B/E AEROSPACE INC - FORM 10-Q

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EXCEL - IDEA: XBRL DOCUMENT - B/E AEROSPACE INC	Financial_Report.xls
EX-3.6 - EXHIBIT 3.6 - B/E AEROSPACE INC	a50364137ex3_6.htm
EX-32.2 - EXHIBIT 32.2 - B/E AEROSPACE INC	a50364137ex32_2.htm
EX-31.2 - EXHIBIT 31.2 - B/E AEROSPACE INC	a50364137ex31_2.htm
EX-32.1 - EXHIBIT 32.1 - B/E AEROSPACE INC	a50364137ex32_1.htm
EX-31.1 - EXHBIT 31.1 - B/E AEROSPACE INC	a50364137ex31_1.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, 2012

Commission File No. 0-18348

B/E 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)

BE AEROSPACE, INC.

(Former name)

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 has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 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 103,968,909 shares were outstanding as of July 31, 2012.

B/E AEROSPACE, INC.

Form 10-Q for the Quarter Ended June 30, 2012

Table of Contents

		Page
Part I	Financial Information

Item 1.	Condensed Consolidated Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets
	as of June 30, 2012 and December 31, 2011	3

	Condensed Consolidated Statements of Earnings
	and Comprehensive Income for the Three Months and
	Six Months Ended June 30, 2012 and June 30, 2011	4

	Condensed Consolidated Statements of Cash Flows
	for the Six Months Ended June 30, 2012 and June 30, 2011	5

	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	23

Item 4.	Controls and Procedures	23

Part II	Other Information

Item 5.	Other Information	24

Item 6.	Exhibits	25

Signatures		26

PART I - FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

B/E AEROSPACE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In Millions, Except Share Data)

	June 30,			December 31,
	2012			2011

ASSETS

Current assets:
Cash and cash equivalents	$	463.6		$	303.5
Accounts receivable – trade, less allowance for doubtful
accounts ($9.0 at June 30, 2012 and $8.2 at December 31, 2011)		422.9			333.2
Inventories		1,667.1			1,480.4
Deferred income taxes		6.0			37.2
Other current assets		50.3			30.6
Total current assets		2,609.9			2,184.9

Property and equipment, net of accumulated depreciation
($231.5 at June 30, 2012 and $213.3 at December 31, 2011)		244.0			208.3
Goodwill		1,283.5			1,008.3
Identifiable intangible assets		427.4			389.8
Deferred income taxes		0.5			0.3
Other assets		59.1			45.7
	$	4,624.4		$	3,837.3

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	281.3		$	199.3
Accrued interest		44.5			21.7
Accrued liabilities		369.8			358.5
Current maturities of long-term debt		0.6			0.5
Total current liabilities		696.2			580.0

Long-term debt		1,744.9			1,245.0
Deferred income taxes		114.8			101.8
Other non-current liabilities		43.5			37.9

Commitments, contingencies and off-balance sheet
arrangements (Note 8)
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; 104.5 million shares issued as of June 30, 2012
and 104.4 as of December 31, 2011		1.0			1.0
Additional paid-in capital		1,635.5			1,617.5
Retained earnings		464.0			324.0
Accumulated other comprehensive loss		(75.5	)		(69.9	)
Total stockholders’ equity		2,025.0			1,872.6
	$	4,624.4		$	3,837.3

See accompanying notes to condensed consolidated financial statements.

B/E AEROSPACE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

AND COMPREHENSIVE INCOME (UNAUDITED)

(In Millions, Except Per Share Data)


	THREE MONTHS ENDED						SIX MONTHS ENDED
	June 30,			June 30,			June 30,			June 30,
	2012			2011			2012			2011

Revenues	$	768.1		$	608.9		$	1,515.4		$	1,209.1
Cost of sales		474.8			375.8			938.6			753.3
Selling, general and administrative		109.8			89.3			217.1			174.7
Research, development and engineering		45.7			37.1			92.1			74.3

Operating earnings		137.8			106.7			267.6			206.8

Operating earnings, as percentage
of revenues		17.9	%		17.5	%		17.7	%		17.1	%

Interest expense		33.2			26.0			61.6			52.2

Earnings before income taxes		104.6			80.7			206.0			154.6

Income taxes		33.4			25.9			66.0			49.5

Net earnings		71.2			54.8			140.0			105.1

Other comprehensive income:
Foreign currency translation
adjustment and other		(20.9	)		9.5			(5.6	)		32.9
Comprehensive income	$	50.3		$	64.3		$	134.4		$	138.0

Net earnings per common share:
Basic	$	0.70		$	0.54		$	1.37		$	1.04
Diluted	$	0.69		$	0.54		$	1.36		$	1.03

Weighted average common shares:
Basic		102.0			100.9			102.0			100.9
Diluted		102.6			101.8			102.6			101.7

See accompanying notes to condensed consolidated financial statements.

B/E AEROSPACE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In Millions)

	SIX MONTHS ENDED
	June 30,			June 30,
	2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$	140.0		$	105.1
Adjustments to reconcile net earnings to net cash flows provided by
operating activities, net of effects from acquisitions:
Depreciation and amortization		35.1			30.3
Deferred income taxes		48.3			31.0
Non-cash compensation		12.5			12.8
Provision for doubtful accounts		2.2			1.0
Loss on disposal of property and equipment		0.6			0.4
Tax benefits realized from prior exercises of employee stock options
and restricted stock		(3.0	)		(15.2	)
Changes in operating assets and liabilities:
Accounts receivable		(70.6	)		(58.4	)
Inventories		(121.2	)		(43.9	)
Other current assets and other assets		(23.3	)		7.1
Accounts payable and accrued liabilities		104.3			60.4
Net cash provided by operating activities		124.9			130.6

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(53.4	)		(21.1	)
Acquisitions, net of cash acquired		(407.1	)		(17.1	)
Other		(0.2	)		--
Net cash used in investing activities		(460.7	)		(38.2	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common stock issued		2.7			1.8
Purchase of treasury stock		(0.3	)		--
Tax benefits realized from prior exercises of employee stock options
and restricted stock		3.0			15.2
Borrowings on line of credit		215.0			30.0
Repayments on line of credit		(215.0	)		(30.0	)
Proceeds from long-term debt		500.0			--
Principal payments on long-term debt		(0.3	)		(0.3	)
Debt origination costs		(9.8	)		--
Net cash provided by financing activities		495.3			16.7

Effect of foreign exchange rate changes on cash and cash equivalents		0.6			5.4

Net increase in cash and cash equivalents		160.1			114.5
Cash and cash equivalents, beginning of period		303.5			78.7
Cash and cash equivalents, end of period	$	463.6		$	193.2

Supplemental disclosures of cash flow information:
Cash paid during period for:
Interest	$	34.3		$	50.7
Income taxes		36.2			18.2

Supplemental schedule of noncash investing activities:
Accrued capital expenditures	$	2.2		$	7.4

See accompanying notes to condensed consolidated financial statements.

