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, 1995
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)
(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 2,279,896 shares as of February 28, 1995.
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<PAGE>
HEICO CORPORATION
INDEX
Page No.
Part I. Financial information:
Consolidated Condensed Balance Sheets as of
January 31, 1995 and October 31, 1994.......................... 3
Consolidated Condensed Statements of Operations for the
three months ended January 31, 1995 and 1994................... 4
Consolidated Condensed Statements of Cash Flows for the
three months ended January 31, 1995 and 1994................... 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 5. Other Matters........................................... 11
Item 6. Exhibits and Reports on Form 8-K........................ 11
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<PAGE>
PART I. FINANCIAL INFORMATION
HEICO CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
JANUARY 31, OCTOBER 31,
1995 1994
----------- -----------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents $3,497,000 $5,030,000
Short-term investments 943,000 --
Accounts receivable, net 6,240,000 5,720,000
Inventories 5,134,000 5,261,000
Prepaid expenses and other current assets 1,356,000 1,329,000
Deferred income taxes 1 188,000 1,251,000
----------- -----------
Total current assets 18,358,000 18,591,000
----------- -----------
Property, plant and equipment 24,314,000 21,908,000
Less accumulated depreciation (13,844,000) (13,300,000)
----------- -----------
Property, plant and equipment, net 10,470,000 8,608,000
----------- -----------
Intangible assets less accumulated amortization of
$940,000 in 1995 and $853,000 in 1994 11,054,000 10,169,000
----------- -----------
Investments in and advances to unconsolidated
partnerships 2,149,000 1,152,000
----------- -----------
Other assets 857,000 500,000
----------- -----------
Total assets $42,888,000 $39,020,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $1,406,000 $1,054,000
Trade accounts payable 1,209,000 1,048,000
Accrued expenses and other current liabilities 3,203,000 3,798,000
----------- -----------
Total current liabilities 5,818,000 5,900,000
----------- -----------
Long-term debt 7,317,000 4,402,000
----------- -----------
Deferred income taxes 1 619,000 1,623,000
----------- -----------
Other non-current liabilities 365,000 --
----------- -----------
Minority interests 27,000 34,000
----------- -----------
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 - 2,268,646 shares
in 1995 and 2,266,646 shares in 1994 23,000 23,000
Capital in excess of par value 19,000 22,000
Retained earnings 31,392,000 30,994,000
----------- -----------
31,434,000 31,039,000
Less: Note receivable from employee savings and
investment plan (3,692,000) (3,978,000)
----------- -----------
Total shareholders' equity 27,742,000 27,061,000
----------- -----------
Total liabilities and shareholders' equity $42,888,000 $39,020,000
=========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
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HEICO CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS - UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDED JANUARY 31,
------------------------------
1995 1994
----------- -----------
<S> <C> <C>
Revenues:
Aerospace products and services sales,
net of returns and allowances $ 5,392,000 $ 4,455,000
Medical services sales, net of allowances 3,541,000 2,454,000
----------- -----------
Net sales 8,933,000 6,909,000
----------- -----------
Operating costs and expenses:
Cost of aerospace products and services 3,652,000 3 355,000
Cost of medical services 2,318,000 1,745,000
Selling, general and administrative expenses 1,879,000 1,579,000
----------- -----------
Total operating costs and expenses 7,849,000 6,679,000
----------- -----------
Income from operations before equity in loss
of unconsolidated partnerships 1,084,000 230,000
Equity in loss of unconsolidated partnerships (175,000) (120,000)
----------- -----------
Income from operations 909,000 110,000
Interest expense (92,000) (42,000)
Interest and other income 143,000 119,000
Minority interest in consolidated partnership (23,000) --
----------- -----------
Income before income taxes and cumulative
effect of change in accounting principle 937,000 187,000
Income tax expense 368,000 68,000
----------- -----------
Income before cumulative effect of
change in accounting principle 569,000 119,000
Cumulative effect on prior years of change
in accounting for income taxes -- 381,000
----------- -----------
Net income $ 569,000 $ 500,000
=========== ===========
Income per share before cumulative effect
of change in accounting principle $ .25 $ .05
===== =====
Net income per share $ .25 $ .21
===== =====
Weighted average number of common
and common equivalent shares outstanding 2,298,682 2,329,417
=========== ===========
Cash dividends per share $.075 $.075
===== =====
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
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<PAGE>
HEICO CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS - UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JANUARY 31,
