a5747725.htm

0001157523-08-006570.txt : 20080807 0001157523-08-006570.hdr.sgml : 20080807 20080807162217 ACCESSION NUMBER: 0001157523-08-006570 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20080630 FILED AS OF DATE: 20080807 DATE AS OF CHANGE: 20080807 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: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18348 FILM NUMBER: 08998917 BUSINESS ADDRESS: STREET 1: 1400 CORPORATE CTR WY CITY: WELLINGTON STATE: FL ZIP: 33414 BUSINESS PHONE: 5617915000 MAIL ADDRESS: STREET 1: 1400 CORPORATE CENTER WAY STREET 2: 1400 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 a5747725.htm BE AEROSPACE, INC. 10-Q a5747725.htm

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 June 30, 2008

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

(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[ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act: Large accelerated filer [X] Accelerated filer [ ] Non-accelerated filer (do not check if a smaller reporting company) [ ] Smaller reporting company [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES [ ] NO [X]

The registrant has one class of common stock, $0.01 par value, of which 99,126,909 shares were outstanding as of August 4, 2008.

BE AEROSPACE, INC.

Form 10-Q for the Quarter Ended June 30, 2008

Table of Contents

			Page
Part I	Financial Information

Item 1.	Financial Statements (Unaudited)

	a)	Condensed Consolidated Balance Sheets
		as of June 30, 2008 and December 31, 2007	3

	b)	Condensed Consolidated Statements of Earnings for the three and
		six months ended June 30, 2008 and June 30, 2007	4

	c)	Condensed Consolidated Statements of Cash Flows for the
		six months ended June 30, 2008 and June 30, 2007	5

	d)	Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management's Discussion and Analysis of Financial Condition
	and Results of Operations		13

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		25

Item 4.	Controls and Procedures		25

Part II	Other Information

Item 1.	Legal Proceedings		26

Item 1A.	Risk Factors		26

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		31

Item 3.	Defaults Upon Senior Securities		31

Item 4.	Submission of Matters to a Vote of Security Holders		31

Item 5.	Other Information		31

Item 6.	Exhibits		32

Signatures			33

PART I - FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

BE AEROSPACE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Dollars in Millions, Except Share Data)

	June 30,		December 31,
	2008		2007

ASSETS

Current assets:
Cash and cash equivalents	$	75.0	$	81.6
Accounts receivable – trade, less allowance for doubtful
accounts ($5.2 at June 30, 2008 and $4.5 at
December 31, 2007)		297.6		218.0
Inventories, net		733.2		636.3
Deferred income taxes, net		14.4		62.4
Other current assets		19.8		21.7
Total current assets		1,140.0		1,020.0

Property and equipment, net of accumulated depreciation
($170.5 at June 30, 2008 and $158.6 at December 31, 2007)		117.8		116.4
Goodwill		473.2		467.2
Identifiable intangible assets, net of accumulated amortization
($116.2 at June 30, 2008 and $109.7 at December 31, 2007)		141.3		142.2
Other assets, net		40.9		26.2
	$	1,913.2	$	1,772.0

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	205.2	$	192.1
Accrued liabilities		115.7		114.7
Current maturities of long-term debt		1.5		1.6
Total current liabilities		322.4		308.4

Long-term debt, net of current maturities		150.1		150.3
Deferred income taxes, net		36.5		34.9
Other non-current liabilities		21.9		20.3

Commitments, contingencies and off-balance sheet
arrangements (Note 12)
Stockholders' equity:
Preferred stock, $0.01 par value; 1.0 million shares
authorized; no shares outstanding		--		--
Common stock, $0.01 par value; 200.0 million shares
authorized; 93.1 million (June 30, 2008) and
93.1 million (December 31, 2007) shares issued
and outstanding		0.9		0.9
Additional paid-in capital		1,332.8		1,324.3
Retained earnings (Accumulated deficit)		12.7		(89.7	)
Accumulated other comprehensive income		35.9		22.6
Total stockholders' equity		1,382.3		1,258.1
	$	1,913.2	$	1,772.0

See accompanying notes to condensed consolidated financial statements.

BE AEROSPACE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)

(In Millions, Except Per Share Data)


	THREE MONTHS ENDED						SIX MONTHS ENDED
	June 30,			June 30,			June 30,			June 30,
	2008			2007			2008			2007

Net sales	$	522.2		$	398.2		$	995.4		$	786.0
Cost of sales		342.4			257.6			646.5			511.1
Selling, general and administrative		61.7			50.8			118.0			101.5
Research, development and
engineering		33.8			30.3			69.2			57.5

Operating earnings		84.3			59.5			161.7			115.9

Operating earnings percentage		16.1	%		14.9	%		16.2	%		14.7	%

Interest expense, net		2.3			4.1			5.1			14.7
Debt prepayment costs		--			11.0			--			11.0

Earnings before income taxes		82.0			44.4			156.6			90.2

Income taxes		28.1			16.0			54.2			29.7

Net earnings	$	53.9		$	28.4		$	102.4		$	60.5

Net earnings per common share:

Basic	$	0.59		$	0.31		$	1.12		$	0.71
Diluted	$	0.59		$	0.31		$	1.11		$	0.71

Weighted average common shares:

Basic		91.6			90.8			91.6			84.9
Diluted		92.1			91.5			92.0			85.5

See accompanying notes to condensed consolidated financial statements.

BE AEROSPACE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Dollars in Millions)

	SIX MONTHS ENDED
	June 30,			June 30,
	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$	102.4		$	60.5
Adjustments to reconcile net earnings to net cash flows provided by (used in)
operating activities:
Depreciation and amortization		18.0			16.9
Provision for doubtful accounts		0.8			0.3
Non-cash compensation		7.2			5.2
Deferred income taxes		49.4			27.1
Debt prepayment costs		--			11.0
Changes in operating assets and liabilities:
Accounts receivable		(78.1	)		(43.4	)
Inventories		(94.6	)		(120.1	)
Other current assets and other assets		(7.5	)		(3.5	)
Payables, accruals and other liabilities		13.6			4.5
Net cash flows provided by (used in) operating activities		11.2			(41.5	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(13.3	)		(14.7	)
Other, net		(0.1	)		(0.4	)
Net cash flows used in investing activities		(13.4	)		(15.1	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common stock issued		1.4			380.6
Principal payments on long-term debt		(0.3	)		(351.4	)
Debt origination and prepayment costs		(7.8	)		(7.4	)
Borrowings on line of credit		40.0			68.0
Repayments on line of credit		(40.0	)		(68.0	)
Net cash flows (used in) provided by financing activities		(6.7	)		21.8
Effect of foreign exchange rate changes on cash and cash equivalents


Effect of foreign exchange rate changes on cash and cash equivalents		2.3			0.8

Net decrease in cash and cash equivalents		(6.6	)		(34.0	)

Cash and cash equivalents, beginning of period		81.6			65.0

Cash and cash equivalents, end of period	$	75.0		$	31.0

Supplemental disclosures of cash flow information:
Cash paid during period for:
Interest, net	$	5.5		$	20.5
Income taxes, net	$	3.9		$	2.3

See accompanying notes to condensed consolidated financial statements.

BE AEROSPACE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Dollars In Millions, Except Share and Per Share Data)

Note 1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. All adjustments which, in the opinion of management, are considered necessary for a fair presentation of the results of operations for the periods shown, are of a normal recurring nature and have been reflected in the condensed consolidated financial statements. The results of operations for the periods presented are not necessarily indicative of the results expected for the full fiscal year or for any future period. The information included in these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the BE Aerospace, Inc. (the “Company” or "B/E") Annual Report on Form 10-K for the fiscal year ended December 31, 2007.

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 and related disclosures. Actual results could differ from those estimates.

Note 2.

New Accounting Standards

In December 2007, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 141 (revised 2007), “Business Combinations” (“FAS 141(R)”) and No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51” (“FAS 160”). FAS 141(R) will change how business acquisitions are accounted for and FAS 160 will change the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests and classified as a component of equity. FAS 141(R) and FAS 160 are effective for fiscal years beginning on or after December 15, 2008 (January 1, 2009 for the Company). The adoption of FAS 141(R) and FAS 160 is not expected to have a material impact on the Company’s consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities – an Amendment of FASB Statement No. 133” (FAS 161). FAS 161 expands disclosure requirements about how derivative and hedging activities affect an entity’s financial position, financial performance and cash flows. FAS 161 is effective for fiscal years beginning after November 15, 2008, with early adoption encouraged. The adoption of FAS 161 is not expected to have a material impact on the Company’s consolidated financial statements.

Note 3. Inventories

Inventories are stated at the lower of cost or market. Cost is determined using FIFO or the weighted average cost method. Finished goods and work-in-process inventories include material, labor and manufacturing overhead costs. In accordance with industry practice, costs in inventory include amounts relating to long-term contracts with long production cycles and inventory items with long procurement cycles, some of which are not expected to be realized within one year. Inventories consist of the following:

	June 30, 2008		December 31, 2007
Purchased materials and component parts	$	156.1	$	132.2
Work-in-process		41.5		37.7
Finished goods (primarily aftermarket fasteners)		535.6		466.4
	$	733.2	$	636.3

Note 4. Goodwill and Intangible Assets

In accordance with SFAS No. 142, "Goodwill and Other Intangible Assets”, the Company completed the fair value analysis for goodwill and other intangible assets as of December 31, 2007, and concluded that no impairment existed. As of June 30, 2008, the Company believed that no indicators of impairment existed. Amortization expense on identifiable intangible assets was approximately $2.8 and $3.1 for the three month periods ended June 30, 2008 and 2007, respectively and $5.5 and $5.8 for the six months ended June 30, 2008 and 2007, respectively. The Company expects to report amortization expense of approximately $12 in each of the next five fiscal years, exclusive of the impact of the July 2008 acquisition of Honeywell International Inc.’s Consumable Solutions business (HCS). HCS is engaged in the sales and distribution of aerospace consumables such as fasteners, seals, gaskets and electrical components. See Note 13 for more information about the HCS acquisition.

Note 5. Long-Term Debt

In July 2006 and, as amended and restated on August 24, 2006, the Company entered into a Senior Secured Credit Facility (the “2006 Senior Secured Credit Facility”), consisting of a $200.0 revolving credit facility and a $300.0 term loan. As more fully described in Note 13 below, on July 28, 2008 in connection with the HCS acquisition the 2006 Senior Secured Credit Facility was repaid in full and terminated and the Company entered into a new Senior Secured Credit Facility (the “2008 Senior Secured Credit Facility”).

At June 30, 2008, long-term debt consisted principally of $150.0 term loan borrowings under the 2006 Senior Secured Credit Facility. There were no borrowings outstanding on the revolving credit facility of the 2006 Senior Secured Credit Facility at June 30, 2008.

The 2006 Senior Secured Credit Facility contained an interest coverage ratio (as defined therein), maintenance financial covenant and a total leverage ratio covenant (as defined therein). The 2006 Senior Secured Credit Facility was collateralized by substantially all of the Company’s assets and contained customary affirmative covenants, negative covenants and conditions precedent for borrowings, all of which were met as of June 30, 2008.

Note 6.

Fair Value Measurements

The Company adopted SFAS No. 157, “Fair Value Measurements” (SFAS 157), effective January 1, 2008. SFAS 157 defines fair value as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The only assets or liabilities to which SFAS 157 applies are cash and cash equivalents; there was no difference between fair value of such assets and historical cost basis set forth in the June 30, 2008 balance sheet.

Note 7. Accounting for Stock-Based Compensation

The Company has a Long Term Incentive Plan (“LTIP”) under which the Company’s Compensation Committee may grant stock options, stock appreciation rights, restricted stock, restricted stock units or other forms of equity-based or equity-related awards.

During the three and six months ended June, 2008, the Company granted 10,389 and 31,981 shares, respectively, of restricted stock with an average fair market value at the date of grant of $37.06 and $38.30, respectively. Compensation cost is being recognized on a straight-line basis over the four-year vesting period of the stock. Share-based compensation of $3.3 and $6.8 was recognized during the three and six month periods ended June 30, 2008 related to these stock grants and restricted stock granted in prior periods. Unrecognized compensation expense related to share grants, including the estimated impact of any future forfeitures, was $32.9 at June 30, 2008.

No compensation cost was recognized for stock options during the three and six month periods ended June 30, 2008 and 2007 since no options were granted or vested during these periods.

The Company has established a qualified Employee Stock Purchase Plan which allows qualified employees (as defined in the Employee Stock Purchase Plan) to purchase shares of the Company's common stock at a price equal to 85% of the closing price at the end of each semi-annual stock purchase period. Compensation cost for this plan of $0.0 and $0.1 was recognized during the three months ended June 30, 2008 and 2007, respectively and $0.2 was recognized for each of the six months ended June 30, 2008 and 2007.

Note 8.

Segment Reporting

The Company is organized based on the products and services it offers. The Company’s reportable segments are comprised of: Distribution, Interior Systems, Seating, Business Jet and Engineering Services.

The Company evaluates segment performance based on segment operating earnings or loss. Each segment reports its results of operations and makes requests for capital expenditures and acquisition funding to the Company’s chief operational decision-making group. This group is presently comprised of the Chairman and Chief Executive Officer, the President and Chief Operating Officer, and the Senior Vice President and Chief Financial Officer. Each operating segment has separate management teams and infrastructures dedicated to providing a full range of products and services to their customers.

The following table presents net sales and operating earnings by business segment:

	THREE MONTHS ENDED				SIX MONTHS ENDED
	June 30,		June 30,		June 30,			June 30,
	2008		2007		2008			2007
Net sales
Distribution	$	123.6	$	96.3	$	245.6		$	193.2
Interior Systems		104.2		85.6		197.4			166.7
Seating		183.4		145.4		334.3			289.8
Business Jet		72.4		44.5		145.1			88.6
Engineering Services		38.6		26.4		73.0			47.7
	$	522.2	$	398.2	$	995.4		$	786.0
Operating earnings(1)
Distribution	$	31.6	$	21.8	$	66.9		$	41.5
Interior Systems		23.1		15.5		41.5			30.1
Seating		20.1		16.8		35.6			33.7
Business Jet		9.1		4.5		19.7			8.9
Engineering Services		0.4		0.9		(2.0	)		1.7
		84.3		59.5		161.7			115.9
Interest expense		2.3		4.1		5.1			14.7
Debt prepayment costs		--		11.0		--			11.0
Earnings before income taxes	$	82.0	$	44.4	$	156.6		$	90.2

(1) Operating earnings includes an allocation of corporate general and administrative and employee benefits costs based on the proportion of each segments’ sales and employees, respectively.

The following table presents capital expenditures by business segment:

	THREE MONTHS ENDED				SIX MONTHS ENDED
	June 30,		June 30,		June 30,		June 30,
	2008		2007		2008		2007
Capital Expenditures
Distribution	$	0.6	$	0.6	$	1.7	$	2.2
Interior Systems		1.5		2.1		4.1		4.5
Seating		1.5		2.5		5.1		4.6
Business Jet		1.0		1.2		1.5		2.5
Engineering Services		0.2		0.3		0.9		0.9
	$	4.8	$	6.7	$	13.3	$	14.7

The following table presents total assets by business segment:


	June 30,		December 31,
	2008		2007
Total Assets (1)
Distribution	$	641.1	$	575.2
Interior Systems		443.3		415.3
Seating		383.2		357.9
Business Jet		260.4		256.4
Engineering Services		185.2		167.2
	$	1,913.2	$	1,772.0

(1) Corporate assets of $107.0 and $139.2 at June 30, 2008 and December 31, 2007, respectively, have been allocated to the above segments based on each segment’s respective percentage of total assets.

Note 9.

