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, 2003 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 Identification No.)
incorporation or organization)
3000 TAFT STREET, HOLLYWOOD, FLORIDA 33021
(Address of principal executive offices) (Zip Code)
(954) 987-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ___
-----
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act).
Yes ___ No X
-----
The number of shares outstanding of each of the Registrant's classes of
common stock as of February 28, 2003:
Common Stock, $.01 par value 9,431,375 shares
Class A Common Stock, $.01 par value 11,587,444 shares
HEICO CORPORATION
INDEX TO QUARTERLY REPORT
Page No.
--------
Part I. Financial Information:
Item 1. Condensed Consolidated Balance Sheets (unaudited)
as of January 31, 2003 and October 31, 2002 2
Condensed Consolidated Statements of Operations
(unaudited)for the three months ended
January 31, 2003 and 2002 3
Condensed Consolidated Statements of Cash Flows
(unaudited)for the three months ended
January 31, 2003 and 2002 4
Notes to Condensed Consolidated Financial
Statements (unaudited) 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures about
Market Risks 19
Item 4. Controls and Procedures 20
Part II. Other Information:
Item 6. Exhibits and Reports on Form 8-K 21
Signature 22
Certifications 23
1
PART I. Item 1. FINANCIAL INFORMATION
HEICO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED
January 31, 2003 October 31, 2002
------------------ -----------------
ASSETS
Current assets:
Cash and cash equivalents $4,614,000 $4,539,000
Accounts receivable, net 23,017,000 28,407,000
Inventories 54,630,000 54,514,000
Prepaid expenses and other current assets 8,090,000 7,811,000
Deferred income taxes 2,876,000 3,295,000
------------------ -----------------
Total current assets 93,227,000 98,566,000
Property, plant and equipment, net 40,226,000 40,059,000
Goodwill and other intangible assets, net 189,494,000 189,482,000
Other assets 7,924,000 8,225,000
------------------ -----------------
Total assets $330,871,000 $336,332,000
================== =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $12,253,000 $6,756,000
Trade accounts payable 7,413,000 7,640,000
Accrued expenses and other current liabilities 10,623,000 14,935,000
------------------ -----------------
Total current liabilities 30,289,000 29,331,000
Long-term debt, net of current maturities 38,730,000 49,230,000
Deferred income taxes 7,043,000 6,240,000
Other non-current liabilities 5,931,000 6,154,000
------------------ -----------------
Total liabilities 81,993,000 90,955,000
------------------ -----------------
Minority interests in consolidated subsidiaries 38,991,000 38,313,000
------------------ -----------------
Commitments and contingencies (Notes 14 and 15)
Shareholders' equity:
Preferred Stock, par value $.01 per share; Authorized - 10,000,000
shares issuable in series; 200,000 shares designated as Series A
Junior Participating Preferred Stock, none issued -- --
Common Stock, $.01 par value; Authorized - 30,000,000 shares;
Issued and Outstanding - 9,431,375 and 9,380,174 shares,
respectively 94,000 94,000
Class A Common Stock, $.01 par value; Authorized - 30,000,000
shares; Issued and Outstanding - 11,587,444 and 11,570,195
shares, respectively 116,000 116,000
Capital in excess of par value 154,362,000 153,847,000
Retained earnings 60,315,000 58,007,000
------------------ -----------------
214,887,000 212,064,000
Less: Note receivable secured by Class A Common Stock (5,000,000) (5,000,000)
------------------ -----------------
Total shareholders' equity 209,887,000 207,064,000
------------------ -----------------
Total liabilities and shareholders' equity $330,871,000 $336,332,000
================== =================
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED.
2
HEICO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
Three months ended January 31,
--------------------------------------------
2003 2002
------------------ -----------------
Net sales $41,788,000 $41,012,000
------------------ -----------------
Operating costs and expenses:
Cost of sales 28,012,000 26,162,000
Selling, general and administrative expenses 8,247,000 9,088,000
------------------ -----------------
Total operating costs and expenses 36,259,000 35,250,000
------------------ -----------------
Operating income 5,529,000 5,762,000
Interest expense (345,000) (788,000)
Interest and other income 81,000 63,000
------------------ -----------------
Income before income taxes and minority interests 5,265,000 5,037,000
Income tax expense 1,857,000 1,770,000
------------------ -----------------
Income before minority interests 3,408,000 3,267,000
Minority interests in consolidated subsidiaries 574,000 439,000
------------------ -----------------
Net income $2,834,000 $2,828,000
================== =================
Net income per share:
Basic $.14 $.14
================== =================
Diluted $.13 $.13
================== =================
Weighted average number of common shares outstanding:
Basic 20,987,543 20,840,629
================== =================
Diluted 22,245,851 22,537,779
================== =================
Cash dividends per share $.025 $.025
================== =================
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED.
