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Heico Annual Report, Year Ended Oct 31, 1999

Filing Date
Filed January 27, 2000
Period End
October 31, 1999
Securities
HEIHEI-A
In the record · 2016–202610-K1010-Q338-K83

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

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01—Abstract

Summary

Summary of the 10-K filed January 27, 2000. Cited figures are marked; the original filing is the authoritative source.

HEICO Corporation (HEI) reported fiscal 1999 (year ended October 31, 1999) net sales of $141.3 milliona, up 48% from $95.4 million in fiscal 1998, with net income of $16.3 million, or $.93 per diluted share, up 55% from $10.5 million, or $.68 per diluted share.

Operating income rose 73% to $32.8 millionb, and operating margin improved to 23.2% of sales from 19.9%. The Flight Support Group (FSG), which makes FAA-approved jet engine replacement parts and provides repair and overhaul services, accounted for 67% of revenues, and the Electronics & Ground Support Group (EGSG) accounted for 33%. Growth was driven largely by acquisitions, including McClain, Rogers-Dierks, Thermal Structures, and several others, with total acquisition cash flows of $104.9 million in fiscal 1999 alone.

The balance sheet expanded substantially. Total assets grew to $273.2 millionc from $133.1 million, and total debt, including current maturities, rose to $73.5 million from $30.5 million, mostly borrowings of $66.0 million under a $120 million revolving credit facility. Shareholders' equity increased to $139.3 million from $67.6 million, helped by a Class A common stock offering that netted $56.3 million.

Lufthansa Technik holds a 20% minority interest in the FSG, and minority interest in consolidated subsidiary stood at $30.0 milliond at year-end. Investors should note the risk factors the filing describes. Approximately 40% of fiscal 1999 net sales came from replacement parts and overhaul services for the JT8D engine, down from 48% in fiscal 1998, and the filing notes that FAA noise regulations and EU restrictions affect that engine's usability.

Five largest customers accounted for approximately 20% of net sales. The company is in litigation with United Technologies Corporation and Travelers Casualty & Surety Co., with no provision recorded, and a proposed IRS adjustment could result in additional taxes of approximately $1.8 million.

02—Key points

Key Highlights

  1. Net sales rose 48% to $141.3 million in fiscal 1999; net income rose 55% to $16.3 million, or $.93 per diluted share.
  2. Operating income increased 73% to $32.8 million, with operating margin improving to 23.2% from 19.9%; gross profit margin averaged 40.7%.
  3. Flight Support Group contributed 67% of revenues and Electronics & Ground Support Group 33%; total backlog was $60.1 million at October 31, 1999, versus $18.5 million a year earlier.
  4. Acquisitions drove growth, with cash paid for acquisitions of $104.9 million in fiscal 1999 and $157.2 million over the last three years.
  5. Total debt rose to $73.5 million from $30.5 million, including $66.0 million borrowed under a $120 million revolving credit facility at a weighted average rate of 6.42%.
  6. Shareholders' equity more than doubled to $139.3 million, aided by a Class A common stock offering with net proceeds of $56.3 million.
  7. Concentration and regulatory risk: about 40% of fiscal 1999 net sales came from JT8D engine parts and services, and the five largest customers accounted for approximately 20% of net sales.

03—Questions

Frequently Asked Questions

  1. What is HEICO's core business?

    HEICO states it believes it is the world's largest manufacturer of FAA-approved jet engine replacement parts, other than the original equipment manufacturers and their subcontractors. It also makes electronic and ground support equipment for the airline and defense industries, through its Flight Support Group and Electronics & Ground Support Group.

  2. How much did HEICO grow in fiscal 1999, and how was that growth achieved?

    Net sales increased 48% to $141.3 million. The filing attributes the increase to new and acquired FAA-approved parts, higher overhaul demand, and acquisitions, including $11.1 million of FSG revenue from newly acquired businesses and $10.1 million of EGSG revenue from newly acquired businesses.

  3. What are the main risks the filing identifies?

    The filing cites dependence on JT8D engine parts, which were about 40% of fiscal 1999 net sales, and FAA and EU noise regulations affecting older engines. It also describes intense competition, primarily from Pratt & Whitney, and pending litigation with United Technologies Corporation and Travelers, for which no provision has been recorded.

  4. How is HEICO financing its acquisitions and what does its debt look like?

    Acquisitions were funded mainly through the $120 million revolving credit facility entered into in July 1998, along with the public offering of 3.0 million Class A shares. Total debt was $73.5 million at October 31, 1999, and the facility is secured by company assets, excluding real estate, and carries covenants on working capital, leverage, and net worth.

  5. Who is Lufthansa's role in HEICO's business?

    Lufthansa Technik AG holds a 20% minority interest in HEICO Aerospace Holdings, the FSG parent, under a strategic alliance formed in October 1997. Lufthansa has funded research and development and receives 20% of FSG dividends, and minority interest in consolidated subsidiary was $30.0 million at year-end.

04—Continue

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