SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES ACT OF 1934
Date of Report (Date of earliest event reported): JULY 30, 1999.
HEICO CORPORATION
(Exact name of registrant as specified in its charter)
FLORIDA
(State or other jurisdiction of incorporation)
001-04604 65-0341002
(Commission File Number) (IRS Employer Identification No.)
3000 TAFT STREET
HOLLYWOOD, FLORIDA 33021
(Address of principal offices)
Registrant's telephone number, including area code: (954) 987-6101
--------------------------------------------------------------
(Former name or former address, if changed since last report.)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Pursuant to a Stock Purchase Agreement dated as of July 12, 1999 (the "Stock
Purchase Agreement"), the Registrant acquired all of the outstanding capital
stock of Thermal Structures, Inc. and its Quality Honeycomb, Inc. affiliate
(together "Thermal"). The closing of the transaction occurred on July 30, 1999
and was effective as of June 30, 1999. In consideration of this acquisition, the
Registrant paid $29,150,000 in cash at the closing, and assumed approximately
$4,000,000 in debt. The assumed debt was repaid by the Registrant at closing.
Subject to meeting certain earnings objectives, one of Thermal's selling
shareholders could receive additional consideration of up to $1,000,000 over
three years. The purchase price will be adjusted based on the actual net worth
of Thermal as of June 30, 1999. The purchase price was determined through
arms-length negotiations. This acquisition is being accounted for using the
purchase method of accounting.
Corona, CA-based Thermal is a leading manufacturer of thermal insulation
products and related components primarily for aerospace and defense
applications. Founded in 1975, Thermal's customers include major airlines
worldwide, certain aerospace, defense and other transportation original
equipment manufacturers as well as electrical power generation turbine
manufacturers.
The source of the purchase price was proceeds from the Registrant's $120 million
revolving credit facility.
ITEM 7. FINANCIAL STATEMENT, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial statements of businesses acquired
The financial statements of Thermal Structures, Inc. required by Rule
3-05(b) of Regulation S-X are included as Exhibits 99.1 and 99.2.
Financial statements of Quality Honeycomb, Inc. are not included herein
in accordance with 3.05(b) due to insignificance.
(b) Pro forma financial information
The following unaudited pro forma consolidated condensed financial
information is furnished in accordance with Article 11 of Regulation
S-X:
Introductory note to unaudited pro forma consolidated condensed
financial statements (page 3).
Unaudited pro forma consolidated condensed balance sheet as of April
30, 1999 (page 4).
Unaudited pro forma consolidated condensed statement of operations for
the six months ended April 30, 1999 (page 5).
Unaudited pro forma consolidated condensed statement of operations for
the year ended October 31, 1998 (page 6).
Notes to unaudited pro forma consolidated condensed financial
statements (pages 7-9).
(c) Exhibits
2.1 Stock Purchase Agreement dated as of July 12, 1999 among HEICO
Corporation, Thermal Structures, Inc., Quality Honeycomb,
Inc., David A. Janes, Vaughn Barnes, Stephen T. Braunheim, DLD
Investments, LLC, and Acme Freight, LLC (without schedules and
exhibits).
1
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 hereunto duly authorized.
HEICO CORPORATION
Date: August 13, 1999
By: /S/ THOMAS S. IRWIN
-----------------------------------------
Thomas S. Irwin, Executive Vice President
and Chief Financial Officer
2
HEICO CORPORATION AND SUBSIDIARIES
INTRODUCTORY NOTE TO UNAUDITED
PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated condensed balance sheet and
statements of operations utilize the historical financial condition and results
of operations of HEICO Corporation and subsidiaries (the Company) as of April
30, 1999 and for the six months then ended and for the year ended October 31,
1998. The unaudited pro forma consolidated condensed financial statements have
been prepared on the basis summarized below:
1. The unaudited pro forma consolidated condensed balance sheet as of
April 30, 1999, assumes that the Company's acquisition of all of the
outstanding stock of Thermal Structures, Inc. (TSI) and its Quality
Honeycomb, Inc. (QHC) affiliate had been consummated as of that
date.
2. The unaudited pro forma consolidated condensed statement of
operations for the six months ended April 30, 1999, assumes that the
Company's acquisition of all of the outstanding capital stock of TSI
and QHC had been consummated as of the beginning of the six-month
period ended April 30, 1999.
