HEICO Flies a Bit Lower

HEICO’s (HEI - Snapshot Report) fiscal 2009 second quarter was “challenging” and the outlook for the balance of the year is “opaque!”

HEI’s Q2-09 Net Sales declined by 9.6% to $130.2 million. Gross Income was down 18.8% to $42.5 million and the Gross Margin dropped from 36.3% to 32.7%. S,G&A Expense was off by 18.5% to $21.2 million and, as a percent of Sales, it dropped from 18.0% to 16.3%. Operating Income fell 19.1% to $21.3 million and the Operating Margin declined from 18.3% to 16.4%. Interest Expense was off by 82.6% to $112 thousand. The Income Tax Rate fell to 32.7% from 34.8%.  Minority Interests were lower by 22.5% to $3.8 million. Net Income of just over $10.5 million was down by 11.8%. Diluted EPS were off by 11.4% to 39¢ versus 44¢ on 0.9% fewer shares.

Drilling down into the segments, Flight Support Net Sales were off by 6.7% to $100.7 million, while Operating Income was off by 22.0% to $15.9 million and the Operating Margin fell from 18.9% to 15.8%. Electronic Technologies Net Sales declined by 18.2% to $29.5 million, but Operating Income was only off by 17.8% to $8.0 million, so the Operating Margin rose ever-so-slightly from 27.1% to 27.2%.

Corporate and Other costs shrank by 31.3% to $2.6 million and, as a percent of Sales, declined from 2.6% to 2.0%, which aided results.

Overall Cash Flow in the quarter was a negative $3.1 million as compared to a positive $480 thousand last year, as Operating Cash Flow was down by $8.6 million.

The Balance Sheet reflected the tough times in the Commercial Aerospace sector, as the Days in Inventory rose from 123 in Q1-08 to 148 in Q1-09; however, the number of Days in Accounts Receivable did drop from 53 to 50. Goodwill (excluding Intangibles, which are not reported until the 10-Q is filed) dropped from 80.1% of Equity to 76.5%. Net Long-Term Debt also declined, from 12.6% of Equity to 6.4%.
   
HEI bought back about $8 million of its stock in March of ‘09. It continues to develop new products to add to its “generic” portfolio, as well as make strategic acquisitions.  It expects to generate approximately $70 million of Operating Cash Flow in ’09, while Capital expenditures are pegged at $10 million to $12 million.

HEI’s Revenue distribution presently is 71% Commercial Aerospace, 16% Defense and Space and 13% Other.

The Company’s current outlook for Fiscal 2009 is for a drop in Net Sales and Diluted EPS in the range of 5% to 10%. Its recent VPT acquisition was its 39th since the Company’s inception; excluding VPT, Organic Sales would be off by 10%.