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Heico Annual Report, Year Ended Oct 31, 1996

Filing Date
Filed January 28, 1997
Period End
October 31, 1996
Securities
HEIHEI-A
In the record · 2016–202610-K1010-Q338-K83

HEI filed 10 annual reports (10-K), 33 quarterly reports (10-Q) and 83 current reports (8-K) between 2016 and 2026.

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01—Abstract

Summary

Summary of the 10-K filed January 28, 1997. Cited figures are marked; the original filing is the authoritative source.

HEICO Corporation (the Company), a Florida-based aerospace products and services company trading on the American Stock Exchange under the symbol "HEI," reported fiscal 1996 (year ended October 31, 1996) net sales of $34,565,000,a up from $25,613,000 in fiscal 1995 and $19,212,000 in fiscal 1994.

Net income from continuing operations rose to $3,665,000,b or $.62 per share, from $1,437,000, or $.27 per share, a year earlier. Total net income was $9,892,000, or $1.68 per share, including a $5,264,000 gain on the July 1996 sale of its MediTek Health Corporation health care segment to U.S. Diagnostic, Inc. The company is now a single business segment focused on aerospace, with its Flight Support Group (Jet Avion, LPI Industries and Aircraft Technology, led by replacement parts for Pratt & Whitney JT8D engines) representing 93% of fiscal 1996 continuing sales and its Ground Support Group (Trilectron, acquired September 1996 for about $7 million in cash plus $2.3 million of assumed debt) contributing $2,325,000 of sales. Balance sheet strengthened over the year: total assets rose to $61,836,000 from $47,401,000, shareholders' equity increased to $41,488,000 from $30,146,000, and long-term debt declined to $6,022,000 from $7,076,000.

Cash and cash equivalents increased to $11,025,000,c and the Company held a $10,000,000 convertible note from U.S. Diagnostic, Inc. Operating cash flow fell to $1,692,000 in fiscal 1996 from $7,123,000 in fiscal 1995, which the filing attributes primarily to planned inventory increases, and inventories grew to $15,277,000 from $5,359,000. Backlog was $25 million at October 31, 1996, compared with $23 million a year earlier. The principal risk disclosed is pending litigation brought by United Technologies Corporation alleging patent infringement, misappropriation of trade secrets and unfair competition relating to jet engine parts sold by Jet Avion.

United seeks approximately $10 milliond for patent infringement and approximately $30 million for the trade secret and unfair competition claims, though the aggregate is said not to exceed approximately $30 million. The Company has filed counterclaims, and no provision for loss has been recorded. Management and counsel believe the patent claims can be successfully defended and the trade secret and unfair competition claims are unlikely to be proven within the statute of limitations.

02—Key points

Key Highlights

  1. Net sales of $34,565,000 in fiscal 1996, up 35% from $25,613,000 in fiscal 1995.
  2. Net income from continuing operations of $3,665,000, or $.62 per share, up 155% from $1,437,000, or $.27 per share, in fiscal 1995.
  3. Total net income of $9,892,000 ($1.68 per share), including a $5,264,000 gain on the sale of the MediTek health care segment to U.S. Diagnostic, Inc.
  4. Flight Support Group accounted for 93% of fiscal 1996 continuing sales; JT8D engine-related products were approximately 75% of sales.
  5. Acquired Trilectron Industries in September 1996 for approximately $7 million in cash and $2.3 million of assumed debt, adding ground support equipment operations.
  6. Total assets rose to $61,836,000 and shareholders' equity to $41,488,000; long-term debt fell to $6,022,000 from $7,076,000.
  7. Operating cash flow declined to $1,692,000 from $7,123,000, primarily reflecting planned inventory increases to $15,277,000.

03—Questions

Frequently Asked Questions

  1. What drove the increase in HEICO's fiscal 1996 earnings?

    The filing attributes the improvement primarily to increased sales volume at HEICO Aerospace, mainly jet engine replacement parts sold to commercial airlines, along with improved gross margins, which averaged 35.2% in fiscal 1996 compared with 31.7% in fiscal 1995. Income from operations rose $2,801,000 to $4,512,000.

  2. How much of the fiscal 1996 net income came from the sale of the health care business?

    The sale of MediTek Health Corporation to U.S. Diagnostic, Inc. produced a gain of $5,264,000, or $.89 per share, net of expenses and taxes. Income from continuing operations was $3,665,000, or $.62 per share, and discontinued health care operations contributed $963,000.

  3. What is the status of the litigation with United Technologies Corporation?

    United Technologies filed a complaint in November 1989 alleging patent infringement, trade secret misappropriation and unfair competition involving jet engine parts sold by Jet Avion. United seeks approximately $10 million for patent infringement and approximately $30 million for the other claims, with the aggregate not exceeding approximately $30 million. The Company has filed counterclaims, motions are pending, no trial date has been set, and no provision for loss has been recorded.

  4. What is the $10 million convertible note received from the MediTek sale?

    The note is a five-year, 6-1/2% promissory note from U.S. Diagnostic, Inc. in the principal amount of $10,000,000, convertible at the Company's option into 1,081,081 shares of USDL common stock. The Company has demand and piggy-back registration rights, and USDL may prepay the note beginning December 31, 1997.

  5. What is the backlog and outlook for the business?

    Backlog of unshipped orders was $25 million at October 31, 1996, up from $23 million a year earlier, including $11 million from the newly acquired Trilectron operations and $9 million of forecasted shipments under certain Flight Support Group contracts. Substantially all of the backlog is expected to be delivered during fiscal 1997.

04—Continue

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