UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X)QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 1997
OR
( )TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to ______________
Commission file number 1-4604
HEICO CORPORATION
(Exact name of registrant as specified in its charter)
FLORIDA 65-0341002
(State or other jurisdiction of (I.R.S. Employer )
incorporation or organization) Identification No.)
3000 TAFT STREET, HOLLYWOOD, FLORIDA 33021
(Address of principal executive offices) (Zip Code)
(305) 987-6101
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
The number of shares outstanding of the issuer's common stock, $.01 par value,
is 5,324,998 shares as of February 28, 1997.
-1-
HEICO CORPORATION
INDEX
Page No.
--------
Part I. Financial information:
Consolidated Condensed Balance Sheets as of
January 31, 1997 and October 31, 1996........................ 3
Consolidated Condensed Statements of Operations for the
three months ended January 31, 1997 and 1996................. 4
Consolidated Condensed Statements of Cash Flows for the
three months ended January 31, 1997 and 1996................. 5
Notes to Consolidated Condensed Financial Statements........... 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................... 8
Part II. Other Information:
Item 1. Legal Proceedings..................................... 11
Item 6. Exhibits and Reports on Form 8-K...................... 11
-2-
PART I. FINANCIAL INFORMATION
HEICO CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS
JANUARY 31, OCTOBER 31,
1997 1996
------------ ------------
(Unaudited)
Current assets:
Cash and cash equivalents $ 10,956,000 $ 11,025,000
Accounts receivable, net 7,524,000 7,879,000
Inventories 16,196,000 15,277,000
Prepaid expenses and other current assets 1,019,000 874,000
Deferred income taxes 2,403,000 2,058,000
------------ ------------
Total current assets 38,098,000 37,113,000
------------ ------------
Note receivable 10,000,000 10,000,000
------------ ------------
Property, plant and equipment 20,323,000 19,599,000
Less accumulated depreciation (13,610,000) (13,754,000)
------------ ------------
Property, plant and equipment, net 6,713,000 5,845,000
------------ ------------
Intangible assets less accumulated amortization of
$894,000 in 1997 and $805,000 in 1996 4,646,000 4,756,000
------------ ------------
Unexpended bond proceeds 2,000,000 2,649,000
------------ ------------
Other assets 2,721,000 1,473,000
------------ ------------
Total assets $ 64,178,000 $ 61,836,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 413,000 $ 494,000
Trade accounts payable 4,023,000 4,803,000
Accrued expenses and other current liabilities 5,653,000 5,903,000
Income taxes payable 1,200,000 665,000
------------ ------------
Total current liabilities 11,289,000 11,865,000
------------ ------------
Long-term debt 5,977,000 6,022,000
------------ ------------
Deferred income taxes 1,109,000 1,137,000
------------ ------------
Other non-current liabilities 2,186,000 1,324,000
------------ ------------
Commitments and contingencies
Shareholders' equity:
Preferred stock, par value $.01 per share;
Authorized - 10,000,000 shares issuable
in series; 50,000 designated as
Series A Junior Participating Preferred
Stock, none issued -- --
Common stock, $.01 par value; Authorized -
20,000,000 shares; Issued - 5,321,703 shares
in 1997 and 5,275,551 shares in 1996 53,000 53,000
Capital in excess of par value 31,326,000 30,881,000
Retained earnings 15,184,000 13,893,000
------------ ------------
46,563,000 44,827,000
Less: Note receivable from employee savings and
investment plan (2,946,000) (3,339,000)
------------ ------------
Total shareholders' equity 43,617,000 41,488,000
------------ ------------
Total liabilities and shareholders' equity $ 64,178,000 $ 61,836,000
============ ============
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
-3-
HEICO CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS - UNAUDITED
THREE MONTHS ENDED JANUARY 31,
------------------------------
1997 1996
-------------- ------------
Net sales $ 14,267,000 $ 6,978,000
-------------- ------------
Operating costs and expenses:
Cost of sales 9,526,000 4,656,000
Selling, general and administrative expenses 2,707,000 1,597,000
-------------- ------------
Total operating costs and expenses 12,233,000 6,253,000
-------------- ------------
Income from operations 2,034,000 725,000
Interest expense (95,000) (51,000)
Interest and other income 409,000 193,000
-------------- ------------
Income from continuing operations
before income taxes 2,348,000 867,000
Income tax expense 754,000 289,000
-------------- ------------
Net income from continuing operations 1,594,000 578,000
Net income from discontinued operations -- 292,000
-------------- ------------
Net income $ 1,594,000 $ 870,000
