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Heico Corp (HEI) filed its fiscal 2015 10-K annual report with the SEC on Dec 17, 2015.
- Top risk flagged: FAA certification and airworthiness rules: Revocation or suspension of material authorizations could halt regulated manufacturing, repair, and overhaul operations
Heico Corp FY2015 10-K analysis
AI summary of each section, grounded in the filing text
Business Overview
- Core model: diversified aerospace and defense manufacturer serving niche aftermarket, electronic technology, and mission-critical component markets
- Two-segment mix shifted toward Flight Support, 68% of fiscal 2015 sales versus 66% in fiscal 2013
- Continued acquisition-led expansion, approximately 60 acquisitions since 1990, broadening products, technologies, customers, and geographic presence
- Flight Support R&D reached $17.7 million, while Electronic Technologies R&D totaled $21.0 million in fiscal 2015
- Backlog increased to $349 million from $291 million, with fiscal 2015 acquisitions driving increases in both segments
Management Discussion & Analysis
- Revenue $1,188.6M, up 5% YoY from $1,132.3M, led by FSG $809.7M, up 6%
- Operating margin 19.3% vs 18.0%, with gross margin 36.5% vs 35.2%
- Best segment FSG: $809.7M sales, $149.8M operating income, 18.5% margin
- Worst growth segment ETG: $391.0M sales, up 3%, with 25.3% operating margin
- Operating cash flow $172.9M, acquisitions $166.8M, dividends $9.3M, fiscal 2016 capex expected near $30M
- Fiscal 2016 outlook: higher sales and net income, with lower space-product demand and defense-budget cuts key risks
Risk Factors
- FAA certification and airworthiness rules: Revocation or suspension of material authorizations could halt regulated manufacturing, repair, and overhaul operations
- Defense and homeland-security exposure: 56% of Electronic Technologies Group sales tied to defense, satellite, spacecraft, and homeland-security products
- Supplier vulnerability: Long-lead components may require costly customer or regulatory recertification after supplier changes
- Competitive pressure from Pratt & Whitney and General Electric: OEMs could bundle products and services or cut prices
- Leadership concentration: Mendelson family executives and affiliates controlled approximately 22% of outstanding Common Stock
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