01—Abstract
Summary
Summary of the 10-K filed December 19, 2019. Cited figures are marked; the original filing is the authoritative source.
HEICO Corporation, through its subsidiaries, reported record fiscal 2019 results for the year ended October 31, 2019.
Net sales rose 16% to a record $2,055.6 milliona from $1,777.7 million in fiscal 2018, driven by the Electronic Technologies Group (ETG), whose net sales increased 19% to $834.5 million, and the Flight Support Group (FSG), whose net sales increased 13% to $1,240.2 million. Operating income increased 21% to a record $457.1 million, and net income attributable to HEICO increased to a record $327.9 million, or $2.39 per diluted share, from $259.2 million, or $1.90 per diluted share. Operating cash flow was $437.4 million, up from $328.5 million in fiscal 2018.
Growth was supported by acquisitions, with $240.8 millionb of cash paid for acquisitions, net of cash acquired, in fiscal 2019. Total debt including current portion was $562.0 million at October 31, 2019, with a total debt to total capitalization ratio of 25%, and the company had approximately $741 million of unused committed availability under its revolving credit facility as of December 17, 2019. Total backlog rose to $900 million from $783 million.
Management targets growth in fiscal 2020 full-year net sales and net income over fiscal 2019 levels, excluding additional acquisitions. Risk factors highlighted by the filing include dependence on the aviation industry cycle, defense and space budget reductions, foreign sales exposure (approximately 36%c of consolidated net sales), competition, and goodwill and intangible assets representing 61% of total assets. The company declared a semi-annual cash dividend of $.08 per share in December 2019, a 14% increase over the prior $.07 per share.
02—Key points
Key Highlights
- Record net sales of $2,055.6 million, up 16% from $1,777.7 million in fiscal 2018.
- Record operating income of $457.1 million, up 21%; operating margin rose to 22.2% from 21.2%.
- Net income attributable to HEICO reached a record $327.9 million, or $2.39 per diluted share, versus $1.90 in fiscal 2018.
- ETG net sales rose 19% to a record $834.5 million; FSG net sales rose 13% to a record $1,240.2 million.
- Net cash provided by operating activities was $437.4 million, up from $328.5 million, while $240.8 million was spent on acquisitions, net of cash acquired.
- Total backlog increased to $900 million as of October 31, 2019, from $783 million a year earlier.
- Total debt was $562.0 million, a 25% debt-to-total-capitalization ratio; the board declared a $.08 semi-annual dividend, a 14% increase.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, Heico kept $0.16.
- Revenue$2.06B100.0%
- Cost of revenue−$1.24B60.4%
- Gross profit$813.8M39.6%
- Operating costs−$356.7M17.4%
- Operating income$457.1M22.2%
- Interest, other & tax−$129.2M6.3%
- Net income$327.9M16.0%
04—Financials
Financial Highlights
Figures from 10-KFY2019filed December 19, 2019Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $2.06B$1.78B | +15.6% |
| Cost of Revenue | $1.24B$1.09B | +14.2% |
| Gross Profit | $813.84M$690.72M | +17.8% |
| R&D Expenses | $66.63M$57.45M | +16.0% |
| SG&A Expenses | $356.74M$314.47M | +13.4% |
| Operating Expenses | $1.60B$1.40B | +14.1% |
| Operating Income | $457.10M$376.25M | +21.5% |
| Interest Expense | $21.70M$19.90M | +9.0% |
| Net Income | $327.90M$259.23M | +26.5% |
| EPS (Basic) | $2.45$1.96 | +25.0% |
| EPS (Diluted) | $2.39$1.90 | +25.8% |
| Shares Outstanding (Basic) | 133.64M132.54M | +0.8% |
| Shares Outstanding (Diluted) | 137.35M136.70M | +0.5% |
05—Questions
Frequently Asked Questions
How did HEICO's revenue and profitability perform in fiscal 2019?
Net sales increased 16% to a record $2,055.6 million, operating income rose 21% to a record $457.1 million, and net income attributable to HEICO rose to a record $327.9 million, or $2.39 per diluted share. Gross profit margin increased to 39.6% from 38.9%.
What are HEICO's two operating segments and how did they contribute?
The Flight Support Group accounted for 60% of fiscal 2019 net sales and the Electronic Technologies Group for 40%. FSG net sales were $1,240.2 million with operating income of $242.0 million; ETG net sales were $834.5 million with operating income of $245.7 million.
How is HEICO financing its growth and what is its debt position?
The company relies mainly on operating cash flow and its $1.3 billion revolving credit facility, which matures in November 2022. Total debt including current portion was $562.0 million as of October 31, 2019, and the company had approximately $741 million of unused committed availability as of December 17, 2019.
What is HEICO's outlook for fiscal 2020?
Management is targeting growth in fiscal 2020 full-year net sales and net income over fiscal 2019 levels, excluding the impact of additional acquired businesses. It expects growth in the FSG's commercial aviation and defense product lines and across the ETG, and plans capital expenditures of approximately $42 million.
What are the main risks investors should consider?
Key risks include dependence on the aviation industry cycle, reductions in defense, space or homeland security spending, risks from foreign sales (approximately 36% of fiscal 2019 consolidated net sales), intense competition, and goodwill and intangible assets, which represented 61% of total assets as of October 31, 2019.
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