Heico Corp 10-Q for FY2021 Q3

Heico Corp (HEI)

10-Q 2021-08-26 For: 2021-07-31

Added on April 07, 2026

About this 10-Q

Heico Corp filed this 10-Q on August 26, 2021, covering the quarter ended July 31, 2021 (FY2021 Q3).

Headline figures

Quarter ended July 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $471.71M; up 22.1% from $386.41M a year earlier
Net income: $76.89M; up 41.6% from net income of $54.32M a year earlier
Diluted EPS: $0.56; up 40.0% from $0.40 a year earlier

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

						For the quarterly period ended July 31, 2021

						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	54,228,197	shares
Class A Common Stock, $.01 par value	81,155,834	shares


			Page
Part I.	Financial Information

	Item 1.	Financial Statements:

		Condensed Consolidated Balance Sheets (unaudited) as of July 3 1 , 2021 and October 31, 2020	2

		Condensed Consolidated Statements of Operations (unaudited) for the nine and three months ended July 3 1 , 2021 and 2020	3

		Condensed Consolidated Statements of Comprehensive Income (unaudited) for the nine and three months ended July 3 1 , 2021 and 2020	4

		Condensed Consolidated Statements of Shareholders’ Equity (unaudited) for the nine and three months ended July 3 1 , 2021 and 2020	5

		Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended July 3 1 , 2021 and 2020	7

		Notes to Condensed Consolidated Financial Statements (unaudited)	8

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36

	Item 4.	Controls and Procedures	36

Part II.	Other Information

	Item 6.	Exhibits	37

Signatures			38


	July 31, 2021	October 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$269,816	$406,852
Accounts receivable, net	209,001	210,433
Contract assets	62,400	60,429
Inventories, net	457,172	463,205
Prepaid expenses and other current assets	32,626	24,706
Total current assets	1,031,015	1,165,625

Property, plant and equipment, net	179,101	168,848
Goodwill	1,402,876	1,383,167
Intangible assets, net	545,800	579,041
Other assets	302,843	251,030
Total assets	$3,461,635	$3,547,711

LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt	$1,493	$1,045
Trade accounts payable	80,611	76,237
Accrued expenses and other current liabilities	179,515	162,232
Income taxes payable	598	1,647
Total current liabilities	262,217	241,161

Long-term debt, net of current maturities	385,380	738,786
Deferred income taxes	38,868	55,658
Other long-term liabilities	330,400	280,291
Total liabilities	1,016,865	1,315,896

Commitments and contingencies (Note 11)

Redeemable noncontrolling interests (Note 3)	224,684	221,208

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; 54,228 and 54,195 shares issued and outstanding	542	542
Class A Common Stock, $.01 par value per share; 150,000 shares authorized; 81,155 and 80,923 shares issued and outstanding	812	809
Capital in excess of par value	315,601	299,930
Deferred compensation obligation	4,777	4,886
HEICO stock held by irrevocable trust	(4,777)	(4,886)
Accumulated other comprehensive loss	(3,265)	(9,149)
Retained earnings	1,873,239	1,688,045
Total HEICO shareholders’ equity	2,186,929	1,980,177
Noncontrolling interests	33,157	30,430
Total shareholders’ equity	2,220,086	2,010,607
Total liabilities and equity	$3,461,635	$3,547,711


	Nine months ended July 31,		Three months ended July 31,
	2021	2020	2021	2020

Net sales	$1,356,260	$1,360,831	$471,707	$386,410

Operating costs and expenses:
Cost of sales	833,336	840,411	286,990	242,927
Selling, general and administrative expenses	245,053	232,835	83,879	75,049

Total operating costs and expenses	1,078,389	1,073,246	370,869	317,976

Operating income	277,871	287,585	100,838	68,434

Interest expense	(6,248)	(10,644)	(1,717)	(2,602)
Other income	1,179	934	162	632

Income before income taxes and noncontrolling interests	272,802	277,875	99,283	66,464

Income tax expense	36,400	9,600	15,600	8,900

Net income from consolidated operations	236,402	268,275	83,683	57,564

Less: Net income attributable to noncontrolling interests	18,244	16,618	6,794	3,248

Net income attributable to HEICO	$218,158	$251,657	$76,889	$54,316

Net income per share attributable to HEICO shareholders:
Basic	$1.61	$1.87	$.57	$.40
Diluted	$1.58	$1.83	$.56	$.40