============== ============
Net income per share:
From continuing operations $ .25 $ .10
From discontinued health care operations -- .05
-------------- ------------
Net income per share $ .25 $ .15
============== ============
Weighted average number of common
and common equivalent shares outstanding 6,275,658 5,588,013
============== ============
Cash dividends per share $ .050 $ .041
============== ============
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
-4-
HEICO CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS - UNAUDITED
THREE MONTHS ENDED
JANUARY 31,
----------------------------
1997 1996
------------ ------------
Cash flows from operating activities:
Net income $ 1,594,000 $ 870,000
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 387,000 638,000
(Income) loss from unconsolidated partnerships -- (108,000)
Minority interest in consolidated partnerships -- 81,000
Deferred income taxes (373,000) 131,000
Change in assets and liabilities:
(Increase) in accounts receivable 263,000 (114,000)
(Increase) decrease in inventories (919,000) (189,000)
(Increase) in prepaid expenses and other
current assets (145,000) (200,000)
(Decrease) in trade payables, accrued
expenses and other current liabilities (1,028,000) (225,000)
Increase in income taxes payable 535,000 80,000
Increase in other non-current liabilities 76,000 58,000
Other (22,000) --
------------ ------------
Net cash provided by operating activities 368,000 1,022,000
------------ ------------
Cash flows from investing activities:
Maturity (purchase) of short-term investments -- 2,939,000
Purchases of property, plant and equipment (1,165,000) (523,000)
Acquisitions:
Contingent note payments -- (425,000)
Other -- --
Advances to unconsolidated partnerships -- (59,000)
Distributions to minority interests -- (117,000)
Payments for deferred organization costs -- (178,000)
Payment received from employee savings and
investment plan note receivable 393,000 353,000
Other (335,000) (17,000)
------------ ------------
Net cash provided by (used in) investing activities (1,107,000) 1,973,000)
------------ ------------
Cash flows from financing activities:
Proceeds from the exercise of stock options 425,000 222,000
Proceeds from the issuance of long-term debt 680,000 217,000
Payments on long-term debt and capital leases (154,000) (293,000)
Repurchases of common stock -- --
Cash dividends paid (282,000) (219,000)
Other 1,000 5,000
------------ ------------
Net cash (used in) financing activities 670,000 (68,000)
------------ ------------
Net increase (decrease) in cash and cash equivalents (69,000) 2,927,000
Cash and cash equivalents at beginning of year 11,025,000 4,664,000
------------ ------------
Cash and cash equivalents at end of period $ 10,956,000 $ 7,591,000
------------ ------------
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
-5-
HEICO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - UNAUDITED
January 31, 1997
1. The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with the instructions to Form 10-Q and therefore do
not include all information and footnotes normally included in annual
consolidated financial statements and should be read in conjunction with the
financial statements and notes thereto included in the Company's latest Annual
Report on Form 10-K for the year ended October 31, 1996. In the opinion of
management, the unaudited consolidated condensed financial statements contain
all adjustments (consisting of only normal recurring accruals) necessary for a
fair presentation of the consolidated condensed balance sheets and consolidated
condensed statements of operations and cash flow for such interim periods
presented. The results of operations for the three months ended January 31, 1997
are not necessarily indicative of the results which may be expected for the
entire fiscal year.
2. Accounts receivable are composed of the following:
JANUARY 31, 1997 OCTOBER 31, 1996
---------------- ----------------
Accounts receivable $ 7,513,000 $ 7,882,000
Net costs and estimated earnings in excess of
billings on uncompleted contracts 265,000 265,000
Less allowance for doubtful accounts (254,000) (268,000)
---------------- ----------------
Accounts receivable, net $7,524,00 $ 7,879,000
================ ================
Inventories are comprised of the following:
JANUARY 31, 1997 OCTOBER 31, 1996
---------------- ----------------
Finished products $ 3,764,000 $ 4,428,000
Work in process 5,605,000 5,845,000
Materials, parts, assemblies and supplies 6,827,000 5,004,000
---------------- ----------------
Total inventories $ 16,196,000 $ 15,277,000
================ ================
Revenue amounts set forth in the accompanying Consolidated Condensed Statements
of Operations do not include any material amounts in excess of billings related
to long-term contracts.