3. The unaudited pro forma consolidated condensed statement of
operations for the year ended October 31, 1998, assumes the
acquisitions of all of the outstanding capital stock of McClain
International, Inc. (see Form 8-K dated July 31, 1998 for
description of acquisition), TSI and QHC had been consummated as of
the beginning of the year ended October 31, 1998.
The unaudited pro forma consolidated condensed statements of operations are not
necessarily indicative of actual operating results had the acquisitions been
made at the beginning of the periods presented or of future results of
operations.
Effective June 30, 1999, TSI consummated an agreement and plan of merger whereby
TSI's parent, Thermal Holdings, Inc., formerly a subsidiary of California
Manufacturing Enterprises, Inc. (CME), was merged with TSI and CME. TSI
continues as the surviving entity. TSI has accounted for the merger as an
exchange of common stock between companies under common control, accordingly,
assets and liabilities transferred were accounted for at historical costs in a
manner similar to that in pooling-of-interests accounting. The accompanying
unaudited pro forma consolidated condensed balance sheet and statements of
operations as of April 30, 1999 and for the six months then ended and for the
year ended October 31, 1998 were not retroactively restated to reflect this
transaction due to immateriality.
3
HEICO CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
as of April 30, 1999
(unaudited)
HEICO Thermal Quality
Corporation(1) Structures, Inc.(2) Honeycomb, Inc.(3)
------------- ------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 17,674,000 $ 412,000 $ 23,000
Short-term investments 5,548,000 -- --
Accounts receivable, net 22,138,000 3,296,000 49,000
Inventories 31,456,000 1,718,000 92,000
Prepaid expenses and other current assets 3,117,000 630,000 9,000
Deferred income taxes 1,241,000 149,000 --
------------- ------------- -------------
Total current assets 81,174,000 6,205,000 173,000
Property, plant and equipment, net 20,985,000 780,000 120,000
Intangible assets, net 71,858,000 -- --
Unexpended bond proceeds 1,795,000 -- --
Deferred income taxes 1,724,000 -- --
Other assets 5,480,000 522,000 90,000
------------- ------------- -------------
Total assets $ 183,016,000 $ 7,507,000 $ 383,000
============= ============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 398,000 $ -- $ --
Trade accounts payable 7,498,000 667,000 7,000
Accrued expenses and other current liabilities 7,981,000 466,000 21,000
Income taxes payable 286,000 201,000 1,000
------------- ------------- -------------
Total current liabilities 16,163,000 1,334,000 29,000
------------- ------------- -------------
Long-term debt, net of current maturities 10,009,000 -- --
Other non-current liabilities 3,683,000 -- --
------------- ------------- -------------
Minority interest in consolidated subsidiary 19,550,000 -- --
------------- ------------- -------------
Shareholders' equity:
Preferred stock, none issued -- -- --
Common stock 85,000 221,000 50,000
Class A common stock 72,000 -- --
Capital in excess of par value 92,649,000 -- --
Accumulated other comprehensive income (816,000) -- --
Retained earnings (deficit) 43,628,000 12,667,000 (131,000)
Due to (from) affiliates -- (6,715,000) 435,000
------------- ------------- -------------
135,618,000 6,173,000 354,000
Less: Note receivable from employee savings
and investment plan (2,007,000) -- --
------------- ------------- -------------
Total shareholders' equity 133,611,000 6,173,000 354,000
------------- ------------- -------------
Total liabilities and shareholders' equity $ 183,016,000 $ 7,507,000 $ 383,000
============= ============= =============
Pro Forma Pro Forma
Adjustments Combined
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ (2,747,000)* $ 15,362,000
Short-term investments -- 5,548,000
Accounts receivable, net -- 25,483,000
Inventories -- 33,266,000
Prepaid expenses and other current assets -- 3,756,000
Deferred income taxes -- 1,390,000
------------- -------------
Total current assets (2,747,000) 84,805,000
Property, plant and equipment, net -- 21,885,000
Intangible assets, net 27,638,000 99,496,000
Unexpended bond proceeds -- 1,795,000
Deferred income taxes -- 1,724,000
Other assets (418,000)(4) 5,674,000
------------- -------------
Total assets $ 24,473,000 $ 215,379,000
