HEICO CORP - Quarter Report: 2010 January (Form 10-Q)
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, 2010
OR
|
o
|
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
o
Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate Web site, if
any, every Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such
files). Yes o No o
Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of “large
accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule
12b-2 of the Exchange Act.
Large
accelerated filer x
Accelerated filer o
Non-accelerated filer o
Smaller reporting company o
Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes o No x
The number of shares outstanding of
each of the registrant’s classes of common stock as of February 28, 2010 is as
follows:
|
Common
Stock, $.01 par value
|
10,431,225
shares
|
|
Class
A Common Stock, $.01 par value
|
15,748,524
shares
|
HEICO
CORPORATION
|
Page
|
||||
|
2
|
||||
|
3
|
||||
|
4
|
||||
|
5
|
||||
|
6
|
||||
|
18
|
||||
|
27
|
||||
|
27
|
||||
|
28
|
||||
|
28
|
||||
|
29
|
||||
PART I. FINANCIAL INFORMATION; Item
1. FINANCIAL STATEMENTS
HEICO
CORPORATION AND SUBSIDIARIES
|
January
31, 2010
|
October
31, 2009
|
|||||||
|
ASSETS
|
||||||||
|
Current
assets:
|
||||||||
|
Cash
and cash equivalents
|
$ | 7,524,000 | $ | 7,167,000 | ||||
|
Accounts
receivable, net
|
74,491,000 | 77,864,000 | ||||||
|
Inventories,
net
|
141,640,000 | 137,585,000 | ||||||
|
Prepaid
expenses and other current assets
|
5,641,000 | 4,290,000 | ||||||
|
Deferred
income taxes
|
16,503,000 | 16,671,000 | ||||||
|
Total
current assets
|
245,799,000 | 243,577,000 | ||||||
|
Property,
plant and equipment, net
|
60,063,000 | 60,528,000 | ||||||
|
Goodwill
|
366,415,000 | 365,243,000 | ||||||
|
Intangible
assets, net
|
40,028,000 | 41,588,000 | ||||||
|
Other
assets
|
25,527,000 | 21,974,000 | ||||||
|
Total
assets
|
$ | 737,832,000 | $ | 732,910,000 | ||||
|
LIABILITIES
AND EQUITY
|
||||||||
|
Current
liabilities:
|
||||||||
|
Current
maturities of long-term debt
|
$ | 240,000 | $ | 237,000 | ||||
|
Trade
accounts payable
|
28,146,000 | 26,978,000 | ||||||
|
Accrued
expenses and other current liabilities
|
31,500,000 | 36,978,000 | ||||||
|
Income
taxes payable
|
5,516,000 | 1,320,000 | ||||||
|
Total
current liabilities
|
65,402,000 | 65,513,000 | ||||||
|
Long-term
debt, net of current maturities
|
43,159,000 | 55,194,000 | ||||||
|
Deferred
income taxes
|
41,570,000 | 41,340,000 | ||||||
|
Other
long-term liabilities
|
27,040,000 | 23,268,000 | ||||||
|
Total
liabilities
|
177,171,000 | 185,315,000 | ||||||
|
Commitments
and contingencies (Note 11)
|
||||||||
|
Redeemable
noncontrolling interests (Note 12)
|
56,937,000 | 56,937,000 | ||||||
|
Shareholders’
equity:
|
||||||||
|
Preferred
Stock, $.01 par value per share; 10,000,000 shares
|
||||||||
|
authorized;
300,000 shares designated as Series B Junior
|
||||||||
|
Participating
Preferred Stock and 300,000 shares designated
|
||||||||
|
as
Series C Junior Participating Preferred Stock; none issued
|
¾ | ¾ | ||||||
|
Common
Stock, $.01 par value per share; 30,000,000 shares
authorized
|
||||||||
|
10,431,225
and 10,409,141 shares issued and outstanding, respectively
|
104,000 | 104,000 | ||||||
|
Class
A Common Stock, $.01 par value per share; 30,000,000
|
||||||||
|
shares
authorized; 15,738,448 and 15,713,234 shares issued
|
||||||||
|
and
outstanding, respectively
|
157,000 | 157,000 | ||||||
|
Capital
in excess of par value
|
225,759,000 | 224,625,000 | ||||||
|
Accumulated
other comprehensive loss
|
(1,402,000 | ) | (1,381,000 | ) | ||||
|
Retained
earnings
|
199,406,000 | 189,485,000 | ||||||
|
Total
HEICO shareholders’ equity
|
424,024,000 | 412,990,000 | ||||||
|
Noncontrolling
interests
|
79,700,000 | 77,668,000 | ||||||
|
Total
shareholders' equity
|
503,724,000 | 490,658,000 | ||||||
|
Total
liabilities and equity
|
$ | 737,832,000 | $ | 732,910,000 | ||||
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
HEICO
CORPORATION AND SUBSIDIARIES
|
Three
months ended January 31,
|
||||||||
|
2010
|
2009
|
|||||||
|
Net
sales
|
$ | 135,535,000 | $ | 130,437,000 | ||||
|
Operating
costs and expenses:
|
||||||||
|
Cost
of sales
|
85,415,000 | 86,533,000 | ||||||
|
Selling,
general and administrative expenses
|
25,576,000 | 22,451,000 | ||||||
|
Total
operating costs and expenses
|
110,991,000 | 108,984,000 | ||||||
|
Operating
income
|
24,544,000 | 21,453,000 | ||||||
|
Interest
expense
|
(119,000 | ) | (195,000 | ) | ||||
|
Other
income (expense)
|
155,000 | (47,000 | ) | |||||
|
Income
before income taxes and noncontrolling interests
|
24,580,000 | 21,211,000 | ||||||
|
Income
tax expense
|
8,550,000 | 5,860,000 | ||||||
|
Net
income from consolidated operations
|
16,030,000 | 15,351,000 | ||||||
|
Less: Net
income attributable to noncontrolling interests
|
(4,237,000 | ) | (4,034,000 | ) | ||||
|
Net
income attributable to HEICO
|
$ | 11,793,000 | $ | 11,317,000 | ||||
|
Net
income per share attributable to HEICO shareholders:
|
||||||||
|
Basic
|
$ | .45 | $ | .43 | ||||
|
Diluted
|
$ | .44 | $ | .42 | ||||
|
Weighted
average number of common shares outstanding:
|
||||||||
|
Basic
|
26,146,872 | 26,410,681 | ||||||
|
Diluted
|
26,961,534 | 27,241,961 | ||||||
|
Cash
dividends per share
|
$ | .06 | $ | .06 | ||||
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
HEICO
CORPORATION AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
|
HEICO
Shareholders' Equity
|
||||||||||||||||||||||||||||||||
|
Accumulated
|
||||||||||||||||||||||||||||||||
|
Redeemable
|
Class
A
|
Capital
in
|
Other
|
Total
|
||||||||||||||||||||||||||||
|
Noncontrolling
|
Common
|
Common
|
Excess
of
|
Comprehensive
|
Retained
|
Noncontrolling
|
Shareholders'
|
|||||||||||||||||||||||||
|
Interests
|
Stock
|
Stock
|
Par
Value
|
Loss
|
Earnings
|
Interests
|
Equity
|
|||||||||||||||||||||||||
|
Balances
as of October 31, 2009
|
||||||||||||||||||||||||||||||||
|
(as
previously reported)
|
$ | ― | $ | 104,000 | $ | 157,000 | $ | 224,625,000 | $ | (1,381,000 | ) | $ | 234,348,000 | $ | ― | $ | 457,853,000 | |||||||||||||||
|
Retrospective
adjustments related to
|
||||||||||||||||||||||||||||||||
|
adoption
of accounting guidance for
|
||||||||||||||||||||||||||||||||
|
noncontrolling
interests
|
56,937,000 | — | — | — | — | (44,863,000 | ) | 77,668,000 | 32,805,000 | |||||||||||||||||||||||
|
Balances
as of October 31, 2009
|
||||||||||||||||||||||||||||||||
|
(as
adjusted)
|
56,937,000 | 104,000 | 157,000 | 224,625,000 | (1,381,000 | ) | 189,485,000 | 77,668,000 | 490,658,000 | |||||||||||||||||||||||
|
Comprehensive
income:
|
||||||||||||||||||||||||||||||||
|
Net
income
|
2,205,000 | — | — | — | — | 11,793,000 | 2,032,000 | 13,825,000 | ||||||||||||||||||||||||
|
Foreign
currency translation adjustments
|
— | — | — | — | (23,000 | ) | — | — | (23,000 | ) | ||||||||||||||||||||||
|
Total
comprehensive income
|
2,205,000 | — | — | — | (23,000 | ) | 11,793,000 | 2,032,000 | 13,802,000 | |||||||||||||||||||||||