-----------------------------------
1995 1994
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income $569,000 $500,000
Items affecting cash from operations:
Depreciation and amortization 626,000 435,000
Deferred income taxes 59,000 15,000
Loss from unconsolidated partnerships 254,000 192,000
Minority interest in consolidated partnerships 23,000 --
Cumulative effect of change in
accounting principle -- (381,000)
Change in assets and liabilities:
(Increase) in accounts receivable (520,000) (149,000)
Decrease (increase) in inventories 127,000 (253,000)
(Increase) in prepaid expenses and other
current assets (19,000) (120,000)
(Decrease) in trade payables, accrued
expenses and other current liabilities (405,000) (222,000)
Other -- 1,000
---------- -----------
Net cash provided by operating activities 714,000 462,000
---------- -----------
Cash flows from investing activities:
Advances to unconsolidated partnerships (211,000) (128,000)
Purchases of property, plant and equipment (163,000) (338,000)
Acquisitions, including contingent note payments (640,000) (360,000)
Purchase of short-term investments (943,000) --
Deferred financing and organization costs (79,000) --
Payment received from employee savings and
investment plan note receivable 286,000 --
---------- -----------
Net cash (used in) investing activities (1,750,000) (826,000)
---------- -----------
Cash flows from financing activities:
Proceeds from the exercise of stock options 114,000 22,000
Proceeds from the issuance of long-term debt 15,000 --
Payments on long-term debt (312,000) (92,000)
Repurchase of common stock (117,000) (238,000)
Cash dividends paid (171,000) (170,000)
Other (26,000) --
---------- -----------
Net cash (used in) financing activities (497,000) (478,000)
---------- -----------
Net (decrease) in cash and cash equivalents (1,533,000) (842,000)
Cash and cash equivalents at beginning of year 5,030,000 5,481,000
---------- -----------
Cash and cash equivalents at end of period $3,497,000 $4,639,000
========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
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<PAGE>
HEICO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - UNAUDITED
January 31, 1995
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, 1994. 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, 1995 are not necessarily indicative of the
results which may be expected for the entire fiscal year.
2. Short-term investments are highly liquid investments with maturities of
more than three months when purchased and are carried at cost, which
approximates market.
3. Accounts receivable are composed of the following:
<TABLE>
<CAPTION>
JANUARY 31, 1995 OCTOBER 31, 1994
------------------ ----------------
<S> <C> <C>
Accounts receivable.............................. $ 7,985,000 $ 7,284,000
Less contractual allowances and
allowance for doubtful accounts............... 1,745,000 1,564,000
------------------ ----------------
Accounts receivable, net......................... $ 6,240,000 $ 5,720,000
================== ================
</TABLE>
Inventories are comprised of the following:
<TABLE>
<CAPTION>
JANUARY 31, 1995 OCTOBER 31, 1994
------------------ ----------------
<S> <C> <C>
Finished products................................ $ 2,285,000 $ 1,916,000
Work in process.................................. 1,320,000 1,784,000
Materials, parts, assemblies and supplies........ 1,529,000 1,561,000
------------------ ----------------
Total inventories................................ $ 5,134,000 $ 5,261,000
================== ================
</TABLE>
Inventory and receivable amounts set forth in the accompanying consolidated
condensed balance sheets do not include any material amounts related to
long-term contracts.
4. The equity in loss of unconsolidated partnerships reported in the
consolidated condensed statements of operations has been reduced by
interest income from the unconsolidated partnerships of $79,000 in 1995 and
$72,000 in 1994.
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<PAGE>
5. 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.
6. Supplemental disclosures of cash flow information for the three months
ended January 31, 1995 and 1994 are as follows:
Cash paid for interest was $92,000 and $47,000 in 1995 and 1994,
respectively. Cash paid for income taxes was $46,000 and $20,000 in 1995
and 1994, respectively.
Non-cash investing and financing activities related to purchases of
property, plant and equipment of $2,218,000, investment in and advances to
unconsolidated partnerships of $908,000 and deferred charges of $484,000
were financed by capital leases which were assumed from an unconsolidated
partnership during fiscal 1995.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For the three months ended January 31, 1995 and 1994
RESULTS OF OPERATIONS
Fiscal 1995 first quarter net income of $569,000 ($.25 per share) increased
378% over fiscal 1994 first quarter income before cumulative effect of
change in accounting principle of $119,000 ($.05 per share) and increased
7% over fiscal 1994 fourth quarter net of income of $532,000 ($.23 per
share).
