01—Abstract
Summary
Summary of the 10-K filed December 17, 2015. Cited figures are marked; the original filing is the authoritative source.
HEICO Corporation's fiscal 2015 annual report (year ended October 31, 2015) shows record results.
Net sales rose to $1,188.6 milliona from $1,132.3 million, and net income attributable to HEICO increased to a record $133.4 million, or $1.97 per diluted share, from $121.3 million, or $1.80 per diluted share. Operating income reached a record $229.7 million, up from $203.4 million. The Flight Support Group produced $809.7 million in net sales and $149.8 million in operating income, while the Electronic Technologies Group produced $391.0 million in net sales and $98.8 million in operating income.
The filing states that the company is targeting growth in fiscal 2016 full-year net sales and net income over fiscal 2015 levels. Growth was supported by acquisitions. The company paid $166.8 millionb in cash for fiscal 2015 acquisitions, funded principally from its revolving credit facility, and total debt rose to $367.6 million from $329.1 million.
As of October 31, 2015, the company was in compliance with all covenants, and about $440 millionc of unused committed availability remained under its revolving credit facility as of December 15, 2015. Total backlog was $349 million, up from $291 million a year earlier. The filing also highlights concentration and risk factors.
Approximately 56%d of Electronic Technologies Group sales came from defense, space and homeland security markets, and about 34% of consolidated net sales came from foreign customers. Insiders beneficially owned approximately 22% of Common Stock and about 6% of Class A Common Stock as of December 15, 2015. The Board declared a semi-annual cash dividend of $.08 per share payable in January 2016.
02—Key points
Key Highlights
- Record net sales of $1,188.6 million in fiscal 2015, up from $1,132.3 million in fiscal 2014.
- Record net income attributable to HEICO of $133.4 million, or $1.97 per diluted share, versus $1.80 per diluted share in fiscal 2014.
- Record operating income of $229.7 million, up from $203.4 million, with gross profit margin rising to 36.5% from 35.2%.
- Flight Support Group net sales of $809.7 million and operating income of $149.8 million; Electronic Technologies Group net sales of $391.0 million and operating income of $98.8 million.
- Acquisitions totaling $166.8 million in cash during fiscal 2015 were funded principally from the revolving credit facility, lifting total debt to $367.6 million.
- Total backlog of unshipped orders rose to $349 million as of October 31, 2015, from $291 million a year earlier.
- Semi-annual cash dividend increased to $.08 per share, declared in December 2015 and payable in January 2016.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, Heico kept $0.11.
- Revenue$1.19B100.0%
- Cost of revenue−$754.5M63.5%
- Gross profit$434.2M36.5%
- Operating costs−$204.5M17.2%
- Operating income$229.7M19.3%
- Interest, other & tax−$96.3M8.1%
- Net income$133.4M11.2%
04—Financials
Financial Highlights
Figures from 10-KFY2015filed December 17, 2015Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $1.19B$1.13B | +5.0% |
| Cost of Revenue | $754.47M$734.00M | +2.8% |
| Gross Profit | $434.18M$398.31M | +9.0% |
| R&D Expenses | $38.75M$37.38M | +3.7% |
| SG&A Expenses | $204.52M$194.92M | +4.9% |
| Operating Expenses | $958.99M$928.92M | +3.2% |
| Operating Income | $229.66M$203.39M | +12.9% |
| Interest Expense | $4.63M$5.44M | −15.0% |
| Net Income | $133.36M$121.29M | +10.0% |
| EPS (Basic) | $1.60$1.82 | −12.1% |
| EPS (Diluted) | $1.57$1.80 | −12.8% |
| Shares Outstanding (Basic) | 83.42M66.46M | +25.5% |
| Shares Outstanding (Diluted) | 84.76M67.45M | +25.7% |
05—Questions
Frequently Asked Questions
What drove HEICO's record fiscal 2015 results?
The filing attributes the increase in net sales principally to $54.9 million in net sales from fiscal 2015 acquisitions within the Flight Support Group, plus $11.4 million of additional aftermarket replacement parts and repair and overhaul sales. Operating income also benefited from an improved gross profit margin and a $15.0 million impact from prior-year intangible asset impairment losses that did not recur.
How is HEICO financing its acquisitions and what is its debt position?
The company paid for its acquisitions in cash principally using proceeds from its revolving credit facility. Total debt including current portion was $367.6 million as of October 31, 2015, versus $329.1 million a year earlier, and consisted almost entirely of $365.2 million of revolving credit borrowings. The company reported $440 million of unused committed availability as of December 15, 2015, and said it believes operating cash flow and borrowings will fund cash requirements for at least the next twelve months.
What does management expect for fiscal 2016?
Management said it anticipates net sales growth within Flight Support Group product lines serving commercial aviation and defense markets, and growth in the Electronic Technologies Group compared with fiscal 2015, moderated by lower demand for certain space-related products. The company is targeting growth in full-year fiscal 2016 net sales and net income over fiscal 2015 levels, and expects capital expenditures of approximately $30 million.
What are the main risks highlighted in the filing?
Key risks include dependence on the aviation industry and its cyclical downturns, government regulation by the FAA, and reductions in defense, space or homeland security spending, which affect about 56% of Electronic Technologies Group sales. About 34% of consolidated net sales came from foreign customers, exposing the company to currency, political and export-license risks. The filing also notes that its executive officers and directors, together with related entities and the 401(k) plan, beneficially owned about 22% of Common Stock and about 6% of Class A Common Stock.
06—Continue