B/E AEROSPACE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited - In Millions, Except 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 B/E Aerospace, Inc. (the “Company”) Annual Report on Form 10-K for the fiscal year ended December 31, 2011.

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. Recent Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board (“FASB”) issued ASU 2011-05, Presentation of Comprehensive Income, which amends FASB ASC 220, Comprehensive Income. This guidance requires presentation of total comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The option to present components of other comprehensive income as part of the statement of stockholders’ equity was eliminated. The items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income were not changed. Additionally, no changes were made to the calculation and presentation of earnings per share. The Company adopted the provisions of ASU 2011-05 effective December 31, 2011, which resulted in the presentation of a single continuous statement of earnings and comprehensive income in our consolidated financial statements.

In December 2011, the FASB issued ASU 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. This guidance defers only those changes in ASU 2011-05 that relate to the presentation of reclassification adjustments. The adoption of ASU 2011-12 is not expected to have a material impact on the Company’s consolidated financial statements.

Note 3. Business Combinations

On January 30, 2012, the Company acquired 100% of the outstanding stock of UFC Aerospace Corp. (“UFC”), a provider of complex supply chain management and inventory logistics solutions, for a net purchase price of approximately $404.7 in cash. The transaction was accounted for as a purchase under FASB ASC 805, Business Combinations (“ASC 805”). The assets purchased and liabilities assumed for this acquisition have been reflected in the accompanying condensed consolidated balance sheet as of June 30, 2012 and the results of operations for this acquisition are included in the accompanying condensed consolidated statement of earnings and comprehensive income from the date of acquisition.

In June 2012, the Company entered into an agreement to acquire Interturbine Aviation Logistics GmbH, Interturbine Logistics Solutions and Interturbine Technologies GmbH (collectively Interturbine), a provider of material management logistical services to global airlines and maintenance, repair and overhaul (“MRO”) providers, in a €200 million all cash transaction. Interturbine supplies fasteners, cables and wires, electronic components, electrical and electromechanical materials, tools, hot bonding equipment and ground equipment to its primary customer base of airlines and MRO providers globally. The Company received approval from the regulators earlier than anticipated and, as a result, this transaction has now closed.

The Company has not yet completed the evaluation and allocation of the purchase price for the UFC acquisition as management’s assessment of the valuation of certain assets and liabilities is not yet complete. The Company does not believe that the final allocation will materially modify the preliminary purchase price allocation. The following table summarizes the preliminary estimates of fair values of assets acquired and liabilities assumed in accordance with ASC 805, which are currently recorded based on management’s estimates as follows:

Accounts receivable-trade	$	26.6
Inventories		66.5
Other current and non-current assets		0.2
Property and equipment		1.5
Goodwill		276.3
Identified intangibles		51.2
Accounts payable		(12.1	)
Other current and non-current liabilities		(5.5	)
Total purchase price	$	404.7

All of the goodwill and other intangible assets related to this acquisition are expected to be deductible for tax purposes.

Consolidated unaudited pro forma revenues, net earnings and diluted net earnings per share for the three and six month periods ended June 30, 2012 and 2011, giving effect to the UFC acquisition as if it had occurred on January 1, 2011 were as follows:

	THREE MONTHS ENDED				SIX MONTHS ENDED
	June 30, 2012 Actual		June 30, 2011 Pro forma		June 30, 2012 Pro forma		June 30, 2011 Pro forma
Revenues	$	768.1	$	646.1	$	1,530.7	$	1,286.1
Net earnings		71.2		56.2		141.1		109.6
Diluted net earnings per share		0.69		0.55		1.37		1.08

The Company has begun transferring legacy UFC customers into its consumables management segment systems. As a result it is not practicable to report stand-alone revenues and operating earnings of the acquired business since the acquisition date.

Note 4. 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. Work-in-process inventories include costs and estimated earnings in excess of billings on uncompleted contracts and excess over average costs on long-term contracts. Finished goods inventories primarily consist of aerospace fasteners. Inventories consist of the following:

	June 30, 2012		December 31, 2011
Purchased materials and component parts	$	189.9	$	165.3
Work-in-process		330.8		295.4
Finished goods		1,146.4		1,019.7
	$	1,667.1	$	1,480.4

Note 5. Goodwill and Intangible Assets

The table below sets forth the intangible assets by major asset class, all of which were acquired through business purchase transactions:

			June 30, 2012
	Useful						Net
	Life		Original		Accumulated		Book
	(Years)		Cost		Amortization		Value
Customer contracts and relationships		8-30	$	362.4	$	53.2	$	309.2
Acquired technologies		5-34		128.0		48.6		79.4
Replacement parts annuity and product approvals		20-22		31.7		28.8		2.9
Technical qualifications, plans and drawings		15-22		27.9		23.0		4.9
Trademarks and patents		5-30		26.4		18.2		8.2
Trade names	Indefinite			19.9		-		19.9
Covenants not to compete		3-5		3.3		0.4		2.9
			$	599.6	$	172.2	$	427.4

Amortization expense associated with identifiable intangible assets was approximately $6.9 and $6.4 for the three months ended June 30, 2012 and 2011, respectively, and $13.8 and $12.8 for the six month periods ended June 30, 2012 and 2011, respectively. The Company expects to report amortization expense of approximately $28 in each of the next five fiscal years. The future amortization amounts are estimates. Actual future amortization expense may be different due to future acquisitions, impairments, changes in amortization periods or other factors. The Company expenses costs to renew or extend the term of a recognized intangible asset.

