Heico Corp 10-Q for FY2020 Q3

Heico Corp (HEI)

10-Q 2020-08-27 For: 2020-07-31

Added on April 07, 2026

About this 10-Q

Heico Corp filed this 10-Q on August 27, 2020, covering the quarter ended July 31, 2020 (FY2020 Q3).

Headline figures

Quarter ended July 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $386.41M; down 27.4% from $532.32M a year earlier
Net income: $54.32M; down 33.0% from net income of $81.1M a year earlier
Diluted EPS: $0.40; down 32.2% from $0.59 a year earlier

Search and read filings like this one from Claude or ChatGPT with the SEC filings MCP server →


☒						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

						For the quarterly period ended July 31, 2020

						OR

☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

						For the transition period from ______ to _______


Florida						65-0341002
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

3000 Taft Street, Hollywood, Florida						33021
(Address of principal executive offices)						(Zip Code)


Common Stock, $.01 par value	54,189,223	shares
Class A Common Stock, $.01 par value	80,753,663	shares


	July 31, 2020	October 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$395,278	$57,001
Accounts receivable, net	181,134	274,326
Contract assets	59,113	43,132
Inventories, net	473,104	420,319
Prepaid expenses and other current assets	32,115	18,953
Total current assets	1,140,744	813,731

Property, plant and equipment, net	170,340	173,345
Goodwill	1,320,047	1,268,703
Intangible assets, net	542,674	550,693
Other assets	249,445	162,739
Total assets	$3,423,250	$2,969,211

LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt	$1,073	$906
Trade accounts payable	80,548	106,225
Accrued expenses and other current liabilities	146,288	178,957
Income taxes payable	1,733	3,050
Total current liabilities	229,642	289,138

Long-term debt, net of current maturities	739,016	561,049
Deferred income taxes	45,869	51,496
Other long-term liabilities	252,372	184,604
Total liabilities	1,266,899	1,086,287

Commitments and contingencies (Note 12)

Redeemable noncontrolling interests (Note 3)	204,139	188,264

Shareholders’ equity:
Preferred Stock, $.01 par value per share; 10,000 shares authorized; none issued	—	—
Common Stock, $.01 par value per share; 150,000 shares authorized; 54,189 and 54,143 shares issued and outstanding	542	541
Class A Common Stock, $.01 par value per share; 150,000 shares authorized; 80,741 and 80,353 shares issued and outstanding	807	804
Capital in excess of par value	301,532	284,609
Deferred compensation obligation	4,232	4,232
HEICO stock held by irrevocable trust	(4,232)	(4,232)
Accumulated other comprehensive loss	(4,451)	(16,739)
Retained earnings	1,623,285	1,397,327
Total HEICO shareholders’ equity	1,921,715	1,666,542
Noncontrolling interests	30,497	28,118
Total shareholders’ equity	1,952,212	1,694,660
Total liabilities and equity	$3,423,250	$2,969,211


	Nine months ended July 31,			Three months ended July 31,
	2020	2019	2020	2019

Net sales	$1,360,831	$1,514,118	$386,410	$532,324

Operating costs and expenses:
Cost of sales	840,411	909,663	242,927	319,493
Selling, general and administrative expenses	232,835	267,911	75,049	93,417

Total operating costs and expenses	1,073,246	1,177,574	317,976	412,910

Operating income	287,585	336,544	68,434	119,414

Interest expense	(10,644)	(16,496)	(2,602)	(5,523)
Other income	934	2,420	632	268

Income before income taxes and noncontrolling interests	277,875	322,468	66,464	114,159

Income tax expense	9,600	55,300	8,900	25,100

Net income from consolidated operations	268,275	267,168	57,564	89,059

Less: Net income attributable to noncontrolling interests	16,618	24,956	3,248	7,961

Net income attributable to HEICO	$251,657	$242,212	$54,316	$81,098

Net income per share attributable to HEICO shareholders:
Basic	$1.87	$1.82	$.40	$.61
Diluted	$1.83	$1.76	$.40	$.59

Weighted average number of common shares outstanding:
Basic	134,676	133,405	134,837	133,970
Diluted	137,257	137,273	137,234	137,634