3
HEICO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
Three months ended January 31,
--------------------------------------------
2003 2002
------------------ -----------------
Operating Activities:
Net income $2,834,000 $2,828,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,198,000 1,064,000
Deferred income tax provision (benefit) 1,222,000 (503,000)
Minority interests in consolidated subsidiaries 574,000 439,000
Tax benefit on stock option exercises 344,000 2,669,000
Change in assets and liabilities, net of acquisitions:
Decrease in accounts receivable 5,426,000 3,249,000
Increase in inventories (116,000) (3,272,000)
Increase in prepaid expenses and other current assets (279,000) (982,000)
Decrease in trade accounts payables, accrued
expenses and other current liabilities (4,576,000) (991,000)
Decrease in income taxes payable - (564,000)
Other 41,000 21,000
------------------ -----------------
Net cash provided by operating activities 6,668,000 3,958,000
------------------ -----------------
Investing Activities:
Capital expenditures (1,310,000) (1,306,000)
Acquisitions and related costs, net of cash acquired - (4,416,000)
Other (28,000) 57,000
------------------ -----------------
Net cash used in investing activities (1,338,000) (5,665,000)
------------------ -----------------
Financing Activities:
Principal payments on long-term debt (5,003,000) (1,007,000)
Proceeds from revolving credit facility - 4,000,000
Proceeds from the exercise of stock options 169,000 38,000
Cash dividends paid (525,000) (522,000)
Other 104,000 -
------------------ -----------------
Net cash (used in) provided by financing activities (5,255,000) 2,509,000
------------------ -----------------
Net increase in cash and cash equivalents 75,000 802,000
Cash and cash equivalents at beginning of year 4,539,000 4,333,000
------------------ -----------------
Cash and cash equivalents at end of period $4,614,000 $5,135,000
================== =================
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED.
4
HEICO CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
1. The accompanying unaudited condensed consolidated financial statements of
HEICO Corporation and its subsidiaries (the Company) have been prepared in
conformity with accounting principles generally accepted in the United States of
America for interim financial information and in accordance with the
instructions to Form 10-Q. Therefore, the condensed consolidated financial
statements do not include all information and footnotes normally included in
annual consolidated financial statements and should be read in conjunction with
the consolidated financial statements and notes thereto included in the
Company's latest Annual Report on Form 10-K for the year ended October 31, 2002.
The October 31, 2002 condensed consolidated balance sheet was derived from
audited financial statements. In the opinion of management, the unaudited
condensed consolidated financial statements contain all adjustments (consisting
of only normal recurring accruals) necessary for a fair presentation of the
condensed consolidated balance sheets, statements of operations and cash flows
for such interim periods presented. The results of operations for the three
months ended January 31, 2003 are not necessarily indicative of the results
which may be expected for the entire fiscal year.
Certain amounts in the prior years' financial statements have been reclassified
to conform to the current year presentation.
2. Accounts receivable are composed of the following:
January 31, 2003 October 31, 2002
------------------- -------------------
Accounts receivable $24,455,000 $30,029,000
Less: Allowance for doubtful accounts (1,438,000) (1,622,000)
------------------- -------------------
Accounts receivable, net $23,017,000 $28,407,000
=================== ===================
3. Costs and estimated earnings on uncompleted percentage-of-completion
contracts are as follows:
January 31, 2003 October 31, 2002
------------------- -------------------
Costs incurred on uncompleted contracts $5,688,000 $4,453,000
Estimated earnings 5,123,000 4,252,000
------------------- -------------------
10,811,000 8,705,000
Less: Billings to date (10,634,000) (8,551,000)
------------------- -------------------
$177,000 $154,000
=================== ===================
Included in accompanying balance
sheets under the following captions:
Accounts receivable, net (costs and estimated
earnings in excess of billings) $1,406,000 $1,737,000
Accrued expenses and other current liabilities
(billings in excess of costs and estimated earnings) (1,229,000) (1,583,000)
------------------- -------------------
$177,000 $154,000
=================== ===================
5
Changes in estimates on long-term contracts accounted for under the
percentage-of-completion method did not have a significant impact on net income
and diluted net income per share in the three months ended January 31, 2003 and
2002.
4. Inventories are composed of the following:
January 31, 2003 October 31, 2002
------------------- -------------------
Finished products $32,210,000 $32,501,000
Work in process 9,172,000 8,603,000
Materials, parts, assemblies and supplies 13,248,000 13,410,000
------------------- -------------------
Total inventories $54,630,000 $54,514,000
=================== ===================
Inventories related to long-term contracts were not significant as of January
31, 2003 and October 31, 2002.
5. Property, plant and equipment are composed of the following:
January 31, 2003 October 31, 2002
------------------- -------------------
Land $2,627,000 $2,627,000
Building and improvements 20,858,000 20,846,000
Machinery and equipment 42,004,000 41,739,000
Construction in progress 2,723,000 1,702,000
------------------- -------------------
68,212,000 66,914,000
Less: Accumulated depreciation (27,986,000) (26,855,000)
------------------- -------------------
Property, plant and equipment, net $40,226,000 $40,059,000
=================== ===================
6. Goodwill and other intangible assets are composed of the following:
January 31, 2003 October 31, 2002
------------------- -------------------
Goodwill $205,230,000 $205,213,000
Other intangible assets 2,996,000 4,062,000
------------------- -------------------
208,226,000 209,275,000
Less: Accumulated amortization (18,732,000) (19,793,000)
------------------- -------------------
Goodwill and other intangibles, net $189,494,000 $189,482,000
=================== ===================
The changes in the carrying amount of goodwill during the three months ended
January 31, 2003 by segment are as follows:
Consolidated
FSG ETG Total
----------------- --------------- -----------------
Balances as of October 31, 2002 $118,706,000 $68,971,000 $187,677,000
Goodwill acquired during the period -- -- --
Adjustments to Goodwill 17,000 -- 17,000
----------------- --------------- -----------------
Balances as of January 31, 2003 $118,723,000 $68,971,000 $187,694,000
================= =============== =================
6
Other intangible assets subject to amortization consist primarily of licenses,
loan costs, patents, and non-compete covenants. The gross carrying amount and
accumulated amortization of other intangible assets was $3.0 million and $1.2
million, respectively, as of January 31, 2003. Amortization expense of other
intangible assets for the three months ended January 31, 2003 was $67,000.