Goodwill increased $275.2 during the six months ended June 30, 2012, of which $276.3 relates to the UFC acquisition and the offset is primarily a result of foreign currency translations.

Note 6. Long-Term Debt

On March 13, 2012, the Company issued $500.0 aggregate principal amount of 5.25% senior notes due 2022 (the “5.25% Senior Unsecured Notes”), in an offering pursuant to the Securities Act of 1933, as amended. The notes are senior unsecured debt obligations of the Company. As of June 30, 2012, long-term debt primarily consisted of its 5.25% Senior Unsecured Notes, $650.0 aggregate principal amount ($644.9 net of original issue discount) of 6.875% senior unsecured notes due 2020 and $600.0 aggregate principal amount of 8.5% senior unsecured notes due 2018. The Company also has a $950.0 revolving credit facility, as amended and restated as of August 3, 2012, (the “Revolving Credit Facility”), none of which was drawn at June 30, 2012.

Borrowings under the Revolving Credit Facility bear interest at an annual rate equal to the London interbank offered rate (“LIBOR”) (as defined in the Revolving Credit Facility) plus 175 basis points or Prime (as defined in the Revolving Credit Facility) plus 75 basis points. If drawn, as of June 30, 2012, the rate under the Revolving Credit Facility would have been approximately 2.21%.

Letters of credit outstanding under the Revolving Credit Facility aggregated $8.9 at June 30, 2012.

The Revolving Credit Facility contains an interest coverage ratio financial covenant (as defined therein) that must be maintained at a level greater than 2.0 to 1 and a total leverage ratio covenant (as defined therein) which limits net debt to a 4.25 to 1 multiple of EBITDA (as defined therein). The Revolving Credit Facility is collateralized by substantially all of the Company’s assets and contains customary affirmative covenants, negative covenants and conditions precedent for borrowings, all of which were met as of June 30, 2012.

Note 7. Fair Value Measurements

All financial instruments, except long-term debt, are carried at amounts that approximate estimated fair value. The fair value is the price at which an asset could be exchanged in a current transaction between knowledgeable, willing parties. Assets measured at fair value are categorized based upon the lowest level of significant input to the valuations.

Level 1 – quoted prices in active markets for identical assets and liabilities.

Level 2 – quoted prices for identical assets and liabilities in markets that are not active, or observable inputs other than quoted prices in active markets for identical assets and liabilities.

Level 3 – unobservable inputs in which there is little or no market data available, which require the reporting entity to develop its own assumptions.

The carrying amounts of cash and cash equivalents (which the Company classifies as Level 1 assets), accounts receivable-trade and accounts payable represent their respective fair values due to their short- term nature. There was no debt outstanding under the Revolving Credit Facility as of June 30, 2012. The fair value of the Company’s senior unsecured notes, based on market prices for publicly-traded debt (which the Company classifies as Level 2 inputs), was $1,891.9 and $1,367.1 as of June 30, 2012 and December 31, 2011, respectively.

Note 8. 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 in the condensed consolidated balance sheets. At June 30, 2012, future minimum lease payments under these arrangements totaled approximately $214.7, the majority of which related to long-term real estate leases.

Litigation — The Company is a defendant in various legal actions arising in the normal course of business, the outcomes of which, in the opinion of management, neither individually nor in the aggregate, are likely to result in a material adverse effect on the Company’s condensed consolidated financial statements.

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 design, manufacture, sale and delivery of its products, indemnities to various lessors in connection with facility leases for certain claims arising from such facilities or leases, 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 many of our 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 have a material effect on the Company’s 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.

Note 9. Accounting for Stock-Based Compensation

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

Compensation cost generally is recognized on a straight-line basis over the vesting period of the shares. Share-based compensation of $6.0 and $11.8, and $6.2 and $12.3 was recognized during the three and six month periods ended June 30, 2012 and 2011, respectively, related to the equity grants made pursuant to the LTIP. Unrecognized compensation expense related to equity grants, including the estimated impact of any future forfeitures, was $37.6 at June 30, 2012.

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 was not material to any of the periods presented.

Note 10. Segment Reporting

The Company is organized based on the products and services it offers. The Company’s reportable segments, which are also its operating segments, are comprised of commercial aircraft, consumables management and business jet.

The Company has six reporting units, which were determined based on materiality and on the guidelines contained in FASB ASC Topic 350, Subtopic 20, Section 35. Each reporting unit represents either (a) an operating segment (which is also a reportable segment) or (b) a component of an operating segment, which constitutes a business, for which there is discrete financial information available that is regularly reviewed by segment management.

The Company evaluates segment performance based on segment operating earnings or losses. Each segment regularly reports its results of operations and makes requests for capital expenditures and acquisition funding to the Company’s chief operating decision-making group. This group is 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 commercial, business jet, military, MRO, aircraft leasing and aircraft manufacturing customers.

The Company has not included product line information due to the similarity of commercial aircraft segment (“CAS”) product offerings and the impracticality of determining such information for the consumables management segment (“CMS”).

The following table presents revenues and operating earnings by reportable segment:

	THREE MONTHS ENDED				SIX MONTHS ENDED
	June 30,		June 30,		June 30,		June 30,
	2012		2011		2012		2011
Revenues
Commercial aircraft	$	392.3	$	308.5	$	767.0	$	618.8
Consumables management		286.6		239.9		573.4		470.7
Business jet		89.2		60.5		175.0		119.6
	$	768.1	$	608.9	$	1,515.4	$	1,209.1

Operating earnings (1)
Commercial aircraft	$	69.9	$	51.9	$	135.4	$	101.2
Consumables management		55.5		48.3		107.3		92.9
Business jet		12.4		6.5		24.9		12.7
		137.8		106.7		267.6		206.8
Interest expense		33.2		26.0		61.6		52.2
Earnings before income taxes	$	104.6	$	80.7	$	206.0	$	154.6

(1) Operating earnings include an allocation of corporate IT costs, employee benefits and selling, general and administrative costs based on the proportion of each segment’s systems users, number of employees and sales.

