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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 25, 2004
HEICO CORPORATION
(Exact name of registrant as specified in its charter)
FLORIDA 1-4604 65-0341002
(State or other jurisdiction (Commission file number) (I.R.S. Employer
of incorporation) Identification No.)
3000 Taft Street, Hollywood, Florida 33021
(Address of principal executive offices) (Zip Code)
(954) 987-4000
(Registrant's telephone number, including area code)
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On August 25, 2004, HEICO Corporation issued a press release announcing
its financial results for the third quarter of fiscal 2004. A copy of the press
release is furnished as Exhibit 99.1 to this report.
ITEM 8.01 OTHER EVENTS
On August 25, 2004, the Company issued a press release announcing its
financial results for the third quarter of fiscal 2004. As reported therein, the
Company committed to a restructuring plan involving certain subsidiaries of its
Flight Support Group that provide repair and overhaul services ("repair and
overhaul subsidiaries") during the third quarter of fiscal 2004. The
restructuring plan calls for inventory write-downs, contract termination costs,
management hiring/relocation related expenses, and other associated costs. The
unexpected death of an executive of certain of the repair and overhaul
subsidiaries was the impetus for the commencement of the restructuring
activities, which the Company believes will allow it to better service its
customers and improve operating margins.
The Company incurred $600,000 of restructuring expenses in its third
quarter of fiscal 2004 ended July 31, 2004. The restructuring expenses included
$350,000 of inventory write-downs (non-cash amount) and a $250,000 accrual for
management hiring/relocation related expenses. The inventory written down is
related to older generation aircraft for which repair and overhaul services are
being discontinued by the Company.
The Company estimates it will incur an additional $400,000 - $600,000 of
restructuring expenses relating to contract termination costs, management
hiring/relocation related expenses and other associated costs over the fourth
quarter of fiscal 2004 and first quarter of fiscal 2005. The contract
termination costs expected to be incurred, including lease termination on a
facility, are estimated to total $250,000 - $300,000. Additional costs expected
to be incurred principally consist of moving costs related to the consolidation
of two repair and overhaul facilities and one-time employee termination/hiring
benefits, which are estimated to aggregate approximately $150,000 - $300,000.
The aggregate total amount of expenses to be incurred in connection with
the restructuring plan is $1.0 million to $1.2 million of which $650,000 -
$850,000 represents future cash expenditures.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(C) EXHIBITS
EXHIBIT NO. DESCRIPTION
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99.1 Press release, dated August 25, 2004, titled "HEICO
Reports Significantly Increased 3rd Qtr Results."
2
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HEICO CORPORATION
---------------------------------
(Registrant)
Date: August 25, 2004 By: /s/ Thomas S. Irwin
----------------------------
Thomas S. Irwin
Executive Vice President
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
3
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
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99.1 Press release, dated August 25, 2004, titled "HEICO Reports
Significantly Increased 3rd Qtr Results."
4
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
August 25, 2004
Thomas S. Irwin (954) 987-4000 ext. 7560
Victor H. Mendelson (305) 374-1745 ext. 7590
HEICO REPORTS SIGNIFICANTLY
INCREASED 3rd Qtr RESULTS
150% Increase in Net Income and Continued Strong Cash Flow;
29% Increase in Operating Income on 23% Increase in Net Sales;
Raises 2004 Sales and Earnings Targets
HOLLYWOOD, FL and MIAMI, FL -- HEICO CORPORATION (NYSE: HEI.A and HEI) today
reported that net income for the third quarter of 2004 increased 150% to
$8,115,000, or 32 cents per diluted share, compared to net income of $3,240,000,
or 13 cents per diluted share, for the third quarter of fiscal 2003. For the
first nine months of fiscal 2004, net income increased 78% to $15,464,000, or 60
cents per diluted share, from $8,682,000, or 36 cents per diluted share, in the
first nine months of fiscal 2003.
(NOTE: HEICO has two classes of common stock traded on the NYSE. Both classes,
the Class A Common Stock (HEI.A) and the Common Stock (HEI), are virtually
identical in all economic respects. The only difference between the share
classes is the voting rights. The Class A Common Stock (HEI.A) receives 1/10
vote per share and the Common Stock (HEI) receives one vote per share.)
