SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
HEICO CORPORATION
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(Name of Registrant As Specified In Its Charter)
N/A
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
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(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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HEICO CORPORATION
3000 Taft Street, Hollywood, Florida 33021
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Notice of Annual Meeting of Shareholders
To Be Held March 25, 2005
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The Annual Meeting of Shareholders of HEICO Corporation, a Florida
corporation ("HEICO" or the "Company"), will be held on March 25, 2005 at 10:00
a.m., Eastern Standard Time, at the J.W. Marriott Miami Hotel, 1109 Brickell
Avenue, Miami, Florida, for the following purposes:
1. To elect a Board of Directors for the ensuing year;
2. To ratify the appointment of Deloitte & Touche LLP as the Company's
independent registered public accounting firm for the fiscal year
ending October 31, 2005; and
3. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only holders of record of HEICO Common Stock and Class A Common Stock as
of the close of business on January 18, 2005 will be entitled to vote at the
Meeting.
You are requested, regardless of the number of shares owned, to sign and
date the enclosed proxy and to mail it promptly, or to use the telephone or
Internet voting systems set forth in the proxy. You may revoke your proxy either
by a written notice to HEICO or in person at the meeting (without affecting any
vote previously taken).
BY ORDER OF THE BOARD OF DIRECTORS
Laurans A. Mendelson
Chairman of the Board,
President and Chief Executive Officer
February 23, 2005
HEICO CORPORATION
3000 Taft Street, Hollywood, Florida 33021
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PROXY STATEMENT
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This Proxy Statement is furnished to the shareholders of HEICO
Corporation ("HEICO" or the "Company") in connection with the solicitation of
proxies by HEICO's Board of Directors for use at the Annual Meeting of
Shareholders of HEICO to be held at the J.W. Marriott Miami Hotel, 1109 Brickell
Avenue, Miami, Florida, 33131 on Friday, March 25, 2005 at 10:00 a.m., Eastern
Standard Time. This Proxy Statement is first being mailed to shareholders on or
about February 25, 2005.
At the annual meeting, the shareholders will be asked to elect a Board
of Directors (Board); to ratify the appointment of Deloitte & Touche LLP as the
Company's independent registered public accounting firm for the fiscal year
ending October 31, 2005; and to vote on any other business which properly comes
before the meeting.
The Board of Directors of HEICO urges you to promptly date, sign and
mail your proxy, or to use the telephone or Internet voting systems set forth in
the proxy, in the form enclosed with this Proxy Statement, to make certain that
your shares are voted at the meeting. Proxies in the enclosed or other
acceptable form that are received in time for the meeting will be voted.
However, you may revoke your proxy at any time prior to its use by a revocation
in writing or a later dated proxy that is received in sufficient time by HEICO
prior to the Annual Meeting; and, if you attend the meeting, you may vote your
shares in person.
If your proxy is received in time for the meeting, it will be voted in
the manner specified by you in the proxy. If you do not specify a choice, the
proxy will be voted as indicated in the form of proxy.
HEICO will bear the expense of soliciting proxies in the accompanying
form. Solicitations will be by mail, and directors, officers and regular
employees of HEICO may solicit proxies personally or by telephone, telegram or
special letter. HEICO will also employ D. F. King & Co., 48 Wall Street, New
York, New York 10005, to assist in soliciting proxies for a fee of $5,500 plus
related out-of-pocket expenses.
Only holders of record of HEICO Common Stock, $0.01 par value per share
(the "Common Stock"), and Class A Common Stock, $0.01 par value per share (the
"Class A Common Stock"), as of the close of business on January 18, 2005 will be
entitled to vote at the meeting. On that date, there were outstanding 9,958,179
shares of Common Stock, each entitled to one vote, and 14,448,110 shares of
Class A Common Stock, each entitled to 1/10th vote per share.
VOTING REQUIREMENTS
The presence, in person or by proxy, of the holders of a majority of the
voting power of the shares of all classes of the Company's common stock entitled
to vote shall constitute a quorum at the annual meeting of shareholders. If a
quorum is present, the affirmative vote of a majority of the voting power of the
shares of all classes of the Company's common stock represented in person or by
proxy at the annual meeting and entitled to vote on the subject matter at the
annual meeting shall be required to elect members of the Board of Directors.
A proxy submitted by a shareholder may indicate that all or a portion of
the shares represented by such proxy are not being voted by such shareholder
with respect to a particular matter ("non-voted shares"). This could occur, for
example, when a broker is not permitted to vote shares held in "street name" on
certain matters in the absence of instructions from the beneficial owner of the
shares. Non-voted shares with respect to a particular matter will be counted for
purposes of determining the presence of a quorum but will not be counted as
shares present and
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entitled to vote on such matter for purposes of voting, and therefore, will have
no effect on matters brought to a vote at the annual meeting. Shares voted to
abstain as to a particular matter and directions to "withhold authority" to vote
for directors, will be counted for purposes of determining the presence of a
quorum and will be counted as present and entitled to vote with respect to such
matter for purposes of voting, and therefore, will have the effect of votes
against the matters brought to a vote at the annual meeting.
Under the terms of the HEICO Savings and Investment Plan (the "Plan"),
all shares allocated to the accounts of participating employees will be voted or
not voted by the trustee of the Plan as directed by written instructions from
the participating employees, and allocated shares for which no instructions are
received and all unallocated shares will be voted by the trustee of the Plan in
the same proportion as the shares for which instructions are received. Voting
instruction cards are being mailed to all participants in the Plan. If a
participant also owns shares outside the Plan, the participant must return both
the proxy card and the voting instruction card as indicated on those cards in
order to cause all of their shares to be voted in accordance with their
instructions. To be assured that the trustee will receive voting instruction
cards on a timely basis, voting instruction cards for shares in the Plan must be
duly signed and received no later than March 23, 2005. The total number of
shares in the Plan as of the record date represents approximately 9.76% of the
voting power of all classes of common stock outstanding as of the record date
and entitled to vote at the annual meeting.
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VOTING SECURITIES OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of HEICO Common Stock and Class A Common Stock as of January 18, 2005
by (i) each person who is known to the Company to be the beneficial owner of
more than 5% of the outstanding Common Stock or Class A Common Stock; (ii) the
Chief Executive Officer and the other four most highly compensated executive
officers; (iii) each of the directors of the Company; and (iv) all directors and
executive officers of the Company as a group. Except as set forth below, the
shareholders named below have sole voting and investment power with respect to
all shares of Common Stock and Class A Common Stock shown as being beneficially
owned by them.
SHARES BENEFICIALLY OWNED/(2)/
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CLASS A
COMMON STOCK COMMON STOCK
-------------------- --------------------
NAME AND ADDRESS OF BENEFICIAL OWNER/(1)/ NUMBER PERCENT NUMBER PERCENT
- ----------------------------------------- ---------- ------- ---------- -------
(a) Certain beneficial owners:
Mendelson Reporting Group/(3)/....................................... 2,336,924 21.83% 1,362,224 9.16%
Dr. Herbert A. Wertheim/(4)/......................................... 1,136,176 11.41% 1,132,196 7.84%
State Street Research & Management Company/(5)/...................... 896,010 9.00% - -
Investment Counselors of Maryland, LLC/(6)/.......................... - - 1,255,980 8.69%
Royce & Associates, LLC/(7)/......................................... 819,900 8.23% - -
Dimensional Fund Advisors Inc./(8)/.................................. 768,963 7.72% - -
Susquehanna Investment Group/(9)/.................................... - - 940,650 6.51%
Rene Plessner Reporting Group/(10)/.................................. 540,497 5.43% - -
Wasatch Advisors, Inc./(11)/......................................... - - 744,815 5.16%
(b) Directors:
Samuel L. Higginbottom/(12)/......................................... 9,749 * 8,309 *
Wolfgang Mayrhuber/(13)/............................................. 26,000 * 22,737 *
Eric A. Mendelson/(14)/.............................................. 641,898 6.26% 316,216 2.17%
Laurans A. Mendelson/(15)/........................................... 1,380,408 13.72% 993,152 6.82%
Victor H. Mendelson/16)/............................................. 629,182 6.11% 347,674 2.38%
Albert Morrison, Jr./(17)/........................................... 14,558 * 14,078 *
Joseph W. Pallot..................................................... * * * *
Dr. Alan Schriesheim/(18)/........................................... 111,474 1.11% 113,965 *
(c) Executive officers listed in Summary Compensation Table
who are not directors:
Thomas S. Irwin/(19)/................................................ 458,743 4.52% 139,817 *
James L. Reum........................................................ 10,454 * 10,455 *
All directors and executive officers as a group (10 persons)/(20)/... 2,967,902 26.88% 1,671,585 11.08%
All directors, executive officers, the HEICO Savings and
Investment Plan and the Mendelson Reporting Group as a
group/(21)/ ........................................................ 3,892,914 35.25% 2,516,478 16.67%
- ----------
* Represents ownership of less than 1%.