The following table presents capital expenditures by reportable segment:

	THREE MONTHS ENDED				SIX MONTHS ENDED
	June 30,		June 30,		June 30,		June 30,
	2012		2011		2012		2011
Capital expenditures
Commercial aircraft	$	18.9	$	7.5	$	32.5	$	14.5
Consumables management		8.6		2.3		15.9		4.7
Business jet		2.6		1.0		5.0		1.9
	$	30.1	$	10.8	$	53.4	$	21.1

The following table presents goodwill by reportable segment:

	June 30,		December 31,
	2012		2011
Goodwill
Commercial aircraft	$	383.7	$	384.2
Consumables management		809.7		535.5
Business jet		90.1		88.6
	$	1,283.5	$	1,008.3

The following table presents total assets by reportable segment:

	June 30,		December 31,
	2012		2011
Total assets (1)
Commercial aircraft	$	1,481.7	$	1,366.1
Consumables management		2,772.9		2,156.8
Business jet		369.8		314.4
	$	4,624.4	$	3,837.3

(1) Corporate assets (including cash and cash equivalents) of $511.2 and $304.6 at June 30, 2012 and December 31, 2011, respectively, have been allocated to the above segments based on each segment’s respective percentage of total assets.

Note 11. 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 weighted average common shares outstanding including the dilutive effect of stock options, shares issued under the Employee Stock Purchase Plan and restricted shares based on an average share price during the period. For the three and six month periods ended June 30, 2012 and 2011, approximately 0.5 and 0.5, and 0.4 and 0.5 shares of the Company’s common stock, respectively, were excluded from the determination of diluted earnings per common share because their effect would have been anti-dilutive. The computations of basic and diluted earnings per share for the three and six month periods ended June 30, 2012 and 2011, respectively, are as follows:

	THREE MONTHS ENDED				SIX MONTHS ENDED
	June 30,		June 30,		June 30,		June 30,
	2012		2011		2012		2011
Net earnings	$	71.2	$	54.8	$	140.0	$	105.1

Basic weighted average common shares		102.0		100.9		102.0		100.9
Effect of dilutive stock options and
employee stock purchase plan shares		0.1		0.1		0.1		0.1
Effect of restricted shares issued		0.5		0.8		0.5		0.7
Diluted weighted average common shares		102.6		101.8		102.6		101.7

Basic net earnings per share	$	0.70	$	0.54	$	1.37	$	1.04
Diluted net earnings per share	$	0.69	$	0.54	$	1.36	$	1.03

Note 12. Accounting for Uncertainty in Income Taxes

In accordance with FASB ASC 740, Income Taxes (“ASC 740”), the Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.

As of June 30, 2012 and December 31, 2011, the Company had $20.6 and $19.2, respectively, of net unrecognized tax benefits. Any subsequent recognition of unrecognized tax benefits, if recognized, would lower the effective tax rate.

The Company classifies interest and penalties related to income tax as income tax expense. The amount included in the Company’s liability for unrecognized tax benefits for interest and penalties was less than $1.0 as of June 30, 2012 and December 31, 2011.

The Company recently completed its U.S. federal income tax examination for year 2006 with immaterial adjustments, and with minor exceptions, the Company is currently open to audit by the tax authorities for the five tax years ending December 31, 2011. There are currently no material income tax audits in progress.

Note 13. Subsequent Events

On July 12, 2012, the Company issued $800.0 of senior unsecured notes, priced to yield 4.9%, as an add-on to the Company’s existing $500.0 issue of 5.25% Senior Unsecured Notes due March 2022. On July 23, 2013, the Company accepted for payment $527.2 aggregate principal amount of its 8.5% senior unsecured notes due 2018 tendered pursuant to its previously announced tender offer and consent solicitation, paying $1,120.45 per $1,000 principal amount of notes tendered. The tender offer expired on August 3, 2012. All remaining outstanding notes not tendered pursuant to the tender offer have been called for redemption and will be redeemed on August 23, 2012.

On August 3, 2012, the Company entered into a Second Amended and Restated Credit Agreement (the “New Credit Agreement”), which amended and restated the Company’s Revolving Credit Facility. The New Credit Agreement increases the existing $750.0 Revolving Credit Facility to a $950.0 senior secured revolving credit facility, and, among other things, lowered the Company’s interest rate margins by 50 basis points, lowered commitment fees by 10 basis points and reduced the required interest coverage ratio to 2.0: 1.0.

B/E AEROSPACE, INC.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

(In Millions, Except Per Share Data)

OVERVIEW

The following discussion and analysis addresses the results of our operations for the three and six month periods ended June 30, 2012, as compared to our results of operations for the three and six month periods ended June 30, 2011. 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 we are the world’s largest manufacturer of cabin interior products for commercial aircraft and for business jets and the world’s leading distributor of aerospace fasteners and consumables. We sell our products directly to virtually all of the world’s major airlines and aerospace manufacturers. Also, based on our experience, we believe that we have achieved leading global market positions in each of our major product categories, which include:

● a broad line of aerospace fasteners and consumables, consisting of over 400,000 Stock Keeping Units serving the commercial aerospace, business jet and military industries;

● 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 galley systems, lavatories, coffeemakers, water boilers, beverage containers, refrigerators, freezers, chillers and a line of ovens that includes microwave, high efficiency convection and steam ovens;

● both chemical and gaseous aircraft oxygen storage, distribution and delivery systems, protective breathing equipment and a broad range of lighting products; and

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

We also design, engineer and manufacture customized fully-integrated thermal and power management solutions as well as provide comprehensive aircraft cabin interior reconfiguration, program management and certification services.

We conduct our operations through strategic business units that have been aggregated under three reportable segments: commercial aircraft, consumables management and business jet.