Amortization expense of other intangible assets for the fiscal year ending
October 31, 2003 is expected to be $324,000. Amortization expense for each of
the next five fiscal years is expected to be $311,000 in fiscal 2004, $256,000
in fiscal 2005, $117,000 in fiscal 2006, $116,000 in fiscal 2007 and $115,000 in
fiscal 2008.
7. Long-term debt consists of:
January 31, 2003 October 31, 2002
------------------- -------------------
Borrowings under revolving credit facility $49,000,000 $54,000,000
Industrial Development Revenue Refunding
Bonds - Series 1988 1,980,000 1,980,000
Equipment loans 3,000 6,000
------------------- -------------------
50,983,000 55,986,000
Less: Current maturities of long-term debt (12,253,000) (6,756,000)
------------------- -------------------
$38,730,000 $49,230,000
=================== ===================
Current maturities of long-term debt includes $12,250,000 and $6,750,000 of the
outstanding borrowings under the revolving credit facility assuming borrowings
outstanding as of January 31, 2003 and October 31, 2002, respectively, are
converted to term loans pursuant to the Company's option to convert such
borrowings as set forth below.
8. Pursuant to the Company's $120 million revolving credit facility (Credit
Facility), funds may be used for working capital and general corporate needs of
the Company and to finance acquisitions on a revolving basis through July 2003.
The Company has the option to convert outstanding advances to term loans
amortizing over a period through July 2005. The Company plans to renew or
replace this Credit Facility prior to its July 2003 expiration date. As of
January 31, 2003 and October 31, 2002, the Company had a total of $49 million
and $54 million, respectively, borrowed under the Credit Facility at weighted
average interest rates of 2.3% and 2.9%, respectively.
The interest rates on the Series 1988 industrial development revenue bonds were
1.2% and 1.9% as of January 31, 2003 and October 31, 2002, respectively.
9. For the three months ended January 31, 2003 and 2002, cost of sales amounts
included approximately $2.2 million and $2.5 million, respectively, of new
product research and development expenses. The expenses for the first three
months of fiscal 2003 and fiscal 2002 are net of reimbursements pursuant to
research and development cooperation and joint venture agreements. The
reimbursements pursuant to such agreements in the three months ended January 31,
2003 and January 31, 2002 were not significant.
7
10. The following table sets forth the computation of basic and diluted net
income per share:
Three months ended January 31,
---------------------------------------
2003 2002
---------------- ---------------
Numerator:
Net income $2,834,000 $2,828,000
================ ===============
Denominator:
Weighted average common shares outstanding - basic 20,987,543 20,840,629
Effect of dilutive stock options 1,258,308 1,697,150
---------------- ---------------
Weighted average common shares outstanding - diluted 22,245,851 22,537,779
================ ===============
Net income per share - basic $.14 $.14
Net income per share - diluted $.13 $.13
Anti-dilutive stock options excluded 2,074,911 1,204,049
11. Information on operating segments for the three months ended January 31,
2003 and 2002, respectively, for the Flight Support Group (FSG), consisting of
HEICO Aerospace Holdings Corp. and its subsidiaries, and the Electronic
Technologies Group (ETG), consisting of HEICO Electronic Technologies Corp. and
its subsidiaries, is as follows:
Other,
Segments (1) Primarily
---------------------------------- Corporate and Consolidated
FSG ETG Intersegment Totals
-------------- ---------------- ---------------- ---------------
For the three months ended January 31, 2003:
- -----------------------------------------------
Net sales $31,886,000 $10,000,000 ($98,000) $41,788,000
Depreciation and amortization 819,000 308,000 71,000 1,198,000
Operating income 5,377,000 768,000 (616,000) 5,529,000
Capital expenditures 140,000 1,170,000 - 1,310,000
For the three months ended January 31, 2002:
- -----------------------------------------------
Net sales $29,054,000 $12,134,000 ($176,000) $41,012,000
Depreciation and amortization 691,000 292,000 81,000 1,064,000
Operating income 4,266,000 2,660,000 (1,164,000) 5,762,000
Capital expenditures 1,133,000 171,000 2,000 1,306,000
(1) During the fiscal year ended October 31, 2002, one of the Company's
subsidiaries formerly included in the Electronic Technologies Group was
reclassified to the Flight Support Group. Prior period results have been
retroactively restated to reflect the revised segment classification.
12. The Company adopted FASB Interpretation No. 45 (FIN 45), "Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others," effective as of its first quarter of
fiscal 2003. FIN 45 requires, among other things as further detailed in Note 16,
disclosures to be made by a guarantor about its obligations under certain
guarantees that it has issued. Such disclosures for the Company are set forth
below.
8
As of January 31, 2003, the Company has furnished several letters of credit that
are supported by its Credit Facility. Specifically, the Company's industrial
development revenue bonds are secured by a $2.0 million letter of credit
expiring February 2004 and a mortgage on the related properties pledged as
collateral. The Company has also arranged for standby letters of credit
aggregating to $1.2 million to meet the security requirement of its insurance
company for potential workers compensation claims. Lastly, one of the Company's
subsidiaries has guaranteed its performance related to a customer contract
through a $0.5 million letter of credit expiring July 2003.
