. The increase in interest expense is due to the impact of higher interest rates during the current quarter on the Company's bank borrowings. Earnings before income taxes in the current quarter were $4,932, as compared to $14,269 in the prior year's comparable period. Income tax expense for the quarter ended May 27, 2000 was $494, as compared to $2,854 in the prior year's comparable period. Net earnings were $4,438 or $0.18 per share for the three months ended May 27, 2000, as compared to $11,415 or $0.46 per share for the comparable period in the prior year. Liquidity and Capital Resources The Company's liquidity requirements consist of working capital needs, on-going capital expenditures and scheduled payments of interest and principal on indebtedness. B/E's primary requirements for working capital have been related to the reduction of accrued liabilities, including interest, accrued penalties incurred in connection with the fiscal 2000 seating manufacturing problems, incentive compensation, warranty obligations and accrued severance. B/E's working capital was $135,564 as of May 27, 2000, as compared to $129,913 as of February 26, 2000. At May 27, 2000, the Company's cash and cash equivalents were $32,441, as compared to $37,363 at February 26, 2000. Cash provided from operating activities was $3,347 for the three months ended May 27, 2000. The primary source of cash during the three months ended May 27, 2000 was net earnings, depreciation and amortization of $15,257, a $6,174 decrease in accounts receivable, inventories and other current assets offset by a use of cash of $4,195 related to a decrease in accounts payable and $14,470 related to a decrease in accrued liabilities. The Company's capital expenditures were $4,994 and $14,237 during the three months ended May 27, 2000 and May 29, 1999, respectively. The year over year decrease in capital expenditures is primarily attributable to significant expenditures in the prior year for management information system enhancements and expenditures for plant modernization. The Company anticipates on-going annual capital expenditures of approximately $20,000 for the next several years. The Company believes that the cash flow from operations and availability under the Company's Bank Credit Facility will provide adequate funds for its working capital needs, planned capital expenditures and debt service requirements through the term of the Bank Credit Facility. The Company believes that it will be able to refinance the Bank Credit Facility prior to its termination, although there can be no assurance that it will be able to do so. The Company's ability to fund its operations, make planned capital expenditures, make scheduled payments and refinance its indebtedness depends on its future operating performance and cash flow, which, in turn, are subject to prevailing economic conditions and to financial, business and other factors, some of which are beyond its control. Deferred Tax Assets The Company has established a valuation allowance 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 assets during the federal operating loss carryforward period, which begins to expire 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 that are impacting the airframe manufacturers and the airlines, the Company's high degree of financial leverage, risks associated with new product introductions, recent increases in the cost of fuel and its impact on our airline customers, further remediation of our Seating Products operating problems and risks associated with the integration of its acquired businesses. The Company monitors these uncertainties, 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. Dependence upon Conditions in the Airline Industry The Company's principal customers are the world's commercial airlines. As a result, our business is directly dependent upon the conditions in the highly cyclical and competitive commercial airline industry. In the late 1980s and early 1990s, the world airline industry suffered a severe downturn, which resulted in record losses and several air carriers seeking protection under bankruptcy laws. As a consequence, during such period, airlines sought to conserve cash by reducing or deferring scheduled cabin interior refurbishment and upgrade programs and by delaying purchases of new aircraft. This led to a significant contraction in the commercial aircraft cabin interior products industry and a decline in our business and profitability. Since early 1994, the airlines have experienced a turnaround in operating results, leading the domestic airline industry to record operating earnings during calendar years 1995 through 1998. This financial turnaround was, in part, driven by record load factors, rising fare prices and declining fuel costs. Airline company balance sheets have been substantially strengthened and their liquidity enhanced as a result of their record profitability, debt and equity financings and a closely managed fleet expansion. Recent increases in fuel prices have not had a material impact on the airline industry to-date. However, should fuel prices continue at or above the current level for a prolonged period, we would expect to see the airline industry's profitability impacted and discretionary airline spending may be more closely monitored or even reduced. In addition, the airline industry is undergoing a process of consolidation and significantly increased competition. Such consolidation could result in a reduction of future aircraft orders as overlapping routes are eliminated and airlines seek greater economies through higher aircraft utilization. Increased airline competition may also result in airlines seeking to reduce costs by promoting greater price competition from airline cabin interior products manufacturers, thereby adversely affecting our revenues and margins. Recently, turbulence in the financial and currency markets of many Asian countries has led to uncertainty with respect to the economic outlook for these countries. Although not all carriers have been affected by the current economic events in the Pacific Rim, certain carriers, including non-Asian carriers that have substantial Asian routes, could cancel or defer their existing orders. In addition, in December 1998, Boeing announced that in light of continued economic conditions in Asia, it would be reducing production of a number of aircraft types, including particularly wide-body aircraft that require almost five times the dollar content for our products as compared to narrow-body aircraft. [Remainder of page intentionally left blank] Forward Looking Statements This report includes forward-looking statements based on our current expectations, assumptions, estimates and projections about our company and our industry. These forward-looking statements involve risks and uncertainties, including, but not limited to, the future benefits of corrective actions in our seating business, implementation and expected benefits of lean manufacturing and continuous improvement programs, our dealings with customers and partners, the consolidation of facilities, productivity improvements from recent information technology investments, the reduction of debt and other risks detailed in our Securities and Exchange Commission filings. Our actual experience may differ materially from that anticipated in such statements. Factors that might cause such a difference include, but are not limited to, those discussed in "Risk Factors" contained in the Company's Annual Report on Form 10-K for the fiscal year ended February 26, 2000, as well as future events that may have the effect of reducing our available operating income and cash balances, such as unexpected operating losses, the impact of rising fuel prices on our airline customers, delays in, or unexpected costs associated with, the integration of our acquired businesses, conditions in the airline industry, problems meeting customer delivery requirements, new or expected refurbishments, capital expenditures, cash expenditures related to possible future acquisitions, further remediation of our Seating Products operating problems, labor disputes involving us, our significant customers or airframe manufacturers, the possibility of a write-down of intangible assets, delays or inefficiencies in the introduction of new products or fluctuations in currency exchange rates. Item 3. Quantitative and Qualitative Disclosures about Market Risk During the three months ended May 27, 2000, there were no material changes to the disclosure about market risk included in the Company's Annual Report on Form 10-K for the fiscal year ended February 26, 2000. PART II - OTHER INFORMATION Item 1. Legal Proceedings Not applicable. Item 2. Changes in Securities Not applicable. Item 3. Defaults Upon Senior Securities Not applicable. Item 4. Submission of Matters to a Vote of Security Holders Not applicable. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K a. Exhibits 1. Exhibit 27 Financial Data Schedule for the three months ended May 27, 2000. b. Reports on Form 8-K None. Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BE AEROSPACE, INC. Date: June 28, 2000 By: /s/ Robert J. Khoury -------------------------------- Robert J. Khoury Vice Chairman and Chief Executive Officer Date: June 28, 2000 By: /s/ Thomas P. McCaffrey ----------------------------- Thomas P. McCaffrey Corporate Senior Vice President of Administration and Chief Financial Officer EX-27 2 0002.txt
5 3-MOS FEB-26-2000 MAY-27-2000 32,441 0 103,726 (3,659) 120,499 288,060 219,845 (69,473) 858,309 152,496 617,317 0 0 252 62,002 858,309 169,125 169,125 107,572 150,462 0 0 13,731 4,932 494 4,438 0 0 0 4,438 0.18 0.18
-----END PRIVACY-ENHANCED MESSAGE-----