Operating income increased 29% to $7,870,000 for the third quarter of fiscal
2004 from $6,101,000 for the third quarter of fiscal 2003 and increased 37% to
$22,615,000 for the first nine months of fiscal 2004 from $16,561,000 for the
first nine months of fiscal 2003.
Net sales for the third quarter of fiscal 2004 were up 23% to $55,820,000 from
$45,412,000 in the third quarter of fiscal 2003. Net sales increased 20% to
$154,764,000 in the first nine months of fiscal 2004 from $128,791,000 in the
first nine months of fiscal 2003.
Net income for the third quarter and the first nine months of fiscal 2004
includes $4.0 million in proceeds (net of the minority interest's share of the
income) from a key-person life insurance policy maintained by a subsidiary of
the Company's Flight Support Group. In the attached Condensed Consolidated
Statements of Operations, the life insurance proceeds are excluded from the
computation of operating income and reported after operating income. Included in
- more -
operating income for the third quarter and first nine months of fiscal 2004 are
$600,000 of pre-tax restructuring expenses within certain subsidiaries of the
Flight Support Group that provide repair and overhaul services and $235,000 of
pre-tax legal and other costs related to litigation brought by a subsidiary of
the Company's Electronic Technologies Group. The net impact of the life
insurance proceeds reduced by the restructuring expenses and litigation-related
expenses increased net income by $3.6 million, or $.14 per diluted share, for
the third quarter and first nine months of fiscal 2004.
Cash flow from operating activities for the first nine months of fiscal 2004
increased 80% to $32.6 million, including $5.0 million from the life insurance
proceeds, from $18.1 million in the first nine months of fiscal 2003 and equaled
211% of the Company's net income. Capital expenditures totaled $3.4 million in
the first nine months of fiscal 2004.
Laurans A. Mendelson, HEICO's Chairman, President & Chief Executive Officer,
remarked, "Based on our operating results through the third quarter and current
market conditions, we are raising our fiscal 2004 sales growth target to 20%
over fiscal 2003 and increasing our diluted earnings per share target to a range
of $.78 - $.80, which would represent a significant increase of over 50% from
fiscal 2003 per share results. Fiscal 2004 cash flow from operating activities
should approximate $39 - $40 million, which would represent an $11 - $12 million
increase over fiscal 2003. Capital expenditures should total $5 - $6 million in
fiscal 2004.
We are pleased to report both increased sales and improved margins in each of
our business segments and our PMA aftermarket sales reached an all time
quarterly high in the third quarter. This reflects both organic growth, which
approximated 15% in the third quarter of fiscal 2004 over the third quarter of
fiscal 2003, and growth through acquiring profitable, well-managed businesses.
We also believe that our ongoing new product development efforts and strategic
relationships with some of the world's major airlines continue to contribute to
the improved operating results within the Flight Support Group where sales have
exceeded our internal targets.
Operating margins within our Flight Support Group continue to show
year-over-year improvement despite the restructuring expenses incurred in the
third quarter of fiscal 2004. We believe these restructuring efforts, which
include consolidation of two West Coast repair and overhaul facilities and
related management hiring and relocation expenses, will allow us to better serve
our customers while further improving operating margins.
As we continue to add new products and further penetrate our markets, we expect
the Flight Support Group's operating margins in the fourth quarter of fiscal
2004 to continue to show year-over-year improvement, while maintaining strong
operating margins in the Electronic Technologies Group.
We are also pleased to note continued very strong cash flow. Cash flow from
operating activities in the third quarter of fiscal 2004 totaled $15.9 million,
allowing us to reduce borrowings under our revolving credit facility by $8.0
million in the quarter while increasing cash and cash equivalent investments by
$4.8 million.
- more -
As we look to the fourth quarter of fiscal 2004, fiscal 2005 and beyond, we
believe we have established a strong foundation for long-term growth in sales
and earnings. With both traffic and capacity growing within the commercial
airline industry, our focus on new product development in both our business
segments and our strong balance sheet, HEICO is poised for continued strong
growth."