The Company's accounting policy for product warranties is to accrue an estimated
liability at the time of shipment. The amount recognized is based on historical
claim cost experience. Changes in the product warranty liability for the three
months ended January 31, 2003 are as follows:
Balance as of October 31, 2002 $685,000
Accruals for warranties issued during the period 66,000
Warranty claims settled during the period (60,000)
----------------
Balance as of January 31, 2003 $691,000
================
13. The Company's comprehensive income consists of:
Three months ended January 31,
------------------------------------------------
2003 2002
------------------- ------------------
Net income $2,834,000 $2,828,000
Interest rate swap gain adjustment -- 147,000
Tax expense -- (52,000)
------------------- ------------------
Comprehensive income $2,834,000 $2,923,000
=================== ==================
14. The Company is involved in various legal actions arising in the normal
course of business. Based upon the amounts sought by the plaintiffs in these
actions, management is of the opinion that the outcome of these matters will not
have a significant effect on the Company's condensed consolidated financial
statements.
15. As partial consideration in the acquisition of Inertial Airline Services,
Inc. (IAS) in August 2001, the Company issued $5 million in HEICO Class A Common
Stock (289,964 shares) and guaranteed that the resale value of such Class A
Common Stock would be at least $5 million through August 31, 2002, which both
parties agreed to extend to August 31, 2003. Based on the closing market price
of HEICO Class A Common Stock on January 31, 2003, the Company would have had to
pay the seller an additional amount of approximately $2.5 million in cash, which
would have been recorded as a reduction of shareholders' equity. Concurrent with
the purchase, the Company loaned the seller $5 million, which is due August 31,
2003 and is secured by the 289,964 shares of HEICO Class A Common Stock. The
loan is reflected as a reduction in the equity section of the Company's
consolidated balance sheet as a note receivable secured by Class A Common Stock.
16. On November 1, 2002, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets." SFAS No. 144 supercedes SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of."
SFAS No. 144 applies to all long-lived assets (including
9
discontinued operations) and consequently amends Accounting Principles Board
(APB) Opinion No. 30, "Reporting Results of Operations - Reporting the Effects
of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions." SFAS No. 144 develops one
accounting model (based on the model in SFAS No. 121) for long-lived assets that
are to be disposed of by sale, as well as addresses the principal implementation
issues. SFAS No. 144 requires that long-lived assets that are to be disposed of
by sale be measured at the lower of carrying value or fair value less cost to
sell. That requirement eliminates the requirement of APB Opinion No. 30 that
discontinued operations be measured at net realizable value or that entities
include under "discontinued operations" in the financial statements amounts for
operating losses that have not yet occurred. Additionally, SFAS No. 144 expands
the scope of discontinued operations to include all components of an entity with
operations that (1) can be distinguished from the rest of the entity and (2)
will be eliminated from the ongoing operations of the entity in a disposal
transaction. The adoption of SFAS No. 144 did not have a material effect on the
Company's results of operations or financial position.
On November 1, 2002, the Company adopted SFAS No. 145, "Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." This Statement eliminates the SFAS No. 4, "Reporting Gains and
Losses from Extinguishment of Debt," requirement that gains and losses from
extinguishment of debt be classified as an extraordinary item, and requires that
such gains and losses be evaluated for extraordinary classification under the
criteria of APB Opinion No. 30. This statement also amends SFAS No. 13,
"Accounting for Leases," to require that certain lease modifications that have
economic effects that are similar to sales-leaseback transactions be accounted
for in the same manner as sales-leaseback transactions. SFAS No. 145 also makes
various other technical corrections to existing pronouncements. The adoption of
SFAS No. 145 did not have a material effect on the Company's results of
operations or financial position.
In November 2002, the Emerging Issues Task Force (EITF) reached a consensus on
Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables" (EITF 00-21).
This Issue addresses certain aspects of the accounting by a vendor for
arrangements under which it will perform multiple revenue-generating activities.
EITF 00-21 provides guidance to determine how arrangement consideration should
be measured, whether an arrangement should be divided into separate units of
accounting, and how arrangement consideration should be allocated among separate
units of accounting. The provisions of EITF 00-21 are effective for revenue
arrangements entered into in fiscal periods beginning after June 15, 2003. The
Company is evaluating the requirements of EITF 00-21, but does not currently
believe adoption will have a significant impact on its results of operations or
financial position.
In November 2002, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 45 (FIN 45), "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others." This Interpretation elaborates on the disclosures to be made by a
guarantor in its interim and annual financial statements about its obligations
under certain guarantees that it has issued. It also clarifies that a guarantor
is required to recognize, at the inception of a guarantee, a liability for the
fair value of the obligation undertaken in issuing the guarantee. The initial
recognition and measurement provisions of this Interpretation are applicable on
a prospective basis to guarantees issued or
10
modified after December 31, 2002. The disclosure requirements of FIN 45 are
effective for financial statement periods ending after December 15, 2002. The
Company adopted FIN 45 effective as of its first quarter of fiscal 2003, which
did not have a material effect on the Company's results of operations or
financial position. (See Note 12 above).
