01—Abstract
Summary
Summary of the 10-K filed December 22, 2011. Cited figures are marked; the original filing is the authoritative source.
HEICO Corporation, through its subsidiaries, reports that it believes it is the world's largest manufacturer of FAA-approved jet engine and aircraft component replacement parts other than OEMs and their subcontractors, and a leading manufacturer of electronic equipment for the aviation, defense, space, industrial, medical and telecommunication markets.
Fiscal 2011 (year ended October 31, 2011) net sales rose 24% to a record $764.9 milliona from $617.0 million, and net income attributable to HEICO rose to a record $72.8 million, or $1.71 per diluted share, from $54.9 million, or $1.30 per diluted share. Operating income increased 27% to a record $138.4 million. The Flight Support Group produced $539.6 million in sales and $95.0 million in operating income, while the Electronic Technologies Group produced $227.8 million in sales and $59.5 million in operating income.
The company completed several acquisitions in fiscal 2011, including Blue Aerospace and 3D Plus SA, for aggregate cash cost of $94.7 millionb, and subsequently acquired Switchcraft, Inc. in November 2011 for approximately $143 million. Balance sheet capacity expanded in December 2011 when HEICO entered a $670 million unsecured revolving credit agreement maturing in December 2016, replacing its $300 million facility. At October 31, 2011, cash was $17.5 million, total debt was $40.2 million (6% of total capitalization), and approximately $262 million was available under the prior revolver.
Operating cash flow was $125.5 millionc. Backlog grew to $224 million from $142 million, driven largely by a five-year contract worth approximately $50 million at an Electronic Technologies Group subsidiary. Management is targeting growth in fiscal 2012 net sales and net income over fiscal 2011 levels.
02—Key points
Key Highlights
- Record fiscal 2011 net sales of $764.9 million, up 24% from $617.0 million in fiscal 2010.
- Record net income attributable to HEICO of $72.8 million, or $1.71 per diluted share, versus $54.9 million, or $1.30 per diluted share, in fiscal 2010.
- Flight Support Group net sales rose to $539.6 million with operating income of $95.0 million; Electronic Technologies Group net sales reached $227.8 million with operating income of $59.5 million.
- Backlog increased to $224 million at October 31, 2011 from $142 million a year earlier, including a five-year contract worth approximately $50 million at an Electronic Technologies Group subsidiary.
- Entered a $670 million Revolving Credit Agreement in December 2011, maturing December 2016 and expandable by $130 million, replacing the $300 million facility.
- Acquisitions totaled $94.7 million in cash in fiscal 2011, and the Switchcraft, Inc. acquisition for approximately $143 million closed in November 2011.
- Total debt was $40.2 million at October 31, 2011, or 6% of total capitalization, with $17.5 million in cash and approximately $262 million of unused revolver availability.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2011, Heico kept $0.10.
- Revenue$764.9M100.0%
- Cost of revenue−$490.4M64.1%
- Gross profit$274.4M35.9%
- Operating costs−$136.0M17.8%
- Operating income$138.4M18.1%
- Interest, other & tax−$65.6M8.6%
- Net income$72.8M9.5%
04—Financials
Financial Highlights
Figures from 10-KFY2011filed December 22, 2011Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $764.89M$617.02M | +24.0% |
| Cost of Revenue | $490.45M$394.67M | +24.3% |
| Gross Profit | $274.44M$222.35M | +23.4% |
| R&D Expenses | $25.40M$22.70M | +11.9% |
| SG&A Expenses | $136.01M$113.17M | +20.2% |
| Operating Expenses | $626.46M$507.85M | +23.4% |
| Operating Income | $138.43M$109.17M | +26.8% |
| Interest Expense | $142K$508K | −72.0% |
| Net Income | $72.82M$54.94M | +32.5% |
| EPS (Basic) | $1.12$1.07 | +4.7% |
| EPS (Diluted) | $1.10$1.04 | +5.8% |
| Shares Outstanding (Basic) | 65.05M51.30M | +26.8% |
| Shares Outstanding (Diluted) | 66.41M52.77M | +25.9% |
05—Questions
Frequently Asked Questions
How concentrated is HEICO's customer base?
No single customer accounted for 10% or more of total consolidated sales in any of the last three fiscal years. Net sales to the five largest customers were approximately 17% of total net sales in fiscal 2011.
How much of HEICO's revenue comes from outside the United States?
The company states that 34% of consolidated net sales in fiscal 2011 were derived from sales to foreign customers, and it markets its products in approximately 95 countries.
What are the main risks the filing highlights for investors?
Key risks include dependence on aviation industry performance and commercial air travel demand, reductions in U.S. or foreign defense, space or homeland security spending, government regulation (including FAA approvals), intense competition, the ability to execute its acquisition strategy, and the concentration of voting control among executive officers and directors, who beneficially owned approximately 21% of Common Stock and 6% of Class A Common Stock.
What did HEICO pay in dividends and how has the dividend changed?
In July 2011 HEICO paid a semi-annual cash dividend of $.06 per share, a 25% increase over the prior $.048 amount, bringing the annual rate to $.12. In December 2011 the Board declared another semi-annual dividend of $.06 per share payable in January 2012.
What is the outlook for fiscal 2012?
Management said it will focus on new products and services, market penetration, acquisitions and financial strength. It noted that economic uncertainty may moderate growth in commercial aviation markets while it expects overall stable markets for Electronic Technologies Group products, and it is targeting growth in fiscal 2012 net sales and net income over fiscal 2011 levels.
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