For the first three months of fiscal 1995, net sales totaled $8,933,000,
representing a 29% increase over sales of $6,909,000 in the first three
months of fiscal 1994.
The improved fiscal 1995 earnings are primarily attributable to increased
sales of the Company's medical services subsidiary, MediTek Health
Corporation, and increased sales volume in the Company's aerospace products
and services subsidiary, HEICO Aerospace Corporation, discussed below.
The fiscal 1994 first quarter results include income of $381,000, or $.16
per share, from the cumulative effect on prior years of a change in
accounting for income taxes.
Net sales of MediTek totaled $3,541,000 in the first quarter of fiscal
1995, representing an increase of $1,087,000, or 44%, over revenues in the
first three months of fiscal 1994. The fiscal 1995 increase in MediTek's
revenues are due principally to the inclusion of one medical diagnostic
facility acquired in February 1994, as well as the opening of a new medical
diagnostic center in the second quarter of fiscal 1994. Net sales of
MediTek exclude revenues of the unconsolidated partnerships, which totaled
$1.3 million and $1.7 million the first quarter of fiscal 1995 and 1994,
respectively.
Net sales of HEICO Aerospace totaled $5,392,000 in the first quarter of
fiscal 1995 as compared to $4,455,000 in the same period of fiscal 1994.
The $937,000, or 21%, increase in HEICO Aerospace's first quarter revenues
from fiscal 1994 to fiscal 1995 is due principally to higher sales volumes
of the Company's commercial jet engine replacement parts.
-8-
<PAGE>
HEICO Aerospace's total backlog of $13.3 million as of January 31, 1995
increased $2.7 million from $10.6 million as of January 31, 1994 and
decreased $1 million from the October 31, 1994 backlog balance of $14.3
million. The increase in current backlog over that of January 31, 1994 is
principally due to increases in orders from HEICO Aerospace's commercial
airline industry and OEM customers. The decrease in current backlog from
that of October 31, 1994 is principally due to the increased first quarter
shipments. The backlog includes amounts based on estimated quantities
provided by customers pursuant to certain contracts aggregating
approximately $6 million at January 31, 1995.
Gross profit margins of MediTek averaged 34.5% in the first quarter of
fiscal 1995 as compared to 28.9% in the first quarter of fiscal 1994. The
increase in the gross profit margin percentage in fiscal 1995 is
principally due to the addition of new centers with higher operating
margins. This increase in margin percentage together with the
aforementioned increase in MediTek's sales resulted in MediTek's gross
profit increasing $514,000 in the first quarter of fiscal 1995 over the
first quarter of fiscal 1994.
HEICO Aerospace's gross profit margins averaged 32.3% for the first quarter
of fiscal 1995, an increase over the 24.7% average margins experienced in
the same period of fiscal 1994. This increase in gross profit margins
reflects an increase in sales of higher margin products and manufacturing
cost reductions.
First quarter fiscal 1995 selling, general and administrative expenses
increased $300,000 over amounts in the first quarter of fiscal 1994 due
principally to increased HEICO Aerospace selling efforts and increased
general corporate expenses, partially offset by the effects of expense
reduction programs at MediTek. As a percentage of sales, however, these
expenses declined to 21.0% of consolidated net sales in the first quarter
of fiscal 1995 from 22.9% in the first quarter of fiscal 1994.
The equity in loss of unconsolidated partnerships increased in the first
quarter of fiscal 1995 from the same period of last year primarily due to
an increase in the Company's ownership percentage of the unconsolidated
partnerships. The equity in loss of these partnerships includes costs
representing the management services fee income payable to MediTek and
included in consolidated net sales as part of medical services sales. This
income totaled $135,000 in the first quarter of fiscal 1995 and $173,000 in
the first quarter of fiscal 1994.