Net 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 issued under the Employee Stock Purchase Plan and restricted shares. Shares outstanding for the periods presented were as follows:

	THREE MONTHS ENDED				SIX MONTHS ENDED
	June 30,		June 30,		June 30,		June 30,
	2008		2007		2008		2007
Net earnings	$	53.9	$	28.4	$	102.4	$	60.5

Basic weighted average common shares (in millions)		91.6		90.8		91.6		84.9
Effect of dilutive stock options and
employee stock puchase plan shares (in millions)		0.1		0.3		0.1		0.3
Effect of restricted shares issued (in millions)		0.4		0.4		0.3		0.3
Diluted weighted average common shares (in millions)		92.1		91.5		92.0		85.5

Basic net earnings per share	$	0.59	$	0.31	$	1.12	$	0.71
Diluted net earnings per share	$	0.59	$	0.31	$	1.11	$	0.71

Note 10. Comprehensive Earnings

Comprehensive earnings is defined as all changes in a company's net assets except changes resulting from transactions with shareholders. It differs from net earnings in that certain items currently recorded to equity would be a part of comprehensive earnings.

The following table sets forth the computation of comprehensive earnings for the periods presented:

	THREE MONTHS ENDED				SIX MONTHS ENDED
	June 30,		June 30,		June 30,		June 30,
	2008		2007		2008		2007
Net earnings	$	53.9	$	28.4	$	102.4	$	60.5
Other comprehensive earnings:
Foreign exchange translation adjustment and other		0.1		3.9		13.3		6.4
Comprehensive earnings	$	54.0	$	32.3	$	115.7	$	66.9

Note 11. Accounting for Uncertainty in Income Taxes

The Company adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), on January 1, 2007. Upon adoption, the liability for unrecognized tax benefits at January 1, 2007 was $4.9, which was accounted for as a $2.3 increase to accumulated deficit, a $2.3 increase in long term deferred tax assets, and a $0.3 reduction in income taxes payable. The net amount of these unrecognized tax benefits, if recognized, would affect the Company’s effective tax rate.

The Company’s tax expense of $54.2 during the six month period ended June 30, 2008 reflects approximately $0.4 of tax benefits associated with non-recurring tax planning initiatives that were finalized during the first quarter of 2008. Our tax expense for this period would have been $54.6 excluding these non-recurring tax planning initiatives resulting in an effective tax rate of approximately 34.9%.

The Company is not currently undergoing any material income tax examinations in the U.S. federal or state jurisdictions in which the Company operates. The Company is currently undergoing an income tax audit in one of its non-U.S. jurisdictions. With minor exceptions, the Company is currently open to audit by the tax authorities for the tax years ending December 31, 2003 through December 31, 2007.

The Company classifies interest and penalties related to income taxes as income tax expense. The amount included in the Company’s liability for unrecognized tax benefits for interest and penalties as of the date of adoption of FIN 48 was under $1.0 and this amount did not materially change as of June 30, 2008.

Note 12. Commitments, Contingencies and Off-Balance Sheet Arrangements

Lease Commitments — The Company finances its use of certain facilities and equipment under committed lease arrangements provided by various institutions. Since the terms of these arrangements meet the accounting definition of operating lease arrangements, the aggregate sum of future minimum lease payments is not reflected on the condensed consolidated balance sheet. At June 30, 2008, future minimum lease payments under these arrangements totaled approximately $118.2; the majority of which related to the long-term real estate leases.

Indemnities, Commitments and Guarantees — During its normal course of business, the Company has made certain indemnities, commitments and guarantees under which it may be required to make payments in relation to certain transactions. These indemnities include non-infringement of patents and intellectual property indemnities to the Company's customers in connection with the delivery, design, manufacture and sale of its products, indemnities to various lessors in connection with facility leases for certain claims arising from such facility or lease, and indemnities to other parties to certain acquisition agreements. The duration of these indemnities, commitments and guarantees varies, and in certain cases is indefinite. The Company believes that substantially all of these indemnities, commitments and guarantees provide for limitations on the maximum potential future payments the Company could be obligated to make. However, the Company is unable to estimate the maximum amount of liability related to its indemnities, commitments and guarantees because such liabilities are contingent upon the occurrence of events which are not reasonably determinable. Management believes that any liability for these indemnities, commitments and guarantees would not be material to the accompanying condensed consolidated financial statements. Accordingly, no significant amounts have been accrued for indemnities, commitments and guarantees.

Product Warranty Costs – Estimated costs related to product warranties are accrued at the time products are sold. In estimating its future warranty obligations, the Company considers various relevant factors, including the Company's stated warranty policies and practices, the historical frequency of claims and the cost to replace or repair its products under warranty. The following table provides a reconciliation of the activity related to the Company's accrued warranty expense:

	SIX MONTHS ENDED
	June 30,			June 30,
	2008			2007
Beginning balance	$	20.6		$	18.4
Accruals for warranties issued
during the period		16.4			5.8
Settlements made		(14.3	)		(3.9	)
Ending balance	$	22.7		$	20.3

Note 13.

Subsequent Events

HCS Acquisition – On July 28, 2008, the Company acquired from Honeywell International Inc. (“Honeywell”) its Consumables Solutions distribution business (“HCS”) for $1,050.0. The purchase price consisted of $901.4 cash, plus six million shares of the Company’s common stock valued at $148.6 or $24.77 per share. The HCS acquisition will be accounted for using the purchase method of accounting.

In connection with the HCS acquisition, the Company entered into a 30-year license agreement to become Honeywell’s exclusive licensee with respect to the sale to the global aerospace industry of Honeywell proprietary fasteners, seals, bearings, gaskets and electrical components associated with Honeywell’s engines, APU’s, avionics, and wheels and brakes. The Company also became the exclusive supplier of both Honeywell proprietary consumables and standard consumables to support the internal manufacturing needs of Honeywell Aerospace. The Company also entered into a transition services agreement with Honeywell pursuant to which Honeywell will provide temporary services to the Company related to the HCS business. In addition, the Company entered into a stockholders agreement with Honeywell and certain of its affiliates that provides for certain restrictions on the ability of such entities to transfer their shares of the Company’s common stock received in the transaction, certain registration rights for their shares of the Company’s common stock received in the transaction, and a standstill provision restricting certain actions by Honeywell.

On July 1, 2008, the Company sold $600.0 aggregate principal amount of the Company’s 8 ½% Senior Notes due 2018 (the “Senior Notes”), in an offering registered pursuant to the Securities Act of 1933, as amended.

The Senior Notes were issued pursuant to an indenture between the Company and Wilmington Trust Company, as trustee. The net proceeds from the offering of the Notes of approximately $586.0 were deposited into a cash collateral account administered by the administrative agent under the 2008 Senior Secured Credit Facility. Upon closing of the HCS acquisition, the net proceeds were released to the Company from the collateral account to pay a portion of the cash consideration in the HCS acquisition. The Company used the net proceeds, together with borrowings under the 2008 Senior Secured Credit Facility described below and an issuance of its common stock to Honeywell to pay for the HCS acquisition, to repay approximately $150.0 of indebtedness under its 2006 Senior Secured Credit Facility and to pay transaction fees and expenses.

2008 Senior Secured Credit Facility – In connection with the closing of the HCS acquisition, the Company entered into the 2008 Senior Secured Credit Facility, consisting of a $525.0 term loan facility with a six-year maturity and a revolving credit facility of $350.0, with a five-year maturity. After giving effect to the HCS acquisition and the related financing transactions as of June 30, 2008, the Company would have had $1,126.6 of outstanding indebtedness consisting of $525.0 of term loan due in 2014, and $600.0 of 8 ½% Senior Notes due in 2018, and $1.6 of other debt. On a proforma basis at June 30, 2008, stockholders equity would have been $1,528.6, the Company’s net debt to net capital ratio would have been 40.3% and there were no borrowings outstanding under our $350.0 revolving credit facility.

BE AEROSPACE, INC.

ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

(Dollars In Millions, Except As Noted And Per Share Data)

OVERVIEW

The following discussion and analysis addresses the results of our operations for the three and six months ended June 30, 2008, as compared to our results of operations for the three and six months ended June 30, 2007. In addition, the discussion and analysis addresses our liquidity, financial condition and other matters for these periods.

Based on our experience in the industry, we believe that we are the world’s largest manufacturer of cabin interior products for commercial aircraft and for business jets and the leading aftermarket distributor of aerospace fasteners. We sell our manufactured products directly to virtually all of the world’s major airlines and airframe manufacturers and a wide variety of business jet customers. In addition, based on our experience, we believe that we have achieved leading global market positions in each of our major product categories, which include:

•

commercial aircraft seats, including an extensive line of super first class, first class, business class, tourist class and regional aircraft seats;

•

a full line of aircraft food and beverage preparation and storage equipment, including coffeemakers, water boilers, beverage containers, refrigerators, freezers, chillers and microwaves, high heat convection and steam ovens;

•

both chemical and gaseous aircraft oxygen delivery, distribution and storage systems, protective breathing equipment and lighting products;

•

business jet and general aviation interior products, including an extensive line of executive aircraft seats, direct and indirect overhead lighting systems, oxygen delivery systems, air valve systems, high-end furniture and cabinetry; and

•

a broad line of aerospace fasteners, covering over 200,000 stock keeping units (SKUs) serving the commercial aircraft, business jet and military and defense industries.

We also design, develop and manufacture a broad range of cabin interior structures and provide comprehensive aircraft cabin interior reconfiguration and passenger-to-freighter conversion engineering services and component kits.

We conduct our operations through strategic business units that have been aggregated under five reportable segments: Distribution, Interior Systems, Seating, Business Jet and Engineering Services.

Net sales by reportable segment for the three and six month periods ended June 30, 2008 and June 30, 2007 were as follows:

	THREE MONTHS ENDED										SIX MONTHS ENDED
	June 30, 2008					June 30, 2007					June 30, 2008					June 30, 2007
	Net Sales		% of Net Sales			Net Sales		% of Net Sales			Net Sales		% of Net Sales			Net Sales		% of Net Sales
Distribution	$	123.6		23.7	%	$	96.3		24.2	%	$	245.6		24.7	%	$	193.2		24.6	%
Interior Systems		104.2		19.9	%		85.6		21.5	%		197.4		19.8	%		166.7		21.2	%
Seating		183.4		35.1	%		145.4		36.5	%		334.3		33.6	%		289.8		36.9	%
Business Jet		72.4		13.9	%		44.5		11.2	%		145.1		14.6	%		88.6		11.3	%
Engineering Services		38.6		7.4	%		26.4		6.6	%		73.0		7.3	%		47.7		6.0	%
	$	522.2		100.0	%	$	398.2		100.0	%	$	995.4		100.0	%	$	786.0		100.0	%

Net sales by geographic area (based on destination) for the three and six month periods ended June 30, 2008 and June 30, 2007 were as follows:

	THREE MONTHS ENDED										SIX MONTHS ENDED
	June 30, 2008					June 30, 2007					June 30, 2008					June 30, 2007
	Net		% of			Net		% of			Net		% of			Net		% of
	Sales		Net Sales			Sales		Net Sales			Sales		Net Sales			Sales		Net Sales
United States	$	232.4		44.5	%	$	168.7		42.4	%	$	450.3		45.2	%	$	339.1		43.1	%
Europe		116.7		22.3	%		120.1		30.2	%		224.9		22.6	%		248.1		31.6	%
Asia, Pacific Rim,
Middle East and
Other		173.1		33.2	%		109.4		27.4	%		320.2		32.2	%		198.8		25.3	%
	$	522.2		100.0	%	$	398.2		100.0	%	$	995.4		100.0	%	$	786.0		100.0	%

Net sales from our domestic and foreign operations for the three and six month periods ended June 30, 2008 and June 30, 2007 were as follows:

	THREE MONTHS ENDED				SIX MONTHS ENDED
	June 30, 2008		June 30, 2007		June 30, 2008		June 30, 2007
Domestic	$	332.7	$	239.7	$	651.0	$	485.6
Foreign		189.5		158.5		344.4		300.4
Total	$	522.2	$	398.2	$	995.4	$	786.0

New product development is a strategic initiative for us. Our customers regularly request that we engage in new product development and enhancement activities. We believe that these activities will protect and enhance our leadership position. We believe our investments in research and development over the past several years have been the driving force behind our ongoing market share gains. Research, development and engineering spending have been approximately 7% - 8% of sales for the past several years and are expected to remain at approximately that level for the next year.

We also believe in providing our businesses with the tools required to remain competitive. In that regard, we have invested, and intend to continue to invest, in property and equipment that enhance our productivity. Over the past three years, annual capital expenditures ranged from $17 - $32. Taking into consideration the HCS acquisition described below, our backlog, targeted capacity utilization levels, recent capital expenditure investments and current industry conditions, we anticipate capital expenditures of approximately $45-$50 over the next twelve months.

On July 28, 2008, we acquired from Honeywell International Inc. (“Honeywell”) the Consumables Solutions distribution business (“HCS”) for $1,050.0. The purchase price consisted of $901.4 cash, plus six million shares of our common stock valued at $148.6, or $24.77 per share. The HCS acquisition will be accounted for using the purchase method of accounting.

In connection with the HCS acquisition, we entered into a 30-year license agreement to become Honeywell’s exclusive licensee with respect to the sale to the global aerospace industry of Honeywell proprietary fasteners, seals, bearings, gaskets and electrical components associated with Honeywell’s engines, APU’s, avionics, and wheels and brakes. We also became the exclusive supplier of both Honeywell proprietary consumables and standard consumables to support the internal manufacturing needs of Honeywell Aerospace. We also entered into a transition services agreement with Honeywell pursuant to which Honeywell will provide temporary services to us related to the HCS business. In addition, we entered into a stockholders agreement with Honeywell that provides for certain restrictions on the ability of such entities to transfer their shares of our common stock received in the transaction, certain registration rights for their shares of our common stock received in the transaction and a standstill provision restricting certain actions by Honeywell.

We believe the HCS acquisition is a transformational transaction for our company. After giving effect to the HCS acquisition, for the year ended December 31, 2007, our distribution segment would have generated approximately 42% of our revenues and nearly 50% of our operating earnings. We expect that we will begin to realize the cost synergies from the combination of the two businesses during 2009. Our aerospace consumables distribution segment is expected to yield superior financial results as we integrate the businesses, expand our product offerings and leverage the combined volume of the two businesses over our existing robust IT and automated inventory retrieval systems and as we transition the HCS business to our stocking distributor business model.

THREE MONTHS ENDED JUNE 30, 2008,

AS COMPARED TO THREE MONTHS ENDED JUNE 30, 2007

(All Dollar Amounts in Millions Except Per Share Data)

The following is a summary of net sales by segment:

	NET SALES
	Three Months Ended June 30,
	($ in millions)
					Percent
	2008		2007		Change
Distribution	$	123.6	$	96.3		28.3	%
Interior Systems		104.2		85.6		21.7	%
Seating		183.4		145.4		26.1	%
Business Jet		72.4		44.5		62.7	%
Engineering Services		38.6		26.4		46.2	%
Total	$	522.2	$	398.2		31.1	%

Net sales for the three months ended June 30, 2008 were $522.2, an increase of $124.0, or 31.1% as compared to the prior year.

The distribution segment revenue growth rate of 28.3% reflects the significant ongoing investments in product line expansion, the broad-based increase in aftermarket demand for aerospace fasteners and continued market share gains.

The interior systems segment revenue growth rate of 21.7% reflects both higher aftermarket demand as well as a higher level of new wide-body aircraft deliveries. Seating segment revenue growth of 26.1% reflects the scheduled deliveries of major new programs.

Business jet segment revenues increased by 62.7% reflecting strong demand for business jet interior equipment and super first class products. The engineering services segment revenue growth rate was 46.2% reflecting the ramp-up of shipments on new programs.

Cost of sales for the current period were $342.4, or 65.6% of net sales, as compared to $257.6, or 64.7% of net sales, in the prior year. The 90 basis point increase in the current year is due to the 62.7% increase in business jet revenue and due to learning curve and start-up costs at our seating and engineering services segments.

Selling, general and administrative expenses were $61.7, or 11.8% of net sales, as compared to $50.8, or 12.8% of sales, in the prior year. The $10.9 year over year increase reflects the higher level of selling and marketing costs ($2.7); commissions, compensation and benefits ($0.8), maintenance and repairs ($0.7) and legal and professional fees ($1.1) to support the 31.1% increase in revenues and the approximately 26% increase in backlog. The 100 basis point decline in selling, general and administrative spending as a percentage of sales is due to operating leverage at the higher sales volume.