All per share and share information in this release has been adjusted
retroactively to give effect to a 10% stock dividend paid in January 2004.
The 29% increase in operating income for the third quarter and the 37% increase
in operating income for the first nine months of fiscal 2004 over the comparable
periods of fiscal 2003 reflect increased sales and higher margins within each of
the Company's two operating segments, the Flight Support Group (FSG) and the
Electronic Technologies Group (ETG).
For the third quarter of fiscal 2004, sales of the FSG increased 22% to
$40,086,000 from $32,742,000 for the third quarter of fiscal 2003. For the first
nine months of fiscal 2004, sales of the FSG increased 18% to $112,053,000 from
$95,004,000 for the first nine months of fiscal 2003. The increase in revenues
for the third quarter and first nine months of fiscal 2004 versus the respective
fiscal 2003 periods resulted primarily from improved demand for the Company's
replacement parts and repair and overhaul services, which reflects continuing
recovery in the commercial airline industry, as well as increased sales of new
products.
Operating income of the FSG increased 25% to $6,006,000 for the third quarter of
fiscal 2004 from $4,797,000 for the third quarter of fiscal 2003 and increased
21% to $17,344,000 for the first nine months of fiscal 2004 from $14,336,000 for
the first nine months of fiscal 2003. The increase in operating income for the
third quarter and the first nine months of fiscal 2004 reflects the higher sales
and improved margins within the FSG.
Sales of the ETG increased 23% to $15,743,000 for the third quarter of fiscal
2004 from $12,814,000 for the third quarter of fiscal 2003 and increased 26% to
$42,825,000 for the first nine months of fiscal 2004 from $34,102,000 for the
first nine months of fiscal 2003. The increase in sales for the third quarter
and the first nine months of fiscal 2004 is primarily due to the acquisition of
Sierra Microwave Technology in December 2003.
Operating income of the ETG increased 27% to $3,428,000 for the third quarter of
fiscal 2004 from $2,702,000 for the third quarter of fiscal 2003 and increased
79% to $9,615,000 for the first nine months of fiscal 2004 from $5,374,000 for
the first nine months of fiscal 2003. The increase in operating income for the
third quarter and the first nine months of fiscal 2004 reflects the acquisition
of Sierra.
There are currently approximately 14.3 million shares of HEICO's Class A Common
Stock (HEI.A) outstanding and 9.9 million shares of HEICO's Common Stock (HEI)
outstanding. The stock symbols for HEICO's two classes of common stock on most
web sites are HEI.A and HEI. However, some web sites change HEICO's Class A
Common Stock stock symbol (HEI.A) to HEI/A or HEIa.
- more -
As previously announced, HEICO will hold a conference call on Thursday, August
26, 2004 at 8:30 a.m. Eastern Daylight Time to discuss its third quarter
results. Individuals wishing to participate in the conference call should dial:
U.S./Canada/International/Local 302-709-8328, wait for the conference operator
and provide the operator with the "Verbal" Passcode/Conference ID VM409831. A
digital replay will be available one hour after the completion of the conference
for 14 days. To access, dial: U.S./Canada/International/Local 402-220-2946 and
enter Passcode/Conference ID 409831#.
HEICO Corporation is engaged primarily in certain niche segments of the
aviation, defense, space and electronics industries through its Hollywood,
FL-based HEICO Aerospace Holdings Corp. subsidiary and its Miami, FL-based HEICO
Electronic Technologies Corp. subsidiary. HEICO's customers include a majority
of the world's airlines and airmotives as well as numerous defense and space
contractors and military agencies worldwide in addition to telecommunications,
electronics and medical equipment manufacturers. For more information about
HEICO, please visit our web site at http://www.heico.com.
