United
States


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-K





[ X
]           ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES
EXCHANGE ACT OF 1934


For the
fiscal year ended December 31, 2009





[    ]
            TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF


THE
SECURITIES EXCHANGE ACT OF 1934





Commission
File No. 0-18348





BE
AEROSPACE, INC.


(Exact
name of registrant as specified in its charter)





Delaware
              06-1209796(State
      or other jurisdiction of incorporation or organization)
              (I.R.S.
      Employer Identification No.)1400
      Corporate Center Way, Wellington, Florida
              33414(Address
      of principal executive offices)
              (Zip
      Code)
  (561)
791-5000


(Registrant's
telephone number, including area code)





Securities
registered pursuant to Section 12(b) of the Act:  None


Securities
registered pursuant to Section 12(g) of the Act:


Common
Stock, $.01 Par Value


(Title of
Class)





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes [X]
No [   ].





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes
[   ] No [X].





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 if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of the registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]





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
aggregate market value of the registrant's voting stock held by non-affiliates
was approximately $1,454.0 million on June 30, 2009 based on the closing sales
price of the registrant's common stock as reported on the Nasdaq Global Select
Market as of such date, which is the last business day of the registrant's most
recently completed second fiscal quarter.  Shares of common stock held
by executive officers and directors and persons who own 5% or more of
outstanding common stock have been excluded since such persons may be deemed
affiliates.  This determination of affiliate status is not a
determination for any other purpose.  The number of shares of the
registrant's common stock, $.01 par value, outstanding as of February 23, 2010
was 102,213,996 shares.





DOCUMENTS
INCORPORATED BY REFERENCE





Certain
sections of the registrant's Proxy Statement to be filed with the Commission in
connection with the 2009 Annual Meeting of Stockholders are incorporated by
reference in Part III of this Form 10-K.  With the exception of those
sections that are specifically incorporated by reference in this Annual Report
on Form 10-K, such Proxy Statement shall not be deemed filed as part of this
Report or incorporated by reference herein.














INDEX


PART
I





ITEM
      1.
              Business
              1ITEM
      1A.
              Risk Factors
              14ITEM
      1B.
              Unresolved Staff Comments
              20ITEM
      2.
              Properties
              20ITEM
      3.
              Legal Proceedings
              20ITEM
      4.
              Submission of Matters to a Vote of Security
      Holders
              20PART
      IIITEM
      5.
              Market
      for Registrant’s Common Equity, Related StockholderMatters and
      Issuer Purchases of Equity Securities
              21ITEM
      6.
              Selected Financial Data
              22ITEM
      7.
              Management’s
      Discussion and Analysis of Financial Condition andResults of
      Operations
              23ITEM
      7A.
              Quantitative and Qualitative Disclosures about Market
      Risk
              34ITEM
      8.
              Financial Statements and Supplementary
      Data
              34ITEM
      9.
              Changes
      in and Disagreements with Accountants on Accounting andFinancial
      Disclosure
              34ITEM
      9A.
              Controls and Procedures
              35PART
      IIIITEM
      10.
              Directors, Executive Officers and Corporate
      Governance
              38ITEM
      11.
              Executive Compensation
              41ITEM
      12.
              Security
      Ownership of Certain Beneficial Owners and Managementand Related
      Stockholder Matters
              41ITEM
      13.
              Certain Relationships and Related Transactions, and
      Director Independence
              41ITEM
      14.
              Principal Accounting Fees and Services
              41PART
      IVITEM
      15.
              Exhibits and Financial Statement
      Schedules
              42Index to Exhibits
              43Signatures
              46Index to Consolidated Financial Statements and
      Schedule
              F-1










FORWARD-LOOKING
STATEMENTS





This
report contains forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, (the Securities Act) and Section 21E of
the Securities Exchange Act of 1934, as amended (the Exchange Act). Such
forward-looking statements include, but are not limited to, all statements that
do not relate solely to historical or current facts, including statements
regarding 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 and
expected benefits from 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, the global recession and the impact on our business
of the recent and projected 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 this Form 10-K, 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, Swine Flu), delays in, or
unexpected costs associated with, the integration of our acquired or recently
consolidated businesses, conditions in the airline industry, conditions in the
business jet industry, 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’ suppliers or airframe manufacturers, the impact of a prolonged global
recession, 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 this entire Form 10-K.





Unless otherwise
indicated, the industry data contained in this Form 10-K is from the
January/February 2010 issue of the Airline Monitor, December 2009 reports of the
International Air Transport Association (IATA), the Boeing Current Market
Outlook 2009, “The ACAS Database” or the Airbus and Boeing corporate
websites.





PART
1





ITEM 1.    BUSINESS





Our
Company





General





Based on
our experience in the industry, we believe we are the world’s largest
manufacturer of cabin interior products for commercial aircraft and 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.  In addition, through our consumables
management segment, we sell a large and growing number of consumable parts to
market participants in the defense industry.  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
      275,000 Stock Keeping Units (SKUs) serving the aerospace, commercial
      aircraft, business jet and military and defense
    industries;·
            commercial
      aircraft seats, including an extensive line of super first class, first
      class, business class, tourist class and regional aircraft
      seats;





1





·
            a
      full line of aircraft food and beverage preparation and storage equipment,
      including galley systems, coffeemakers, water boilers, beverage
      containers, refrigerators, freezers, chillers and
      ovens, including 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
provide comprehensive aircraft cabin interior reconfiguration and
passenger-to-freighter conversion engineering services, galley systems, and
component kits.





We were
organized as a corporation in Delaware in 1987. We have substantially expanded
the size, scope and nature of our business as a result of a number of
acquisitions. Between 1989 and 2006, we completed 24 acquisitions, for an
aggregate purchase price of approximately $1.2 billion. We believe these
acquisitions enabled us to position ourselves as a preferred global supplier to
our customers.  During this period we completed three major facility
and product line consolidation efforts, eliminating 22 facilities. We
implemented lean manufacturing and continuous improvement programs which,
together with our information technology investments, have significantly
improved our productivity. These facility consolidations and productivity
enhancements allowed us to expand our operating margins by 570 basis points
during the period from December 31, 2005 through December 31, 2008 (exclusive of
a goodwill and intangible asset impairment charge in 2008).  In 2008,
we completed the acquisition of the Consumables Solutions distribution business
(HCS) from Honeywell International Inc. (Honeywell) for a purchase price of
approximately $1.0 billion.  HCS distributed fasteners, hardware,
bearings, seals, gaskets and electrical components and other consumables to the
global airline, aerospace, business jet and defense industries. The combination
of HCS with our existing consumables products business created the world’s
leading distributor of aerospace fasteners and consumables.  As a
result of this acquisition, we have eliminated 4 additional facilities, further
rationalized our consumables management segment, and significantly expanded
segment operating margins.  The acquisition of HCS has allowed us to
alter our business mix, such that approximately one-half of our business is
related primarily to the sale of consumables products and commercial aircraft
spares.





Our
principal executive offices and corporate headquarters are located at 1400
Corporate Center Way, Wellington, Florida 33414 and our telephone number is
561-791-5000.





Industry
Overview





The commercial and business jet
aircraft cabin interior products industries encompass a broad range of products
and services, including aircraft seating, passenger entertainment and service
systems, food and beverage preparation and storage systems, galleys, passenger
and crew oxygen storage, distribution and delivery systems, lavatories, lighting
systems, evacuation equipment, and overhead bins, as well as interior
reconfigurations and a variety of other engineering design, integration,
installation, retrofit and certification services such as passenger-to-freighter
conversions.





Historically,
the airline cabin interior products industry has derived revenues from five
sources:





·
            New
      installation programs in which airlines purchase new equipment directly
      from interior equipment manufacturers to outfit these newly purchased
      aircraft;





·
            Retrofit
      programs in which airlines purchase new interior furnishings
      to upgrade the interiors of aircraft already in
    service;





·
            Refurbishment
      programs in which airlines purchase components and services to improve the
      appearance and functionality of their cabin interior
      equipment;





·
            Equipment
      to upgrade the functionality or appearance of the aircraft interior;
      and





·
            Replacement
      spare parts.





The
retrofit and refurbishment cycles for commercial aircraft cabin interior
products differ by product category. Aircraft seating typically has a
refurbishment cycle of one to two years and a retrofit cycle of four to eight
years. Food and beverage preparation and storage equipment is periodically
upgraded or repaired, and requires a continual flow of spare parts, but may be
retrofitted only once or twice during the useful life of an
aircraft.





2





There is
a direct relationship between demand for fasteners and consumables products and
fleet size, aircraft utilization and aircraft age. All aircraft must be
serviced at prescribed intervals, which also drives aftermarket demand for
aerospace fasteners and consumables.





Historically,
aerospace fastener and consumables revenues have been derived from the following
sources:





·
            Mandated
      maintenance and replacement of specified
parts;





·
            Demand
      for aerospace fasteners and other consumables for new build aircraft from
      the original equipment manufacturers (OEMs) and their
      suppliers;





·
            Aerospace
      and defense subcontractors, most of whom tend to purchase through
      distributors as a result of the channel shift due to
      outsourcing by aerospace and military aircraft OEMs;
    and





·
            Demand
      for structural modifications, cabin interior modifications and
      passenger-to-freighter conversions.





Through
the strategic acquisition of HCS and its merger with our existing consumables
business we have created the worldwide leader in the distribution of aerospace
fasteners and consumables.  The acquisition of HCS has allowed us to
alter our business mix such that approximately one-half of our business is
related primarily to consumables and spares demand.





Based on
industry sources and studies, we estimate that during 2009, the commercial and
business jet cabin interior products industry, for the principal products of the
type which we manufacture, exclusive of service revenues, had annual sales of
approximately $1.8 billion and the aerospace fastener and consumables industry
had annual sales of approximately $3.9 billion.  We estimate that the
total worldwide installed base of commercial and general aviation aircraft cabin
interior products for the principal type of products which we manufacture,
valued at replacement prices, was approximately $16.5 billion as of December 31,
2009.





During
2009, global air traffic decreased by approximately 4.5% as compared with global
traffic increases of 0.1% in 2008 and 7.5% in 2007. The 2009 decrease in traffic
was the largest decline in history and reflects the drop in global gross
domestic product, the first negative growth for the global economy since the
Great Depression. In response to this economic environment, airlines, aircraft
OEM’s, subcontractors and maintenance, repair and overhaul centers (MRO’s)
implemented stringent cash conservation measures, which resulted in a reduction
in the global fleet capacity, delays and cancellation of new aircraft purchases,
the deferral of fleet refurbishment programs and a massive destocking of
consumables and spare parts.  The destocking continued for most of
2009 resulting in an approximate 30% decrease in demand for commercial aircraft
spares and consumables products.





Reflecting
the record drop in global air traffic demand and fewer high yield premium
passengers in 2009, the global airline industry recorded approximately $11
billion in global airline losses.  Global air traffic is expected to
increase in 2010 by an estimated 3.0% compared with the 4.5% decline in global
air traffic in 2009 and the airline industry is expected to record losses in
2010 of approximately $5.6 billion.  Further, Airline Monitor expects
global air traffic to increase in 2011 by approximately 5.0% which is in-line
with the long-term global air traffic growth average over the past 20
years.  IATA recently reported that international air traffic results
are beginning to show some improvement.  Fourth quarter 2009
international air traffic improved approximately 2.4% compared to a year ago.
Asia and the Middle East experienced significant air traffic growth of 4.7% and
16.6%, respectively, while North American and European passenger traffic
continues to lag behind the rest of the world with declines of 2.0% and 2.4%,
respectively.  North American air traffic in December 2009 increased
approximately 10% from February 2009.  Premium passenger demand has
also improved by 5% from the trough levels reached in March 2009, but is still
down approximately 20% from the peak in 2008.




In 2009
the airlines have been able to access the capital markets to strengthen their
balance sheets.  According to IATA, during 2009, the airline industry
raised approximately $38 billion by accessing the capital markets, issuing debt
and equity securities and through aircraft sales and leaseback
transactions.





In
addition, during 2009, business jet manufacturers significantly reduced their
delivery rates, in some cases, by up to 50%, due to the global recession and
other industry specific factors.  Approximately 868 business jets were
delivered in 2009 versus 1,154 business jets in 2008 and 1,039 business jets in
2007.  According to industry sources, business jet deliveries are
expected to decline to approximately 700 aircraft in 2010.





3





While our
book to bill ratio was 0.9:1 during 2009, our book to bill ratio in the fourth
quarter of the year was 1:1, the first quarterly period where the ratio was in
excess of one in over a year.   Our backlog at December 31, 2009
was $2.7 billion, down approximately 7% as compared with our December 31, 2008
backlog (which was at record levels). We believe our December 31, 2009 backlog
is well dispersed geographically; approximately 10% of our backlog was with
domestic airlines, approximately 25% was with European airlines, and
approximately 29% was with airlines in the Asia, Pacific and Middle East
region.  The balance of our backlog was primarily with U.S. leasing
companies, major aerospace suppliers and business jet
manufacturers.





Other
factors expected to affect the industries we serve include the
following:




Long Term Growth in Worldwide
Fleet.  The size of the worldwide fleet is important to us
since the proper maintenance of the fleet generates ongoing demand for spare
parts, refurbishment retrofits and fasteners and other consumable
products.  Over the next 15 years, the Airline Monitor expects revenue
passenger miles to increase at a compound annual growth rate of approximately
5.6% during the 2009 to 2024 period, increasing from 2.7 trillion miles in 2009
to approximately 6.1 trillion miles by 2024.  As a result, Airline
Monitor expects the worldwide fleet of passenger aircraft to increase by
approximately 82% from approximately 18,100 aircraft at December 31, 2009 to
approximately 33,000 aircraft at December 31, 2024.





Existing Installed
Base.  Our existing installed base of products typically
generates continued retrofit, refurbishment and spare parts revenue as airlines
maintain their aircraft interiors. According to industry sources, the world's
active commercial passenger aircraft fleet consisted of approximately 18,100
aircraft as of December 31, 2009. Additionally, based on industry sources, there
are approximately 16,200 business jets currently in service. Based on such fleet
numbers, we estimate that the total worldwide installed base of commercial and
general aviation aircraft cabin interior products for the principal products of
the type which we manufacture, valued at replacement prices, was approximately
$16.5 billion as of December 31, 2009.  The size of the installed base
is expected to increase as a result of the growth in the world wide fleet and is
expected to generate additional and continued demand for retrofit,
refurbishment, consumables and spare parts.





Wide-Body Aircraft
Deliveries.  The trend toward a global fleet with a higher
percentage of wide-body aircraft is significant to us because wide-body aircraft
require up to six to nine times the dollar value content for the principal
products of the type which we manufacture as compared to narrow-body aircraft.
According to Airline Monitor, wide-body aircraft deliveries are
expected to grow at a nearly 15% compound annual growth rate over the four-year
period ending 2013.  Deliveries of wide-body, long haul aircraft
constitute an increasing share of total new aircraft deliveries and are an
increasing percentage of the worldwide fleet. Wide-body aircraft represented
approximately 21% of all new commercial aircraft (excluding regional jets)
delivered over the four-year period ended December 31,
2009.  Importantly, according to Airline Monitor, over the 2010 to
2013 time period, 1,167 wide-body and super wide-body aircraft are expected to
be delivered by Boeing and Airbus, representing approximately 29% of total
deliveries. Wide-body aircraft carry up to three or four times the number of
seats as narrow-body aircraft and have multiple classes of service, including
super first class compartments, first class and business class
configurations.  In addition, aircraft cabin crews on wide-body
aircraft flights today may make and serve between 300 and 900 meals and may brew
and serve more than 2,000 cups of coffee and serve more than 200 glasses of wine
on a single flight, thereby generating substantial demand for seating products
and food and beverage preparation and storage equipment, as well as extensive
oxygen storage, delivery distribution systems and lighting systems.





New Aircraft
Deliveries.  The number of new aircraft delivered each year is
generally regarded as cyclical in nature. According to Airline Monitor, new
deliveries of large commercial jets during 2009, 2008 and 2007 were 974, 852 and
888, respectively, and according to Airline Monitor’s forecast new deliveries of
large commercial jets in 2010, 2011, 2012 and 2013 are expected to be
approximately 945, 1,020, 1,025 and 1,010, respectively.




Shift Toward Seller Furnished
Equipment for Major Systems.Traditionally, we have sold a
broad range of customized cabin interior products directly to the
airlines.  Commencing with the launch of the Boeing 787 and Airbus
A350 XWB, both Boeing and Airbus began selecting manufacturers for certain cabin
interior systems for the production life of the aircraft.  To date, we
have been selected by Boeing to manufacture our patented Pulse OxygenTM
system and passenger service units for the B787 and B747-8, and we have been
selected by Airbus to manufacture our next generation galley systems and our
patented passenger oxygen delivery system for the A350 XWB.  We have
also been selected by Boeing to manufacture cabin lighting for the next
generation Boeing 737 aircraft programs.  A demand trend by airframe
OEM’s toward the procurement of seller furnished equipment (“SFE”) for certain
cabin and interior systems is important to us as it increases the content of our
products on each such aircraft type.




4





Additionally,
we have been selected by major business jet manufacturers to deliver next
generation seating platforms for the Embraer 450 and 500, Global Gulfstream
G250, Dassault 7x and HondaJet.  We have also been selected to deliver
our state-of-the-art vacuum waste water system on the Dassault 7x, Embraer 450
and 500 and the Bombardier Lear 85.  Together, our SFE programs are
currently valued at approximately $2.5 billion and are expected to significantly
increase our content per aircraft type; however, only a small portion of these
programs are included in our reported backlog at December 31,
2009.  We believe these programs provide an excellent platform for
long term revenue stability over the coming years.





Growth in Passenger-to-Freighter
Conversion Business.   Industry sources project that the
size of the worldwide freighter fleet will almost double over the next twenty
years, growing to almost 3,250 aircraft. Industry sources also estimate that
during this period nearly 2,050 cargo aircraft will come from converting
commercial passenger aircraft to be used as freighters. We have developed the
engineering certification packages and kits to convert Airbus A300-600,
B747-200, B767-200 and A300-B4 aircraft types to be used as
freighters.





New Product
Development.  The aircraft cabin interior products companies
are engaged in extensive product development and marketing efforts for both new
features on existing products and new products. These products include a broad
range of amenities such as luxurious first class cabins with appointments such
as lie-flat seating, mini-bars, closets, flat screen TVs and digital LED mood
lighting.  We have recently introduced products including electric
lie-flat first and business class seats, narrow and wide-body economy class
seats, full face crew masks, Pulse OxygenTM gaseous passenger oxygen systems
for the Boeing 787 andAirbus A350 XWB, next
generation galley systems for the Airbus A350 XWB, electric fully berthing
business jet seating, light weight, lower maintenance waste water systems for
business and commercial jets, a full range of business and executive jet seating
and LED lighting products, protective breathing equipment, oxygen generating
systems, new food and beverage preparation and storage equipment, kevlar barrier
nets, de-icing systems and crew rests.  The success of our new product
development efforts can increase demand for our products and retrofitting
efforts.





Engineering Services
Markets.  Historically, the airlines have relied primarily on
their own in-house engineering resources to provide engineering, design,
integration and installation services, as well as services related to repairing
or replacing cabin interior products that have become damaged or otherwise
non-functional. As cabin interior product configurations have become
increasingly sophisticated and the airline industry increasingly competitive,
the airlines have begun to outsource these services in order to increase
productivity and reduce costs.





Outsourced
services include:





·
            Engineering,
      design, integration, project management, installation and certification
      services;





·
            Modifications
      and reconfigurations for commercial aircraft including
      passenger-to-freighter conversions and related kits;
  and





·
            Services
      related to the support of product
upgrades.





Competitive
Strengths





We
believe that we have a strong competitive position attributable to a number of
factors, including the following:





Large Installed
Base.  We have a large installed base of commercial and general
aviation cabin interior products, estimated to be valued at approximately $7.5
billion (for the principal type of products which we manufacture, valued at
replacement prices) as of December 31, 2009. Based on our experience in the
industry, we believe our installed base is substantially larger than that of our
competitors. We believe that our large installed base is a strategic advantage
as airlines tend to purchase aftermarket products and services, including spare
parts, retrofit and refurbishment programs, from the original supplier of their
equipment. As a result, we expect our large installed base to generate continued
aftermarket revenue as airlines continue to maintain, evolve and reconfigure
their aircraft cabin interiors.





Operating
Leverage and Low Cost Producer.  Our ability to leverage our
manufacturing and engineering capabilities has allowed us to expand operating
margins. As a result of our cost savings programs implemented following the
downturn in the airline industry in 2001, and through our ongoing continuous
improvement initiatives, global sourcing and lean manufacturing programs, our
operating margins have increased substantially. For example, our 2009 operating
margin of 15.3% expanded by 420 basis points over the operating margin we
realized for the fiscal year ended 2005, reflecting ongoing manufacturing
efficiencies, a shift in product mix as a result of the rapid growth of our
consumables management segment, and operating leverage on the higher volume of
sales.





5





Focus on Innovation and New Product
Development.  We believe, based on our experience in the
industry, that we are a technological leader, with the largest research and
development organization in the cabin interior products industry. As of December
31, 2009, we had 851 employees in engineering, research and development and
program management. We believe our engineering, research and development effort
and our on-site technicians at both the airlines and airframe manufacturers
enable us to play a leading role in developing and introducing innovative
products to meet emerging industry trends, and thereby gain early entrant
advantages. Our strong focus and continued investment in research and
development allows us to compete favorably in winning new business awards. For
example, we believe our technological leadership and new product development
capabilities were a key factor in our ability to grow our backlog. Our backlog
at December 31, 2009 of approximately $2.7 billion increased by $2.0 billion or
286% as compared to our backlog at December 31, 2004. Backlog growth over this
period was driven primarily by demand for new aircraft, international
aftermarket demand for retrofit of existing aircraft, including program awards
in the emerging international super first class cabin interiors
market.  We believe these and other program awards, coupled with
expected follow-on awards for other fleets of existing aircraft for product
commonality and competitive purposes, will, subject to global economic
conditions, drive future sales growth and market share
gains.  Introduction of new products has also led to improvements in
the product mix of our current backlog, which, along with our continued focus on
lean manufacturing processes and additional operating leverage, is expected to
result in continued margin expansion.




Exposure to International
Markets.  Our revenues are generated from multiple geographic
regions.  In 2009, approximately 23% of our sales were to European
customers and approximately 28% of our sales were to customers in emerging
markets such as the Asia/Pacific Rim and Middle East regions.  These
emerging market customers account for approximately 26% of our backlog, with
domestic airlines accounting for approximately 10% of our backlog.  We
believe this geographic diversification makes us less susceptible to a downturn
in a specific geographic region and allows us to take advantage of regional
growth trends.




Diverse Product Offering and Broad
Customer Base.  In addition to serving diverse geographic
regions, we also provide a comprehensive line of products and services to a
broad customer base. During the three year period ended December 31, 2009, no
single customer accounted for more than 10% of our consolidated
revenues.  Our commercial aircraft and business jet segments have a
broad range of over 200 principal customers, including all of the world’s major
airlines, business jet manufacturers and completion centers.  Our
consumables management segment sells consumables to over 1,700 customers
throughout the world.  During the fiscal year ended December 31, 2009,
approximately 8% of our sales were to Boeing and Airbus (in the aggregate) and
approximately 6% were to business jet manufacturers for use in new business
jets. We believe that our broad product offering and customer base make us less
vulnerable to the loss of any one customer or program. We have continued to
expand our available products and services based on our belief that the airline
industry increasingly will seek an integrated approach to the design,
development, integration, installation, testing and sourcing of aircraft cabin
interior equipment. Based on our reputation for quality, service and product
innovation, we believe that we are well positioned to serve the world’s
airlines, aircraft manufacturers and owners and operators of business
jets.





Experience with a Complex Regulatory
Environment.  The airline industry is heavily regulated. The
Federal Aviation Administration (the FAA) prescribes standards and licensing
requirements for aircraft components, including virtually all commercial airline
and general aviation cabin interior products, and licenses component repair
stations within the United States. Comparable agencies, such as the European
Aviation Safety Agency (the EASA), the Japanese Civil Aviation Board (the JCAB),
and the Civil Aviation Administration of China (the CAAC) regulate these matters
in other countries.  In order to sell certain products or services, it
is necessary to obtain the required licenses for the product or service under
these various regulations. In addition, designing new products to meet existing
regulatory requirements and retrofitting installed products to comply with new
regulatory requirements can be both expensive and time consuming. We have a long
history of experience with complex regulatory environments in which we operate
and believe this enables us to efficiently obtain the required approvals for new
products and services.





Growth
Opportunities





We
believe that we will benefit from the following industry trends:





Worldwide Fleet Creates Demand for
Aftermarket and Consumables Products.Our substantial
installed base provides significant ongoing revenues from replacements,
upgrades, repairs and the sale of spare parts, as well as demand for consumables
to support the active fleets of commercial aircraft, business jets and military
aircraft.  For the fiscal years ended December 31, 2009 and 2008
approximately 50% and 56%, respectively, of our revenues were derived from
aftermarket and military demand. In addition, aftermarket revenues are generally
driven by aircraft usage, and as such, they have historically tended to recover
more quickly than revenues from OEMs.  Worldwide air traffic is
expected to grow by approximately 3.0% in 2010 and Airline Monitor forecasts
that revenue passenger miles will grow at a 5.6% compound annual growth rate
over the 2009-2024 period, increasing from 2.7 trillion miles in 2009 to 6.1
trillion miles by 2024.  We believe there are substantial growth
opportunities for retrofit programs for the wide-body aircraft that service
international routes and that the major U.S. airlines will need to invest in
cabin interiors for their international fleets or face the prospect of losing
market share on their international routes.





6





Opportunity to Substantially Expand
Our Addressable Markets through our Consumables Management
Business.  Our consumables management business leverages our
key strengths, including marketing and service relationships with most of the
world’s airlines, commercial aircraft OEMs and their suppliers, business jet
OEMs and their suppliers, maintenance, repair and overhaul centers, and the
military industry.  As approximately 50% of consumables demand is
generated by the existing worldwide fleet, demand for aerospace hardware,
fasteners, bearings, seals, gaskets, electrical components and other consumables
is expected to increase over time as the fleet expands, similar to the market
for cabin interior products.  The aerospace and military OEMs are
increasingly outsourcing to sub-contract manufacturers, driving a channel shift,
which is benefiting distributors such as our company, as many of these
subcontractors tend to purchase through distributors.




Backlog Driven by Aftermarket Demand
from International Airlines Retrofitting Existing Fleets. We believe
that many major international airlines are in the process of reinitiating, or
planning to reinitiate previously deferred cabin interior upgrade programs for
twin-aisle aircraft.  This activity has been, and subject to economic
conditions, is expected to continue to be driven by both the age of the existing
cabin interiors as well as the desire by many of the leading international
carriers to achieve a competitive advantage by investing in cabin interior
products that incorporate leading comfort amenities, thereby improving passenger
loads and yields, or that reduce airline operating costs by reducing maintenance
costs and/or providing lower weight and fuel burn.  We believe that as
international traffic begins to grow, the life cycle of premium products, such
as lie-flat international business class seats and the products comprising our
super first class suites, will continue to compress as airlines seek greater
competitive advantage through state-of-the-art cabin interior
products.





Growth of Wide-Body Aircraft
Fleet.  New aircraft deliveries of wide-body aircraft are
expected to continue to grow over the long term, reflecting Airline Monitor’s
forecast of an approximate 5.6% compound annual growth rate in revenue passenger
miles over the 2009-2024 period.  According to Airline Monitor, new
deliveries of wide-body aircraft totaled 205 in 2009 and are expected to be
approximately 220 in 2010, and over the 2011-2013 period, 947 wide-body aircraft
deliveries are expected, averaging approximately 316 such aircraft per year or a
44% higher delivery level as compared to expected deliveries in
2010.  The Airline Monitor also predicts that nearly 4,407 twin-aisle
aircraft will be delivered over the 2010-2020 timeframe or approximately 401
wide-body and super wide-body aircraft per year, which is 82% higher, on
average, as compared to expected deliveries in 2010.  We expect to
benefit from this trend as wide-body aircraft generally carry more than six to
nine times the dollar value of products of the type that we manufacture as
compared to single-aisle, or narrow-body, aircraft.