Research, development and engineering expenses were $33.8, or 6.5% of net sales, as compared to $30.3, or 7.6% of net sales, in the prior year. The $3.5 increase in spending was primarily due to a high level of certification activities associated with new products, including products for the new Boeing 787 aircraft and A350 XWB aircraft, as well as new product spending for new business jet aircraft type launches (Cessna wide-body, Gulfstream 650, Dassault Falcon 7X and Embraer Legacy 450 MSJ and Legacy 500 MLJ) and the super first class suite of products. The 110 basis points decline in research, development and engineering expenses as a percentage of sales is due to operating leverage at the higher sales level.

Operating earnings for the current period were $84.3, or 16.1% of net sales, and increased by $24.8, or 41.7%, on the 31.1% increase in net sales. The 41.7% growth in operating earnings as compared to the second quarter of last year was driven by the 31.1% increase in revenues and the 120 basis point expansion in operating margin. Revenue growth was driven by robust market conditions and market share gains. The 16.1% operating margin primarily reflects margin expansion in the distribution, interior systems and business jet segments. The 120 basis point margin improvement was achieved in spite of start-up and learning curve costs on new programs in the seating and engineering services segments. Margin expansion in the seating and engineering services segments is expected to positively impact further consolidated margin improvement in the second half of the year.

The following is a summary of operating earnings by segment:

	OPERATING EARNINGS
	Three Months Ended June 30,
	($ in millions)
	2008		2007		Percent Change
Distribution	$	31.6	$	21.8		45.0	%
Interior Systems		23.1		15.5		49.0	%
Seating		20.1		16.8		19.6	%
Business Jet		9.1		4.5		102.2	%
Engineering Services		0.4		0.9		(55.6	%)
Total	$	84.3	$	59.5		41.7	%

Distribution segment operating earnings of $31.6 were 45.0% greater than the same period last year. The distribution segment operating margin expanded by 300 basis points to 25.6% as compared with the second quarter of 2007 reflecting the synergies from the New York Fasteners (NYF) integration and an improved and expanded mix of products on a number of programs.

Interior systems segment operating earnings of $23.1 increased 49.0%, as compared with the same period in the prior year. The interior systems segment operating margin increased by 410 basis points to 22.2%. The significant margin expansion is primarily the result of the synergies arising from the Draeger Aerospace GmbH (Draeger) integration, operational efficiency initiatives and operating leverage.

Seating segment operating earnings of $20.1 increased 19.6%, as compared with the same period in the prior year. The operating margin for the second quarter of 11.0% expanded by 70 basis points on a sequential quarterly basis reflecting ongoing operational improvements as well as the impact of start-up and learning curve costs on new programs.

Business jet segment operating earnings increased by 102.2% as compared with the same period in the prior year as a result of the 62.7% increase in revenue and the 250 basis point increase in operating margin to 12.6%. The significant margin expansion reflects improved operational efficiency, particularly on new programs begun in 2007 and operating leverage at the higher sales level.

The engineering services segment operating earnings of $0.4 during the second quarter of 2008 improved by $2.8 on a sequential quarterly basis reflecting ongoing operational improvements on new programs.

Interest expense for the three months ended June 30, 2008 was $2.3 and was $1.8 lower than the interest expense recorded in the same period in the prior year as a result of our redemption of our $250 aggregate principal amount 8 7/8% senior subordinated notes due 2011 and the prepayment of $100 of term loan borrowings under our 2006 Senior Secured Credit Facility during the second quarter of 2007. We recorded debt prepayment costs of $11.0 related to these debt payments during the 2007 period.

Earnings before income taxes for the three months ended June 30, 2008 of $82.0 increased by $37.6 or 84.7%, as compared to the same period in the prior year as a result of the $24.8, or 41.7% increase in operating earnings and a $1.8, or 43.9% reduction in interest expense.

Income taxes were $28.1 or 34.3.% of earnings before income taxes for the current quarter as compared to $16.0 or 36.0% of earnings before income taxes in the second quarter of 2007.

Net earnings for the second quarter were $53.9 or $0.59 per diluted share, as compared with net earnings of $28.4 or $0.31 per diluted share, in the second quarter of 2007. Second quarter 2008 net earnings and earnings per diluted share increased by $25.5 or 89.8% and $0.28 per diluted share or 90.3%, respectively, as compared with the same period in the prior year.

SIX MONTHS ENDED JUNE 30, 2008,

AS COMPARED TO SIX MONTHS ENDED JUNE 30, 2007

(Dollars In Millions, Except Per Share Data)

The following is a summary of net sales by segment:

	NET SALES
	Six Months Ended June 30,
	($ in millions)
	2008		2007		Percent Change
Distribution	$	245.6	$	193.2		27.1	%
Interior Systems		197.4		166.7		18.4	%
Seating		334.3		289.8		15.4	%
Business Jet		145.1		88.6		63.8	%
Engineering Services		73.0		47.7		53.0	%
Total	$	995.4	$	786.0		26.6	%

Net sales for the six months ended June 30, 2008 were $995.4, an increase of $209.4 or 26.6%, as compared to the same period in the prior year.

The distribution segment delivered revenue growth of 27.1%, as a result of a significant ongoing expansion in product line, a broad-based increase in aftermarket demand for aerospace fasteners, a channel shift from original equipment manufacturers to subcontractors, which tend to acquire fasteners from distributors, and continued market share gains.

The interior systems segment revenue growth of 18.4% reflected the higher level of new aircraft deliveries as well as substantial aftermarket revenue growth. The 15.4% increase in revenues for the seating segment reflects significant market share gains and a higher level of aftermarket, retrofit and refurbishment activity, as well as demand created by new aircraft deliveries.

Business jet segment revenues increased by 63.8%, as a result of increased demand for business jet interior equipment and super first class products. Engineering services segment revenue growth of $25.3 or 53.0% was the result of the higher level of engineering design, program management and certification activities.

Cost of sales for the current period were $646.5, or 64.9% of net sales, as compared to $511.1, or 65.0% of net sales in the prior year. The 10 basis point decrease in the current year is due to margin expansion at our interior systems, business jet and distribution segments offset by learning curve and start-up costs at our seating and engineering services segments.

Selling, general and administrative expenses for the six months ended June 30, 2008 were $118.0, or 11.9% of sales, versus $101.5 or 12.9% of sales in the same period in the prior year. This reflects a higher level of selling and marketing costs ($3.6), legal and professional fees ($2.4), maintenance and repairs ($1.0) and increased compensation and benefits ($1.4) required to support the 26.6% increase in revenues and the 26% increase in backlog from June 30, 2007. The 100 basis point decline in the selling, general and administrative expenses as a percentage of sales reflects operating leverage at higher sales levels.

Research, development and engineering expenses for the six months ended June 30, 2008 were $69.2 or 7.0% of sales, versus $57.5 or 7.3% of sales in the same period in the prior year. The $11.7 or 20.3% increase in spending was primarily due to a high level of certification activities associated with new products, including products for the new Boeing 787 aircraft and A350 XWB aircraft, as well as new product spending for new business jet aircraft type launches (Cessna wide-body, Gulfstream 650, Dassault Falcon 7X and Embraer Legacy 450 MSJ and Legacy 500 MLJ) and the super first class suite of products. The 30 basis points decline in research, development and engineering expenses as a percentage of sales is due to operating leverage at the higher sales level.

For the six months ended June 30, 2008, operating earnings increased 39.5% as compared to the same period in the prior year. Operating earnings growth was driven primarily by the 26.6% increase in revenue and the 150 basis point expansion in operating margin. Revenue growth was driven primarily by robust market conditions and market share gains. The 16.2% operating margin primarily reflects strong margin expansion in the distribution, interior systems and business jet segments. The 150 basis point margin improvement was achieved in spite of start-up and learning curve costs on new programs in the seating and engineering services segments.

The following is a summary of operating earnings by segment:

	OPERATING EARNINGS
	Six Months Ended June 30,
	($ in millions)
	2008			2007		Percent Change
Distribution	$	66.9		$	41.5		61.2	%
Interior Systems		41.5			30.1		37.9	%
Seating		35.6			33.7		5.6	%
Business Jet		19.7			8.9		121.3	%
Engineering Services		(2.0	)		1.7	NM
	$	161.7		$	115.9		39.5	%

For the six months ended June 30, 2008, the distribution segment operating earnings of $66.9 increased by 61.2%, reflecting the 27.1% increase in revenue and the 570 basis point margin expansion. The 27.2% operating margin reflects the synergies from the NYF integration and improved and expanded mix of products on a number of programs.

The interior systems segment operating earnings of $41.5 increased by 37.9%, reflecting the 18.4% increase in revenue and the 290 basis point expansion in operating margin to 21.0%. The significant expansion in operating margin was primarily the result of synergies arising from the Draeger integration, operational efficiency initiatives and operating leverage.

The seating segment operating earnings of $35.6, or 10.6% of sales, increased by $1.9 as compared with the prior year period and reflects the impact of start-up and learning curve costs on new programs during the six months ended June 30, 2008.

The business jet segment operating earnings of $19.7 increased by 121.3% versus the prior year, as a result of the 63.8% increase in revenue and the 360 basis point increase in operating margin to 13.6%. The significant margin expansion reflects substantially improved operational efficiency, particularly on new programs begun in 2007, and operating leverage at the higher sales level.

The engineering services segment operating loss of $2.0 was primarily the result of start-up and learning curve costs on new programs incurred in the first quarter of 2008.

Interest expense for the six months ended June 30, 2008 was $5.1 and was $9.6 lower than the interest expense recorded in the same period in the prior year as a result of the Company’s redemption of its $250 aggregate principal amount 8 7/8% senior subordinated notes due 2011 and the prepayment of $100 of term loan borrowings under its 2006 Senior Secured Credit Facility during the second quarter of 2007. The Company recorded debt prepayment costs of $11.0 related to these debt payments during the six months ended June 30, 2007.

For the six months ended June 30, 2008, earnings before income taxes of $156.6 increased by $66.4, or 73.6%, as compared with the same period in 2007.

Income taxes were $54.2 or 34.6% of earnings before taxes. The tax rate for the six months ended June 30, 2007 was 32.9%.

Net earnings of $102.4 increased by $41.9, or 69.3%, as compared with the prior year. Earnings per diluted share of $1.11 increased by 56.3% as compared with the prior year reflecting the 69.3% increase in net earnings and a 7.6% increase in shares outstanding in the current period, along with debt prepayment costs and a lower tax rate in the prior period.

LIQUIDITY AND BALANCE SHEET METRICS

As of June 30, 2008, our net debt-to-net-capital ratio was 5.3% and net debt was $76.6, which represents total debt of $151.6 less cash and cash equivalents of $75.0. As of June 30, 2008, we had no borrowings outstanding on our $200 revolving credit facility under our 2006 Senior Secured Credit Facility. Working capital as of June 30, 2008 of $817.6, increased by $106.0, or 14.9%, as compared with December 31, 2007 as a result of the 26.6% increase in revenues and the 26.0% increase in backlog during the first half of the current year compared to the first half of the prior year. Accounts receivable increased by $79.6 on the higher sales level while inventories increased by $96.9 reflecting the substantial increase in backlog and further expansion of our fastener product line.

On July 1, 2008, we issued 8 ½% senior notes due 2018 (the “Senior Notes”) pursuant to an indenture between us and Wilmington Trust Company, as trustee. The net proceeds from the offering of the Senior Notes of approximately $586.0 were deposited into a cash collateral account administered by the administrative agent under the 2006 Senior Secured Credit Facility. Upon closing of the HCS acquisition, the net proceeds were released to us from the collateral account to pay a portion of the cash consideration in the HCS acquisition.

We used the net proceeds, together with borrowings under the 2008 Senior Secured Credit Facility and an issuance of its common stock to Honeywell to pay for the HCS acquisition, to repay approximately $150.0 of indebtedness under our 2006 Senior Secured Credit Facility and to pay transaction fees and expenses.

In connection with the closing of the HCS acquisition, on July 28, 2008, we entered into the 2008 Senior Secured Credit Facility, consisting of a $525 term loan facility with a six-year maturity and a revolving credit facility of $350.0, with a five-year maturity.

After giving effect to the HCS acquisition and the related financing transactions as of June 30, 2008, we would have had $1,126.6 of outstanding indebtedness consisting of $525.0 of term loan borrowings under the 2008 Senior Secured Credit Facility due in 2014, and $600.0 of $8.5% senior unsecured notes due 2018 represented by the Senior Notes, and $1.6 of other debt. On a proforma basis at June 30, 2008 stockholders equity would have been $1,528.6, our debt to capital ratio would have been 40.3% and there were no borrowings outstanding under our $350.0 revolving line of credit.

Cash Flows

At June 30, 2008, our cash and cash equivalents was $75.0 compared to $81.6 at December 31, 2007. Cash provided by operating activities was $11.2 for the six months ended June 30, 2008, as compared to cash used in operating activities of $41.5 in the same period in the prior year. The primary source of cash from operations during the six months ended June 30, 2008 was net earnings of $102.4 arising from the higher revenue volume, a 150 basis point expansion in operating margin and $9.6 of lower interest expense. This increase in cash was offset by the higher level of accounts receivable ($78.1) and inventories ($94.6) and the lower level of accounts payable ($12.0) discussed above.

Capital Spending

Our capital expenditures were $13.3 and $14.7 during the six months ended June 30, 2008 and 2007, respectively. Taking into consideration the July 2008 acquisition of HCS, we anticipate capital expenditures of approximately $45 - $50 for the next twelve months. We have no material commitments for capital expenditures. We have, in the past, generally funded our capital expenditures from cash from operations and funds available to us under bank credit facilities. We expect to fund future capital expenditures from cash on hand, from operations and from funds available to us under the 2008 Senior Secured Credit Facility.

Outstanding Debt and Other Financing Arrangements

Long-term debt at June 30, 2008 consisted principally of $150.0 of term loan borrowings under the 2006 Senior Secured Credit Facility.

Term loan borrowings under the 2006 Senior Secured Credit Facility bore interest at an annual rate equal to LIBOR plus 175 basis points (4.68% at June 30, 2008). Revolving credit borrowings under the 2006 Senior Secured Credit Facility, if any, would bear interest at an annual rate equal to, at the Company’s option, LIBOR plus 125 basis points or prime plus 25 basis points.

Contractual Obligations

During the six-month period ended June 30, 2008 there were no material changes in our long-term debt. The following chart reflects our contractual obligations and commercial commitments as of June 30, 2008. As described above, subsequent to June 30, 2008, we repaid all borrowings under its 2006 Senior Secured Credit Facility and entered into the 2008 Senior Secured Credit Facility and issued the Senior Notes. Commercial commitments include lines of credit, guarantees and other potential cash outflows resulting from a contingent event that requires performance by us or our subsidiaries pursuant to a funding commitment.

Contractual Obligations (1)	2008		2009		2010		2011		2012		Thereafter		Total
Long-term debt and other non-current liabilities(2)	$	1.5	$	1.4	$	2.1	$	2.0	$	146.9	$	9.2	$	163.1
Operating leases		10.4		18.0		14.3		11.9		9.5		54.1		118.2
Purchase obligations (3)		23.8		18.6		11.9		3.4		1.6		1.8		61.1
Future interest payment on outstanding debt (4)		41.2		83.0		82.5		82.2		81.9		72.0		442.8
Total	$	76.9	$	121.0	$	110.8	$	99.5	$	239.9	$	137.1	$	785.2

Commercial Commitments
Letters of Credit	$	24.5		--		--		--		--		--	$	24.5

(1)

Our liability for unrecognized tax benefits of $10.4 at June 30, 2008 has been omitted from the above table because we cannot determine with certainty when this liability will be settled. It is reasonably possible that the amount of liability for unrecognized tax benefits will change in the next twelve months; however, we do not expect the change to have a significant impact on our consolidated financial statements.