Certain statements in this press release constitute forward-looking statements,
which are subject to risks, uncertainties and assumptions. HEICO's actual
results could differ materially from those expressed in or implied by those
forward-looking statements as a result of factors, including, but not limited
to: lower demand for commercial air travel or airline fleet changes, which could
cause lower demand for our goods and services; product specification costs and
requirements, which could cause an increase to our costs to complete contracts;
governmental and regulatory demands, export policies and restrictions,
reductions in defense or space spending by U.S. and/or foreign customers, or
competition from existing and new competitors, which could reduce our sales;
HEICO's ability to introduce new products and product pricing levels, which
could reduce our sales or sales growth; HEICO's ability to make acquisitions and
achieve operating synergies from acquired businesses, customer credit risk,
interest rates and economic conditions within and outside of the aerospace,
defense, space and electronics industries, which could negatively impact our
costs and revenues. Parties receiving this material are encouraged to review all
of HEICO's filings with the Securities and Exchange Commission, including, but
not limited to filings on Form 10-K, Form 10-Q and Form 8-K. We undertake no
obligation to publicly update or revise any forward-looking statement, whether
as a result of new information, future events or otherwise.
- more -
HEICO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
THREE MONTHS ENDED JULY 31,
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2004 2003
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Net sales $ 55,820,000 $ 45,412,000
Cost of sales 36,204,000 /(1)/ 30,276,000
Selling, general and administrative expenses 11,746,000 /(2)//(3)/ 9,035,000
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Operating income 7,870,000 6,101,000
Interest expense (250,000) (307,000)
Interest and other income 93,000 17,000
Life insurance proceeds 5,000,000 /(4)/ --
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Income before income taxes and minority interests 12,713,000 5,811,000
Income tax expense 2,591,000 2,107,000
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Income before minority interests 10,122,000 3,704,000
Minority interests' share of income 2,007,000 464,000
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Net income $ 8,115,000 /(4)//(5)/ $ 3,240,000
============== ==============
Net income per share: /(6)/
Basic $ .34 /(4)//(5)/ $ .14
Diluted $ .32 /(4)//(5)/ $ .13
Weighted average number of common shares outstanding: /(6)/
Basic 24,165,595 23,234,687
Diluted 25,755,455 24,463,742
THREE MONTHS ENDED JULY 31,
------------------------------------------
2004 2003
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Operating segment information: -
Net sales:
Flight Support Group $ 40,086,000 $ 32,742,000
Electronic Technologies Group 15,743,000 12,814,000
Intersegment sales (9,000) (144,000)
-------------- --------------
$ 55,820,000 $ 45,412,000
============== ==============
Operating income:
Flight Support Group $ 6,006,000 /(1)//(2)/ $ 4,797,000
Electronic Technologies Group 3,428,000 /(3)/ 2,702,000
Other, primarily corporate (1,564,000) (1,398,000)
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$ 7,870,000 $ 6,101,000
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HEICO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
NINE MONTHS ENDED JULY 31,
------------------------------------------
2004 2003
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Net sales $ 154,764,000 $ 128,791,000
Cost of sales 100,898,000 /(1)/ 85,978,000
Selling, general and administrative expenses 31,251,000 /(2)//(3)/ 26,252,000
-------------- --------------
Operating income 22,615,000 16,561,000
Interest expense (882,000) (937,000)
Interest and other income 95,000 106,000
Life insurance proceeds 5,000,000 /(4)/ --
-------------- --------------
Income before income taxes and minority interests 26,828,000 15,730,000
Income tax expense 7,447,000 5,605,000
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Income before minority interests 19,381,000 10,125,000
Minority interests' share of income 3,917,000 1,443,000
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Net income $ 15,464,000 /(4)//(5)/ $ 8,682,000
============== ==============
Net income per share: /(6)/
Basic $ .64 /(4)//(5)/ $ .38
Diluted $ .60 /(4)//(5)/ $ .36
Weighted average number of common shares outstanding: /(6)/
Basic 23,986,315 23,147,042
Diluted 25,709,844 24,409,265
NINE MONTHS ENDED JULY 31,
------------------------------------------
2004 2003
-------------- --------------
Operating segment information: -
Net sales:
Flight Support Group $ 112,053,000 $ 95,004,000
Electronic Technologies Group 42,825,000 34,102,000
Intersegment sales (114,000) (315,000)
-------------- --------------
$ 154,764,000 $ 128,791,000