Shift Toward Seller Furnished
Equipment for Major Systems.Commencing with the launch of the
Boeing 787 and Airbus A350 XWB, both Boeing and Airbus began selecting exclusive
manufacturers for certain cabin interior systems for the production life of the
aircraft.  To date, we have been selected by Boeing to manufacture our
patented Pulse OxygenTM
system and passenger service units for the B787 and B747-8, and we have been
selected by Airbus to manufacture our next generation galley systems and our
patented passenger oxygen delivery system for the A350
XWB.  Traditionally, some of these products and system components were
customized and sold directly to the airlines that purchased aircraft from Boeing
or Airbus.  This increasing designation of seller furnished equipment
for major systems is important to us as it increases the content of our products
on each such aircraft type.  These programs are currently valued at
approximately $2.5 billion and are expected to significantly increase our
content per aircraft type.  However, only a small portion of these
programs were included in our reported backlog at December 31,
2009.  We believe these programs along with our other awards provide a
solid platform for long term revenue stability over the coming
years.





Growth of Worldwide Airline
Fleet.   According to Airline Monitor, new deliveries of large
commercial aircraft increased to 974 aircraft in 2009, as compared to 852
aircraft in 2008 and 888 in 2007.  According to the Airline Monitor,
new aircraft deliveries are expected to total 945 in 2010 and 1,020 in 2011. The
worldwide fleet of passenger aircraft was approximately 18,100 as of
December 31, 2009 and, according to the Airline Monitor, is expected to
increase to approximately 33,000 by December 31, 2024. As the size of the
fleet expands, demand is also expected to grow for upgrade and refurbishment
programs, for cabin interior products and for maintenance products, including
consumables and spares.





Growth in New Aircraft Introductions
Lead to New Cabin Interior Product Introductions and Major Retrofit
Opportunities.According to
Airbus, 17 customers have placed orders for 202 of the new Airbus A380 super
wide-body aircraft and 30 customers have placed 505 orders for the new A350 XWB.
According to Boeing, through December 31, 2009, 55 customers have placed orders
for 851 of the new 787 wide-body aircraft.  We believe the airliners
often use the occasion of a new aircraft fleet type to introduce next generation
cabin interior products and configurations that can yield the airlines greater
revenues and/or cost advantages.  In such cases, we believe airlines
will also invest in programs to retrofit their existing fleets to incorporate
these new interior products and configurations in order to enhance their revenue
and/or cost advantages realized on the new fleets and to maintain product and
service commonality.





7





Long Term Growth in Business Jet and
VIP Aircraft Markets.  Business jet deliveries decreased by 25%
in 2009 as compared to 2008 after growing by 11% in 2008.  According
to industry sources, new business jet deliveries are expected to total 700 in
2010 and 760 in 2011.  While business jet deliveries are expected to
decline significantly in the near term, we expect that over the longer term
several larger business jet types, including the Boeing and Airbus Business
Jets, the Bombardier Challenger, the Global Express and the Global 5000,
the Gulfstream 250, 450, 550 and 650, the Falcon 900, and the Falcon 2000 and
7x, the Embraer Legacy 450 and Legacy 500 to be significant contributors to
growth in new general aviation aircraft deliveries.  This is important
to us because the typical cost of cabin interior products manufactured for a
large business jet can be ten times more than the cost to equip the interior of
a small jet. Advances in engine technology and avionics and the continued
development of fractional ownership of executive aircraft are also important
growth factors for the business jet market. In addition, because the average age
of the more than 16,200 general aviation and VIP jet aircraft existing today is
approximately 15 years, we believe significant cabin interior retrofit and
upgrade opportunities exist.





Business Strategy





Our
business strategy is to maintain a leadership position and to best serve our
customers by:





·
            Offering
      the broadest and most innovative products and services in the
      industry;





·
            Offering
      a broad range of engineering services including design, integration,
      installation and certification services and aircraft
      reconfiguration;





·
            Pursuing
      the highest level of quality in every facet of our operations, from the
      factory floor to customer support;





·
            Aggressively
      pursuing continuous improvement initiatives in all facets of our
      businesses and in particular our manufacturing operations, to reduce cycle
      time, lower cost, improve quality and expand our margins;
    and





·
            Pursuing
      a worldwide marketing and product support approach focused by airline and
      general aviation airframe manufacturers and encompassing our entire
      product line.








Products
and Services





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




The
following is a summary of revenues for each of our segments:





Fiscal
      Year Ended December 31,($
      in millions)2009
              
              
              2008
              
              
              2007%
      of
              
              
              
              
              
              %
      of
              
              
              
              
              
              %
      ofRevenues
              
              
              Revenues
              
              
              Revenues
              
              
              Revenues
              
              
              Revenues
              
              
              RevenuesConsumables
      management
              
              $
              798.1
              
              
              
              41.2
              %
              
              $
              697.3
              
              
              
              33.0
              %
              
              $
              386.5
              
              
              
              23.0
              %Commercial
      aircraft
              
              
              911.3
              
              
              
              47.0
              %
              
              
              1,138.7
              
              
              
              54.0
              %
              
              
              1,098.1
              
              
              
              65.5
              %Business
      jet
              
              
              228.3
              
              
              
              11.8
              %
              
              
              274.0
              
              
              
              13.0
              %
              
              
              193.1
              
              
              
              11.5
              %Total
      revenues
              
              $
              1,937.7
              
              
              
              100.0
              %
              
              $
              2,110.0
              
              
              
              100.0
              %
              
              $
              1,677.7
              
              
              
              100.0
              %







Consumables
Management Segment





We
believe, based on our experience in the industry that we are the world’s leading
distributor and value added service provider of aerospace fasteners and
consumables and we believe we offer one of the broadest lines of aerospace
hardware and inventory management services worldwide. Through the strategic
acquisition of HCS and its integration with our existing consumables management
segment we believe we have created the worldwide leader in the distribution of
aerospace fasteners and consumables.  The acquisition of HCS has
allowed us to alter our business mix such that demand for approximately one-half
of our business is related to consumables products and commercial aircraft
segment spares.  Approximately 50% of our fasteners and consumables
sales are to the aftermarket and military, and historically, we have shipped
approximately 60% of our orders within 24 hours of receipt of the order. With
over 275,000 SKUs and next-day service, we serve as a distributor for almost
every major aerospace fastener manufacturer. Our service offerings include
inventory management and replenishment, electronic data interchange, special
packaging and bar-coding, parts kitting, quality assurance testing and
purchasing assistance. Our seasoned purchasing and sales teams, coupled with
state-of-the-art information technology and automated retrieval systems, provide
the basis for our reputation for high quality and overnight
delivery.





8





Commercial
Aircraft Segment





We
believe, based on our experience in the industry, that we are the world's
leading manufacturer of aircraft seats, offering a wide selection of first
class, business class, tourist class and regional aircraft seats. A typical seat
manufactured and sold by us includes the seat frame, cushions, armrests, tray
table and a variety of optional features such as adjustable lumbar supports,
footrests, reading lights, head/neck supports, and other comfort
amenities.  We also integrate a wide variety of in-flight
entertainment equipment into our seats, which is supplied to us by our customers
or third party suppliers.





First and Business
Classes.  Based upon major airlines' program selection and our
backlog, we believe we are the leading worldwide manufacturer of premium class
seats. Our line of first class sleeper seats incorporates full electric
actuation, an electric ottoman, privacy panels and sidewall-mounted tables. Our
business class seats incorporate features developed over 25 years of seating
design. The business class seats include electrical or mechanical actuation, PC
power ports, iPod connectivity, telephones, leg rests, adjustable lumbar
cushions, four-way adjustable headrests and fiber optic reading lights. The
first and business class products are substantially more expensive than tourist
class seats due to these luxury appointments.





Tourist Class and Regional Jet
Seats.  We believe, based on our installed base, that we are a
leading worldwide manufacturer of tourist class seats and regional aircraft
seats. We believe our Spectrum® coach class seat has become the industry's most
popular seat platform for single-aisle aircraft since its launch in late
2002.  We believe the seat improves comfort and offers significantly
improved passenger living space as well as benefiting the airlines with
simplified maintenance and spare parts purchasing. Spectrum® was engineered for
use across the entire single-aisle aircraft fleet, including regional
jets.  We recently introduced our next generation main cabin seating
platform, which we believe will be the industry’s lightest full-featured
seat.  This seat platform utilizes advanced proprietary technologies
that we believe will significantly reduce cost of ownership, simplify
maintenance and increase overall passenger living space.





Spares.  Aircraft
seats require regularly scheduled maintenance in the course of normal passenger
use. Airlines depend on seat manufacturers and secondary suppliers to provide
spare parts and kit upgrade programs. As a result, a significant market exists
for spare parts and kit upgrades.




We
believe, based on our experience in the industry, that we are the leading
manufacturer of food and beverage preparation and storage equipment for both
narrow and wide-body aircraft, offering a broad selection of coffee and beverage
makers, water boilers, liquid containers, ovens, refrigeration equipment, oxygen
delivery systems and a variety of other interior components.





Oxygen Delivery
Systems.  We believe, based on our experience in the industry,
that we are the leading manufacturer of oxygen storage, distribution and
delivery systems for both commercial and business jet aircraft.  We
have the capability to both produce all required components and to fully
integrate overhead passenger service units with either chemical or gaseous
oxygen equipment.  Our oxygen equipment has been approved for use on
all Boeing and Airbus aircraft and is also found on essentially all general
aviation and VIP aircraft.  The Boeing 787 will be the first aircraft
equipped with a passenger oxygen system using our advanced Pulse OxygenTMand
passenger service unit technology.  Airbus has also selected us to
provide similar technology for its passenger and crew oxygen systems for the
A350 XWB.





Coffee Makers/Water
Boilers.  We believe, based on our experience in the industry,
that we are the leading manufacturer of aircraft coffee and beverage
makers.  We manufacture a broad line of coffee makers, including the
Endura® beverage maker, coffee warmers and water boilers, and a Combi Unit®
which will both brew coffee and boil water for tea while utilizing 25% less
electrical power than traditional 5,000-watt water boilers.  We also
manufacture a cappuccino/espresso maker.





9





Ovens.  We believe,
based on our experience in the industry, that we are the leading manufacturer of
a broad line of specialized ovens, including high efficiency convection ovens,
and steam ovens and warming ovens.  Our DS Steam OvenTM uses
a method of preparing in-flight food by maintaining constant temperature and
moisture in the food.  Our DS Steam OvenTM
addresses the airlines' need to provide a wider range of food offerings than can
be prepared by convection ovens.





Refrigeration
Equipment.  We believe, based on our experience in the
industry, that we are the worldwide industry leader in the design, manufacture
and supply of commercial aircraft refrigeration equipment.  We
manufacture self-contained wine and beverage chillers, refrigerators/freezers
and galley air chilling systems.





Waste Water
Systems.  We have recently entered the vacuum waste system
market. Our vacuum waste water system incorporates a proprietary design which we
believe will eliminate the primary cause of failure which plagues other vacuum
systems.  In addition, we believe our systems include advanced
proprietary components and systems that will significantly lower the overall
cost of ownership, simplify maintenance and improve lavatory
hygiene.  We believe the cost of ownership savings will be achieved as
a result of weight savings and reliability improvements as a result of combining
our proprietary composite components with optimized integrated
systems.  Our waste water systems are configurable so savings can be
realized on both new aircraft and existing in-service aircraft.  We
believe the design modularity will reduce airframe corrosion issues and provide
for simplified, faster maintenance and ease of removal, resulting in up to a 60%
in reduction in service time.





Galley Systems.  We
have been selected by Airbus to provide next generation galley systems for the
Airbus A350 aircraft.  Our innovative A350 galley system is designed
to accommodate the aircraft’s “flex zones,” which allows the airlines to select
from wide ranging galley configurations.  A modular approach to the
design allows the airlines to select galley positions and configurations for
their specific operational needs, while minimizing total aircraft system
weight.





Engineering, Design, Integration,
Installation and Certification Services.  We believe, based on
our experience in the industry, that we are a leading supplier of engineering,
design, integration, installation and certification services for commercial
aircraft passenger cabin interiors.  We also offer to our customers
in-house capabilities to design, manage, integrate, test and certify
reconfigurations and modifications for commercial aircraft and to manufacture
related products, including engineering kits and interface components. We
provide a broad range of interior reconfiguration services which allow airlines
to modify the cabin layout, install telecommunications and entertainment
equipment, relocate galleys, lavatories, overhead bins, and crew rest
compartments.  We believe, based on our experience in the industry,
that we are a leading supplier of structural design and integration services,
including airframe modifications for passenger-to-freighter conversions
particularly for the Airbus A300-600.  In addition, we have performed
passenger-to-freighter conversions for Airbus A300-600 and A300-B4 aircraft and
Boeing 767, Boeing 747-200 Combi, Boeing 747-200 (exclusive of door surround).
Freighter conversions require sophisticated engineering capabilities and very
large and complex proprietary parts kits.





Crew Rest
Compartments.  We believe, based on our experience in the
industry, that we are a leader in the design, certification and manufacture of
crew rest compartments. Long-haul international flights can carry two flight
crews and the off-duty flight crew often utilizes crew rest compartments to
sleep during the flight. A crew rest compartment is constructed utilizing
lightweight cabin interior materials and incorporates seating, electrical,
heating, ventilation and air conditioning and lavatory systems.





We
estimate that as of December 31, 2009, we had an aggregate installed base of
products produced by our commercial aircraft segment, valued at replacement
prices, of approximately $6.2 billion.





Business
Jet Segment





We
believe, based on our experience in the industry, that we are the leading
manufacturer of a broad product line of furnishings for business jets. Our
products include a complete line of business jet seating and sofa products,
including electric fully berthing lie flat seats, direct and indirect lighting,
air valves and oxygen delivery systems as well as sidewalls, bulkheads,
credenzas, closets, galley structures, lavatories, waste water systems and
tables. We have the capability to provide complete interior packages for
business jets and executive aircraft (i.e. head-of-state) interiors, including
design services, interior components and program management services. We believe
we are the preferred supplier of seating products and direct and indirect
lighting systems for most business jet manufacturers.




Our
business jet segment, which has had decades of experience in equipping VIP and
head of state aircraft, is the leading manufacturer of super first class cabin
interior products for commercial wide-body aircraft. Super first class products
incorporate a broad range of amenities such as luxurious first class cabins with
appointments such as lie-flat seating, mini-bars, closets, flat screen
televisions and mood lighting, which, until recently, were found only in VIP and
head-of-state aircraft.





10





We
estimate that as of December 31, 2009, we had an aggregate installed base of
business jet and super first class equipment, valued at replacement prices, of
approximately $1.3 billion.





Research,
Development and Engineering





We work
closely with commercial airlines, business jet and aerospace manufacturers and
global leasing companies to improve existing products and identify customers'
emerging needs. Our expenditures in research, development and engineering
totaled $102.6 million, $131.4 million and $127.9 million representing 5.3%,
6.2% and 7.6% of revenues for the years ending December 31, 2009, 2008 and 2007,
respectively. We employed 851 professionals in engineering, research and
development and program management as of December 31, 2009. We believe, based on
our experience in the industry, that we have the largest engineering
organization in the cabin interior products industry, with mechanical,
electrical, electronic and software design skills, as well as substantial
expertise in program management, materials composition and custom cabin interior
layout design and certification.





Marketing
and Customers





We market
our aerospace fasteners and other consumables directly to the airlines, aircraft
leasing companies, MROs, general aviation airframe manufacturers, first-tier
suppliers to the commercial, military and defense airframe manufacturers, the
airframe manufacturers and other distributors. We believe that our key
competitive advantages are the breadth of our product offerings and our ability
to deliver our products on a timely basis. We believe that those advantages
coupled with our core competencies in product information management, purchasing
and logistics management provide strong barriers to entry.





We market
and sell our commercial aircraft products directly to virtually all of the
world's major airlines, aircraft leasing companies and airframe manufacturers.
Airlines select manufacturers of cabin interior products primarily on the basis
of custom design capabilities, product quality and performance, on-time
delivery, after-sales customer service, product support and price. We believe
that our large installed base, our timely responsiveness in connection with the
custom design, manufacture, delivery and after-sales customer service and
product support, our broad product line and stringent customer and regulatory
requirements, all present barriers to entry for potential new competitors in the
cabin interior products market.





We
believe that airlines prefer our integrated worldwide marketing approach, which
is focused by airline and encompasses our entire product line. Led by senior
executives, teams representing each product line serve designated airlines that
together accounted for the vast majority of the purchases of products
manufactured by our commercial aircraft segment including our super first class
product.  Our teams have developed customer-specific strategies to
meet each airline's product and service needs. We also staff "on-site" customer
engineers at major airlines and airframe manufacturers to represent our 
entire product line and work closely with customers to
develop specifications for each successive generation of products required by
the airlines. These engineers help customers integrate our wide range of cabin
interior products and assist in obtaining the applicable regulatory
certification for each particular product or cabin configuration. Through our
on-site customer engineers, we expect to be able to more efficiently design and
integrate products that address the requirements of our customers. We provide
program management services, integrating all on-board cabin interior equipment
and systems, including installation and Federal Aviation Administration
certification, allowing airlines to substantially reduce costs. We believe that
we are the only supplier in the commercial aircraft cabin interior products
industry with the size, resources, breadth of product line and global product
support capability to operate in this manner.





Our
program management approach assigns a program management team to each
significant contract. The program management team leader is responsible for all
aspects of the specific contract and profitability, including managing change
orders, negotiating related up front engineering charges and monitoring the
progress of the contract through its delivery dates. We believe that our
customers benefit substantially from our program management approach, including
better on-time delivery and higher service levels. We also believe our program
management approach results in better customer satisfaction.





We market
our business jet products directly to all of the world's general aviation
airframe manufacturers, completion centers and operators. Business jet owners
typically rely upon the airframe manufacturers and completion centers to
coordinate the procurement and installation of their interiors. Business jet
owners select manufacturers of business jet products on a basis similar to
commercial aircraft interior products: customer design capabilities, product
quality and performance, on-time delivery, after-sales customer service, product
support and price. We believe that potential new competitors would face a number
of barriers to entering the cabin interior products market. Barriers to entry
include regulatory requirements, our large installed product base, our custom
design capability, manufacturing capability, delivery, and after-sales customer
service, product support and our broad product line.





11





As of
December 31, 2009, our direct sales, marketing and product support organizations
consisted of 555 employees. In addition, we currently retain 38 independent
sales representatives. Our sales to non-U.S. customers were approximately $1.0
billion and $1.1 billion for the fiscal years ended December 31, 2009 and 2008,
respectively, which represents approximately 51% and 53% of revenues,
respectively.  Approximately 66% of our total revenues were derived
from airlines, aircraft leasing companies, MROs, and other commercial aircraft
operators during each of the two fiscal years ended December 31, 2009.
Approximately 50% and 56% of our revenues during the fiscal years ended December
31, 2009 and 2008, respectively, were from consumables, refurbishment, military,
spares and upgrade programs. During the three years ended December 31, 2009, no
single customer accounted for more than 10% of our consolidated revenues. The
portion of our revenues attributable to particular customers varies from year to
year with the airlines' scheduled purchases of new aircraft and for retrofit and
refurbishment programs for their existing aircraft.  In 2009, Boeing
and Airbus in the aggregate represented 8% of our sales.





Backlog





Our
backlog at December 31, 2009 was $2.7 billion, as compared with backlog of $2.9
billion at December 31, 2008 and $2.2 billion at December 31, 2007.
Approximately 47% of our backlog at December 31, 2009 is expected to be
delivered within the next twelve months. At December 31, 2009, approximately 10%
of our total backlog was with domestic airlines, approximately 25% of our
backlog was with European customers, approximately 29% of backlog was with
customers in emerging markets such as the Asia/Pacific Rim and the Middle East
regions. The balance of our backlog is with U.S. aircraft leasing companies,
major suppliers to the airframe OEM’s, MRO’s, business jet manufacturers and
completion centers.  In addition to our $2.7 billion backlog, we have
a number of supplier furnished equipment awards which we have won, but not yet
recorded into backlog.  At December 31, 2009 we estimate the value of
these awards at over $2.5 billion.





Customer
Service





We
believe that our customers place a high value on customer service and product
support and that this service level is a critical differentiating factor in our
industry. The key elements of such service include:





·
            Rapid response to requests for
      engineering design, proposal requests and technical
      specifications;





·
            Flexibility with respect to
      customized features;





·
            On-time
  delivery;





·
            Immediate availability of spare
      parts for a broad range of products;
and





·
            Prompt attention to customer
      problems, including on-site customer
training.





Customer
service is particularly important to airlines due to the high cost to the
airlines of late delivery, malfunctions and other problems.





Warranty
and Product Liability





We
warrant our products, or specific components thereof, for periods ranging from
one to ten years, depending upon product and component type. We establish
reserves for product warranty expense after considering relevant factors such as
our stated warranty policies and practices, historical frequencies of claims to
replace or repair products under warranty and recent sales and claims trends.
Actual warranty costs reduce the warranty reserve as they are incurred. We
periodically review the adequacy of accrued product warranty reserves and
revisions of such reserves are recognized in the period in which such revisions
are determined.





We also
carry product liability insurance.  We believe that our insurance
should be sufficient to cover product liability claims.





12





Competition





The
commercial aircraft cabin interior products market is relatively fragmented,
with a number of competitors in each of the individual product categories. Due
to the global nature of the commercial aerospace industry, competition comes
from both U.S. and foreign manufacturers. However, as aircraft cabin interiors
have become increasingly sophisticated and technically complex, airlines have
demanded higher levels of engineering support and customer service than many
smaller cabin interior products suppliers can provide. At the same time,
airlines have recognized that cabin interior product suppliers must be able to
integrate a wide range of products, including sophisticated electronic
components, such as video and live broadcast TV, particularly in wide-body
aircraft. We believe that the airlines' increasing demands will result in a
continuing consolidation of suppliers. We have participated in 
this consolidation through strategic acquisitions and we
intend to continue to participate in the consolidation.





Our
primary competitors in the aerospace hardware and consumables distribution
market are Wesco Aircraft Hardware and Anixter Pentacon.  Our
principal competitors for our commercial aircraft segment are Groupe Zodiac
S.A., Keiper Recaro GmbH, JAMCO and Premium Aircraft Interiors Group (PAIG,
formerly Britax). The market for business jet products is highly fragmented,
consisting of numerous competitors, the largest of which is Decrane Aircraft
Holdings.





Manufacturing
and Raw Materials





Our
manufacturing operations consist of both the in-house manufacturing of component
parts and sub-assemblies and the assembly of our designed component parts that
are purchased from outside vendors. We maintain up-to-date facilities, and we
have an ongoing strategic manufacturing improvement plan utilizing lean
manufacturing processes. We constantly strive for continuous improvement from
implementation of these plans for each of our product lines. We have implemented
common information technology platforms company-wide, as appropriate. These
activities should lower our production costs, shorten cycle times and reduce
inventory requirements and at the same time improve product quality, customer
response and profitability. We do not believe we are materially dependent on any
single supplier or assembler for any of our raw materials or specified and
designed component parts and, based upon the existing arrangements with vendors,
our current and anticipated requirements and market conditions, we believe that
we have made adequate provisions for acquiring raw materials.





Government
Regulation





The FAA
prescribes standards and licensing requirements for aircraft components, and
licenses component repair stations within the United States. Comparable agencies
regulate such matters in other countries. We hold several FAA component
certificates and perform component repairs at a number of our U.S. facilities
under FAA repair station licenses. We also hold an approval issued by the EASA
to design, manufacture, inspect and test aircraft seating products in Leighton
Buzzard, England and to manufacture and ship from our Kilkeel, Northern Ireland
facility. We also have the necessary approvals to design, manufacture, inspect,
test and repair our interior systems products in Nieuwegein, the
Netherlands.





In March
1992, the FAA adopted Technical Standard Order C127, or TSO-C127, which provides
a design approval that the FAA may issue to seat manufacturers for seats tested
dynamically to meet the requirements of 14 CFR 25.562 (commonly referred to as
“16G”).  We believe we have developed and certified more seat models
that meet the requirements of TSO-C127 and TSO-C127 than our
competitors.  The FAA and EASA also prescribe that seats meet certain
flammability and electrical interference specifications.  In October
2005, the FAA adopted regulation 14 CFR 121.311(j), which requires dynamic
testing of all seats installed in all new aircraft certified after January 1,
1988 and produced after October 27, 2009.  EASA is expected to
establish a similar rule.  Our large installed base of 16G seats
demonstrates our industry leadership in seat certification
requirements.





In
November 2002, our seating group became the first passenger seating supplier to
sign a Partnership for Safety Plan (PSP) with the FAA. Based on established
qualifications of personnel and systems, the PSP provides us with increased
authority to approve test plans and reports and to witness tests. The PSP
provides us with a number of business benefits including greater planning
flexibility, simplified scheduling and greater program control and eliminates
variables such as FAA workload and priorities.





Environmental
Matters





Our
operations are subject to extensive and changing federal, state and foreign laws
and regulations establishing health and environmental quality standards,
including those governing discharges of pollutants into the air and water and
the management and disposal of hazardous substances and wastes. We may be
subject to liability or penalties for violations of those standards. We are also
subject to laws and regulations, such as the Federal Superfund Law and similar
state statutes, governing remediation of contamination at facilities that we
currently or formerly owned or operated or to which we send hazardous substances
or wastes for treatment, recycling or disposal. We believe that we are currently
compliant, in all material respects, with applicable environmental laws and
regulations. However, we could become subject to future liabilities or
obligations as a result of new or more stringent interpretations of existing
laws and regulations. In addition, we may have liabilities or obligations in the
future if we discover any environmental contamination or liability relating to
our facilities or operations.





13





Patents





We
currently hold 254 U.S. patents and 243 foreign patents, as well as 131 U.S.
patent applications and 282 foreign patent applications covering a variety of
products. We believe that the termination, expiration or infringement of one or
more of such patents would not have a material adverse effect on
us.





Employees





As of
December 31, 2009, we had approximately 5,500 employees. Approximately 65% of
our employees are engaged in manufacturing/distribution operations and
purchasing, 15% in engineering, research and development and program management,
11% in sales, marketing and product support and 9% in finance, information
technology, legal and general administration. Unions represent approximately 7%
of our worldwide employees. One domestic labor contract, representing
approximately 5% of our employees, expires in May, 2012.  The labor
contract with the only other domestic union, which represents 1% of our
employees, expires in June, 2010.  The balance of our union employees
are located in the U.K., the Netherlands and Germany, which tend to have
government mandated union organizations.  We consider our employee
relations to be good.





Financial
Information About Segments and Foreign and Domestic Operations





Financial
and other information by segment and relating to foreign and domestic operations
for the fiscal years ended December 31, 2009, 2008 and 2007, is set forth in
Note 13 to our consolidated financial statements.





Available
Information





Our
filings with the SEC, including our annual reports on Form 10-K, quarterly
reports on Form 10-Q, our Proxy Statement, current reports on Form 8-K and
amendments to those reports, are available free of charge on our website as soon
as reasonably practicable after they are filed with, or furnished to, the SEC.
Our Internet website is located at http://www.beaerospace.com.
Information included in or connected to our website is not incorporated by
reference in this annual report.





ITEM 1A.    RISK FACTORS





You
should consider carefully the following risks and uncertainties, along with the
other information contained in or incorporated by reference in this Form
10-K.  Additional risks and uncertainties that we do not presently know
about or currently believe are not material may also adversely affect our
business and operations.  If any of the following events actually
occur, our business, financial condition and financial results could be
materially adversely affected.





Risks
Relating to Our Industry





The
airline industry is heavily regulated and failure to comply with applicable laws
could reduce our sales, or require us to incur additional costs to achieve
compliance, which could negatively impact our results of operations and
financial condition.





