01—Abstract
Summary
Summary of the 10-K filed December 22, 2010. Cited figures are marked; the original filing is the authoritative source.
HEICO Corporation (HEI) reported record fiscal 2010 results for the year ended October 31, 2010.
Net sales rose 14.6% to a record $617.0 milliona from $538.3 million in fiscal 2009, driven by the Electronic Technologies Group (ETG), whose sales increased 43.4% to $205.6 million on acquisitions and organic growth of approximately 12%. The Flight Support Group (FSG) grew 4.3% to $412.3 million, entirely organically. Operating income rose 23.7% to a record $109.2 million, with the operating margin improving to 17.7% from 16.4%, helped by a higher FSG gross margin from a more favorable product mix.
Net income attributable to HEICO was a record $54.9 millionb, or $1.62 per diluted share, versus $44.6 million, or $1.32 per diluted share, a year earlier. Net cash provided by operating activities was $101.7 million. The balance sheet strengthened over the year.
Total debt fell to $14.2 millionc from $55.4 million, and total debt to total capitalization dropped to 2% from 10%. The company had approximately $284 million of unused availability under its $300 million revolving credit facility, which matures in May 2013. Backlog grew to $142.5 million from $104.5 million.
Management is targeting growth in fiscal 2011 net sales and net income over fiscal 2010 levels, citing an expected increase in commercial airline capacity. Key risks include dependence on the aviation industry, defense and homeland security budgets, and foreign sales, which made up 31%d of consolidated net sales.
Redeemable noncontrolling interests totaled $55.0 million, with put rights that could require cash purchases beginning in fiscal 2011. Management's estimate of the aggregate redemption amount is approximately $55 million, and contingent acquisition consideration could total roughly $91 million at maximum, with an estimated $9 million expected to be paid.
02—Key points
Key Highlights
- Record net sales of $617.0 million, up 14.6% from $538.3 million in fiscal 2009.
- Record net income attributable to HEICO of $54.9 million, or $1.62 per diluted share, versus $1.32 in fiscal 2009.
- Electronic Technologies Group sales rose 43.4% to a record $205.6 million; Flight Support Group sales rose 4.3% to $412.3 million, entirely organic.
- Consolidated gross profit margin improved to 36.0% from 33.6%, and operating income reached a record $109.2 million (17.7% of net sales).
- Total debt was reduced to $14.2 million from $55.4 million, with total debt to total capitalization falling to 2% from 10%.
- Backlog of unshipped orders increased to $142.5 million from $104.5 million; substantially all is expected to ship in fiscal 2011.
- Quarterly dividend increased 25% to $.06 per share; the company paid its 64th consecutive semi-annual dividend in July 2010.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2010, Heico kept $0.09.
- Revenue$617.0M100.0%
- Cost of revenue−$394.7M64.0%
- Gross profit$222.3M36.0%
- Operating costs−$113.2M18.3%
- Operating income$109.2M17.7%
- Interest, other & tax−$54.2M8.8%
- Net income$54.9M8.9%
04—Financials
Financial Highlights
Figures from 10-KFY2010filed December 22, 2010Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $617.02M$538.30M | +14.6% |
| Cost of Revenue | $394.67M$357.29M | +10.5% |
| Gross Profit | $222.35M$181.01M | +22.8% |
| R&D Expenses | $22.70M$19.70M | +15.2% |
| SG&A Expenses | $113.17M$92.76M | +22.0% |
| Operating Expenses | $507.85M$450.04M | +12.8% |
| Operating Income | $109.17M$88.25M | +23.7% |
| Interest Expense | $508K$615K | −17.4% |
| Net Income | $54.94M$44.63M | +23.1% |
| EPS (Basic) | $1.07$1.09 | −1.8% |
| EPS (Diluted) | $1.04$1.06 | −1.9% |
| Shares Outstanding (Basic) | 51.30M40.94M | +25.3% |
| Shares Outstanding (Diluted) | 52.77M42.23M | +25.0% |
05—Questions
Frequently Asked Questions
How did HEICO perform financially in fiscal 2010?
HEICO reported record net sales of $617.0 million, record operating income of $109.2 million, and record net income attributable to HEICO of $54.9 million, or $1.62 per diluted share. Sales increased 14.6% over fiscal 2009, and operating income increased 23.7%.
Which segment drove growth in fiscal 2010?
The Electronic Technologies Group drove most of the growth, with net sales up 43.4% to $205.6 million, including roughly $40 million from a February 2010 acquisition and two fiscal 2009 acquisitions, as well as organic growth of approximately 12%. The Flight Support Group's sales rose 4.3% to $412.3 million on organic growth.
What is HEICO's outlook for fiscal 2011?
Management said that, as the commercial airline industry expects an increase in capacity during 2011, it is targeting growth in fiscal 2011 full-year net sales and net income over fiscal 2010 levels. It also described increasing demand for some commercial electronic products and stable demand for defense products.
How strong is HEICO's balance sheet and liquidity?
As of October 31, 2010, the company had $6.5 million of cash and cash equivalents, total debt of $14.2 million, and shareholders' equity of $554.8 million. It also had approximately $284 million of unused availability under its revolving credit facility, and management believes operating cash flow and borrowings will be sufficient for at least the next twelve months.
What are the main risks to HEICO's business?
The filing cites dependence on the aviation industry and commercial air travel, reductions in defense, space, or homeland security spending, and risks from foreign sales, which were 31% of consolidated net sales. It also notes intense competition, product liability and environmental liabilities, and the need to keep successfully executing its acquisition strategy.
06—Continue