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure." This Statement amends SFAS No. 123,
"Accounting for Stock-Based Compensation," to provide alternative methods of
transition for an entity that voluntarily changes to the fair value based method
of accounting for stock-based compensation. It also amends the disclosure
provisions of SFAS No. 123 to require prominent disclosure about the effects on
reported net income of an entity's accounting policy decisions with respect to
stock-based employee compensation. Finally, SFAS No. 148 amends APB Opinion No.
28, "Interim Financial Reporting," to require disclosure about those effects in
interim financial information. The transition guidance and annual disclosure
requirements are effective for fiscal years ending after December 15, 2002. The
interim disclosure requirements are effective for interim periods beginning
after December 15, 2002. The Company plans to begin making these disclosures
effective with its quarterly report on Form 10-Q for the second quarter of
fiscal 2003.
On January 1, 2003, the Company adopted SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS No. 146 addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies EITF Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (Including Certain
Costs Incurred in a Restructuring)." SFAS No. 146 requires recognition of a
liability for a cost associated with an exit or disposal activity at fair value
when the liability is incurred. Previously, a liability for an exit cost was
recognized when the entity committed to an exit plan under EITF Issue No. 94-3.
The adoption of SFAS No. 146 did not have a significant effect on the Company's
results of operations or financial position, but may affect the timing and
amounts of the recognition of future restructuring costs.
In January 2003, the FASB issued FASB Interpretation No. 46 (FIN 46),
"Consolidation of Variable Interest Entities." This Interpretation clarifies the
application of Accounting Research Bulletin No. 51, "Consolidated Financial
Statements," to certain entities in which equity investors do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. FIN 46 requires an enterprise
to consolidate a variable interest entity if that enterprise will absorb a
majority of the entity's expected losses, is entitled to receive a majority of
the entity's expected residual returns, or both. FIN 46 also requires
disclosures about unconsolidated variable interest entities in which an
enterprise holds a significant variable interest. FIN 46 is effective for
variable interest entities created or entered into after January 31, 2003. It
applies in the first fiscal year or interim period beginning after June 15,
2003, to variable interest entities in which an enterprise holds a variable
interest that it acquired before February 1, 2003. The Company does not expect
FIN 46 to have a significant effect on its results of operations or financial
position.
11
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
This discussion of our financial condition and results of operations should be
read in conjunction with our Condensed Consolidated Financial Statements and
Notes thereto included herein. The preparation of consolidated financial
statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as of the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ significantly from those estimates
if different assumptions were used or different events ultimately transpire.
The Company's critical accounting policies, which require management to make
judgments about matters that are inherently uncertain, are described in Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," under the heading "Critical Accounting Policies" in the Company's
2002 annual report on Form 10-K.
The Company has two operating segments: the Flight Support Group (FSG),
consisting of HEICO Aerospace Holdings Corp. (HEICO Aerospace) and its
subsidiaries, and the Electronic Technologies Group (ETG), consisting of HEICO
Electronic Technologies Corp., and its subsidiaries.
Results of Operations
The following table sets forth the results of operations, net sales and
operating income by operating segment and the percentage of net sales
represented by the respective items.
Three months ended January 31,
-----------------------------------------------
2003 2002
------------------- ------------------
Net sales $41,788,000 $41,012,000
------------------- ------------------
Cost of sales 28,012,000 26,162,000
Selling, general and administrative expenses 8,247,000 9,088,000
------------------- ------------------
Total operating costs and expenses 36,259,000 35,250,000
------------------- ------------------
Operating income $5,529,000 $5,762,000
=================== ==================
12
Three months ended January 31,
-----------------------------------------------
2003 2002
------------------- ------------------
Net sales by segment: (1)
FSG $31,886,000 $29,054,000
ETG 10,000,000 12,134,000
Intersegment sales (98,000) (176,000)
------------------- ------------------
$41,788,000 $41,012,000
=================== ==================
Operating income by segment: (1)
FSG $5,377,000 $4,266,000
ETG 768,000 2,660,000
Other, primarily corporate (616,000) (1,164,000)
------------------- ------------------
$5,529,000 $5,762,000
=================== ==================
Net sales 100.0% 100.0%
Gross profit 33.0% 36.2%
Selling, general and administrative expense 19.7% 22.2%
Operating income 13.2% 14.0%
Interest expense 0.8% 1.9%
Interest and other income 0.2% 0.2%
Income tax expense 4.4% 4.3%
Minority interests 1.4% 1.1%
Net income 6.8% 6.9%
(1) During the fiscal year ended October 31, 2002, one of the Company's
subsidiaries formerly included in the Electronic Technologies Group was
reclassified to the Flight Support Group. Prior period results have been
retroactively restated to reflect the revised segment classification.
Comparison of First Quarter of Fiscal 2003 to First Quarter of Fiscal 2002
Net Sales
Net sales for the first quarter of fiscal 2003 totaled $41.8 million, up 2% when
compared to net sales of $41.0 million for the first quarter of fiscal 2002. The
increase in net sales reflects an increase of $2.8 million (a 10% increase) to
$31.9 million in sales from the FSG, partially offset by a decrease of $2.1
million (an 18% decrease) to $10.0 million in sales from the ETG. The FSG sales
increase primarily reflects higher commercial aftermarket parts and services
sales, principally attributable to sales of new products and some strengthening
in demand within the commercial airline industry. The decrease in sales within
the ETG primarily resulted from shipments that were deferred due to production
delays in certain products as well as some delays pursuant to customer
requirements. The Company expects to make these ETG shipments during the balance
of fiscal 2003.
