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Heico Annual Report, Year Ended Oct 31, 2006

Filing Date
Filed January 12, 2007
Period End
October 31, 2006
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 12, 2007. Cited figures are marked; the original filing is the authoritative source.

HEICO Corporation's fiscal 2006 Form 10-K (year ended October 31, 2006) reports net sales of $392.2 milliona, up 45.4% from $269.6 million in fiscal 2005, with operating income of $66.9 million and net income of $31.9 million, or $1.20 per diluted share, versus $22.8 million, or $.87 per diluted share, a year earlier.

The company operates two segments: the Flight Support Group, which makes FAA-approved jet engine and aircraft replacement parts and provides repair and overhaul services and accounted for $277.3 millionb of net sales, and the Electronic Technologies Group, which makes electronic, electro-optical and interconnection products and accounted for $115.0 million. Management attributes the sales growth to acquisitions (Seal LLC, Arger, Prime Air, Connectronics, Lumina, HVT and EDT) and to organic growth of approximately 14% in the Flight Support Group and approximately 8% in the Electronic Technologies Group. Gross margin eased slightly to 36.3% from 37.5%, while SG&A rose to $75.6 million, and interest expense increased to $3.5 million from $1.1 million on higher revolver borrowings.

Total debt rose to $55.1 millionc and cash was $5.0 million at year-end, with net cash from operations of $46.9 million funding $58.1 million of acquisitions and $10.0 million of capital expenditures. Backlog grew to $80.0 million from $61.3 million. The company states it is targeting growth in fiscal 2007 net sales and earnings over fiscal 2006 results, and it reports that management and related parties beneficially owned approximately 35% of common stock.

02—Key points

Key Highlights

  1. Net sales rose 45.4% to $392.2 million in fiscal 2006, with the Flight Support Group at $277.3 million and the Electronic Technologies Group at $115.0 million.
  2. Operating income increased 49.8% to $66.9 million, and net income reached $31.9 million, or $1.20 per diluted share, compared with $.87 per diluted share in fiscal 2005.
  3. Gross profit margin decreased slightly to 36.3% from 37.5%, reflecting less favorable product mix in the Flight Support Group.
  4. Backlog of unshipped orders was $80.0 million at October 31, 2006, up from $61.3 million a year earlier, with substantially all expected to be delivered in fiscal 2007.
  5. Total debt increased to $55.1 million, mainly borrowings under a $130 million revolving credit facility used to fund $58.1 million of acquisitions in fiscal 2006.
  6. Net cash provided by operating activities was $46.9 million, and the company holds PMAs for over 5,000 jet engine and aircraft component replacement parts.
  7. Management and related parties beneficially owned approximately 35% of common stock as of January 23, 2006, giving them substantial influence over elections and control.

03—Questions

Frequently Asked Questions

  1. What drove HEICO's revenue growth in fiscal 2006?

    Net sales grew $122.5 million to $392.2 million. The filing attributes the Flight Support Group's $85.3 million increase to acquisitions of Seal LLC, Arger and Prime Air plus organic growth of approximately 14%, and the Electronic Technologies Group's $37.2 million increase to acquisitions of Connectronics, Lumina, HVT and EDT plus organic growth of approximately 8%.

  2. Did profitability improve?

    Yes. Operating income rose to $66.9 million from $44.6 million, and operating margin improved to 17.0% from 16.6%. Net income rose to $31.9 million from $22.8 million. Gross margin slipped to 36.3% from 37.5%, while SG&A fell as a percentage of sales to 19.3% from 20.9%.

  3. How is HEICO financing its acquisitions and what is its debt position?

    Acquisitions were principally funded in cash from the revolving credit facility. Total debt rose to $55.1 million from $34.1 million at October 31, 2005. The $130 million Amended and Restated Revolving Credit Agreement expires in August 2010 and can be increased to $175 million. Cash and cash equivalents were $5.0 million at year-end.

  4. What is HEICO's outlook for fiscal 2007?

    The company states that, based on current economic and market conditions and including recent acquisitions, it is targeting growth in fiscal 2007 net sales and earnings over fiscal 2006 results. It also plans to focus on new products, market penetration, additional acquisitions and maintaining financial strength.

  5. What are the main risks to the business?

    The filing cites dependence on aviation industry performance and downward cycles, government regulation including FAA approvals, reductions in defense or space spending (approximately 44% of Electronic Technologies Group sales came from military agencies and their suppliers in fiscal 2006), intense competition from OEMs, product liability exposure, reliance on acquisitions, and key personnel.

04—Continue

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