The FAA
prescribes standards and licensing requirements for aircraft components,
including virtually all commercial airline and general aviation cabin interior
products and licenses component repair stations within the United States.
Comparable agencies, such as the EASA, the CAAC and the JCAB, regulate these
matters in other countries. If we fail to obtain a required license for one of
our products or services or lose a license previously granted, the sale of the
subject product or service would be prohibited by law until such license is
obtained, reinstated or renewed. In addition, designing new products to meet
existing regulatory requirements and retrofitting installed products to comply
with new regulatory requirements can be both expensive and time
consuming.





From time
to time, these regulatory agencies propose new regulations. These new
regulations generally cause an increase in costs to comply with these
regulations. For example, the FAA dynamic testing requirements originally
established in 1988 under 14 CFR 25.562 are currently required for certain new
generation aircraft types.  The recent enactment of 14 CFR 121.311(j)
will require dynamic testing of all seats installed in all new aircraft produced
after October 27, 2009.  EASA is expected to establish a similar
rule.  Compliance with this rule may require industry participants to
expand engineering, plant and equipment to ensure that all products meet this
rule.  Smaller seating companies may not have the resources, financial
or otherwise, to comply with this rule and may be required to sell their
business or cease operations.  To the extent the FAA implements rule
changes in the future, we may incur additional costs to achieve
compliance.





14





The
airline industry is subject to extensive health and environmental regulations,
any violation of which could subject us to significant liabilities and
penalties.





We are
subject to extensive and changing federal, state and foreign laws and
regulations establishing health, safety and environmental quality standards, and
may be subject to liability or penalties for violations of those standards. We
are also subject to laws and regulations governing remediation of contamination
at facilities currently or formerly owned or operated by us or to which we have
sent hazardous substances or wastes for treatment, recycling or disposal. We may
be subject to future liabilities or obligations as a result of new or more
stringent interpretations of existing laws and regulations. In addition, we may
have liabilities or obligations in the future if we discover any environmental
contamination or liability at any of our facilities, or at facilities we may
acquire.





Risks
Relating to Our Business





We
are directly dependent upon the conditions in the airline and business jet
industries and a continued economic downturn could negatively impact our
results of operations and financial condition.





Global
financial markets have experienced extreme volatility and disruption for more
than two years, which at times, reached unprecedented levels as a result
of the financial crisis affecting the banking system and participants in
the global financial markets. Concerns over the tightening of the corporate
credit markets, inflation, energy costs and the dislocation of the residential
real estate and mortgage markets have contributed to the volatility in the
global financial markets and, together with the global financial crisis,
have created uncertainties for global economic conditions in the
future.  The airline and business jet industries are particularly
sensitive to changes in economic conditions.  In 2008 and 2009, the
airline industry was parking aircraft, delaying new aircraft purchases and
delivery of new aircraft, deferring retrofit programs and depleting existing
inventories. The business jet industry was also severely impacted
by both the recession and by declining corporate profits.





Unfavorable
economic conditions have caused reduced spending for both leisure and
business travel, which have also negatively affected the airline and
business jet industries. The weakened global economy caused rapid declines in
global air travel during 2008 and 2009.  According to IATA,
the economic downturn, combined with the high fuel prices experienced
during most of 2009, contributed to the worldwide airline industry’s loss
of approximately $11 billion in 2009. In addition, as a result of the decline in
both traffic and airfares following the September 11, 2001 terrorist
attacks and threats of future terrorist attacks, SARS, H1N1,
the conflicts in Iraq and Afghanistan, 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 $52.8 billion in
calendar years 2001-2009 which caused a significant number of airlines worldwide
to declare bankruptcy or cease operations in the last nine years.





We
expect, based on current economic conditions, that air traffic will begin
to return to growth in 2010. Declining air traffic has, and, if the
expected increase in air traffic does not occur, will continue to
negatively impact our customer base. A continued economic downturn would
continue to negatively impact the airline and business jet industries, which
could cause a significant negative impact on our results of operations and
financial condition.




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, 51% and 53% of our
revenues for the years ended December 31, 2009 and 2008, respectively, 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 28% and 32%,
respectively, of our sales during the fiscal years ended December 31, 2009
and 2008 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, 2009, we reported a cumulative foreign
currency translation adjustment of approximately $31.5 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.





15





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.





If
we make acquisitions, they may be less successful than we expect, which could
have a material adverse effect on our financial condition.




We have
made many acquisitions in the past.  We may also consider future
acquisitions, some of which could be material to us. We explore and conduct
discussions with many third parties regarding possible acquisitions. Our ability
to continue to achieve our goals may depend upon our ability to effectively
acquire and integrate such companies, to achieve cost efficiencies and to manage
these businesses as part of our company. For example, we are currently in the
process of integrating the HCS business with the expected completion in the
first half of 2010.  Successful integration of HCS's operations with
those of our consumables management 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 to eliminate
redundant and excess costs.  Our efforts to integrate HCS or future
acquisitions 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 acquisition. 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 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.  We also may not be able to raise the substantial
capital required for acquisitions and integrations on satisfactory terms, if at
all.




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





We may
incur additional debt under our credit facility or through new borrowings to
finance our operations or for future growth.  A high degree of
leverage 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.




16




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





Our total
assets reflect substantial intangible assets. At December 31, 2009, goodwill and
identified intangibles, net, represented approximately 36.6% of 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 general accepted accounting principles in the United
States, 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.  For example,
during the year ended December 31, 2008, in accordance with the Financial
Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 350,
Intangibles – Goodwill and
Other (FASB Statement No. 142, Goodwill and Other Intangible Assets) (ASC
350) we performed our annual testing of impairment of
goodwill.  Adverse equity market conditions caused a decrease in
market multiples, including our fiscal year end market capitalization at
December 31, 2008.  The fair value of our reporting units for goodwill
impairment testing were determined using valuation techniques  based
on estimates, judgments and assumptions we believe were appropriate under the
circumstances.  The sum of the fair values of the reporting units were
evaluated based on our market capitalization determined using average share
prices within a reasonable period of time near December 31, 2008, plus an
estimated control premium plus the fair value of our debt
obligations.  The decrease in the market multiples and our market
capitalization resulted in a decline in the fair value of our reporting units as
of December 31, 2008.  Accordingly, we recorded a pre-tax impairment
charge related to goodwill and intangible assets of approximately $390.0 million
for the year ended December 31, 2008.  We also performed our annual
testing of impairment of goodwill for the year ended December 31, 2009. There
was no impairment recorded in 2009. As of December 31, 2009, the remaining
balances of goodwill and intangible assets were $703.2 million and $337.4
million, respectively.





We
have a significant backlog that may be deferred or may not entirely be
realized.





As of
December 31, 2009, we had approximately $2.7 billion of backlog. Given the
nature of our industry and customers, there is a risk that orders forming part
of our backlog may be cancelled or deferred due to economic conditions or
fluctuations in our customers’ business needs, purchasing budgets or inventory
management practices. For example, at December 31, 2008, several large retrofit
programs that were scheduled for delivery in 2009 were deferred until 2010 and
2011, which negatively impacted our revenues and profits for 2009. Failure to
realize sales from our existing or future backlog would negatively impact our
financial results.





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





The
credit agreement governing our senior bank borrowings contains numerous
financial and operating 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, 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. 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, any future indentures or agreements
governing our debt securities, which could permit 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.





We
compete with a number of established companies, some of which have significantly
greater financial, technological and marketing resources than we do, and we may
not be able to compete effectively with these companies.





We
compete with numerous established companies. Some of these companies, have
significantly greater financial, technological and marketing resources than we
do. Our ability to be an effective competitor will depend on our ability to
remain the supplier of retrofit and refurbishment products and spare parts on
the commercial fleets on which our products are currently in service. It will
also depend on our success in causing our products and the new products we may
develop to be selected for installation in new aircraft, including
next-generation aircraft, and in avoiding product
obsolescence.  Developing and maintaining a competitive advantage may
require continued investment in product development, engineering, supply-chain
management and sales and marketing, and we may not have enough resources to make
such investments, which could negatively impact our results of operations and
financial condition.





17





We
incur risk associated with new programs.





New
programs with new technologies typically carry risks associated with design
changes, development of new production tools, increased capital and funding
commitments, ability to meet customer specifications, delivery schedules and
unique contractual requirements, supplier performance, ability of the customer
to meet its contractual obligations to us, and our ability to accurately
estimate costs associated with such programs.  In addition, any new
program may not generate sufficient demand or may experience technological
problems or significant delays in the regulatory or other certification or
manufacturing and delivery schedule.  If we were unable to perform our
obligations under new programs to the customer’s satisfaction, if we were unable
to manufacture products at our estimated costs, or if a new program in which we
had made a significant investment was terminated or experienced weak demand,
certification or other delays or technological problems, then our business,
financial condition and results of operations could be materially adversely
affected.





Provisions
in our charter documents may discourage potential acquisitions of our company,
even those which the holders of a majority of our common stock may
favor.





Our
restated certificate of incorporation and by-laws contain provisions that may
have the effect of discouraging a third party from making an acquisition of us
by means of a tender offer, proxy contest or otherwise. Our restated certificate
of incorporation and by-laws:





·
              classify
      the board of directors into three classes, with directors of each class
      serving for a staggered three-year period;·
              provide
      that directors may be removed only for cause and only upon the approval of
      the holders of at least two-thirds of the voting power of our shares
      entitled to vote generally in the election of such
    directors;·
              require
      at least two-thirds of the voting power of our shares entitled to vote
      generally in the election of directors to alter, amend or repeal the
      provisions relating to the classified board and removal of directors
      described above;·
              permit
      the board of directors to fill vacancies and newly created directorships
      on the board;·
              restrict
      the ability of stockholders to call special meetings;
  and·
              contain
      advance notice requirements for stockholder
  proposals.





You
may not receive cash dividends on our shares of common stock.





We have
never paid a cash dividend and do not plan to pay cash dividends on our common
stock in the foreseeable future.  We intend to retain our earnings to
finance the development and expansion of our business and to repay
indebtedness.  Also, our ability to declare and pay cash dividends on
our common stock is restricted by customary covenants in our bank credit
facility and may be restricted by customary covenants in our future agreements
governing future debt.





If
the price of our common stock continues to fluctuate significantly, you could
lose all or part of any investment in our common stock.





The price
of our common stock is subject to sudden and material increases and decreases,
and decreases could adversely affect investments in our common
stock.  For example from January 1, 2009 through December 31, 2009,
the sale price of our common stock has ranged from a low of $6.32 to a high of
$24.29.  The price of our common stock could fluctuate widely in
response to:





·
              our
      quarterly operating results;·
              changes
      in earnings estimates by securities analysts;·
              changes
      in our business;·
              changes
      in the market’s perception of our business;·
              changes
      in the businesses, earnings estimates or market perceptions of our
      competitors or customers;




18




·
              changes
      in airline industry or business jet industry
  conditions;·
              changes
      in our key personnel;·
              changes
      in general market or economic conditions; and·
              changes
      in the legislative or regulatory
environment.





In
addition, the stock market has experienced extreme price and volume fluctuations
in recent years that have significantly affected the quoted prices of the
securities of many companies, including companies in our
industry.  The changes often appear to occur without regard to
specific operating performance.  The price of our common stock could
fluctuate based upon factors that have little or nothing to do with our company
and these fluctuations could materially reduce our stock price.





We
have grown, and may continue to grow, at a rapid pace.  Our inability
to properly manage or support the growth may have a material adverse effect on
our business, financial condition, and results of operations and could cause the
market value of our common stock to decline.





We have
experienced rapid growth in recent periods and intend to continue to grow our
business both through acquisitions and internal expansion of products and
services.  Our growth to date has placed, and could continue to place,
significant demands on our management team and our operational, administrative
and financial resources.  We may not be able to grow effectively or
manage our growth successfully, and the failure to do so could have a material
adverse effect on our business, financial condition, and results of operations
and could cause the market value of our common stock to decline.





We may be unable
to retain key personnel who are key to our operations.





Our
success, among other things, is dependent on our ability to attract and retain
highly qualified senior management and other key
personnel.  Competition for key personnel is intense and our ability
to attract and retain key personnel is dependent on a number of factors,
including prevailing market conditions and compensation packages offered by
companies competing for the same talent.  The inability to hire and
retain these persons may adversely affect our operations.








19




ITEM 1B.    UNRESOLVED STAFF
COMMENTS





None.





ITEM 2.    PROPERTIES
 
 As of
December 31, 2009, we had 27 principal operating facilities and one
administrative facility, which comprised an aggregate of approximately 2.7
million square feet of space.  The following table describes the
principal facilities and indicates the location, function, approximate size, and
ownership status of each location.
 
 Segment
                Location
                Purpose
                
                
                Facility
                  Size
                  (Sq. Feet)
                
                Ownership




Consumables
      Management
              Miami,
      Florida
              Distribution
              
              
              355,800
              
              LeasedHamburg,
      Germany
              Distribution
              
              
              67,300
              
              LeasedCarson,
      California
              Distribution
              
              
              56,500
              
              LeasedEarth
      City, Missouri
              Distribution
              
              
              47,000
              
              LeasedHamburg,
      Germany
              Distribution
              
              
              44,000
              
              LeasedStratford,
      Connecticut
              Distribution
              
              
              67,000
              
              LeasedParamus,
      New Jersey
              Distribution
              
              
              36,000
              
              LeasedTempe,
      Arizona
              Distribution
              
              
              34,000
              
              LeasedWichita,
      Kansas
              Distribution
              
              
              49,000
              
              LeasedCommercial
      Aircraft
              Winston-Salem,
      North Carolina
              Manufacturing
              
              
              358,700
              
              LeasedKilkeel,
      Ireland
              Manufacturing
              
              
              176,000
              
              Leased/OwnedMarysville,
      Washington
              Manufacturing
              
              
              155,000
              
              LeasedLenexa,
      Kansas
              Manufacturing
              
              
              130,000
              
              LeasedLeighton
      Buzzard, England
              Manufacturing
              
              
              114,000
              
              OwnedAnaheim,
      California
              Manufacturing
              
              
              108,900
              
              LeasedLubeck,
      Germany
              Manufacturing
              
              
              86,100
              
              LeasedWestminster,
      California
              Manufacturing
              
              
              85,000
              
              LeasedCompton,
      California
              Manufacturing
              
              
              63,400
              
              LeasedNieuwegein,
      the Netherlands
              Manufacturing
              
              
              47,400
              
              LeasedPacoima,
      California
              Manufacturing
              
              
              28,800
              
              LeasedRockford,
      Illinois
              Manufacturing
              
              
              14,100
              
              LeasedEverett,
      Washington
              Manufacturing
              
              
              25,200
              
              LeasedBusiness
      Jet
              Miami,
      Florida
              Manufacturing
              
              
              146,000
              
              LeasedHolbrook,
      New York
              Manufacturing
              
              
              27,900
              
              LeasedFenwick,
      West Virginia
              Manufacturing
              
              
              148,800
              
              OwnedNogales,
      Mexico
              Manufacturing
              
              
              62,400
              
              LeasedTucson,
      Arizona
              Manufacturing
              
              
              90,500
              
              LeasedCorporate
              Wellington,
      Florida
              Administrative
              
              
              28,700
              
              Leased/Owned2,653,500




We
believe that our facilities are suitable for their present intended purposes and
are adequate for our present and anticipated level of operations.





ITEM 3.    LEGAL PROCEEDINGS





We are 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 our business,
results of operations or financial condition.





There are
no material pending legal proceedings, other than the ordinary routine
litigation incidental to the business discussed above, to which we, or any of
our subsidiaries, are a party or of which any of our property is the
subject.





ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS





During
the last quarter of the fiscal year covered by this Form 10-K, we did not submit
any matters to a vote of security holders, through the solicitation of proxies
or otherwise.





20




ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY,
RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY
SECURITIES


Our
common stock is quoted on the Nasdaq Global Select Market under the symbol
"BEAV.”  The following table sets forth, for the periods indicated,
the range of high and low per share sales prices for the common stock as
reported by Nasdaq.
 
 Fiscal
      Year Ended December 31,(Amounts
      in Dollars)2009
                
                
                2008High
                
                
                Low
                
                
                High
                
                
                LowFirst
      Quarter
                
                $
                11.48
                
                
                $
                6.32
                
                
                $
                53.79
                
                
                $
                30.41Second
      Quarter
                
                
                17.67
                
                
                
                8.10
                
                
                
                43.51
                
                
                
                23.04Third
      Quarter
                
                
                21.05
                
                
                
                11.55
                
                
                
                28.70
                
                
                
                12.50Fourth
      Quarter
                
                
                24.29
                
                
                
                17.47
                
                
                
                15.61
                
                
                
                5.37
 
 On
February 23, 2010, the last reported sale price of our common stock as reported
by NASDAQ was $25.48 per share.  As of such date, based on information
provided to us by Computershare, our transfer agent, we had
approximately 1,551 registered holders, and because many of these shares
are held by brokers and other institutions on behalf of the beneficial holders,
we are unable to estimate the number of beneficial shareholders represented by
these holders of record.
 
 We have
not paid any cash dividends in the past, and we have no present intention of
doing so in the immediate future. Our board of directors intends, for the
foreseeable future, to retain any earnings to reduce indebtedness and finance
our future growth, but expects to review our dividend policy regularly. The
credit agreement governing our bank credit facilities permit the declaration of
cash dividends only in certain circumstances described therein.
 
 The
following line graph compares the annual percentage change in the Company’s
cumulative total shareholder return on our common stock relative to the
cumulative total returns of the NASDAQ Composite index, the Dow Jones US
Airlines index and the Dow Jones US Aerospace & Defense index. An investment
of $100 (with reinvestment of all dividends) is assumed to have been made in the
Company's common stock and in each of the indexes on 12/31/2004 and its relative
performance is tracked through 12/31/2009.











Following
is a summary of repurchases of our common stock during the three-month period
ended December 31, 2009.


Total Number
      ofShares PurchasedTotal Number
              
              
              
              
              
              as
      Part of Publiclyof
      Shares
              
              
              Average
      Price Paid
              
              
              Announced
      PlansPurchased
      (1)
              
              
              per Share
              
              
              or
      ProgramsOctober
      1-31
              
              
              --
              
              
              $
              --
              
              
              --November
      1 - 30
              
              
              31,994
              
              
              
              19.82
              
              
              
              --December
      1 - 31
              
              
              3,730
              
              
              
              23.13
              
              
              
              --35,724
              
              
              $
              20.16
              
              
              
              --
 
 (1)
              All
      of the 35,724 shares purchased during the three-month period ended
      December 31, 2009 were acquired from employees in connection with the
      settlement of income tax and related benefit withholding obligations
      arising from vesting of restricted stock grants.  These shares were
      not part of a publicly announced program to purchase common
      shares.




ITEM 6.    SELECTED FINANCIAL DATA
 (In
millions, except per share data)
 
 The
financial data for each of the years in the five year period ended December 31,
2009 have been derived from financial statements that have been audited by our
independent registered public accounting firm. The following financial
information is qualified by reference to, and should be read in conjunction
with, Item 7 – “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” and our historical financial statements, including notes
thereto, which are included in Item 15 of this Form 10-K.  Our
historical results are not necessarily indicative of our future
results.
  Fiscal
      Year Ended December 31,2009
                  
                  
                  2008
                  
                  
                  2007
                  
                  
                  2006
                  
                  
                  2005Statements
      of Earnings (Loss) Data:Revenues
                  
                  $
                  1,937.7
                  
                  
                  $
                  2,110.0
                  
                  
                  $
                  1,677.7
                  
                  
                  $
                  1,128.2
                  
                  
                  $
                  844.1Cost
      of sales
                  
                  
                  1,268.5
                  
                  
                  
                  1,386.5
                  
                  
                  
                  1,107.6
                  
                  
                  
                  731.7
                  
                  
                  
                  548.5Selling,
      general and administrative
                  
                  
                  270.5
                  
                  
                  
                  238.3
                  
                  
                  
                  195.2
                  
                  
                  
                  159.6
                  
                  
                  
                  136.4Research,
      development and engineering
                  
                  
                  102.6
                  
                  
                  
                  131.4
                  
                  
                  
                  127.9
                  
                  
                  
                  88.6
                  
                  
                  
                  65.6Asset
      impairment charge (1)
                  
                  
                  --
                  
                  
                  
                  390.0
                  
                  
                  
                  --
                  
                  
                  
                  --
                  
                  
                  
                  --Operating
      earnings (loss)
                  
                  
                  296.1
                  
                  
                  
                  (36.2
                  )
                  
                  
                  247.0
                  
                  
                  
                  148.3
                  
                  
                  
                  93.6Operating
      margin
                  
                  
                  15.3
                  %
                  
                  
                  (1.7
                  %)
                  
                  
                  14.7
                  %
                  
                  
                  13.1
                  %
                  
                  
                  11.1
                  %Interest
      expense, net
                  
                  
                  88.4
                  
                  
                  
                  48.0
                  
                  
                  
                  20.9
                  
                  
                  
                  38.9
                  
                  
                  
                  59.3Debt
      prepayment costs
                  
                  
                  3.1
                  
                  
                  
                  3.6
                  
                  
                  
                  11.0
                  
                  
                  
                  19.4
                  
                  
                  
                  --Earnings
      (loss) before income taxes
                  
                  
                  204.6
                  
                  
                  
                  (87.8
                  )
                  
                  
                  215.1
                  
                  
                  
                  90.0
                  
                  
                  
                  34.3Income
      tax expense (benefit)(2)
                  
                  
                  62.6
                  
                  
                  
                  11.6
                  
                  
                  
                  67.8
                  
                  
                  
                  4.4
                  
                  
                  
                  (50.3
                  )Net
      earnings (loss)
                  
                  $
                  142.0
                  
                  
                  $
                  (99.4
                  )
                  
                  $
                  147.3
                  
                  
                  $
                  85.6
                  
                  
                  $
                  84.6Basic
      net earnings (loss) per share:Net
      earnings (loss)
                  
                  $
                  1.44
                  
                  
                  $
                  (1.05
                  )
                  
                  $
                  1.67
                  
                  
                  $
                  1.11
                  
                  
                  $
                  1.44Weighted
      average common shares
                  
                  
                  98.5
                  
                  
                  
                  94.3
                  
                  
                  
                  88.1
                  
                  
                  
                  77.1
                  
                  
                  
                  58.8Diluted
      net earnings (loss) per share:Net
      earnings (loss)
                  
                  $
                  1.43
                  
                  
                  $
                  (1.05
                  )
                  
                  $
                  1.66
                  
                  
                  $
                  1.10
                  
                  
                  $
                  1.39Weighted
      average common shares
                  
                  
                  99.3
                  
                  
                  
                  94.3
                  
                  
                  
                  88.8
                  
                  
                  
                  78.0
                  
                  
                  
                  60.8Balance
      Sheet Data (end of period):Working
      capital
                  
                  $
                  1,286.9
                  
                  
                  $
                  1,173.7
                  
                  
                  $
                  711.6
                  
                  
                  $
                  456.0
                  
                  
                  $
                  573.4Goodwill,
      intangible and other assets, net
                  
                  
                  1,087.9
                  
                  
                  
                  1,081.7
                  
                  
                  
                  635.6
                  
                  
                  
                  636.2
                  
                  
                  
                  525.3Total
      assets
                  
                  
                  2,840.1
                  
                  
                  
                  2,930.1
                  
                  
                  
                  1,772.0
                  
                  
                  
                  1,497.7
                  
                  
                  
                  1,426.5Long-term
      debt, net of current maturities
                  
                  
                  1,018.5
                  
                  
                  
                  1,117.2
                  
                  
                  
                  150.3
                  
                  
                  
                  502.0
                  
                  
                  
                  677.4Stockholders'
      equity
                  
                  
                  1,447.5
                  
                  
                  
                  1,266.5
                  
                  
                  
                  1,258.1
                  
                  
                  
                  706.0
                  
                  
                  
                  569.6Other
      Data:Depreciation
      and amortization
                  
                  $
                  49.5
                  
                  
                  $
                  40.7
                  
                  
                  $
                  35.0
                  
                  
                  $
                  29.4
                  
                  
                  $
                  28.6
  (1)  During
the year ended December 31, 2008, in accordance with ASC 350 we performed our
annual testing of impairment of goodwill.  Adverse equity market
conditions caused a decrease market multiples at December 31,
2008.  The fair value of our reporting units for goodwill impairment
testing were determined using valuation techniques based on estimates, judgments
and assumptions we believe were appropriate under the
circumstances.  The sum of the fair values of the reporting units were
evaluated based on our market capitalization determined using average share
prices within a reasonable period of time near December 31, 2008 plus an
estimated control premium plus the fair value of our debt
obligations.  The decrease in the market multiples and our market
capitalization resulted in a decline in the fair value of our reporting units as
of December 31, 2008.  Accordingly, we recorded a pre-tax impairment
charge related to goodwill and intangible assets of approximately $390.0
million.
  (2)
During the year ended December 31, 2005 we reversed a significant portion of our
valuation allowance on our U.S. deferred tax asset as a result of improved
operating performance and outlook and expected reductions in interest costs
resulting from note redemptions.
  22
  ITEM
7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION ANDRESULTS
OF OPERATIONS
 (Dollars
in millions, except per share data)
  OVERVIEW
 
 Based on
our experience in the industry, we believe we are the world’s largest
manufacturer of cabin interior products for commercial aircraft and business
jets and the leading aftermarket distributor and value added service provider of
aerospace fasteners and other consumables products. We sell our manufactured
products directly to virtually all of the world’s major airlines and aerospace
manufacturers.  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:
 
 ·
                a
      broad line of aerospace fasteners, consisting of over 275,000 SKUs,
      serving the aerospace commercial aircraft,  business jet and
      military and defense 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 coffeemakers, water boilers, beverage containers, refrigerators,
      freezers, chillers and a line of ovens which includes microwave, high heat
      convection and steam ovens;·
                both
      chemical and gaseous aircraft oxygen delivery, distribution and storage
      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,
      oxygen delivery systems, air valve systems, high-end furniture and
      cabinetry.
 
 We also
provide comprehensive aircraft cabin interior reconfiguration and
passenger-to-freighter conversion engineering services, galley systems and
component kits.
 
 We
generally derive our revenues from refurbishment or upgrade programs for the
existing worldwide fleets of commercial and general aviation aircraft and from
the sale of our cabin interior equipment for new aircraft deliveries as well as
consumable products for both the new build market and the
aftermarket.  For the 2009, 2008 and 2007 fiscal years, approximately
50%, 56% and 60% of our revenues, respectively, were derived from our
aftermarket and military consumables products with the remaining portions
attributable to the sale of cabin interior equipment associated with new
aircraft deliveries. We believe our large installed base of products, estimated
to be approximately $7.5 billion as of December 31, 2009 (valued at replacement
market prices), gives us a significant advantage over our competitors in
obtaining orders both for spare parts and for refurbishment programs,
principally due to the tendency of the airlines to purchase equipment for such
programs from the incumbent supplier.
 
 We
conduct our operations through strategic business units that have been
aggregated under three reportable segments: consumables management, commercial
aircraft and business jet.
 