(2)	After giving effect to the financing transactions described above, long-term debt and other non-current liabilities would have been $4.1, $6.2, $5.8, $5.7, $5.7, $1,110.6, and $1,138.1, respectively.

(3)

Occasionally we enter into purchase commitments for production materials and other items, which are reflected in the table above. We also enter into unconditional purchase obligations with various vendors and suppliers of goods and services in the normal course of operations through purchase orders or other documentation or just with an invoice. Such obligations are generally outstanding for periods less than a year and are settled by cash payments upon delivery of goods and services and are not reflected in purchase obligations.

(4)

Interest payments include estimated amounts due on the $150.0 outstanding on the term loan of our 2006 Senior Secured Credit Facility, based on the actual rate of interest at June 30, 2008. Actual interest payments will fluctuate based on LIBOR pursuant to the terms of the 2006 Senior Secured Credit Facility.

We believe that our cash flows, together with cash on hand and the availability under the 2008 Senior Secured Credit Facility, provide us with the ability to fund our operations, make planned capital expenditures and make scheduled debt service payments for at least the next twelve months. However, such cash flows are dependent upon our future operating performance, which, in turn, is subject to prevailing economic conditions and to financial, business and other factors, including the conditions of our markets, some of which are beyond our control. If, in the future, we cannot generate sufficient cash from operations to meet our debt service obligations, we will need to refinance such debt obligations, obtain additional financing or sell assets. We cannot assure you that our business will generate cash from operations or that we will be able to obtain financing from other sources sufficient to satisfy our debt service or other requirements.

Off-Balance Sheet Arrangements

Lease Arrangements

We finance our use of certain equipment under committed lease arrangements provided by various financial institutions. Since the terms of these arrangements meet the accounting definition of operating lease arrangements, the aggregate sum of future minimum lease payments is not reflected in our consolidated balance sheet. Future minimum lease payments under these arrangements aggregated approximately $118.2 at June 30, 2008.

Indemnities, Commitments and Guarantees

During the normal course of business, we made certain indemnities, commitments and guarantees under which we may be required to make payments in relation to certain transactions. These indemnities include non-infringement of patents and intellectual property indemnities to our customers in connection with the delivery, design, manufacture and sale of our products, indemnities to various lessors in connection with facility leases for certain claims arising from such facility or lease, and indemnities to other parties to certain acquisition agreements. The duration of these indemnities, commitments and guarantees varies, and in certain cases, is indefinite. We believe that substantially all of our indemnities, commitments and guarantees provide for limitations on the maximum potential future payments we could be obligated to make. However, we are unable to estimate the maximum amount of liability related to our indemnities, commitments and guarantees because such liabilities are contingent upon the occurrence of events which are not reasonably determinable. Management believes that any liability for these indemnities, commitments and guarantees would not be material to our accompanying condensed consolidated financial statements.

Deferred Tax Assets

We maintained a valuation allowance of approximately $9.8 as of June 30, 2008 primarily related to our domestic capital loss carryforwards because of uncertainties that preclude us from determining that it is more likely than not that we will be able to generate sufficient capital gain income and realize the tax benefit during the applicable carryforward period.

RECENT ACCOUNTING PRONOUNCEMENTS

For a discussion of New Accounting Standards and Recent Accounting Pronouncements, refer to Note 2 of the Notes to our Condensed Consolidated Financial Statements included in Part 1, Item 1 of this report.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions or conditions.

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and potentially result in materially different results under different assumptions and conditions. We believe that our critical accounting policies are limited to those described in Note 1 to Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007. There have been no changes to our critical accounting policies since December 31, 2007.

DEPENDENCE UPON CONDITIONS IN THE AIRLINE INDUSTRY

The September 11, 2001 terrorist attacks, SARS and the onset of the Iraq war severely impacted conditions in the airline industry. According to industry sources, in the aftermath of the attacks most major U.S. and a number of international carriers substantially reduced their flight schedules, parked or retired portions of their fleets, reduced their workforces and implemented other cost reduction initiatives. U.S. airlines further responded by decreasing domestic airfares. As a result of the decline in both traffic and airfares following the September 11, 2001 terrorist attacks, and their aftermath, as well as other factors, such as increases in fuel costs and heightened competition from low-cost carriers, the world airline industry lost a total of approximately $42.0 billion in calendar years 2001-2005. The airline industry crisis also caused28 airlines worldwide to declare bankruptcy or cease operations in the last seven years. The recent increases in fuel prices and the prospect of continued fuel price increases are expected to continue to have a negative impact on the airline and business jet industries. According to International Air Transport Association (IATA), the worldwide airline industry is expected to incur losses of approximately $6.1 billion during 2008, which reflects the expectation that the North American airlines will incur losses of approximately $4.2 billion, the European, Asia-Pacific and Middle Eastern airlines will incur losses of approximately $0.8 billion and the Latin American and African airlines will incur losses of approximately $1.0 billion. These IATA estimates assume no benefit from any mitigating actions to be taken during 2008 (such as increased ticket prices and the recently announced capacity reductions), and further assume average oil prices at $122.0 per barrel for the full year 2008. The price of a barrel of oil at January 2, 2008 was approximately $99.6 and at July 25, 2008, was approximately $123.0.

As a result of the foregoing, the domestic U.S. airlines, in large part, have been seeking to conserve cash by not placing orders for cabin interior refurbishment programs or new aircraft. This, together with the reduction of new business jet production, caused a substantial contraction in our business during the 2001 through 2003 period. Although the global airline industry began to recover in late 2003, the challenging operating environment we face in our industry is expected to continue and will be influenced by a wide variety of factors currently affecting the industry, including the economic environment, fuel prices, labor issues, airline consolidation, airline insolvencies, terrorism and safety concerns. The rate at which the business jet industry recovers is dependent on corporate profits, the number of used jets on the market and other factors, which could slow the rate of recovery.

FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements include, but are not limited to, all statements that do not relate solely to historical or current facts, including statements regarding the expected benefits derived in connection with the HCS acquisition, implementation and expected benefits of lean manufacturing and continuous improvement plans, our dealings with customers and partners, the consolidation of facilities, reduction of our workforce, integration of acquired businesses, ongoing capital expenditures, our ability to grow our business, the impact of the large number of grounded aircraft on demand for our products and our underlying assets, the adequacy of funds to meet our capital requirements, the ability to refinance our indebtedness, if necessary, the reduction of debt, the potential impact of new accounting pronouncements, and the impact on our business of the recent increases in passenger traffic and projected increases in passenger traffic and the size of the airline fleet. Such forward-looking statements include risks and uncertainties and our actual experience and results may differ materially from the experience and results anticipated in such statements. Factors that might cause such a difference include those discussed in our filings with the Securities and Exchange Commission, under the heading "Risk Factors" in our Annual Report on Form 10-K, for the fiscal year ended December 31, 2007 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, outbreaks in national or international hostilities, terrorist attacks, prolonged health issues which reduce air travel demand (e.g., SARS), delays in, or unexpected costs associated with, the integration of our acquired or recently consolidated businesses, including HCS, conditions in the airline industry, conditions in the business jet industry, regulatory developments, problems meeting customer delivery requirements, our success in winning new or expected refurbishment contracts from customers, capital expenditures, increased leverage, possible future acquisitions, facility closures, product transition costs, 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, fluctuations in currency exchange rates or our inability to properly manage our rapid growth.

Except as required under the federal securities laws and rules and regulations of the SEC, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented herein. These statements should be considered only after carefully reading the risk factors and the other information in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007 and this entire quarterly report on Form 10-Q.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to a variety of risks, including foreign currency fluctuations and changes in interest rates affecting the cost of our variable-rate debt.

Foreign Currency - We have direct operations in Europe that receive revenues from customers primarily in U.S. dollars, and we purchase raw materials and component parts from foreign vendors primarily in British pounds or euros. Accordingly, we are exposed to transaction gains and losses that could result from changes in foreign currency exchange rates relative to the U.S. dollar. The largest foreign currency exposure results from activity in British pounds and euros.

From time to time, we and our foreign subsidiaries may enter into foreign currency exchange contracts to manage risk on transactions conducted in foreign currencies. At June 30, 2008, we had no outstanding forward currency exchange contracts. In addition, we have not entered into any other derivative financial instruments.

Interest Rates – At June 30, 2008, we had adjustable rate debt totaling $150.0. The weighted average interest rates for the adjustable rate debt was approximately 4.68% at June 30, 2008. If interest rates on variable rate debt were to increase by 10% above current rates, our pretax income would decline by approximately $0.7. We do not engage in transactions intended to hedge our exposure to changes in interest rates.

As of June 30, 2008, we maintained a portfolio of securities consisting mainly of taxable, interest-bearing deposits with weighted average maturities of less than three months. If short-term interest rates were to increase or decrease by 10%, we estimate interest income would increase or decrease by approximately $0.1.

ITEM 4.

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness, as of June 30, 2008, of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information required to be included in the Company’s periodic filings with the Securities and Exchange Commission and in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified, in the SEC’s rules and forms.

Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting that occurred during the second quarter of 2008 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings	Not applicable.
Item 1A. Risk Factors

RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in “Item 1A. Risk Factors” in our 2007 Annual Report on Form 10-K, which could materially adversely affect our business, financial condition, results of operations, cash flows or prospects. Other than as set forth below, there have been no material changes in our risk factors from those disclosed in our 2007 Annual Report on Form 10-K. The information presented below updates and should be read in conjunction with the risk factors contained in our most recent Annual Report on Form 10-K.

We are directly dependent upon the conditions in the airline and business jet industries and a severe and prolonged downturn could negatively impact our results of operations.

Increased leverage could adversely impact our business and results of operations.

As of June 30, 2008, on a pro forma basis, after giving effect to the issuance on July 1, 2008 of $600.0 million of our 8½% senior unsecured notes due 2018 (the “Senior Notes”), the borrowings under our new Senior Secured Credit Facility (the “2008 Senior Secured Credit Facility”) and the repayment of the 2006 Senior Secured Credit Facility (collectively, the “Financing Transactions”), we would have had approximately $1,126.6 million of indebtedness, with $525.0 million consisting of secured borrowings under the 2008 Senior Secured Credit Facility with $350.0 million of undrawn borrowing capacity under the revolving credit facility of the 2008 Senior Secured Credit Facility, without taking into account any outstanding letters of credit. As a result of the Financing Transactions our ratio of total debt to capitalization increased from 9.9% to 42.4%. The foregoing amounts do not include trade payables to which the Senior Notes are effectively subordinated.

The terms of the 2008 Senior Secured Credit Facility and the indenture governing the Senior Notes limit but do not prohibit us from incurring substantial amounts of additional debt in the future, which we may incur to finance our operations, for future growth, acquisitions or for other purposes. If new debt is added to our current debt levels, the related risks that we now face could intensify.

Our consolidated pro forma interest expense, net for the year ended December 31, 2007, pro forma for the Financing Transactions, assuming the completion of the Financing Transactions on that date, would have been $99.6 million compared to our historical interest expense, net of $20.9 million for the year ended December 31, 2007.

Our higher degree of leverage as a result of the consummation of the Financing Transactions or as a result of additional debt we may incur in the future could have important consequences to us. For example, it could:

• increase our vulnerability to adverse economic and industry conditions;

• require us to dedicate a substantial portion of cash from operations to the payment of debt service, thereby reducing the availability of cash to fund working capital, capital expenditures and other general corporate purposes;

• limit our ability to obtain additional financing for working capital, capital expenditures, general corporate purposes or acquisitions;

• place us at a disadvantage compared to our competitors that are less leveraged; and

• limit our flexibility in planning for, or reacting to, changes in our business and in our Industry.

There are risks inherent in international operations that could have a material adverse effect on our business operations.

While the majority of our operations are based domestically, we have significant manufacturing operations based internationally with facilities in the United Kingdom, the Netherlands and Germany. In addition, we sell our products to airlines all over the world. Our customers are located primarily in North America, Europe and the emerging markets including the Asia/Pacific Rim region, South America and the Middle East. As a result, 55% of our net sales for the year ended December 31, 2007 and 57% of our sales for the year ended December 31, 2006 were to customers located outside the United States.

In addition, we have a number of subsidiaries in foreign countries (primarily in Europe), which have sales outside the United States. Approximately 38% and 35%, respectively, of our sales during the fiscal years ended December 31, 2007 and 2006 came from our foreign operations. Fluctuations in the value of foreign currencies affect the dollar value of our net investment in foreign subsidiaries, with these fluctuations being included in a separate component of stockholders' equity. At December 31, 2007, we reported a cumulative foreign currency translation adjustment of approximately $22.6 million in stockholders' equity as a result of foreign currency adjustments, and we may incur additional adjustments in future periods. In addition, operating results of foreign subsidiaries are translated into U.S. dollars for purposes of our statement of operations at average monthly exchange rates. Moreover, to the extent that our revenues are not denominated in the same currency as our expenses, our net earnings could be materially adversely affected. For example, a portion of labor, material and overhead costs for goods produced in our production facilities in the United Kingdom, Germany and the Netherlands are incurred in British pounds or euros, but the related sales revenues are generally denominated in U.S. dollars. Changes in the value of the U.S. dollar or other currencies could result in material fluctuations in foreign currency translation amounts or the U.S. dollar value of transactions and, as a result, our net earnings could be materially adversely affected. Our exposure to foreign currencies will increase as a result of the HCS acquisition.

Historically we have not engaged in hedging transactions. However, we may engage in hedging transactions in the future to manage or reduce our foreign exchange risk. Our attempts to manage our foreign currency exchange risk may not be successful and, as a result, our results of operations and financial condition could be materially adversely affected.

Our foreign operations could also be subject to unexpected changes in regulatory requirements, tariffs and other market barriers and political, economic and social instability in the countries where we operate or sell our products and offer our services. The impact of any such events that may occur in the future could subject us to additional costs or loss of sales, which could materially adversely affect our operating results.

The acquisition of HCS, and future acquisitions that we may make, may be less successful than we expect, which could have a material adverse effect on our financial condition.

We have substantially expanded the size, scope and nature of our business as a result of a number of acquisitions. Since 1989, we completed 25 acquisitions, for an aggregate purchase price of approximately $2.1 billion. We intend to continue to explore and conduct discussions regarding possible future acquisitions, some of which may be material. Our acquisitions involve numerous risks. For example, we may not be successful in implementing appropriate operational, financial and management systems and controls to achieve the expected benefits from these acquisitions. Our efforts to integrate these businesses could be materially adversely affected by a number of factors beyond our control, such as regulatory developments, general economic conditions, increased competition and the loss of certain customers resulting from the acquisitions. In addition, the process of integrating these businesses could cause difficulties for us, including an interruption of, or loss of momentum in, the activities of our existing business and the loss of key personnel and customers. Further, the benefits that we anticipate from these acquisitions, including expected costs synergies, may not develop. Depending upon the acquisition opportunities available, we also may need to raise additional funds through the capital markets or arrange for additional bank financing in order to consummate such acquisitions. Changes in U.S. and global financial and equity markets, including market disruptions, limited liquidity and interest rate fluctuations, may increase the cost of raising capital. The inability to raise capital on favorable terms, particularly during times of uncertainty in the financial markets similar to that which is currently being experienced in the financial markets, could impact our ability to sustain and grow our businesses through acquisitions.

The HCS acquisition is larger than any of the other acquisitions we have made in the past. This acquisition will significantly increase the size of our Company and our dependence on our combined distribution segment and may expand the geographic areas in which we operate. We may not be able to achieve the desired benefits from the HCS acquisition or any other acquisitions we may complete in the future. Following the HCS acquisition, we may consider future acquisitions, some of which could be material to us.

Our total assets include substantial intangible assets. The write-off of a significant portion of unamortized intangible assets would negatively affect our financial results.

Our total assets reflect substantial intangible assets and our intangible assets will increase substantially as a result of the HCS acquisition. At June 30, 2008, goodwill and identified intangibles, net, represented approximately 32% of our total assets. Intangible assets consist principally of goodwill and other identified intangible assets associated with our acquisitions.