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ -- $ 398,000
Trade accounts payable -- 8,172,000
Accrued expenses and other current liabilities -- 8,468,000
Income taxes payable -- 488,000
------------- -------------
Total current liabilities -- 17,526,000
------------- -------------
Long-term debt, net of current maturities 24,338,000 ** 34,347,000
Other non-current liabilities -- 3,683,000
------------- -------------
Minority interest in consolidated subsidiary 6,662,000 (6) 26,212,000
------------- -------------
Shareholders' equity:
Preferred stock, none issued
Common stock (271,000)(7) 85,000
Class A common stock -- 72,000
Capital in excess of par value -- 92,649,000
Unrealized loss on investments -- (816,000)
Retained earnings (12,536,000)(7) 43,628,000
Due to (from) affiliates 6,280,000 (7) --
------------- -------------
(6,527,000) 135,618,000
Less: Note receivable from employee savings
and investment plan -- (2,007,000)
------------- -------------
Total shareholders' equity (6,527,000) 133,611,000
------------- -------------
Total liabilities and shareholders' equity $ 24,473,000 $ 215,379,000
============= =============
See accompanying notes to unaudited pro forma consolidated financial statements
* PRO-FORMA ADJUSTMENT TO CASH AND CASH EQUIVALENTS
Estimated purchase price adjustment $ (397,000)(5)
Cash used for purchase price (2,350,000)(5)
=============
$ (2,747,000)
=============
** PRO-FORMA ADJUSTMENT TO LONG-TERM DEBT
Proceeds from revolving credit facility $ 31,000,000 (5)
Assumed additional cash investment by Luftansa
in HEICO Aerospace used to repay debt (6,662,000)(6)
=============
$ 24,338,000
=============
4
HEICO CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
For the six months ended April 30, 1999
(unaudited)
HEICO Thermal Quality Pro Forma Pro Forma
Corporation(1) Structures, Inc.(2) Honeycomb, Inc.(3) Adjustments Combined
------------ ------------ ------------ ------------ ------------
Net sales $ 60,942,000 $ 8,393,000 $ 203,000 $ -- $ 69,538,000
------------ ------------ ------------ ------------ ------------
Operating costs and expenses:
Cost of sales 35,830,000 4,719,000 258,000 -- 40,807,000
Selling, general and administrative
expenses 10,563,000 3,170,000 54,000 (1,185,000)(8) 12,602,000
------------ ------------ ------------ ------------ ------------
Total operating costs and expenses 46,393,000 7,889,000 312,000 (1,185,000) 53,409,000
------------ ------------ ------------ ------------ ------------
Operating income (loss) 14,549,000 504,000 (109,000) 1,185,000 16,129,000
Interest and other expense (821,000) (11,000) -- (969,000)(9) (1,801,000)
Interest and other income 547,000 -- -- (64,000)(10) 483,000
------------ ------------ ------------ ------------ ------------
Income (loss) before income taxes
and minority interest 14,275,000 493,000 (109,000) 152,000 14,811,000
Income tax expense 5,151,000 201,000 -- 205,000(11) 5,557,000
------------ ------------ ------------ ------------ ------------
Income (loss) before
minority interest 9,124,000 292,000 (109,000) (53,000) 9,254,000
Minority interest 1,831,000 -- -- (5,000) 1,826,000
------------ ------------ ------------ ------------ ------------
Net income (loss) $ 7,293,000 $ 292,000 $ (109,000) $ (48,000) $ 7,428,000
============ ============ ============ ============ ============
Net income per share
Basic $ 0.52 $ 0.53
============ ============
Diluted $ 0.43 $ 0.44
============ ============
Weighted average number of common
shares outstanding
Basic 13,911,609 13,911,609
============ ============
Diluted 16,845,280 16,845,280
============ ============
See accompanying notes to unaudited pro forma consolidated financial statements
5
HEICO CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
For the twelve months ended October 31, 1998
(unaudited)
HEICO Thermal Quality
Corporation(13) Structures, Inc.(14) Honeycomb, Inc.(15)
------------- ------------- -------------
Net sales $ 95,351,000 $ 19,022,000 $ 548,000
------------- ------------- -------------
Operating costs and expenses:
Cost of sales 59,247,000 10,065,000 497,000
Selling, general and administrative expenses 17,140,000 5,620,000 73,000
------------- ------------- -------------
Total operating costs and expenses 76,387,000 15,685,000 570,000
------------- ------------- -------------
Operating income (loss) 18,964,000 3,337,000 (22,000)
Interest and other expense (984,000) -- --
