01—Abstract
Summary
Summary of the 10-K filed December 18, 2014. Cited figures are marked; the original filing is the authoritative source.
HEICO Corporation's fiscal 2014 Form 10-K (year ended October 31, 2014) reports record net sales of $1,132.3 milliona, up from $1,008.8 million in fiscal 2013, and record net income attributable to HEICO of $121.3 million, or $1.80 per diluted share, versus $102.4 million, or $1.53 per diluted share, a year earlier.
Operating income rose to a record $203.4 millionb, though the operating margin eased to 18.0% from 18.2%. The Flight Support Group (67% of net sales) produced record sales of $762.8 million and operating income of $136.5 million, while the Electronic Technologies Group (33% of net sales) posted sales of $379.4 million and operating income of $88.9 million. The ETG's results were weighed down by a $15.0 million impairment of intangible assets, offset in part by a $28.1 million reduction in accrued contingent consideration.
Cash flow from operations was $190.7 millionc, up from $131.8 million, supported by a $47.0 million decrease in working capital. Total debt fell to $329.1 million from $377.5 million, and cash and cash equivalents ended the year at $20.2 million. Management noted approximately $480 million of unused availability under its revolving credit facility as of December 16, 2014, and said it expects that availability plus operating cash flow to fund requirements for at least the next twelve months.
For fiscal 2015, management anticipates continued growth in the FSG's aftermarket and repair businesses, improved demand in the ETG, and targets growth in full-year net sales and net income over fiscal 2014 levels. Total backlog was $291 milliond at October 31, 2014, versus $305 million a year earlier, with the ETG backlog declining to $156 million from $190 million due to reduced contract scope for one long-term defense customer. The company completed the acquisition of the 20% noncontrolling interest held by Lufthansa Technik AG in four HEICO Aerospace subsidiaries in February 2014, paying a dividend of $67.4 million.
02—Key points
Key Highlights
- Record net sales of $1,132.3 million (up from $1,008.8 million) and record net income attributable to HEICO of $121.3 million, or $1.80 per diluted share.
- Flight Support Group net sales reached a record $762.8 million with operating income of $136.5 million; Electronic Technologies Group net sales were $379.4 million with operating income of $88.9 million.
- Operating income of $203.4 million was a record, but operating margin slipped to 18.0% from 18.2%, reflecting a $15.0 million net impairment in the ETG (net of a $28.1 million contingent consideration reduction).
- Net cash provided by operating activities rose to $190.7 million from $131.8 million, aided by a $47.0 million decrease in working capital.
- Total debt declined to $329.1 million from $377.5 million; the $326.0 million revolving credit balance matures in fiscal 2019, and about $480 million of unused availability remained as of December 16, 2014.
- Total backlog was $291 million versus $305 million a year earlier, with the ETG backlog down to $156 million from $190 million due to reduced scope on a long-term defense contract.
- Fiscal 2015 outlook targets growth in full-year net sales and net income over fiscal 2014, with capital expenditures anticipated to approximate $25 million.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2014, Heico kept $0.11.
- Revenue$1.13B100.0%
- Cost of revenue−$734.0M64.8%
- Gross profit$398.3M35.2%
- Operating costs−$194.9M17.2%
- Operating income$203.4M18.0%
- Interest, other & tax−$82.1M7.3%
- Net income$121.3M10.7%
04—Financials
Financial Highlights
Figures from 10-KFY2014filed December 18, 2014Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $1.13B$1.01B | +12.2% |
| Cost of Revenue | $734.00M$637.58M | +15.1% |
| Gross Profit | $398.31M$371.18M | +7.3% |
| R&D Expenses | $37.38M$32.90M | +13.6% |
| SG&A Expenses | $194.92M$187.59M | +3.9% |
| Operating Expenses | $928.92M$825.17M | +12.6% |
| Operating Income | $203.39M$183.59M | +10.8% |
| Interest Expense | $5.44M$3.72M | +46.4% |
| Net Income | $121.29M$102.40M | +18.5% |
| EPS (Basic) | $1.82$1.54 | +18.2% |
| EPS (Diluted) | $1.80$1.53 | +17.6% |
| Shares Outstanding (Basic) | 66.46M66.30M | +0.2% |
| Shares Outstanding (Diluted) | 67.45M66.98M | +0.7% |
05—Questions
Frequently Asked Questions
How did HEICO perform financially in fiscal 2014?
HEICO reported record net sales of $1,132.3 million, up from $1,008.8 million in fiscal 2013, and record net income attributable to HEICO of $121.3 million, or $1.80 per diluted share, compared with $102.4 million, or $1.53 per diluted share, the prior year. Operating income also reached a record $203.4 million.
Which business segment drove the most growth?
The Flight Support Group drove most of the growth, with net sales rising 15% to a record $762.8 million and operating income increasing 12% to $136.5 million. The Electronic Technologies Group's net sales rose 8% to $379.4 million, and its operating income rose 7% to $88.9 million, though its gross margin declined and it recorded impairment losses.
What were the main factors affecting the Electronic Technologies Group's profitability?
The ETG's gross profit margin fell by 4.2% principally due to a less favorable product mix for certain space and defense products. The segment also recorded $15.0 million of intangible asset impairment losses tied to fiscal 2012 and 2013 acquisitions, reflecting less favorable projected market conditions for certain space and defense products. These were partly offset by a $28.1 million reduction in accrued contingent consideration.
How is HEICO's balance sheet and liquidity position?
Total debt decreased to $329.1 million from $377.5 million, and total debt to total capitalization was 30%, down from 34%. Cash and cash equivalents were $20.2 million at year end. Management stated that about $480 million was available under its revolving credit facility as of December 16, 2014, and that this and operating cash flow should be sufficient for at least the next twelve months. The company was in compliance with all covenants as of October 31, 2014.
What is management's outlook for fiscal 2015?
Management anticipates continued growth in the Flight Support Group's aftermarket replacement parts and repair and overhaul services, partly offset by declines in certain industrial products within specialty products lines. It expects improved demand and moderate growth in the Electronic Technologies Group. The company is targeting growth in full-year fiscal 2015 net sales and net income over fiscal 2014 levels and expects capital expenditures of approximately $25 million.
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