(1) Unless otherwise indicated, the address of each beneficial owner
identified is c/o HEICO Corporation, 3000 Taft Street, Hollywood, Florida
33021.
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(2) The number of shares of Common Stock and Class A Common Stock deemed
outstanding includes (i) 9,958,179 shares of Common Stock outstanding as
of January 18, 2005 (ii) 14,448,110 shares of Class A Common Stock
outstanding as of January 18, 2005 and (iii) shares issuable upon exercise
of stock options held by the respective person or group which are
presently exercisable or which may be exercised within 60 days after
January 18, 2005 as set forth below. Pursuant to the rules of the
Securities and Exchange Commission, presently exercisable stock options
and stock options that become exercisable within 60 days are deemed to be
outstanding and to be beneficially owned by the person or group for the
purpose of computing the percentage ownership of such person or group, but
are not treated as outstanding for the purpose of computing the percentage
ownership of any other person or group.
(3) The Mendelson Reporting Group consists of Laurans A. Mendelson; Eric A.
Mendelson; Victor H. Mendelson; Mendelson International Corporation, a
corporation whose stock is owned solely by Eric and Victor Mendelson and
whose Chairman of the Board is Laurans A. Mendelson; LAM Limited Partners,
a partnership whose sole general partner is a corporation controlled by
Arlene Mendelson, the wife of Laurans A. Mendelson; LAM Alpha Limited
Partners, a partnership whose sole general partner is a corporation
controlled by Laurans A. Mendelson; EAM Management Limited Partners, a
partnership whose sole general partner is a corporation controlled by Eric
A. Mendelson; VHM Management Limited Partners, a partnership whose sole
general partner is a corporation controlled by Victor H. Mendelson; and
the Victor H. Mendelson Revocable Investment Trust, whose grantor, sole
presently vested beneficiary and trustee is Victor H. Mendelson. Includes
744,822 shares of Common Stock and 428,857 shares of Class A Common Stock
subject to stock options that are presently exercisable or exercisable
within 60 days after January 18, 2005. See Notes (14), (15) and (16)
below. The address of the Mendelson Reporting Group is 825 Brickell Bay
Drive, 16th Floor, Miami, Florida 33131.
(4) The address of Dr. Wertheim is 191 Leucadendra Drive, Coral Gables,
Florida 33156.
(5) Based on information in a Schedule 13G filed on January 27, 2005, all
shares are held in portfolios of certain mutual funds and/or institutional
accounts managed by State Street Research & Management Company, a
registered investment advisor. The address of State Street Research &
Management Company is One Financial Center, 31st Floor, Boston,
Massachusetts 02111.
(6) Based on information in a Schedule 13G filed on February 3, 2005, all
shares are held in portfolios of advisory clients of Investment Counselors
of Maryland, LLC, a registered investment advisor. The address of
Investment Counselors of Maryland, LLC is 803 Cathedral Street, Baltimore,
Maryland 21201.
(7) Based on information in a Schedule 13G filed on January 28, 2005, all
shares are held in portfolios of certain mutual funds and/or institutional
accounts managed by Royce & Associates, LLC, a registered investment
advisor. The address of Royce & Associates, LLC is 1414 Avenue of the
Americas, New York, New York 10019.
(8) Based on information in a Schedule 13G/A filed on February 9, 2005, all
shares are held in managed accounts of Dimensional Fund Advisors Inc., a
registered investment advisor. The address of Dimensional Fund Advisors
Inc. is 1299 Ocean Avenue, 11th Floor, Santa Monica, California 90401.
(9) Based on information in a Schedule 13G/A filed on February 11, 2005, all
shares are held by Susquehanna Investment Group, registered brokers or
dealers. The address of Susquehanna Investment Group is One Commerce
Center, 1201 N. Orange Street, S-715, Wilmington, Delaware 19801.
(10) Based on information in a Schedule 13D dated February 24, 2002 filed by
Mr. Plessner individually and as sole Trustee for the Rene Plessner
Associates, Inc. Profit Sharing Plan. Reflects 107,127 shares of Common
Stock held by Mr. Plessner and 433,370 shares of Common Stock held by the
Rene Plessner Associates, Inc. Profit Sharing Plan, an employee profit
sharing plan of Rene Plessner Associates, Inc., an executive search
company. The address of Rene Plessner Reporting Group is 200 East 74th
Street, Penthouse A, New York, New York 10021.
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(11) Based on information in a Schedule 13G/A filed on February 14, 2005, all
shares are held in portfolios of advisory clients of Wasatch Advisors,
Inc., a registered investment advisor. The address of Wasatch Advisors,
Inc. is 150 Social Hall Avenue, Salt Lake City, Utah 84111.
(12) Includes 6,000 shares of Common Stock and 600 shares of Class A Common
Stock subject to stock options that are presently exercisable or
exercisable within 60 days after January 18, 2005.
(13) Includes 26,000 shares of Common Stock and 20,530 shares of Class A Common
Stock subject to stock options that are presently exercisable or
exercisable within 60 days after January 18, 2005.
(14) Includes 157,282 shares of Common Stock and 147,409 shares of Class A
Common Stock held by Mendelson International Corporation; 82,360 shares of
Common Stock held by EAM Management Limited Partners; 302,810 shares of
Common Stock and 145,067 shares of Class A Common Stock subject to stock
options that are presently exercisable or exercisable within 60 days after
January 18, 2005; 19,531 shares of Common Stock and 18,713 shares of Class
A Common Stock held by the HEICO Savings and Investment Plan and allocated
to Eric A. Mendelson's account; and 950 shares of Common Stock and 1,094
shares of Class A Common Stock owned by Eric A. Mendelson's children. See
Note (3) above.
(15) Laurans A. Mendelson disclaims beneficial ownership with respect to
157,282 shares of Common Stock and 147,409 shares of Class A Common Stock,
respectively, of these shares, which are held in the name of Mendelson
International Corporation and 45,441 shares of Common Stock and 16,319
shares of Class A Common Stock, which were donated to and are presently
held by the Laurans A. and Arlene H. Mendelson Charitable Foundation,
Inc., of which Mr. Mendelson is President. Includes 1,046,155 shares of
Common Stock and 699,216 shares of Class A Common Stock held solely by Mr.
Mendelson or LAM Limited Partners or LAM Alpha Limited Partners. Also
includes 106,257 shares of Common Stock and 105,888 shares of Class A
Common Stock subject to stock options that are presently exercisable or
exercisable within 60 days after January 18, 2005 and 25,273 shares of
Common Stock and 24,320 shares of Class A Common Stock held by the HEICO
Savings and Investment Plan and allocated to Laurans A. Mendelson's
account. See Notes (3), (14) and (16).
(16) Includes 157,282 shares of Common Stock and 147,409 shares of Class A
Common Stock held by Mendelson International Corporation; 36,180 shares of
Common Stock held by VHM Management Limited Partners; 335,755 shares of
Common Stock and 177,902 shares of Class A Common Stock subject to stock
options that are presently exercisable or exercisable within 60 days after
January 18, 2005 of which 50,000 shares of Common Stock are held by the
Victor H. Mendelson Revocable Investment Trust; 15,910 shares of Common
Stock and 15,163 shares of Class A Common Stock held by the HEICO Savings
and Investment Plan and allocated to Victor H. Mendelson's account; and
1,000 shares of Common Stock and 1,110 shares of Class A Common Stock
owned by Victor H. Mendelson's children. See Note (3) above.