 Revenues
by reportable segment for the years ended December 31, 2009, 2008 and 2007 were
as follows:
 
 Fiscal
      Year Ended December 31,2009
                
                
                2008
                
                
                2007%
      of
                
                
                
                
                
                %
      of
                
                
                
                
                
                %
      ofRevenues
                
                
                Revenues
                
                
                Revenues
                
                
                Revenues
                
                
                Revenues
                
                
                RevenuesConsumables
      management
                
                $
                798.1
                
                
                
                41.2
                %
                
                $
                697.3
                
                
                
                33.0
                %
                
                $
                386.5
                
                
                
                23.0
                %Commercial
      aircraft
                
                
                911.3
                
                
                
                47.0
                %
                
                
                1,138.7
                
                
                
                54.0
                %
                
                
                1,098.1
                
                
                
                65.5
                %Business
      jet
                
                
                228.3
                
                
                
                11.8
                %
                
                
                274.0
                
                
                
                13.0
                %
                
                
                193.1
                
                
                
                11.5
                %Total
      revenues
                
                $
                1,937.7
                
                
                
                100.0
                %
                
                $
                2,110.0
                
                
                
                100.0
                %
                
                $
                1,677.7
                
                
                
                100.0
                %
  23
  Revenues
by domestic and foreign operations for the years ended December 31, 2009, 2008
and 2007 were as follows:
 
 Fiscal
      Year Ended December 31,2009
                
                
                2008
                
                
                2007Domestic
                
                $
                1,399.5
                
                
                $
                1,428.8
                
                
                $
                1,036.6Foreign
                
                
                538.2
                
                
                
                681.2
                
                
                
                641.1Total
      revenues
                
                $
                1,937.7
                
                
                $
                2,110.0
                
                
                $
                1,677.7
 
 
 Revenues
by geographic segment (based on destination) for the years ended December 31,
2009, 2008 and 2007 were as follows:
  Fiscal
      Year Ended December 31,2009
                
                
                2008
                
                
                2007%
      of
                
                
                
                
                
                %
      of
                
                
                
                
                
                %
      ofRevenues
                
                
                Revenues
                
                
                Revenues
                
                
                Revenues
                
                
                Revenues
                
                
                RevenuesU.S.
                
                $
                943.3
                
                
                
                48.7
                %
                
                $
                994.4
                
                
                
                47.1
                %
                
                $
                749.5
                
                
                
                44.7
                %Europe
                
                
                449.3
                
                
                
                23.2
                %
                
                
                508.9
                
                
                
                24.1
                %
                
                
                468.0
                
                
                
                27.9
                %Asia,
      Pacific Rim,Middle
      East and other
                
                
                545.1
                
                
                
                28.1
                %
                
                
                606.7
                
                
                
                28.8
                %
                
                
                460.2
                
                
                
                27.4
                %Total
      revenues
                
                $
                1,937.7
                
                
                
                100.0
                %
                
                $
                2,110.0
                
                
                
                100.0
                %
                
                $
                1,677.7
                
                
                
                100.0
                %
 Between
1989 and 2006, we substantially expanded the size, scope and nature of our
business through 24 acquisitions for an aggregate purchase price of
approximately $1.2 billion.
 
 During
the third quarter of 2008, we acquired Honeywell’s Consumable Solutions
distribution business, for the aggregate purchase price of approximately $1.0
billion. The HCS business distributed consumables parts and supplies to aviation
industry manufacturers, airlines, and aircraft repair and overhaul
facilities.  The combination of HCS with our consumables management
segment positioned us as the leading global distributor and value-added provider
of aerospace fasteners and other consumable products.  The combined
business serves as a distributor for every major aerospace fastener manufacturer
in the world. The combination of HCS with our existing distribution business
created the world’s leading distributor of aerospace fasteners and consumables
thereby allowing us to alter our business mix, such that approximately one-half
of our business is related to the sale of consumables products and commercial
aircraft spares.
  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 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 was
approximately 5.3% of sales during 2009 and is expected to remain at
approximately that 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 the A350, our targeted
capacity utilization levels, recent acquisitions and current industry
conditions, we expect that capital expenditures will be approximately $55-65
million over the next twelve months.
 
 Our
global customers continue to be impacted by weak demand for passenger travel
which has resulted in sharply lower yields for the global airline
industry.  Global air traffic in 2009 decreased by approximately 4.5%
as compared with global traffic increases of 0.1% in 2008, and 7.5% in
2007.  The 2009 decrease in traffic was the largest decline in history
and reflects the drop in global gross domestic product, the first negative
growth for the global economy since the Great Depression.  In response
to this economic environment, airlines, aircraft OEM’s, subcontractors and MRO’s
implemented stringent cash conservation measures, which resulted in a reduction
in the global fleet capacity, delays and cancellation of new aircraft purchases,
the deferral of fleet refurbishment programs and a massive destocking of
consumables and spare parts.  The destocking continued for most of
2009 resulting in an approximate 30% decrease in demand for commercial aircraft
spares and consumables products.  In addition, due to the demand
factors discussed above, business jet manufacturers have significantly reduced
their delivery rates by, in some cases, up to 50%.  We have responded
to these events by initiating intensive cost reduction initiatives, which
included reducing our headcount by almost 1,700 people, or approximately 24%,
from peak employment levels in July 2008, while still maintaining high service
levels and quality products for our customers.  Additionally, the cost
synergies associated with our ongoing HCS integration, combined with the
continued success of our corporate-wide lean and supply chain initiatives, have
further reduced our cost structure.  We expect that demand for our
products will improve in 2010 consistent with the expected higher level of
global air traffic.
 
 24
 
 Despite
these difficult industry conditions, we expect that our strategic decision to
alter our business mix such that approximately one-half of our business is
related to consumables and spares demand, as well as our strategic focus on OEM
direct or seller furnished equipment programs will positively impact our
business in the future.
 
 RESULTS
OF OPERATIONS
 
 In
order to present our financial results on a more comparable basis, certain
information in the following discussion and analysis is presented after giving
effect to the HCS acquisition.  Amounts presented on a “proforma”
basis have been calculated as if the HCS acquisition had occurred on January 1,
2008.
 
 Year
Ended December 31, 2009 Compared to the Year Ended December 31,
2008
 
 Revenues
for the year ended December 31, 2009 were $1,937.7, a decrease of 8.2% as
compared to 2008.
 
 Revenues
for each of our segments are set forth in the following table:
 
 Fiscal
      Year Ended December 31,2008
                
                
                2008
                
                
                Change
                
                
                %
      Change2009
                
                
                As
      Reported
                
                
                Proforma
                
                
                Proforma
                
                
                ProformaConsumables
      management
                
                $
                798.1
                
                
                $
                697.3
                
                
                $
                1,043.1
                
                
                $
                (245.0
                )
                
                
                -23.5
                %Commercial
      aircraft
                
                
                911.3
                
                
                
                1,138.7
                
                
                
                1,138.7
                
                
                
                (227.4
                )
                
                
                -20.0
                %Business
      jet
                
                
                228.3
                
                
                
                274.0
                
                
                
                274.0
                
                
                
                (45.7
                )
                
                
                -16.7
                %Total
      revenues
                
                $
                1,937.7
                
                
                $
                2,110.0
                
                
                $
                2,455.8
                
                
                $
                (518.1
                )
                
                
                -21.1
                %
  Consumables
management segment revenues increased by $100.8 or 14.5% as compared with the
prior year.    The higher level of revenues at the
consumables management segment were the result of the acquisition of HCS in July
of 2008. On a proforma basis, 2009 consumables management segment revenues
decreased by $245.0 or 23.5% as compared with 2008. The decline in consumables
management segment revenues reflects reduced activity at airline and MRO
maintenance facilities, reduced aircraft capacity, a decrease in revenue
passenger miles flown, and substantially reduced activity at business jet
manufacturers. 2009 commercial aircraft segment revenues of $911.3 declined
20.0% as compared with the prior year, reflecting retrofit program push outs,
reduced activity at airlines and MRO maintenance facilities, reduced aircraft
capacity and a lower level of revenue passenger miles flown. 2009 business jet
segment revenues of $228.3 decreased by $45.7 or 16.7% reflecting reduced demand
for new business jets as a result of the economic downturn.
 
 Cost of
sales for the current period of $1,268.5 decreased by $118.0 or 8.5% compared
with $1,386.5 cost of sales in the prior year primarily due to a decrease in
revenues of $172.3 or 8.2%. Cost of sales as a percentage of revenues was 65.5%
in 2009 and 65.7% in 2008.
 
 Selling,
general and administrative (SG&A) expenses for 2009 were $270.5 or 14.0% of
revenues, as compared with $238.3, or 11.3% of revenues in
2008.  SG&A expense increased in 2009 as compared with 2008
primarily as a result of including HCS for full year 2009, which in 2008 was
included only for the period subsequent to July 28, 2008, a $14.4 favorable
foreign exchange effect in 2008 as compared with a $9.1 cost during 2009, a
$10.1 increase in acquisition, integration and transition costs (AIT) related to
the HCS acquisition, offset by our cost reduction initiatives, including an
approximate 24% reduction in headcount as compared with our headcount at June
30, 2008.
 
 Research,
development and engineering expenses for 2009 were $102.6 or 5.3% of sales, as
compared to $131.4 or 6.2% of sales in 2008, and reflect the lower level of
spending associated with customer specific engineering
activities.   2009 research, development and engineering expenses
include new product development activities and certification efforts related to
a number of new products.  The 90 basis point decline in research,
development and engineering expenses as a percentage of sales is due to the
change in business mix as a result of the HCS acquisition.  During
2009, we applied for 108 U.S. and foreign patents as compared with 98 during
2008.
 
 25
 
 Operating
earnings were $296.1 in 2009, compared with an operating loss of $36.2 in 2008.
On a proforma basis, and excluding the $390.0 goodwill and asset impairment
charges, operating earnings for 2009 decreased by $97.7  as a result of the
21.1% decrease in revenues, a $10.1 increase in AIT costs and $23.5 of net
unfavorable impact from foreign exchange.
 
 The
following is a summary of operating earnings performance by
segment:
  As
      Reported
                
                
                Proforma
      and Excluding Asset
                  Impairment
      ChargesFiscal
      Year Ended December 31,
                
                
                Fiscal
      Year Ended December 31,Percent
                
                
                
                
                
                
                
                
                
                
                
                Percent2009
                
                
                2008
                
                
                Change
                
                
                Change
                
                
                2009
                
                
                2008
                
                
                Change
                
                
                ChangeConsumables
      management
                
                $
                151.0
                
                
                $
                (151.7
                )
                
                $
                302.7
                
                
                
                -199.5
                %
                
                $
                151.0
                
                
                $
                198.5
                
                
                $
                (47.5
                )
                
                
                -23.9
                %Commercial
      aircraft
                
                
                121.0
                
                
                
                78.2
                
                
                $
                42.8
                
                
                
                54.7
                %
                
                
                121.0
                
                
                
                158.0
                
                
                $
                (37.0
                )
                
                
                -23.4
                %Business
      jet
                
                
                24.1
                
                
                
                37.3
                
                
                $
                (13.2
                )
                
                
                -35.4
                %
                
                
                24.1
                
                
                
                37.3
                
                
                $
                (13.2
                )
                
                
                -35.4
                %Total
      operating earnings (loss)
                
                $
                296.1
                
                
                $
                (36.2
                )
                
                $
                332.3
                
                
                
                -918.0
                %
                
                $
                296.1
                
                
                $
                393.8
                
                
                $
                (97.7
                )
                
                
                -24.8
                %
 
 Consumables
management segment operating earnings were $151.0 in
2009.  Consumables management segment operating loss of $151.7 in 2008
reflects $310.2 of goodwill and intangible asset impairment
charges.  Exclusive of these charges, 2008 operating earnings would
have been $158.5. On a proforma basis and excluding the goodwill and intangible
asset impairment charges, operating earnings decreased by $47.5, or 23.9% on the
23.5% decrease in revenues.
  Commercial
aircraft segment 2009 operating earnings were $121.0, or 13.3% of
revenues.  2008 operating earnings of $78.2, included $79.8 of
goodwill and intangible asset impairment charges.  Exclusive of these
charges, 2008 operating earnings would have been $158.0.  Excluding
the impact of goodwill and intangible asset impairment charges in 2008,
commercial aircraft segment 2009 operating earnings decreased by $37.0 or 23.4%
on the 20.0% decrease in revenues. The 60 basis point decrease in operating
margin was primarily due to a $227.4, or 20.0% decrease in revenues and
approximately $9.0 of unfavorable foreign exchange effects in 2009 as compared
with $16.6 of favorable foreign exchange effects in 2008, offset by successful
cost reduction initiatives, improved manufacturing efficiencies and an overall
improved mix of product revenue in 2009.
  Business
jet segment’s 2009 operating earnings of $24.1 decreased by $13.2, or 35.4%, as
compared with the prior year, reflecting the 16.7% decrease in revenues, an
unfavorable mix of product revenue and the negative impact of reduced operating
leverage in the current period.
  Net
interest expense for 2009 of $88.4 was $40.4 higher than the net interest
expense in 2008, primarily due to the increase in long-term debt associated with
the July 2008 HCS acquisition.   We incurred debt prepayment
costs of $3.1 in 2009 related to a $100.0 prepayment of long-tem debt; we
incurred debt prepayment costs of $3.6 in 2008 related to the termination of the
bank credit facilities existing at the time of the HCS acquisition.
 
 Earnings
before income taxes in 2009 were $204.6, as compared to loss before income taxes
of $87.8 in 2008.  Excluding the impact of the 2008 goodwill and
intangible asset impairment charge, 2009 earnings before income taxes of $204.6
decreased by $97.6, or 32.3% as a result of the factors described
above.
  Income
taxes during 2009 were $62.6, or 30.6% of earnings before income
taxes.  A significant portion of the 2008 goodwill and intangible
asset impairment charge was non-deductible for tax purposes, which resulted in
income tax expense of $11.6 in 2008.  Excluding the impact of the
goodwill and intangible asset impairment charges, our 2008 income tax expense
was $101.6, representing an effective tax rate of 33.6%.  Our
effective tax rate in 2009 decreased as compared with 2008 primarily due to
higher research and development tax credits arising from tax reduction
initiatives completed during 2009.
  2009 net
earnings and net earnings per diluted share were $142.0 and $1.43, respectively,
as compared to 2008 net loss and net loss per diluted share of ($99.4) and
($1.05), respectively, due to the reasons described above.
 
 26
 Year
Ended December 31, 2008 Compared to the Year Ended December 31,
2007
 
 Record
revenues for the year ended December 31, 2008 were $2,110.0, an increase of
25.8% as compared to 2007.
 
 Revenues
for each of our segments are set forth in the following table:
  Fiscal
      Year Ended December 31,Percent2008
                
                
                2007
                
                
                Change
                
                
                ChangeConsumables
      management
                
                $
                697.3
                
                
                $
                386.5
                
                
                $
                310.8
                
                
                
                80.4
                %Commercial
      aircraft
                
                
                1,138.7
                
                
                
                1,098.1
                
                
                
                40.6
                
                
                
                3.7
                %Business
      jet
                
                
                274.0
                
                
                
                193.1
                
                
                
                80.9
                
                
                
                41.9
                %Total
      sales
                
                $
                2,110.0
                
                
                $
                1,677.7
                
                
                $
                432.3
                
                
                
                25.8
                %
 
 Consumables
management segment revenues increased by 80.4% as compared with the prior
year.  The higher level of revenues at the consumables management
segment were the result of the acquisition of HCS, which accounted for $238.6 of
the revenue increase and a broad-based increase in aftermarket revenues and
investments in product line expansion, offset by a decrease in demand in the
fourth quarter, as a result of the global recession.  Proforma revenue
growth at the consumables management segment in 2008, reflecting the acquisition
of HCS as if it had occurred as of the beginning of 2007, was
13.0%.  Commercial aircraft segment revenues increased 3.7% as
compared with the prior year, reflecting lower demand in the second half of
2008, as a result of the global recession.  Business jet segment
revenues increased by $80.9 or 41.9%, reflecting the higher level of new
business jet deliveries and higher revenues from super first class
products.
 
 Cost of
sales for 2008 of $1,386.5, or 65.7% of revenues, increased by $278.9 compared
to $1,107.6, or 66.0% of revenues in 2007. The 30 basis point decrease in 2008
is due to the change in business mix as a result of the acquisition of HCS,
offset by margin expansion at both the commercial aircraft and business jet
segments.
 
 Selling,
general and administrative expenses in 2008 were $238.3, or 11.3% of sales,
compared to $195.2, or 11.6% in 2007.  The increase in spending is
primarily due to the HCS acquisition ($28.9), and higher commissions,
compensation and benefits ($13.7) associated with the 25.8% increase in revenues
and a nearly 32% increase in backlog from December 31, 2007, offset by favorable
exchange effects ($14.4).  Selling, general and administrative
expenses as a percentage of sales decreased by 30 basis points, reflecting the
operating leverage in our business.
 
 Research,
development and engineering expenses for 2008 were $131.4, or 6.2% of sales,
compared to $127.9, or 7.6% of sales in the prior year, and reflect the higher
level of spending associated with customer specific engineering activities, new
product development activities (primarily at the commercial aircraft segment),
certification efforts related to a number of new products, including products
for the new Boeing 787 Dreamliner Aircraft, Airbus A350 XWB, as well as new
product spending for new business jet aircraft (Cessna Citation Columbus,
Gulfstream 650, Dassault Falcon 7X and Embraer Legacy 450 and Legacy 500) and
the super first class suite of products.  The 140 basis point decline
in research, development and engineering expenses as a percentage of sales is
due to the change in business mix as a result of the HCS
acquisition.  During 2008, we applied for 98 U.S. and foreign patents
versus 88 during 2007.
 
 During
the year ended December 31, 2008, in accordance with ASC 350 we performed our
annual testing of impairment of goodwill.  Adverse equity market
conditions caused a decrease in market multiples, including our fiscal year end
market capitalization at December 31, 2008.  The fair value of our
reporting units for goodwill impairment testing were determined using valuation
techniques  based on estimates, judgments and assumptions that we
believe were appropriate under the circumstances.  The sum of the fair
values of the reporting units were evaluated based on our  market
capitalization determined using average share prices within a reasonable period
of time near December 31, 2008, plus an estimated control premium plus the fair
value of our debt obligations.  The decrease in the current market
multiples and our market capitalization resulted in a decline in the fair value
of our reporting units as of December 31, 2008, we recorded a pre-tax asset
impairment charge related to goodwill and intangible assets of approximately
$390.0.
  As a
result of the $390.0 asset impairment charge, our 2008 operating loss was
($36.2) as compared to 2007 operating earnings of $247.0, or 14.7% of sales in
2007. Operating earnings, exclusive of the asset impairment charge, increased by
43.2% due to the 25.8% revenue growth and a 210 basis point expansion in
operating margin to 16.8% of sales, reflecting our high in quality
backlog.
 
 27
 
 The
following is a summary of operating earnings performance by
segment:
 
 As
      Reported
                
                
                Excluding
      Asset Impairment ChargesFiscal
      Year Ended December 31,
                
                
                Fiscal
      Year Ended December 31,Percent
                
                
                
                
                
                
                
                
                
                
                
                Percent2008
                
                
                2007
                
                
                Change
                
                
                Change
                
                
                2008
                
                
                2007
                
                
                Change
                
                
                ChangeConsumables
      management
                
                $
                (151.7
                )
                
                $
                85.5
                
                
                $
                (237.2
                )
                
                
                (277.4
                )%
                
                $
                158.5
                
                
                $
                85.5
                
                
                $
                73.0
                
                
                
                85.4
                %Commercial
      aircraft
                
                
                78.2
                
                
                
                141.8
                
                
                
                (63.6
                )
                
                
                (44.9
                )%
                
                
                158.0
                
                
                
                141.8
                
                
                
                16.2
                
                
                
                11.4
                %Business
      jet
                
                
                37.3
                
                
                
                19.7
                
                
                
                17.6
                
                
                
                89.3
                %
                
                
                37.3
                
                
                
                19.7
                
                
                
                17.6
                
                
                
                89.3
                %Total
      operating (loss) earnings
                
                $
                (36.2
                )
                
                $
                247.0
                
                
                $
                (283.2
                )
                
                
                (114.7
                )%
                
                $
                353.8
                
                
                $
                247.0
                
                
                $
                106.8
                
                
                
                43.2
                %
 Consumables
management segment operating loss of $151.7 in 2008 reflects $310.2 of goodwill
and intangible asset impairment charges.  Exclusive of these charges,
operating earnings would have been $158.5, representing an increase of $73.0, or
85.4%, due to an 80.4% increase in revenue and a 60 basis point increase in
operating margin. Consumables management segment operating earnings in 2008 were
also impacted by $9.7 of acquisition and integration costs related to the HCS
acquisition and $21.2 of unfavorable contract accrual adjustments related to the
HCS acquisition.  On a proforma basis, giving effect to the
acquisition of HCS as if it occurred on January 1, 2007, and excluding the
goodwill and asset impairment charges, revenues in 2008 of $1,043.6 would have
increased by $120.0, or 13.0% as compared to proforma revenues in 2007 of
$923.6, and proforma operating earnings would have increased by 41.2% to $198.5
(19.0% of sales), as compared to $140.6 in 2007.  Proforma operating
earnings, including the goodwill and asset impairment charges incurred in 2008,
would have been ($104.7) and $140.6, for the years ended December 31, 2008 and
2007, respectively.
  For the
year ended December 31, 2008, commercial aircraft segment operating earnings of
$78.2 reflect $79.8 of goodwill and intangible asset impairment charges.
Exclusive of these charges, 2008 operating earnings increased by $16.2, or 11.4%
as compared to 2007, primarily due to a 100 basis point expansion in operating
margin.  Excluding goodwill and asset impairment charges, operating
margin at commercial aircraft segment expanded by 100 basis points during 2008
reflecting synergies associated with the Draeger acquisition, improved
efficiencies associated with major seating programs and successful cost
reduction initiatives and favorable foreign exchange effects as a result of the
strengthening of the U.S. dollar in the second half of 2008, offset by an
overall weaker product revenue mix. Excluding goodwill and asset impairment
charges, operating margin at commercial aircraft segment has expanded by 460
basis points over the 2005-2008 period.
  Business
jet segment’s 2008 operating earnings of $37.3 increased by $17.6, or 89.3%, as
compared with the prior year, as a result of the 41.9% increase in revenue and
the 340 basis point expansion in operating margin.  This margin
expansion reflects substantially improved operating results for the super first
class product line and operating leverage at the higher sales
level.
 
 We
financed the acquisition of HCS (and refinanced $150.0 of existing indebtedness)
by completing a new $525.0 term loan to banks, a $600.0 of senior unsecured
notes offering and by issuing 6.0 million shares of our common stock to
Honeywell at an agreed upon value of $26.38 per share.  See
“Outstanding Debt and Other Financing Arrangements” below for additional
information regarding our indebtedness.  Interest expense was $48.0
for 2008, an increase of $27.1 as compared to 2007 due to the debt incurred to
finance the HCS acquisition.  During 2008 we recorded debt prepayment
costs of $3.6, incurred in connection with the financing of the HCS
acquisition.
 
 Loss
before income taxes in 2008 was ($87.8), as compared to earnings before income
taxes of $215.1 in 2007.  Excluding the goodwill and intangible asset
impairment charges, the 2008 earnings before income taxes were $302.2, an
increase of $87.1, or 40.5% compared to 2007, due to factors described
above.
 
 A
significant portion of the goodwill and intangible asset impairment charge was
non-deductible for tax purposes, which resulted in income tax expense for 2008
of $11.6. Excluding the impact of the goodwill and intangible asset impairment
charges, the Company’s tax expense was $101.6 for an effective tax rate of
33.6%. The Company’s tax expense of $67.8 for 2007 reflected a tax benefit for
the recognition of our U.K. deferred tax asset in the amount of
$8.7.
 
 28
 
 Net loss
and net loss per diluted share in 2008 were ($99.4) and ($1.05),
respectively.  Excluding the goodwill and intangible asset impairment
charges, 2008 net earnings and net earnings per diluted share were $200.6 and
$2.12, respectively, as compared to 2007 net earnings and net earnings per
diluted share of $147.3 and $1.66, respectively.
 
 
   
 29
 
 LIQUIDITY
AND CAPITAL RESOURCES
 
 Current
Financial Condition
 
 Current
Financial Condition
 
 As of
December 31, 2009, our net debt-to-net-capital ratio was 38.3%.  Net
debt was $898.6, which represented total debt of $1,018.7, less cash and cash
equivalents of $120.1. At December 31, 2009, there was $418.4 in term debt
outstanding under the senior secured credit facility, which consists of a $350.0
revolving credit facility and a $525.0 six-year term loan facility, due July
2014. There were no borrowings outstanding under the revolving credit facility
of our credit agreement and we have no debt maturities until
2014.  Our 8.5% Senior Notes are due in 2018.  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 December 31, 2009 was $1,286.9, an increase of $113.2 as compared
with working capital at December 31, 2008. During 2009, we successfully
completed our initiative to bring HCS inventories in line with our distribution
stocking business model.  This effort was the primary driver behind
the $73.1 increase in net inventory, all of which occurred in the first half of
the year.
 
 Cash
Flows
 
 As of
December 31, 2009, cash and cash equivalents were $120.1 as compared to $168.1
at December 31, 2008.  Cash provided by operating activities was $82.3
for the year ended December 31, 2009 as compared to $115.5 for the year ended
December 31, 2008. The primary sources of cash provided by operating activities
during 2009 were net earnings of $142.0, depreciation and amortization of $49.5,
non-cash compensation of $24.1, a $55.2 decrease in accounts receivable, a $16.5
decrease in other current assets and other assets and a deferred income tax
provision of $45.3. The primary use of cash in operating activities during the
year ended December 31, 2009 was primarily related to a decrease of $181.5 in
accounts payable and accrued liabilities and a $73.1 net increase in
inventories, which was principally related to our initiative to bring the HCS
inventories in-line in our consumables management segment stocking distributor
business model (which was completed in the first half of 2009).  The
primary sources of cash provided by operating activities during 2008 were a net
loss of $99.4 offset by a non-cash charge for goodwill and intangible asset
impairment of $390.0, depreciation and amortization of $40.7, non-cash
compensation of $15.5, a $50.9 increase in accounts payable and accrued
liabilities, a $14.7 increase in deferred income taxes and an $8.7 provision for
doubtful accounts.  The primary use of cash in operating activities
during the year ended December 31, 2008 was primarily related to a $262.0
investment in inventories, and a $22.2 increase in accounts
receivable.
 
 The
primary use of cash in investing activities during the year ended December 31,
2009 was related to capital expenditures of $28.4. The primary use of cash in
investing activities during the year ended December 31, 2008 was related to the
HCS acquisition of $907.5 and capital expenditures of $31.7.
 
 During
2009, we prepaid $100.0 of our term loan facility from cash provided by
operating activities. During 2008, we prepaid $150.0 of our bank term loan with
proceeds from the financing of the HCS acquisition.
 
 Capital
Spending
 
 Our
capital expenditures were $28.4 and $31.7 during the years ended December 31,
2009 and 2008, respectively.  Taking into consideration our backlog,
recent program awards to deliver multi-year programs for the A350 aircraft,
targeted capacity utilization levels, recent capital expenditure investments,
the HCS acquisition and current industry conditions, we anticipate capital
expenditures of approximately $55-$65 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 our senior secured credit facility.
 
 Between
1989 and 2009, we completed 25 acquisitions for an aggregate purchase price of
approximately $2.2 billion.  Following these acquisitions, we
rationalized the businesses, reduced headcount by approximately 5,500 employees
and eliminated 26 facilities.  We have financed these acquisitions
primarily through issuances of debt and equity securities.
  30
 
 Outstanding
Debt and Other Financing Arrangements
 
 Long-term
debt at December 31, 2009 consisted of $600.0 aggregate principal amount of the
Company’s 8.5% Senior Notes due 2018 (Senior Notes) and $418.4 outstanding under
the term loan facility of the Company’s senior secured credit facility (Credit
Agreement). In the fourth quarter of 2009, we made a $100.0 prepayment of our
term loan facility.
 
 On July
1, 2008, we issued $600.0 aggregate principal amount of our 8.5% Senior Notes
due 2018, in an offering registered pursuant to the Securities
Act.  The net proceeds of our offering of Senior Notes were used,
together with borrowings under the Term Loan Facility described below and an
issuance of our common stock to Honeywell, to pay for the HCS acquisition, to
repay approximately $150.0 outstanding under our Old Credit Agreement described
below, and to pay transaction fees and expenses.
 
