01—Abstract
Summary
Summary of the 10-K filed December 23, 2009. Cited figures are marked; the original filing is the authoritative source.
HEICO Corporation (HEI) reported fiscal 2009 (year ended October 31, 2009) net sales of $538.3 milliona, down from $582.3 million in fiscal 2008, and net income of $44.6 million, or $1.65 per diluted share, versus $48.5 million, or $1.78 per diluted share, a year earlier.
The decline reflects lower demand in the Flight Support Group (FSG) from airline capacity cuts and cost-conserving by airlines, partially offset by growth in the Electronic Technologies Group (ETG), which benefited from acquisitions and defense-related demand. Operating income fell to $88.3 millionb from $105.8 million, with gross margin narrowing to 33.6% from 36.1%. A favorable IRS settlement added approximately $1.2 million to net income.
The company remains financially conservative, with cash of $7.2 millionc, total debt of $55.4 million (11% of total capitalization), and about $243 million of unused revolving credit availability as of October 31, 2009. Net cash from operating activities was $75.8 million.
Management said it expects to be able to fund cash requirements for the foreseeable future and is targeting growth in net sales, earnings and operating cash flow in fiscal 2010. The company spent $71.1 milliond on acquisitions in fiscal 2009, including VPT, Inc. and the Seacom division of Dukane Corp., and declared a regular semi-annual dividend of $.06 per share, with the annual dividend rate of $.12 representing a 20% increase over the prior year.
02—Key points
Key Highlights
- Net sales fell 7.6% to $538.3 million, with the FSG down 9.5% to $395.4 million and the ETG down 1.8% to $143.4 million.
- Operating income decreased 16.6% to $88.3 million; operating margin declined to 16.4% from 18.2%, driven by lower FSG margins.
- Net income was $44.6 million ($1.65 per diluted share), compared with $48.5 million ($1.78 per diluted share) in fiscal 2008; results included an IRS settlement benefit of about $1.2 million.
- Backlog totaled $104.5 million at October 31, 2009, down from $107.1 million; FSG backlog fell to $32.9 million while ETG backlog rose to $71.6 million.
- Balance sheet remains modest: total debt of $55.4 million, shareholders' equity of $457.9 million, and $243 million of unused revolving credit availability.
- Acquisitions totaled $71.1 million in fiscal 2009, including VPT, Inc. (82.5% interest) and the Seacom division of Dukane Corp.
- Dividends: a regular semi-annual cash dividend of $.06 per share was declared in December 2009, bringing the annual rate to $.12 per share.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2009, Heico kept $0.08.
- Revenue$538.3M100.0%
- Cost of revenue−$357.3M66.4%
- Gross profit$181.0M33.6%
- Operating costs−$92.8M17.2%
- Operating income$88.3M16.4%
- Interest, other & tax−$43.6M8.1%
- Net income$44.6M8.3%
04—Financials
Financial Highlights
Figures from 10-KFY2009filed December 23, 2009Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $538.30M$582.35M | −7.6% |
| Cost of Revenue | $357.29M$371.85M | −3.9% |
| Gross Profit | $181.01M$210.50M | −14.0% |
| R&D Expenses | $19.70M— | — |
| SG&A Expenses | $92.76M$104.71M | −11.4% |
| Operating Expenses | $450.04M$476.56M | −5.6% |
| Operating Income | $88.25M$105.79M | −16.6% |
| Interest Expense | $615K$2.31M | −73.4% |
| Net Income | $44.63M$48.51M | −8.0% |
| EPS (Basic) | $1.09$1.48 | −26.4% |
| EPS (Diluted) | $1.06$1.42 | −25.4% |
| Shares Outstanding (Basic) | 40.94M32.89M | +24.5% |
| Shares Outstanding (Diluted) | 42.23M34.05M | +24.0% |
05—Questions
Frequently Asked Questions
Why did HEICO's sales and operating income decline in fiscal 2009?
The Flight Support Group's sales fell 9.5% as airline capacity cuts and airline efforts to reduce spending lowered demand for aftermarket replacement parts and repair and overhaul services. Gross margin also declined to 33.6% from 36.1%, mainly due to less favorable FSG product mix and lower volumes spread over fixed manufacturing costs.
How did the Electronic Technologies Group perform?
ETG net sales declined slightly by 1.8% to $143.4 million, but acquisitions contributed approximately $17 million. Defense-related businesses, including space and homeland security products, showed some strength, while medical, telecommunication and certain electronic products were weaker. ETG operating income rose 3.1% to $40.0 million.
What is HEICO's financial position and liquidity?
At October 31, 2009, HEICO had cash of $7.2 million and total debt of $55.4 million, equal to 11% of total capitalization. It had about $243 million of unused availability under its $300 million revolving credit facility, which matures in May 2013. Management believes operating cash flow and available borrowings will fund cash requirements for the foreseeable future.
What is management's outlook for fiscal 2010?
Management said HEICO will continue focusing on new products and services, market penetration, acquisitions and financial strength. It is targeting growth in net sales, earnings and net cash provided by operating activities in fiscal 2010 over fiscal 2009, despite uncertainty about the duration of the global economic recession.
How much exposure does HEICO have to the defense market and to its largest customers?
About 46% of ETG's fiscal 2009 sales came from defense products and services sold to U.S. and foreign military agencies. Overall, about 20% of total net sales were from the five largest customers, and no single customer accounted for 10% or more of consolidated sales in any of the last three fiscal years.
06—Continue