============== ==============
Operating income:
Flight Support Group $ 17,344,000 /(1)//(2)/ $ 14,336,000
Electronic Technologies Group 9,615,000 /(3)/ 5,374,000
Other, primarily corporate (4,344,000) (3,149,000)
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$ 22,615,000 $ 16,561,000
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HEICO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
JULY 31, 2004 OCTOBER 31, 2003
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Cash and cash equivalents $ 8,270,000 $ 4,321,000
Accounts receivable, net 31,502,000 28,820,000
Inventories 48,977,000 51,240,000
Prepaid expenses and other current assets 10,424,000 10,103,000
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Total current assets 99,173,000 94,484,000
Property, plant and equipment, net 36,799,000 35,537,000
Goodwill 216,801,000 188,700,000
Other assets 15,862,000 14,523,000
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Total assets $ 368,635,000 $ 333,244,000
=============== ===============
Current maturities of long-term debt $ 58,000 $ 29,000
Other current liabilities 25,678,000 22,657,000
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Total current liabilities 25,736,000 22,686,000
Long-term debt, net of current maturities 36,086,000 31,984,000
Other non-current liabilities 21,019,000 16,479,000
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Total liabilities 82,841,000 71,149,000
Minority interests in consolidated subsidiaries 43,816,000 40,577,000
Shareholders' equity 241,978,000 221,518,000
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Total liabilities and shareholders' equity $ 368,635,000 $ 333,244,000
=============== ===============
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
NINE MONTHS ENDED JULY 31,
---------------------------------
2004 2003
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Cash flows from operating activities:
Net income $ 15,464,000 $ 8,682,000
Depreciation and amortization 5,126,000 5,004,000
Deferred income tax provision 3,654,000 2,858,000
Minority interests' share of income 3,917,000 1,443,000
(Increase) decrease in accounts receivable (897,000) 1,400,000
Decrease in inventories 2,459,000 1,258,000
Other 2,881,000 (2,534,000)
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Net cash provided by operating activities 32,604,000 18,111,000
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Cash flows from investing activities:
Capital expenditures (3,442,000) (3,137,000)
Acquisitions and related costs, net of cash acquired (28,064,000) (1,530,000)
Other (1,159,000) 197,000
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Net cash used in investing activities (32,665,000) (4,470,000)
--------------- ---------------
Cash flows from financing activities:
Borrowings (payments) on revolving credit facilities, net 4,000,000 (12,000,000)
Cash dividends paid (1,201,000) (1,055,000)
Other 1,211,000 (390,000)
--------------- ---------------
Net cash provided by (used in) financing activities 4,010,000 (13,445,000)
--------------- ---------------
Net increase in cash and cash equivalents 3,949,000 196,000
Cash and cash equivalents at beginning of year 4,321,000 4,539,000
--------------- ---------------
Cash and cash equivalents at end of period $ 8,270,000 $ 4,735,000
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HEICO CORPORATION
FOOTNOTES TO CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
- ----------
(1) Includes $350,000 related to inventory write-downs of an aggregate $600,000
(see also Note 2 below) in restructuring expenses recorded by the Company
in July 2004 within certain subsidiaries of the Flight Support Group that
provide repair and overhaul services ("the repair and overhaul
subsidiaries").
(2) Includes $250,000 related to management hiring/relocation related expenses
of an aggregate $600,000 (see also Note 1 above) in restructuring expenses
recorded by the repair and overhaul subsidiaries in July 2004.
(3) Includes $235,000 of legal and other costs related to litigation brought by
a subsidiary of the Electronic Technologies Group against two former
employees for breach of contract and other possible causes of action
against the former employees and others.
(4) Represents proceeds from a $5.0 million key-person life insurance policy
maintained by a subsidiary of the Flight Support Group. The minority
interest's share of this income totaled $1.0 million, which is reported as
a component of minority interests' share of income. Accordingly, the life
insurance proceeds increased net income by $4.0 million, or $.17 per basic
and $.16 per diluted share.
(5) The restructuring expenses (see Notes 1 and 2 above) decreased net income
by $301,000, or $.01 per basic and diluted share. The litigation-related
expenses (see Note 3 above) decreased net income by $148,000, or $.01 per
basic and diluted share.
(6) All per share and share information has been adjusted retroactively to give
effect to a 10% stock dividend paid in January 2004.