|
Cash
dividends ($.06 per share)
|
— | — | — | — | — | (1,570,000 | ) | — | (1,570,000 | ) | ||||||||||||||||||||||
|
Tax
benefit from stock option exercises
|
— | — | — | 947,000 | — | — | — | 947,000 | ||||||||||||||||||||||||
|
Proceeds
from stock option exercises
|
— | — | — | 232,000 | — | — | — | 232,000 | ||||||||||||||||||||||||
|
Redemptions
of common stock related to
|
||||||||||||||||||||||||||||||||
|
stock
option exercises
|
— | — | — | (353,000 | ) | — | — | — | (353,000 | ) | ||||||||||||||||||||||
|
Distributions
to noncontrolling interests
|
(2,508,000 | ) | — | — | — | — | — | — | — | |||||||||||||||||||||||
|
Adjustments
to redemption amount of
|
||||||||||||||||||||||||||||||||
|
redeemable
noncontrolling interests
|
302,000 | — | — | — | — | (302,000 | ) | — | (302,000 | ) | ||||||||||||||||||||||
|
Stock
option compensation expense
|
— | — | — | 308,000 | — | — | — | 308,000 | ||||||||||||||||||||||||
|
Other
|
1,000 | — | — | — | 2,000 | — | — | 2,000 | ||||||||||||||||||||||||
|
Balances
as of January 31, 2010
|
$ | 56,937,000 | $ | 104,000 | $ | 157,000 | $ | 225,759,000 | $ | (1,402,000 | ) | $ | 199,406,000 | $ | 79,700,000 | $ | 503,724,000 | |||||||||||||||
|
HEICO
Shareholders' Equity
|
||||||||||||||||||||||||||||||||
|
Accumulated
|
||||||||||||||||||||||||||||||||
|
Redeemable
|
Class
A
|
Capital
in
|
Other
|
Total
|
||||||||||||||||||||||||||||
|
Noncontrolling
|
Common
|
Common
|
Excess
of
|
Comprehensive
|
Retained
|
Noncontrolling
|
Shareholders'
|
|||||||||||||||||||||||||
|
Interests
|
Stock
|
Stock
|
Par
Value
|
Loss
|
Earnings
|
Interests
|
Equity
|
|||||||||||||||||||||||||
|
Balances
as of October 31, 2008
|
||||||||||||||||||||||||||||||||
|
(as
previously reported)
|
$ | ― | $ | 106,000 | $ | 158,000 | $ | 229,443,000 | $ | (4,819,000 | ) | $ | 192,872,000 | $ | ― | $ | 417,760,000 | |||||||||||||||
|
Retrospective
adjustments related to
|
||||||||||||||||||||||||||||||||
|
adoption
of accounting guidance for
|
||||||||||||||||||||||||||||||||
|
noncontrolling
interests
|
48,736,000 | — | — | — | — | (35,896,000 | ) | 71,138,000 | 35,242,000 | |||||||||||||||||||||||
|
Balances
as of October 31, 2008
|
||||||||||||||||||||||||||||||||
|
(as
adjusted)
|
48,736,000 | 106,000 | 158,000 | 229,443,000 | (4,819,000 | ) | 156,976,000 | 71,138,000 | 453,002,000 | |||||||||||||||||||||||
|
Comprehensive
income:
|
||||||||||||||||||||||||||||||||
|
Net
income
|
1,911,000 | — | — | — | — | 11,317,000 | 2,123,000 | 13,440,000 | ||||||||||||||||||||||||
|
Foreign
currency translation adjustments
|
— | — | — | — | (775,000 | ) | — | — | (775,000 | ) | ||||||||||||||||||||||
|
Total
comprehensive income
|
1,911,000 | — | — | — | (775,000 | ) | 11,317,000 | 2,123,000 | 12,665,000 | |||||||||||||||||||||||
|
Cash
dividends ($.06 per share)
|
— | — | — | — | — | (1,585,000 | ) | — | (1,585,000 | ) | ||||||||||||||||||||||
|
Tax
benefit from stock option exercises
|
— | — | — | 2,139,000 | — | — | — | 2,139,000 | ||||||||||||||||||||||||
|
Proceeds
from stock option exercises
|
— | — | 1,000 | 321,000 | — | — | — | 322,000 | ||||||||||||||||||||||||
|
Acquisition
of noncontrolling interests
|
(9,315,000 | ) | — | — | — | — | 6,349,000 | — | 6,349,000 | |||||||||||||||||||||||
|
Distributions
to noncontrolling interests
|
(929,000 | ) | — | — | — | — | — | (461,000 | ) | (461,000 | ) | |||||||||||||||||||||
|
Adjustments
to redemption amount of
|
||||||||||||||||||||||||||||||||
|
redeemable
noncontrolling interests
|
(893,000 | ) | — | — | — | — | 893,000 | — | 893,000 | |||||||||||||||||||||||
|
Stock
option compensation expense
|
— | — | — | 4,000 | — | — | — | 4,000 | ||||||||||||||||||||||||
|
Other
|
— | — | — | — | 135,000 | 1,000 | — | 136,000 | ||||||||||||||||||||||||
|
Balances
as of January 31, 2009
|
$ | 39,510,000 | $ | 106,000 | $ | 159,000 | $ | 231,907,000 | $ | (5,459,000 | ) | $ | 173,951,000 | $ | 72,800,000 | $ | 473,464,000 | |||||||||||||||
The accompanying notes are an integral part of
these condensed consolidated financial statements.
HEICO
CORPORATION AND SUBSIDIARIES
|
Three
months ended January 31,
|
||||||||
|
2010
|
2009
|
|||||||
|
Operating
Activities:
|
||||||||
|
Net
income from consolidated operations
|
$ | 16,030,000 | $ | 15,351,000 | ||||
|
Adjustments
to reconcile net income from consolidated operations
|
||||||||
|
to
net cash provided by operating activities:
|
||||||||
|
Depreciation
and amortization
|
4,251,000 | 3,471,000 | ||||||
|
Deferred
income tax provision
|
429,000 | 87,000 | ||||||
|
Tax
benefit from stock option exercises
|
947,000 | 2,139,000 | ||||||
|
Excess
tax benefit from stock option exercises
|
(666,000 | ) | (1,796,000 | ) | ||||
|
Stock
option compensation expense
|
308,000 | 4,000 | ||||||
|
Changes
in operating assets and liabilities, net of acquisitions:
|
||||||||
|
Decrease
in accounts receivable
|
3,401,000 | 13,619,000 | ||||||
|
Increase
in inventories
|
(4,082,000 | ) | (7,830,000 | ) | ||||
|
Increase
in prepaid expenses and other current assets
|
(1,352,000 | ) | (1,600,000 | ) | ||||
|
Increase
(decrease) in trade accounts payable
|
1,179,000 | (2,935,000 | ) | |||||
|
Decrease
in accrued expenses and other current liabilities
|
(4,486,000 | ) | (15,129,000 | ) | ||||
|
Increase
(decrease) in income taxes payable
|
4,387,000 | (353,000 | ) | |||||
|
Other
|
(69,000 | ) | 178,000 | |||||
|
Net
cash provided by operating activities
|
20,277,000 | 5,206,000 | ||||||
|
Investing
Activities:
|
||||||||
|
Acquisitions
and related costs, net of cash acquired
|
(2,182,000 | ) | (2,216,000 | ) | ||||
|
Capital
expenditures
|
(2,158,000 | ) | (2,616,000 | ) | ||||
|
Other
|
(3,000 | ) | 14,000 | |||||
|
Net
cash used in investing activities
|
(4,343,000 | ) | (4,818,000 | ) | ||||
|
Financing
Activities:
|
||||||||
|
Payments
on revolving credit facility
|
(13,000,000 | ) | (13,000,000 | ) | ||||
|
Borrowings
on revolving credit facility
|
1,000,000 | 16,000,000 | ||||||
|
Acquisitions
of noncontrolling interests
|
— | (10,568,000 | ) | |||||
|
Distributions
to noncontrolling interests
|
(2,508,000 | ) | (1,390,000 | ) | ||||
|
Cash
dividends paid
|
(1,570,000 | ) | (1,585,000 | ) | ||||
|
Redemptions
of common stock related to stock option exercises
|
(353,000 | ) | — | |||||
|
Excess
tax benefit from stock option exercises
|
666,000 | 1,796,000 | ||||||
|
Proceeds
from stock option exercises
|
232,000 | 322,000 | ||||||
|
Other
|
(34,000 | ) | (45,000 | ) | ||||
|
Net
cash used in financing activities
|
(15,567,000 | ) | (8,470,000 | ) | ||||
|
Effect
of exchange rate changes on cash
|
(10,000 | ) | (97,000 | ) | ||||
|
Net
increase (decrease) in cash and cash equivalents
|
357,000 | (8,179,000 | ) | |||||
|
Cash
and cash equivalents at beginning of year
|
7,167,000 | 12,562,000 | ||||||
|
Cash
and cash equivalents at end of period
|
$ | 7,524,000 | $ | 4,383,000 | ||||
The accompanying notes are an integral part of these condensed
consolidated financial statements.