On at least an annual basis, we assess whether there has been an impairment in the value of goodwill and other intangible assets with indefinite lives. If the carrying value of the tested asset exceeds its estimated fair value, impairment is deemed to have occurred. In this event, the amount is written down to fair value. Under current accounting rules, this would result in a charge to operating earnings. Any determination requiring the write-off of a significant portion of unamortized goodwill and identified intangible assets would negatively affect our results of operations and total capitalization, which could be material.

We have significant financial and operating restrictions in our debt instruments that may have an adverse effect on our operations.

Our Senior Secured Credit Facility and the indenture governing our Senior Notes contain numerous covenants that limit our ability to incur additional or repay existing indebtedness, to create liens or other encumbrances, to make certain payments and investments, including dividend payments, distributions in respect of our capital stock or repurchase of our capital stock, to engage in transactions with affiliates, to engage in sale/leaseback transactions, to guarantee indebtedness and to sell or otherwise dispose of assets and merge or consolidate with other entities. In addition, our Senior Secured Credit Facility contains financial covenants requiring us to maintain a minimum interest coverage ratio and a maximum total leverage ratio. Agreements governing future indebtedness could also contain significant financial and operating restrictions. A failure to comply with the obligations contained in any current or future agreement governing our indebtedness could result in an event of default under our current or any future bank credit facility or indentures or other agreements governing our debt securities, which could cause acceleration of the related debt and acceleration of debt under other instruments that may contain cross-acceleration or cross-default provisions. We may not have, or may not be able to obtain, sufficient funds to make any required accelerated payments.

As a supplier of military and other products to the U.S. government and contractors of the U.S. government, we are subject to additional risks.

Sales of our military and other products to the U.S. government or to contractors of the U.S. government are largely dependent upon government budgets. A reduction in funding for, or termination of, U.S. government programs that we participate in could adversely impact our results of operations. In addition, the terms of contracts with the U.S. government generally permit the U.S. government to terminate contracts partially or completely, with or without cause, at any time. Any unexpected termination of a significant government contract could have a material adverse effect on our results of operations. We are also subject to government investigations of business practices and compliance with government procurement regulations. If we were charged with wrongdoing as a result of any such investigation or other government investigations, we could be suspended from bidding on or receiving awards of new government contracts and/or have our export privileges suspended. The acquisition of the HCS business increases our exposure to this risk.

We may not successfully integrate HCS.

Our acquisition of HCS involves the integration of the HCS business with our distribution business. These two businesses were previously operated independently, often competing in some of the same or similar aerospace hardware consumables distribution markets. If we cannot successfully integrate HCS operations with those of our distribution segment, we may experience material negative consequences to our business, financial condition or results of operations. The integration of the two businesses that have previously operated separately will be a costly and time-consuming process that will involve a number of risks, including, but not limited to:

• diversion of senior management’s attention from the management of daily operations to the integration of operations;

• demands on the management of our distribution segment related to the significant increase in the size and scope of the distribution business for which they are responsible;

• difficulties in the assimilation of different corporate cultures, practices and sales and distribution methodologies, as well as in the assimilation and retention of extensive and geographically dispersed operations and personnel;

• difficulties in implementing information technology and automated inventory retrieval systems to support the entire combined business;

• larger foreign operations and increased exposure to risks relating to business operations outside the United States;

• difficulties and unanticipated expenses related to the integration of facilities, departments, systems, including accounting systems, computer and other technologies, books and records and procedures, as well as in maintaining uniform standards, including internal accounting controls, procedures and policies;

• costs and expenses associated with any undisclosed or potential liabilities;

• our ability to rationalize redundant facilities and consolidate multiple sales offices, forward stocking locations and operational facilities; and

• the use of more cash resources and increased capital expenditures on integration and implementation activities than we currently expect, which could offset any such savings and other synergies resulting from the HCS acquisition.

Successful integration of HCS’s operations with those of our distribution segment will depend on our ability to manage the combined operations, realize opportunities for revenue growth presented by broader product offerings and expanded geographic coverage and eliminate redundant and excess costs. The estimates of the expected annual cost synergies from the HCS acquisition assume that, in significant part, as result of our integration efforts, HCS’s operating margins will increase to levels that are more comparable to our operating margins over the next three years. There can be no assurance that the HCS business will achieve these anticipated operating margin levels. If our integration efforts are not successful, we may not be able to maintain the levels of revenue, earnings or operating efficiency that BE Aerospace and HCS had achieved or might have achieved if they remained separate businesses and that is anticipated as a result of the synergies expected to be realized with the combination of our distribution business with the HCS business. Even if we are able to successfully integrate the operations of HCS, we may not be able to realize the cost savings, synergies and revenue and earnings growth in our distribution segment that we anticipate from the integration in the time frame that we currently expect, and the costs of achieving these benefits may be higher than, what we currently expect.

We will depend on Honeywell for certain transitional services pursuant to a transition services agreement, which may be difficult for us to replace without operational problems and additional costs.

Our ability to operate and integrate the HCS business in a cost-effective manner depends to a large extent on the proper functioning of its information technology and business support systems. For a period of time following the closing of the HCS acquisition, Honeywell will continue to provide certain information technology, network and other support services to the HCS business. The terms of these arrangements are governed by a transition services agreement that we entered into at the time of the closing of the HCS acquisition. If Honeywell fails to perform its obligations under the transition services agreement, we may not be able to perform such services ourselves or obtain such services from third parties at all or on terms favorable to us. In addition, upon termination of the transition services agreement, if we are unable to develop the systems, resources and controls necessary to allow us to provide the services formerly provided by Honeywell or to obtain such services from third parties in a cost-effective manner, we may experience an increase in costs, which could adversely affect our business, financial condition or results of operations.

The HCS operations are subject to their own risks, which we may not be able to manage successfully. There may be additional risks resulting from the HCS acquisition that are not presently known to us.

HCS’s results of operations are subject to many of the same risks that affect our financial condition and results of operations and, more specifically, those of our distribution segment. There may be additional risks resulting from the HCS acquisition that are not presently known to us. Any discovery of adverse information concerning the HCS business could be material and, in many cases, we would have limited rights of recovery. The indemnification provided in the stock and asset purchase agreement may not be sufficient to protect us from, or compensate us for, all losses resulting from the acquisition or HCS’s prior operations. For example, under the terms of the acquisition agreement, indemnification is limited to certain subject matters and the maximum aggregate amount of such losses for which Honeywell will indemnify us is limited to $150.0 million, subject to certain exceptions. A material loss associated with the HCS acquisition for which there is not adequate indemnification could negatively affect our results of operations, our financial condition and our reputation in the industry and reduce the anticipated benefits of the acquisition.

As Honeywell will account for a substantial portion of our revenues following the acquisition, the loss of this customer would cause a significant decline in the acquired business’ revenues.

In connection with the closing of the acquisition of HCS, we entered into exclusive long-term supply and license agreements with Honeywell to become Honeywell’s exclusive licensee to supply third parties with certain proprietary Honeywell products and to supply Honeywell’s Aerospace business with certain products. As a result, Honeywell is expected to account for approximately 8.7% of our distribution segment’s sales. Any changes to the supply and license agreements which could result in reductions or terminations of product purchases by Honeywell without an offsetting increase in new sales to other customers, would result in a substantial decline in the acquired business’ revenue and operating results. In addition, as a result of the acquisition, certain HCS customers may not be willing to continue or expand their existing relationships with HCS following the acquisition, which could adversely affect our business, financial condition or results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	Not applicable.

Item 3. Defaults Upon Senior Securities	Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders

Annual meeting took place on July 31, 2008.

1. Class II Directors elected –Robert J. Khoury and Jonathan M. Schofield. Directors whose term of office continued after meeting (Class I and III) – Charles L. Chadwell, Richard G. Hamermesh, Amin J. Khoury, Jim C. Cowart and Arthur E. Wegner.

2. Proposal to Adopt the MacBride Principles

The number of shares voted for, against and abstained/withheld were as follows:

1. Election of Class II Directors	For	Against	Abstain Withheld	Unvoted
Robert J. Khoury	81,552,236	0	3,573,350	0
Jonathan M. Schofield	58,268,112	0	26,857,474	0
2. Proposal to Adopt the MacBride Principles	8,804,509	57,024,463	12,655,509	6,641,105

Item 5. Other Information

On August 5, 2008, the Compensation Committee of our Board of Directors approved a grant of 75,000 restricted shares of our Common Stock, par value $.01 per share (the “Restricted Shares”) to Robert Marchetti, our vice president and general manager—distribution segment. The grant is made pursuant to the Company’s 2005 Long-Term Incentive Plan (the "Plan") and vests as follows:

Time-based Restricted Shares. 56,250 Restricted Shares will vest on December 31, 2010.

Performance-Based Restricted Shares. 18,750 Restricted Shares will vest on December 31, 2010 provided that the Company achieves a targeted level of cumulative operating earnings for the period from January 1, 2009 through December 31, 2010.

If prior to December 31, 2010 Mr. Marchetti’s employment with the Company and its subsidiaries terminates for any reason other than death or Disability (as defined in the Plan), the Restricted Shares will be immediately cancelled. If Mr. Marchetti’s employment is terminated prior to December 31, 2010 due to his death or Disability (as defined in the Plan), the Restricted Shares will vest immediately (regardless of the level of attainment of the performance goals) and will no longer be subject to cancellation or restrictions on transfer. In addition, upon a Change in Control (as defined in the plan) (regardless of the level of attainment of the performance goals), the Restricted Shares will vest immediately and will no longer be subject to cancellation or transfer restrictions. In all other respects, the Restricted Shares will be subject to the terms of the Plan and the standard form of award agreement.

Item 6.		Exhibits

Exhibit 10		Material Contracts

10.1		Commitment Letter, dated as of June 9, 2008, among the Registrant, JPMorgan Chase Bank, N.A., UBS Loan Finance LLC and Credit Suisse Securities (USA) LLC, as Initial Lenders, and J.P. Morgan Securities Inc., UBS Securities LLC and Credit Suisse Securities (USA) LLC, as Joint Lead Arrangers and Joint Bookrunners.

Exhibit 31		Rule 13a-14(a)/15d-14(a) Certifications

31.1		Certification of Chief Executive Officer

31.2		Certification of Chief Financial Officer

Exhibit 32		Section 1350 Certifications

32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350

32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350

SIGNATURES

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: August 7, 2008	By:	/s/ Amin J. Khoury
		Amin J. Khoury
		Chairman and
		Chief Executive Officer





Date: August 7, 2008	By:	/s/ Thomas P. McCaffrey
		Thomas P. McCaffrey
		Senior Vice President and
		Chief Financial Officer

EX-10.1 2 a5747725ex10_1.htm EXHIBIT 10.1 a5747725ex10_1.htm

Exhibit 10.1

J.P. MORGAN SECURITIES INC.

JPMORGAN CHASE BANK, N.A.

270 Park Avenue

New York, New York 10017

UBS LOAN FINANCE LLC

677 Washington Boulevard

Stamford, Connecticut 06901

UBS SECURITIES LLC

299 Park Avenue

New York, New York 10171

CREDIT SUISSE, CAYMAN ISLANDS BRANCH

CREDIT SUISSE SECURITIES (USA) LLC

Eleven Madison Avenue

New York, New York 10010

June 9, 2008

BE Aerospace, Inc.

1400 Corporate Center Way

Wellington, FL 33414

Attention: Mr. Thomas P. McCaffrey

$1,550,000,000 Senior Secured Credit Facilities

Commitment Letter

Ladies and Gentlemen:

You have advised JPMorgan Chase Bank, N.A. (“JPMCB”), UBS Loan Finance LLC (“UBS”), Credit Suisse, Cayman Islands Branch (“CS” and, together with JPMCB and UBS, each an “Initial Lender” and, collectively the “Initial Lenders”), J.P. Morgan Securities Inc. (“JPMorgan”), UBS Securities LLC (“UBSS”) and Credit Suisse Securities (USA) LLC (“CSS” and, together with JPMorgan and UBSS, the “Joint Lead Arrangers”) (the Initial Lenders and the Joint Lead Arrangers being collectively referred to herein as the “Commitment Parties” and each a “Commitment Party”) that BE Aerospace, Inc., a Delaware corporation (the “Borrower” or “you”), intends to consummate the Transactions (such term and each other capitalized term used but not defined herein having the meanings assigned to them in the Term Sheet (as defined below)).

In connection with the Transactions, JPMCB is pleased to advise you of its commitment to provide up to $516,666,666.67 of the Facilities, UBS is pleased to advise you of its commitment to provide up to $516,666,666.67 of the Facilities and CS is pleased to advise you of its commitment to provide up to $516,666,666.66 of the Facilities, each on a several but not joint basis, each pro rata among the tranches of the Facilities and each upon the terms and subject to the conditions set forth or referred to in this Commitment Letter and in the Summary of Principal Terms and Conditions attached hereto as Exhibit A (the “Term Sheet”).

You hereby appoint JPMorgan, UBSS and CSS to act, and JPMorgan, UBSS and CSS each hereby agree to act as joint lead arrangers and joint bookrunners for the Facilities on the terms and subject to the conditions set forth or referred to in this Commitment Letter and in the Term Sheet. You also hereby appoint JPMCB to act, and JPMCB hereby agrees to act, as sole and exclusive administrative and collateral agent for the Facilities on the terms and subject to the conditions set forth or referred to in this Commitment Letter and in the Term Sheet. It is understood and agreed that (a) no additional agents, co-agents, arrangers, co-arrangers, managers or co-managers will be appointed and no other titles will be awarded in connection with the Facilities unless you and we so agree and (b) no compensation (other than as expressly contemplated by the Term Sheet, the Fee Letter referred to below or the Administrative Agency Fee Letter referred to below) will be paid in connection with the Facilities unless you and we so agree (it being understood that JPMorgan shall appear on the “left” on all materials relating to the Facilities).

The Joint Lead Arrangers reserve the right, prior to or after the execution of definitive documentation for the Facilities, in consultation with you, to syndicate all or a portion of their respective commitments hereunder to one or more financial institutions that will become parties to such definitive documentation pursuant to syndications to be managed by the Joint Lead Arrangers (the financial institutions becoming parties to such definitive documentation being collectively referred to as the “Lenders”); provided that, notwithstanding each Joint Lead Arranger’s right to syndicate the Facilities and receive commitments with respect thereto, it is understood that any syndication of, or receipt of commitments in respect of, all or any portion of any Joint Lead Arranger’s commitments hereunder prior to the initial funding under the Facilities shall not be a condition to such Joint Lead Arranger’s commitments nor reduce such Joint Lead Arranger’s commitments hereunder with respect to any of the Facilities; provided, however, that the foregoing proviso shall not constitute a waiver of any other condition set forth in this Commitment Letter or the Term Sheet which shall impact the ability of the Joint Lead Arrangers to syndicate the Facilities, including clauses (b), (f) and (g) of the eleventh paragraph of this letter. You understand that each of the Facilities will be separately syndicated. The Joint Lead Arrangers may decide to commence syndication efforts promptly, and you agree actively to assist the Joint Lead Arrangers in completing timely and orderly syndications satisfactory to the Joint Lead Arrangers. Such assistance shall include (a) your using commercially reasonable efforts to ensure that the syndication efforts benefit materially from the existing lending and investment banking relationships of the Borrower, (b) direct contact during the syndication between your senior management, representatives and advisors, on the one hand, and the proposed Lenders, on the other hand, (c) your assistance (including the use of commercially reasonable efforts to cause your affiliates and advisors to assist) in the preparation of materials to be used in connection with the syndication (collectively with the Term Sheet, the “Information Materials”) and (d) the hosting, with the Joint Lead Arrangers, of one or more meetings of prospective Lenders. Notwithstanding anything to the contrary herein, the Borrower shall have no obligation to provide any information with respect to the Acquired Business other than the information set forth on Schedule 5.19(c) to the Purchase Agreement.