Weighted average number of common shares outstanding:
Basic	135,291	134,676	135,370	134,837
Diluted	137,837	137,257	137,957	137,234


		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, 2020	$221,208	$542	$809	$299,930	$4,886	($4,886)	($9,149)	$1,688,045	$30,430	$2,010,607
Comprehensive income	13,808	—	—	—	—	—	5,884	218,158	4,617	228,659
Cash dividends ($.17 per share)	—	—	—	—	—	—	—	(23,002)	—	(23,002)
Issuance of common stock to HEICO Savings and Investment Plan	—	—	—	8,216	—	—	—	—	—	8,216
Share-based compensation expense	—	—	—	6,354	—	—	—	—	—	6,354
Proceeds from stock option exercises	—	—	3	4,502	—	—	—	—	—	4,505
Redemptions of common stock related to stock option exercises	—	—	—	(3,687)	—	—	—	—	—	(3,687)
Distributions to noncontrolling interests	(20,122)	—	—	—	—	—	—	—	(1,731)	(1,731)
Acquisitions of noncontrolling interests	(2,336)	—	—	—	—	—	—	—	—	—
Noncontrolling interests assumed related to acquisitions	1,097	—	—	—	—	—	—	—	—	—
Adjustments to redemption amount of redeemable noncontrolling interests	9,962	—	—	—	—	—	—	(9,962)	—	(9,962)
Capital contributions from noncontrolling interests	1,067	—	—	—	—	—	—	—	—	—
Deferred compensation obligation	—	—	—	—	(109)	109	—	—	—	—
Other	—	—	—	286	—	—	—	—	(159)	127
Balances as of July 31, 2021	$224,684	$542	$812	$315,601	$4,777	($4,777)	($3,265)	$1,873,239	$33,157	$2,220,086


(in thousands)	July 31, 2021	October 31, 2020
Accounts receivable	$220,711	$223,171
Less: Allowance for doubtful accounts	(11,710)	(12,738)
Accounts receivable, net	$209,001	$210,433


	July 31, 2021	October 31, 2020
Redeemable at fair value	$186,223	$179,415
Redeemable based on a multiple of future earnings	38,461	41,793
Redeemable noncontrolling interests	$224,684	$221,208


	Foreign Currency Translation	Defined Benefit Pension Plan	Accumulated Other Comprehensive Loss
Balances as of October 31, 2020	($6,460)	($2,689)	($9,149)
Unrealized gain	5,783	—	5,783
Amortization of unrealized loss	—	101	101
Balances as of July 31, 2021	($677)	($2,588)	($3,265)


	Segment		Consolidated Totals
	FSG	ETG
Balances as of October 31, 2020	$427,565	$955,602	$1,383,167
Goodwill acquired	4,446	11,761	16,207
Foreign currency translation adjustments	1,481	1,840	3,321
Adjustments to goodwill	188	(7)	181
Balances as of July 31, 2021	$433,680	$969,196	$1,402,876


	As of July 31, 2021			As of October 31, 2020
	Gross Carrying Amount	Accumulated Amortization	Net Carrying Amount	Gross Carrying Amount	Accumulated Amortization	Net Carrying Amount
Amortizing Assets:
Customer relationships	$440,641	($210,848)	$229,793	$443,143	($188,919)	$254,224
Intellectual property	244,651	(98,837)	145,814	240,725	(84,686)	156,039
Licenses	6,559	(4,980)	1,579	6,559	(4,670)	1,889
Patents	1,117	(784)	333	1,071	(746)	325
Non-compete agreements	721	(721)	—	811	(811)	—
Trade names	450	(248)	202	450	(219)	231
	694,139	(316,418)	377,721	692,759	(280,051)	412,708
Non-Amortizing Assets:
Trade names	168,079	—	168,079	166,333	—	166,333
	$862,218	($316,418)	$545,800	$859,092	($280,051)	$579,041


	July 31, 2021	October 31, 2020
Borrowings under revolving credit facility	$375,000	$730,000
Finance leases and note payable	11,873	9,831
	386,873	739,831
Less: Current maturities of long-term debt	(1,493)	(1,045)
	$385,380	$738,786


	July 31, 2021	October 31, 2020	Change
Contract assets	$62,400	$60,429	$1,971
Contract liabilities	26,693	25,631	1,062
Net contract assets	$35,707	$34,798	$909


	As of July 31, 2021
	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	$—	$238,544	$—	$238,544
Money market funds	392	—	—	392
Total assets	$392	$238,544	$—	$238,936
Liabilities:
Contingent consideration	$—	$—	$43,931	$43,931