HEICO
CORPORATION AND SUBSIDIARIES
|
1.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
Basis
of Presentation
The accompanying unaudited condensed
consolidated financial statements of HEICO Corporation and its subsidiaries
(collectively, “HEICO,” or 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
Annual Report on Form 10-K for the year ended October 31, 2009. The
October 31, 2009 Condensed Consolidated Balance Sheet has been derived from the
Company’s audited consolidated financial statements. In the opinion
of management, the unaudited condensed consolidated financial statements contain
all adjustments (consisting principally of normal recurring accruals) necessary
for a fair presentation of the condensed consolidated balance sheets, statements
of operations and statements of cash flows for such interim periods
presented. The results of operations for the three months ended
January 31, 2010 are not necessarily indicative of the results which may be
expected for the entire fiscal year.
Noncontrolling
Interests
Effective
November 1, 2009, the Company adopted new accounting guidance that requires the
recognition of certain noncontrolling interests (previously referred to as
minority interests) as a separate component within equity in the consolidated
balance sheet. It also requires the amount of consolidated net income
attributable to the parent and the noncontrolling interests be clearly
identified and presented within the consolidated statement of
operations. The adoption of this new guidance has affected the
presentation of noncontrolling interests in the Company’s condensed consolidated
financial statements on a retrospective basis. For example, under
this guidance, “Net income from consolidated operations” is comparable to what
was previously presented as “Income before minority interests” and “Net income
attributable to HEICO” is comparable to what was previously presented as “Net
income.” Further, acquisitions of noncontrolling interests are
considered a financing activity under the new accounting guidance and are no
longer presented as an investing activity.
Effective November 1, 2009, the Company
also adopted new accounting guidance that affects the financial statement
classification and measurement of redeemable noncontrolling
interests. As further detailed in Note 15, Commitments and
Contingencies, of the Notes to Consolidated Financial Statements of the
Company’s Annual Report on Form 10-K for the year ended October 31, 2009, the
holders of equity interests in certain of the Company’s subsidiaries have rights
(“Put Rights”) that require the Company to provide cash consideration for their
equity
interests
(the “Redemption Amount”) at fair value or at a formula that management intended
to reasonably approximate fair value based solely on a multiple of future
earnings over a measurement period. The Put Rights are embedded in
the shares owned by the noncontrolling interest holders and are not
freestanding. Previously, the Company recorded such redeemable
noncontrolling interests at historical cost plus an allocation of subsidiary
earnings based on ownership interest, less dividends paid to the noncontrolling
interest holders. Effective November 1, 2009, the Company adjusted
its redeemable noncontrolling interests in accordance with this new accounting
guidance to the higher of their carrying cost or management’s estimate of the
Redemption Amount with a corresponding decrease to retained earnings and
classified such interests outside of permanent equity. Under this
guidance, subsequent adjustments to the carrying amount of redeemable
noncontrolling interests to reflect any changes in the Redemption Amount at the
end of each reporting period will be recorded in the same
manner. Such adjustments to Redemption Amounts based on fair value
will have no effect on net income per share attributable to HEICO shareholders
whereas the portion of periodic adjustments to the carrying amount of redeemable
noncontrolling interests based solely on a multiple of future earnings that
reflect a redemption amount in excess of fair value will effect net income per
share attributable to HEICO shareholders under the two-class
method.
As a result of adopting the new
accounting guidance for noncontrolling interests and redeemable noncontrolling
interests, the Company (i) reclassified approximately $78 million from temporary
equity (previously labeled as “Minority interests in consolidated subsidiaries”)
to permanent equity (labeled as “Noncontrolling interests”) pertaining to
noncontrolling interests that do not contain a redemption feature; and (ii)
renamed temporary equity as “Redeemable noncontrolling interests” and recorded
an approximately $45 million increase to redeemable noncontrolling interests
with a corresponding decrease to retained earnings in the Company’s Condensed
Consolidated Balance Sheet. The resulting $57 million of redeemable
noncontrolling interests as of November 1, 2009 represents management’s estimate
of the aggregate Redemption Amount of all Put Rights that the Company would be
required to pay of which approximately $25 million is redeemable at fair value
and approximately $32 million is redeemable based solely on a multiple of future
earnings. The actual Redemption Amount will likely be
different. See Note 12, Redeemable Noncontrolling Interests, for
additional information.
New
Accounting Pronouncements
In
September 2006, the Financial Accounting Standards Board (“FASB”) issued new
guidance which defines fair value, establishes a framework for measuring fair
value, and requires expanded disclosures about fair value
measurements. In February 2008, the FASB issued additional guidance
which delayed the effective date by one year for nonfinancial assets and
liabilities that are recognized or disclosed at fair value in the financial
statements on a nonrecurring basis. These nonfinancial assets and
liabilities include items such as goodwill, other intangible assets, and
property, plant and equipment that are measured at fair value resulting from
impairment, if deemed necessary. The portions of the new guidance
that were delayed were adopted by the Company on a prospective basis as of the
beginning of fiscal 2010, or November 1, 2009. The adoption did not
have a material effect on the Company’s results of operations, financial
position or cash flows.
In
December 2007, the FASB issued new guidance for business combinations that
retains the fundamental requirements of previous guidance that the acquisition
method of accounting (formerly the “purchase accounting” method) be used for all
business combinations and for an acquirer to be identified for each business
combination. However, the new guidance changes the approach of
applying the acquisition method in a number of significant areas, including that
acquisition costs will generally be expensed as incurred; noncontrolling
interests will be valued at fair value as of the acquisition date; in-process
research and development will be recorded at fair value as an indefinite-lived
intangible asset as of the acquisition date; restructuring costs associated with
a business combination will generally be expensed subsequent to the acquisition
date; and changes in deferred tax asset valuation allowances and income tax
uncertainties after the acquisition date generally will affect income tax
expense. The Company adopted the new guidance on a prospective basis
as of the beginning of fiscal 2010 for all business combinations consummated on
or after November 1, 2009. The adoption did not have a material
effect on the Company’s results of operations, financial position or cash
flows.
In January 2010, the FASB issued
Accounting Standards Update (“ASU”) 2010-06, “Improving Disclosures About Fair
Value Measurements,” which requires new disclosures regarding transfers in and
out of Level 1 and Level 2 fair value measurements and more detailed information
of activity in Level 3 fair value measurements. ASU 2010-06 is
effective for reporting periods beginning after December 15, 2009, or as of the
second quarter of fiscal 2010 for HEICO, except the additional Level 3
disclosures, which are effective in fiscal years beginning after December 15,
2010, or as of fiscal 2012 for HEICO. The Company is currently
evaluating the effect the adoption of ASU 2010-06 will have on its results of
operations, financial position and cash flows.
|
2.
|
ACQUISITIONS
|
During the first quarter of fiscal
2010, the Company, through its HEICO Electronic Technologies Corp. (“HEICO
Electronic”) subsidiary, paid $1.9 million of additional purchase consideration
pursuant to the terms of the purchase agreement associated with a prior year
acquisition. The amount paid, of which $1.8 million was accrued as
additional goodwill as of October 31, 2009, was based on a multiple of the
subsidiary’s earnings relative to target. Since this amount was not
contingent upon the former shareholders of the acquired entity remaining
employed by the Company or providing future services to the Company, the payment
was recorded as an additional cost of the acquired entity.
As of January 31, 2010, the Company,
through HEICO Electronic, accrued $1.0 million of additional purchase
consideration related to a prior year acquisition for which the earnings
objective was met. The Company expects to pay the amount accrued
during fiscal 2010. The amount accrued was based on a multiple of the
subsidiary’s earnings relative to target and was not contingent upon the former
shareholders of the acquired entity remaining employed by the Company or
providing future services to the Company. Accordingly, the accrual
was recorded as additional goodwill.
During fiscal 2009, the Company made
certain acquisitions, as further detailed in Note 2, Acquisitions, of the Notes
to Consolidated Financial Statements of the Company’s Annual Report on Form 10-K
for the year ended October 31, 2009. The operating results of each of
the Company’s fiscal 2009 acquisitions were included in the Company’s results of
operations from their effective acquisition date. Had the fiscal 2009
acquisitions been consummated as of the beginning of fiscal 2009, net sales, net
income attributable to HEICO, and basic and diluted net income per share
attributable to HEICO shareholders on a pro forma basis for the first quarter of
fiscal 2009 would have been $139,169,000, $12,120,000, $.46 and $.44,
respectively. The pro forma financial information is presented for
comparative purposes only and is not necessarily indicative of the results of
operations that actually would have been achieved if the acquisitions had taken
place as of the beginning of fiscal 2009. The unaudited pro forma
financial information includes adjustments to historical amounts such as
additional amortization expense related to intangible assets acquired, increased
interest expense associated with borrowings to finance the acquisitions, and
applicable adjustments to net income attributable to noncontrolling interests as
well as the exclusion of any acquisition-related expenses.
|
3.