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<PAGE>
Income from operations, which totaled $909,000 for the first quarter of
fiscal 1995, increased $799,000 over the same period of last year. This
increase reflects income from operations at MediTek of approximately
$700,000 in the current year as compared to approximately $170,000 in the
first quarter of last year and income from operations at HEICO Aerospace of
approximately $1 million in the first quarter of fiscal 1995 as compared to
approximately $490,000 in the first quarter of last year. MediTek's
improvement results primarily from the additional diagnostic centers
discussed above, while HEICO Aerospace's improvement is due primarily to
the aforementioned gross profit margin improvements and sales volume
increases.
Interest expense in the first quarter of fiscal 1995 was $92,000 as
compared to $42,000 of interest expense in the first quarter of fiscal
1994. This increase in interest expense is attributable to increases in
debt associated with additional MediTek centers.
Interest and other income increased $24,000 from the first quarter of
fiscal 1994 to the first quarter of the current year due principally to an
increase in market interest rates.
The Company's effective tax rate increased from 36.3% for the first quarter
of fiscal 1994 to 39.3% in the same period of fiscal 1995 primarily due to
the reduced impact of tax benefits on investment income and export sales as
a result of the higher level of income from operations.
LIQUIDITY AND CAPITAL RESOURCES
During the first three months of fiscal 1995, net cash provided by
operating activities totaled $714,000, up from $462,000 in the first three
months of fiscal 1994.
The Company's principal investing activities during the first quarter of
fiscal 1995 were the purchase of short-term investments and contingent note
payments related to MediTek's acquisitions.
The Company's principal financing activities during the first quarter of
fiscal 1995 were the receipt of funds for the exercise of Company stock
options and the payment of funds for the open market purchases of 13,000
shares of the Company's stock, scheduled payments on long-term debt and
payments of cash dividends.
There have been no other material changes in the liquidity or the capital
resources of the Company since the end of fiscal 1994.
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<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no material developments in previously
reported litigation involving the Company and its
subsidiaries. See also reference to plaintiff litigation in
Item 5. "Other Matters."
ITEM 5. OTHER MATTERS
In June 1994, the Second Judicial Circuit Court of Florida, in and
for Leon County (the "State Court") in a lawsuit in which MediTek
was a co-plaintiff ruled that certain fee caps (the "Fee Caps")
passed by the State of Florida's (the "State") legislature in 1992
limiting fees charged by designated health service providers,
including diagnostic imaging, violated the Constitution of the
State and, therefore, are unenforceable. In February 1995, the
State Court issued an order granting final summary judgement that
the Fee Caps were unconstitutional for providers of diagnostic
imaging services. The State is expected to appeal the decision,
but has not yet filed an appeal.
As a result of the State Court's decision, MediTek is not
presently subject to the Fee Caps. Further, due to other court
challenges, MediTek and all other diagnostic imaging service
providers have never been subject to the Fee Caps. Although
MediTek believes that the Fee Caps violate both the Florida
Constitution and the United States Constitution, there can be no
assurance that the State Court's decision will not be reversed, or
that the Fee Caps will ultimately be found to be unconstitutional
or that the Fee Caps would not be reinstated retroactively to the
initial effective date. Imposition of Fee Caps could have a
materially adverse impact upon MediTek's operations within
Florida, which contributed approximately 47% of MediTek's income
from operations for the first three months of fiscal 1995. (See
Item 1. Business - Medical Services, "Government regulation" of
the Company's Form 10-K for the year ended October 31, 1994.)
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, 1995.
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<PAGE>
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 10, 1995 BY /s/Thomas S. Irwin
- - ------------------------ ------------------------------------
Date Thomas S. Irwin, Executive Vice
President and Chief Financial Officer
(Principal Financial and Accounting
Officer)
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Exhibit 11
HEICO CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
1995 1994
-------------------------- --------------------------
FULLY FULLY
PRIMARY DILUTED PRIMARY DILUTED
------- ------- ------- -------
<S> <C> <C> <C> <C>
Three months ended January 31:
Weighted average number of common
shares outstanding 2,267,831 2,267,831 2,273,816 2,273,816
Common Stock equivalents arising from
dilutive stock options (1) 30,851 43,715 55,601 55,601
--------- --------- --------- ---------
2,298,682 2,311,546 2,329,417 2,329,417
========= ========= ========= =========
Income per share from operations
before cumulative effect of
change in accounting principle $0.25 $0.25 $0.05 $0.05
===== ===== ===== =====
Net income per share (1) $0.25 $0.25 $0.21 $0.21
===== ===== ===== =====
<FN>
(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.
</FN>
</TABLE>
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