Interest and other income 2,062,000 52,000 --
------------- ------------- -------------
Income (loss) before income taxes and
minority interest 20,042,000 3,389,000 (22,000)
Income tax expense 6,914,000 1,296,000 1,000
------------- ------------- -------------
Income (loss) before minority interest 13,128,000 2,093,000 (23,000)
Minority interest 2,619,000 -- --
------------- ------------- -------------
Net income (loss) $ 10,509,000 $ 2,093,000 $ (23,000)
============= ============= =============
Net income per share:
Basic $ 0.84
=============
Diluted $ 0.68
=============
Weighted average number of common
shares outstanding
Basic 12,499,079
=============
Diluted 15,540,620
=============
McClain Pro Forma Pro Forma
International, Inc.(16) Adjustments Combined
------------- ------------- -------------
Net sales $ 9,696,000 $ -- $ 124,617,000
------------- ------------- -------------
Operating costs and expenses:
Cost of sales 4,720,000 -- 74,529,000
Selling, general and administrative expenses 1,759,000 (1,938,000)(8) 22,654,000
------------- ------------- -------------
Total operating costs and expenses 6,479,000 (1,938,000) 97,183,000
------------- ------------- -------------
Operating income (loss) 3,217,000 1,938,000 27,434,000
Interest and other expense -- (3,359,000)(9) (4,343,000)
Interest and other income 93,000 (688,000)(10) 1,519,000
------------- ------------- -------------
Income (loss) before income taxes and
minority interest 3,310,000 (2,109,000) 24,610,000
Income tax expense -- 904,000 9,115,000
------------- ------------- -------------
Income (loss) before minority interest 3,310,000 (3,013,000) 15,495,000
Minority interest -- 643,000 3,262,000
------------- ------------- -------------
Net income (loss) $ 3,310,000 $ (3,656,000) $ 12,233,000
============= ============= =============
Net income per share:
Basic $ 0.98
=============
Diluted $ 0.79
=============
Weighted average number of common
shares outstanding
Basic 12,499,079
=============
Diluted 15,540,620
=============
See accompanying notes to unaudited pro forma consolidated financial statements
6
HEICO CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(1) As reported in the Company's Form 10-Q as of and for the six-month period
ended April 30, 1999.
(2) Represents Thermal Structure's balance sheet and statement of operations
as of and for six-month period ended April 30, 1999.
(3) Represents Quality Honeycomb's balance sheet and statement of operations
as of and for six-month period ended June 30, 1999.
(4) Represents other assets of $418,000 not acquired from the shareholders of
Thermal Structures.
(5) Represents adjustments to record acquired assets and assumed liabilities
based on their fair market values and the excess of cost over the fair
value of net assets acquired from the acquisition.
The origin of the purchase costs is as follows:
Purchase costs:
Cash paid from revolving credit facility proceeds ***$31,000,000
Cash paid from cash and cash equivalents on hand 2,350,000
Cash acquired (435,000)
Estimated purchase price adjustment 397,000
------------
Total purchase cost (including estimated acquisition
costs of $.2 million), net of cash acquired $ 33,312,000
============
Allocation of purchase costs:
Accounts receivable $ 3,345,000
Inventories 1,810,000
Prepaid expenses and other current assets 788,000
Property, plant and equipment 900,000
Other assets 194,000
Liabilities assumed (1,363,000)
------------
5,674,000
Excess of costs over the fair value of net assets acquired 27,638,000
------------
Total allocation of purchase costs $ 33,312,000
============
*** Cash paid from revolving credit proceeds of $31 million includes $4 million
in assumed debt repaid at closing. The assumed debt was incurred by Thermal
Structures in May 99 and the proceeds were distributed to its shareholders.
(6) Represents assumed additional cash investment by Luftansa Technik AG in
the Company's 80% owned subsidiary HEICO Aerospace Holdings Corp.
Pursuant to the Shareholders' Agreement between Luftansa Technik AG and
the Company, Luftansa Technik AG has the right to particpate in certain
investments by the Company in order to maintain its 20% interest. The
assumption of participation is based on Luftansa Technik AG's pro rata
participation in prior acquistions.
(7) Represents the elimination of Thermal Structures' and Quality Honeycomb's
stockholders' equity.