Gross Profits and Operating Expenses
The Company's gross profit margins averaged 33.0% for the first quarter of
fiscal 2003 as compared to 36.2% for the first quarter of fiscal 2002,
reflecting lower margins within the ETG, partially offset by higher margins
within the FSG. The ETG's gross profit margin decrease was primarily caused by
the deferred shipments mentioned above and lower sales of higher margin
products. The FSG's gross profit margin increase was principally due to higher
sales volumes
13
and, to a lesser extent, lower new product research and development expenses.
Cost of sales amounts for the first quarter of fiscal 2003 and fiscal 2002
include approximately $2.2 million and $2.5 million, respectively, of new
product research and development expenses net of reimbursements pursuant to
cooperation and joint venture agreements. The decline in new product research
and development expenses within the FSG is in line with a $1.0 million decrease
in the fiscal 2003 budget relative to actual fiscal 2002 expenses.
Selling, general and administrative (SG&A) expenses were $8.2 million and $9.1
million for the first quarter of fiscal 2003 and the first quarter of fiscal
2002, respectively. The decrease in SG&A expenses is mainly due to lower
corporate expenses and lower commission related expenses within the ETG due to
the lower sales discussed above. Corporate expenses in the first quarter of
fiscal 2003 include the reversal of approximately $400,000 of professional fees
that were accrued in the fourth quarter of fiscal 2002 pursuant to a contractual
arrangement, which was renegotiated in the first quarter of fiscal 2003. As a
percentage of net sales, SG&A expenses decreased to 19.7% for the first quarter
of fiscal 2003 compared to 22.2% for the first quarter of fiscal 2002. The
decrease is due to the reduction in corporate expenses and higher sales volumes
within the FSG, partially offset by the deferred sales within the ETG.
Operating Income
Operating income totaled $5.5 million in the first quarter of fiscal 2003 versus
$5.8 million for the first quarter of fiscal 2002. The decrease in operating
income reflects an increase from $4.3 million to $5.4 million in the Company's
FSG and a $0.5 million reduction in corporate expenses, offset by a decrease
from $2.7 million to $0.8 million in the Company's ETG. As a percentage of net
sales, operating income decreased from 14.0% in the first quarter of fiscal 2002
to 13.2% in the first quarter of fiscal 2003. The decline in operating income as
a percentage of net sales reflects a decrease in the ETG's operating income as a
percentage of net sales from 21.9% in the first quarter of fiscal 2002 to 7.7%
in the first quarter of fiscal 2003, partially offset by an increase in the
FSG's operating income as a percentage of net sales from 14.7% in the first
quarter of fiscal 2002 to 16.9% in the first quarter of fiscal 2003. The
decrease in the ETG's operating income and operating income as a percentage of
net sales reflects the lower sales and gross profit margins discussed
previously. The increase in the FSG's operating income and operating income as a
percentage of net sales reflects the higher sales and lower new product
development expenses discussed previously.
Interest Expense
Interest expense decreased $443,000 from $788,000 in the first quarter of fiscal
2002 to $345,000 in the first quarter of fiscal 2003. The decrease was
principally due to lower interest rates and a lower weighted average balance
outstanding under the Company's Credit Facility in fiscal 2003.
Interest and Other Income
Interest and other income in the first quarter of fiscal 2003 approximated
amounts in the first quarter of fiscal 2002.
14
Minority Interests
Minority interests in consolidated subsidiaries represents the minority
interests held in HEICO Aerospace. The increase from the first quarter of fiscal
2002 to the first quarter of fiscal 2003 was primarily due to higher earnings of
the FSG.
Net Income
The Company's net income was $2.8 million, or $.13 per diluted share, in the
first quarter of fiscal 2003 and in the first quarter of fiscal 2002.
Outlook
The Company reported improved results in the FSG, which, like most companies
supplying the airline industry, has been impacted by the events of September 11,
2001 coupled with a weak economy. The Company believes that its ongoing new
product development efforts and related revenue increases combined with its
strategic relationships with some of the world's major airlines contributed to
the strengthening seen within the FSG during the first quarter of fiscal 2003.
With HEICO's recently announced strategic relationship with Delta Air Lines, the
Company now has four unique partner positions with major international airlines.
The Company continues to have discussions with other major airlines as well.
Sales and earnings within the ETG during the first quarter of fiscal 2003 fell
short of the Company's expectations. The Company believes it has resolved the
cause of the production delays and expects that its shipments will meet revised
customer requirements. The Company expects to make these delayed shipments over
the balance of fiscal 2003.
The Company continues to adhere to its long-term strategy of developing and
marketing new products and services, which provides its existing customers with
substantial cost savings and allows it to expand to new markets. During the
remainder of fiscal 2003, the Company expects continued improvements in its
operating results.
Liquidity and Capital Resources
The Company generates cash primarily from its operating activities and financing
activities, including borrowings under long-term credit agreements.
Principal uses of cash by the Company include acquisitions, payments of interest
and principal on debt, capital expenditures and increases in working capital.
The Company believes that its operating cash flow and available borrowings under
the Company's Credit Facility will be sufficient to fund cash requirements for
the foreseeable future.