Revenues by reportable segment for the three months ended June 30, 2012 and June 30, 2011, respectively, were as follows:

	THREE MONTHS ENDED										SIX MONTHS ENDED
	June 30, 2012					June 30, 2011					June 30, 2012					June 30, 2011
	Revenues		% of Revenues			Revenues		% of Revenues			Revenues		% of Revenues			Revenues		% of Revenues
Commercial aircraft	$	392.3		51.1	%	$	308.5		50.7	%	$	767.0		50.6	%	$	618.8		51.2	%
Consumables management		286.6		37.3	%		239.9		39.4	%		573.4		37.8	%		470.7		38.9	%
Business jet		89.2		11.6	%		60.5		9.9	%		175.0		11.6	%		119.6		9.9	%
Total revenues	$	768.1		100.0	%	$	608.9		100.0	%	$	1,515.4		100.0	%	$	1,209.1		100.0	%

Revenues by geographic area (based on destination) for the three and six month periods ended June 30, 2012 and June 30, 2011, respectively, were as follows:

	THREE MONTHS ENDED										SIX MONTHS ENDED
	June 30, 2012					June 30, 2011					June 30, 2012					June 30, 2011
			% of					% of					% of					% of
	Revenues		Revenues			Revenues		Revenues			Revenues		Revenues			Revenues		Revenues
United States	$	365.6		47.6	%	$	317.5		52.2	%	$	743.4		49.1	%	$	628.9		52.0	%
Europe		189.0		24.6	%		145.7		23.9	%		385.2		25.4	%		303.3		25.1	%
Asia, Pacific Rim,
Middle East and Other		213.5		27.8	%		145.7		23.9	%		386.8		25.5	%		276.9		22.9	%
Total revenues	$	768.1		100.0	%	$	608.9		100.0	%	$	1,515.4		100.0	%	$	1,209.1		100.0	%

Revenues from our domestic and foreign operations for the three and six month periods ended June 30, 2012 and June 30, 2011, respectively, were as follows:

	THREE MONTHS ENDED				SIX MONTHS ENDED
	June 30, 2012		June 30, 2011		June 30, 2012		June 30, 2011
Domestic	$	557.6	$	429.1	$	1,098.5	$	850.3
Foreign		210.5		179.8		416.9		358.8
Total revenues	$	768.1	$	608.9	$	1,515.4	$	1,209.1

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 these activities protect and enhance our leadership position. We believe our investments in research and development over the past several years have been a driving force behind our ongoing market share gains and the growth of our record backlog. Research, development and engineering spending was approximately 5.9% of sales during the second quarter of 2012 and is expected to remain at approximately the same percentage of sales for the next several years.

We also believe in providing our businesses with the tools required to remain competitive. In that regard, we have invested, and will continue to invest, in property and equipment that enhances our productivity. Taking into consideration recent program awards to deliver multi-year programs for various Boeing and Airbus aircraft, our targeted capacity utilization levels, recent acquisitions and current industry conditions, we expect that our capital expenditures will be approximately $135 during 2012.

Our strong revenue growth in the current quarter is being driven primarily by the robust new aircraft delivery cycle. Approximately 65% of second quarter bookings were driven by demand for products for new-buy aircraft, offsetting weaker aftermarket demand. As a result of our successful R&D investments, we are experiencing significant market share gains, and with the robust demand from the strong new aircraft cycle, we are seeing strong revenue growth. In addition, essentially our entire $4.4 billion supplier furnished equipment (“SFE”) backlog will represent additional market share gains and as our SFE products ramp up we expect to see our revenue per new aircraft delivery increase over time. Notwithstanding the sluggish economy in the U.S. and the macroeconomic contraction, particularly in Europe, global passenger traffic continues to grow and airline load factors continue at near all-time highs. According to the International Air Transport Association (“IATA”), global airline traffic grew 6.5% through the first half of 2012 year-over-year, compared to capacity growth of 4.7%, which helped maintain load factors at historically high levels. Airlines are successfully managing capacity, and fuel prices have dropped a bit, which has lead IATA to confirm their forecast of a third straight year of industry profitability.

RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2012,

AS COMPARED TO THREE MONTHS ENDED JUNE 30, 2011

($ in Millions, Except Backlog and Per Share Data)

Consolidated Results

	REVENUES
	Three Months Ended June 30,
					Percent
	2012		2011		Change
Commercial aircraft	$	392.3	$	308.5		27.2	%
Consumables management		286.6		239.9		19.5	%
Business jet		89.2		60.5		47.4	%
Total revenues	$	768.1	$	608.9		26.1	%

Second quarter 2012 revenues of $768.1 were a record for any quarter and increased $159.2, or 26.1%, as compared with the same period of the prior year. Pro forma revenue growth, giving effect to all acquisitions completed during 2011 and 2012 as if they had occurred on January 1, 2011, was 17.6%.

Cost of sales for the current period was $474.8, or 61.8% of sales, as compared with cost of sales of $375.8, or 61.7% of sales in the prior year period. The 10 basis point increase in cost of sales (10 basis point decrease in gross margin) is due to ongoing continuous improvement cost reduction activities.

Selling, general and administrative (“SG&A”) expenses for the second quarter 2012 were $109.8, or 14.3% of sales, as compared with SG&A expenses of $89.3, or 14.7% of sales in the same period in 2011. The higher level of SG&A in the current period is primarily due to recent acquisitions ($5.4), acquisition, integration and transition (“AIT”) costs ($4.2), and $10.9 of other costs and expenses associated with the 26.1% increase in consolidated revenues.

Research, development and engineering expense for the second quarter of 2012 was $45.7, or 5.9% of sales, as compared with $37.1 or 6.1% of sales in the same period in 2011. The $8.6 increase in spending is primarily due to new product development activities in our commercial aircraft segment associated with our $8.1 billion total backlog ($3.7 billion booked and $4.4 billion awarded but unbooked).

Second quarter 2012 operating earnings of $137.8 were also a record and increased 29.1% on the aforementioned 26.1% increase in revenues. Operating margin was 17.9% and expanded 40 basis points as compared with the prior year period. Operating earnings growth and operating margin expansion were driven by the higher sales volume, improved revenue mix and ongoing operational efficiency initiatives.

Interest expense in the second quarter 2012 of $33.2 increased by $7.2 as a result of the higher debt level due to recent acquisitions.

Second quarter 2012 earnings before income taxes of $104.6 increased $23.9, or 29.6% as compared with the prior year period, as a result of the above mentioned 29.1% increase in operating earnings, offset by the $7.2 increase in interest expense.