 On July
28, 2008, we entered into a senior secured credit facility, dated as of July 28,
2008 consisting of (a) a five-year, $350.0 revolving credit facility (the
Revolving Credit Facility) and (b) a six-year, $525.0 term loan facility (the
Term Loan Facility).  Borrowings under the Revolving Credit Facility
bear interest at an annual rate equal to the London interbank offered rate
(LIBOR) (as defined) plus 275 basis points or prime (as defined) plus 175 basis
points. There were no amounts outstanding under the Revolving Credit Facility as
of December 31, 2009.  Borrowings under the Term Loan Facility bear
interest at an annual rate equal to LIBOR plus 275 basis points or prime (as
defined) plus 175 basis points (5.75% at December 31, 2009).  During
2009 we prepaid $100.0 of our Term Loan Facility and $418.4 was outstanding
under the Term Loan Facility as of December 31, 2009.  Letters of
credit outstanding under the Credit Agreement aggregated approximately $4.3 as
of December 31, 2009.
 
 During
2008, we prepaid approximately $150.0 outstanding under our Amended and Restated
Credit Agreement, dated as of August 25, 2006 (the Old Credit
Agreement).  The Old Credit Agreement was terminated as of July 28,
2008.
 
 Contractual
Obligations
 
 The
following charts reflect our contractual obligations and commercial commitments
as of December 31, 2009. 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
                
                2010
                
                
                2011
                
                
                2012
                
                
                2013
                
                
                2014
                
                
                Thereafter
                
                
                TotalLong-term
      debt and other non-current liabilities (1)
                
                $
                0.2
                
                
                $
                1.3
                
                
                $
                0.7
                
                
                $
                0.8
                
                
                $
                419.3
                
                
                $
                611.8
                
                
                $
                1,034.1Operating
      leases
                
                
                24.5
                
                
                
                21.0
                
                
                
                17.6
                
                
                
                15.5
                
                
                
                14.3
                
                
                
                67.8
                
                
                
                160.7Purchase
      obligations (2)
                
                
                29.2
                
                
                
                6.0
                
                
                
                4.4
                
                
                
                2.0
                
                
                
                1.8
                
                
                
                1.6
                
                
                
                45.0Future
      interest payment on outstanding debt (3)
                
                
                76.7
                
                
                
                76.7
                
                
                
                76.7
                
                
                
                76.7
                
                
                
                65.9
                
                
                
                178.5
                
                
                
                551.2Total
                
                $
                130.6
                
                
                $
                105.0
                
                
                $
                99.4
                
                
                $
                95.0
                
                
                $
                501.3
                
                
                $
                859.7
                
                
                $
                1,791.0Commercial
      CommitmentsLetters
      of Credit
                
                $
                4.3
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                $
                4.3
 
 (1)
              Our
      liability for unrecognized tax benefits of $15.9 at December 31, 2009 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 material impact on our consolidated financial
      statements.
 
 (2)
              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.
 
 (3)
              Interest
      payments include estimated amounts due on our outstanding term loan of our
      Senior Secured Credit Facility based on the actual interest rate at
      December 31, 2009 and estimated interest payments due on the 8.5% Senior
      Notes based on the stated rate of 8.5%.  Actual interest
      payments on our obligations under the Senior Secured Credit Facility will
      fluctuate based on LIBOR or prime pursuant to the terms of the senior
      secured credit facility.
  31
 
 We
believe that our cash flows, together with cash on hand and the availability
under the 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 $160.7 at December 31, 2009.
 
 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 consolidated financial statements.
 
 Deferred
Tax Assets
 
 We
maintained a tax valuation allowance of $10.5 as of December 31, 2009, primarily
related to foreign tax credits and foreign net operating losses.
 
 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 below. For a detailed
discussion on the application of these and other accounting policies, see Note 1
to our Consolidated Financial Statements.
 
 Revenue
Recognition
 
 Product
revenues are recorded when the earnings process is complete. This generally
occurs when the products are shipped to the customer in accordance with the
contract or purchase order, risk of loss and title has passed to the customer,
collectibility is reasonably assured and pricing is fixed and determinable. In
instances where title does not pass to the customer upon shipment, we recognize
revenue upon delivery or customer acceptance, depending on the terms of the
sales contract.
 
 Service
revenues primarily consist of engineering activities and are recorded when
services are performed.
 
 32
 
 Revenues
and costs under certain long-term contracts are recognized using contract
accounting under the percentage-of-completion method in accordance with ASC 605,
Construction – Type and
Production – Type Contracts (the American Institute of Certified Public
Accountants Statement of Position 81-1, Accounting for Performance of
Construction – Type and Certain Production – Type Contracts) (ASC 605), with the
majority of the contracts accounted for under the cost-to-cost method. Under the
cost-to-cost method, the revenues related to the long-term contracts are
recognized based on the ratio of actual costs incurred to total estimated costs
to be incurred. The Company also uses the units-of-delivery method to account
for certain of its contracts.  Under the units-of delivery method,
revenues are recognized based on the contract price of units
delivered.
 
 The
percentage-of-completion method requires the use of estimates of costs to
complete long-term contracts. Due to the duration of these contracts as well as
the technical nature of the products involved, the estimation of these costs
requires management judgment in connection with assumptions and projections
related to the outcome of future events.  Management’s assumptions
include future labor performance and rates and projections relative to material
and overhead costs, as well as the quantity and timing of product deliveries.
The Company reevaluates its contract estimates periodically and reflects changes
in estimates in the current period using the cumulative catch-up method.
Revenues associated with any contractual claims are recognized when it is
probable that the claim will result in additional contract revenue and the
amount can be reasonably estimated. Anticipated losses on contracts are
recognized in the period in which the losses become probable and
estimable.
 
 Accounts
Receivable
 
 We
perform ongoing credit evaluations of our customers and adjust credit limits
based upon payment history and the customer's current creditworthiness, as
determined by our review of their current credit information. We continuously
monitor collections and payments from our customers and maintain an allowance
for estimated credit losses based upon our historical experience and any
specific customer collection issues that we have identified. If the actual
uncollected amounts significantly exceed the estimated allowance, our operating
results would be significantly adversely affected. While such credit losses have
historically been within our expectations and the provisions established, we
cannot guarantee that we will continue to experience the same credit loss rates
that we have in the past.
 
 Inventories
 
 We value
our inventories at the lower of cost to purchase, using FIFO or weighted average
cost method, or market. The inventory balance, which includes the cost of raw
material, purchased parts, labor and production overhead costs, is recorded net
of a reserve for excess, obsolete or unmarketable inventories. We regularly
review inventory quantities on hand and record a reserve for excess and obsolete
inventories based primarily on historical usage and on our estimated forecast of
product demand and production requirements. In accordance with industry
practice, costs in inventory include amounts relating to long-term contracts
with long production cycles and to inventory items with long procurement cycles,
some of which are not expected to be realized within one year.  Demand
for our products can fluctuate significantly. Our estimates of future product
demand may prove to be inaccurate, in which case we may have understated or
overstated the provision required for excess and obsolete inventories. In the
future, if our inventories are determined to be overvalued, we would be required
to recognize such costs in our cost of goods sold at the time of such
determination. Likewise, if our inventories are determined to be undervalued, we
may have over-reported our costs of goods sold in previous periods and would be
required to recognize such additional operating income at the time of
sale.
 
 Long-Lived
Assets and Goodwill
 
 To
conduct our global business operations and execute our strategy, we acquire
tangible and intangible assets, which affect the amount of future period
amortization expense and possible impairment expense that we may incur. The
determination of the value of such intangible assets requires management to make
estimates and assumptions that affect our consolidated financial statements. In
accordance with ASC 350, we assess potential impairment to goodwill of a
reporting unit and other intangible assets on an annual basis or when there is
evidence that events or changes in circumstances indicate that the carrying
amount of an asset may not be recovered. Our judgment regarding the existence of
impairment indicators and future cash flows related to intangible assets are
based on operational performance of our acquired businesses, expected changes in
the global economy, aerospace industry projections, discount rates and other
judgmental factors. Future events could cause us to conclude that impairment
indicators exist and that goodwill or other acquired tangible or intangible
assets associated with our acquired businesses are impaired. Any resulting
impairment loss could have an adverse impact on our results of
operations.
 
 During
2008, adverse equity market conditions caused a decrease in market multiples,
including our fiscal year end market capitalization at December 31,
2008.  The fair value of our reporting units for goodwill impairment
testing were determined using valuation techniques based on estimates, judgments
and assumptions we believe were appropriate under the
circumstances.  The sum of the fair values of the reporting units were
evaluated based on our market capitalization determined using average share
prices within a reasonable period of time near December 31, 2008, plus an
estimated control premium plus the fair value of our debt
obligations.  The decrease in market multiples and our market
capitalization at December 31, 2008 resulted in a decline in the fair value of
our reporting units.  Accordingly, as of December 31, 2008, we
recorded a pre-tax impairment charge of $369.3 related to goodwill and $20.7
related to an identifiable intangible asset.  There were no indicators
of goodwill or intangible asset impairment at December 31, 2009.
 
 33
 
 
 Accounting
for Income Taxes
 
 Significant
management judgment is required in evaluating our tax positions and in
determining our provision for income taxes, our deferred tax assets and
liabilities and any valuation allowance recorded against our net deferred tax
assets. We have recorded a valuation allowance of $10.5 as of December 31, 2009,
due to uncertainties related to our ability to utilize our deferred tax assets,
primarily consisting of our foreign net operating losses and foreign tax credit
carryforwards. The valuation allowance is based on our estimates of taxable
income by jurisdictions in which we operate and the period over which our
deferred tax assets will be recoverable. In the event that actual results differ
from these estimates, or we revise these estimates in future periods, we may
need to adjust the valuation allowance which could materially impact our
financial position and results of operations.
 
 Effect
of Inflation
 
 Inflation
has not had and is not expected to have a significant effect on our
operations.
 
 ITEM 7A.    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 December 31, 2009, we had no outstanding foreign currency
exchange contracts. In addition, we have not entered into any other derivative
financial instruments.
 
 Interest Rates - At December
31, 2009, we had adjustable rate debt of $418.4. The weighted average interest
rate for the adjustable rate debt was approximately 5.75% at December 31, 2009.
If interest rates on variable rate debt were to increase by 10% above current
rates, the impact on our financial statements would be to reduce pre-tax income
by $2.4. We do not engage in transactions intended to hedge our exposure to
changes in interest rates.
 
 As of
December 31, 2009, 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 8.    FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA
 
 The
information required by this section is set forth beginning on page F-1 of this
Form 10-K.
 
 ITEM
9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
ANDFINANCIAL
DISCLOSURE
 
 None.
 
 34
 
 ITEM 9A.    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
December 31, 2009, of the design and operation of the Company’s disclosure
controls and procedures (as defined in Rule 13a-15(e) of the Exchange
Act).  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 SEC 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 fourth quarter of 2009 that have materially affected, or are
reasonably likely to materially affect, the Company’s internal control over
financial reporting.
  
 35
 
 MANAGEMENT’S ANNUAL REPORT
ON INTERNAL CONTROL OVER FINANCIAL REPORTING
  The
management of BE Aerospace, Inc. and its subsidiaries (the Company) is
responsible for establishing and maintaining adequate internal control over
financial reporting for the Company.  Internal control over financial
reporting is a process designed by, or under the supervision of the Company’s
principal executive and principal financial officers, and effected by the
Company’s board of directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of the Company’s financial statements for external purposes in
accordance with generally accepted accounting principles.
 
 The
Company’s internal control over financial reporting includes those policies and
procedures that: (1) pertain to the maintenance of records, that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the
assets of the Company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and
expenditures of the Company are being made only in accordance with
authorizations of management and directors of the Company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Company’s assets that could have a
material effect on the financial statements.
 
 Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
 
 The
Company’s management assessed the effectiveness of the Company’s internal
control over financial reporting as of December 31, 2009.  In making
the assessment, the Company’s management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated
Framework.  Based on its assessment, management believes that,
as of December 31, 2009, the Company’s internal control over financial reporting
is effective.
 
 The
registered public accounting firm that audited the financial statements included
in this annual report has issued an attestation report on the Company’s internal
control over financial reporting.
 
 By:
                /s/ Amin J. Khoury
                
                By:
                /s/ Thomas P. McCaffreyAmin
      J. Khoury
                
                
                Thomas
      P. McCaffreyChairman
      and Chief Executive Officer
                
                
                Senior
      Vice President and Chief Financial OfficerFebruary
      25, 2010
                
                
                February
      25, 2010
 36
 
 REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
   The Board
of Directors and Stockholders
 BE
Aerospace, Inc.
 Wellington,
Florida
 
 We have
audited the internal control over financial reporting of BE Aerospace, Inc. and
subsidiaries (the Company) as of December 31, 2009, based on criteria
established in Internal
Control – Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.  The Company’s management is
responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying Management’s Annual Report on Internal
Control Over Financial Reporting.  Our responsibility is to express an
opinion on the Company’s internal control over financial reporting based on our
audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing
and evaluating the design and operating effectiveness of internal control based
on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.
 
 A
company’s internal control over financial reporting is a process designed by, or
under the supervision of, the company’s principal executive and principal
financial officers, or persons performing similar functions, and effected by the
company’s Board of Directors, management, and other personnel, 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. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial
statements.
 
 Because
of the inherent limitations of internal control over financial reporting,
including the possibility of collusion or improper management override of
controls, material misstatements due to error or fraud may not be prevented or
detected on a timely basis. Also, projections of any evaluation of the
effectiveness of the internal control over financial reporting to future periods
are subject to the risk that the controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
 
 In our
opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2009, based on the
criteria established in Internal Control — Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission.
 
 We have
also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated financial statements and
financial statement schedule as of and for the year ended December 31,
2009, of the Company and our report dated February 25, 2010, expressed an
unqualified opinion on those consolidated financial statements and financial
statement schedule.
 
 /s/  Deloitte
& Touche LLP
 Certified
Public Accountants
 
 Boca
Raton, Florida
 February
25, 2010
 
 37
 
 PART
III
 
 ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS AND
CORPORATE GOVERNANCE
 
 The
following table sets forth information regarding our directors and executive
officers as of February 25, 2010. Officers of the Company are elected annually
by the Board of Directors.
 
 Title
              Age
              PositionAmin
      J. Khoury
              70
              Chairman
      of the Board and Chief Executive OfficerCharles
      L. Chadwell
              69
              Director(2),
      (3)Jim
      C. Cowart
              58
              Director(1),
      (3)Richard
      G. Hamermesh
              62
              Director(1),
      (3)Robert
      J. Khoury
              67
              DirectorJonathan
      M. Schofield
              69
              Director(2),
      (3)Arthur
      E. Wegner
              72
              Director(1),
      (3)Michael
      B. Baughan
              50
              President
      and Chief Operating OfficerThomas
      P. McCaffrey
              55
              Senior
      Vice President, Chief Financial Officer and TreasurerWayne
      R. Exton
              46
              Vice
      President and General Manager, Business Jet SegmentWerner
      Lieberherr
              49
              Vice
      President and General Manager, Commercial Aircraft
  SegmentRobert
      A. Marchetti
              67
              Vice
      President and General Manager, Consumables ManagementRyan
      M. Patch
              49
              Vice
      President - Law, General Counsel and SecretaryStephen
      R. Swisher
              51
              Vice
      President - Finance and Controller
 
 ________
 (1)         Member,
Audit Committee
 (2)         Member,
Compensation Committee
 (3)         Member,
Nominating and Corporate Governance Committee
 38
 
 Director
Classification
 
 Our
restated certificate of incorporation provides that the Board of Directors is to
be divided into three classes, each nearly as equal in number as possible, so
that each director (in certain circumstances after a transitional period) will
serve for three years, with one class of directors being elected each
year.  The Board is currently comprised of two Class I Directors (Jim
C. Cowart and Arthur E. Wegner), two Class II Directors (Robert J. Khoury and
Jonathan M. Schofield) and three Class III Directors (Amin J. Khoury, Charles L.
Chadwell and Richard G. Hamermesh). The terms of the Class I, Class II and Class
III Directors expire at the end of each respective three-year term and upon the
election and qualification of successor directors at annual meetings of
stockholders held at the end of each fiscal year. Our executive officers are
elected annually by the Board of Directors following the annual meeting of
stockholders and serve at the discretion of the Board of Directors.
 
 Current
Directors
 
 Amin J. Khoury has been the
Chairman of the Board since July 1987 when he founded the
company.  Effective December 31, 2005, Mr. Amin J. Khoury was
appointed Chief Executive Officer.  Mr. Amin J. Khoury also served as
the company’s Chief Executive Officer until April 1, 1996.  Since
1986, Mr. Khoury has been a director of Synthes, Inc., the world’s leading
manufacturer and marketer of orthopedic trauma implants and a leading global
manufacturer and marketer of cranial-maxillofacial and spine implants. Mr.
Khoury is a member of the board of directors of the Aerospace Industries
Association.  Mr. Khoury is the brother of Robert J.
Khoury.
 
 Charles L. Chadwell has been
a Director since January 2007.  He was the Vice President and General
Manager, Commercial Engine Operations for GE Aircraft Engines, from which he
retired in 2002.  After joining General Electric in 1965, he held a
variety of management positions, including:  Program Manager, CF6-80C
program; Plant Manager, GE Aircraft Engines’ Wilmington, North Carolina plant;
General Manager, GE Aircraft Engines’ Sourcing Operations; General Manager;
Production Operations, GE Aircraft Engines’ Lynn, Massachusetts plant; Vice
President, GE Aircraft Engines Human Resources; and Vice President and General
Manager, Production and Procurement, GE Aircraft Engines.  Currently
serves on the Boards of Spirit AeroSystems Holdings Inc., Parkway Products Inc.
and Chairman of the Board, PaR Systems.
 
 Jim C. Cowart has been a
Director since November 1989.  Since September 2005, Mr. Cowart has
been a Director of EAG Inc., a privately held company, a predecessor of which
was a company listed on the London Stock Exchange, and which provides
microanalytic laboratory services including surface analysis and materials
characterization.  Since September 2004, Mr. Cowart has been Chairman
and Chief Executive Officer of Auriga Medical Products GmbH, a distributor of
medical devices.  He is a Principal of Cowart & Co. LLC and Auriga
Partners, Inc., private capital firms that provide strategic planning,
competitive analysis, financial relations and other services.  From
August 1999 to May 2001, he was Chairman of QualPro Corporation, an aerospace
components manufacturing company.  From January 1993 to November 1997,
he was the Chairman and CEO of Aurora Electronics Inc. Previously, Mr. Cowart
was a founding general partner of Capital Resource Partners, a private
investment capital manager, and held various positions in investment banking and
venture capital with Lehman Brothers, Shearson Venture Capital and Kidder,
Peabody & Co.
 
 Richard G. Hamermesh has been
a Director since July 1987. Dr. Hamermesh has been a Professor of Management
Practice at Harvard Business School since July 1, 2002. From 1987 to 2001, he
was a co-founder and a Managing Partner of The Center for Executive Development,
an executive education and development consulting firm.  From 1976 to
1987, Dr. Hamermesh was a member of the faculty of Harvard Business School. He
is also an active investor and entrepreneur, having participated as a principal,
director and investor in the founding and early stages of more than 15
organizations.
 
 Robert J. Khoury has been a
Director since July 1987, when he co-founded the company.  On December
31, 2005, Mr. Khoury retired from service as the company’s President and Chief
Executive Officer, a position he held since August 2000.  From April
1996 through August 2000, he served as Vice Chairman.  Mr. Khoury is
the brother of Amin J. Khoury.
 
 Jonathan M. Schofield has
been a Director since April 2001. From December 1992 through February 2000, Mr.
Schofield served as Chairman of the Board and CEO of Airbus North America
Holdings, a subsidiary of Airbus Industries, a manufacturer of large civil
aircraft, and served as Chairman from February 2000 until his retirement in
March 2001. From 1989 until he joined Airbus, Mr. Schofield was President of
United Technologies International Corporation. Mr. Schofield is currently a
member of the board of directors of Aero Sat, Inc., Nordam Group and
TurboCombustor Technology, Inc.; and is a trustee of LIFT Trust.
 
 39
 
 Arthur E. Wegner has been a
Director since January 2007.  Mr. Wegner retired in 2000 as Executive
Vice President of Raytheon Company and Chairman of Raytheon
Aircraft.  He joined Raytheon Company in July 1993 as a Senior Vice
President and was appointed Chairman and CEO of Raytheon’s Beech Aircraft
Corporation.  In September 1994, he was appointed Chairman and CEO of
Raytheon Aircraft, which was formed by the merger of Raytheon subsidiaries,
Beech Aircraft and Raytheon Corporate Jets.  He became Chairman of
Raytheon Aircraft in 2000.  He was elected an Executive Vice President
of Raytheon Company in March of 1995.  Mr. Wegner came to Raytheon
Company after 20 years with United Technologies Corporation (UTC), where he was
Executive Vice President and President of UTC’s Aerospace and Defense
Sector.  Prior to that he was President of UTC’s Pratt and Whitney
Division.  Mr. Wegner is past Chairman of the Board of Directors of
the General Aviation Manufacturers Association and the Aerospace Industries
Association.
 
 Executive
Officers
 
 Michael B. Baughan has been
President and Chief Operating Officer since December 31, 2005.  From
July 2002 to December 31, 2005, Mr. Baughan served as Senior Vice President and
General Manager of Commercial Aircraft Segment. From May 1999 to July 2002, Mr.
Baughan was Vice President and General Manager of Seating Products. From
September 1994 to May 1999, Mr. Baughan was Vice President, Sales and Marketing
for Seating Products. Prior to 1994, Mr. Baughan held various positions
including President of AET Systems, Manager of Strategic Initiatives at The
Boston Company (American Express) and Sales Representative at Dow Chemical
Company.
 
 Thomas P. McCaffrey has been
Senior Vice President and Chief Financial Officer since May 1993. From August
1989 through May 1993, Mr. McCaffrey was a Director with Deloitte & Touche
LLP, and from 1976 through 1989 served in several capacities, including Audit
Partner, with Coleman & Grant LLP.
 
 Werner Lieberherr has
been Vice President and General Manager, Commercial Aircraft Segment since July
2006.  Prior to joining our company, Mr. Lieberherr spent 20 years
with  Alstom Power, Inc., where he served in various senior management
positions in Europe, Asia, and North America, including President, Managing
Director, Vice President Project Management Worldwide, and General
Manager-Sales.
 
 Wayne R. Exton has been Vice
President and General Manager, Business Jet Segment since May
2006.  From November 2005 to April 2006, Mr. Exton served as Vice
President and General Manager super first class division of the Business Jet
Segment.  Prior to joining our company, Mr. Exton spent nine years at
the PLC (formerly Britax PLC) Britax Automotive and Aerospace Divisions of
Britax PLC, serving in a variety of senior management positions including
President, Vice President Operations and Director of Global Marketing and
Sales.  Before joining PLC, Mr. Exton held several senior management
positions at Magneti Marelli (a division of Fiat), and Lucas
Electrical.
 
 Robert A. Marchetti has been
Vice President and General Manager, Consumables Management Segment since April
2002. From February 2001 to April 2002, Mr. Marchetti was Vice President of
Machined Products Group. From 1997 to January 2001, Mr. Marchetti was employed
by Fairchild Corporation’s Fasteners Division with his last position being
Senior Vice President and Chief Operating Officer. From 1990 to 1997, Mr.
Marchetti served as a corporate officer of UNC Inc. where he held several senior
positions such as Corporate VP of Marketing, President of Tri-Remanufacturing
and Chief Operating Officer of the Accessory Overhaul Division. From 1989 to
1990, he served as President of AWA Incorporated. From 1986 through 1989, Mr.
Marchetti was Vice President of Marketing at General Electric Aircraft Engines
and General Manager for a Component Repair Division. From 1965 through 1986 he
held several sales and general management positions with Copperweld Corporation
and Carlisle Corporation.
 
 Ryan M. Patch has been Vice
President - Law, General Counsel and Secretary since July 2009 and was
previously Vice President - Law from December 2008 to July 2009.  From
2005 to 2008, Mr. Patch was a shareholder and member of the Board of Directors
of Jackson, DeMarco, Tidus & Peckenpaugh LLP in Irvine,
California.  Prior to that, Mr. Patch was a partner in a boutique
California law firm since 1992. Mr. Patch is Authorized House Counsel in the
State of Florida and
has beenadmitted to practice before the State Bar of California, the
U.S. District Court Central District of California, the U.S. District Court
Southern District of California, and the U.S. District Court Northern District
of California.
 
 Stephen R. Swisher has been
Vice President - Finance and Controller since August 1999. Mr. Swisher has been
Controller since 1996 and served as Director, Finance from 1994 to 1996. Prior
to 1994, Mr. Swisher held various management positions at Burger King
Corporation and Deloitte & Touche LLP.
 
 40




Audit
Committee
 
 We have a
separately-designated standing Audit Committee established in accordance with
section 3(a)(58)(A) of the Exchange Act.  Messrs. Cowart, Hamermesh
and Wegner currently serve as members of the Audit Committee.  Under
the current SEC rules and the rules of the Nasdaq, all of the members are
independent. Our Board of Directors has determined that Mr. Cowart is an “audit
committee financial expert” in accordance with current SEC rules.  Mr.
Cowart is also independent, as that term is used in Item 407 of Regulation S-K
of the federal securities laws.
 
 Section
16(a) Beneficial Ownership Reporting Compliance
 
 Section
16(a) of the Exchange Act requires our directors and executive officers, and
persons who own more than ten percent of a registered class of our equity
securities, to file with the SEC initial reports of ownership and reports of
changes in ownership of our common stock and other equity securities. Officers,
directors and greater-than-ten-percent shareholders are required by SEC
regulations to furnish us with copies of all Section 16(a) forms they
file.
  To our
knowledge, based solely on a review of the copies of such reports furnished to
us and, with respect to our officers and directors, written representations that
no other reports were required, during the fiscal year ended December 31, 2009,
all Section 16(a) filing requirements applicable to our officers, directors and
greater-than-ten-percent beneficial owners were complied with.
  In making
the above statements, we have relied on the written representations of our
directors and officers and copies of the reports that have been filed with the
SEC.
 
 Code
of Ethics
  We have
adopted a code of ethics, or Code of Business Conduct, to comply with the rules
of the SEC and Nasdaq.  The Code of Business Conduct applies to our
directors, officers and employees worldwide, including our principal executive
officer and senior financial officers.  A copy of our Code of Business
Conduct is maintained on our website at www.beaerospace.com.
 
 ITEM 11.    EXECUTIVE
COMPENSATION
 
 Information
set forth under the caption "Executive Compensation" in the Proxy Statement is
incorporated by reference herein. The Compensation Committee Report will be
included in the Proxy Statement and is not incorporated herein.
 
 ITEM
12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENTAND
RELATED STOCKHOLDER MATTERS
 
 Information
set forth under the captions "Security Ownership of Certain Beneficial Owners
and Management" and “Equity Compensation Plan Information” in the Proxy
Statement is incorporated by reference herein.
 
 ITEM 13.    CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
 
 Information
set forth under the caption "Certain Relationships and Related Transactions" in
the Proxy Statement is incorporated by reference herein.
 
 ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND
SERVICES
 
 Information
set forth under the caption “Principal Accountant Fees and Services” in the
Proxy Statement is incorporated by reference herein.
 