Inventories related to long-term contracts aggregated approximately $500,000 as
of January 31, 1997 and $628,000 as of October 31, 1996.
-6-
3. Long-term debt consists of:
JANUARY 31, 1997 OCTOBER 31, 1996
---------------- ----------------
Industrial Development Revenue
Bonds - Series 1996 $ 3,500,000 $ 3,500,000
Industrial Development Revenue
Refunding Bonds - Series 1988 1,980,000 1,980,000
Term loan borrowing under revolving
credit facility 238,000 317,000
Equipment loans 672,000 719,000
---------------- ----------------
6,390,000 6,516,000
Less current maturities (413,000) (494,000)
---------------- ----------------
$ 5,977,000 $ 6,022,000
================ ================
The term loan borrowings and equipment loans bear interest as of January 31,
1997 at 8.5% and 8.75% respectively.
4. The fiscal 1996 net income from discontinued operations represents the
Company's former subsidiary, MediTek Health Corporation, which was sold in the
third quarter of fiscal 1996 at a gain of $5,264,000 (89 cents per share).
5. Net income per share is calculated on the basis of the weighted average
number of common shares outstanding during each period plus common share
equivalents arising from the assumed exercise of stock options, if dilutive, and
has been adjusted for the effect of any stock dividends and stock splits.
6. Supplemental disclosures of cash flow information for the three months ended
January 31, 1997 and 1996 are as follows:
Cash paid for interest was $95,000 and $67,000 in 1997 and 1996,
respectively. Cash paid for income taxes was $592,000 and $304,000 in 1997 and
1996, respectively.
7. In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS No. 123). SFAS No. 123 established a fair value based method
of accounting for stock options. Entities may elect to either adopt the
measurement criteria of the statement for accounting purposes, thereby
recognizing an amount in results of operations on a prospective basis, or
disclose the pro forma effects of the new measurement criteria in Notes to
Consolidated Financial Statements. The Company intends to adopt the pro forma
disclosure features of SFAS No. 123, which are effective for fiscal year 1997.
-7-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For the three months ended January 31, 1997 and 1996
RESULTS OF OPERATIONS
Fiscal 1997 first quarter net income of $1,594,000 ($.25 per share) increased
176% over fiscal 1996 first quarter net income from continuing operations of
$578,000 ($.10 per share).
For the first three months of fiscal 1997, net sales totaled $14,267,000,
representing a 104% increase over net sales from continuing operations of
$6,978,000 in the first three months of fiscal 1996.
The improved fiscal 1997 earnings are primarily attributable to increased sales
as discussed below.
Net sales of the Company's Flight Support operations totaled $8,786,000 in the
first quarter of fiscal 1997 as compared to $6,978,000 in the same period of
fiscal 1996. The $l,808,000, or 26%, increase from fiscal 1996 to fiscal 1997 is
principally due to increased sales volumes of jet engine replacement parts to
the Company's commercial airline industry customers.
Net sales of the Company's Ground Support operations totaled $5,481,000 for the
first quarter of fiscal 1997, all of which represented sales of Trilectron
Industries, Inc. (Trilectron), a business acquired in September 1996.
The Company's Flight Support operations had a backlog which totaled
approximately $14 million as of January 31, 1997 and October 31, 1996. The
current backlog decreased from $24 million as of January 31, 1996 principally
due to expiration of certain customer contracts which have been replaced by
orders pursuant to shorter term purchase orders.
The Company's Ground Support operations had a backlog totalling $14 million at
January 31, 1997. This is a 27% increase over the October 31, 1996 backlog
balance of $11 million and is principally due to receipt of a contract
approximating $4 million covering deliveries expected to begin in fiscal 1997
and continue into 1998.
-8-
The Company's gross profit margins averaged 33.2% in the first quarter of fiscal
1997, which approximated the 33.3% average gross profit margins in the first
quarter of fiscal 1996. This reflects an improvement in gross margins in the
Flight Support operations, partially offset by inclusion of the newly-acquired
Ground Support operations. Sales of ground support equipment generally carry
lower profit margins than those of the Company's Flight Support operations. The
improvement in margins in the Flight Support operations reflects volume
increases in sales of higher margin products and manufacturing cost
efficiencies.