|
SELECTED
FINANCIAL STATEMENT INFORMATION
|
Accounts
Receivable
|
January
31, 2010
|
October
31, 2009
|
|||||||
|
Accounts
receivable
|
$ | 77,419,000 | $ | 80,399,000 | ||||
|
Less: Allowance
for doubtful accounts
|
(2,928,000 | ) | (2,535,000 | ) | ||||
|
Accounts
receivable, net
|
$ | 74,491,000 | $ | 77,864,000 | ||||
Costs
and Estimated Earnings on Uncompleted Percentage-of-Completion
Contracts
|
January
31, 2010
|
October
31, 2009
|
|||||||
|
Costs
incurred on uncompleted contracts
|
$ | 11,354,000 | $ | 10,280,000 | ||||
|
Estimated
earnings
|
9,064,000 | 8,070,000 | ||||||
| 20,418,000 | 18,350,000 | |||||||
|
Less: Billings
to date
|
(14,411,000 | ) | (12,543,000 | ) | ||||
| $ | 6,007,000 | $ | 5,807,000 | |||||
|
Included
in the accompanying Condensed Consolidated
|
||||||||
|
Balance
Sheets under the following captions:
|
||||||||
|
Accounts
receivable, net (costs and estimated
|
||||||||
|
earnings
in excess of billings)
|
$ | 6,038,000 | $ | 5,832,000 | ||||
|
Accrued
expenses and other current liabilities
|
||||||||
|
(billings
in excess of costs and estimated earnings)
|
||||||||
|
earnings)
|
(31,000 | ) | (25,000 | ) | ||||
| $ | 6,007,000 | $ | 5,807,000 | |||||
Changes
in estimates did not have a material effect on net income from consolidated
operations for the three months ended January 31, 2010 and 2009.
Inventories
|
January
31, 2010
|
October
31, 2009
|
|||||||
|
Finished
products
|
$ | 81,407,000 | $ | 79,665,000 | ||||
|
Work
in process
|
14,941,000 | 14,279,000 | ||||||
|
Materials,
parts, assemblies and supplies
|
45,292,000 | 43,641,000 | ||||||
|
Inventories,
net
|
$ | 141,640,000 | $ | 137,585,000 | ||||
Inventories related to long-term
contracts were not significant as of January 31, 2010 and October 31,
2009.
Property,
Plant and Equipment
|
January
31, 2010
|
October
31, 2009
|
|||||||
|
Land
|
$ | 3,656,000 | $ | 3,656,000 | ||||
|
Buildings
and improvements
|
38,092,000 | 38,091,000 | ||||||
|
Machinery,
equipment and tooling
|
82,263,000 | 80,697,000 | ||||||
|
Construction
in progress
|
5,864,000 | 5,331,000 | ||||||
| 129,875,000 | 127,775,000 | |||||||
|
Less: Accumulated
depreciation and amortization
|
(69,812,000 | ) | (67,247,000 | ) | ||||
|
Property,
plant and equipment, net
|
$ | 60,063,000 | $ | 60,528,000 | ||||
Accrued
Customer Rebates and Credits
The aggregate amount of accrued
customer rebates and credits included within accrued expenses and other current
liabilities in the accompanying Condensed Consolidated Balance Sheets was
$11,531,000 and $9,689,000 as of January 31, 2010 and October 31, 2009,
respectively. The total customer rebates and credits deducted within
net sales for the three months ended January 31, 2010 and 2009 was $2,379,000
and $2,172,000, respectively.
|
4.
|
GOODWILL
AND OTHER INTANGIBLE ASSETS
|
The Company has two operating segments:
the Flight Support Group (“FSG”) and the Electronic Technologies Group
(“ETG”). Changes in the carrying amount of goodwill by operating
segment for the three months ended January 31, 2010 are as follows:
|
Segment
|
Consolidated
|
|||||||||||
|
FSG
|
ETG
|
Totals
|
||||||||||
|
Balances
as of October 31, 2009
|
$ | 188,459,000 | $ | 176,784,000 | $ | 365,243,000 | ||||||
|
Accrued
additional purchase consideration
|
¾ | 997,000 | 997,000 | |||||||||
|
Adjustments
to goodwill
|
¾ | 144,000 | 144,000 | |||||||||
|
Foreign
currency translation adjustments
|
¾ | 31,000 | 31,000 | |||||||||
|
Balances
as of January 31, 2010
|
$ | 188,459,000 | $ | 177,956,000 | $ | 366,415,000 | ||||||
The accrued additional purchase
consideration is related to a prior year acquisition for which the earnings
objective was met during the first quarter of fiscal 2010 (see Note 2,
Acquisitions).
Identifiable
intangible assets consist of the following:
|
As
of January 31, 2010
|
As
of October 31, 2009
|
|||||||||||||||||||||||
|
Gross
|
Net
|
Gross
|
Net
|
|||||||||||||||||||||
|
Carrying
|
Accumulated
|
Carrying
|
Carrying
|
Accumulated
|
Carrying
|
|||||||||||||||||||
|
Amount
|
Amortization
|
Amount
|
Amount
|
Amortization
|
Amount
|
|||||||||||||||||||
|
Amortizing
Assets:
|
||||||||||||||||||||||||
|
Customer
relationships
|
$ | 33,244,000 | $ | (11,338,000 | ) | $ | 21,906,000 | $ | 33,237,000 | $ | (9,944,000 | ) | $ | 23,293,000 | ||||||||||
|
Intellectual
property
|
3,372,000 | (726,000 | ) | 2,646,000 | 3,369,000 | (628,000 | ) | 2,741,000 | ||||||||||||||||
|
Licenses
|
1,000,000 | (566,000 | ) | 434,000 | 1,000,000 | (547,000 | ) | 453,000 | ||||||||||||||||
|
Non-compete
agreements
|
1,222,000 | (997,000 | ) | 225,000 | 1,221,000 | (969,000 | ) | 252,000 | ||||||||||||||||
|
Patents
|
579,000 | (257,000 | ) | 322,000 | 575,000 | (246,000 | ) | 329,000 | ||||||||||||||||
|
Trade
names
|
569,000 | (29,000 | ) | 540,000 | 569,000 | ¾ | 569,000 | |||||||||||||||||
| 39,986,000 | (13,913,000 | ) | 26,073,000 | 39,971,000 | (12,334,000 | ) | 27,637,000 | |||||||||||||||||
|
Non-Amortizing
Assets:
|
||||||||||||||||||||||||
|
Trade
names
|
13,955,000 | ¾ | 13,955,000 | 13,951,000 | ¾ | 13,951,000 | ||||||||||||||||||
| $ | 53,941,000 | $ | (13,913,000 | ) | $ | 40,028,000 | $ | 53,922,000 | $ | (12,334,000 | ) | $ | 41,588,000 | |||||||||||
Amortization
expense related to intangible assets for the three months ended January 31, 2010
and 2009 was $1,576,000 and $941,000, respectively. Amortization
expense related to intangible assets for the fiscal year ending October 31, 2010
is estimated to be $6,162,000.
|
5.
|
LONG-TERM
DEBT
|
Long-term debt consists of the
following:
|
January
31, 2010
|
October
31, 2009
|
|||||||
|
Borrowings
under revolving credit facility
|
$ | 43,000,000 | $ | 55,000,000 | ||||
|
Notes
payable, capital leases and equipment loans
|
399,000 | 431,000 | ||||||
| 43,399,000 | 55,431,000 | |||||||
|
Less:
Current maturities of long-term debt
|
(240,000 | ) | (237,000 | ) | ||||
| $ | 43,159,000 | $ | 55,194,000 | |||||
As of January 31, 2010 and October 31,
2009, the weighted average interest rate on borrowings under the Company’s $300
million revolving credit facility was .9%. The revolving credit
facility contains both financial and non-financial covenants. As of
January 31, 2010, the Company was in compliance with all such
covenants.
|
6.
|
INCOME
TAXES
|
As of January 31, 2010, the Company’s
liability for gross unrecognized tax benefits related to uncertain tax positions
was $3,484,000 of which $2,989,000 would decrease the Company’s income tax
expense and effective income tax rate if the tax benefits were recognized. A
reconciliation of the activity related to the liability for gross unrecognized
tax benefits for the three months ended January 31, 2010 is as
follows:
|
Balance
as of October 31, 2009
|
$ | 3,328,000 | ||
|
Increases
related to current year tax positions
|
156,000 | |||
|
Balance
as of January 31, 2010
|
$ | 3,484,000 |
There were no material changes in the
liability for unrecognized tax positions resulting from tax positions taken
during the current or a prior year, settlements with other taxing authorities or
a lapse of applicable statutes of limitations. The accrual of
interest and penalties related to the unrecognized tax benefits was not material
for the three months ended January 31, 2010. Further, the Company
does not expect the total amount of unrecognized tax benefits to materially
change in the next twelve months.
|
7.