Income tax expense in the current period of $33.4, or 31.9% of earnings before income taxes, increased by $7.5 as compared with the prior year period income tax expense of $25.9, which represented 32.1% of earnings before income taxes.

Second quarter 2012 net earnings and net earnings per diluted share were $71.2 and $0.69 per share, increases of 29.9% and 27.8%, respectively, as compared with the second quarter of 2011. Exclusive of items (AIT costs), second quarter 2012 net earnings and net earnings per diluted share were $74.0 and $0.72 per share, respectively, increases of 35.0% and 33.3%, respectively, as compared with the second quarter of 2011.

Book-to-bill ratio for the second quarter of 2012 was 1 to 1. Backlog at June 30, 2012 was approximately $3.7 billion and total backlog, booked and awarded but unbooked, was approximately $8.1 billion, an increase of approximately 25% versus June 30, 2011.

Segment Results

The following is a summary of operating earnings by segment:

	OPERATING EARNINGS
	Three Months Ended June 30,
					Percent
	2012		2011		Change
Commercial aircraft	$	69.9	$	51.9		34.7	%
Consumables management		55.5		48.3		14.9	%
Business jet		12.4		6.5		90.8	%
Total operating earnings	$	137.8	$	106.7		29.1	%

Second quarter 2012 commercial aircraft segment (“CAS”) operating earnings of $69.9 increased 34.7% as compared with the prior year period. Operating margin of 17.8% expanded 100 basis points as compared with the prior year period due to an improved revenue mix and ongoing operational efficiency initiatives.

Second quarter 2012 consumables management segment (“CMS”) operating earnings of $55.5 increased 14.9% as compared with the prior year period. Operating earnings, adjusted to exclude AIT costs, were $59.7 and adjusted operating margin was 20.8%, an increase of 70 basis points as compared with operating margin for the prior year period.

Second quarter 2012 business jet segment operating earnings of $12.4 increased 90.8% as compared with the prior year period. Operating margin of 13.9% expanded by 320 basis points as compared with the prior year period, reflecting the 47.4% increase in revenues, an improved mix of revenues and ongoing operational improvements.

SIX MONTHS ENDED JUNE 30, 2012,

AS COMPARED TO SIX MONTHS ENDED JUNE 30, 2011

($ in Millions, Except Backlog and Per Share Data)

Consolidated Results

	REVENUES
	Six Months Ended June 30,
					Percent
	2012		2011		Change
Commercial aircraft	$	767.0	$	618.8		23.9	%
Consumables management		573.4		470.7		21.8	%
Business jet		175.0		119.6		46.3	%
Total revenues	$	1,515.4	$	1,209.1		25.3	%

For the six months ended June 30, 2012, revenues of $1,515.4 increased 25.3%, as compared with the prior year period. Pro forma revenue growth, giving effect to all acquisitions completed during 2011 and 2012 as if they occurred on January 1, 2011, was 17.2%.

Cost of sales for the six month period was $938.6, or 61.9% of sales, as compared with cost of sales of $753.3, or 62.3% of sales in the prior year period. The 40 basis point decrease in cost of sales (40 basis point increase in gross margin) is due to an improved revenue mix and ongoing manufacturing efficiency initiatives.

Selling, general and administrative (“SG&A”) expenses for the first six months of 2012 were $217.1, or 14.3% of sales, as compared with SG&A expenses of $174.7, or 14.4% of sales, in the same period in 2011. The higher level of SG&A in the current period is primarily due to recent acquisitions ($8.5), AIT costs ($8.5), and $25.4 of other costs and expenses associated with the 25.3% increase in consolidated revenues.

Research, development and engineering expense for the first six months of 2012 was $92.1, or 6.1% of sales as compared with $74.3 or 6.1% of sales in the same period in 2011. The $17.8 increase in spending is primarily due to new product development activities in our commercial aircraft segment associated with our record $8.1 billion total backlog ($3.7 billion booked and $4.4 billion awarded but unbooked).

For the six months ended June 30, 2012, operating earnings of $267.6 increased 29.4% as compared with the prior year. Operating margin in the current period of 17.7% expanded 60 basis points as compared with the prior year period. Operating earnings, adjusted to exclude AIT costs, were $276.1, an increase of 33.5%, and adjusted operating margin of 18.2% expanded 110 basis points as compared with the prior year period.

Interest expense in the first half of 2012 of $61.6 increased by $9.4 as a result of the higher debt level due to recent acquisitions.

Earnings before income taxes in the current six month period of $206.0 increased by $51.4, or 33.2% as compared with the prior year period, as a result of a $60.8 increase in operating earnings, offset by a $9.4 increase in interest expense.

Income tax expense in the current period of $66.0 or 32.0% of earnings before income taxes, increased by $16.5 as compared with the prior year period income tax expense of $49.5, which also represented 32.0% of earnings before income taxes.

Net earnings for the first half of 2012 of $140.0 and net earnings per diluted share of $1.36 increased $34.9 and $0.33, or 33.2% and 32.0%, respectively, as compared with the same period of the prior year period for the reasons described above (38.8% and 37.9%, respectively, excluding items).

Bookings for the six months ended June 30, 2012 were approximately $1.6 billion, representing a book-to-bill ratio of approximately 1.1 to 1.

Segment Results

The following is a summary of operating earnings by segment:

	OPERATING EARNINGS
	Six Months Ended June 30,
					Percent
	2012		2011		Change
Commercial aircraft	$	135.4	$	101.2		33.8	%
Consumables management		107.3		92.9		15.5	%
Business jet		24.9		12.7		96.1	%
Total operating earnings	$	267.6	$	206.8		29.4	%

For the six months ended June 30, 2012, CAS operating earnings of $135.4 increased 33.8% as compared with the prior year period. Operating margin of 17.7% expanded 130 basis points as compared with the prior year period, due to an improved revenue mix and ongoing operational efficiency initiatives.

For the six months ended June 30, 2012, CMS operating earnings of $107.3 increased 15.5% as compared with the prior year period. CMS operating earnings, adjusted to exclude AIT costs, were $115.8 and adjusted operating margin was 20.2%, an increase of 50 basis points as compared with operating margin for the prior year period.