 41




PART
IV
  ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES
 
 (a)
              Documents
      filed as part of report on Form
10-K
 
 1.     Financial
Statements
 
 Report of
Independent Registered Public Accounting Firm
 
 Consolidated
Balance Sheets, December 31, 2009 and December 31, 2008
 
 Consolidated
Statements of Earnings and Comprehensive Income for the Fiscal Years Ended
December 31, 2009, 2008, and 2007
 
 Consolidated
Statements of Stockholders' Equity for the Fiscal Years Ended December 31, 2009,
2008, and 2007
 
 Consolidated
Statements of Cash Flows for the Fiscal Years Ended December 31, 2009, 2008, and
2007
 
 Notes to
Consolidated Financial Statements for the Fiscal Years Ended December 31, 2009,
2008, and 2007
 
 2.     Financial
Statement Schedules
 
 Schedule
II – Valuation and Qualifying Accounts
 
 All other
consolidated financial statement schedules are omitted because such schedules
are not required or the information required has been presented in the
aforementioned consolidated financial statements.
  3.Exhibits – The exhibits listed in the following "Index to Exhibits" are
filed with this Form 10-K or incorporated by reference as set forth
below.
  (b)
              The
      exhibits listed in the "Index to Exhibits" below are filed with this Form
      10-K or incorporated by reference as set forth
  below.
   (c)
              Additional
      Financial Statement Schedules –
None.
  42
  INDEX TO EXHIBITS
 ExhibitNumber
                  DescriptionExhibit
      3
                  Articles
      of Incorporation and By-Laws3.1
                  Amended
      and Restated Certificate of Incorporation (1)3.2
                  Certificate
      of Amendment of the Restated Certificate of Incorporation
    (2)3.3
                  Certificate
      of Amendment of the Restated Certificate of Incorporation
    (3)3.4
                  Certificate
      of Amendment of the Restated Certificate of Incorporation
    (8)3.5
                  Amended
      and Restated By-Laws (9)3.6
                  Certificate
      of Amendment of the Restated Certificate of Incorporation
    (10)Exhibit
      4
                  Instruments
      Defining the Rights of Security Holders, including debentures4.1
                  Specimen
      Common Stock Certificate (1)4.2
                  Indenture,
      dated as of July 1, 2008, between the Registrant and Wilmington Trust
      Company, as Trustee (15)4.3
                  First
      Supplemental Indenture, dated as of July 1, 2008, between the
      Registrant and Wilmington Trust Company, as Trustee
(15)Exhibit
      10(i)
                  Material
      Contracts10.1
                  Stock
      and Asset Purchase Agreement, dated June 9, 2008, between the Registrant
      and Honeywell International Inc. (14)10.2
                  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 (16)10.3
                  Supply
      Agreement, dated as of July 28, 2008, between the Registrant and Honeywell
      International Inc. (17)10.4
                  License
      Agreement, dated as of July 28, 2008, between the Registrant and Honeywell
      International Inc. (17)10.5
                  Stockholders
      Agreement, dated as of July 28, 2008, among the Registrant and Honeywell
      International Inc., Honeywell UK Limited, Honeywell Holding France SAS and
      Honeywell Deutschland GmbH (17)10.6
                  Credit
      Agreement, dated as of July 28, 2008, among the Registrant, as Borrower,
      JPMorgan Chase Bank, N.A., as Administrative Agent, UBS Securities LLC and
      Credit Suisse Securities(USA) LLC, as Syndication Agents, The Royal Bank
      of Scotland plc and Wells Fargo Bank, N.A., as Documentation Agents, and
      certain lenders party thereto (17)Exhibit
      10(iii)
                  Management
      Contracts and Executive Compensation Plans, Contracts and
      Arrangements10.7
                  Amended
      and Restated Employment Agreement for Amin J. Khoury dated as of December
      31, 2008 (18)10.8
                  Amended
      and Restated Employment Agreement for Michael B. Baughan dated as of
      December 31, 2008 (18)10.9
                  Amended
      and Restated Employment Agreement for Thomas P. McCaffrey dated as of
      December 31, 2008(18)10.10
                  Amended
      and Restated Employment Agreement for Werner Lieberherr dated as of
      December 9, 2008 (18)10.11
                  Amended
      and Restated Employment Agreement for Wayne R. Exton dated as of December
      9, 2008 (18)
  43
  10.12
                    Employment
      Agreement dated as of January 1, 2009 between the Registrant and Robert A.
      Marchetti (18)10.13
                    Amended
      and Restated Employment Agreement for Stephen R. Swisher dated December 9,
      2008 (18)10.14
                    Retirement
      Agreement dated as of November 19, 2008 between the Registrant and Edmund
      J. Moriarty (18)10.15
                    Retirement
      Agreement dated as of December 31, 2005 between the Registrant and Robert
      J. Khoury (12)10.16
                    Consulting
      Agreement dated as of December 31, 2005 between the Registrant and Robert
      J. Khoury (12)10.17
                    United
      Kingdom 1992 Employee Share Option Scheme (2)10.18
                    1996
      Stock Option Plan (6)10.19
                    Amendment
      No. 1 to the 1996 Stock Option Plan (4)10.20
                    Amendment
      No. 2 to the 1996 Stock Option Plan (5)10.21
                    2001
      Stock Option Plan (7)10.22
                    2005
      Long-Term Incentive Plan (19)10.23
                    2007
      Standard Form of Restricted Stock Award Agreement (13)10.24
                    2007
      Form of Restricted Stock Award Agreement for Robert A. Marchetti
      (13)10.25
                    2007
      Form of Restricted Stock Award Agreement for Amin J. Khoury
      (13)10.26
                    2007
      Form of Restricted Stock Award Agreement for Thomas P. McCaffrey
      (13)10.27
                    2007
      Form of Restricted Stock Award Agreement for Michael B. Baughan
      (13)10.28
                    Restricted
      Stock Award Agreement, between Registrant and Robert A. Marchetti, dated
      August 5, 2008 (17)10.29
                    2008
      Form of Performance-Based Restricted Stock Unit Award Agreement
      (17)10.30
                    2008
      Form of Performance-Based Restricted Stock Award Agreement
      (17)10.31
                    2008
      Form of Performance-Based Restricted Stock Award Agreement (Amin J.
      Khoury) (17)10.32
                    2008
      Form of Performance-Based Restricted Stock Award Agreement (Thomas P.
      McCaffrey & Michael B. Baughan) (17)10.33
                    2008
      Form of Performance-Based Restricted Stock Unit Agreement (Thomas P.
      McCaffrey & Michael B. Baughan) (17)10.34
                    Amended
      and Restated 1994 Employee Stock Purchase Plan (11)10.35
                    Amendment
      to the 1994 Employee Stock Purchase Plan (18)10.36
                    Employment
      Agreement dated October 17, 2008 between the Registrant and Ryan M.
      Patch*10.37
                    November
      2009 Standard Form of Restricted Stock Award Agreement
  (20)10.38
                    November
      2009 Standard Form of Restricted Stock Unit Award Agreement
      (20)10.39
                    November
      2009 Form of Restricted Stock Award Agreement for Amin J. Khoury
      (20)10.40
                    November
      2009 Form of Restricted Stock Award Agreement (Thomas P. McCaffrey/Michael
      B. Baughan) (20)10.41
                    November
      2009 Form of Restricted Stock Unit Award Agreement (Thomas P.
      McCaffrey/Michael B. Baughan) (20)Exhibit
      14
                    Code
      of Ethics14.1
                    Code
      of Business Conduct (9)Exhibit
      21
                    Subsidiaries
      of the Registrant21.1
                    Subsidiaries*Exhibit
      23
                    Consents
      of Experts and Counsel23.1
                    Consent
      of Independent Registered Public Accounting Firm – Deloitte & Touche
      LLP*
  44
  Exhibit
      31
                    Rule
      13a-14(a)/15d-14(a) Certifications31.1
                    Certification
      of Chief Executive Officer*31.2
                    Certification
      of Chief Financial Officer*Exhibit
      32
                    Section
      1350 Certifications32.1
                    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*
 
 __________________
 * Filed
herewith.
 
 (1)
                Incorporated
      by reference to the Company’s Registration Statement on Form S-1/A, as
      amended (No. 33-33689), filed with the Commission on April 18,
      1990.
 (2)
                Incorporated
      by reference to the Company’s Registration Statement on Form S-1 (No.
      333-54146), filed with the Commission on November 3,
  1992.
 (3)
                Incorporated
      by reference to the Company’s Registration Statement on Form S-3/A (No.
      333-60209), filed with the Commission on December 21,
  1998.
 (4)
                Incorporated
      by reference to the Company’s Registration Statement on Form S-8 (No.
      333-89145), filed with the Commission on October 15,
  1999.
 (5)
                Incorporated
      by reference to the Company’s Registration Statement on Form S-8 (No.
      333-30578), filed with the Commission on February 16,
  2000.
 (6)
                Incorporated
      by reference to the Company's Registration Statement on Form S-8 (No.
      333-14037), filed with the Commission on October 15,
  1996.
 (7)
                Incorporated
      by reference to the Company's Registration Statement on Form S-8 (No.
      333-71442), filed with the Commission on October 11,
  2001.
 (8)
                Incorporated
      by reference to the Company’s Registration Statement on Form S-3/A (No.
      333-112493), as amended, filed with the Commission on February 13,
      2004.
 (9)
                Incorporated
      by reference to the Company’s Transition Report on Form 10-K for the
      ten-month transition period ended December 31, 2002, filed with the
      Commission March 26, 2003.
 (10)
                Incorporated
      by reference to the Company’s Quarterly Report on Form 10-Q for the
      quarter ended June 30, 2006, filed with the Commission on August 7,
      2006.
 (11)
                Incorporated
      by reference to the Company’s Quarterly Report on Form 10-Q for the
      quarter ended September 30, 2006, filed with the Commission on November 7,
      2006.
 (12)
                Incorporated
      by reference to the Company’s Annual Report on Form 10-K for the fiscal
      year ended December 31, 2005 filed with the Commission on March 15,
      2006.
 (13)
                Incorporated
      by reference to the Company’s Quarterly Report on Form 10-Q for the
      quarter ended March 31, 2007, filed with the Commission on May 9,
      2007.
 (14)
                Incorporated
      by reference to the Company’s Current Report on Form 8-K dated June 9,
      2008, filed with the Commission on June 11,
  2008.
 (15)
                Incorporated
      by reference to the Company’s Current Report on Form 8-K dated June 26,
      2008, filed with the Commission on July 1,
2008.
 (16)
                Incorporated
      by reference to the Company’s Quarterly Report on Form 10-Q for the
      quarter ended June 30, 2008, filed with the Commission on August 7,
      2008.
 (17)
                Incorporated
      by reference to the Company’s Quarterly Report on Form 10-Q for the
      quarter ended September 30, 2008, filed with the Commission on November 7,
      2008.
 (18)
                Incorporated
      by reference to the Company’s Annual Report on Form 10K for the fiscal
      year ended December 31, 2008, filed with the Commission on February 25,
      2009.
 (19)
                Incorporated
      by reference to the Company's Registration Statement on Form S-8 (No.
      333-161028), filed with the Commission on August 4,
  2009.
 (20)
                Incorporated
      by reference to the Company’s Quarterly Report on Form 10-Q for the
      quarter ended September 30, 2009, filed with the Commission on November 5,
      2009.






45




SIGNATURES
 
 Pursuant
to the requirements of Section 13 or 15(d) 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.By:
              /s/ Amin J. KhouryAmin
      J. KhouryChairman
      and Chief Executive Officer
 
 Date:  February
25, 2010
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
 
 Signature
              
              Title
              Date/s/
      Amin J. Khoury
              
              Chairman
      and Chief Executive Officer
              February
      25, 2010Amin
      J. Khoury/s/
      Thomas P. McCaffrey
              
              Senior
      Vice President and Chief Financial Officer
                (Principal
      Financial and Accounting Officer)
              February
      25, 2010Thomas
      P. McCaffrey/s/
      Charles L. Chadwell
              
              Director
              February
      25, 2010Charles
      L. Chadwell/s/
      Jim C. Cowart
              
              Director
              February
      25, 2010Jim
      C. Cowart/s/
      Richard G. Hamermesh
              
              Director
              February
      25, 2010Richard
      G. Hamermesh/s/
      Robert J. Khoury
              
              Director
              February
      25, 2010Robert
      J. Khoury/s/
      Jonathan M. Schofield
              
              Director
              February
      25, 2010Jonathan
      M. Schofield/s/
      Arthur E. Wegner
              
              Director
              February
      25, 2010Arthur
      E. Wegner






46




ITEM 8.    INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND SCHEDULE
  PageReport
      of Independent Registered Public Accounting Firm
                F-2Consolidated
      Financial Statements:Consolidated
      Balance Sheets, December 31, 2009 and 2008
                F-3Consolidated
      Statements of Earnings (Loss) and Comprehensive Income
    (Loss)
                F-4for
      the Fiscal Years Ended December 31, 2009, 2008 and 2007Consolidated
      Statements of Stockholders' Equity
                F-5for
      the Fiscal Years Ended December 31, 2009, 2008 and 2007Consolidated
      Statements of Cash Flows
                F-6for
      the Fiscal Years Ended December 31, 2009, 2008 and 2007Notes
      to Consolidated Financial Statements
                F-7for
      the Fiscal Years Ended December 31, 2009, 2008 and 2007Consolidated
      Financial Statement Schedule:Schedule
      II - Valuation and Qualifying Accounts
                F-23for
      the Fiscal Years Ended December 31, 2009, 2008 and 2007
 
 F-1
 
 REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
  The Board
of Directors and Stockholders
 BE
Aerospace, Inc.
 Wellington,
Florida
 
 We have
audited the accompanying consolidated balance sheets of BE Aerospace, Inc. and
subsidiaries (the Company) as of December 31, 2009 and 2008, and the
related consolidated statements of earnings (loss) and comprehensive income
(loss), stockholders’ equity, and cash flows for each of the three years in the
period ended December 31, 2009. Our audits also included the financial
statement schedule listed in item 15(a)(2). These consolidated financial
statements and the financial statement schedule are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these
consolidated financial statements and the financial statement schedule based on
our audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
 
 In our
opinion, such consolidated financial statements present fairly, in all material
respects, the financial position of BE Aerospace, Inc. and subsidiaries as of
December 31, 2009 and 2008, and the results of their operations and their
cash flows for each of the three years in the period ended December 31,
2009, in conformity with accounting principles generally accepted in the United
States of America. Also, in our opinion, the financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
 
 We have
also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the Company’s internal control over financial
reporting as of December 31, 2009, based on the criteria established in
Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission and our report dated February 25, 2010 expressed an
unqualified opinion on the Company's internal control over financial
reporting.
  
  /s/
Deloitte & Touche LLP
 Certified
Public Accountants
 
 Boca
Raton, Florida
 February
25, 2010
 
 F-2
 
 
 CONSOLIDATED
BALANCE SHEETS, DECEMBER 31, 2009 AND 2008
 (In
millions, except per share data)
  December
      31,
                
                
                December
      31,2009
                
                
                2008ASSETSCurrent
      assets:Cash
      and cash equivalents
                
                $
                120.1
                
                
                $
                168.1Accounts
      receivable trade, net
                
                
                222.5
                
                
                
                271.4Inventories,
      net
                
                
                1,247.4
                
                
                
                1,197.0Deferred
      income taxes, net
                
                
                12.1
                
                
                
                22.1Other
      current assets
                
                
                20.5
                
                
                
                24.8Total
      current assets
                
                
                1,622.6
                
                
                
                1,683.4Property
      and equipment, net
                
                
                114.3
                
                
                
                115.8Goodwill
                
                
                703.2
                
                
                
                663.6Identifiable
      intangible assets, net
                
                
                337.4
                
                
                
                356.0Deferred
      income taxes, net
                
                
                15.3
                
                
                
                49.2Other
      assets, net
                
                
                47.3
                
                
                
                62.1$
                2,840.1
                
                
                $
                2,930.1LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Accounts
      payable
                
                $
                142.7
                
                
                $
                274.5Accrued
      liabilities
                
                
                192.8
                
                
                
                229.2Current
      maturities of long-term debt
                
                
                0.2
                
                
                
                6.0Total
      current liabilities
                
                
                335.7
                
                
                
                509.7Long-term
      debt, net of current maturities
                
                
                1,018.5
                
                
                
                1,117.2Deferred
      income taxes, net
                
                
                7.1
                
                
                
                5.4Other
      non-current liabilities
                
                
                31.3
                
                
                
                31.3Commitments,
      contingencies and off-balance sheetarrangements
      (Note 8)Stockholders'
      equity:Preferred
      stock, $0.01 par value; 1.0 sharesauthorized;
      no shares outstanding
                
                
                --
                
                
                
                --Common
      stock, $0.01 par value; 200.0 sharesauthorized;
      102.4 shares issuedas
      of December 31, 2009, and 101.1 sharesissued
      as of December 31, 2008
                
                
                1.0
                
                
                
                1.0Additional
      paid-in capital
                
                
                1,525.1
                
                
                
                1,499.4Accumulated
      deficit
                
                
                (47.1
                )
                
                
                (189.1
                )Accumulated
      other comprehensive loss
                
                
                (31.5
                )
                
                
                (44.8
                )Total
      stockholders' equity
                
                
                1,447.5
                
                
                
                1,266.5$
                2,840.1
                
                
                $
                2,930.1
 See
accompanying notes to consolidated financial statements.
 
 F-3
 
 CONSOLIDATED
STATEMENTS OF EARNINGS (LOSS) AND COMPREHENSIVE INCOME (LOSS)
 FOR THE
FISCAL YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
 (In
millions, except per share data)
 
 Fiscal
      Years Ended December 31,2009
                
                
                2008
                
                
                2007Revenues
                
                $
                1,937.7
                
                
                $
                2,110.0
                
                
                $
                1,677.7Cost
      of sales
                
                
                1,268.5
                
                
                
                1,386.5
                
                
                
                1,107.6Selling,
      general and administrative
                
                
                270.5
                
                
                
                238.3
                
                
                
                195.2Research,
      development and engineering
                
                
                102.6
                
                
                
                131.4
                
                
                
                127.9Asset
      impairment charge
                
                
                --
                
                
                
                390.0
                
                
                
                --Operating
      earnings (loss)
                
                
                296.1
                
                
                
                (36.2
                )
                
                
                247.0Interest
      expense, net
                
                
                88.4
                
                
                
                48.0
                
                
                
                20.9Debt
      prepayment costs
                
                
                3.1
                
                
                
                3.6
                
                
                
                11.0Earnings
      (loss) before income taxes
                
                
                204.6
                
                
                
                (87.8
                )
                
                
                215.1Income
      tax expense
                
                
                62.6
                
                
                
                11.6
                
                
                
                67.8Net
      earnings (loss)
                
                
                142.0
                
                
                
                (99.4
                )
                
                
                147.3Other
      comprehensive income (loss):Foreign
      exchange translationadjustment
      and other
                
                
                13.3
                
                
                
                (67.4
                )
                
                
                9.8Comprehensive
      income (loss)
                
                $
                155.3
                
                
                $
                (166.8
                )
                
                $
                157.1Net
      earnings (loss) per share - basic
                
                $
                1.44
                
                
                $
                (1.05
                )
                
                $
                1.67Net
      earnings (loss) per share - diluted
                
                $
                1.43
                
                
                $
                (1.05
                )
                
                $
                1.66Weighted
      average common shares - basic
                
                
                98.5
                
                
                
                94.3
                
                
                
                88.1Weighted
      average common shares - diluted
                
                
                99.3
                
                
                
                94.3
                
                
                
                88.8
 
 See
accompanying notes to consolidated financial statements.
 
 F-4
 
 CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY
 FOR THE FISCAL YEARS ENDED
DECEMBER 31, 2009, 2008 AND 2007
 (In
millions)
 
 AccumulatedAdditional
                
                
                
                
                
                Other
                
                
                TotalCommon Stock
                
                
                Paid-in
                
                
                Accumulated
                
                
                Comprehensive
                
                
                Stockholders'Shares
                
                
                Amount
                
                
                Capital
                
                
                Deficit
                
                
                Income (Loss)
                
                
                EquityBalance,
      December 31, 2006
                
                
                79.5
                
                
                
                0.8
                
                
                
                927.2
                
                
                
                (234.8
                )
                
                
                12.8
                
                
                
                706.0Sale
      of common stockunder
      public offering, net
                
                
                12.1
                
                
                
                0.1
                
                
                
                368.5
                
                
                
                --
                
                
                
                --
                
                
                
                368.6Sale
      of stock underemployee
      stock purchase plan
                
                
                0.1
                
                
                
                --
                
                
                
                3.1
                
                
                
                --
                
                
                
                --
                
                
                
                3.1Exercise
      of stock options
                
                
                1.0
                
                
                
                --
                
                
                
                14.8
                
                
                
                --
                
                
                
                --
                
                
                
                14.8Restricted
      stock grants
                
                
                0.4
                
                
                
                --
                
                
                
                10.7
                
                
                
                --
                
                
                
                --
                
                
                
                10.7Net
      earnings
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                147.3
                
                
                
                --
                
                
                
                147.3Foreign
      currency translationadjustment
      and other
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                0.1
                
                
                
                9.8
                
                
                
                9.9Impact
      of adoption of FIN 48
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                (2.3
                )
                
                
                --
                
                
                
                (2.3
                )Balance,
      December 31, 2007
                
                
                93.1
                
                
                
                0.9
                
                
                
                1,324.3
                
                
                
                (89.7
                )
                
                
                22.6
                
                
                
                1,258.1Sale
      of stock underemployee
      stock purchase plan
                
                
                0.2
                
                
                
                --
                
                
                
                3.1
                
                
                
                --
                
                
                
                --
                
                
                
                3.1Common
      stock issuedfor
      acquisition
                
                
                6.0
                
                
                
                0.1
                
                
                
                158.2
                
                
                
                --
                
                
                
                --
                
                
                
                158.3Purchase
      of treasury stock
                
                
                --
                
                
                
                --
                
                
                
                (1.3
                )
                
                
                --
                
                
                
                --
                
                
                
                (1.3
                )Exercise
      of stock options
                
                
                0.1
                
                
                
                --
                
                
                
                0.7
                
                
                
                --
                
                
                
                --
                
                
                
                0.7Restricted
      stock grants
                
                
                1.7
                
                
                
                --
                
                
                
                15.0
                
                
                
                --
                
                
                
                --
                
                
                
                15.0Deferred
      income tax expensefrom
      share based payments
                
                
                --
                
                
                
                --
                
                
                
                (0.6
                )
                
                
                --
                
                
                
                --
                
                
                
                (0.6
                )Net
      loss
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                (99.4
                )
                
                
                --
                
                
                
                (99.4
                )Foreign
      currency translationadjustment
      and other
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                (67.4
                )
                
                
                (67.4
                )Balance,
      December 31, 2008
                
                
                101.1
                
                
                
                1.0
                
                
                
                1,499.4
                
                
                
                (189.1
                )
                
                
                (44.8
                )
                
                
                1,266.5Sale
      of stock underemployee
      stock purchase plan
                
                
                0.2
                
                
                
                --
                
                
                
                3.8
                
                
                
                --
                
                
                
                --
                
                
                
                3.8Purchase
      of treasury stock
                
                
                --
                
                
                
                --
                
                
                
                (1.7
                )
                
                
                --
                
                
                
                --
                
                
                
                (1.7
                )Exercise
      of stock options
                
                
                0.1
                
                
                
                --
                
                
                
                0.1
                
                
                
                --
                
                
                
                --
                
                
                
                0.1Restricted
      stock grants
                
                
                1.0
                
                
                
                --
                
                
                
                23.5
                
                
                
                --
                
                
                
                --
                
                
                
                23.5Net
      earnings
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                142.0
                
                
                
                --
                
                
                
                142.0Foreign
      currency translationadjustment
      and other
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                13.3
                
                
                
                13.3Balance,
      December 31, 2009
                
                
                102.4
                
                
                
                1.0
                
                
                
                1,525.1
                
                
                
                (47.1
                )
                
                
                (31.5
                )
                
                
                1,447.5
 
 See
accompanying notes to consolidated financial statements.
 
 F-5
 
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 FOR THE FISCAL YEARS ENDED
DECEMBER 31, 2009, 2008 AND 2007
 (In
millions)
 
 Fiscal
      Year Ended December 31,2009
                
                
                2008
                
                
                2007CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      earnings (loss)
                
                $
                142.0
                
                
                $
                (99.4
                )
                
                $
                147.3Adjustments
      to reconcile net earnings (loss) tonet
      cash flows provided by operating activities, net ofeffects
      from acquisition:Goodwill
      and intangible asset impairment charge
                
                
                --
                
                
                
                390.0
                
                
                
                --Depreciation
      and amortization
                
                
                49.5
                
                
                
                40.7
                
                
                
                35.0Deferred
      income taxes
                
                
                45.3
                
                
                
                (14.7
                )
                
                
                58.5Non-cash
      compensation
                
                
                24.1
                
                
                
                15.5
                
                
                
                11.0(Benefit)
      provision for doubtful accounts
                
                
                (1.6
                )
                
                
                8.7
                
                
                
                0.6Loss
      on disposal of property and equipment
                
                
                2.8
                
                
                
                0.5
                
                
                
                0.5Debt
      prepayment costs
                
                
                3.1
                
                
                
                3.6
                
                
                
                11.0Changes
      in operating assets and liabilities:Accounts
      receivable
                
                
                55.2
                
                
                
                (22.2
                )
                
                
                (43.2
                )Inventories
                
                
                (73.1
                )
                
                
                (262.0
                )
                
                
                (212.9
                )Other
      current assets and other assets
                
                
                16.5
                
                
                
                3.9
                
                
                
                (19.2
                )Accounts
      payable and accrued liabilities
                
                
                (181.5
                )
                
                
                50.9
                
                
                
                33.4Net
      cash flows provided by operating activities
                
                
                82.3
                
                
                
                115.5
                
                
                
                22.0CASH
      FLOWS FROM INVESTING ACTIVITIES:Capital
      expenditures
                
                
                (28.4
                )
                
                
                (31.7
                )
                
                
                (32.1
                )Acquisitions,
      net of cash acquired
                
                
                --
                
                
                
                (907.5
                )
                
                
                --Other
                
                
                (0.9
                )
                
                
                (5.2
                )
                
                
                (0.5
                )Net
      cash flows used in investing activities
                
                
                (29.3
                )
                
                
                (944.4
                )
                
                
                (32.6
                )CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from common stock issued, net of expenses
                
                
                3.3
                
                
                
                3.4
                
                
                
                386.1Purchase
      of treasury stock
                
                
                (1.7
                )
                
                
                (1.3
                )
                
                
                --Proceeds
      from long-term debt
                
                
                --
                
                
                
                1,124.1
                
                
                
                --Principal
      payments on long term debt
                
                
                (104.1
                )
                
                
                (152.8
                )
                
                
                (352.8
                )Debt
      facility and debt prepayment costs
                
                
                --
                
                
                
                (50.3
                )
                
                
                (7.4
                )Borrowings
      on line of credit
                
                
                --
                
                
                
                65.0
                
                
                
                93.0Repayments
      on line of credit
                
                
                --
                
                
                
                (65.0
                )
                
                
                (93.0
                )Net
      cash flows (used in) provided by financing activities
                
                
                (102.5
                )
                
                
                923.1
                
                
                
                25.9Effect
      of foreign exchange rate changes on cash andcash
      equivalents
                
                
                1.5
                
                
                
                (7.7
                )
                
                
                1.3Net
      (decrease) increase in cash and cash equivalents
                
                
                (48.0
                )
                
                
                86.5
                
                
                
                16.6Cash
      and cash equivalents, beginning of year
                
                
                168.1
                
                
                
                81.6
                
                
                
                65.0Cash
      and cash equivalents, end of year
                
                $
                120.1
                
                
                $
                168.1
                
                
                
                81.6Supplemental
      disclosures of cash flow information:Cash
      paid during period for:Interest
                
                $
                109.7
                
                
                $
                19.2
                
                
                
                26.6Income
      taxes
                
                
                14.1
                
                
                
                17.7
                
                
                
                8.0Supplemental
      schedule of non-cash activitites:Common
      stock issued in connection with acquisition
                
                $
                --
                
                
                $
                158.3
                
                
                $
                --
   See
accompanying notes to consolidated financial statements.
 
 F-6
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE FISCAL YEARS ENDED
DECEMBER 31, 2009, 2008 AND 2007
 (In
millions, except share and per share data)
 
 1.    SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
 
 Organization and Basis of
Presentation –
BE Aerospace, Inc. and its wholly owned subsidiaries (the Company) designs,
manufactures, sells and services commercial aircraft and business jet cabin
interior products consisting of a broad range of seating, interior systems,
including structures as well as food and beverage storage and preparation
equipment and distributes aerospace fasteners and consumables.  The
Company’s principal customers are the operators of commercial and business jet
aircraft, aircraft manufacturers and their suppliers.  As a result,
the Company’s business is directly dependent upon the conditions in the
commercial airline, business jet and aircraft manufacturing
industries.  The accompanying consolidated financial statements are
prepared in accordance with accounting principles generally accepted in the
United States of America.
 