|
FAIR
VALUE MEASUREMENTS
|
The Company performs its fair value
measurements according to accounting guidance that defines fair value as the
price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement
date. The guidance also establishes a three-level fair value
hierarchy that prioritizes the inputs to valuation techniques used to measure
fair value. An asset or liability’s level is based on the lowest
level of input that is significant to the fair value measurement. The
guidance requires that assets and liabilities carried at fair value be
classified and disclosed in one of the following three categories:
|
|
Level
1 — Quoted prices in active markets for identical assets or
liabilities;
|
|
|
Level
2 — Inputs, other than quoted prices included within Level 1, that are
observable for the asset or liability either directly or indirectly;
or
|
|
|
Level
3 — Unobservable inputs for the asset or liability where there is little
or no market data, requiring management to develop its own
assumptions.
|
The
following table sets forth by level within the fair value hierarchy, the
Company’s assets and liabilities that were measured at fair value on a recurring
basis as of January 31, 2010:
|
Level
1
|
Level
2
|
Level
3
|
Total
|
|||||||||||||
|
Assets:
|
||||||||||||||||
|
Deferred
compensation plans
|
||||||||||||||||
|
Corporate
owned life insurance
|
$ | — | $ | 20,494,000 | $ | — | $ | 20,494,000 | ||||||||
|
Mutual
funds
|
1,569,000 | — | — | 1,569,000 | ||||||||||||
|
Equity
securities
|
1,272,000 | — | — | 1,272,000 | ||||||||||||
|
Other
|
1,000 | 140,000 | — | 141,000 | ||||||||||||
|
Total
|
$ | 2,842,000 | $ | 20,634,000 | $ | — | $ | 23,476,000 | ||||||||
|
Liabilities
|
— | — | — | — | ||||||||||||
The Company maintains two non-qualified
deferred compensation plans. The assets of the HEICO Corporation
Leadership Compensation Plan (the “LCP”) principally represent cash surrender
values of life insurance policies, which derive their fair values from
investments in mutual funds that are managed by an insurance company and are
classified within Level 2. Certain other assets of the LCP represent
investments in publicly-traded equity securities and are classified within Level
1. The assets of the Company’s other deferred compensation plan are
principally invested in publicly-traded mutual funds and equity securities and a
life insurance policy, and the fair values of this plan’s assets are classified
within Level 1 and Level 2, respectively. The assets of both plans
are held within irrevocable trusts and classified within other assets in the
Company’s Condensed Consolidated Balance Sheets. The related
liabilities of the two deferred compensation plans are included within other
long-term liabilities in the Company’s Condensed Consolidated Balance Sheets and
have an aggregate value of $23,102,000 as of January 31, 2010.
The carrying amounts of the Company’s
cash and cash equivalents, accounts receivable, trade accounts payable and
accrued expenses and other current liabilities approximate fair value as of
January 31, 2010 due to the relatively short maturity of the respective
instruments. The carrying amount of long-term debt approximates fair
value due to its variable interest rates.
|
8.
|
RESEARCH
AND DEVELOPMENT EXPENSES
|
Cost of sales for the three months
ended January 31, 2010 and 2009 includes approximately $5.1 million and $4.8
million, respectively, of new product research and development
expenses.
|
9.
|
NET
INCOME PER SHARE ATTRIBUTABLE TO HEICO
SHAREHOLDERS
|
The computation of basic and diluted
net income per share attributable to HEICO shareholders is as
follows:
|
Three
months ended January 31,
|
||||||||
|
2010
|
2009
|
|||||||
|
Numerator:
|
||||||||
|
Net
income attributable to HEICO
|
$ | 11,793,000 | $ | 11,317,000 | ||||
|
Denominator:
|
||||||||
|
Weighted
average common shares outstanding-basic
|
26,146,872 | 26,410,681 | ||||||
|
Effect
of dilutive stock options
|
814,662 | 831,280 | ||||||
|
Weighted
average common shares outstanding - diluted
|
26,961,534 | 27,241,961 | ||||||
|
Net
income per share attributable to HEICO shareholders -
basic
|
$ | .45 | $ | .43 | ||||
|
Net
income per share attributable to HEICO shareholders -
diluted
|
$ | .44 | $ | .42 | ||||
|
Anti-dilutive
stock options excluded
|
347,500 | ¾ | ||||||
No portion of the adjustments to the
redemption amount of redeemable noncontrolling interests of $302,000 for the
three months ended January 31, 2010 reflect a redemption amount in excess of
fair value and therefore no portion of the adjustments effect basic or diluted
net income per share attributable to HEICO shareholders.
|
10.
|
OPERATING
SEGMENTS
|
Information on the Company’s two
operating segments, 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, for the three months ended January 31, 2010 and 2009,
respectively, is as follows:
|
Other,
|
||||||||||||||||
|
Primarily
|
||||||||||||||||
|
Segment
|
Corporate
and
|
Consolidated
|
||||||||||||||
|
FSG
|
ETG
|
Intersegment
|
Totals
|
|||||||||||||
|
For the three months
ended January 31, 2010:
|
||||||||||||||||
|
Net
sales
|
$ | 93,779,000 | $ | 42,058,000 | $ | (302,000 | ) | $ | 135,535,000 | |||||||
|
Depreciation
and amortization
|
2,464,000 | 1,688,000 | 99,000 | 4,251,000 | ||||||||||||
|
Operating
income
|
16,720,000 | 11,170,000 | (3,346,000 | ) | 24,544,000 | |||||||||||
|
Capital
expenditures
|
1,949,000 | 206,000 | 3,000 | 2,158,000 | ||||||||||||
|
For the three months
ended January 31, 2009:
|
||||||||||||||||
|
Net
sales
|
$ | 99,562,000 | $ | 30,959,000 | $ | (84,000 | ) | $ | 130,437,000 | |||||||
|
Depreciation
and amortization
|
2,411,000 | 951,000 | 109,000 | 3,471,000 | ||||||||||||
|
Operating
income
|
15,641,000 | 8,542,000 | (2,730,000 | ) | 21,453,000 | |||||||||||
|
Capital
expenditures
|
2,291,000 | 314,000 | 11,000 | 2,616,000 | ||||||||||||
Total assets by operating segment as of
January 31, 2010 and October 31, 2009 are as follows:
|
Other,
|
||||||||||||||||
|
Segment
|
Primarily
|
Consolidated
|
||||||||||||||
|
FSG
|
ETG
|
Corporate
|
Totals
|
|||||||||||||
|
Total
assets as of January 31, 2010
|
$ | 416,264,000 | $ | 284,141,000 | $ | 37,427,000 | $ | 737,832,000 | ||||||||
|
Total
assets as of October 31, 2009
|
414,030,000 | 285,602,000 | 33,278,000 | 732,910,000 | ||||||||||||
|
11.
|
COMMITMENTS
AND CONTINGENCIES
|
Guarantees
The Company has arranged for a standby
letter of credit for $1.5 million to meet the security requirement of its
insurance company for potential workers’ compensation claims, which is supported
by the Company’s revolving credit facility. As of January 31, 2010,
one of the Company’s subsidiaries has guaranteed its performance related to a
customer contract through a letter of credit for $.6 million, expiring May 2010,
which is supported by the Company’s revolving credit facility. The
subsidiary is also a beneficiary of a letter of credit related to the same
contract.
Product
Warranty
Changes in the Company’s product
warranty liability for the three months ended January 31, 2010 and 2009,
respectively, are as follows:
|
Three
months ended January 31,
|
||||||||
|
2010
|
2009
|
|||||||
|
Balances
as of beginning of fiscal year
|
$ | 1,022,000 | $ | 671,000 | ||||
|
Accruals
for warranties
|
454,000 | 222,000 | ||||||
|
Warranty
claims settled
|
(281,000 | ) | (248,000 | ) | ||||
|
Balances
as of January 31
|
$ | 1,195,000 | $ | 645,000 | ||||
Additional
Contingent Purchase Consideration
As part of the agreement to acquire a
subsidiary by the ETG in fiscal 2007, the Company may be obligated to pay
additional purchase consideration up to 73 million Canadian dollars in
aggregate, which translates to approximately $68 million U.S. dollars based on
the January 31, 2010 exchange rate, should the subsidiary meet certain earnings
objectives through fiscal 2012.
As part of the agreement to acquire a
subsidiary by the ETG in fiscal 2009, the Company may be obligated to pay
additional purchase consideration of up to approximately $1.3 million in fiscal
2010, $1.3 million in fiscal 2011 and $10.1 million in fiscal 2012 should the
subsidiary meet certain earnings objectives during each of the first three years
following the acquisition.
As part
of the agreement to acquire a subsidiary by the ETG in fiscal 2009, the Company
may be obligated to pay additional purchase consideration of up to approximately
$11.7 million should the subsidiary meet certain earnings objectives during the
first two years following the acquisition.
The above referenced additional
contingent purchase consideration will be accrued when the earnings objectives
are met. Such additional contingent purchase consideration is based
on a multiple of earnings above a threshold (subject to a cap in certain cases)
and is not contingent upon the former shareholders of the acquired entities
remaining employed by the Company or providing future services to the
Company. Accordingly, such consideration will be recorded as an
additional cost of the respective acquired entity when paid. The
aggregate maximum amount of such contingent purchase consideration that the
Company could be required to pay is approximately $93 million payable over
future periods beginning in fiscal 2010 through fiscal 2013. Assuming
the subsidiaries perform over their respective future measurement periods at the
same earnings levels they have performed in the comparable historical
measurement periods, the aggregate amount of such contingent purchase
consideration that the Company would be required to pay is approximately $9
million. The actual contingent purchase consideration will likely be
different.