(17) Includes 6,000 shares of Common Stock subject to stock options that are
presently exercisable or exercisable within 60 days after January 18,
2005. Albert Morrison, Jr.'s voting and dispositive power with respect to
6,966 shares of Common Stock and 8,516 shares of Class A Common Stock is
held indirectly through Sheridan Ventures, Inc., a corporation of which
Mr. Morrison is the President, but not a shareholder.
(18) Includes 111,182 shares of Common Stock and 110,795 shares of Class A
Common Stock subject to stock options that are presently exercisable or
exercisable within 60 days after January 18, 2005 and 2,000 shares of
Class A Common Stock owned by the estate of Dr. Schriesheim's wife.
(19) Includes 190,862 shares of Common Stock and 84,371 shares of Class A
Common Stock subject to stock options that are presently exercisable or
exercisable within 60 days after January 18, 2005 and 33,342 shares of
Common Stock and 32,310 shares of Class A Common Stock held by the HEICO
Savings and Investment Plan and allocated to Thomas S. Irwin's account.
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(20) Includes 1,084,866 shares of Common Stock and 645,153 shares of Class A
Common Stock subject to stock options that are presently exercisable or
exercisable within 60 days after January 18, 2005. The total for all
directors and executive officers as a group (10 persons) also includes
94,056 shares of Common Stock and 90,506 shares of Class A Common Stock
held by the HEICO Savings and Investment Plan and allocated to accounts of
the executive officers pursuant to the Plan.
(21) Includes 2,336,924 shares of Common Stock and 1,362,224 shares of Class A
Common Stock owned by the Mendelson Reporting Group and 1,019,068 shares
of Common Stock and 935,399 shares of Class A Common Stock held by the
HEICO Savings and Investment Plan of which 742,208 shares of Common Stock
and 664,932 shares of Class A Common Stock are allocated to participants
in the Plan, including 94,056 shares of Common Stock and 90,506 shares of
Class A Common Stock allocated to the directors, executive officers and
members of the Mendelson Reporting Group, and of which 276,860 shares of
Common Stock and 270,467 shares of Class A Common Stock are unallocated as
of January 18, 2005.
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PROPOSAL TO ELECT DIRECTORS
(Proposal No. 1)
Each of the eight individuals named in the table below has been
nominated by the Board of Directors of the Company for election to the Board of
Directors at the annual meeting to serve until the next annual meeting or until
his successor is elected and qualified. All of the nominees are currently
serving on the Board of Directors. The Board of Directors has no reason to
believe that any of the nominees will not be a candidate or will be unable to
serve.
NAME AGE CORPORATE OFFICE OR POSITION DIRECTOR SINCE
- ---------------------- --- --------------------------------------------------- --------------
Samuel L. Higginbottom 83 Director 1989
Wolfgang Mayrhuber 57 Director 2001
Eric A. Mendelson 39 President - Flight Support Group; 1992
President and Chief Executive Officer of HEICO
Aerospace Holdings Corp; and Director
Laurans A. Mendelson 66 Chairman of the Board; President and Chief Executive 1989
Officer; and Director
Victor H. Mendelson 37 President - Electronic Technologies Group 1996
and General Counsel of the Company; President
and Chief Executive Officer of HEICO Electronic
Technologies Corp.; and Director
Albert Morrison, Jr. 68 Director 1989
Joseph W. Pallot 44 Director 2004
Dr. Alan Schriesheim 74 Director 1984
BUSINESS EXPERIENCE OF NOMINEES
Samuel L. Higginbottom is a retired executive officer of Rolls Royce,
Inc. (an aircraft engine manufacturer), where he served as Chairman, President
and Chief Executive Officer from 1974 to 1986. He was the Chairman of the
Columbia University Board of Trustees from 1982 until September 1989. He was
President, Chief Operating Officer and a director of Eastern Airlines, Inc.,
from 1970 to 1973 and served in various other executive capacities with that
company from 1964 to 1969. Mr. Higginbottom was a director of British Aerospace
Holdings, Inc., an aircraft manufacturer, from 1986 to 1999 and was a director
of AmeriFirst Bank from 1986 to 1991. He is a Trustee Emeritus of St. Thomas
University, Miami, Florida.
Wolfgang Mayrhuber was elected to the Board of Directors in 2001 after
serving as Advisor to the Board of Directors of the Company since 1997. Mr.
Mayrhuber has served as Chairman of the Executive Board and Chief Executive
Officer of Deutsche Lufthansa AG ("Lufthansa") since June 2003. He has served
with Lufthansa since 1970, and has held various senior management positions for
the maintenance and overhaul of aircraft, components and engines. In 1992, Mr.
Mayrhuber was appointed Executive Vice President and Chief Operating Officer
Technical at Lufthansa. In 1994, he became Chairman of the Executive Board of
Lufthansa Technik AG. In 2001, Mr. Mayrhuber was appointed to the Executive
Board of Deutsche Lufthansa AG.
Eric A. Mendelson has been an employee of the Company since 1990,
serving in various capacities. Mr. Mendelson has served as Executive Vice
President of the Company since 2001, President and Chief Executive Officer of
HEICO Aerospace Holdings Corp. (HEICO Aerospace), a subsidiary of HEICO, since
its formation in 1997 and President of HEICO Aerospace Corporation since 1993.
Mr. Mendelson is a co-founder, and, since 1987, has been Managing Director of
Mendelson International Corporation, a private investment company which is a
shareholder of HEICO. Eric Mendelson is the son of Laurans Mendelson and the
brother of Victor Mendelson.
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Laurans A. Mendelson has served as Chairman of the Board of the Company
since December 1990. He has also served as Chief Executive Officer of the
Company since February 1990 and President of the Company since September 1991.
HEICO Corporation is a member of the Aerospace Industries Association (AIA) in
Washington D.C., and Mr. Mendelson has frequently served on the Board of
Governors of AIA. He is also Vice-Chairman of the Board of Trustees, member of
the Executive Committee and member of the Society of Mt. Sinai Founders of Mt.
Sinai Medical Center in Miami Beach, Florida. In addition, Mr. Mendelson served
as a Trustee of Columbia University in The City of New York from 1995 to 2001,
as well as Chairman of the Trustees' Audit Committee. Mr. Mendelson currently
serves as Trustee Emeritus of Columbia University and is a member of the
Trustees' Finance and Audit Committees. Mr. Mendelson is a Certified Public
Accountant. Laurans A. Mendelson is the father of Eric Mendelson and Victor
Mendelson.
Victor H. Mendelson has been associated with the Company since 1990,
serving in various capacities. Mr. Mendelson has served as Executive Vice
President of the Company since 2001, President and Chief Executive Officer of
HEICO Electronic Technologies Corp., a subsidiary of HEICO, since September 1996
and as General Counsel of the Company since 1993. He was the Chief Operating
Officer of the Company's former MediTek Health Corp. subsidiary from 1995 until
its profitable sale in 1996. Mr. Mendelson is a co-founder, and, since 1987, has
been President of Mendelson International Corporation, a private investment
company which is a shareholder of HEICO. He is a Trustee of the Greater Miami
Chamber of Commerce and a Director of the Florida Grand Opera. Victor Mendelson
is the son of Laurans Mendelson and the brother of Eric Mendelson.
Albert Morrison, Jr. is a retired executive officer of Morrison, Brown,
Argiz & Company, a certified public accounting firm located in Miami, Florida,
where he served as Chairman from 1971 to January 2003. He serves as the Chairman
of the Miami-Dade County Industrial Development Authority. Mr. Morrison also
serves as a director of Logic Devices, Inc., a computer electronics company, and
as a member of the Board of Directors of the Florida International University
Foundation.