You will assist us in preparing Information Materials, including but not limited to a Confidential Information Memorandum or lender slides, for distribution to prospective Lenders. If requested, you also will assist us in preparing an additional version of the Information Materials (the “Public-Side Version”) to be used by prospective Lenders’ public-side employees and representatives (“Public-Siders”) who do not wish to receive material non-public information (within the meaning of United States federal securities laws) with respect to the Borrower, its affiliates and any of their respective securities (“MNPI”) and who may be engaged in investment and other market related activities with respect to the Borrower’s or its affiliates’ securities or loans. Before distribution of any Information Materials, you agree to execute and deliver to us (i) a letter in which you authorize distribution of the Information Materials to a prospective Lender’s employees willing to receive MNPI (“Private-Siders”) and (ii) a separate letter in which you authorize distribution of the Public-Side Version to Public-Siders and represent that no MNPI is contained therein You also acknowledge that the Joint Lead Arrangers’ Public-Siders consisting of publishing debt analysts may participate in any meetings or telephone conference calls held pursuant to clause (d) of the immediately previous paragraph; provided that such analysts shall not publish any information obtained from such meetings or calls (i) until the syndication of the Facilities has been completed upon the making of allocations by the Joint Lead Arrangers and the Joint Lead Arrangers freeing the Facilities to trade or (ii) in violation of any confidentiality agreement between you and the Commitment Parties.

The Borrower agrees that the following documents may be distributed to both Private-Siders and Public-Siders, unless the Borrower advises the Joint Lead Arrangers in writing (including by email) within a reasonable time prior to their intended distribution that such materials should only be distributed to Private-Siders: (a) administrative materials prepared by the Joint Lead Arrangers for prospective Lenders (such as a lender meeting invitation, bank allocation, if any, and funding and closing memoranda), (b) notification of changes in the Facilities’ terms and (c) other materials intended for prospective Lenders after the initial distribution of Information Materials. If you advise us that any of the foregoing should be distributed only to Private-Siders, then Public-Siders will not receive such materials without further discussions with you.

The Borrower hereby authorizes the Joint Lead Arrangers to distribute drafts of definitive documentation with respect to the Facilities to Private-Siders and Public-Siders.

It is understood and agreed that the Joint Lead Arrangers will, after consultation with you, manage all aspects of the syndication, including determination of when the Joint Lead Arrangers will approach potential Lenders and the time of acceptance of the Lenders’ commitments, any naming rights and the final allocations of the commitments among the Lenders. It is also understood and agreed that the amount and distribution of fees among the Lenders will be at the Joint Lead Arrangers’ discretion. To assist the Joint Lead Arrangers in their syndication efforts, you agree promptly to prepare and provide to the Commitment Parties all information with respect to the Borrower and its subsidiaries, the Acquired Business, the Transactions and the other transactions contemplated hereby, including a business plan in form and substance satisfactory to the Joint Lead Arrangers and all other financial information and projections (the “Projections”), as the Commitment Parties may reasonably request in connection with the structuring, arrangement and syndication of the Facilities; provided, that with respect to information relating to the Acquired Business, your obligation to provide such information shall be limited to providing the information specified on Schedule 5.19(c) to the Purchase Agreement.

You hereby represent and covenant that (a) all information other than the Projections (the “Information”) that has been or will be made available to the Commitment Parties by or on behalf of the Borrower, its subsidiaries, or any of your representatives or affiliates, including information as it relates to the Acquired Business, is or will be, when furnished, complete and correct in all material respects and does not or will not, when furnished, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not misleading in light of the circumstances under which such statements are made and (b) the Projections that have been or will be made available to the Commitment Parties by or on behalf of the Borrower or its subsidiaries, or any of your representatives or affiliates, have been and will be prepared in good faith based upon assumptions that are reasonable at the time made and at the time the related Projections are made available to the Commitment Parties. You agree that if at any time from and including the date hereof until the closing of the Facilities, the condition in the preceding sentence would not be satisfied if the Information and Projections were being furnished at such time, then you will promptly supplement the Information and the Projections so that such condition would be satisfied under those circumstances. In arranging the Facilities, including the syndications of the Facilities, the Commitment Parties will be entitled to use and rely primarily on the Information and the Projections without responsibility for independent verification thereof.

As consideration for the Initial Lenders’ commitments hereunder and the Joint Lead Arrangers’ agreement to structure, arrange and syndicate the Facilities and to provide advisory services in connection therewith, you agree to pay to the Initial Lenders the fees as set forth in the Term Sheet, in the Fee Letter dated the date hereof and delivered herewith with respect to the Facilities (the “Fee Letter”) and in the Administrative Agency Fee Letter dated the date hereof and delivered herewith with respect to the Facilities (the “Administrative Agency Fee Letter”). Once paid, such fees shall not be refundable under any circumstances.

The commitments hereunder and the Joint Lead Arrangers’ agreement to perform the services described herein are subject to (a) each of the Commitment Parties not having discovered or otherwise becoming aware of information not previously disclosed to it that is materially and adversely inconsistent with information previously provided to the Commitment Parties prior to the date hereof (when taken in conjunction with all other information previously provided to the Commitment Parties) with respect to each of (x) of the Borrower and its subsidiaries, taken as a whole, and (y) the Acquired Business, so long as, in each case, in the Joint Lead Arrangers’ reasonable determination such discovery or awareness negatively impacts the Joint Lead Arrangers’ ability to syndicate the Facilities on the terms provided for in the Commitment Letter, the Term Sheet and the Fee Letter (including the ability to Syndicate the Facilities at the designated pricing levels and with the other economic and financial terms set forth herein and therein), (b) there not having occurred (i) any change, effect or circumstance that, individually or in the aggregate, has had, or would reasonably be expected to have, a material adverse effect on the business, assets, liabilities, results of operations or financial condition of the Business (as defined in the Purchase Agreement); provided, however, that changes, effects or circumstances, alone or in combination, that arise out of or result from (w) changes in economic conditions, financial or securities markets in general, or the industries and markets (including with respect to commodity prices) in which the Business is operated, provided such change does not disproportionately effect the Business, (x) the execution and performance of the Purchase Agreement and the announcement of the Purchase Agreement and the transactions contemplated thereby (other than as set forth in Section 3.4 or Section 5.1 of the Purchase Agreement), (y) acts of God, calamities, national or international political or social conditions, including the engagement by the United States in hostilities, whether commenced before or after the date hereof, or the occurrence of any military attack or terrorist act upon the United States, provided such act, calamity or condition does not disproportionately effect the Business or (z) any actions taken, or failures to take action, or such other changes or events, in each case, to which the Borrower has consented shall not be considered in determining whether such a material adverse effect has occurred, or (ii) any material adverse change in or material adverse effect on the ability of Seller to perform its obligations under the Purchase Agreement or to consummate the transactions contemplated thereby, (c) the Initial Lenders’ satisfaction that, prior to and during the syndication of the Facilities, there shall be no competing offering, placement or arrangement of debt securities or commercial bank or other credit facilities of the Borrower or its subsidiaries being offered, placed or arranged (other than a notes offering in an amount and with a structure as you and the Commitment Parties shall agree), (d) the negotiation, execution and delivery on or before October 31, 2008 of definitive documentation with respect to the Facilities satisfactory to the Initial Lenders and their counsel, (e) corporate family/corporate credit ratings shall have been received, and ratings shall have been assigned to the Facilities, from each of Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (“S&P”), and Moody’s Investors Service Inc. (“Moody’s”) not less than 15 business days prior to the Closing Date, (f) the Initial Lenders’ having been afforded no less than 20 consecutive business days after the completion of the Information Materials to syndicate the Facilities, provided, that such 20 consecutive business days shall not include any period that includes any of the period from August 16, 2008 through and including September 1, 2008, and (g) the other conditions set forth in the Term Sheet and the annexes and schedules thereto. Those matters that are not covered by or made clear under the provisions hereof and of the Term Sheet are subject to the approval and agreement of the Commitment Parties and you.

Notwithstanding anything in this Commitment Letter, the Term Sheet (including the exhibits and schedules thereto), the Fee Letter, the definitive documentation for the Facilities or any other letter agreement or other undertaking concerning the financing of the Transaction to the contrary, (i) the only representations relating to the Borrower and/or the Acquired Business, as the case may be, the accuracy of which shall be a condition to availability of the Facilities on the Closing Date shall be (A) the representations with respect to the Acquired Business made by the Seller in the Purchase Agreement (the accuracy of which will be certified by the Seller on the Closing Date) and (B) the representations with respect to the Borrower made by the Borrower (I) in the definitive documentation for the Facilities (other than the material adverse change representation as set forth in the Term Sheet) and (II) in the Purchase Agreement, and (ii) the terms of the definitive documentation for the Facilities shall be in a form such that they do not impair availability of the Facilities on the Closing Date if the conditions set forth or referred to herein and in the Term Sheet (including in Schedule I thereto) are satisfied (it being understood that to the extent (x) any security interest or other lien in collateral comprised of real estate or (y) an effective account control agreement in the case of any item of collateral in which perfection of a security interest or other lien by means of control requires an agreement with a person other than a Commitment Party or the Borrower or the Acquired Business (such collateral being herein referred to as “Control Collateral”), in each case is not provided on the Closing Date after the Borrower’s good faith use of commercially reasonable efforts to do so, the perfection of the Collateral Agent's security interest or other Lien in such real estate or Control Collateral shall not constitute a condition precedent to the availability of the Facilities on the Closing Date but shall be required as soon as practicable after the Closing Date pursuant to arrangements and timing reasonably satisfactory to the Collateral Agent). Notwithstanding anything in this Commitment Letter, the Fee Letter, the definitive documentation for the Facilities or any other letter agreement or other undertaking concerning the Facilities contemplated herein to the contrary, the only conditions to the availability of the Facilities on the Closing Date are set forth or referred to (x) in this and the immediately preceding paragraph, (y) in the Term Sheet opposite the captions “Conditions to Initial Borrowings” and “Conditions to Each Borrowing” and (z) in Schedule I to the Term Sheet.

By executing this Commitment Letter, you agree (a) to indemnify and hold harmless each of the Commitment Parties, their respective affiliates and their respective officers, directors, employees, affiliates, agents and controlling persons from and against any and all losses, claims, damages, liabilities and expenses, joint or several, to which any such persons may become subject arising out of or in connection with this Commitment Letter, the Fee Letter, the Administrative Agency Fee Letter, the Term Sheet, the Transactions and the other transactions contemplated hereby, the Facilities, the use of the proceeds thereof or any related transaction or any claim, litigation, investigation or proceeding relating to any of the foregoing, regardless of whether any of such indemnified parties is a party thereto, and to reimburse each of such indemnified parties upon demand for any reasonable legal or other expenses incurred in connection with investigating or defending any of the foregoing, provided that the foregoing indemnity will not, as to any indemnified party, apply to losses, claims, damages, liabilities or related expenses to the extent they are found in a final nonappealable judgment of a court to have resulted from the willful misconduct or gross negligence of such indemnified party, and (b) to reimburse the Commitment Parties from time to time, for all reasonable out-of-pocket expenses (including but not limited to expenses of the Commitment Parties’ due diligence investigation, consultants’ fees, syndication expenses, travel expenses and reasonable fees, disbursements and other charges of counsel) incurred in connection with the Facilities and the preparation of this Commitment Letter, the Term Sheet, the Fee Letter, the Administrative Agency Fee Letter, the definitive documentation for the Facilities and any security arrangements in connection therewith or the administration, amendment or waiver thereof, in each case whether or not the Closing Date occurs or any Bank Documentation is executed and delivered or any extensions of credit are made under any portion of the Facilities. Notwithstanding any other provision of this Commitment Letter, no indemnified person shall be liable for any damages arising from the use by others of information or other materials obtained through electronic, telecommunications or other information transmission systems or for any special, indirect, consequential or punitive damages in connection with its activities related to the Facilities.

You acknowledge that we and our respective affiliates may be providing debt financing, equity capital or other services (including financial advisory services) to other companies in respect of which you may have conflicting interests regarding the transactions described herein and otherwise. None of the Commitment Parties or any of their respective affiliates will use confidential information obtained from you by virtue of the transactions contemplated by this Commitment Letter or its other relationships with you in connection with the performance by the Commitment Parties or any of their respective affiliates of services for other companies, and none of the Commitment Parties or any of their respective affiliates will furnish any such information to other companies. You also acknowledge that none of the Commitment Parties or any of their respective affiliates has any obligation to use in connection with the transactions contemplated by this Commitment Letter, or to furnish to the Borrower or its respective subsidiaries, confidential information obtained by the Commitment Parties or any of their respective affiliates from other companies.

This Commitment Letter and the commitments hereunder shall not be assignable by you without the prior written consent of the Commitment Parties, and any purported assignment without such consent shall be null and void. This Commitment Letter may not be amended or any provision hereof waived or modified except by an instrument in writing signed by each of the Commitment Parties and you. This Commitment Letter may be executed in any number of counterparts, each of which shall be deemed an original and all of which, when taken together, shall constitute one agreement. Delivery of an executed counterpart of a signature page of this Commitment Letter by facsimile transmission shall be effective as delivery of a manually executed counterpart of this Commitment Letter. This Commitment Letter (including the exhibits hereto), the Fee Letter and the Administrative Agency Fee Letter are the only agreements that have been entered into among us with respect to the Facilities and set forth the entire understanding of the parties with respect thereto. This Commitment Letter is intended to be solely for the benefit of the parties hereto and is not intended to confer any benefits upon, or create any rights in favor of, any person other than the parties hereto. This Commitment Letter shall be governed by, and construed in accordance with, the laws of the State of New York, without giving effect to the conflicts of law principles thereof. The Commitment Parties may perform the duties and activities described hereunder through any of their respective affiliates and the provisions of the second preceding paragraph shall apply with equal force and effect to any of such affiliates so performing any such duties or activities.

Each party hereto irrevocably and unconditionally submits to the exclusive jurisdiction of any state or Federal court sitting in the City of New York over any suit, action or proceeding arising out of or relating to the Transactions or the other transactions contemplated hereby, this Commitment Letter, the Term Sheet, the Administrative Agency Fee Letter or the Fee Letter or the performance of services hereunder or thereunder. You hereby agree that service of any process, summons, notice or document by registered mail addressed to you shall be effective service of process for any suit, action or proceeding brought in any such court. You will promptly appoint an authorized agent (the “Authorized Agent”), upon whom process may be served in any suit, action or proceeding arising out of or relating to the Transactions, this Commitment Letter, the Term Sheet, the Administrative Agency Fee Letter or the Fee Letter or the performance of services hereunder or thereunder which may be instituted in any such court. You agree to take any and all action, including the filing of any and all documents, that may be necessary to establish and continue such appointment in full force and effect as aforesaid. Service of process upon the Authorized Agent shall be deemed, in every respect, effective service of process upon you. Each party hereto irrevocably and unconditionally waives any objection to the laying of venue of any such suit, action or proceeding brought in any such court and any claim that any such suit, action or proceeding has been brought in any inconvenient forum. Each party hereto agrees that a final judgment in any such suit, action or proceeding brought in any such court shall be conclusive and binding upon it and may be enforced in any other courts to whose jurisdiction it is or may be subject, by suit upon judgment. You and the Commitment Parties irrevocably agree to waive trial by jury in any suit, action, proceeding, claim or counterclaim brought by or on behalf of any party related to or arising out of the Transactions, this Commitment Letter, the Term Sheet, the Administrative Agency Fee Letter or the Fee Letter or the performance of services hereunder or thereunder.