Selling, general and administrative (SG&A) expenses in the first quarter of
fiscal 1997 increased $1,110,000 over amounts in the first quarter of fiscal
1996. The increase from fiscal 1996 is due principally to increased selling
expenses by the Flight Support operations and the SG&A expenses of Trilectron.
As a percentage of sales, however, SG&A expenses improved to 19.0% of
consolidated net sales in the first quarter of fiscal 1997, down from 22.9% in
the first quarter of fiscal 1996.
Income from operations, which totaled $2,034,000 for the first quarter of fiscal
1997, increased $1,309,000, or 181%, over the same period of last year. This
increase reflects the increase in sales of Flight Support operations and sales
of Ground Support operations as discussed above.
Interest and other income in the first quarter of fiscal 1997 increased $216,000
over the first quarter of fiscal 1996, principally due to interest income on the
convertible note received from the sale of MediTek in July 1996.
The Company's effective tax rate totaled 32.1% for the first quarter of 1997 and
33.3% in the first quarter of 1996.
LIQUIDITY AND CAPITAL RESOURCES
During the first three months of fiscal 1997, net cash provided by operating
activities totaled $368,000 reflecting higher earnings, net of planned increases
in inventories to meet customer delivery requirements and scheduled payments of
trade accounts payable and other current liabilities.
The Company's principal investing activities during the first quarter of fiscal
1997 were purchases of property, plant and equipment of $1.1 million.
-9-
The Company's principal financing activities during the first quarter of fiscal
1997 were $.7 million in proceeds of long-term debt primarily representing
reimbursements for qualified expenditures from Industrial Revenue Bond proceeds
and the receipt of funds from the exercise of Company stock options of $.4
million.
During the first quarter of 1997, Trilectron received approval from Manatee
County, Florida for an increase from $3 million to $4 million in the amount of
industrial development revenue bonds to be issued to construct and equip a
larger facility in Palmetto, Florida. The bonds are expected to be issued in the
second quarter of fiscal 1997.
There have been no other material changes in the liquidity or the capital
resources of the Company since the end of fiscal 1996.
-10-
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no material developments in previously reported
litigation involving the Company and its subsidiaries.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 11 - Computation of earnings per share.
(b) There were no reports on Form 8-K filed during the three months
ended January 31, 1997.
-11-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HEICO CORPORATION
(Registrant)
MARCH 14, 1997 BY /S/THOMAS S. IRWIN
-------------- -----------------------------------------
Date Thomas S. Irwin, Executive Vice
President and Chief Financial Officer
(Principal Financial and Accounting
Officer)
-12-
EXHIBIT 11
HEICO CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
1997 1996
--------------------- ---------------------
Fully Fully
PRIMARY DILUTED PRIMARY DILUTED
--------- --------- --------- ---------
Three months ended January 31:
Weighted average number of common
shares outstanding 5,286,713 5,286,713 5,086,140 5,086,140
Common Stock equivalents arising from
dilutive stock options (1) 988,945 1,037,971 501,873 510,745
--------- --------- --------- ---------
6,275,658 6,324,684 5,588,013 5,596,885
========= ========= ========= =========
Net income per share (1)
From continuing operations $ .25 $ .25 $ .10 $ .10
From discontinued operations -- -- .05 .05
--------- --------- --------- ---------
Net income per share $ .25 $ .25 $ .15 $ .15
========= ========= ========= =========
_____________________________
(1) Computed under the "treasury stock" method using the average market price
for the primary computation and using the higher of average or ending
market prices for the fully diluted computation.
-13-
5
3-MOS
OCT-31-1997
JAN-31-1997
10,956,000
0
7,778,000
(254,000)
16,196,000
38,098,000
20,323,000
(13,610,000)
64,178,000
11,289,000
5,977,000
0
0
53,000
43,564,000
64,178,000
14,267,000
14,267,000
9,526,000
9,526,000
2,707,000
0
95,000
2,348,000
754,000
1,594,000
0
0
0
1,594,000
.25
.25
