HEICO (HEI) - 2021 Q1 - Quarterly Report

Part I. Financial Information Financial Statements This section presents HEICO Corporation's unaudited condensed consolidated financial statements for Q1 2021, reflecting a 43% decrease in commercial aerospace net sales due to the pandemic - The company operates through two segments: the Flight Support Group (FSG) and the Electronic Technologies Group (ETG)[19] - The COVID-19 pandemic continues to adversely impact the business, with consolidated net sales for commercial aerospace businesses decreasing by approximately 43% in Q1 2021 compared to Q1 2020, though a gradual recovery is cautiously anticipated in the second half of fiscal 2021 due to vaccine progress[20] Condensed Consolidated Statements of Operations (Unaudited, in thousands) | Metric | Three months ended Jan 31, 2021 | Three months ended Jan 31, 2020 | | :--- | :--- | :--- | | Net sales | $417,902 | $506,275 | | Operating income | $80,285 | $110,990 | | Net income attributable to HEICO | $70,596 | $121,888 | | Diluted EPS | $0.51 | $0.89 | Condensed Consolidated Balance Sheet Highlights (Unaudited, in thousands) | Metric | January 31, 2021 | October 31, 2020 | | :--- | :--- | :--- | | Total current assets | $1,149,099 | $1,165,625 | | Total assets | $3,565,584 | $3,547,711 | | Total current liabilities | $234,675 | $241,161 | | Total liabilities | $1,263,200 | $1,315,896 | | Total shareholders' equity | $2,080,159 | $2,010,607 | Condensed Consolidated Statements of Cash Flows Highlights (Unaudited, in thousands) | Metric | Three months ended Jan 31, 2021 | Three months ended Jan 31, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $107,199 | $81,136 | | Net cash used in investing activities | ($25,271) | ($63,554) | | Net cash used in financing activities | ($91,407) | ($10,215) | | Cash and cash equivalents at end of period | $399,403 | $63,971 | Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses Q1 2021 financial results, highlighting a 17% decrease in consolidated net sales to $417.9 million, driven by a 34% decline in FSG sales and a 28% drop in operating income Results of Operations Consolidated net sales decreased 17% to $417.9 million, driven by a 34% organic decline in FSG sales, while ETG sales grew 7%, leading to a 28% drop in operating income Net Sales and Operating Income by Segment (in thousands) | Segment | Q1 2021 Net Sales | Q1 2020 Net Sales | Q1 2021 Operating Income | Q1 2020 Operating Income | | :--- | :--- | :--- | :--- | :--- | | Flight Support Group | $199,334 | $301,067 | $25,822 | $62,045 | | Electronic Technologies Group | $223,550 | $208,411 | $60,128 | $57,491 | | Total Consolidated | $417,902 | $506,275 | $80,285 | $110,990 | - The FSG's net sales decrease of 34% was principally organic, reflecting lower demand for commercial aerospace products due to the pandemic, while the ETG's 7% net sales increase was driven by $14.6 million from fiscal 2020 acquisitions[64] - Consolidated gross profit margin decreased to 37.9% from 39.1% in Q1 2020, mainly due to lower margins in both the FSG and ETG segments[65] - Net income attributable to HEICO was $70.6 million, or $0.51 per diluted share, down from $121.9 million, or $0.89 per diluted share, in Q1 2020, reflecting lower operating income and higher income tax expense, partially offset by lower interest expense and less net income attributable to noncontrolling interests[75] Outlook Due to pandemic uncertainty, HEICO is not providing fiscal 2021 guidance but anticipates a gradual recovery in commercial aerospace demand in the second half of fiscal 2021 - The company will not provide fiscal 2021 guidance due to pandemic-related uncertainty[76] - HEICO believes its conservative fiscal policies, healthy balance sheet, and liquidity will allow it to invest in R&D and gain market share during the recovery[76] - The company's strategy of diversification into defense, space, electronics, and medical markets provides a strong financial position to navigate the uncertain economic period[77] Liquidity and Capital Resources Net cash from operating activities increased to $107.2 million in Q1 2021, with anticipated fiscal 2021 capital expenditures of $40 million, and a total debt to shareholders' equity ratio of 32.2% - Net cash provided by operating activities increased by $26.1 million YoY to $107.2 million in Q1 2021[82] - In Q1 2021, the company made $70.0 million in payments on its revolving credit facility, paid $10.8 million in dividends, and made $7.7 million of distributions to noncontrolling interests[84] - The company anticipates approximately $40 million in capital expenditures for fiscal 2021 and was in compliance with all debt covenants, with a total debt to shareholders' equity ratio of 32.2%[79] Quantitative and Qualitative Disclosures About Market Risk No material changes in the company's market risk sensitivity assessment have occurred since the October 31, 2020 Annual Report on Form 10-K - There have not been any material changes in the company's assessment of HEICO's sensitivity to market risk since the last Annual Report on Form 10-K[90] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of January 31, 2021, with no material changes to internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that HEICO's disclosure controls and procedures are effective as of the end of the reporting period[91] - There were no changes in internal control over financial reporting during the first quarter that materially affected, or are reasonably likely to materially affect, the company's internal controls[92] Part II. Other Information Exhibits This section lists exhibits filed with Form 10-Q, including CEO and CFO certifications and Interactive Data Files (Inline XBRL) List of Exhibits | Exhibit No. | 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 | Inline XBRL Documents |