7
(8) Represents the amortization of the excess of costs over the fair value of
net assets acquired and elimination of shareholders' compensation and
management fees.
Six months Twelve months
ended ended
April 30, 1999 October 31, 1998
----------- -----------
MCCLAIN
Amortization of the excess of costs
over the fair value of net assets acquired
(over 30 years)**** $ -- $ 942,000
Elimination of shareholders'
compensation -- (1,355,000)
----------- -----------
-- (413,000)
----------- -----------
THERMAL STRUCTURES AND QUALITY HONEYCOMB
Amortization of the excess of costs
over the fair value of net assets acquired
(over 30 years)**** 461,000 921,000
Elimination of management fees paid to sellers (1,646,000) (2,446,000)
----------- -----------
(1,185,000) (1,525,000)
----------- -----------
$(1,185,000) $(1,938,000)
=========== ===========
**** The costs of the acquisition of Thermal Structures and Quality Honeycomb
have been allocated to the assets acquired and the liabilities assumed
based on their fair values at the date of the acquisition as determined
by management. The allocation of the cost of the acquisitions is
preliminary while the Company obtains final information regarding the
fair values of all assets acquired; however, management believes that any
adjustments to the amounts allocated will not have a material effect on
the Company's financial position or results of operations.
(9) Represents interest expense incurred on borrowings under the revolving
credit facility.
Six months Twelve months
ended ended
April 30, 1999 October 31, 1998
----------- -----------
MCCLAIN
Interest expense on $25 million at 6.75% in 1998 -- (1,266,000)
----------- -----------
THERMAL STRUCTURES AND QUALITY HONEYCOMB
Interest expense on $31 million at 6.25% in 1999
and at 6.75% in 1998 (969,000) (2,093,000)
----------- -----------
$ (969,000) $(3,359,000)
=========== ===========
8
(10) Represents the elimination of investment income from cash used for the
acquisitions and the elimination of interest income on assets not
acquired as follows.
Six months Twelve months
ended ended
April 30, 1999 October 31, 1998
----------- -----------
MCCLAIN
Lost investment income on $10.8
million at a rate of 5.65% at October 31, 1998 $ -- $ (459,000)
Elimination of interest income on
assets not acquired -- (93,000)
----------- -----------
-- (552,000)
----------- -----------
THERMAL STRUCTURES AND QUALITY HONEYCOMB
Lost investment income on $2.4 million at a rate
of 5.30% at April 30, 1999 and 5.65%
at October 31, 1998 $ (64,000) $ (136,000)
----------- -----------
$ (64,000) $ (688,000)
=========== ===========
(11) To adjust for the effects of income taxes on (a) the historical earnings
of the acquisition of McClain, an S Corporation prior to acquisition, as
if it had been fully subject to federal and applicable state income taxes
and (b) the effect of the pro forma adjustments.
Six months Twelve months
ended ended
April 30, 1999 October 31, 1998
----------- -----------
McClain -- 741,000
Thermal Structures and Quality Honeycomb 205,000 163,000
----------- -----------
$ 205,000 $ 904,000
=========== ===========
(12) Represents the incremental minority interest of Lufttansa Technik in the
net income of McClain, Thermal Structures and Quality Honeycomb.
Six months Twelve months
ended ended
April 30, 1999 October 31, 1998
----------- -----------
McClain -- 444,000
Thermal Structures and Quality Honeycomb (5,000) 199,000
----------- -----------
$ (5,000) $ 643,000
=========== ===========
(13) As reported in the Company's Form 10-K for the fiscal year ended October
31, 1998.
(14) Represents Thermal Structures' statement of operations for the year ended
October 25, 1998.
(15) Represents Quality Honeycomb's statement of operations for the year ended
December 27, 1998.
(16) Represents McClain's statement of operations for the nine-month period
ended July 31, 1998, the period prior to acquisition.
9
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
2.1 Stock Purchase Agreement dated as of July 12, 1999 among HEICO
Corporation, Thermal Structures, Inc., Quality Honeycomb,
Inc., David A. Janes, Vaughn Barnes, Stephen T. Braunheim, DLD
Investments, LLC, and Acme Freight, LLC (without schedules and
exhibits).
99.1 Thermal Structures, Inc. Financial Statements for the Six Months
Ended April 30, 1999
99.2 Thermal Structures, Inc. Financial Statements for the Years Ended
October 25, 1998 and October 26, 1997.