Litigation
The Company is involved in various
legal actions arising in the normal course of business. Based upon
the Company’s and its legal counsel’s evaluations of any claims or assessments,
management is of the opinion that the outcome of these matters will not have a
material adverse effect on the Company’s results of operations, financial
position or cash flows.
|
12.
|
REDEEMABLE
NONCONTROLLING INTERESTS
|
As further detailed in Note 15,
Commitments and Contingencies, of the Notes to Consolidated Financial Statements
of the Company’s Annual Report on Form 10-K for the year ended October 31, 2009,
the holders of equity interests in certain of the Company’s subsidiaries have
rights (“Put Rights”) that may be exercised on varying dates causing the Company
to purchase their equity interests beginning in fiscal 2010 through fiscal
2018. The Put Rights, all of which relate either to common shares or
membership interests in limited liability companies, provide that the cash
consideration to be paid for their equity interests (the “Redemption Amount”) be
at fair value or at a formula that management intended to reasonably approximate
fair value based solely on a multiple of future earnings over a measurement
period. As of January 31, 2010, management’s estimate of the
aggregate Redemption Amount of all Put Rights that the Company would be required
to pay is approximately $57 million. The actual Redemption Amount
will likely be different. The portion of the estimated Redemption
Amount as of January 31, 2010 redeemable at fair value is $25 million and the
portion redeemable based solely on a multiple of future earnings is $32
million. See Note 1, Summary of Significant Accounting Policies, for
more information regarding how the Company accounts for its redeemable
noncontrolling interests in accordance with new accounting guidance adopted as
of the beginning of fiscal 2010 and the Condensed Consolidated Statements of
Shareholders’ Equity
and
Comprehensive Income for a summary of changes in redeemable noncontrolling
interests for the three months ended January 31, 2010 and 2009.
During the three months ended January
31, 2009, the Company acquired certain redeemable noncontrolling interests and
accounted for the transaction under the accounting guidance in effect at that
time pertaining to step acquisitions. The excess of the purchase
price paid over the carrying amount was allocated principally to goodwill under
such guidance. As previously mentioned, the Condensed Consolidated
Statement of Shareholders’ Equity and Comprehensive Income for the three months
ended January 31, 2009 is presented on a retrospective basis to reflect the
adoption of new accounting guidance as of November 1, 2009 pertaining to
noncontrolling interests, which
resulted in an increase to redeemable noncontrolling interests and a decrease to
retained earnings. The subsequent acquisition of certain redeemable
noncontrolling interests on a retrospective basis results in a reversal of any
previous recorded decrease to retained earnings related to such redeemable
noncontrolling interests recorded as part of the adoption of this new accounting
guidance.
|
13.
|
SUBSEQUENT
EVENT
|
In
February 2010, the Company, through HEICO Electronic, acquired substantially all
of the assets and assumed certain liabilities of dB Control. dB
Control produces high-power devices used in both defense and commercial
applications. The total consideration for this acquisition was
principally paid in cash using proceeds from the Company’s revolving credit
facility. The total consideration for this acquisition and related allocation to
the tangible and identifiable intangible assets acquired and liabilities assumed
is not material or significant to the Company’s condensed consolidated
financial statements.
|
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 materially from those estimates
if different assumptions were used or different events ultimately
transpire.
Our critical accounting policies, some
of 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 our Annual Report on Form 10-K for the year ended
October 31, 2009.
Our business is comprised of 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. (“HEICO Electronic”) and its subsidiaries.
Our results of operations for the three
months ended January 31, 2010 have been affected by certain fiscal 2009
acquisitions as further detailed in Note 2, Acquisitions, of the Notes to
Consolidated Financial Statements of our Annual Report on Form 10-K for the year
ended October 31, 2009.
Results
of Operations
The following table sets forth the
results of our operations, net sales and operating income by segment and the
percentage of net sales represented by the respective items in our Condensed
Consolidated Statements of Operations.
|
Three
months ended January 31,
|
||||||||
|
2010
|
2009
|
|||||||
|
Net
sales
|
$ | 135,535,000 | $ | 130,437,000 | ||||
|
Cost
of sales
|
85,415,000 | 86,533,000 | ||||||
|
Selling,
general and administrative expenses
|
25,576,000 | 22,451,000 | ||||||
|
Total
operating costs and expenses
|
110,991,000 | 108,984,000 | ||||||
|
Operating
income
|
$ | 24,544,000 | $ | 21,453,000 | ||||
|
Net
sales by segment:
|
||||||||
|
Flight
Support Group
|
$ | 93,779,000 | $ | 99,562,000 | ||||
|
Electronic
Technologies Group
|
42,058,000 | 30,959,000 | ||||||
|
Intersegment
sales
|
(302,000 | ) | (84,000 | ) | ||||
| $ | 135,535,000 | $ | 130,437,000 | |||||
|
Operating
income by segment:
|
||||||||
|
Flight
Support Group
|
$ | 16,720,000 | $ | 15,641,000 | ||||
|
Electronic
Technologies Group
|
11,170,000 | 8,542,000 | ||||||
|
Other,
primarily corporate
|
(3,346,000 | ) | (2,730,000 | ) | ||||
| $ | 24,544,000 | $ | 21,453,000 | |||||
|
Net
sales
|
100.0 | % | 100.0 | % | ||||
|
Gross
profit
|
37.0 | % | 33.7 | % | ||||
|
Selling,
general and administrative expenses
|
18.9 | % | 17.2 | % | ||||
|
Operating
income
|
18.1 | % | 16.4 | % | ||||
|
Interest
expense
|
0.1 | % | 0.1 | % | ||||
|
Other
income (expense)
|
0.1 | % | — | |||||
|
Income
tax expense
|
6.3 | % | 4.5 | % | ||||
|
Net
income attributable to noncontrolling interests
|
3.1 | % | 3.1 | % | ||||
|
Net
income attributable to HEICO
|
8.7 | % | 8.7 | % | ||||
Comparison
of First Quarter of Fiscal 2010 to First Quarter of Fiscal 2009
Net
Sales
Net sales for the first quarter of
fiscal 2010 increased by 3.9% to $135.5 million, as compared to net sales of
$130.4 million for the first quarter of fiscal 2009. The increase in
net sales reflects an increase of $11.1 million (a 35.9% increase) to $42.1
million in net sales within the ETG partially offset by a decrease of $5.8
million (a 5.8% decrease) to $93.8 million in net sales within the
FSG. The net sales increase in the ETG reflects the additional net
sales contributed by two fiscal 2009 acquisitions (one in May 2009 and the other
in October 2009) as well as organic growth of approximately 6%. The
organic growth in the ETG reflects some strengthening in demand for certain of
our satellite, defense and medical equipment products. The net sales
decrease within the FSG reflects reduced demand for our FSG products and
services, which continue to be impacted by reduced airline
capacity.
Gross
Profit and Operating Expenses
Our consolidated gross profit margin
increased to 37.0% for the first quarter of fiscal 2010 as compared to 33.7% for
the first quarter of fiscal 2009, mainly reflecting higher margins within the
FSG principally due to a more favorable product sales mix, including the
favorable impact from the sale of some products previously written down as
slow-moving. Consolidated cost of sales for the first quarter of
fiscal 2010 and 2009 includes approximately $5.1 million and $4.8 million,
respectively, of new product research and development expenses.
Selling, general and administrative
(“SG&A”) expenses were $25.6 million and $22.5 million for the first quarter
of fiscal 2010 and fiscal 2009, respectively. The increase in
SG&A expenses was mainly due to the operating costs of the two fiscal 2009
acquisitions referenced above. SG&A expenses as a percentage of
net sales increased from 17.2% for the first quarter of fiscal 2009 to 18.9% for
the first quarter of fiscal 2010 reflecting the lower net sales volumes within
the FSG and an increase in amortization expense of intangible assets associated
with the prior year ETG acquisitions.
Operating
Income
Operating income for the first quarter
of fiscal 2010 increased by 14.4% to $24.5 million as compared to operating
income of $21.5 million for the first quarter of fiscal 2009. The
increase in operating income reflects a $2.6 million increase (a 30.8% increase)
to $11.2 million in operating income of the ETG in the first quarter of fiscal
2010, up from $8.5 million for the first quarter of fiscal 2009 and a $1.1
million increase (a 6.9% increase) in operating income of the FSG to $16.7
million for the first quarter of fiscal 2010, up from $15.6 million for the
first quarter of fiscal 2009, partially offset by a $.6 million increase in
corporate expenses. The increase in operating income for the ETG in
the first quarter of 2010 reflects the impact of the fiscal 2009 acquisitions
and organic sales growth. The increase in operating income for the
FSG in the first quarter of 2010 reflects the aforementioned higher gross profit
margins.