		HEICO Shareholders' Equity
	Redeemable Noncontrolling Interests	Common Stock	Class A Common Stock	Capital in Excess of Par Value	Deferred Compensation Obligation	HEICO Stock Held by Irrevocable Trust	Accumulated Other Comprehensive Loss	Retained Earnings	Noncontrolling Interests	Total Shareholders' Equity
Balances as of October 31, 2019	$188,264	$541	$804	$284,609	$4,232	($4,232)	($16,739)	$1,397,327	$28,118	$1,694,660
Comprehensive income	12,556	—	—	—	—	—	12,288	251,657	4,568	268,513
Cash dividends ($.16 per share)	—	—	—	—	—	—	—	(21,552)	—	(21,552)
Issuance of common stock to HEICO Savings and Investment Plan	—	1	—	8,575	—	—	—	—	—	8,576
Share-based compensation expense	—	—	—	7,775	—	—	—	—	—	7,775
Proceeds from stock option exercises	—	—	4	5,341	—	—	—	—	—	5,345
Redemptions of common stock related to stock option exercises	—	—	(1)	(5,329)	—	—	—	—	—	(5,330)
Distributions to noncontrolling interests	(11,240)	—	—	—	—	—	—	—	(947)	(947)
Acquisitions of noncontrolling interests	(7,475)	—	—	—	—	—	—	—	—	—
Noncontrolling interests assumed related to acquisitions	16,471	—	—	—	—	—	—	—	—	—
Adjustments to redemption amount of redeemable noncontrolling interests	4,147	—	—	—	—	—	—	(4,147)	—	(4,147)
Other	1,416	—	—	561	—	—	—	—	(1,242)	(681)
Balances as of July 31, 2020	$204,139	$542	$807	$301,532	$4,232	($4,232)	($4,451)	$1,623,285	$30,497	$1,952,212


(in thousands)	July 31, 2020	October 31, 2019
Accounts receivable	$193,173	$277,992
Less: Allowance for doubtful accounts	(12,039)	(3,666)
Accounts receivable, net	$181,134	$274,326


	July 31, 2020	October 31, 2019
Redeemable at fair value	$154,074	$136,611
Redeemable based on a multiple of future earnings	50,065	51,653
Redeemable noncontrolling interests	$204,139	$188,264


	Foreign Currency Translation	Defined Benefit Pension Plan	Accumulated Other Comprehensive Loss
Balances as of October 31, 2019	($14,989)	($1,750)	($16,739)
Unrealized gain	12,228	—	12,228
Amortization of unrealized loss	—	60	60
Balances as of July 31, 2020	($2,761)	($1,690)	($4,451)


	Segment			Consolidated Totals
	FSG	ETG
Balances as of October 31, 2019	$410,044	$858,659	$1,268,703
Goodwill acquired	14,986	34,589	49,575
Foreign currency translation adjustments	3,425	2,878	6,303
Deconsolidation of subsidiary	—	(4,249)	(4,249)
Adjustments to goodwill	—	(285)	(285)
Balances as of July 31, 2020	$428,455	$891,592	$1,320,047


	As of July 31, 2020					As of October 31, 2019
	Gross Carrying Amount	Accumulated Amortization	Net Carrying Amount	Gross Carrying Amount	Accumulated Amortization	Net Carrying Amount
Amortizing Assets:
Customer relationships	$426,423	($189,469)	$236,954	$411,076	($162,722)	$248,354
Intellectual property	225,396	(80,220)	145,176	216,359	(70,169)	146,190
Licenses	6,559	(4,529)	2,030	6,559	(4,102)	2,457
Patents	1,048	(732)	316	986	(666)	320
Non-compete agreements	810	(810)	—	813	(813)	—
Trade names	450	(209)	241	450	(180)	270
	660,686	(275,969)	384,717	636,243	(238,652)	397,591
Non-Amortizing Assets:
Trade names	157,957	—	157,957	153,102	—	153,102
	$818,643	($275,969)	$542,674	$789,345	($238,652)	$550,693


	July 31, 2020	October 31, 2019
Borrowings under revolving credit facility	$730,000	$553,000
Finance leases and note payable	10,089	8,955
	740,089	561,955
Less: Current maturities of long-term debt	(1,073)	(906)
	$739,016	$561,049


	July 31, 2020	October 31, 2019	Change
Contract assets	$59,113	$43,132	$15,981
Contract liabilities	22,863	23,809	(946)
Net contract assets	$36,250	$19,323	$16,927


	As of July 31, 2020
	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total
Assets:
Deferred compensation plan:
Corporate-owned life insurance	$—	$176,921	$—	$176,921
Money market funds	1,011	—	—	1,011
Total assets	$1,011	$176,921	$—	$177,932

Liabilities:
Contingent consideration	$—	$—	$18,015	$18,015


	Fiscal 2017 Acquisition
Compound annual revenue growth rate range	(3	%)	-	10%
Weighted average discount rate	3.3%


(in thousands)	July 31, 2020	October 31, 2019
Finished products	$241,895	$199,880
Work in process	39,777	32,548
Materials, parts, assemblies and supplies	191,432	187,891
Inventories, net of valuation reserves	$473,104	$420,319


(in thousands)	July 31, 2020	October 31, 2019
Land	$6,922	$6,820
Buildings and improvements	122,405	116,997
Machinery, equipment and tooling	264,900	253,127
Construction in progress	9,593	8,382
	403,820	385,326
Less: Accumulated depreciation and amortization	(233,480)	(211,981)
Property, plant and equipment, net	$170,340	$173,345