Joseph W. Pallot has been a Shareholder of Devine Goodman Pallot &
Wells, P.A., a Miami, Florida-based transactional and litigation boutique law
firm since 2000. From 1993 to 2000 he was a Partner of the law firm of Steel
Hector & Davis LLP. Mr. Pallot also serves on the board of directors and
executive committee of the Beacon Council (Miami-Dade County, Florida's official
economic development organization).
Dr. Alan Schriesheim is retired from the Argonne National Laboratory,
where he served as Director from 1984 to 1996. From 1983 to 1984, he served as
Senior Deputy Director and Chief Operating Officer of Argonne. From 1956 to
1983, Dr. Schriesheim served in a number of capacities with Exxon Corporation in
research and administration, including positions as General Manager of the
Engineering Technology Department for Exxon Research and Engineering Co. and
Director of Exxon's Corporate Research Laboratories. Dr. Schriesheim is also a
member of the Board of the Children's Memorial Hospital of Chicago, Illinois.
CORPORATE GOVERNANCE, BOARD COMMITTEES AND MEETINGS
During the fiscal year ended October 31, 2004, the Board of Directors
held five meetings. The Board of Directors has determined that Mr. Higginbottom,
Mr. Mayrhuber, Mr. Morrison, Mr. Pallot and Dr. Schriesheim have met the
standards of independence as set forth in the Company's Corporate Governance
Guidelines, which are consistent with the standards established by the New York
Stock Exchange.
The Board of Directors has an Executive Committee, a Nominating and
Corporate Governance Committee, a Compensation Committee, a Finance/Audit
Committee, an Environmental, Safety and Health Committee and a Stock Option Plan
Committee. Committee member appointments are re-evaluated annually and approved
by the Board of Directors at its next regularly scheduled meeting that follows
the annual meeting of shareholders. Information regarding each of the current
committees is as follows:
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The Executive Committee has such powers as are delegated by the Board of
Directors, which may be exercised while the Board of Directors is not in
session, provided such powers are not in conflict with specific powers conferred
to other committees or are otherwise contrary to law. The Executive Committee
did not meet in fiscal 2004 and its members consist of Mr. Laurans Mendelson
(Committee Chairman), Mr. Higginbottom and Dr. Schriesheim.
The Nominating and Corporate Governance Committee assists the Board of
Directors in identifying and recommending to the Board qualified individuals to
be nominated as director; makes recommendations concerning committee membership,
appointments and director compensation; periodically reviews and recommends to
the Board of Directors updates to the Company's Corporate Governance Guidelines;
assists the Board and the Company in interpreting and applying the Company's
Corporate Governance Guidelines and Code of Business Conduct; and oversees the
annual evaluation of management and of the Board of Directors. The Nominating
and Corporate Governance Committee met two times in fiscal 2004 and its members
consist of Mr. Higginbottom (Committee Chairman), Mr. Morrison and Dr.
Schriesheim.
Prior to nominating an existing director for re-election to the Board of
Directors, the Nominating and Corporate Governance Committee will consider the
existing director's independence, if required, skills, performance and meeting
attendance. The Nominating and Corporate Governance Committee will consider
candidates recommended by shareholders (see the caption "Shareholder Proposals
and Nominations" contained herein). In evaluating candidates for potential
director nomination, the Nominating and Corporate Governance Committee will
consider, among other things, candidates that are independent, if required; who
possess personal and professional integrity; have good business judgment,
relevant experience and skills; and who would be effective as a director in
conjunction with the full Board of Directors in collectively serving the
long-term interests of the Company's shareholders. All candidates will be
reviewed in the same manner, regardless of the source of recommendation.
The Compensation Committee reviews and approves compensation of the
Company's officers, key employees and directors. The Compensation Committee met
two times in fiscal 2004 and its members consist of Mr. Higginbottom (Committee
Chairman), Mr. Mayhruber, Mr. Morrison and Dr. Schriesheim. The Board of
Directors has determined that each member of the Compensation Committee is
independent in accordance with the New York Stock Exchange's listing standards.
The annual report of the Compensation Committee is contained herein.
The Finance/Audit Committee oversees the quality and integrity of the
accounting, auditing, internal control and financial reporting practices of the
Company, including the appointment, compensation, retention and oversight of the
work of the Company's independent auditor. The Finance/Audit Committee met four
times in fiscal 2004 and its members consist of Mr. Morrison (Committee
Chairman), Mr. Higginbottom, Mr. Pallot and Dr. Schriesheim. The Board of
Directors has determined that each member of the Finance/Audit Committee is
financially literate and independent in accordance with the New York Stock
Exchange's listing standards and that Mr. Morrison is an "audit committee
financial expert", as defined by the Securities and Exchange Commission (SEC).
The annual report of the Finance/Audit Committee is contained herein.
The Environmental, Safety and Health Committee meets with the Company's
senior management and oversees compliance in all matters relating to federal and
state environmental, safety and health regulations. The Environmental, Safety
and Health Committee met three times in fiscal 2004 and its members consist of
Dr. Schriesheim (Committee Chairman), Mr. Mayrhuber, Mr. Eric Mendelson and Mr.
Victor Mendelson. The Environmental, Safety and Health Committee also visits
Company operating locations on a periodic basis.
The Stock Option Plan Committee administers the Company's stock option
plans and has authority to grant options, to determine the persons to whom and
the times at which options are granted, and to determine the terms and
provisions of each grant. The Stock Option Plan Committee met one time in fiscal
2004 and its members consist of Mr. Morrison (Committee Chairman) and Mr.
Higginbottom.
Committee Charters of the Nominating and Corporate Governance Committee,
Compensation Committee and Finance/Audit Committee are available on the
Company's website.
Each of the directors attended 75% or more of the meetings of the Board
of Directors and committees on which he served in fiscal 2004. The Company does
not have a formal policy regarding attendance by members of
9
the Board of Directors at the annual meeting of shareholders, but it encourages
directors to attend and historically, most have done so. Six of the then seven
members of the Board of Directors attended the 2004 annual shareholder meeting.
The non-management directors meet at least once per year in an executive
session. The non-management directors elect a presiding director for each
executive session among the chairs of Board committees on a rotating basis.
COMPENSATION OF DIRECTORS
Directors of the Company receive an annual retainer of $35,000 and are
required to purchase shares of HEICO common stock equivalent to one-third of the
annual retainer ($11,667). The Company accrues one-third of each directors'
annual retainer and periodically purchases HEICO common stock on behalf of
directors.
Directors are paid a fee of $1,500 for each regular Board of Directors
meeting attended and members of committees of the Board of Directors are paid a
$6,000 annual retainer for each committee served and $1,000 for attendance at
each committee meeting or site visit. In addition, committee chairmen are paid
an annual retainer of $2,500 for each committee chaired. During fiscal 2004, an
aggregate of $275,653 was paid or accrued to directors under the compensation
arrangements described above (including $73,945 to Samuel Higginbottom, $50,878
to Wolfgang Mayrhuber, $69,062 to Albert Morrison, Jr., $6,179 to Joseph Pallot
and $75,589 to Dr. Alan Schriesheim), excluding amounts to Laurans A. Mendelson,
Eric A. Mendelson and Victor H. Mendelson, which are reported in the Summary
Compensation Table. Prior to March 1, 2004, per diem fees for other consulting
services were paid to individual directors, as assigned by the Chairman of the
Board, in the amount of $600 per day. Effective March 1, 2004, such fees were
discontinued. Through March of fiscal 2004, $25,500 was paid to Samuel
Higginbottom and $1,200 to Dr. Alan Schriesheim for consulting services.
As of November 2003, the Company amended its Director's Retirement Plan
to effectively freeze vested benefits. The Directors' Retirement Plan was
adopted in 1991 in order to facilitate Director retirements and covered the then
current directors of the Company. Four of the current eight Directors are
covered under the Directors' Retirement Plan. Under the Directors' Retirement
Plan, as amended, the four current Directors who are participants will receive
annually the average retainer ($19,000) such Director was paid during his
service as a member of the Board of Directors payable in quarterly installments.