You agree that you will not disclose, directly or indirectly, this Commitment Letter, the Term Sheet, the Administrative Agency Fee Letter, the Fee Letter, the contents of any of the foregoing or the activities of the Commitment Parties pursuant hereto or thereto to any person without the prior approval of the Commitment Parties, except that you may disclose (a) this Commitment Letter, the Term Sheet, the Fee Letter and the contents hereof and thereof (i) to your officers, employees, attorneys, accountants and advisors directly involved in the consideration of this matter on a confidential and need-to-know basis and (ii) as required by applicable law or compulsory legal process (in which case you agree to inform us promptly thereof) and (b) this Commitment Letter, the Term Sheet and the contents hereof and thereof (but not the Fee Letter (other than upon request by the Seller, to the Seller as redacted in a mutually agreed fashion), the Administrative Agency Fee Letter or the contents thereof) to the Seller and its officers, directors, employees, attorneys, accountants and advisors, in each case in connection with the Transactions and on a confidential and need-to-know basis after this Commitment Letter has been accepted by you. Notwithstanding anything herein to the contrary, any party subject to confidentiality obligations hereunder or under any other related document (and any employee, representative or other agent of such party) may disclose to any and all persons, without limitation of any kind, such party's U.S. federal income tax treatment and the U.S. federal income tax structure of the transactions contemplated hereby relating to such party and all materials of any kind (including opinions or other tax analyses) that are provided to it relating to such tax treatment and tax structure. However, no such party shall disclose any information relating to such tax treatment or tax structure to the extent nondisclosure is reasonably necessary in order to comply with applicable securities laws.

We hereby notify you that pursuant to the requirements of the USA Patriot Act, Title III of Pub. L. 107-56 (signed into law October 26, 2001) (the “Patriot Act”), we and the other Lenders may be required to obtain, verify and record information that identifies the Borrower and the Acquired Business, which information includes the name, address and tax identification number and other information regarding them that will allow us or such Lender to identify them in accordance with the Patriot Act. This notice is given in accordance with the requirements of the Patriot Act and is effective as to us and the Lenders.

Please indicate your acceptance of the terms hereof and of the Fee Letter and the Administrative Agency Fee Letter by signing in the appropriate space below and in the Fee Letter and the Administrative Agency Fee Letter and returning to the Initial Lenders the enclosed duplicate originals (or facsimiles or .pdfs) of this Commitment Letter, the Administrative Agency Fee Letter and the Fee Letter not later than 5:00 p.m., New York City time, on June 9, 2008. The commitments hereunder will expire at such time in the event that the Initial Lenders have not received such executed duplicate originals (or facsimiles) in accordance with the immediately preceding sentence. In the event that the initial borrowing under the Facilities does not occur on or before October 31, 2008, then this Commitment Letter and the commitments hereunder shall automatically terminate unless the Commitment Parties shall, in their discretion, agree to an extension. The compensation, reimbursement, indemnification, jurisdiction and confidentiality provisions contained herein, in the Administrative Agency Fee Letter and in the Fee Letter shall remain in full force and effect regardless of whether definitive financing documentation shall be executed and delivered and notwithstanding the termination of this Commitment Letter or the commitments hereunder.

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We are pleased to have been given the opportunity to assist you in connection with the financing for the Transactions.

	Very truly yours,

	JPMORGAN CHASE BANK, N.A.,

	By	/s/ Matthew H. Massie
	Name: Matthew H. Massie
	Title: Managing Director

	J.P. MORGAN SECURITIES INC.,

	By	/s/ Gerry Murray
	Name: Gerry Murray
	Title: Managing Director

	CREDIT SUISSE, CAYMAN ISLANDS BRANCH,

	By	/s/ Karl Studer
	Name: Karl Studer
	Title: Director

	By	/s/ Markus Frenzen
	Name: Markus Frenzen
	Title: Assistant Vice President

	CREDIT SUISSE SECURITIES (USA) LLC,

	By	/s/ Christopher G. Cunningham
	Name: Christopher G. Cunningham
	Title: Managing Director

	UBS LOAN FINANCE LLC,

	By	/s/ James Boland
	Name: James Boland
	Title: Managing Director

	By	/s/ Warren Jervey
	Name: Warren Jervey
	Title: Executive Director and Counsel Region Americas Legal

	UBS SECURITIES LLC,

	By	/s/ James Boland
	Name: James Boland
	Title: Managing Director

	By	/s/ Warren Jervey
	Name: Warren Jervey
	Title: Executive Director and Counsel Region Americas Legal

Accepted and agreed to as of the date first above written:

BE AEROSPACE, INC.,

By /s/ Thomas P. McCaffrey______________

Name: Thomas P. McCaffrey

Title: Senior Vice President and Chief Financial Officer

EXHIBIT A

SUMMARY OF PRINCIPAL TERMS AND CONDITIONS

$1,550,000,000 Senior Secured Credit Facilities

Borrower:	BE Aerospace, Inc. (“Borrower”).

Joint Lead Arrangers and Joint Bookrunners:	J.P. Morgan Securities Inc. (“JPMorgan”), UBS Securities LLC (“UBSS”) and Credit Suisse Securities (USA) LLC (“CSS”).

Lenders:	A syndicate of banks, financial institutions and other entities, including JPMorgan Chase Bank, N.A. (“JPMCB”), UBS Loan Finance LLC (“UBS”) and Credit Suisse, Cayman Islands Branch (“CS”), arranged by the Joint Lead Arrangers (collectively, the “Lenders”).

Administrative Agent, Collateral Agent and Issuing Bank:	JPMCB (the “Administrative Agent” and the “Collateral Agent”).

Issuing Bank:	JPMCB and any additional financial institution acceptable to the Borrower and JPMCB.

Swingline Lender:	JPMCB.

Type and Amount of Facilities:	Revolving Credit Facility

	A revolving credit facility (the “Revolving Credit Facility”) in an aggregate principal amount of $350.0 million.

	Term Loan Facility

	A term loan facility (the “Term Loan Facility”) in an aggregate principal amount of $1,200.0 million.

	Incremental Facilities

	The Term Loan Facility will permit the Borrower to add one or more incremental term loan facilities to the Term Loan Facility (each, an “Incremental Facility”); provided that (i) no Lender will be required to participate in any such Incremental Facility, (ii) no event of default or default exists or would exist after giving effect thereto, (iii) all financial covenants would be satisfied on a pro forma basis on the date of incurrence and for the most recent determination period, on a pro forma basis the ratio, of (A) consolidated senior secured indebtedness as of the end of such period to (B) consolidated EBITDA for such period shall not exceed 2.75 to 1.00 (subject to step-downs to be agreed) on such date and for such period,

	(iv) the maturity date of any such Incremental Facility shall be no earlier than the maturity date of the Term Loan Facility and the amortization schedule thereof shall not require cumulative amortization at any time to be greater than that applicable to the remaining Term Loan Facility at the closing of such Incremental Facility, (v) the interest rates applicable to any Incremental Facility shall be determined by the Borrower and the lenders thereunder, (vi) any Incremental Facility shall be on terms and pursuant to documentation otherwise consistent with the Term Loan Facility and (vii) if the initial yield on such Incremental Facility exceeds by more than zero basis points the Interest Margin then in effect under the Term Loan Facility (the amount of such excess above zero basis points being referred to as the “Yield Differential”), then the Interest Margins then in effect under the Term Loan Facility shall automatically be increased by such Yield Differential, effective upon the extension of the loans under the Incremental Facility. For purposes of the foregoing sentence, the initial yield on any Incremental Facility shall be determined by the Administrative Agent to be equal to the sum of (x) the applicable margin for loans under the Incremental Facility that bear interest based on the LIBOR rate and (y) if the Incremental Facility is originally advanced at a discount or the Lenders making the same receive a fee directly or indirectly from any Company for doing so (the amount of such discount or fee, expressed as a percentage of the Incremental Facility, being referred to herein as “OID”), the amount of such OID divided by the lesser of (A) the average life to maturity of the Incremental Facility and (B) four).

	The Revolving Credit Facility and the Term Loan Facility are herein referred to collectively as the “Facilities”.

Acquisition	The Borrower proposes to acquire (the “Acquisition”) certain assets and certain foreign subsidiaries of the consumable solutions division (the “Acquired Business”) currently owned by Honeywell International, Inc. (the “Seller”). The Acquisition will be effected pursuant to an asset purchase agreement (the “Purchase Agreement”) among the Borrower and the Seller.

Purpose:	Proceeds of the Term Loan Facilities will be used by the Borrower and its subsidiaries: (i) to finance the Acquisition, (ii) to pay fees and expenses related to the Acquisition and (iii) to refinance existing debt of the Borrower and its subsidiaries (including the extinguishment of all remaining amounts owed under the Borrower’s Amended and Restated Credit Agreement dated as of August 24, 2006) (collectively, the “Transactions”). Proceeds of the Revolving Credit Facility shall be used to finance working capital needs and for general corporate purposes of the Borrower and its subsidiaries.


Closing Date:	The date of the closing of the Acquisition, but no later than October 31, 2008.

Maturity Dates:	Term Loan Facility: Six years from the Closing Date (the “Term Loan Facility Maturity Date”).

	Revolving Credit Facility: Five years from the Closing Date (the “Revolving Credit Facility Maturity Date”).

Availability:	Term Loan Facility: The Term Loan Facility (other than the Incremental Facility) will be available in a single drawing on the Closing Date.

	Revolving Credit Facility: The Revolving Credit Facility will be available on and after the Closing Date on a fully revolving basis to but excluding the Revolving Credit Facility Maturity Date; provided that (i) the Borrower may borrow under the Revolving Credit Facility on the Closing Date in order to fund any amount of OID on the Closing Date and (ii) an additional portion of the Revolving Credit Facility to be agreed will be available on the Closing Date.

Letters of Credit:	Up to an amount to be agreed of the Revolving Credit Facility will be available for letters of credit, on terms and conditions customary for similar credit facilities to be set forth in the Bank Documentation. Each letter of credit shall expire not later than the earlier of (i) 12 months after its date of issuance and (ii) the fifth day prior to the Maturity Date of the Revolving Credit Facility.

	Drawings under any letter of credit shall be reimbursed by the Borrower on or before the next business day. To the extent that the Borrower does not reimburse the Issuing Bank on or before the next business day, the Lenders under the Revolving Credit Facility shall be irrevocably obligated to reimburse the Issuing Bank pro rata based upon their respective Revolving Credit Facility commitments.

	The issuance of all letters of credit shall be subject to the customary procedures of the Issuing Bank.

Swingline Facility:	Up to $15.0 million of the Revolving Credit Facility will be available for swingline borrowings, on terms and conditions customary for similar credit facilities to be set forth in the Bank Documentation.

	Except for purposes of calculating the commitment fee described below, any swingline borrowings will reduce availability under the Revolving Credit Facility on a dollar-for-dollar basis.


Amortization:	Term Loan Facility: The Term Loan Facility will amortize in equal quarterly installments in annual amounts equal to 1.0% of the outstanding principal amount of the Term Loan Facility, with the balance payable on the Term Loan Facility Maturity Date.

	Revolving Credit Facility: None.

Interest:	At the Borrower’s option, loans will bear interest based on the ABR or LIBOR, as described below (except that all swingline borrowings will accrue interest based on the ABR):

	A. ABR Option

	Interest will be at the ABR plus the applicable Interest Margin, calculated on the basis of the actual number of days elapsed in a year of 365 days and payable quarterly in arrears. The ABR is defined as the higher of the Federal Funds Rate, as published by the Federal Reserve Bank of New York, plus 1/2 of 1% and the prime commercial lending rate of JPMCB. With respect to the interest rate per annum applicable to advances under the Facilities, ABR shall be subject to a floor of 4.25%.

	ABR borrowings (other than swingline borrowings) will be available on same-day’s notice (if received prior to 11 A.M. New York Time) and will be in minimum amounts to be agreed upon.

	B. LIBOR Option

	Interest will be determined for periods to be selected by Borrower (“Interest Periods”) of one, two, three or six months (or such shorter or longer period as the Lenders may reasonably agree) and will be at an annual rate equal to the London Interbank Offered Rate (“LIBOR”) for the corresponding deposits of U.S. dollars, plus the applicable Interest Margin. LIBOR will be determined by the Administrative Agent at the start of each Interest Period and will be fixed through such period. Interest will be paid at the end of each Interest Period or, in the case of Interest Periods longer than three months, quarterly, and will be calculated on the basis of the actual number of days elapsed in a year of 360 days. LIBOR will be adjusted for maximum statutory reserve requirements (if any). With respect to the interest rate per annum applicable to advances under the Facilities, LIBOR shall be subject to a floor of 3.25%.

	LIBOR borrowings will require three business days’ prior notice and will be in minimum amounts to be agreed upon.


Default Interest and Fees:	During the continuance of an event of default, interest will accrue (i) in the case of principal, interest or premium (if any) on any loan at a rate of 2.0% per annum plus the rate otherwise applicable to such loan and (ii) in the case of any other amount, at a rate of 2.0% per annum plus the non-default interest rate then applicable to ABR loans under the Revolving Credit Facility. Default interest shall be payable on demand.

Interest Margins:	The applicable Interest Margin for the Revolving Credit Facility will be 2.25% for ABR loans and 3.25% for LIBOR loans; the applicable Interest Margin for the Term Loan Facility will be 2.25% for ABR loans and 3.25% for LIBOR loans; provided that after the date on which Borrower shall have delivered financial statements for the fiscal quarter ending at least three months after the Closing Date, the Interest Margin for the Revolving Credit Facility will be determined pursuant to a grid to be agreed based on the Borrower’s leverage ratio.

Commitment Fee:	A Commitment Fee shall accrue on the unused amounts of the commitments under the Revolving Credit Facility. Such Commitment Fee will initially be 0.40% per annum; provided that after the date on which Borrower shall have delivered financial statements for the fiscal quarter ending at least three months after the Closing Date, the Commitment Fee will be determined pursuant to a grid to be agreed based on the Borrower’s leverage ratio. Accrued Commitment Fees will be payable quarterly in arrears (calculated on a 360-day basis) for the account of the Lenders from the Closing Date.

Letter of Credit Fees:	The Borrower will pay (i) the Issuing Bank a fronting fee equal to 0.125% per annum and (ii) the Lenders under the Revolving Credit Facility letter of credit participation fees equal to the Interest Margin for LIBOR loans under the Revolving Credit Facility, in each case, on the undrawn amount of all outstanding letters of credit. In addition, the Borrower will pay the Issuing Bank customary issuance fees.

Mandatory Prepayments:	To the extent that any loans are outstanding under the Term Loan Facility, the Term Loans shall be prepaid in an amount equal to (a) 100% of the net proceeds received from the sale or other disposition of all or any part of the assets of Borrower or any of its subsidiaries after the Closing Date other than sales of inventory in the ordinary course of business and other exceptions to be agreed (including reinvestment of such proceeds within 360 days), (b) 100% of the net proceeds received by Borrower or any of its subsidiaries from the issuance of debt after the Closing Date other than permitted debt and exceptions to be agreed, (c) 100% of all casualty and condemnation proceeds in excess of amounts applied within 360 days to replace or restore any properties in respect of which such proceeds are paid to the Borrower and its subsidiaries and (d) 50% of excess cash flow of the Borrower and its subsidiaries (subject to step-downs and to be defined in a manner to be agreed).


	There will be no prepayment penalties (except LIBOR breakage costs) for mandatory prepayments.

Optional Prepayments:	Permitted in whole or in part, with prior notice but without premium or penalty (except LIBOR breakage costs) and including accrued and unpaid interest, subject to limitations as to minimum amounts of prepayments; provided that prior to the 1st anniversary of the Closing Date, Optional Prepayments of the Term Loan Facility will be subject to a premium equal to 1% of the amount prepaid (with exceptions to be agreed).

Application of Prepayments:	Optional Prepayments of the Term Loan Facility will be applied to the scheduled amortization thereof at the discretion of the Borrower.

Guarantees:	So long as (x) all or substantially all of the domestic assets of the Borrower and its direct and indirect subsidiaries (including the Acquired Business) are retained by the Borrower and (y) no direct or indirect subsidiary of the Borrower (other than Advanced Thermal Sciences Corporation and Aerospace Lighting Corporation, so long as such subsidiaries do not hold in excess of $60.0 million of assets in the aggregate (the “Excluded Subsidiaries”)) or direct or indirect parent of the Borrower acquires domestic assets that, after giving effect to such acquisition and together with the domestic assets held by all other subsidiaries, would constitute more than 7.5% of the total domestic assets of the Borrower and its subsidiaries on a consolidated basis, then guarantees shall not be required from any such entity.