Operating Activities
The Company's cash flow from operations was $6.7 million for the first three
months of fiscal
15
2003, consisting primarily of net income of $2.8 million, depreciation and
amortization of $1.2 million, a deferred income tax provision of $1.2 million,
minority interests in consolidated subsidiaries of $0.6 million, a decrease in
net operating assets of $0.5 million, and a tax benefit related to stock option
exercises of $0.3 million.
Investing Activities
Cash used in investing activities during the first three months of fiscal 2003
related primarily to capital expenditures totaling $1.3 million for building
improvements and equipment purchases.
Financing Activities
Cash used in financing activities during the first three months of fiscal 2003
primarily related to principal repayments totaling $5.0 million on the Company's
Credit Facility.
New Accounting Pronouncements
On November 1, 2002, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets." SFAS No. 144 supercedes SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of."
SFAS No. 144 applies to all long-lived assets (including discontinued
operations) and consequently amends Accounting Principles Board (APB) Opinion
No. 30, "Reporting Results of Operations - Reporting the Effects of Disposal of
a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions." SFAS No. 144 develops one accounting model (based on
the model in SFAS No. 121) for long-lived assets that are to be disposed of by
sale, as well as addresses the principal implementation issues. SFAS No. 144
requires that long-lived assets that are to be disposed of by sale be measured
at the lower of carrying value or fair value less cost to sell. That requirement
eliminates the requirement of APB Opinion No. 30 that discontinued operations be
measured at net realizable value or that entities include under "discontinued
operations" in the financial statements amounts for operating losses that have
not yet occurred. Additionally, SFAS No. 144 expands the scope of discontinued
operations to include all components of an entity with operations that (1) can
be distinguished from the rest of the entity and (2) will be eliminated from the
ongoing operations of the entity in a disposal transaction. The adoption of SFAS
No. 144 did not have a material effect on the Company's results of operations or
financial position.
On November 1, 2002, the Company adopted SFAS No. 145, "Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." This Statement eliminates the SFAS No. 4, "Reporting Gains and
Losses from Extinguishment of Debt," requirement that gains and losses from
extinguishment of debt be classified as an extraordinary item, and requires that
such gains and losses be evaluated for extraordinary classification under the
criteria of APB Opinion No. 30. This statement also amends SFAS No. 13,
"Accounting for Leases," to require that certain lease modifications that have
economic effects that are similar to sales-leaseback transactions be accounted
for in the same manner as sales-leaseback transactions. SFAS No. 145 also makes
various other technical corrections to existing pronouncements. The adoption of
SFAS No. 145 did not have a material effect on the
16
Company's results of operations or financial position.
In November 2002, the Emerging Issues Task Force (EITF) reached a consensus on
Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables" (EITF 00-21).
This Issue addresses certain aspects of the accounting by a vendor for
arrangements under which it will perform multiple revenue-generating activities.
EITF 00-21 provides guidance to determine how arrangement consideration should
be measured, whether an arrangement should be divided into separate units of
accounting, and how arrangement consideration should be allocated among separate
units of accounting. The provisions of EITF 00-21 are effective for revenue
arrangements entered into in fiscal periods beginning after June 15, 2003. The
Company is evaluating the requirements of EITF 00-21, but does not currently
believe adoption will have a significant impact on its results of operations or
financial position.
In November 2002, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 45 (FIN 45), "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others." This Interpretation elaborates on the disclosures to be made by a
guarantor in its interim and annual financial statements about its obligations
under certain guarantees that it has issued. It also clarifies that a guarantor
is required to recognize, at the inception of a guarantee, a liability for the
fair value of the obligation undertaken in issuing the guarantee. The initial
recognition and measurement provisions of this Interpretation are applicable on
a prospective basis to guarantees issued or modified after December 31, 2002.
The disclosure requirements of FIN 45 are effective for financial statement
periods ending after December 15, 2002. The Company adopted FIN 45 effective as
of its first quarter of fiscal 2003, which did not have a material effect on the
Company's results of operations or financial position. (See Note 12 of the Notes
to Condensed Consolidated Financial Statements.)
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure." This Statement amends SFAS No. 123,
"Accounting for Stock-Based Compensation," to provide alternative methods of
transition for an entity that voluntarily changes to the fair value based method
of accounting for stock-based compensation. It also amends the disclosure
provisions of SFAS No. 123 to require prominent disclosure about the effects on
reported net income of an entity's accounting policy decisions with respect to
stock-based employee compensation. Finally, SFAS No. 148 amends APB Opinion No.
28, "Interim Financial Reporting," to require disclosure about those effects in
interim financial information. The transition guidance and annual disclosure
requirements are effective for fiscal years ending after December 15, 2002. The
interim disclosure requirements are effective for interim periods beginning
after December 15, 2002. The Company plans to begin making these disclosures
effective with its quarterly report on Form 10-Q for the second quarter of
fiscal 2003.
On January 1, 2003, the Company adopted SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS No. 146 addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies EITF Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (Including Certain
Costs Incurred in a Restructuring)." SFAS No. 146 requires recognition of a
17
liability for a cost associated with an exit or disposal activity at fair value
when the liability is incurred. Previously, a liability for an exit cost was
recognized when the entity committed to an exit plan under EITF Issue No. 94-3.
The adoption of SFAS No. 146 did not have a significant effect on the Company's
results of operations or financial position, but may affect the timing and
amounts of the recognition of future restructuring costs.
