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Heico Annual Report, Year Ended Oct 31, 2005

Filing Date
Filed January 17, 2006
Period End
October 31, 2005
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.

  1. FY2018 annual report10-K · Dec ’18Dec ’18
  2. Leadership change8-K · Mar ’21Mar ’21
  3. Leadership change8-K · Sep ’25Sep ’25

01—Abstract

Summary

Summary of the 10-K filed January 17, 2006. Cited figures are marked; the original filing is the authoritative source.

HEICO Corporation (HEI) reported fiscal 2005 (year ended October 31, 2005) net sales of $269.6 milliona, up from $215.7 million in fiscal 2004, with operating income of $44.6 million versus $32.6 million and net income of $22.8 million, or $.87 per diluted share, compared with $20.6 million, or $.80 per diluted share, in fiscal 2004.

The Flight Support Group (69% of net sales) and the Electronic Technologies Group (31%) both grew, with the Flight Support Group's operating margin rising from 15.8% to 18.9% on aftermarket parts and repair demand, while the Electronic Technologies Group's operating margin declined from 24.4% to 22.2% amid softness in the commercial satellite market. Growth was also supported by fiscal 2005 acquisitions of Connectronics, Lumina Power and HVT Group, funded largely by borrowings under the revolving credit facility. The balance sheet expanded as total assets rose to $435.6 millionb from $364.3 million, goodwill increased to $248.2 million, and total debt (including current portion) increased to $34.1 million from $18.1 million.

Net cash provided by operating activities was $35.8 millionc, and cash used in investing activities was $45.9 million, including $41.5 million for acquisitions. In August 2005 the company entered into a $130 million Amended and Restated Revolving Credit Agreement expiring in August 2010.

Management targets fiscal 2006 net sales and earnings growth over fiscal 2005 with some operating margin improvement, and it reported that its internal control over financial reporting was effective as of October 31, 2005. Investors should note the company's reliance on FAA Parts Manufacturer Approvals (over 4,000 cumulative approvals, about 2,800 actively marketed), the exclusive relationships with several airlines, Lufthansa's 20% minority interest in HEICO Aerospace, and a goodwill carrying value of $17.3 milliond for one reporting unit whose foreign military sales have declined and where a future impairment could arise if expected capabilities are delayed.

02—Key points

Key Highlights

  1. Net sales rose to $269.6 million in fiscal 2005 from $215.7 million in fiscal 2004, with the Flight Support Group at $185.7 million and the Electronic Technologies Group at $84.1 million.
  2. Operating income increased to $44.6 million from $32.6 million, and operating margin improved to 16.6% from 15.1%.
  3. Net income was $22.8 million, or $.87 per diluted share, versus $20.6 million, or $.80 per diluted share, in fiscal 2004, which included $5.0 million of life insurance proceeds.
  4. Gross profit margin improved to 37.5% from 35.1%, driven by higher Flight Support Group margins.
  5. Total assets grew to $435.6 million and goodwill to $248.2 million, while total debt increased to $34.1 million from $18.1 million after acquisitions.
  6. Backlog of unshipped orders reached $61.3 million at October 31, 2005, up from $45.2 million, with substantially all expected to be delivered in fiscal 2006.
  7. Management targets fiscal 2006 net sales and earnings growth over fiscal 2005, with some operating margin improvement.

03—Questions

Frequently Asked Questions

  1. What drove the increase in HEICO's fiscal 2005 results?

    The Flight Support Group's net sales rose 21.2% to $185.7 million on improved demand for aftermarket replacement parts and repair and overhaul services, and the Electronic Technologies Group's net sales rose 34.2% to $84.1 million, reflecting acquisitions of Connectronics, Lumina Power and HVT Group as well as improved defense and industrial demand.

  2. How did the two operating segments perform in profitability?

    The Flight Support Group's operating income rose to $35.1 million, with its operating margin increasing from 15.8% to 18.9%. The Electronic Technologies Group's operating income rose to $18.6 million, but its operating margin declined from 24.4% to 22.2%, mainly due to softness in the commercial satellite market.

  3. How was HEICO's growth financed and what is its debt position?

    The company borrowed a net $16.0 million under its revolving credit facility in fiscal 2005 and generated $35.8 million from operating activities. Total debt including current portion was $34.1 million at October 31, 2005. In August 2005 it entered into a $130 million revolving credit agreement expiring in August 2010, which can be increased to $175 million.

  4. What risks did the filing identify for investors?

    The filing notes that the company's goodwill for one reporting unit had a carrying value of $17.3 million, and a decline in foreign military sales could lead to an impairment if expected expanded capabilities are delayed. It also cites competition from OEMs and other suppliers, the FAA's PMA approval process, and dependence on commercial aviation, which represented about 64% of fiscal 2005 net sales.

  5. Does HEICO plan to continue paying dividends?

    HEICO has historically paid semi-annual cash dividends on both classes of common stock, and its Board presently intends to continue regular semi-annual payments. Cash dividends were $.05 per share in fiscal 2005, and the company notes that its ability to pay could be affected by business performance, liquidity, capital needs, and loan covenants.

04—Continue

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