These quarterly payments will continue for the same period of time that the
participant served on the Board of Directors, not to exceed ten years. During
fiscal 2004, $88,175 was accrued pursuant to the Directors' Retirement Plan,
while amounts totaling $45,500 were paid, including $4,750 to Samuel
Higginbottom and $4,750 to Dr. Alan Schriesheim.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR EACH OF THE
NOMINEES.
10
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides the compensation earned by the Company's
Chief Executive Officer and each of the four other most highly compensated
executive officers of the Company or its subsidiaries (collectively, the "Named
Executive Officers") during each of the past three fiscal years ended October
31:
LONG-TERM
COMPENSATION
---------------------
ANNUAL COMPENSATION/(1)/ NUMBER OF
FISCAL ----------------------------------------- SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OTHER/(2)/ OPTIONS GRANTED/(3)/ COMPENSATION
- ----------------------------------- ------ --------- --------- ---------- --------------------- ------------
Laurans A. Mendelson 2004 $ 651,557 $ 585,000 $ 44,551 - $ 42,940/(6)/
Chairman of the Board, 2003 595,000 - 32,269 - 41,790/(6)/
President and Chief Executive 2002 595,000 90,000/(4)/ 30,401 110,000/(5)/ 41,140/(6)/
Officer
Thomas S. Irwin 2004 327,907 325,000 - - 41,650/(7)/
Executive Vice President 2003 299,000 - - 55,000 7,000/(7)/
and Chief Financial Officer 2002 299,000 50,000/(4)/ - 55,000 6,350/(7)/
Eric A. Mendelson 2004 327,907 325,000 42,525 - 18,800/(8)/
President - Flight Support Group; 2003 299,000 - 26,801 137,500 17,650/(8)/
President and Chief Executive 2002 299,000 50,000/(4)/ 26,801 55,000 15,935/(8)/
Officer of HEICO Aerospace Holdings
Corp.
Victor H. Mendelson 2004 327,907 325,000 48,111 - 17,400/(9)/
President - Electronic Technologies 2003 299,000 - 33,695 137,500 16,250/(9)/
Group and General Counsel of the 2002 299,000 50,000/(4)/ 30,401 55,000 14,675/(9)/
Company; President and Chief
Executive Officer of HEICO
Electronic Technologies Corp.
James L. Reum 2004 51,163/(10)/ - - - -
Executive Vice President of 2003 68,555/(10)/ - - - -
HEICO Aerospace Holdings Corp. 2002 50,185/(10)/ - - - -
- ----------
(1) Salary and bonus amounts include amounts deferred by executive officers
pursuant to a non-qualified deferred compensation plan available to
selected employees. Under such deferred compensation plan, selected
employees elected to defer a portion of their compensation through
December 31, 2004. Amounts deferred are immediately vested and invested in
individually directed investment accounts. Earnings on such investment
accounts, which are maintained by a trustee, accrue to the benefit of the
individual.
(2) Represents Directors' fees.
(3) Information has been adjusted retroactively to give effect to a 10% stock
dividend paid in shares of Class A Common Stock in January 2004.
11
(4) Represents a special bonus related to the additional gain on the sale of
Trilectron Industries, Inc. In fiscal 2000, the Company sold Trilectron
for a substantial gain. In fiscal 2000, the Company paid cash bonuses to
the executive officers contingent upon Trilectron's successful and
profitable sale, but refrained from paying all of the amounts it reserved
for these bonuses until such time as it could finally calculate the total
sale gain due to expiration of certain contractual contingencies related
to the sale. In fiscal 2002, when the gain became fully calculable, the
Compensation Committee paid the balance of these bonus funds to several
Company employees, including its executive officers.
(5) These options were voluntarily cancelled by Mr. Laurans A. Mendelson
during fiscal 2003.
(6) Includes annual life insurance premiums paid by the Company of $34,790 in
fiscal 2004, fiscal 2003 and fiscal 2002. Amounts also include Company
contributions to Mr. Laurans A. Mendelson's HEICO Savings and Investment
Plan account of $8,150 in fiscal 2004, $7,000 in fiscal 2003 and $6,350 in
fiscal 2002. Participation in the HEICO Savings and Investment Plan is
available to substantially all employees of the Company.
(7) Includes annual life insurance premiums paid by the Company of $33,500 in
fiscal 2004. Amounts also include Company contributions to Mr. Irwin's
HEICO Savings and Investment Plan account of $8,150 in fiscal 2004, $7,000
in fiscal 2003 and $6,350 in fiscal 2002. Participation in the HEICO
Savings and Investment Plan is available to substantially all employees of
the Company.
(8) Includes annual life insurance premiums paid by the Company of $10,650 in
fiscal 2004 and 2003 and $9,585 in fiscal 2002. Amounts also include
Company contributions to Mr. Eric A. Mendelson's HEICO Savings and
Investment Plan account of $8,150 in fiscal 2004, $7,000 in fiscal 2003
and $6,350 in fiscal 2002. Participation in the HEICO Savings and
Investment Plan is available to substantially all employees of the
Company.
(9) Includes annual life insurance premiums paid by the Company of $9,250 in
fiscal 2004 and 2003 and $8,325 in fiscal 2002. Amounts also include
Company contributions to Mr. Victor H. Mendelson's HEICO Savings and
Investment Plan account of $8,150 in fiscal 2004, $7,000 in fiscal 2003
and $6,350 in fiscal 2002. Participation in the HEICO Savings and
Investment Plan is available to substantially all employees of the
Company.
(10) Mr. Reum retired from full-time service to HEICO Aerospace Holdings Corp.
in August 2001 and remains active on a part-time basis.
12
STOCK OPTION GRANTS IN LAST FISCAL YEAR
There were no individual grants of stock options pursuant to the
Company's stock option plan made during the fiscal year ended October 31, 2004
to the Named Executive Officers.
AGGREGATE OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table provides information concerning stock option
exercises during fiscal 2004 and stock option holdings as of the fiscal year
ended October 31, 2004 for each of the Named Executive Officers. Information has
been adjusted as necessary for all stock dividends and stock splits.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
SHARES YEAR-END AT FISCAL YEAR-END/(1)/
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------- ------------ ----------- ----------- ------------- ----------- -------------
Laurans A. Mendelson 50,000/(2)/ $ 664,295 359,455 - $ 4,297,026 -
Thomas S. Irwin 65,769/(3)/ 829,276 264,233 82,722 1,910,894 $ 555,140
Eric A. Mendelson 82,216/(4)/ 1,027,502 420,377 175,340 3,160,941 1,288,776
Victor H. Mendelson 82,216/(4)/ 1,028,496 486,157 175,340 4,012,922 1,288,776
James L. Reum - - - - - -
- ----------
(1) Represents the closing price per share of the underlying common stock as
reported on the New York Stock Exchange on October 31, 2004 less the
option exercise price (if a positive spread) multiplied by the number of
unexercised stock option grants.
(2) Represents 50,000 shares of Common Stock acquired upon the exercise of
options granted in fiscal 1995.
(3) Represents 32,943 shares of Common Stock and 32,826 shares of Class A
Common Stock acquired upon the exercise of options granted in fiscal 1995.
(4) Represents 41,180 shares of Common Stock and 41,036 shares of Class A
Common Stock acquired upon the exercise of options granted in fiscal 1995.
13
COMPENSATION COMMITTEE REPORT
THE COMMITTEE
The Compensation Committee (the "Committee") consists entirely of
Directors who are "independent" as defined under New York Stock Exchange rules.
The Committee notes that none of its members are current or former employees or
officers of the Company. The Committee generally makes all decisions concerning
the Company's executive officers' compensation and all such decisions are
reviewed by the full Board of Directors. However, decisions about stock options
issued or to be issued under the 1993 or 2002 Stock Option Plans are made by the
Stock Option Plan Committee (the "SOC"), which then presents its actions to the
full Board of Directors for ratification. The SOC also consists of only
"independent" directors.
