01—Abstract
Summary
Summary of the 10-K filed December 20, 2012. Cited figures are marked; the original filing is the authoritative source.
HEICO Corporation (HEI) reported record fiscal 2012 results for the year ended October 31, 2012.
Net sales rose 17% to a record $897.3 milliona from $764.9 million, operating income increased 18% to a record $163.3 million, and net income attributable to HEICO reached a record $85.1 million, or $1.60 per diluted share, versus $72.8 million, or $1.37 per diluted share, in fiscal 2011. Growth came from both segments: the Electronic Technologies Group (ETG) grew net sales 46% to $331.6 million, driven largely by the Switchcraft, 3D Plus, Ramona Research and Moritz Aerospace acquisitions, while the Flight Support Group (FSG) grew 6% to $570.3 million. Gross margin improved to 36.5% from 35.9%, and net cash provided by operating activities was $138.6 million.
Total debt rose to $131.8 millionb from $40.2 million, mainly to fund acquisitions totaling $197.3 million in cash during fiscal 2012. The company's balance sheet remains conservative: total debt to total capitalization was 15%, and roughly $541 million was unused under the $670 million revolving credit facility, which was extended to December 2017 on December 11, 2012. Management's outlook targets growth in fiscal 2013 net sales and net income over fiscal 2012 levels, while noting that possible U.S. defense and space spending reductions could modestly reduce ETG organic growth.
Backlog stood at $252 millionc at October 31, 2012, up from $224 million. A key near-term item for shareholders is a special and extraordinary cash dividend, increased from $1.14 to $2.14 per share on both classes of common stock, aggregating approximately $117 million, funded by revolver borrowings and paid in December 2012 ahead of expected 2013 tax increases.
The company also accelerated its regular semi-annual $.06 dividend into December 2012. Risk factors highlighted by the filing include dependence on the aviation industry cycle, FAA regulation, customer concentration within defense spending, foreign sales exposure (33%d of consolidated net sales), and the execution risk of its acquisition strategy.
02—Key points
Key Highlights
- Record fiscal 2012 net sales of $897.3 million, up 17% from $764.9 million, with net income attributable to HEICO of $85.1 million ($1.60 diluted EPS) versus $1.37 in fiscal 2011.
- Electronic Technologies Group net sales rose 46% to a record $331.6 million, principally from acquisitions of 3D Plus, Switchcraft, Ramona Research and Moritz Aerospace; Flight Support Group net sales grew 6% to $570.3 million.
- Gross profit margin improved to 36.5% from 35.9%; operating income rose 18% to a record $163.3 million.
- Acquisitions totaled $197.3 million in cash in fiscal 2012, including Switchcraft at approximately $142.7 million net of cash acquired; total debt increased to $131.8 million from $40.2 million.
- Special and extraordinary dividend increased to $2.14 per share (about $117 million total), paid in December 2012, plus the regular $.06 semi-annual dividend accelerated into December 2012.
- Backlog of unshipped orders was $252 million at October 31, 2012, compared with $224 million a year earlier; about $541 million was available under the revolving credit facility.
- Management targets fiscal 2013 net sales and net income growth over fiscal 2012 levels, while flagging possible modest organic growth decreases in ETG from U.S. defense spending reductions.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2012, Heico kept $0.09.
- Revenue$897.3M100.0%
- Cost of revenue−$569.9M63.5%
- Gross profit$327.4M36.5%
- Operating costs−$164.1M18.3%
- Operating income$163.3M18.2%
- Interest, other & tax−$78.1M8.7%
- Net income$85.1M9.5%
04—Financials
Financial Highlights
Figures from 10-KFY2012filed December 20, 2012Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $897.35M$764.89M | +17.3% |
| Cost of Revenue | $569.91M$490.45M | +16.2% |
| Gross Profit | $327.44M$274.44M | +19.3% |
| R&D Expenses | $30.39M$25.40M | +19.7% |
| SG&A Expenses | $164.14M$136.01M | +20.7% |
| Operating Expenses | $734.05M$626.46M | +17.2% |
| Operating Income | $163.29M$138.43M | +18.0% |
| Interest Expense | $2.43M$142K | +1612.7% |
| Net Income | $85.15M$72.82M | +16.9% |
| EPS (Basic) | $1.29$1.12 | +15.2% |
| EPS (Diluted) | $1.28$1.10 | +16.4% |
| Shares Outstanding (Basic) | 65.86M65.05M | +1.2% |
| Shares Outstanding (Diluted) | 66.62M66.41M | +0.3% |
05—Questions
Frequently Asked Questions
How did HEICO's revenue and earnings perform in fiscal 2012?
Net sales increased 17% to a record $897.3 million, operating income rose 18% to a record $163.3 million, and net income attributable to HEICO was a record $85.1 million, or $1.60 per diluted share, compared with $72.8 million, or $1.37 per diluted share, in fiscal 2011.
What drove growth in the Electronic Technologies Group?
ETG net sales increased $103.8 million (46%) to a record $331.6 million. The filing attributes about $87.4 million of the increase to acquisitions of 3D Plus, Switchcraft, Ramona Research and Moritz Aerospace, with organic growth of approximately 7%.
How is HEICO funding its acquisitions and the special dividend?
Acquisitions were paid mainly in cash using revolving credit facility proceeds, totaling $197.3 million in fiscal 2012. The special and extraordinary dividend of approximately $117 million will be funded from borrowings under the revolving credit facility, which had about $541 million of unused availability at October 31, 2012.
What are the main risks identified in the filing?
Key risks include dependence on the aviation industry and commercial air travel demand, FAA and other government regulation, reductions in U.S. or foreign defense, space or homeland security spending, risks of sales to foreign customers (33% of fiscal 2012 consolidated net sales), intense competition, and the ability to execute the acquisition strategy and integrate acquired businesses.
What is management's outlook for fiscal 2013?
Management is targeting growth in fiscal 2013 full-year net sales and net income over fiscal 2012 levels, expects stable markets for most ETG products, and warns that threatened U.S. defense and space spending reductions could cause modest decreases in ETG organic growth. Fiscal 2013 capital expenditures are anticipated to be approximately $18 to $20 million.
06—Continue