(in thousands)	July 31, 2021	October 31, 2020
Finished products	$216,865	$235,501
Work in process	45,304	37,957
Materials, parts, assemblies and supplies	195,003	189,747
Inventories, net of valuation reserves	$457,172	$463,205


(in thousands)	July 31, 2021	October 31, 2020
Land	$10,680	$6,678
Buildings and improvements	134,582	120,769
Machinery, equipment and tooling	276,983	265,408
Construction in progress	8,359	8,487
	430,604	401,342
Less: Accumulated depreciation and amortization	(251,503)	(232,494)
Property, plant and equipment, net	$179,101	$168,848


	Nine months ended July 31,		Three months ended July 31,
	2021	2020	2021	2020
Flight Support Group:
Aftermarket replacement parts (1)	$390,685	$412,088	$136,357	$102,629
Repair and overhaul parts and services (2)	147,709	154,517	54,591	32,601
Specialty products (3)	128,338	164,584	46,170	42,928
Total net sales	666,732	731,189	237,118	178,158

Electronic Technologies Group:
Electronic component parts primarily for defense, space and aerospace equipment (4)	521,586	494,864	176,238	165,189
Electronic component parts for equipment in various other industries (5)	184,596	143,421	63,305	45,730
Total net sales	706,182	638,285	239,543	210,919

Intersegment sales	(16,654)	(8,643)	(4,954)	(2,667)

Total consolidated net sales	$1,356,260	$1,360,831	$471,707	$386,410


	Nine months ended July 31,		Three months ended July 31,
	2021	2020	2021	2020
Flight Support Group:
Aerospace	$473,470	$543,205	$175,388	$114,627
Defense and Space	162,196	157,664	51,898	53,269
Other (1)	31,066	30,320	9,832	10,262
Total net sales	666,732	731,189	237,118	178,158

Electronic Technologies Group:
Defense and Space	439,488	413,883	148,035	141,282
Other (2)	210,114	167,861	72,203	55,155
Aerospace	56,580	56,541	19,305	14,482
Total net sales	706,182	638,285	239,543	210,919

Intersegment sales	(16,654)	(8,643)	(4,954)	(2,667)

Total consolidated net sales	$1,356,260	$1,360,831	$471,707	$386,410


				Weighted
Acquisition Date	Fair Value	Unobservable Input	Range	Average (1)
8-18-2020	$10,821	Compound annual revenue growth rate	0% - 19%	7%
		Discount rate	4.3% - 4.6%	4.4%

8-11-2020	14,531	Compound annual revenue growth rate	4% - 16%	13%
		Discount rate	4.8% - 4.8%	4.8%

9-15-2017	18,579	Compound annual revenue growth rate	(3%) - 10%	6%
		Discount rate	3.4% - 3.4%	3.4%


						Liabilities
Balance as of October 31, 2020						$41,974
Increase in accrued contingent consideration						1,305
Foreign currency transaction adjustments						652
Balance as of July 31, 2021						$43,931


			Other, Primarily Corporate and Intersegment (1)	Consolidated Totals
	Segment
	FSG	ETG
Nine months ended July 31, 2021:
Net sales	$666,732	$706,182	($16,654)	$1,356,260
Depreciation	10,159	9,457	728	20,344
Amortization	15,036	32,588	848	48,472
Operating income	103,357	200,419	(25,905)	277,871
Capital expenditures	5,885	23,749	490	30,124

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

Three months ended July 31, 2021:
Net sales	$237,118	$239,543	($4,954)	$471,707
Depreciation	3,330	3,238	242	6,810
Amortization	4,929	10,871	287	16,087
Operating income	42,059	68,997	(10,218)	100,838
Capital expenditures	1,792	5,921	473	8,186

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


			Other, Primarily Corporate	Consolidated Totals
	Segment
	FSG	ETG
Total assets as of July 31, 2021	$1,139,630	$1,893,434	$428,571	$3,461,635
Total assets as of October 31, 2020	1,127,666	1,896,671	523,374	3,547,711


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). *


		HEICO CORPORATION

Date:	August 26, 2021	By:	/s/ CARLOS L. MACAU, JR.
			Carlos L. Macau, Jr. Executive Vice President - Chief Financial Officer and Treasurer (Principal Financial Officer)

		By:	/s/ STEVEN M. WALKER
			Steven M. Walker Chief Accounting Officer and Assistant Treasurer (Principal Accounting Officer)