For the six months ended June 30, 2012, business jet segment operating earnings of $24.9 increased 96.1%, as compared with the prior year period. Operating margin of 14.2% expanded by 360 basis points, reflecting the 46.3% increase in revenues, an improved mix of revenues and ongoing operational improvements.

LIQUIDITY AND CAPITAL RESOURCES

Current Financial Condition

As of June 30, 2012, our net debt-to-net-capital ratio was 38.8%. Net debt was $1,281.9, which represented total debt of $1,745.5, less cash and cash equivalents of $463.6. At June 30, 2012, net capital (total debt plus total stockholders’ equity less cash and cash equivalents) was $3,306.9. As of June 30, 2012, long-term debt consisted of $500 aggregate principal amount of our 5.25% senior unsecured notes due 2022 (the “5.25% Notes”), $650 aggregate principal amount ($644.9 net of original issue discount) of our 6.875% senior unsecured notes due 2020 (the “6.875% Notes”) and $600 aggregate principal amount of our 8.5% senior unsecured notes due 2018 (the “8.5% Notes”). At June 30, 2012 there were no amounts outstanding under our revolving credit facility. Cash on hand at June 30, 2012 increased by $160.1 as compared with cash on hand at December 31, 2011 primarily as a result of cash flows from operating activities of $124.9, plus $490.3 of net proceeds from the 5.25% Notes, less capital expenditures of $53.4, less expenditures for acquisitions of $407.1. Our liquidity requirements consist of working capital needs, ongoing capital expenditures and payments of interest and principal on our indebtedness. Our primary requirements for working capital are directly related to the level of our operations.

Working capital as of June 30, 2012 was $1,913.7, an increase of $308.8 as compared with working capital at December 31, 2011. As of June 30, 2012, total current assets increased by $425.0 and total current liabilities increased by $116.2. The increase in current assets was primarily due to an increase in cash of $160.1 (as described above), an increase in accounts receivable of $89.7 and an increase in inventories of $186.7 to support future revenue growth. Accounts receivable and inventories increased by $29.9 and $77.7, respectively, due to the UFC acquisition. The increase in total current liabilities was primarily due to an increase in accounts payable of $82.0, of which $15.8 was the result of the January 30, 2012 acquisition of UFC and an increase in accrued interest of $22.8. Accounts payable were higher at June 30, 2012 due to the increase in business activity.

Cash Flows

As of June 30, 2012, our cash and cash equivalents were $463.6 as compared to $303.5 at December 31, 2011. Cash generated from operating activities was $124.9 for the six months ended June 30, 2012, as compared to $130.6 in the same period in the prior year. The primary sources of cash from operations during the six months ended June 30, 2012 were net earnings of $140.0, adjusted by depreciation and amortization of $35.1, non-cash compensation of $12.5, a decrease in deferred income taxes of $48.3 and an increase in accounts payable and accrued liabilities of $104.3. Offsetting these sources of cash were a $70.6 increase in accounts receivable as a result of increased revenues and a $121.2 increase in inventories as a result of our record backlog.

Capital Spending

Our capital expenditures were $53.4 and $21.1 during the six months ended June 30, 2012 and 2011, respectively. We expect capital expenditures of approximately $135 during 2012. These capital expenditures are needed to support our total backlog of $8.1 billion ($3.7 billion booked and $4.4 billion awarded but unbooked), and take into consideration our targeted capacity utilization levels, recent acquisitions and current industry conditions. We have, in the past, generally funded our capital expenditures with cash from operations and funds available to us under revolving bank credit facilities. We expect to fund future capital expenditures from cash on hand, from operations and from funds available to us under our revolving credit facility.

Outstanding Debt and Other Financing Arrangements

Long-term debt at June 30, 2012 totaled $1,745.5 and consisted of our 5.25% Notes, our 6.875% Notes and our 8.5% Notes.

We also have a five-year, $950.0 revolving credit facility, as amended and restated as of August 3, 2012. The revolving credit facility also provides an option to request additional incremental revolving credit borrowing capacity and incremental term loans, in each case upon the satisfaction of certain customary terms and conditions. At June 30, 2012, there were no amounts outstanding under our revolving credit facility.

Our obligations under the revolving credit facility are secured by liens on substantially all of our domestic assets, including a pledge of a portion of the capital stock of certain foreign subsidiaries owned directly by us. Amounts borrowed and outstanding under the revolving credit facility will, in certain circumstances, be required to be prepaid with the proceeds from certain asset sales, subject to certain thresholds and reinvestment rights. The revolving credit facility matures in August 2017 unless terminated earlier.

The revolving credit facility contains an interest coverage ratio financial covenant (as defined therein) that must be maintained at a level greater than 2.0 to 1. The revolving credit facility agreement also contains a total leverage ratio covenant (as defined therein) which limits net debt to a 4.25 to 1 multiple of EBITDA (as defined therein). The revolving credit facility contains customary affirmative covenants, negative covenants, and conditions precedent for borrowings, all of which were met as of June 30, 2012.

Contractual Obligations

The following table reflects our contractual obligations and commercial commitments as of June 30, 2012. 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	2012		2013		2014		2015		2016		Thereafter		Total
Long-term debt and other non-current liabilities (1)	$	0.6	$	1.8	$	0.9	$	1.2	$	1.4	$	1,762.5	$	1,768.4
Operating leases		17.1		32.4		28.9		27.1		23.5		85.7		214.7
Purchase obligations (2)		7.0		1.8		1.4		1.1		1.1		1.1		13.5
Future interest payments on outstanding debt (3)		63.8		124.9		124.9		124.8		121.9		399.6		959.9
Total	$	88.5	$	160.9	$	156.1	$	154.2	$	147.9	$	2,248.9	$	2,956.5

Commercial Commitments
Letters of credit	$	8.9		--		--		--		--		--	$	8.9

(1) Our liability for unrecognized tax benefits of $20.6 at June 30, 2012 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) Occasionally, we enter into purchase commitments for production materials and other items. 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, other documentation or 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 as purchase obligations in this table.

(3) Interest payments include interest payments due on the 5.25% Senior Unsecured Notes, the 6.875% Senior Unsecured Notes and the 8.5% Senior Unsecured Notes based on the stated rates of 5.25%, 6.875%, and 8.5%, respectively. Actual interest payments on our obligations under the revolving credit facility will fluctuate based on LIBOR or prime rate pursuant to the terms of the revolving credit facility.

