01—Abstract
Summary
Summary of the 10-K/A filed February 5, 1998. Cited figures are marked; the original filing is the authoritative source.
HEICO Corporation (AMEX: HEI) filed this Form 10-K/A (Amendment No. 1) for the fiscal year ended October 31, 1997 to restate Item 3, Legal Proceedings, and Note 13 to the financial statements.
The filing reports fiscal 1997 net sales of $63,674,000,a up from $34,565,000 in fiscal 1996, and net income of $7,019,000, or $.73 per diluted share, compared with $9,892,000 in fiscal 1996, which included a $5,264,000 gain on the sale of the MediTek health care operations. Income from operations rose to $9,114,000 from $4,512,000. The company attributes the growth to the Flight Support Group and to a full year of Trilectron's Ground Support Group sales, which were included for twelve months in fiscal 1997 versus two months in fiscal 1996.
The company's principal business is FAA-approved jet engine replacement parts (Flight Support Group, about 65% of revenues) and ground support equipment (Ground Support Group, about 35%). During fiscal 1997 it acquired Northwings Accessories Corporation for approximately $7.0 millionb in cash and 232,360 shares, and in October 1997 it sold a 20% interest in HEICO Aerospace to Lufthansa Technik AG for $10 million, with a further approximately $16 million to be paid over three years under a research and development cooperation agreement. Total assets were $88,639,000 and shareholders' equity was $59,446,000 at October 31, 1997.
The amendment reports that on January 27, 1998, the court granted the company's summary judgment motion on UTC's remaining patent infringement claim, finding that HEICO Aerospace and Jet Avion did not infringe. The company's counterclaims against UTC remain pending, and UTC may challenge the rulings. No provision for gain or loss has been recorded.
02—Key points
Key Highlights
- Net sales rose to $63,674,000 in fiscal 1997 from $34,565,000 in fiscal 1996 and $25,613,000 in fiscal 1995.
- Net income from continuing operations was $7,019,000, or $.73 per share, versus $3,665,000, or $.41 per share, in fiscal 1996.
- Fiscal 1996 net income of $9,892,000 included a $5,264,000 gain on the sale of MediTek Health Corporation.
- Income from operations increased to $9,114,000 from $4,512,000, and gross profit margins averaged 32.4% versus 35.2% in fiscal 1996.
- Lufthansa Technik AG invested approximately $26 million in HEICO Aerospace, comprising $10 million at closing for a 20% interest and about $16 million over three years under an R&D cooperation agreement.
- Backlog of unshipped orders was $36 million at October 31, 1997, compared with $25 million a year earlier.
- The UTC patent infringement claim was dismissed on summary judgment on January 27, 1998; the company's counterclaims against UTC remain pending.
03—Questions
Frequently Asked Questions
What drove the increase in HEICO's fiscal 1997 sales?
The filing attributes the increase to higher Flight Support Group revenues, including $2,223,000 from Northwings for two months since its acquisition, and a $19,827,000 increase in Ground Support Group revenues, reflecting twelve months of Trilectron sales in fiscal 1997 compared with two months in fiscal 1996. Flight Support sales excluding Northwings rose mainly on higher jet engine replacement part volumes to commercial airlines.
Why did net income decline in fiscal 1997 compared with fiscal 1996?
Total net income fell to $7,019,000 from $9,892,000. The fiscal 1996 figure included a $5,264,000 gain on the sale of MediTek and $963,000 from discontinued operations. Net income from continuing operations rose to $7,019,000 from $3,665,000.
What is the status of the litigation with United Technologies?
On January 27, 1998, the court granted summary judgment for HEICO Aerospace and Jet Avion on UTC's remaining patent infringement claim, and earlier rulings dismissed the trade secret and unfair competition claims. Only HEICO's counterclaims against UTC remain pending. UTC may challenge the rulings, and no provision for gain or loss has been recorded.
What did the Lufthansa Technik transaction involve?
On October 30, 1997, Lufthansa Technik AG invested approximately $26 million in HEICO Aerospace. This consisted of $10 million paid at closing for a 20% interest, which carried a book value of about $3,273,000, and about $16 million to be paid over three years under a research and development cooperation agreement. The companies also agreed to cooperate on technical services and marketing support.
How much cash did HEICO hold and how was it financed?
Cash and cash equivalents were $24,199,000 at October 31, 1997, up from $11,025,000. Operating cash flow was $1,716,000 for fiscal 1997. Financing inflows included $9,700,000 from the sale of the minority interest in HEICO Aerospace and $2,272,000 from long-term debt issuance, while investing activities included $10,000,000 from the sale of the MediTek note receivable.
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