HOW THE COMMITTEE APPROACHES EXECUTIVE COMPENSATION
The Committee believes it must offer executives opportunities to receive
meaningful compensation in order to attract them to HEICO and for them to remain
in the Company's employ. The Committee recognizes that talented executives will,
if not properly compensated, avail themselves of opportunities elsewhere which
would place HEICO at a major disadvantage. HEICO is usually classified as a
small-medium sized business which can be perceived by some executives as riskier
than employment with the many large aerospace, defense and electronic companies
in the marketplace. Similarly, numerous start-up businesses can offer executives
major equity and other upside which companies our size are sometimes perceived
to lack.
Simultaneously, the Committee wishes to ensure that its executives
invest in HEICO, as the Committee believes that equity ownership leads to better
results because the executives will view every success the Company has as their
own and will feel every failure is theirs' as well. The Committee notes that the
Company's executive officers all maintain significant personal investments in
HEICO stock. The Committee also wants to ensure that executives will remain with
the Company over the long term - - in both good times and in difficult times.
Finally, the Committee wants to promote a culture whereby executives are
rewarded when the Company or its shareholders do well.
The Committee recognizes that it is important to find a proper balance
between short and long-term objectives. Generally, the Committee prefers to use
cash compensation for shorter-term objectives and stock-based compensation for
longer-term objectives. This provides a balance between an executive's personal
financial needs and objectives for longer-term wealth accumulation consistent
with the Board's desire to ensure HEICO's future growth and longevity.
Similarly, placing sufficient emphasis on short-term performance through cash
rewards should help ensure that executives focus on more immediate objectives as
well.
Accordingly, the Company and the Committee rely primarily on the
following four methods of compensation:
1. Base Cash Compensation. Utilizing a) external consultants, b)
independent compensation research reports and studies, c) historical
compensation data, d) knowledge of local markets, and e) personal
knowledge of executives, the Committee establishes a base cash
compensation rate to be paid to executives on a normal, periodic
payroll basis over the course of the year. The Committee believes it
is appropriate to adjust annual compensation based upon merit in the
same manner the Company adjusts compensation for its employees
generally. However, the Company's executive officers have typically
asked the Committee to refrain from declaring base cash compensation
increases to them in more challenging economic years. Thus, for
example, the executive officers' base cash compensation was
unchanged for approximately three years - - from January 2001 until
March 2004. Recognizing the Company's dramatically improved
financial performance and the fact that compensation freezes of such
duration in successful companies such as HEICO (which performed
admirably even during difficult times) are unusual, in March 2004
the Committee awarded compensation increases to the executive
officers as set forth in this Proxy Statement.
14
2. Cash Incentive/Performance Bonus Compensation. In years when the
Company experiences strong performance or improvement in
performance, the Committee believes it is important to compensate
the executive officers to allow them to share in the Company's
success. Utilizing the same factors listed in the paragraph above,
the Committee evaluates the Company's performance overall and its
performance according to plans. It then approves a performance
bonus, if it believes one is appropriate.
In years when the Company's overall performance does not reach
desired levels (even if performance is still strong), the executive
officers have previously requested, and the Committee agreed, that
no regular bonuses be awarded to them. This last occurred in 2003
and 2002 following the massive industry downturn which resulted from
the September 11, 2001 attacks. In 2002, the Committee awarded the
remaining bonuses from the gain of the sale of the Company's former
Trilectron Industries, Inc. ("Trilectron") subsidiary that were not
paid upon Trilectron's sale in 2000. In 2000, when HEICO sold
Trilectron for a large gain, the Company paid cash bonuses to the
executive officers contingent upon Trilectron's successful and
profitable sale, but refrained from paying all the amounts that were
reserved for these bonuses until such time as it could finally
calculate the total sale gain due to expiration of certain
contractual contingencies related to the sale. In the second quarter
of fiscal 2002, when the gain became fully calculable, the Committee
paid the balance of those bonus funds to a number of Company
employees, some of whom were executive officers. The Committee
believes cash bonuses are typically best used to reward good
near-term performance.
3. Stock-Based Compensation. Since 1990, the Company has awarded stock
options to numerous employees believing that the employees benefit
only when all shareholders benefit. The Company's practice is to
grant options at no less than the closing price of the stock at the
date of grant. A $1.00 investment in HEICO shares in 1990 became
worth $15.65 on December 31, 2004 (adjusted for stock splits and
stock dividends, but excluding all cash dividends). The Committee
believes this is a result of the Company's substantial sales and
earnings growth delivered by the Company's employees. Stock options
granted to employees have delivered substantial returns to the
employees. However, if the Company and its shareholders had not
prospered, the employees would not have gained and the Company would
not have incurred any costs. Further, compensating with stock
options instead of cash-based compensation helps save the Company
cash. The Committee believes that the share price performance is
evidence of the fact that the marketplace does not discount HEICO
stock as a result of stock options.
In granting stock options, the Committee and the SOC consider the
factors discussed above with respect to Base Cash Compensation, as
well as the past and expected contributions an executive made or is
expected to make to the Company's success, the executive's level of
personal contribution to the Company's success, the executive's
financial investment in the Company, the executive's work ethic and
other factors. The Committee believes stock options are best used to
provide intermediate and long-term incentives and rewards.
The Committee notes that the Company's senior executives have
historically exercised stock options and retained the shares issued,
except for what they believed was required to cover taxes and
exercise costs. The Committee believes this demonstrated a
commitment to the Company and confidence in its future.
4. 401K, Other Miscellaneous. The Company's executives are eligible to
participate in the HEICO Savings and Investment Plan, which is the
Company's 401K plan, in the same manner as any similarly situated
HEICO employees. However, under federal regulations, certain
employees of the company (including executive officers Laurans A.
Mendelson, Thomas S. Irwin, Eric A. Mendelson and Victor H.
Mendelson) are limited in their participation in the Plan and may
not receive the same level of benefits as other employees. The
Committee also pays certain benefits, such as life insurance
premiums, for certain executive officers, offers health benefits and
other employment benefits common to executives and some employees at
HEICO. The Committee believes, based upon the factors reflected in
the first paragraph of this section, these are reasonable, customary
and consistent with practices at other companies.
15
Overall, the Committee has had the opportunity to observe the
Company's management and other executives for close to one and
one-half decades and has concluded that its practices are
appropriate and that they yield results. However, the Committee will
continue to review its practices during the year and may, if it
believes appropriate, change the practices to reflect its beliefs at
that time.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Chief Executive Officer's (the "CEO") compensation is reviewed each
year by the Committee utilizing the factors previously mentioned in this report.
In addition, the Committee considers the example that the CEO sets for
employees, shareholders, customers, and others and evaluates the image that he
projects. In addition to the factors listed in the prior section of this report,
the Committee considers the CEO's candor with the Board, his work efforts and
his overall success in accomplishing the Company's long and short-term
objectives. Examples of the CEO's leadership included his request that his and
other executive officers' salaries be frozen until such time as the Company's
financial results were rising substantially. Under the CEO's leadership, the
Company's sales increased from $32,393,000 in fiscal 1994 to $215,744,000 in
fiscal 2004, while net income improved from $1,851,000 to $20,630,000 during the
same period.
During the CEO's tenure, the Company's share value has dramatically
appreciated - a $1,000 investment in HEICO shares in 1990 became worth $15,650
on December 31, 2004 (adjusted for stock splits and stock dividends, but
excluding all cash dividends).
Further, the Committee takes into consideration the fact that the CEO
had a very successful business career prior to investing in and becoming CEO of
HEICO and he foregoes many other business opportunities in the Company's favor.
Also, the Committee considers the fact that the Company's commercial bank
requires that the CEO and his family maintain their involvement and positions
with the Company as a condition to HEICO's credit facility.
The CEO has invested significant personal sums in the Company and
continues to hold a major investment in it. The Committee believes that his
financial commitment to the Company as a shareholder demonstrates his loyalty to
HEICO and is indicative of the alignment of his personal interests with those of
the rest of HEICO's shareholders. The Committee takes this into consideration
when establishing his compensation.
Submitted by the Compensation Committee of the Company's Board of Directors:
Samuel L. Higginbottom (Chairman), Wolfgang Mayrhuber, Albert Morrison, Jr. and
Dr. Alan Schriesheim.