As a percentage of net sales, our
consolidated operating income increased to 18.1% for the first quarter of fiscal
2010, up from 16.4% for the first quarter of fiscal 2009. The
increase in consolidated operating income as a percentage of net sales reflects
an increase in the FSG’s operating income as a percentage of net sales to 17.8%
in the first quarter of fiscal 2010 from 15.7% in the first quarter of fiscal
2009, partially offset by a decrease in the ETG’s operating income as a
percentage of net sales from 27.6% in the first quarter of fiscal 2009 to 26.6%
in the first quarter of fiscal 2010. The increase in operating income
as a percentage of net sales for the FSG principally reflects the aforementioned
impact of a more favorable product sales mix.
Interest
Expense
Interest expense in the first quarter
of fiscal 2010 and 2009 was not material.
Other
Income (Expense)
Other income (expense) in the first
quarter of fiscal 2010 and 2009 was not material.
Income
Tax Expense
Our effective tax rate for the first
quarter of fiscal 2010 increased to 34.8% from 27.6% for the first quarter of
fiscal 2009. The effective tax rate for the first quarter of fiscal
2009 reflects a settlement reached with the Internal Revenue Service pertaining
to the income tax credit claimed on HEICO’s U.S. federal filings for qualified
research and development activities incurred for fiscal years 2002 through 2005
and a resulting reduction to the related reserve for fiscal years 2006 through
2008 based on new information obtained during the examination, which increased
net income attributable to HEICO by approximately $1,083,000, or $.04 per
diluted share.
Net
Income Attributable to Noncontrolling Interests
Net income attributable to
noncontrolling interests relates to the 20% noncontrolling interest held in the
FSG and the noncontrolling interests held in certain subsidiaries of the FSG and
ETG. The increase in net income attributable to noncontrolling
interests for the first quarter of fiscal 2010 compared to the first quarter of
fiscal 2009 is principally related to the May 2009 acquisition of an ETG
subsidiary in which a noncontrolling interest exists as well as higher earnings
of certain other ETG subsidiaries in which noncontrolling interests
exist.
Net
Income Attributable to HEICO
Net income attributable to HEICO was
$11.8 million, or $.44 per diluted share, for the first quarter of fiscal 2010
compared to $11.3 million, or $.42 per diluted share, for the first quarter of
fiscal 2009 reflecting the increased operating income referenced
above. Diluted net income per share attributable to HEICO
shareholders in the first quarter of fiscal 2009 included the $.04 per diluted
share benefit from the aforementioned favorable IRS settlement.
Outlook
As we look to the balance of fiscal
2010, we expect continued softness during the first half of calendar 2010 in our
commercial aviation markets, which represent approximately 68% of our annual net
sales. While the consensus opinion within the industry continues to
expect a recovery within the airline industry in the later half of 2010, the
strength and exact timing of such a recovery is uncertain at this
time. Based on this aviation market outlook and conditions within our
other major markets, we are targeting full year growth in net sales, earnings
and net cash provided by operating activities in fiscal 2010 over fiscal 2009
results.
Liquidity
and Capital Resources
Our principal uses of cash include
payments of principal and interest on debt, acquisitions, capital expenditures,
distributions to noncontrolling interests, cash dividends and increases in
working capital.
We finance our activities primarily
from our operating activities and financing activities, including borrowings
under our revolving credit facility. As of January 31, 2010, our net
debt to shareholders’ equity ratio was a low 7.1%, with net debt (total debt
less cash and cash equivalents) of $35.9 million. We have no
significant debt maturities until fiscal 2013.
Based on our current outlook, we
believe that our net cash provided by operating activities and available
borrowings under our revolving credit facility will be sufficient to fund cash
requirements for the foreseeable future.
Operating
Activities
Net cash provided by operating
activities was $20.3 million for the first quarter of fiscal 2010, an increase
of $15.1 million from $5.2 million for the first quarter of fiscal 2009, and
consisted primarily of net income from consolidated operations of $16.0 million
and depreciation and amortization of $4.3 million.
Net cash provided by operating
activities for the first quarter of fiscal 2009 included net income from
consolidated operations of $15.4 million and depreciation and amortization of
$3.5 million, but was impacted by a $14.2 million increase in net operating
assets related to the payment of certain accrued employee compensation and
accrued additional purchase consideration since the end of fiscal 2008 and a
higher investment in inventories for new product offerings, partially offset by
a decrease in accounts receivable due to the timing of cash
collections.
Investing
Activities
Net cash used in investing activities
during the first quarter of fiscal 2010 related primarily to acquisitions and
related costs of $2.2 million and capital expenditures totaling $2.2
million. Acquisitions and related costs principally reflect
additional purchase consideration paid pursuant to the terms of the purchase
agreements associated with certain prior year acquisitions. See Note
2, Acquisitions, of the Notes to Condensed Consolidated Financial Statements for
further details.
Financing
Activities
Net cash used in financing activities
during the first quarter of fiscal 2010 related primarily to net borrowings on
our revolving credit facility of $12.0 million, distributions to noncontrolling
interests of $2.5 million, and the payment of $1.6 million in cash dividends on
our common stock, partially offset by the presentation of $.7 million of excess
tax benefit from stock option exercises as a financing activity.
Contractual
Obligations
There have not been any material
changes to the amounts presented in the table of contractual obligations that
was included in our Annual Report on Form 10-K for the year ended October 31,
2009.
See “New Accounting Pronouncements”
below for additional information pertaining to our redeemable noncontrolling
interests.
As discussed in “Off-Balance Sheet
Arrangements – Acquisitions – Additional Contingent Purchase Consideration”
below, we may be obligated to pay additional contingent purchase consideration
based on future earnings of certain acquired businesses. The
aggregate maximum amount of such contingent purchase consideration that we could
be required to pay is approximately $93 million payable over future periods
beginning in fiscal 2010 through fiscal 2013. Assuming the
subsidiaries perform over their respective future measurement periods at the
same earnings levels they have performed in the comparable historical
measurement periods, the aggregate amount of such contingent purchase
consideration that we would be required to pay is approximately $9
million. The actual contingent purchase consideration will likely be
different.
Off-Balance
Sheet Arrangements
Guarantees
We have arranged for a standby letter
of credit for $1.5 million to meet the security requirement of our insurance
company for potential workers’ compensation claims, which is supported by our
revolving credit facility. As of January 31, 2010, one of our
subsidiaries has guaranteed its performance related to a customer contract
through a letter of credit for $.6 million, expiring May 2010, which is
supported by our revolving credit facility. The subsidiary is also a
beneficiary of a letter of credit related to the same contract.
Acquisitions
– Additional Contingent Purchase Consideration
As part of the agreement to acquire a
subsidiary by the ETG in fiscal 2007, we may be obligated to pay additional
purchase consideration up to 73 million Canadian dollars in aggregate, which
translates to approximately $68 million U.S. dollars based on the January 31,
2010 exchange rate, should the subsidiary meet certain earnings objectives
through fiscal 2012.
As part of the agreement to acquire a
subsidiary by the ETG in fiscal 2009, we may be obligated to pay additional
consideration of up to approximately $1.3 million in fiscal 2010, $1.3 million
in fiscal 2011 and $10.1 million in fiscal 2012 should the subsidiary meet
certain earnings objectives during each of the first three years following the
acquisition.
As part of the agreement to acquire a
subsidiary by the ETG in fiscal 2009, we may be obligated to pay additional
purchase consideration of up to approximately $11.7 million should the
subsidiary meet certain earnings objectives during the first two years following
the acquisition.
The above referenced additional
contingent purchase consideration will be accrued when the earnings objectives
are met. Such additional contingent purchase consideration is based
on a multiple of earnings above a threshold (subject to a cap in certain cases)
and is not contingent upon the former shareholders of the acquired entities
remaining employed by us or providing future services to
us. Accordingly, such consideration will be recorded as an additional
cost of the respective acquired entity when paid.
New
Accounting Pronouncements
Effective
November 1, 2009, we adopted new accounting guidance that requires the
recognition of certain noncontrolling interests (previously referred to as
minority interests) as a separate component within equity in the consolidated
balance sheet. It also requires the amount of consolidated net income
attributable to the parent and the noncontrolling interests be clearly
identified and presented within the consolidated statement of
operations. The adoption of this new guidance has affected the
presentation of noncontrolling interests in our condensed consolidated financial
statements on a retrospective basis. For example, under this
guidance, “Net income from consolidated operations” is comparable to what was
previously presented as “Income before minority interests” and “Net income
attributable to HEICO” is comparable to what was previously presented as “Net
income.” Further, acquisitions of noncontrolling interests are
considered a financing activity under the new accounting guidance and are no
longer presented as an investing activity.