In January 2003, the FASB issued FASB Interpretation No. 46 (FIN 46),
"Consolidation of Variable Interest Entities." This Interpretation clarifies the
application of Accounting Research Bulletin No. 51, "Consolidated Financial
Statements," to certain entities in which equity investors do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. FIN 46 requires an enterprise
to consolidate a variable interest entity if that enterprise will absorb a
majority of the entity's expected losses, is entitled to receive a majority of
the entity's expected residual returns, or both. FIN 46 also requires
disclosures about unconsolidated variable interest entities in which an
enterprise holds a significant variable interest. FIN 46 is effective for
variable interest entities created or entered into after January 31, 2003. It
applies in the first fiscal year or interim period beginning after June 15,
2003, to variable interest entities in which an enterprise holds a variable
interest that it acquired before February 1, 2003. The Company does not expect
FIN 46 to have a significant effect on its results of operations or financial
position.
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 (the Act) provides a safe
harbor for forward looking statements made by or on behalf of the Company. The
Company and its representatives may from time to time make written or oral
statements that are "forward-looking," including statements contained in this
report and other filings with the Securities and Exchange Commission and in
reports to the Company's shareholders. Management believes that all statements
that express expectations and projections with respect to future matters may
differ materially from that discussed as a result of factors, including, but not
limited to, the demand for commercial air travel, the Company's ability to
introduce new products and continue to control costs and maintain quality, risks
inherent in changes in market interest rates, the possibility of military action
against Iraq, events such as the terrorist attacks of September 11, 2001 and the
resulting impact on commercial airlines and the economy in general, credit risk
related to receivables from customers, product specification costs and
requirements, governmental and regulatory demands, competition on military
programs, U.S. governmental export policies and restrictions, military program
funding by U.S. and non-U.S. government agencies, product pricing levels, the
Company's ability to make acquisitions and achieve operating synergies from
acquired businesses, anticipated trends in our businesses, including trends in
the markets for aircraft engine and aircraft component replacement parts,
aircraft engine overhaul and electronics equipment and airline fleet changes,
and economic conditions within and outside of the aerospace, defense and
electronics industries. For an enterprise such as the Company, a wide range of
factors could materially affect future developments and performance. A list of
such factors is set forth in the Company's Annual Report on Form 10-K for the
year ended October 31, 2002.
18
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
Substantially all of the Company's borrowings bear interest at floating interest
rates. Based on the outstanding debt balance as of January 31, 2003, a
hypothetical 10% increase in interest rates would increase the Company's
interest expense by approximately $117,000 on an annual basis.
19
Item 4. CONTROLS AND PROCEDURES
Evaluation of Controls and Procedures
Based upon an evaluation performed within 90 days of the date of this quarterly
report on Form 10-Q, the Company's Chief Executive Officer and its Chief
Financial Officer have concluded that the Company's disclosure controls and
procedures were effective (as defined in Exchange Act Rules 13a-14 and 15d-14).
Changes in internal controls
There have been no significant changes in internal controls or in other factors
that could significantly affect these controls subsequent to the date of the
evaluation.
20
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
99.1 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
99.2 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
(b) There were no reports on Form 8-K filed during the three
months ended January 31, 2003.
21
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HEICO CORPORATION
------------------
(Registrant)
Date: March 5, 2003 By: /s/ Thomas S. Irwin
------------------------
Thomas S. Irwin
Executive Vice President
and Chief Financial Officer
(Principal Financial and Accounting
Officer)
22
CERTIFICATION
I, Laurans A. Mendelson, Chief Executive Officer of HEICO Corporation, certify
that:
(1) I have reviewed this quarterly report on Form 10-Q of HEICO
Corporation;
(2) Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
(3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the Registrant as of, and for, the periods presented in
this quarterly report;
(4) The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant
and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the Registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
(5) The Registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the Registrant's auditors and the
audit committee of the Registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Registrant's
ability to record, process, summarize and report financial data
and have identified for the Registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Registrant's
internal controls; and
(6) The Registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: March 5, 2003 /S/ LAURANS A. MENDELSON
------------------------
Laurans A. Mendelson
Chief Executive Officer
23
CERTIFICATION
I, Thomas S. Irwin, Chief Financial Officer of HEICO Corporation, certify that:
(1) I have reviewed this quarterly report on Form 10-Q of HEICO
Corporation;
(2) Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
(3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the Registrant as of, and for, the periods presented in
this quarterly report;
(4) The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant
and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the Registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
(5) The Registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the Registrant's auditors and the
audit committee of the Registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Registrant's
ability to record, process, summarize and report financial data
and have identified for the Registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Registrant's
internal controls; and
(6) The Registrant's other certifying officers and I have indicated in
this annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: March 5, 2003 /S/ THOMAS S. IRWIN
-------------------
Thomas S. Irwin
Chief Financial Officer
24
Exhibit 99.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of HEICO Corporation (the "Company") on
Form 10-Q for the period ended January 31, 2003 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Laurans A. Mendelson,
Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
Date: March 5, 2003 /S/ LAURANS A. MENDELSON
-------------------------
Laurans A. Mendelson
Chief Executive Officer
Exhibit 99.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of HEICO Corporation (the "Company") on
Form 10-Q for the period ended January 31, 2003 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Thomas S. Irwin, Chief
Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
Date: March 5, 2003 /S/ THOMAS S. IRWIN
--------------------
Thomas S. Irwin
Chief Financial Officer