	Nine months ended July 31,			Three months ended July 31,
	2020	2019	2020	2019
Flight Support Group:
Aftermarket replacement parts ⁽¹⁾	$412,088	$500,714	$102,629	$173,992
Repair and overhaul parts and services ⁽²⁾	154,517	216,887	32,601	76,270
Specialty products ⁽³⁾	164,584	197,879	42,928	69,754
Total net sales	731,189	915,480	178,158	320,016

Electronic Technologies Group:
Electronic component parts primarily for defense, space and aerospace equipment ⁽⁴⁾	494,864	459,445	165,189	160,031
Electronic component parts for equipment in various other industries ⁽⁵⁾	143,421	155,564	45,730	56,098
Total net sales	638,285	615,009	210,919	216,129

Intersegment sales	(8,643)	(16,371)	(2,667)	(3,821)

Total consolidated net sales	$1,360,831	$1,514,118	$386,410	$532,324


	Nine months ended July 31,			Three months ended July 31,
	2020	2019	2020	2019
Flight Support Group:
Aerospace	$543,205	$742,555	$114,627	$258,157
Defense and Space	157,664	137,272	53,269	49,769
Other ⁽¹⁾	30,320	35,653	10,262	12,090
Total net sales	731,189	915,480	178,158	320,016

Electronic Technologies Group:
Defense and Space	413,883	390,046	141,282	138,875
Other ⁽²⁾	167,861	162,063	55,155	56,525
Aerospace	56,541	62,900	14,482	20,729
Total net sales	638,285	615,009	210,919	216,129

Intersegment sales	(8,643)	(16,371)	(2,667)	(3,821)

Total consolidated net sales	$1,360,831	$1,514,118	$386,410	$532,324


						Liabilities
Balance as of October 31, 2019						$18,326
Increase in accrued contingent consideration, net						189
Payment of contingent consideration						(500)
Balance as of July 31, 2020						$18,015


			July 31, 2020
Right-of-use assets			$57,752

Current lease liabilities			$13,587
Long-term lease liabilities			45,232
Total operating lease liabilities			$58,819


	Nine months ended	Three months ended
	July 31, 2020	July 31, 2020
Operating lease expense	$12,855	$4,311


Variable lease expense	1,942	619
Total operating lease expense ⁽¹⁾	$14,797	$4,930


Year ending October 31,
2020			$3,639
2021			16,377
2022			14,394
2023			8,952
2024			5,115
2025			4,243
Thereafter			18,566
Total minimum lease payments			71,286
Less: amount representing interest			(12,467)
Present value of minimum lease payments			$58,819


	July 31, 2020
Weighted average remaining lease term (years)	7.0
Weighted average discount rate	5.1	%


			Nine months ended
			July 31, 2020
Cash paid for amounts included in the measurement of lease liabilities			$12,652
Right-of-use assets obtained in exchange for new lease liabilities			7,423


			Other,  Primarily Corporate and  Intersegment ⁽¹⁾	Consolidated Totals
	Segment
	FSG	ETG
Nine months ended July 31, 2020:
Net sales	$731,189	$638,285	($8,643)	$1,360,831
Depreciation	10,835	8,681	760	20,276
Amortization	14,720	29,484	738	44,942
Operating income	121,597	184,948	(18,960)	287,585
Capital expenditures	8,389	9,066	17	17,472

Nine months ended July 31, 2019:
Net sales	$915,480	$615,009	($16,371)	$1,514,118
Depreciation	10,225	8,117	754	19,096
Amortization	14,714	27,138	738	42,590
Operating income	179,843	181,160	(24,459)	336,544
Capital expenditures	12,600	9,008	63	21,671

Three months ended July 31, 2020:
Net sales	$178,158	$210,919	($2,667)	$386,410
Depreciation	3,590	2,872	249	6,711
Amortization	5,109	9,876	246	15,231
Operating income	12,021	61,931	(5,518)	68,434
Capital expenditures	1,624	3,401	12	5,037

Three months ended July 31, 2019:
Net sales	$320,016	$216,129	($3,821)	$532,324
Depreciation	3,467	2,722	251	6,440
Amortization	4,991	9,461	246	14,698
Operating income	64,797	62,206	(7,589)	119,414
Capital expenditures	6,024	2,996	55	9,075


			Other, Primarily Corporate	Consolidated Totals
	Segment
	FSG	ETG
Total assets as of July 31, 2020	$1,153,879	$1,741,959	$527,412	$3,423,250
Total assets as of October 31, 2019	1,149,737	1,643,032	176,442	2,969,211


Exhibit						Description
31.1						Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer. *

31.2						Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer. *

32.1						Section 1350 Certification of Chief Executive Officer. **

32.2						Section 1350 Certification of Chief Financial Officer. **

101.INS						Inline XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL Document. *

101.SCH						Inline XBRL Taxonomy Extension Schema Document. *

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document. *

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document. *

101.LAB						Inline XBRL Taxonomy Extension Labels Linkbase Document. *

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document. *

104						Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). *