Effective November 1, 2009, we also
adopted new accounting guidance that affects the financial statement
classification and measurement of redeemable noncontrolling
interests. As further detailed in Note 15, Commitments and
Contingencies, of the Notes to Consolidated Financial Statements of our Annual
Report on Form 10-K for the year ended October 31, 2009, the holders of equity
interests in certain of our subsidiaries have rights (“Put Rights”) that require
us to provide cash consideration for their equity interests (the “Redemption
Amount”) at fair value or at a formula that management intended to reasonably
approximate fair value based
solely on
a multiple of future earnings over a measurement period. The Put
Rights are embedded in the shares owned by the noncontrolling interest holders
and are not freestanding. Previously, we recorded such redeemable
noncontrolling interests at historical cost plus an allocation of subsidiary
earnings based on ownership interest, less dividends paid to the noncontrolling
interest holders. Effective November 1, 2009, we adjusted our
redeemable noncontrolling interests in accordance with this new accounting
guidance to the higher of their carrying cost or management’s estimate of the
Redemption Amount with a corresponding decrease to retained earnings and
classified such interests outside of permanent equity. Under this
guidance, subsequent adjustments to the carrying amount of redeemable
noncontrolling interests to reflect any changes in the Redemption Amount at the
end of each reporting period will be recorded in the same
manner. Such adjustments to Redemption Amounts based on fair value
will have no effect on net income per share attributable to HEICO shareholders
whereas the portion of periodic adjustments to the carrying amount of redeemable
noncontrolling interests based solely on a multiple of future earnings that
reflect a redemption amount in excess of fair value will effect net income per
share attributable to HEICO shareholders under the two-class
method.
As a result of adopting the new
accounting guidance for noncontrolling interests and redeemable noncontrolling
interests, we (i) reclassified approximately $78 million from temporary equity
(previously labeled as “Minority interests in consolidated subsidiaries”) to
permanent equity (labeled as “Noncontrolling interests”) pertaining to
noncontrolling interests that do not contain a redemption feature; and (ii)
renamed temporary equity as “Redeemable noncontrolling interests” and recorded
an approximately $45 million increase to redeemable noncontrolling interests
with a corresponding decrease to retained earnings in our Condensed Consolidated
Balance Sheet. The resulting $57 million of redeemable noncontrolling
interests as of November 1, 2009 represents management’s estimate of the
aggregate Redemption Amount of all Put Rights that we would be required to pay
of which approximately $25 million is redeemable at fair value and approximately
$32 million is redeemable based solely on a multiple of future
earnings. The actual Redemption Amount will likely be
different. See Note 12, Redeemable Noncontrolling Interests, for
additional information.
In September 2006, the Financial
Accounting Standards Board (“FASB”) issued new guidance which defines fair
value, establishes a framework for measuring fair value, and requires expanded
disclosures about fair value measurements. In February 2008, the FASB
issued additional guidance which delayed the effective date by one year for
nonfinancial assets and liabilities that are recognized or disclosed at fair
value in the financial statements on a nonrecurring basis. These
nonfinancial assets and liabilities include items such as goodwill, other
intangible assets, and property, plant and equipment that are measured at fair
value resulting from impairment, if deemed necessary. We adopted the
portions of the new guidance that were delayed on a prospective basis as of the
beginning of fiscal 2010, or November 1, 2009. The adoption did not have a
material effect on our results of operations, financial position or cash
flows.
In December 2007, the FASB issued new
guidance for business combinations that retains the fundamental requirements of
previous guidance that the acquisition method of accounting (formerly the
“purchase accounting” method) be used for all business combinations and for an
acquirer to be identified for each business combination. However, the
new guidance changes the
approach
of applying the acquisition method in a number of significant areas, including
that acquisition costs will generally be expensed as incurred; noncontrolling
interests will be valued at fair value as of the acquisition date; in-process
research and development will be recorded at fair value as an indefinite-lived
intangible asset as of the acquisition date; restructuring costs associated with
a business combination will generally be expensed subsequent to the acquisition
date; and changes in deferred tax asset valuation allowances and income tax
uncertainties after the acquisition date generally will affect income tax
expense. We adopted the new guidance on a prospective basis as of the
beginning of fiscal 2010 for all business combinations consummated on or after
November 1, 2009. The adoption did not have a material effect on our
results of operations, financial position or cash flows.
In
January 2010, the FASB issued Accounting Standards Update (“ASU”) 2010-06,
“Improving Disclosures About Fair Value Measurements,” which requires new
disclosures regarding transfers in and out of Level 1 and Level 2 fair value
measurements and more detailed information of activity in Level 3 fair value
measurements. ASU 2010-06 is effective for reporting periods
beginning after December 15, 2009, or as of the second quarter of
fiscal 2010 for us, except the additional Level 3 disclosures, which are
effective in fiscal years beginning after December 15, 2010, or as of fiscal
2012 for us. We are currently evaluating the effect the adoption of
ASU 2010-06 will have on our results of operations, financial position and cash
flows.
Forward-Looking
Statements
Certain statements in this report
constitute “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. All statements contained
herein that are not clearly historical in nature may be forward-looking and the
words “anticipate,” “believe,” “expect,” “estimate” and similar expressions are
generally intended to identify forward-looking statements. Any
forward-looking statements contained herein, in press releases, written
statements or other documents filed with the Securities and Exchange Commission
or in communications and discussions with investors and analysts in the normal
course of business through meetings, phone calls and conference calls,
concerning our operations, economic performance and financial condition are
subject to known and unknown risks, uncertainties and
contingencies. We have based these forward-looking statements on our
current expectations and projections about future events. All
forward-looking statements involve risks and uncertainties, many of which are
beyond our control, which may cause actual results, performance or achievements
to differ materially from anticipated results, performance or
achievements. Also, forward-looking statements are based upon
management’s estimates of fair values and of future costs, using currently
available information. Therefore, actual results may differ
materially from those expressed or implied in those
statements. Factors that could cause such differences include, but
are not limited to: lower demand for commercial air travel or airline
fleet changes, which could cause lower demand for our goods and services;
product specification costs and requirements, which could cause an increase to
our costs to complete contracts; governmental and regulatory demands, export
policies and restrictions, reductions in defense, space or homeland security
spending by U.S. and/or foreign customers or competition from existing and new
competitors, which could reduce our sales; HEICO’s ability to introduce new
products and product pricing levels, which could reduce our sales or sales
growth and; HEICO’s ability to
make
acquisitions and achieve operating synergies from acquired businesses, customer
credit risk, interest rates and economic conditions within and outside of the
aviation, defense, space, medical, telecommunication and electronic industries,
which could negatively impact our costs and revenues. We undertake no
obligation to publicly update or revise any forward-looking statement, whether
as a result of new information, future events or otherwise.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
There have not been any material
changes in our assessment of HEICO’s sensitivity to market risk that was
disclosed in Item 7A, “Quantitative and Qualitative Disclosures About Market
Risk,” in our Annual Report on Form 10-K for the year ended October 31,
2009.
|
CONTROLS
AND PROCEDURES
|
Evaluation
of Disclosure Controls and Procedures
Our management, with the participation
of our Chief Executive Officer and our Chief Financial Officer, evaluated the
effectiveness of our disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this
quarterly report. Based upon that evaluation, our Chief Executive
Officer and our Chief Financial Officer concluded that HEICO’s disclosure
controls and procedures are effective as of the end of the period covered by
this quarterly report.
Changes
in Internal Control Over Financial Reporting
There were no changes in our internal
control over financial reporting identified in connection with the evaluation
referred to above that occurred during our most recent fiscal quarter that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
|
During December 2009, we repurchased
7,314 shares of our Common Stock at an average price of $39.43 and 2,090 shares
of our Class A Common Stock at an average price of $30.98 as settlement for
employee taxes due pertaining to exercises of non-qualified stock
options. We made no repurchases of common stock under our existing
share program during the first quarter of fiscal 2010 and the number of shares
that may be repurchased is 1,024,742.
|
EXHIBITS
|
|
Exhibit
|
Description
|
|
|
31.1
|
Rule
13a-14(a)/15d-14(a) Certification of Chief Executive Officer.
*
|
|
|
31.2
|
Rule
13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
*
|
|
|
32.1
|
Section
1350 Certification of Chief Executive Officer. **
|
|
|
32.2
|
Section
1350 Certification of Chief Financial Officer.
**
|
|
|
*
|
Filed
herewith.
|
|
|
**
|
Furnished
herewith.
|
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
|
|||
|
Date:
March 5, 2010
|
By:
|
/s/ THOMAS S.
IRWIN
|
|
|
Thomas
S. Irwin
|
|||
|
|
Executive
Vice President and
|
||
|
|
Chief
Financial Officer
|
||
|
|
(Principal
Financial and
|
||
|
|
Accounting
Officer)
|
||
EXHIBIT
INDEX
|
Exhibit
|
Description
|
|
|
31.1
|
Rule
13a-14(a)/15d-14(a) Certification of Chief Executive Officer.
|
|
|
31.2
|
Rule
13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
|
|
|
32.1
|
Section
1350 Certification of Chief Executive Officer.
|
|
|
32.2
|
Section
1350 Certification of Chief Financial Officer.
|