EMPLOYMENT AGREEMENTS
Thomas S. Irwin and the Company are parties to a key employee
termination agreement which provides lump sum severance payment equal to two
years' compensation if his employment is terminated within three years after a
change in control of the Company (as defined in the key employee termination
agreement).
16
FINANCE/AUDIT COMMITTEE REPORT
The Finance/Audit Committee (the "Audit Committee") of the Board of
Directors is composed entirely of four non-employee directors. The Board of
Directors has determined that each member of the Audit Committee is financially
literate and independent in accordance with the New York Stock Exchange's
listing standards and that Mr. Morrison is an "audit committee financial
expert," as defined by the Securities and Exchange Commission.
The purpose of the Audit Committee is to assist the Board of Directors
in fulfilling its responsibility for the oversight of the quality and integrity
of the accounting, auditing, internal control and financial reporting practices
of the Company and such other duties as directed by the Board of Directors. The
full responsibilities of the Audit Committee are set forth in its formal written
charter, which was adopted by the full Board of Directors in 1999 and most
recently amended in its entirety in December 2003.
Management is responsible for the Company's financial reporting process,
including its system of internal control, and for the preparation of
consolidated financial statements in accordance with accounting principles
generally accepted in the United States of America. The Company's independent
auditor, Deloitte & Touche LLP, is responsible for auditing those financial
statements and for issuing an opinion as to whether those financial statements
are, in all material respects, presented fairly in conformity with accounting
principles generally accepted in the United States of America. The Audit
Committee is responsible for monitoring and reviewing these processes, acting in
an oversight capacity relying on the information provided to it and on the
representations made by management and the independent auditor.
As part of fulfilling its responsibilities, the Audit Committee reviewed
and discussed with management the Company's audited financial statements as of
and for the year ended October 31, 2004 and discussed with Deloitte & Touche LLP
the matters required to be discussed by Statement on Auditing Standards No. 61,
"Communication with Audit Committees". The Audit Committee received the written
disclosures and the letter from Deloitte & Touche LLP required by Independence
Standards Board Standard No. 1, "Independence Discussions with Audit
Committees". The Audit Committee discussed and considered the independence of
Deloitte & Touche LLP with representatives of Deloitte & Touche LLP, reviewing
as necessary all relationships and services which might bear on the objectivity
of Deloitte & Touche LLP. Deloitte & Touche LLP was provided with full access to
the Audit Committee to meet privately and was encouraged to discuss any matter
it desired with the Audit Committee or the full Board of Directors.
Based upon the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the Company's audited
financial statements be included in its Annual Report on Form 10-K for the year
ended October 31, 2004, for filing with the Securities and Exchange Commission.
Respectfully Submitted by the Finance/Audit Committee of the Company's Board of
Directors:
Samuel L. Higginbottom, Albert Morrison, Jr. (Chairman), Joseph W. Pallot and
Dr. Alan Schriesheim.
17
PERFORMANCE GRAPHS
The following graph and table compare the total return on $100 invested
in HEICO Class A Common Stock and HEICO Common Stock with the total return of
$100 invested in the New York Stock Exchange (NYSE) Composite Index and the Dow
Jones U.S. Aerospace Index for the five-year period from October 31, 1999
through October 31, 2004. The NYSE Composite Index measures all common stock
listed on the NYSE. The Dow Jones U.S. Aerospace Index is comprised of large
companies which make aircraft, major weapons, radar and other defense equipment
and systems as well as providers of satellites used for defense purposes. The
total returns include the reinvestment of cash dividends.
[CHART APPEARS HERE]
CUMULATIVE TOTAL RETURN AS OF OCTOBER 31,
---------------------------------------------------------------
1999 2000 2001 2002 2003 2004
-------- -------- -------- -------- -------- --------
HEICO Common Stock/(1)/ $ 100.00 $ 75.69 $ 101.21 $ 65.00 $ 103.56 $ 132.41
HEICO Class A Common Stock/(1)/ $ 100.00 $ 79.93 $ 95.43 $ 60.89 $ 96.78 $ 124.30
NYSE Composite Index $ 100.00 $ 106.48 $ 87.35 $ 75.61 $ 90.10 $ 101.20
Dow Jones U.S. Aerospace Index $ 100.00 $ 141.33 $ 112.61 $ 116.18 $ 132.84 $ 161.66
- ----------
(1) Information has been adjusted retroactively to give effect to 10% stock
dividends paid in shares of Class A Common Stock in July 2000, August 2001
and January 2004.
18
The following graph and table compare the total return on $100 invested
in HEICO Common Stock since October 31, 1990 with the same indices shown on the
five-year performance graph on the previous page. October 31, 1990 was the end
of the first fiscal year following the date the current executive management
team assumed leadership of the Company. No Class A Common Stock was outstanding
as of October 31, 1990. As with the five-year performance graph, the total
returns include the reinvestment of cash dividends.
[CHART APPEARS HERE]
CUMULATIVE TOTAL RETURN AS OF OCTOBER 31,
-----------------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997
-------- -------- -------- -------- -------- -------- -------- ------------
HEICO Common Stock/(1)/ $ 100.00 $ 141.49 $ 158.35 $ 173.88 $ 123.41 $ 263.25 $ 430.02 $ 1,008.31
NYSE Composite Index $ 100.00 $ 130.31 $ 138.76 $ 156.09 $ 155.68 $ 186.32 $ 225.37 $ 289.55
Dow Jones U.S. Aerospace Index $ 100.00 $ 130.67 $ 122.00 $ 158.36 $ 176.11 $ 252.00 $ 341.65 $ 376.36
CUMULATIVE TOTAL RETURN AS OF OCTOBER 31,
-----------------------------------------------------------------------------------------
1998 1999 2000 2001 2002 2003 2004
---------- ---------- ---------- ---------- ---------- ---------- -----------
HEICO Common Stock/(1)/ $ 1,448.99 $ 1,051.61 $ 809.50 $ 1,045.86 $ 670.39 $ 1,067.42 $ 1,366.57
NYSE Composite Index $ 326.98 $ 376.40 $ 400.81 $ 328.78 $ 284.59 $ 339.15 $ 380.91
Dow Jones U.S. Aerospace Index $ 378.66 $ 295.99 $ 418.32 $ 333.32 $ 343.88 $ 393.19 $ 478.49
- ----------
(1) Information has been adjusted retroactively to give effect to all stock
dividends paid during the fourteen-year period.
19
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(Proposal No. 2)
The Finance/Audit Committee has selected the firm of Deloitte & Touche
LLP as the Company's independent registered public accounting firm for the
fiscal year ending October 31, 2005. Deloitte & Touche LLP has served as the
Company's independent registered public accounting firm since 1990.
Shareholder ratification of this selection is not required by the
Company's By-laws or otherwise. However, the Finance/Audit Committee and full
Board of Directors are requesting that shareholders ratify this appointment as a
means of soliciting shareholders' opinions and as a matter of good corporate
governance. If the shareholders do not ratify the selection, the Finance/Audit
Committee will reconsider whether or not to retain Deloitte & Touche LLP. Even
if the selection is ratified, the Finance/Audit Committee, in its discretion,
may direct the appointment of a different independent registered public
accounting firm at any time during the year if it determines such change would
be in the best interests of the Company and its shareholders.
One or more representatives of Deloitte & Touche LLP are expected to be
present at the annual meeting on March 25, 2005. The representatives will have
the opportunity to make a statement, if they desire to do so, and will be
available to respond to appropriate questions from shareholders.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY'S
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING OCTOBER
31, 2005.
PRINCIPAL ACCOUNTING FIRM FEES
The following table presents the aggregate fees billed to the Company by
Deloitte & Touche LLP during the fiscal years ended October 31, 2004 and 2003:
2004 2003
---------- ----------
Audit Fees/(1)/ $ 379,000 $ 256,000
Audit-Related Fees/(2)/ 13,000 26,000
Tax Fees/(3)/ 145,000 145,000
All Other Fees 6,000 4,000
---------- ----------
Total Fees $ 543,000 $ 431,000
========== ==========
- ----------
(1) Audit Fees consist of fees billed for services rendered for the annual
audit of the Company's consolidated financial statements, the review of
condensed consolidated financial statements included in the Company's
quarterly reports on Form 10-Q, and services that are normally provided in
connection with statutory and regulatory filings or engagements.