 Consolidation – The
accompanying consolidated financial statements include the accounts of BE
Aerospace, Inc. and its wholly owned subsidiaries.  Intercompany
transactions and balances have been eliminated in consolidation.
 
 Financial Statement
Preparation –
The preparation of the consolidated 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.
 
 Revenue Recognition – Sales of products are
recorded when the earnings process is complete. This generally occurs when the
products are shipped to the customer in accordance with the contract or purchase
order, risk of loss and title has passed to the customer, collectibility is
reasonably assured and pricing is fixed and determinable. In instances where
title does not pass to the customer upon shipment, we recognize revenue upon
delivery or customer acceptance, depending on the terms of the sales
contract.
 
 Service
revenues primarily consist of engineering activities and are recorded when
services are performed.
 
 Revenues
and costs under certain long-term contracts are recognized using contract
accounting under the percentage-of-completion method in accordance with the
Financial Accounting Standards Board (FASB) Accounting Standards Codification
(ASC) 605, Construction – Type
and Production -Type Contracts (the American Institute of Certified
Public Accountants Statement of Position 81-1, Accounting for Performance of
Construction - Type and Certain Production -Type Contracts) (ASC 605), with the
majority of the contracts accounted for under the cost-to-cost method. Under the
cost-to-cost method, the revenues related to the long-term contracts are
recognized based on the ratio of actual costs incurred to total estimated costs
to be incurred. The Company also uses the units-of-delivery method to account
for certain of its contracts.  Under the units-of delivery method,
revenues are recognized based on the contract price of units
delivered.
 
 The
percentage-of-completion method requires the use of estimates of costs to
complete long-term contracts. Due to the duration of these contracts as well as
the technical nature of the products involved, the estimation of these costs
requires management judgment in connection with assumptions and projections
related to the outcome of future events.  Management’s assumptions
include future labor performance and rates and projections relative to material
and overhead costs, as well as the quantity and timing of product deliveries.
The Company re-evaluates its contract estimates periodically and reflects
changes in estimates in the current period using the cumulative catch-up method.
Revenues associated with any contractual claims are recognized when it is
probable that the claim will result in additional contract revenue and the
amount can be reasonably estimated. Anticipated losses on contracts are
recognized in the period in which the losses become probable and
estimable.
 
 Income Taxes – The Company provides
deferred income taxes for temporary differences between the amounts of assets
and liabilities recognized for financial reporting purposes and such amounts
recognized for income tax purposes.  Deferred income taxes are
computed using enacted tax rates that are expected to be in effect when the
temporary differences reverse.  A valuation allowance related to a
deferred tax asset is recorded when it is more likely than not that some portion
or the entire deferred tax asset will not be realized. The Company classifies
interest and penalties related to income tax as income tax expense.
 
 F-7
 
 Cash Equivalents – The
Company considers all highly liquid debt instruments purchased with an original
maturity of three months or less to be cash equivalents.
 
 Accounts Receivable –The
Company performs ongoing credit evaluations of its customers and adjusts credit
limits based upon payment history and the customer's current creditworthiness,
as determined by review of their current credit information.  The
Company continuously monitors collections and payments from its customers and
maintains a provision for estimated credit losses based upon historical
experience and any specific customer collection issues that have been
identified.  The allowance for doubtful accounts at December 31, 2009
and 2008 was $7.4 and $12.2, respectively.
 
 Inventories –The Company
values inventory at the lower of cost or market, using FIFO or weighted average
cost method.  The Company regularly reviews inventory quantities on
hand and records a provision for excess and obsolete inventory based primarily
on historical demand, as well as an estimated forecast of product demand and
production requirements.  Demand for the Company’s products can
fluctuate significantly.  In accordance with industry practice, costs
in inventory include amounts relating to long-term contracts with long
production cycles and to inventory items with long procurement cycles, some of
which are not expected to be realized within one year.
 
 Property and Equipment–Property and equipment
are stated at cost and depreciated generally under the straight-line method over
their estimated useful lives of three to fifty years (or the lesser of the term
of the lease for leasehold improvements, as appropriate).
 
 Debt Issuance Costs – Costs
incurred to issue debt are deferred and amortized as interest expense over the
term of the related debt.
 
 Goodwill and Intangible
Assets – Under
FASB ASC 350, Intangibles –
Goodwill and Other (FASB Statement No. 142, Goodwill and Other Intangible
Assets) (ASC 350), goodwill and other intangible assets with indefinite lives
are not amortized, but are reviewed at least annually for
impairment.  Acquired intangible assets with definite lives are
amortized over their individual useful lives.  Patents and other
intangible assets are amortized using the straight-line method over periods
ranging from one to thirty years (see Note 5).
 
 On
at least an annual basis, management assesses whether there has been any
impairment in the value of goodwill or intangible assets with indefinite lives
by comparing the fair value to the net carrying value of reporting
units.  If the carrying value exceeds its estimated fair value, an
impairment loss is recognized if the implied fair value of the asset being
tested is less than its carrying value.  In this event, the asset is
written down accordingly. The fair values of reporting units for goodwill
impairment testing are determined using valuation techniques based on estimates,
judgments and assumptions management believes are appropriate in the
circumstances.  The sum of the fair values of the reporting units are
evaluated based on market capitalization determined using average share prices
within a reasonable period of time near the selected testing date (calendar
year-end), plus an estimated control premium plus the fair value of the
Company’s debt obligations.
 
 Long-Lived Assets – The
Company assesses potential impairments to its long-lived assets when there is
evidence that events or changes in circumstances indicate that the carrying
amount of an asset may not be recovered.  An impairment loss is
recognized when the undiscounted cash flows expected to be generated by an asset
(or group of assets) is less than its carrying amount.  Any required
impairment loss is measured as the amount by which the asset's carrying value
exceeds its fair value and is recorded as a reduction in the carrying value of
the related asset and a charge to operating results.  There were no
impairments of long lived assets in 2009, 2008, and 2007.
 
 F-8
 
 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.  Estimated warranty costs are embedded in
the accrued liabilities balances on the consolidated balance
sheet.  The following table provides a reconciliation of the activity
related to the Company's accrued warranty expense:
 
 Fiscal
      Year Ended December 31,2009
                
                
                2008
                
                
                2007Balance
      at beginning of period
                
                $
                22.4
                
                
                $
                20.6
                
                
                $
                18.4Accruals
      for warranties issued during the period
                
                
                26.5
                
                
                
                29.9
                
                
                
                24.5Settlements
      of warranty claims
                
                
                (22.3
                )
                
                
                (28.1
                )
                
                
                (22.3
                )Balance
      at end of period
                
                $
                26.6
                
                
                $
                22.4
                
                
                $
                20.6
 
 Accounting for Stock-Based
Compensation– The Company accounts for share-based compensation
arrangements in accordance with the provisions of FASB ASC 718 Compensation – Stock
Compensation (FASB Statement 123(R), Share Based Payments) (ASC 718),
whereby stock-based compensation cost is measured on the date of grant, based on
the fair value of the award, and is recognized over the requisite service
period.
  Compensation
cost recognized during the three years ended December 31, 2009 related to grants
of restricted stock and restricted stock units. No compensation cost related to
stock options was recognized during those periods as no options were granted
during the three year period ended December 31, 2009 and all options were vested
as of December 31, 2006.
 
 The
Company has established a qualified Employee Stock Purchase Plan.  The
Plan allows qualified employees (as defined in the plan) to participate in the
purchase of designated shares of the Company's common stock at a price equal to
85% of the closing price for each semi-annual stock purchase period. The fair
value of employee purchase rights represents the difference between the closing
price of the Company’s shares on the date of purchase and the purchase price of
the shares. The value of the rights granted during the years ended December 31,
2009, 2008 and 2007 was $0.6, $0.5 and $0.5, respectively.
 
 Treasury
Stock–The Company may
periodically repurchase shares of its common stock from employees for the
satisfaction of their individual payroll tax withholding upon vesting of
restricted stock and restricted stock units in connection with the Company’s
Long Term Incentive Plan.The Company’s
repurchases of common stock are recorded at the average cost of the common stock
and are presented as a reduction of additional paid-in-capital.  The
Company repurchased 94,388 and 84,187 shares of its common stock for $1.7 and
$1.3 respectively, during the years ended December 31, 2009 and 2008,
respectively.  There were no company repurchases of common stock in
2007.
 
 Research and Development –
Research and development expenditures are expensed as incurred.
 
 Foreign Currency Translation
– The assets and
liabilities of subsidiaries located outside the United States are translated
into U.S. dollars at the rates of exchange in effect at the balance sheet
dates.  Revenue and expense items are translated at the average
exchange rates prevailing during the period.  Gains and losses
resulting from foreign currency transactions are recognized currently in income,
and those resulting from translation of financial statements are accumulated as
a separate component of stockholders’ equity.  The Company's European
subsidiaries utilize the British pound or the euro as their local functional
currency.
 
 Concentration of Risk –The
Company’s products and services are primarily concentrated within the aerospace
industry with customers consisting primarily of commercial aircraft
manufacturers, commercial airlines and a wide variety of business jet customers.
In addition to the overall business risks associated with the Company’s
concentration within the aerospace industry, the Company is exposed to a
concentration of collection risk on credit extended to commercial aircraft
manufacturers and commercial airlines.  The Company’s management
performs ongoing credit evaluations on the financial condition of all of its
customers and maintains allowances for uncollectible accounts receivable based
on expected collectibility. Credit losses have historically been within
management's expectations and the provisions established.
 
 F-9
 
 Significant
customers change from year to year depending on the level of refurbishment
activity and/or the level of new aircraft purchases by such customers. During
the fiscal years ended December 31, 2009, 2008 and 2007, no single customer
accounted for more than 10% of the Company’s consolidated net
sales.
 
 Recent
Accounting Pronouncements
  In 2009,
the Company adopted Accounting Standards Update (ASU) No. 2009-01, Statement of
Financial Accounting Standards No. 168 – FASB ASC and the Hierarchy of
Generally Accepted Accounting Principles (GAAP).  This ASU
includes FASB Statement No. 168 in its entirety.  The ASU establishes
the FASB ASC as the source of authoritative accounting principles recognized by
the FASB.  Rules and interpretive releases of the SEC under federal
securities laws are also sources of authoritative GAAP for SEC
registrants.  All guidance contained in the ASC carries an equal level
of authority.  Following this ASU, the FASB will issue only ASUs to
update the ASC.  The adoption did not have a material effect on the
Company’s consolidated financial statements.
  In the
third quarter of 2009, the Company adopted FASB ASC 855, Subsequent Events (FASB
Statement No. 165, Subsequent Events) (ASC 855).  ASC 855 establishes
general standards of accounting for and disclosure of events that occur after
the balance sheet date but before the financial statements are issued, or
available to be issued if not widely distributed.  An entity is
required to disclose the date through which subsequent events have been
evaluated and the basis for that date.  For public entities, this is
the date the financial statements are issued.  ASC 855 does not apply
to subsequent events or transactions that are within the scope of other GAAP and
did not result in significant changes in the subsequent events reported by the
Company.  ASC 855 became effective for interim or annual periods
ending after June 15, 2009 and did not impact the Company’s consolidated
financial statements.  The Company evaluated for subsequent events
through February 25, 2010, the issuance date of these financial
statements.
  In the
third quarter of 2009, the Company adopted FASB ASC 825, Financial Instruments (FSP
FAS 107-1 and Accounting Principles Bulletin 28-1, Interim Disclosures about
Fair Value of Financial Instruments)(ASC 825).  ASC 825 requires fair
value disclosures on an interim basis.  Previously, this has been
disclosed on an annual basis only.
  In the
first quarter of 2009, the Company adopted FASB ASC 820, Fair Value Measurements and
Disclosures (FASB Statement No. 157, Fair Value Measurements)(ASC 820),
for financial assets and liabilities recognized or disclosed at fair
value.  ASC 820 defines fair value and expands disclosures about fair
value measurements.  These definitions apply to other accounting
standards that use fair value measurements and may change the application of
certain measurements used in current practice.  For nonfinancial
assets and liabilities, the effective date is the beginning of fiscal year 2010,
except items that are recognized or disclosed at fair value on a recurring
basis.  The adoption of ASC 820 for these assets and liabilities did
not have a material effect on the Company’s consolidated financial
statements.
 
 
 F-10
 2.    BUSINESS
COMBINATIONS
 
 On July
28, 2008, the Company acquired from Honeywell International Inc. (Honeywell) its
Consumables Solutions distribution business (HCS). The transaction was accounted
for as a purchase under FASB ASC 805, Business Combinations, (FASB
Statement No. 141, Business Combinations) (ASC 805).  The assets
purchased and liabilities assumed in this acquisition have been reflected in the
accompanying consolidated balance sheets and results of operations for the
acquisition are included in the accompanying consolidated statement of earnings
from the date of acquisition.
 
 The
Company completed the evaluation and allocation of the purchase price for the
HCS acquisition during the period ended June 30, 2009. The excess of the
purchase price over the fair value of identifiable net tangible assets acquired
was approximately $860, of which $250 was allocated to intangible assets and
$610 was allocated to goodwill.  Approximately $407 of the allocated
goodwill and all of the $250 identifiable intangible assets are expected to be
amortizable and deductible for tax purposes.
 
 In
connection with the HCS acquisition, the Company entered into a 30-year license
agreement (HCS 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, auxiliary power units, avionics, wheels and
brakes.  The Company also entered into a supply agreement (Honeywell
Supply Agreement), under which it became the exclusive supplier of both
Honeywell proprietary consumables and standard consumables to support the
internal manufacturing needs of Honeywell Aerospace.  Pricing under
the contract is adjusted annually, beginning in 2010, to reflect changes in
market conditions. The HCS License Agreement, the Honeywell Supply Agreement,
along with the various acquired original equipment manufacturer customer
contracts and relationships, were valued at $250.0 and are being amortized over
their respective useful lives, ranging 8-30 years.
 
 3.    INVENTORIES
 
 Finished
goods and work-in-process inventories include material, labor and manufacturing
overhead costs.  Finished goods inventories primarily consist of
aftermarket fasteners. Inventories consist of the following:
 
 December
      31,
                
                
                December
      31,2009
                
                
                2008Purchased
      materials and component parts
                
                $
                112.9
                
                
                $
                150.8Work-in-process
                
                
                25.1
                
                
                
                36.8Finished
      goods
                
                
                1,109.4
                
                
                
                1,009.4$
                1,247.4
                
                
                $
                1,197.0
  4.   
PROPERTY AND EQUIPMENT
 
 Property
and equipment consist of the following:
 
 Useful
      Life
                
                
                December
      31,
                
                
                December
      31,(Years)
                
                
                2009
                
                
                2008Land,
      buildings and improvements
                
                
                5 - 50
                
                
                $
                52.0
                
                
                $
                45.1Machinery
                
                
                5 - 20
                
                
                
                71.8
                
                
                
                69.7Tooling
                
                
                3 - 10
                
                
                
                31.3
                
                
                
                28.9Computer
      equipment and software
                
                
                3 - 15
                
                
                
                123.5
                
                
                
                118.8Furniture
      and equipment
                
                
                3 - 15
                
                
                
                17.2
                
                
                
                15.9295.8
                
                
                
                278.4Less
      accumulated depreciation
                
                
                
                
                
                
                (181.5
                )
                
                
                (162.6
                )$
                114.3
                
                
                $
                115.8
 
 Depreciation
expense was $28.9, $25.7 and $23.9 for the fiscal years ended December 31, 2009,
2008 and 2007, respectively.
 
 F-11
  5.    GOODWILL
AND INTANGIBLE ASSETS
 
 The
following sets forth the intangible assets by major asset class, all of which
were acquired through business purchase transactions:
  December
      31, 2009
                
                
                December
      31, 2008Net
                
                
                
                
                
                
                
                
                
                
                
                NetUseful
      Life
                
                
                Original
                
                
                Accumulated
                
                
                Book
                
                
                Original
                
                
                Accumulated
                
                
                Impairment
                
                
                Book(Years)
                
                
                Cost
                
                
                Amortization
                
                
                Value
                
                
                Cost
                
                
                Amortization
                
                
                Charge
                
                
                ValueAcquired
      technologies
                
                
                10-40
                
                
                $
                101.1
                
                
                $
                37.7
                
                
                $
                63.4
                
                
                $
                101.2
                
                
                $
                33.5
                
                
                $
                --
                
                
                $
                67.7Trademarks
      and patents
                
                
                1-20
                
                
                
                28.5
                
                
                
                18.0
                
                
                
                10.5
                
                
                
                28.2
                
                
                
                17.3
                
                
                
                --
                
                
                
                10.9Trademarks
      and tradenames (non-amortizing)
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                20.7
                
                
                
                --
                
                
                
                (20.7
                )
                
                
                --Technical
      qualifications, plansand
      drawings
                
                
                18-30
                
                
                
                30.7
                
                
                
                22.4
                
                
                
                8.3
                
                
                
                30.2
                
                
                
                20.6
                
                
                
                --
                
                
                
                9.6Replacement
      parts annuityand
      product approvals
                
                
                18-30
                
                
                
                40.3
                
                
                
                32.7
                
                
                
                7.6
                
                
                
                39.2
                
                
                
                30.0
                
                
                
                --
                
                
                
                9.2Customer
      contracts and relationships
                
                
                8-30
                
                
                
                264.6
                
                
                
                18.1
                
                
                
                246.5
                
                
                
                250.0
                
                
                
                4.3
                
                
                
                --
                
                
                
                245.7Covenants
      not to compete andother
      identified intangibles
                
                
                3-14
                
                
                
                9.7
                
                
                
                8.6
                
                
                
                1.1
                
                
                
                27.1
                
                
                
                14.2
                
                
                
                --
                
                
                
                12.9$
                474.9
                
                
                $
                137.5
                
                
                $
                337.4
                
                
                $
                496.6
                
                
                $
                119.9
                
                
                $
                (20.7
                )
                
                $
                356.0
  Amortization
expense of intangible assets was $20.6, $15.0 and $11.1 for the fiscal years
ended December 31, 2009, 2008 and 2007, respectively.  Amortization
expense associated with identified intangible assets is expected to be
approximately $20 in each of the next five 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.
  In
accordance with ASC 350 goodwill and indefinite life intangible assets are not
amortized, but are subject to an annual impairment test.  During the
year ended December 31, 2009, the Company completed step one of the impairment
tests and fair value analysis for goodwill and other intangible assets, and
there were no impairment indicators present and no impairment loss was recorded
during the fiscal year ended December 31, 2009.  During 2008, adverse
equity market conditions caused a decrease in market multiples, including the
Company’s fiscal year end market capitalization at December 31,
2008.  The fair value of the reporting units for goodwill impairment
testing were determined using valuation techniques based on estimates, judgments
and assumptions management believes were appropriate in the
circumstances.  The sum of the fair values of the reporting units were
evaluated based on the Company’s market capitalization determined using average
share prices within a reasonable period of time near December 31, 2008, plus an
estimated control premium plus the fair value of its debt
obligations.  The decrease in the market multiples and the Company’s
market capitalization resulted in a decline in the fair value of the reporting
units as of December 31, 2008.  Accordingly, the Company recorded a
pre-tax impairment charge related to goodwill of $369.3 and a pre-tax impairment
charge of $20.7 related to an intangible asset which was determined to have no
future use.  The accumulated goodwill impairment loss was $369.3 as of
December 31, 2009 and 2008.
  The
changes in the carrying amount of goodwill for the fiscal years ended December
31, 2009 and 2008 are as follows:
 
 Consumables
                
                
                Commerical
                
                
                BusinessManagement
                
                
                Aircraft
                
                
                Jet
                
                
                TotalBalance
      as ofDecember
      31, 2007
                
                $
                133.2
                
                
                $
                245.2
                
                
                $
                88.8
                
                
                $
                467.2Acquisition
      of HCS
                
                
                574.1
                
                
                
                --
                
                
                
                --
                
                
                
                574.1Impairment
      charge
                
                
                (290.7
                )
                
                
                (78.6
                )
                
                
                --
                
                
                
                (369.3
                )Effect
      of foreigncurrency
      translation
                
                
                (0.1
                )
                
                
                (8.1
                )
                
                
                (0.2
                )
                
                
                (8.4
                )Balance
      as ofDecember
      31, 2008
                
                
                416.5
                
                
                
                158.5
                
                
                
                88.6
                
                
                
                663.6Final
      allocation adjustment related toHCS
      acquisition
                
                
                35.9
                
                
                
                --
                
                
                
                --
                
                
                
                35.9Effect
      of foreigncurrency
      translation
                
                
                --
                
                
                
                3.6
                
                
                
                0.1
                
                
                
                3.7Balance
      as ofDecember
      31, 2009
                
                $
                452.4
                
                
                $
                162.1
                
                
                $
                88.7
                
                
                $
                703.2
  F-12
  6.   
ACCRUED LIABILITIES
 Accrued
liabilities consist of the following:
 
 December
      31,
                
                
                December
      31,2009
                
                
                2008Accrued
      salaries, vacation and related benefits
                
                $
                32.9
                
                
                $
                40.3Accrued
      product warranties
                
                
                26.6
                
                
                
                22.4Deferred
      revenue
                
                
                15.3
                
                
                
                12.9HCS
      acquisition accruals
                
                
                6.4
                
                
                
                42.5Other
      accrued liabilities
                
                
                111.6
                
                
                
                111.1$
                192.8
                
                
                $
                229.2
 
 7.   
LONG-TERM DEBT
  Long-term
debt consists of the following:
 
 December
      31,
                
                
                December
      31,2009
                
                
                2008Senior
      Notes
                
                $
                600.0
                
                
                $
                600.0Bank
      credit facilities
                
                
                418.4
                
                
                
                522.4Other
      long-term debt
                
                
                0.3
                
                
                
                0.81,018.7
                
                
                
                1,123.2Less
      current portion of long-term debt
                
                
                (0.2
                )
                
                
                (6.0
                )$
                1,018.5
                
                
                $
                1,117.2
   As of
December 31, 2009, long-term debt consisted of $600.0 aggregate principal amount
of the Company’s 8.5% Senior Notes due 2018 (Senior Notes) and $418.4
outstanding under the six-year term loan facility, due July 2014, (Term Loan
Facility) of the Company’s senior secured credit facility (Credit
Agreement).
 
 The
Credit Agreement consists of (a) a $350.0 five-year revolving credit facility
(Revolving Credit Facility) and (b) the Term Loan
Facility.   Borrowings under the Revolving Credit Facility bear
interest at an annual rate equal to the London interbank offered rate (LIBOR)
(as defined) plus 275 basis points or Prime (as defined) plus 175 basis points.
As of December 31, 2009, the rate under the Revolving Credit Facility was 5.75%.
There were no amounts outstanding under the Revolving Credit Facility as of
December 31, 2009 and 2008.  Borrowings under the Term Loan Facility
bear interest at an annual rate equal to LIBOR (as defined) plus 275 basis
points or Prime (as defined) plus 175 basis points.  As of December
31, 2009, the rate under the Term Loan Facility was 5.75%.
 
 Letters
of credit outstanding under the Credit Agreement aggregated $4.3 at December 31,
2009.
 
 The
Credit Agreement contains an interest coverage ratio financial covenant (as
defined in the Credit Agreement) that must be maintained at a level greater than
2.25 to 1 through December 31, 2009 and 2.50 to 1, thereafter.  The
Credit Agreement also contains a total leverage ratio covenant (as defined in
the Credit Agreement) which limits net debt to a 4.25 to 1 multiple of EBITDA
(as defined in the Credit Agreement) through December 31, 2009 and 4.0 to 1
thereafter.  The Credit Agreement is collateralized by substantially
all of the Company’s assets and contains customary affirmative covenants,
negative covenants, restrictions on the payment of dividends, and conditions
precedent for borrowings, all of which were met as of December 31,
2009.
 
 F-13
  Maturities
of long-term debt are as follows:
 
 Fiscal
      Year Ending December 31,2010
                
                $
                0.22011
                
                
                0.12012
                
                
                -2013
                
                
                -2014
                
                
                418.4Thereafter
                
                
                600.0Total
                
                $
                1,018.7
 
 Interest
expense amounted to $88.8 for the year ended December 31, 2009, $49.7 for the
year ended December 31, 2008 and $23.5 for the year ended December 31,
2007.
  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 on the consolidated balance sheets.  At December 31, 2009,
future minimum lease payments under these arrangements approximated $160.7, of
which $144.3 is related to long-term real estate leases.
 
 Rent
expense for the years ended December 31, 2009, 2008 and 2007 was $26.9, $22.1
and $20.4, respectively.  Future payments under operating leases with
terms greater than one year as of December 31, 2009 are as follows:
 
 Fiscal
      Year Ending December 31,2010
                
                $
                24.52011
                
                
                21.02012
                
                
                17.62013
                
                
                15.52014
                
                
                14.3Thereafter
                
                
                67.8Total
                
                $
                160.7
  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
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 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.  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 consolidated financial statements.  Accordingly, no
significant amounts have been accrued for indemnities, commitments and
guarantees.
  Employment Agreements –The
Company has employment and compensation agreements with three key officers of
the Company.  Agreements for one of the officers provides for the
officer to earn a minimum of $1.0 per year through a three-year period ending
from any date after which it is measured, adjusted annually for changes in the
consumer price index (as defined) or as determined by the Company's Board of
Directors, as well as a retirement compensation payment equal to 1.5 times the
base salary.
 
 F-14
 
 Two other
agreements provide for the officers to each receive annual minimum compensation
of $0.5 per year through a three-year period ending from any date after which it
is measured, adjusted annually for changes in the consumer price index (as
defined) or as determined by the Company's Board of Directors, as well as a
retirement compensation payment equal to 50% of each officer’s average three
years' annual salary (as defined).
 
 Retirement
compensation payments to grantor trusts established for the benefit of the
individuals have been made in arrears on a quarterly basis as provided for under
the above-mentioned employment agreements.  In addition, the Company
has employment agreements with certain other key members of management expiring
on various dates through the year 2010 and 2011.  The Company's
employment agreements generally provide for certain protections in the event of
a change of control.  These protections generally include the payment
of severance and related benefits under certain circumstances in the event of a
change of control, and for the Company to reimburse such officers for the amount
of any excise taxes associated with such benefits.
 