We believe that our cash flows, together with cash on hand and the availability under the revolving 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 sheets. Future minimum lease payments under these arrangements aggregated approximately $214.7 at June 30, 2012.

Indemnities, Commitments and Guarantees

During the normal course of business, we have made, and we may continue to make, 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 design, manufacture, sale and delivery 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 many 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 have a material adverse effect on our accompanying condensed consolidated financial statements.

Deferred Tax Assets

We maintained a valuation allowance of approximately $20.1 as of June 30, 2012 primarily related to foreign net operating losses.

Critical Accounting Policies

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 the Critical Accounting Policies section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011. There have been no changes to our critical accounting policies since December 31, 2011.

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 acquisitions, the expected benefits derived from acquisitions, 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 decreases 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 (the “SEC”), under the heading "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011 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, natural disasters or other environmental occurrences, terrorist attacks, prolonged health issues which reduce air travel demand (such as, SARS, Swine Flu, Icelandic volcano eruptions, Japanese earthquake and tsunami), delays in, or unexpected costs associated with, the integration of acquisitions, conditions in the airline industry, conditions in the business jet industry, regulatory developments, litigation costs, 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, 2011 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.

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. Our 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, 2012, we had no outstanding forward currency exchange contracts. In addition, we have not entered into any other derivative financial instruments.

Interest Rates – As of June 30, 2012, we do not have any adjustable rate debt outstanding. We do not engage in transactions intended to hedge our exposure to changes in interest rates.

As of June 30, 2012, 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 less than $0.1 on an annualized basis.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. 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 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), as of June 30, 2012. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective.

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 2012 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 5. OTHER INFORMATION

On August 3, 2012, we entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”), dated as of August 3, 2012, which amended and restated our previous Amended and Restated Credit Agreement, dated as of December 9, 2010 (the “Prior Credit Agreement”), with JPMorgan Chase Bank, N.A. as administrative agent (the “Administrative Agent”), certain other financial institutions named therein as syndication agents, documentation agents, joint lead arrangers and joint bookrunners, and certain lenders party thereto (the “Lenders”). The Credit Agreement consists of a five-year, $950.0 million, senior secured revolving credit facility (the “Revolving Credit Facility”), which is an increase from the $750.0 million senior secured revolving credit facility under the Prior Credit Agreement.

Our obligations under the Credit Agreement will be secured by liens on substantially all of our domestic assets, including a pledge of a portion of the capital stock of certain foreign subsidiaries owned directly by us. Amounts borrowed and outstanding under the Credit Agreement will, in certain circumstances, be required to be prepaid with the proceeds from certain asset sales, subject to certain thresholds and reinvestment rights (and such prepayment may, in some cases, result in an automatic and permanent reduction in the lender commitments under the Revolving Credit Facility). Unless terminated earlier, the Revolving Credit Facility will mature on August 3, 2017.

The Credit Agreement requires that we maintain a consolidated total net leverage ratio of not more than 4.25 to 1.0 and an interest charge coverage ratio of not less than 2.00 to 1.0, during the term of the Credit Agreement. The Credit Agreement contains customary affirmative and negative covenants with respect to us and our subsidiaries, including limitations on the incurrence of debt, limitations on liens, limitations on the incurrence of contingent obligations, prohibitions on fundamental changes (including by way of merger, consolidation, amalgamation, transfer of all or substantially all of the Company's assets to any subsidiary, liquidation or dissolution), limitations on the sale or other disposition of assets, limitations on investments, loans and advances by us and our subsidiaries, limitations on declaration and payment of dividends, restrictions on transactions with affiliates, prohibitions on changes to fiscal year, limitations on guarantees and limitations on prepayment of other debt, in each case, subject to certain exceptions, materiality qualifications and/or threshold amounts. The Credit Agreement further provides for customary representations and warranties and events of default, including certain change of control events and cross-defaults to other material debt.

The Credit Agreement also provides an option for us to request additional incremental revolving credit borrowing capacity and incremental term loans, in each case upon the satisfaction of certain customary terms and conditions.

We did not draw on the Revolving Credit Facility at closing.

The foregoing description of the Credit Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Credit Agreement. From time to time, the Administrative Agent and certain of the Lenders and/or their affiliates provide us with financial and/or advisory services.

ITEM 6.	EXHIBITS

	Exhibit 3 - Articles of Incorporation and By-Laws

	3.1	Amended and Restated Certificate of Incorporation (incorporated by reference to the Registrant's Registration Statement on Form S-1/A, as amended (No. 33-33689), filed with the SEC on April 18, 1990).

	3.2	Certificate of Amendment of the Restated Certificate of Incorporation (incorporated by reference to the Registrant's Registration Statement on Form S-1 (No. 333-54146), filed with the SEC on November 3, 1992).

	3.3	Certificate of Amendment of the Restated Certificate of Incorporation (incorporated by reference to the Registrant's Registration Statement on Form S-3/A (No. 333-60209), filed with the SEC on December 21,1998).

	3.4	Certificate of Amendment of the Restated Certificate of Incorporation (incorporated by reference to the Registrant's Registration Statement on Form S-3/A (No. 333-112493), as amended, filed with the Commission on February 13, 2004).

	3.5	Certificate of Amendment of the Restated Certificate of Incorporation (incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2006, filed with the Commission on August 7, 2006).

	3.6	Certificate of Amendment of the Restated Certificate of Incorporation.

	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

	Exhibit 101 - Interactive Data Files

	101.INS	XBRL Instance Document

	101.SCH	XBRL Taxonomy Extension Schema Document

	101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document

	101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

	101.LAB	XBRL Taxonomy Extension Label Linkbase Document

	101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

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.

		B/E AEROSPACE, INC.


Date: August 8, 2012	By:	/s/ Amin J. Khoury
		Amin J. Khoury
		Chairman and
		Chief Executive Officer





Date: August 8, 2012	By:	/s/ Thomas P. McCaffrey
		Thomas P. McCaffrey
		Senior Vice President and
		Chief Financial Officer

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