	If any person shall become a domestic subsidiary of the Borrower by virtue of an acquisition permitted under the Facilities, then, unless all or substantially all of the assets of such person are transferred to the Borrower (by merger of such person with and into the Borrower or otherwise), within 90 days after the date such person first became a domestic subsidiary of the Borrower, the Borrower shall cause such person to, and such person shall, guarantee the Facilities on a senior secured basis on terms and conditions satisfactory to the Administrative Agent, and shall execute and deliver to the Administrative Agent such documents as the Administrative Agent reasonably requires evidencing such secured guarantee.

	The Borrower will not permit any subsidiary (subject to exceptions to be agreed) to, directly, or indirectly, incur or assume any guarantee of any obligation of any other entity, unless contemporaneously therewith effective provision is made to guarantee the Facilities equally and ratably with (or on a senior basis to, if applicable) such obligation for so long as such obligation is so guaranteed.


Security:	The Facilities and any hedging or treasury management obligations to which a Lender or an affiliate of a Lender is a counterparty will be secured by perfected first priority pledges of all of the equity interests of each of the Borrower’s direct subsidiaries, and perfected first priority security interests in and mortgages on all tangible and intangible assets (including, without limitation, accounts receivable, inventory, equipment, general intangibles, intercompany notes, insurance policies, investment property, intellectual property, real property, cash and proceeds of the foregoing) of the Borrower, wherever located, now or hereafter owned, except, (i) that any pledge or security interest in any voting stock of any foreign subsidiary shall be limited to 65% of such voting stock unless the pledge of a greater amount shall not result in adverse tax consequences to the Borrower, (ii) to the extent such pledge or security interest would be prohibited by applicable law or would result in material adverse tax consequences to the Borrower, (iii) for certain exceptions to be agreed in respect of non-assignable contracts, (iv) where the costs associated with the taking of such pledge or security interest are excessive in comparison to the benefits afforded to the Lenders thereby, as reasonably determined by the Administrative Agent, (v) that mortgages on real property shall be required only for real property acquired after the Closing Date with a fair market value above $15.0 million, and (vi) for such other exceptions as are agreed.

Conditions to Initial Borrowings:	Those set forth in the Commitment Letter and in Schedule I to this Summary of Principal Terms and Conditions (the “Term Sheet”).

Conditions to Each Borrowing:	Conditions precedent to each borrowing or issuance under the Revolving Credit Facility or the Term Loan Facility will be those customary for a transaction of this type, including (i) absence of any continuing default or event of default, (ii) accuracy of all representations and warranties (other than the material adverse change representation with respect to the initial borrowings) qualified by materiality or similar qualifiers and in all material respects of all other representations and warranties, and (iii) receipt of a customary borrowing notice or letter of credit request, as applicable.

Representations and Warranties:	The following representations and warranties will apply to the Borrower and its subsidiaries, will be subject to materiality levels and/or exceptions to be negotiated and reflected in the satisfactory definitive financing, security and guarantee documentation with respect to the Facilities (the “Bank Documentation”):

	Accuracy and completeness of financial statements (including pro forma financial statements); absence of undisclosed liabilities; no material adverse change; corporate existence; compliance with law; corporate power and authority; enforceability of the Bank Documentation; no conflict with law or contractual obligations; no material litigation; no default; ownership of property; liens; intellectual property; no burdensome restrictions; taxes; Federal Reserve regulations; ERISA; Investment Company Act; subsidiaries; environmental matters; solvency; accuracy and completeness of disclosure; Patriot Act and anti-terrorism law compliance; and creation and perfection of security interests.


Affirmative Covenants:	The following affirmative covenants will apply to the Borrower and its subsidiaries, will be subject to thresholds and/or exceptions to be negotiated and reflected in the Bank Documentation:

	Delivery of certified quarterly and audited annual financial statements, delivery of annual budgets; notices of defaults, litigation and other material events; payment of other obligations; continuation of business and maintenance of existence and material rights and privileges; compliance with all applicable laws and regulations (including, without limitation, environmental matters, taxation and ERISA) and material contractual obligations; maintenance of property and insurance; maintenance of books and records; right of the Lenders to inspect property and books and records; further assurances (including, without limitation, with respect to security interests in after-acquired property); and agreement to establish, no later than 6 months after the Closing Date, an interest rate protection program and/or have fixed rate financing on 40% of the aggregate funded indebtedness of Borrower and its subsidiaries for at least three years.

Negative Covenants:	The following negative covenants will apply to the Borrower and its subsidiaries and will be subject to thresholds and/or exceptions to be negotiated and reflected in the Bank Documentation (including unlimited permitted acquisitions so long as the pro forma secured leverage ratio is below 2.75 to 1.00 for the Borrower and its subsidiaries, and, in the case of permitted acquisitions, so long as (x) (i) any assets held by a domestic target are transferred to the Borrower within ninety days of such acquisition, or (ii) such domestic target becomes a guarantor of the Facilities and (y) any assets held by a domestic target are added as collateral under the Bank Documentation (subject to any exceptions provided therein)):

	1.	Limitation on dispositions of assets and changes of business and ownership.

	2.	Limitation on mergers and acquisitions.

	3.	Limitation on dividends, stock repurchases and redemptions and other restricted payments

	4.	Limitation on indebtedness (including guarantees and other contingent obligations) and preferred stock and prepayment, amendment and redemption thereof.

	5.	Limitation on loans and investments (including loans and investments to subsidiaries (other than foreign subsidiaries with respect to investments, subject to caps to be agreed) which would result in subsidiaries of the Borrower (excluding the Excluded Subsidiaries) holding, in the aggregate more than 7.5% of the total domestic assets of the Borrower and its subsidiaries on a consolidated basis).

	6.	Limitations on liens and further negative pledges.

	7.	Limitation on transactions with affiliates.

	8.	Limitation on capital expenditures.

	9.	Limitation on dividend and other payment restrictions affecting subsidiaries.

	10.	Limitation on Guarantees.

	11.	No modification or waiver of charter documents in any manner materially adverse to the Lenders without the consent of the Requisite Lenders.

	12.	No change to fiscal year.

Financial Covenants:	The following financial covenants will apply to the Borrower and its consolidated subsidiaries (with definitions and calculations to be mutually agreed and set forth in the Bank Documentation) as follows:

	1.	Minimum interest coverage ratio:

	Fiscal quarter ended:	Ratio:
	From the Closing Date to December 31, 2009	2.25 to 1.00
	March 31, 2010 and thereafter	2.50 to 1.00

Maximum total leverage ratio:

	Fiscal quarter ended:	Ratio
	From the Closing Date to December 31, 2009	4.25 to 1.00
	March 31, 2010 and thereafter	4.00 to 1.00

Events of Default:	The following events of default will be subject to materiality levels, default triggers, cure periods and/or exceptions to be negotiated and reflected in the Bank Documentation: nonpayment, breach of representations and covenants, cross-defaults, loss of lien on collateral, invalidity of guarantees (if any), bankruptcy and insolvency events, ERISA events, judgments and change of control (to be defined).

Assignments and Participations:	Each Lender may assign all or a portion of its loans and commitments under the Facilities, provided that each such assignment shall be in a minimum amount of not less than (i) $5.0 million for the Revolving Credit Facility, and (ii) $1.0 million for the Term Loan Facility (in both instances except in the case of the assignment of a Lender’s entire commitment). Assignments will require payment of an administrative fee of $3,500 (which shall be for the account of the applicable assignor or assignee) to the Administrative Agent and the consents of the Administrative Agent, the Borrower and with respect to an assignment of the Revolving Credit Facility, the Issuing Bank, which consents shall not be unreasonably withheld, conditioned or delayed; provided that (i) with respect to the Administrative Agent with regard to the Term Loan Facility and with respect to the Borrower with regard to the Facilities, no consents shall be required for an assignment to an existing Lender or an affiliate of an existing Lender or an approved fund and (ii) no consent of the Borrower shall be required during the continuance of an event of default. In addition, each Lender may sell participations in all or a portion of its loans and commitments under the Facilities; provided that no purchaser of a participation shall have the right to exercise or to cause the selling Lender to exercise voting rights in respect of the Facilities (except as to certain basic issues).

Expenses and Indemnification:	All reasonable out-of-pocket expenses (including but not limited to reasonable legal fees and expenses of one counsel to the Lenders and one local counsel in each appropriate jurisdiction and expenses incurred in connection with due diligence and travel, courier, reproduction, printing and delivery expenses) of the Lenders, the Joint Lead Arrangers, the Administrative Agent, the Collateral Agent and the Issuing Bank associated with the syndication of the Facilities and with the preparation, execution and delivery, administration, amendment, waiver or modification (including proposed amendments, waivers or modifications) of the documentation contemplated hereby are to be paid by the Borrower, subject to receipt of supporting documentation in reasonable detail. In addition, all out-of-pocket expenses (including but not limited to reasonable legal fees and expenses) of the Lenders and the Administrative Agent for workout proceedings, enforcement costs and documentary taxes associated with the Facilities are to be paid by the Borrower, subject to receipt of supporting documentation in reasonable detail.

	The Borrower will indemnify the Lenders, the Joint Lead Arrangers, the Administrative Agent, the Collateral Agent and the Issuing Bank and their respective affiliates, and hold them harmless from and against all reasonable out-of-pocket costs, expenses (including but not limited to reasonable legal fees and expenses) and liabilities arising out of or relating to the transactions contemplated hereby and any actual or proposed use of the proceeds of any loans made under the Facilities; provided, however, that no such person will be indemnified for costs, expenses or liabilities to the extent determined by a final, nonappealable judgment of a court of competent jurisdiction to have been incurred by reason of the gross negligence or willful misconduct of such person.

Yield Protection, Taxes and Other Deductions:	The Bank Documentation will contain yield protection provisions, customary for facilities of this nature, protecting the Lenders in the event of unavailability of LIBOR, breakage losses, reserve and capital adequacy requirements, subject to customary rights of the Borrower to replace Lenders requesting increased costs.

	All payments are to be free and clear of any present or future taxes, withholdings or other deductions whatsoever (other than income taxes in the jurisdiction of the Lender’s applicable lending office). The Lenders will use commercially reasonable efforts to minimize to the extent possible any applicable taxes and the Borrower will indemnify the Lenders and the Administrative Agent for such taxes paid by the Lenders and the Administrative Agent, as the case may be.

Required Lenders:	Lenders holding at least a majority of total loans and commitments under the Facilities, with certain amendments requiring the consent of each affected Lender.

Governing Law and Forum:	The laws of the State of New York. Each party to the Bank Documentation will waive the right to trial by jury and will consent to jurisdiction of the state and federal courts located in The City of New York.

Counsel to the Initial Lenders, the Joint Lead Arrangers, the Administrative Agent, the Issuing Bank and the Collateral Agent:	Fried, Frank, Harris, Shriver & Jacobson LLP.

SCHEDULE I

CONDITIONS TO CLOSING

The commitments of the Initial Lenders under the Commitment Letter with respect to the Bank Facilities, the agreements of the Initial Lenders and the Joint Lead Arrangers to perform the services described in the Commitment Letter are subject to the satisfaction (or waiver) of each of the conditions precedent set forth below.

1. The Initial Lenders shall have reviewed, and be satisfied with, the final structure, terms and conditions and the documentation relating to the Acquisition, including the Purchase Agreement (collectively, the “Acquisition Documents”), and each of the other Transactions (it being understood that Initial Lenders are satisfied with the June 9, 2008 execution form of the Acquisition Agreement and the disclosure schedules and exhibits thereto). The sources and uses of funds shall be as set forth on Schedule II to the Term Sheet or as otherwise agreed between the Borrower and the Lenders. The Acquisition shall be consummated concurrently with the initial funding of the Facilities substantially in accordance with the Acquisition Documents without waiver or amendment thereof, in each case that is material and adverse to the interests of the Lenders, without the consent of the Initial Lenders.

2. The Initial Lenders shall have received (i) audited consolidated balance sheets and related statements of income, stockholders’ equity and cash flows of each of Borrower and the Acquired Business for each of the last three fiscal years ending more than 90 days prior to the Closing Date, (ii) unaudited consolidated balance sheets and related statements of income, stockholders’ equity and cash flows of each of the Borrower and the Acquired Business for each fiscal quarter of the current fiscal year ending more than 45 days prior to the Closing Date and for the comparable periods of the preceding fiscal year (with respect to which the independent auditors shall have performed an SAS 100 review); (iii) a pro forma consolidated balance sheet and related statements of income for the Borrower for the last fiscal year covered by the audited financial statements delivered pursuant to clause (i) above and for the latest four-quarter period ending more than 45 days prior to the Closing Date, in each case after giving effect to the Transactions; and (iv) forecasts of the financial performance of the Borrower and its subsidiaries (x) on an annual basis, through 2012 and (y) on a quarterly basis, through 2008 satisfactory to the Initial Lenders. The financial statements referred to in clauses (i), (ii) and (iii) shall be prepared in accordance with accounting principles generally accepted in the United States.

3. The Lenders shall have received customary opinions, certificates, including a solvency certificate by the chief financial officer of the Borrower, and closing documentation as the Initial Lenders shall reasonably request, in form and substance reasonably satisfactory to the Initial Lenders.

4. The Borrower and each of the Guarantors shall have provided the documentation and other information to the Lenders that is required by regulatory authorities under applicable “know your customer” and anti-money-laundering rules and regulations, including, without limitation, the Patriot Act.

5. All costs, fees, expenses (including, without limitation, reasonable fees of one legal counsel to the Initial Lenders and one local counsel in each appropriate jurisdiction) and other compensation payable to the Lenders, the Joint Lead Arrangers, the Initial Lenders, the Administrative Agent and the Collateral Agent, as separately agreed shall have been paid to the extent due.

6. Subject to the provisions of the eleventh paragraph of the Commitment Letter, the Collateral Agent shall have a perfected, first priority lien on and security interest in the certain assets as required in the Term Sheet under the heading “Security” (subject to liens permitted under the definitive loan documentation and as otherwise agreed by the Lead Arrangers).

SCHEDULE II

CASH SOURCES AND USES

Sources and Uses
Sources	Amount	Uses	Amount
Revolving Credit Facility	$12.0 million	Cash Equity Purchase Price	$800.0 million
Term Loan B	$1,000.0 million	Refinance Existing Debt	$150.0 million
		Fees and Expenses	$62.0 million

TOTAL SOURCES	$1,012.0 million	TOTAL USES	$1,012.0 million

EX-31.1 3 a5747725ex31_1.htm EXHIBIT 31.1 a5747725ex31_1.htm

EXHIBIT 31.1

BE AEROSPACE, INC.

CERTIFICATIONS

I, Amin J. Khoury, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of BE Aerospace, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 7, 2008	By:	/s/ Amin J. Khoury
		Amin J. Khoury
		Chairman and Chief Executive Officer

EX-31.2 4 a5747725ex31_2.htm EXHIBIT 31.2 a5747725ex31_2.htm

EXHIBIT 31.2

B/E AEROSPACE, INC.

CERTIFICATIONS

I, Thomas P. McCaffrey, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of BE Aerospace, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

c.	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 7, 2008	By:	/s/ Thomas P. McCaffrey
		Thomas P. McCaffrey
		Senior Vice President and Chief Financial Officer

EX-32.1 5 a5747725ex32_1.htm EXHIBIT 32.1 a5747725ex32_1.htm

EXHIBIT 32.1

B/E AEROSPACE, INC.

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS REQUIRED BY

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of BE Aerospace, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Amin J. Khoury, Chief Executive Officer of the Company, certify that to the best of my knowledge:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 7, 2008	By:	/s/ Amin J. Khoury
		Amin J. Khoury
		Chairman and Chief Executive Officer

EX-32.2 6 a5747725ex32_2.htm EXHIBIT 32.2 a5747725ex32_2.htm

EXHIBIT 32.2

B/E AEROSPACE, INC.

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS REQUIRED BY

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of BE Aerospace, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Thomas P. McCaffrey, Senior Vice President and Chief Financial Officer of the Company, certify that to the best of my knowledge:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 7, 2008	By:	/s/ Thomas P. McCaffrey
		Thomas P. McCaffrey
		Senior Vice President and Chief Financial Officer