 9.   
INCOME TAXES
 The
components of earnings (loss) before incomes taxes were:
 
 Fiscal
      Year Ended December 31,2009
                
                
                2008
                
                
                2007Earnings
      (loss) beforeincome
      taxesUnited
      States
                
                $
                119.1
                
                
                $
                (119.4
                )
                
                $
                127.3Foreign
                
                
                85.5
                
                
                
                31.6
                
                
                
                87.8Earnings
      (loss) beforeincome
      taxes
                
                $
                204.6
                
                
                $
                (87.8
                )
                
                $
                215.1
 
 Income
tax expense consists of the following:
 
 Fiscal
      Year Ended December 31,2009
                
                
                2008
                
                
                2007Current:Federal
                
                $
                0.8
                
                
                $
                1.9
                
                
                $
                2.1State
                
                
                1.1
                
                
                
                2.9
                
                
                
                --Foreign
                
                
                14.9
                
                
                
                24.1
                
                
                
                7.216.8
                
                
                
                28.9
                
                
                
                9.3Deferred:Federal
                
                
                37.5
                
                
                
                (15.5
                )
                
                
                34.7State
                
                
                5.2
                
                
                
                (4.4
                )
                
                
                5.1Foreign
                
                
                3.1
                
                
                
                2.6
                
                
                
                18.745.8
                
                
                
                (17.3
                )
                
                
                58.5Total
      income tax expense
                
                $
                62.6
                
                
                $
                11.6
                
                
                $
                67.8
 F-15
 
  The
difference between income tax expense and the amount computed by applying the
statutory U.S. federal income tax rate (35%) to the pre-tax earnings consists of
the following:
 
 Fiscal
      Year Ended December 31,2009
                    
                    
                    2008
                    
                    
                    2007Statutory
      federal income tax expense
                    
                    $
                    71.6
                    
                    
                    $
                    (30.7
                    )
                    
                    $
                    75.3U.S.
      state income taxes
                    
                    
                    4.9
                    
                    
                    
                    (1.2
                    )
                    
                    
                    5.9Dividend
      income from foreign affiliate
                    
                    
                    --
                    
                    
                    
                    --
                    
                    
                    
                    2.5Foreign
      tax rate differential
                    
                    
                    (15.9
                    )
                    
                    
                    (17.9
                    )
                    
                    
                    (6.3
                    )Non-deductible
      charges/losses and other
                    
                    
                    7.5
                    
                    
                    
                    10.2
                    
                    
                    
                    3.9Research
      and development credit
                    
                    
                    (5.5
                    )
                    
                    
                    (1.9
                    )
                    
                    
                    (5.3
                    )Goodwill
      and intangible asset impairment charge
                    
                    
                    --
                    
                    
                    
                    54.6
                    
                    
                    
                    --Extra-territorial
      income exclusion
                    
                    
                    --
                    
                    
                    
                    (1.5
                    )
                    
                    
                    (8.2
                    )$
                    62.6
                    
                    
                    $
                    11.6
                    
                    
                    $
                    67.8
 
 The tax
effects of temporary differences and carryforwards that give rise to deferred
income tax assets and liabilities consist of the following:
 
 December
      31,
                    
                    
                    December
      31,2009
                    
                    
                    2008Deferred
      tax assets:Inventory
      reserves
                    
                    $
                    11.2
                    
                    
                    $
                    11.8Warranty
      reserves
                    
                    
                    6.9
                    
                    
                    
                    6.4Accrued
      liabilities
                    
                    
                    14.0
                    
                    
                    
                    12.1Net
      operating loss carryforward
                    
                    
                    23.2
                    
                    
                    
                    24.4Research
      and developmentcredit
      carry forward
                    
                    
                    28.8
                    
                    
                    
                    22.4Alternative
      minimumtax
      credit carryforward
                    
                    
                    4.7
                    
                    
                    
                    3.9Intangible
      assets
                    
                    
                    --
                    
                    
                    
                    22.7HCS purchase accounting
                    
                    
                    1.9
                    
                    
                    
                    12.7Other
                    
                    
                    7.6
                    
                    
                    
                    6.7$
                    98.3
                    
                    
                    $
                    123.1Deferred
      tax liabilities:Acquisition
      accruals
                    
                    $
                    (14.3
                    )
                    
                    $
                    (13.7
                    )Book
      to tax revenue differences
                    
                    
                    (39.2
                    )
                    
                    
                    (30.8
                    )Intangible
      assets
                    
                    
                    (1.6
                    )
                    
                    
                    --Depreciation
                    
                    
                    (11.5
                    )
                    
                    
                    (3.1
                    )Software
      development costs
                    
                    
                    (2.5
                    )
                    
                    
                    (4.6
                    )(69.1
                    )
                    
                    
                    (52.2
                    )Net
      deferred tax asset before valuationallowance
                    
                    
                    29.2
                    
                    
                    
                    70.9Valuation
      allowance
                    
                    
                    (10.5
                    )
                    
                    
                    (6.9
                    )Net
      deferred tax asset
                    
                    $
                    18.7
                    
                    
                    $
                    64.0
 
 The
Company maintained a valuation allowance of $10.5 as of December 31, 2009
primarily related to foreign tax credits and foreign net operating
losses.
 
 As of
December 31, 2009, the Company had federal, state and foreign net operating loss
carryforwards of approximately $110.7, $117.3 and $26.2,
respectively.  The federal and state net operating loss carryforwards
begin to expire in 2018 and 2010, respectively.  As of December 31,
2009, the Company had federal and state research and development tax credit
carryforwards of $28.9 which expire through 2024.
 
 The
Company has not provided for any residual U.S. income taxes on the approximately
$188.0 of earnings from its foreign subsidiaries because such earnings are
intended to be indefinitely reinvested.  It is not practicable to
determine the amount of U.S. income and foreign withholding tax payable in the
event all such foreign earnings are repatriated.
 
 F-16
 
 Through
2009, the Company recognized cumulative tax deductions of $75.8 related to stock
option exercises and vested restricted shares.  In accordance with the
Company’s methodology for determining when these deductions are deemed realized
under ASC 718, the Company assumes that it utilizes its net operating loss
carryforwards to reduce its taxes payable rather than these
deductions.  Pursuant to ASC 718, these deductions are not deemed
realized until they reduce taxes payable.  The Company expects to
record a credit to additional paid-in capital of $29.4 to the extent deductions
of $75.8 are treated as reducing taxes payable in the future.
 
 A
reconciliation of the beginning and ending amounts of gross unrecognized tax
benefit are as follows:
  2009
                    
                    
                    2008
                    
                    
                    2007Balance,
      beginning of the period
                    
                    $
                    15.1
                    
                    
                    $
                    11.8
                    
                    
                    $
                    7.4Additions
      for current year tax positions
                    
                    
                    3.5
                    
                    
                    
                    3.1
                    
                    
                    
                    1.6Additions
      for tax positions of prior years
                    
                    
                    1.6
                    
                    
                    
                    0.7
                    
                    
                    
                    2.5Currency
      fluctuations
                    
                    
                    0.3
                    
                    
                    
                    (0.5
                    )
                    
                    
                    0.3Reduction
      for tax positions of prior years
                    
                    
                    (2.0
                    )
                    
                    
                    --
                    
                    
                    
                    --Balance,
      end of the period
                    
                    $
                    18.5
                    
                    
                    $
                    15.1
                    
                    
                    $
                    11.8
 
 The
difference between the gross uncertain tax position of $18.5 and the liability
for unrecognized tax benefits of $15.9 is due to the netting of certain items
when calculating the liability for unrecognized tax benefits. This liability, if
recognized, would affect the Company’s effective tax rate.  It is
reasonably possible that the amount of liability for unrecognized tax benefits
will change in the next twelve months; however, the Company does not expect the
change to have a material impact on the Company’s consolidated financial
statements.
 
 The
Company is currently undergoing a U.S. federal income tax
examination.  With minor exceptions, the Company is currently open to
audit by the tax authorities for the four tax years ending December 31,
2009.
 
 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 under $1.0 as of
December 31, 2009, and December 31, 2008.
  10.   
EMPLOYEE RETIREMENT PLANS
 
 The
Company sponsors and contributes to a qualified, defined contribution savings
and investment plan, covering substantially all U.S. employees.  The
BE Aerospace Savings and Investment Plan was established pursuant to Section
401(k) of the Internal Revenue Code.  Under the terms of this plan,
covered employees may contribute up to 100% of their pay, limited to certain
statutory maximum contributions for 2009.  Participants are vested in
matching contributions immediately and the matching percentage is 100% of the
first 3% of employee contributions and 50% on the next 2% of employee
contributions.  Total expense for the plan was $6.8, $6.9 and $5.6 for
the calendar years ended December 31, 2009, 2008 and 2007,
respectively.  In addition, the Company contributes to the BE
Aerospace, Inc. Hourly Tax-Sheltered Retirement Plan. This plan was established
pursuant to Section 401(k) of the Internal Revenue Code and covers certain U.S.
union employees.  Total expense for the plan was $0.2, $0.3 and $0.2
for the calendar years ended December 31, 2009, 2008 and 2007,
respectively.  The Company and its subsidiaries participate in
government-sponsored programs in certain European countries.  The
Company funds these plans based on legal requirements, tax considerations, local
practices and investment opportunities.
 
 F-17
  11.    STOCKHOLDERS'
EQUITY
  Earnings (Loss) Per Share -
Basic net earnings (loss) per common share is computed using the weighted
average of common shares outstanding during the year.  Diluted net
earnings (loss) per common share reflects the potential dilution from assumed
conversion of all dilutive securities such as stock options and unvested
restricted stock using the treasury stock method. When the effects of the
outstanding stock options are anti-dilutive, they are not included in the
calculation of diluted earnings per common share. For the years ended
December 31, 2009, 2008 and 2007, securities totaling approximately 1.0,
0.9, and 0.1 million shares, respectively, were excluded from the determination
of diluted earnings per common share because the effect would have been
antidultive.
 
 The
following table sets forth the computation of basic and diluted net earnings per
share for the fiscal years ended December 31, 2009, 2008 and 2007:
 
 Fiscal
      Year Ended December 31,2009
                    
                    
                    2008
                    
                    
                    2007Numerator:
      net earnings (loss)
                    
                    $
                    142.0
                    
                    
                    $
                    (99.4
                    )
                    
                    $
                    147.3Denominator:Denominator
      for basic earnings per share -Weighted
      average shares (in millions)
                    
                    
                    98.5
                    
                    
                    
                    94.3
                    
                    
                    
                    88.1Effect
      of dilutive securities -Dilutive
      securities
                    
                    
                    0.8
                    
                    
                    
                    --
                    
                    
                    
                    0.7Denominator
      for diluted earnings per share -Adjusted
      weighted average shares (in millions)
                    
                    
                    99.3
                    
                    
                    
                    94.3
                    
                    
                    
                    88.8Basic
      net earnings (loss) per share
                    
                    $
                    1.44
                    
                    
                    $
                    (1.05
                    )
                    
                    $
                    1.67Diluted
      net earnings (loss) per share
                    
                    $
                    1.43
                    
                    
                    $
                    (1.05
                    )
                    
                    $
                    1.66
  Long Term Incentive Plan -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 2009, 2008 and
2007, the Company granted restricted stock and restricted stock units to certain
members of the Company’s Board of Directors and
management.  Restricted stock and restricted stock unit grants vest
over periods ranging from two to four years and are granted at the discretion of
the Compensation Committee of the Board of Directors.  Certain awards
also vest upon attainment of performance goals.  Compensation cost is
recorded on a straight-line basis over the vesting term of the shares based on
the grant date value using the closing trading price.  Share based
compensation of $23.3, $15.1 and $10.3 was recorded during 2009, 2008, and 2007
respectively.  Unrecognized compensation cost related to these grants
was $54.1, $51.5, and $41.0 at December 31, 2009, December 31, 2008, and
December 31, 2007, respectively.
 
 The
following table summarizes shares of restricted stock that were granted, vested,
forfeited and outstanding:
 
 December
      31, 2009
                    
                    
                    December
      31, 2008Weighted
                    
                    
                    
                    
                    
                    
                    
                    
                    WeightedWeighted
                    
                    
                    Average
                    
                    
                    
                    
                    
                    Weighted
                    
                    
                    AverageAverage
                    
                    
                    Remaining
                    
                    
                    
                    
                    
                    Average
                    
                    
                    RemainingShares
                    
                    
                    Grant
      Date
                    
                    
                    Vesting
      Period
                    
                    
                    Shares
                    
                    
                    Grant
      Date
                    
                    
                    Vesting
      Period(in
      thousands)
                    
                    
                    Fair
      Value
                    
                    
                    (
      in years)
                    
                    
                    (in
      thousands)
                    
                    
                    Fair
      Value
                    
                    
                    (
      in years)Outstanding,
      beginning ofperiod
                    
                    
                    2,727
                    
                    
                    $
                    18.82
                    
                    
                    
                    3.1
                    
                    
                    
                    1,458
                    
                    
                    $
                    31.18
                    
                    
                    
                    3.1Shares
      granted
                    
                    
                    946
                    
                    
                    
                    20.70
                    
                    
                    
                    --
                    
                    
                    
                    1,764
                    
                    
                    
                    11.85
                    
                    
                    
                    --Shares
      vested
                    
                    
                    (785
                    )
                    
                    
                    20.72
                    
                    
                    
                    --
                    
                    
                    
                    (452
                    )
                    
                    
                    30.09
                    
                    
                    
                    --Shares
      forfeited
                    
                    
                    (121
                    )
                    
                    
                    18.64
                    
                    
                    
                    --
                    
                    
                    
                    (43
                    )
                    
                    
                    33.17
                    
                    
                    
                    --Outstanding,
      end of period
                    
                    
                    2,767
                    
                    
                    
                    18.96
                    
                    
                    
                    2.45
                    
                    
                    
                    2,727
                    
                    
                    
                    18.82
                    
                    
                    
                    3.1
 
 During
the year ended December 31, 2009, the Company granted 112,270 units of
restricted stock.  During the year ended December 31, 2009, 81,348
units of restricted stock were forfeited.  As of December 31, 2009,
the weighted average remaining vesting period for these units was 2.93
years.
 
 F-18
 
 No stock
options were granted during the three years ended December 31, 2009 and no
related stock compensation was recognized as all options were fully vested as of
December 31, 2006.  Outstanding stock options at December 31, 2009,
2008 and 2007 totaled approximately 158,000, 184,000, and 245,000, all of which
were exercisable. During the years ended December 31, 2009, 2008 and 2007,
19,472, 37,150 and 909,789 stock options were exercised with an aggregate
intrinsic value of $0.2, $0.4 and $20.8 determined as of the date of option
exercise.  The aggregate intrinsic value of outstanding options as of
December 31, 2009 was $2.5.
 
 12.   
EMPLOYEE STOCK PURCHASE PLAN
  The
Company has established a qualified Employee Stock Purchase Plan, the terms of
which allow for qualified employees (as defined in the Plan) to participate in
the purchase of designated 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.  The Company issued approximately 213,000, 286,000 and 67,000
shares of common stock during the fiscal years ended December 31, 2009, 2008 and
2007, respectively, pursuant to this plan at a weighted average price per share
of $14.95, $9.26, and $39.46, respectively.
  13.   
SEGMENT REPORTING
  The
Company is organized based on the products and services it
offers.  The Company’s reportable segments are comprised of
consumables management, commercial aircraft and business jet. Each segment
regularly 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 commercial, business
jet, military, MRO, aircraft leasing and aircraft manufacturing customers.Segment information for
prior periods has been presented on a consistent
basis.
 
 The
following table presents net revenues and other financial information by
business segment:
 
 Fiscal
      Year Ended December 31, 2009Consumables
                    
                    
                    Commercial
                    
                    
                    BusinessManagement
                    
                    
                    Aircraft
                    
                    
                    Jet
                    
                    
                    ConsolidatedNet
      revenues
                    
                    $
                    798.1
                    
                    
                    $
                    911.3
                    
                    
                    $
                    228.3
                    
                    
                    $
                    1,937.7Operating
      earnings (2)
                    
                    
                    151.0
                    
                    
                    
                    121.0
                    
                    
                    
                    24.1
                    
                    
                    
                    296.1Total
      assets(3)
                    
                    
                    1,808.9
                    
                    
                    
                    762.9
                    
                    
                    
                    268.3
                    
                    
                    
                    2,840.1Goodwill
                    
                    
                    452.4
                    
                    
                    
                    162.1
                    
                    
                    
                    88.7
                    
                    
                    
                    703.2Capital
      expenditures
                    
                    
                    9.4
                    
                    
                    
                    16.9
                    
                    
                    
                    2.1
                    
                    
                    
                    28.4Depreciation
      and amortization
                    
                    
                    17.0
                    
                    
                    
                    26.0
                    
                    
                    
                    6.5
                    
                    
                    
                    49.5
   Fiscal
      Year Ended December 31, 2008Consumables
                    
                    
                    Commercial
                    
                    
                    BusinessManagement
                    
                    
                    Aircraft
                    
                    
                    Jet
                    
                    
                    ConsolidatedNet
      revenues
                    
                    $
                    697.3
                    
                    
                    $
                    1,138.7
                    
                    
                    $
                    274.0
                    
                    
                    $
                    2,110.0Operating
      earnings (loss) (1)(2)
                    
                    
                    (151.7
                    )
                    
                    
                    78.2
                    
                    
                    
                    37.3
                    
                    
                    
                    (36.2
                    )Total
      assets (3)
                    
                    
                    1,830.9
                    
                    
                    
                    827.6
                    
                    
                    
                    271.6
                    
                    
                    
                    2,930.1Goodwill
                    
                    
                    416.5
                    
                    
                    
                    158.5
                    
                    
                    
                    88.6
                    
                    
                    
                    663.6Capital
      expenditures
                    
                    
                    6.9
                    
                    
                    
                    20.7
                    
                    
                    
                    4.1
                    
                    
                    
                    31.7Depreciation
      and amortization
                    
                    
                    10.1
                    
                    
                    
                    24.7
                    
                    
                    
                    5.9
                    
                    
                    
                    40.7
  F-19
 Fiscal
      Year Ended December 31, 2007Consumables
                    
                    
                    Commercial
                    
                    
                    BusinessManagement
                    
                    
                    Aircraft
                    
                    
                    Jet
                    
                    
                    ConsolidatedNet
      revenues
                    
                    $
                    386.5
                    
                    
                    $
                    1,098.1
                    
                    
                    $
                    193.1
                    
                    
                    $
                    1,677.7Operating
      earnings (2)
                    
                    
                    85.5
                    
                    
                    
                    141.8
                    
                    
                    
                    19.7
                    
                    
                    
                    247.0Total
      assets (3)
                    
                    
                    575.2
                    
                    
                    
                    940.4
                    
                    
                    
                    256.4
                    
                    
                    
                    1,772.0Goodwill
                    
                    
                    133.2
                    
                    
                    
                    245.2
                    
                    
                    
                    88.8
                    
                    
                    
                    467.2Capital
      expenditures
                    
                    
                    4.4
                    
                    
                    
                    22.7
                    
                    
                    
                    5.0
                    
                    
                    
                    32.1Depreciation
      and amortization
                    
                    
                    4.3
                    
                    
                    
                    25.2
                    
                    
                    
                    5.5
                    
                    
                    
                    35.0
 (1)  The
2008 information includes goodwill and intangible asset impairment charge of
$310.2 at consumables management segment and $79.8 at commercial aircraft
segment.  Excluding such charges, operating earnings for 2008 would
have been $158.5 at consumables management segment and $158.0 at commercial
aircraft segment.
 
 (2)  Operating
earnings includes an allocation of corporate IT costs, employee benefits and
general and administrative costs based on the proportion of each segments’
systems users, number of employees and sales, respectively.
 
 (3)  Corporate
assets (including cash and cash equivalents) of $144.6, $256.7 and $139.2 at
December 31, 2009, 2008 and 2007, respectively, have been allocated to the above
segments based on each segments respective percentage of total
assets.  During 2007 certain operations with total assets of
approximately $31.5 were transferred from consumable management to commercial
aircraft segment.
 
 Revenues
for each business segments for the fiscal years ended December 31, 2009, 2008
and 2007 are presented below:
 
 Geographic
Information
 
 The
Company operated principally in three geographic areas, the United States,
Europe (primarily the United Kingdom) and emerging markets, such as Asia,
Pacific Rim, and the Middle East. There were no significant transfers between
geographic areas during these periods.
  The
following table presents revenues and operating earnings based on the
originating location for the fiscal years ended December 31, 2009, 2008 and
2007. Additionally, it presents all identifiable assets related to the
operations in each geographic area as of December 31, 2009 and
2008:
 
 Fiscal
      Year Ended December 31,2009
                      
                      
                      2008
                      
                      
                      2007Revenues:Domestic
                      
                      $
                      1,399.5
                      
                      
                      $
                      1,428.8
                      
                      
                      $
                      1,036.6Foreign
                      
                      
                      538.2
                      
                      
                      
                      681.2
                      
                      
                      
                      641.1$
                      1,937.7
                      
                      
                      $
                      2,110.0
                      
                      
                      $
                      1,677.7Operating
      earnings (loss):Domestic
                      
                      $
                      178.2
                      
                      
                      $
                      (129.7
                      )
                      
                      $
                      159.1Foreign
                      
                      
                      117.9
                      
                      
                      
                      93.5
                      
                      
                      
                      87.9$
                      296.1
                      
                      
                      $
                      (36.2
                      )
                      
                      $
                      247.0December
      31,Identifiable
      assets:
                      
                      
                      2009
                      
                      
                      
                      2008Domestic
                      
                      $
                      2,337.3
                      
                      
                      $
                      2,386.9Foreign
                      
                      
                      502.8
                      
                      
                      
                      543.2$
                      2,840.1
                      
                      
                      $
                      2,930.1
  F-20
 
 Revenues
by geographic area, (based on destination), for the fiscal years ended December
31, 2009, 2008, and 2007 were as follows:
 
 Fiscal
      Year Ended December 31,2009
                    
                    
                    2008
                    
                    
                    2007%
      of
                    
                    
                    
                    
                    
                    %
      of
                    
                    
                    
                    
                    
                    %
      ofRevenues
                    
                    
                    Revenues
                    
                    
                    Revenues
                    
                    
                    Revenues
                    
                    
                    Revenues
                    
                    
                    RevenuesU.S.
                    
                    $
                    943.3
                    
                    
                    
                    48.7
                    %
                    
                    $
                    994.4
                    
                    
                    
                    47.1
                    %
                    
                    $
                    749.5
                    
                    
                    
                    44.7
                    %Europe
                    
                    
                    449.3
                    
                    
                    
                    23.2
                    %
                    
                    
                    508.9
                    
                    
                    
                    24.1
                    %
                    
                    
                    468.0
                    
                    
                    
                    27.9
                    %Asia,
      Pacific Rim,Middle
      East and other
                    
                    
                    545.1
                    
                    
                    
                    28.1
                    %
                    
                    
                    606.7
                    
                    
                    
                    28.8
                    %
                    
                    
                    460.2
                    
                    
                    
                    27.4
                    %$
                    1,937.7
                    
                    
                    
                    100.0
                    %
                    
                    $
                    2,110.0
                    
                    
                    
                    100.0
                    %
                    
                    $
                    1,677.7
                    
                    
                    
                    100.0
                    %
  Export
revenues from the United States to customers in foreign countries amounted to
$533.8, $566.9 and $437.1 in the fiscal years ended December 31, 2009, 2008 and
2007, respectively.
  14.   
FAIR VALUE INFORMATION
  All
financial instruments 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 –
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 and term debt
are a reasonable estimate of their fair values as interest is based upon
floating market rates. The fair value of the Company’s 8.5% Senior Notes, based
on market prices for publicly traded debt, was $636.0 and $540.0 as of December
31, 2009, and December 31, 2008, respectively.
 
 The fair
value information presented herein is based on pertinent information available
to management at December 31, 2009 and December 31, 2008, respectively. Although
management is not aware of any factors that would significantly affect the
estimated fair value amounts, such amounts have not been comprehensively
revalued for purposes of these consolidated financial statements since those
dates, and current estimates of fair value may differ significantly from the
amounts presented herein.
 
 15.    SELECTED QUARTERLY DATA (Unaudited)
  Summarized
quarterly financial data for the fiscal years ended December 31, 2009 and
December 31, 2008 are as follows:
  Fiscal
      Year Ended December 31, 2009First
                    
                    
                    Second
                    
                    
                    Third
                    
                    
                    FourthQuarter
                    
                    
                    Quarter
                    
                    
                    Quarter
                    
                    
                    QuarterRevenues
                    
                    $
                    523.7
                    
                    
                    $
                    474.8
                    
                    
                    $
                    459.8
                    
                    
                    $
                    479.4Gross
      profit
                    
                    
                    176.7
                    
                    
                    
                    165.3
                    
                    
                    
                    162.1
                    
                    
                    
                    165.1Net
      earnings
                    
                    
                    37.9
                    
                    
                    
                    34.7
                    
                    
                    
                    36.1
                    
                    
                    
                    33.3Basic
      net earnings per share(1)
                    
                    
                    0.39
                    
                    
                    
                    0.35
                    
                    
                    
                    0.37
                    
                    
                    
                    0.34Diluted
      net earnings per share (1)
                    
                    
                    0.38
                    
                    
                    
                    0.35
                    
                    
                    
                    0.36
                    
                    
                    
                    0.33
 F-21
 
  Fiscal
      Year Ended December 31, 2008First
                    
                    
                    Second
                    
                    
                    Third
                    
                    
                    FourthQuarter
                    
                    
                    Quarter
                    
                    
                    Quarter
                    
                    
                    QuarterRevenues
                    
                    $
                    473.2
                    
                    
                    $
                    522.2
                    
                    
                    $
                    587.8
                    
                    
                    $
                    526.8Gross
      profit
                    
                    
                    169.1
                    
                    
                    
                    179.8
                    
                    
                    
                    193.4
                    
                    
                    
                    181.2Net
      earnings (loss)
                    
                    
                    48.5
                    
                    
                    
                    53.9
                    
                    
                    
                    51.8
                    
                    
                    
                    (253.6
                    )
                    (2)Basic
      net earnings (loss) per share(1)
                    
                    
                    0.53
                    
                    
                    
                    0.59
                    
                    
                    
                    0.54
                    
                    
                    
                    (2.59
                    )
                    (2)Diluted
      net earnings (loss) per share (1)
                    
                    
                    0.53
                    
                    
                    
                    0.59
                    
                    
                    
                    0.54
                    
                    
                    
                    (2.59
                    )
                    (2)
   (1)
                  Net
      earnings (loss) per share are computed individually for each quarter
      presented.  Therefore, the sum of the quarterly net earnings per
      share may not necessarily equal the total for the
  year.
 
 (2)
                  The
      fourth quarter information includes $390.0 of pre-tax goodwill and
      intangible asset impairment charges, ($300.0 on an after tax
      basis).  Excluding such charges, operating earnings, net
      earnings, basic net earnings per share and diluted net earnings per share
      would have been $90.8, $46.4, $0.47 and $0.47,
    respectively.
  
 F-22
 
 SCHEDULE
II - VALUATION AND QUALIFYING ACCOUNTS
 FOR THE FISCAL YEARS ENDED
DECEMBER 31, 2009, 2008 AND 2007
 (In
millions)
  BalanceAt
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    BalanceBeginning
                    
                    
                    
                    
                    
                    
                    
                    
                    Write-
                    
                    
                    At
      EndOf
                    
                    
                    
                    
                    
                    
                    
                    
                    Offs/
                    
                    
                    OfPeriod
                    
                    
                    Expenses
                    
                    
                    Other
                    
                    
                    Disposals
                    
                    
                    PeriodDeducted From Assets:Allowance for doubtful
      accounts:Fiscal
      year ended December 31, 2009
                    
                    $
                    12.2
                    
                    
                    $
                    (1.6
                    )
                    
                    $
                    0.1
                    
                    
                    $
                    3.3
                    
                    
                    $
                    7.4Fiscal
      year ended December 31, 2008
                    
                    
                    4.5
                    
                    
                    
                    8.7
                    
                    
                    
                    (0.3
                    )
                    
                    
                    0.7
                    
                    
                    
                    12.2Fiscal
      year ended December 31, 2007
                    
                    
                    4.7
                    
                    
                    
                    0.6
                    
                    
                    
                    --
                    
                    
                    
                    0.8
                    
                    
                    
                    4.5Reserve for obsolete
      inventories:Fiscal
      year ended December 31, 2009
                    
                    $
                    41.0
                    
                    
                    $
                    15.2
                    
                    
                    $
                    --
                    
                    
                    $
                    22.7
                    
                    
                    $
                    33.5Fiscal
      year ended December 31, 2008
                    
                    
                    32.2
                    
                    
                    
                    11.0
                    
                    
                    
                    --
                    
                    
                    
                    2.2
                    
                    
                    
                    41.0Fiscal
      year ended December 31, 2007
                    
                    
                    29.1
                    
                    
                    
                    8.1
                    
                    
                    
                    --
                    
                    
                    
                    5.0
                    
                    
                    
                    32.2Deferred tax asset valuation
      allowance:Fiscal
      year ended December 31, 2009
                    
                    $
                    6.9
                    
                    
                    $
                    --
                    
                    
                    $
                    3.6
                    
                    
                    $
                    --
                    
                    
                    $
                    10.5Fiscal
      year ended December 31, 2008
                    
                    
                    9.8
                    
                    
                    
                    --
                    
                    
                    
                    (2.9
                    )
                    
                    
                    --
                    
                    
                    
                    6.9Fiscal
      year ended December 31, 2007
                    
                    
                    15.5
                    
                    
                    
                    --
                    
                    
                    
                    (5.7
                    )
                    
                    
                    --
                    
                    
                    
                    9.8
 
 F-23