(2) Audit-Related Fees consist of fees billed for assurance and related
services that are reasonably related to the performance of the audit or
review of the Company's consolidated financial statements that are not
reported under the caption "Audit Fees". The category includes fees related
to audit of the HEICO Savings and Investment Plan and consultation related
to acquisitions or other business transactions.
(3) Tax Fees consist of fees billed for services rendered for tax compliance.
20
PRE-APPROVAL OF SERVICES PROVIDED BY THE INDEPENDENT AUDITOR
The Finance/Audit Committee (the "Committee") has adopted a policy to
pre-approve all audit and permissible non-audit services provided by the
independent auditor. The Committee will consider annually and, if appropriate,
approve the scope of the audit services to be performed during the fiscal year
as outlined in an engagement letter proposed by the independent auditor. For
permissible non-audit services, the Company will submit to the Committee, at
least annually, a list of services and a corresponding budget estimate that it
recommends the Committee engage the independent auditor to provide. To
facilitate the prompt handling of certain unexpected matters, the Committee
delegates to its Chairman the authority to approve in advance all audit and
non-audit services below $10,000 to be provided by the independent auditor if
presented to the full Committee at the next regularly scheduled meeting. The
independent auditor and Company will routinely inform the Committee as to the
extent of services provided by the independent auditor in accordance with this
pre-approval policy and the fees incurred for the services performed to date.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain subsidiaries of Lufthansa, for which Mr. Mayrhuber serves as
Chairman of the Executive Board and Chief Executive Officer, are customers of
certain subsidiaries of the Company. Purchases made by such subsidiaries of
Lufthansa represented in excess of five percent, but less than 10%, of the
Company's consolidated gross revenues for the fiscal year ended October 31,
2004. The Company expects this customer relationship to continue in the current
fiscal year. The Company believes that the terms of its transactions with
Lufthansa are no less favorable to the Company than would have been obtained
from an unrelated party, and that Mr. Mayrhuber is not afforded any special
benefits as a result of the Company's transactions with Lufthansa.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of reports of ownership, reports of changes
of ownership and written representations under Section 16(a) of the Securities
Exchange Act of 1934, which were furnished to the Company during or with respect
to fiscal 2004 by persons who were, at any time during fiscal 2004, directors or
officers of the Company or beneficial owners of more than 10% of the outstanding
shares of Common Stock or Class A Common Stock, no such person failed to file on
a timely basis any report required by such section during fiscal 2004.
SHAREHOLDER PROPOSALS AND NOMINATIONS
Any shareholder of the Company who wishes to present a proposal for
action at the Company's next annual meeting of shareholders presently scheduled
for March 14, 2006, or to nominate a director candidate for the Company's Board
of Directors, must submit such proposal or nomination in writing to the
Corporate Secretary at HEICO Corporation, 3000 Taft Street, Hollywood, Florida
33021. The proposal or nomination should comply with the time period and
information requirements as set forth in the Company's By-laws relating to
shareholder business or shareholder nominations, respectively. Shareholders
interested in submitting a proposal for inclusion in the Proxy Statement for the
2006 annual meeting of shareholders may do so by following the procedures
prescribed in SEC Rule 14a-8. To be eligible for inclusion, shareholder
proposals must be received by the Company's Corporate Secretary at the herein
above address no later than October 25, 2005.
21
SHAREHOLDER COMMUNICATION WITH THE BOARD OF DIRECTORS
Any shareholder of the Company who wishes to communicate with the Board
of Directors, a committee of the Board, the non-management directors as a group
or any individual member of the Board, may send correspondence to the Corporate
Secretary at HEICO Corporation, 3000 Taft Street, Hollywood, Florida 33021. The
Corporate Secretary will compile and submit on a periodic basis all shareholder
correspondence to the entire Board of Directors, or, if and as designated in the
communication, to a committee of the Board, the non-management directors as a
group or an individual Board member.
SHAREHOLDERS SHARING THE SAME ADDRESS
The Company has adopted a procedure called "householding", which has
been approved by the Securities and Exchange Commission. Under this procedure, a
single copy of the annual report and proxy statement will be sent to any
household at which two or more shareholders reside if they appear to be members
of the same family, unless one of the shareholders at that address notifies us
that they wish to receive individual copies. Shareholders who participate in
householding will continue to receive separate proxy cards. Householding will
not affect dividend mailings in any way. This procedure reduces the Company's
printing costs and mailing fees.
If a single copy of the annual report and proxy statement was delivered
to an address that you share with another shareholder and you wish to receive a
separate copy of the 2005 annual report or this proxy statement, or if you do
not wish to participate in householding and prefer to receive separate copies of
future materials, or if you are sharing an address with another shareholder and
are receiving multiple copies of annual reports or proxy statements and would
like to request delivery of a single copy of annual reports or proxy statements,
please call the Company at (954)-987-4000 or write to the Corporate Secretary at
HEICO Corporation, 3000 Taft Street, Hollywood, Florida 33021.
GENERAL AND OTHER MATTERS
Neither HEICO nor the members of its Board of Directors intend to bring
before the meeting any matters other than those referred to in the accompanying
Notice of Meeting. They have no present knowledge that any other matters will be
presented to be acted on pursuant to your proxy. However, if any other matters
properly come before the meeting, the persons whose names appear in the enclosed
form of proxy will have the discretionary authority to vote the proxy in
accordance with their judgment.
BY ORDER OF THE BOARD OF DIRECTORS,
Laurans A. Mendelson
Chairman of the Board, President
and Chief Executive Officer
22
HEICO CORPORATION
ANNUAL MEETING OF SHAREHOLDERS, MARCH 25, 2005
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of HEICO CORPORATION hereby appoints Laurans A.
Mendelson and Thomas S. Irwin, or either of them, the true and lawful attorney
or attorneys and proxy or proxies of the undersigned with full power of
substitution and revocation to each of them, to vote all the shares of stock
which the undersigned would be entitled to vote, if there personally present, at
the Annual Meeting of Shareholders of HEICO CORPORATION called to be held at the
J.W. Marriott Miami Hotel, 1109 Brickell Avenue, Miami, Florida, at 10:00 a.m.
Eastern Standard Time on March 25, 2005 (notice of such meeting has been
received), and at any adjournments thereof, with all powers which the
undersigned would possess if personally present. Without limiting the generality
of the foregoing, said attorneys and proxies are authorized to vote as indicated
below.
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary) to vote for all nominees
listed below
NOMINEES: 01 Samuel L. Higginbottom, 02 Wolfgang Mayrhuber,
03 Eric A. Mendelson, 04 Laurans A. Mendelson, 05 Victor H. Mendelson,
06 Albert Morrison, Jr., 07 Joseph W. Pallot, 08 Dr. Alan Schriesheim
INSTRUCTION: To withhold authority to vote for an individual nominee, write that
nominee's name in the space provided below.
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(Continued, and to be dated and signed on the reverse side)
RATIFICATION OF DELOITTE & TOUCHE LLP AS THE INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, upon such other matters which may properly come
before the meeting or any adjournments.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT WHERE NO DIRECTION IS GIVEN, IT WILL
BE VOTED FOR THE ELECTION OF ALL DIRECTORS AND FOR PROPOSAL 2.
PLEASE SIGN, DATE AND MAIL THIS PROXY PROMPTLY IN THE ENVELOPE PROVIDED, SO THAT
YOUR SHARES CAN BE VOTED AT THE MEETING.
Dated :_________________________, 2005
Signature
-------------------------------------
Signature if held jointly
---------------------
(Please sign exactly as name appears hereon. If Executor,
Trustee, etc., give full title. If Stock is held in the
name of more than one person, each should sign.)
