HEICO CORPORATION

HEI
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HEICO : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

05/28/2020 | 04:23pm

Overview




This discussion of our financial condition and results of operations should be
read in conjunction with our condensed consolidated financial statements and
notes thereto included herein. The preparation of consolidated financial
statements in conformity with accounting principles generally accepted in the
United States of America
requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as of the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ materially from those estimates if
different assumptions were used or different events ultimately transpire.

Our critical accounting policies, which require management to make judgments
about matters that are inherently uncertain, are described in Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," under the heading "Critical Accounting Policies" in our Annual
Report on Form 10-K for the year ended October 31, 2019. There have been no
material changes to our critical accounting policies during the six months ended
April 30, 2020.

Our business is comprised of two operating segments: the Flight Support Group
("FSG"), consisting of HEICO Aerospace Holdings Corp. and HEICO Flight Support
Corp.
and their respective subsidiaries; and the Electronic Technologies Group
("ETG"), consisting of HEICO Electronic Technologies Corp. and its subsidiaries.

Our results of operations for the six and three months ended April 30, 2020 have
been significantly affected by the COVID-19 outbreak, classified by the World
Health Organization
as a global pandemic in March 2020 (the "Outbreak"). The
effects of the Outbreak and related actions by governments around the world to
mitigate its spread have impacted our employees, customers, suppliers and
manufacturers. In response to the economic impact from the Outbreak, we have
implemented certain cost reduction efforts, including layoffs, temporary reduced
work hours and temporary pay reductions within various departments of our
business, including within our executive management team. Additionally, our
response to the Outbreak has included the implementation of varying health and
safety measures at our facilities, including: supplying and requiring the use of
personal protective equipment; body temperature taking; staggering work shifts;
increasing work-from-home capabilities; consistent and ongoing cleaning of work
spaces and high-touch areas; and establishing processes aligned with the Centers
for Disease and Control
guidelines to work with any individual exposed to
COVID-19 on their necessary quarantine period and the process for the individual
to return to work.
With respect to our results of operations, approximately half of our net sales
are derived from defense, space and other industrial markets including
electronics, medical and telecommunications. Demand for products in that half of
our business has not been
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fundamentally impacted and its operational results remain materially consistent
with financial expectations prior to the commencement of the Outbreak. However,
we have experienced, and expect to continue experiencing, periodic operational
disruptions resulting from supply chain disturbances, staffing challenges,
temporary facility closures, transportation interruptions and other conditions
which slow production or increase costs. While these issues have not yet been
material, it is impossible to predict their future impact and our current
experience indicates that the likely effect will be to delay orders and
shipments measured in weeks and months, and to temporarily increase some costs,
as opposed to profoundly changing our business overall. Fortunately, many of our
defense and medical component design, manufacturing and supply operations are
believed to be crucial suppliers to markets with continuing strong needs. While
it has not had a material impact on our consolidated net sales, demand for our
components used in medical equipment, such as ventilators, x-ray systems,
sterilization equipment and personal protective equipment, has increased as a
result of the Outbreak.

The remaining portion of our net sales is derived from commercial aviation
products and services. The Outbreak has caused significant volatility and a
substantial decline in value across global economic markets. Most notably, the
commercial aerospace industry has experienced an ongoing substantial decline in
demand. As such, our businesses that operate within the commercial aerospace
industry have been materially impacted by the significant decline in global
commercial air travel that began in March 2020. Once commercial air travel
resumes, cost savings will most likely be a priority for our commercial aviation
customers and we anticipate recovery in demand for our commercial aviation
products, which frequently provide aircraft operators with significant savings.
Furthermore, we believe our cost-saving solutions and robust product development
programs will enable us to potentially increase market share and emerge with a
stronger presence within this market.

Additionally, our results of operations for the six and three months ended April
30, 2020
have been affected by the fiscal 2019 acquisitions as further detailed
in Note 2, Acquisitions, of the Notes to Consolidated Financial Statements of
our Annual Report on Form 10-K for the year ended October 31, 2019.
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Results of Operations




The following table sets forth the results of our operations, net sales and
operating income by segment and the percentage of net sales represented by the
respective items in our Condensed Consolidated Statements of Operations (in
thousands):

Three months ended April
Six months ended April 30, 30,
2020 2019 2020 2019
Net sales $974,421 $981,794 $468,146 $515,648
Cost of sales 597,484 590,170 289,256 306,261
Selling, general and administrative
expenses 157,786 174,494 70,729 90,204
Total operating costs and expenses 755,270 764,664 359,985 396,465
Operating income $219,151 $217,130 $108,161 $119,183

Net sales by segment:
Flight Support Group $553,031 $595,464 $251,964 $308,251
Electronic Technologies Group 427,366 398,880 218,955 214,451
Intersegment sales (5,976) (12,550) (2,773) (7,054)
$974,421 $981,794 $468,146 $515,648

Operating income by segment:
Flight Support Group $109,576 $115,046 $47,531 $62,166
Electronic Technologies Group 123,017 118,954 65,526 67,352
Other, primarily corporate (13,442) (16,870) (4,896) (10,335)
$219,151 $217,130 $108,161 $119,183

Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Gross profit 38.7 % 39.9 % 38.2 % 40.6 %
Selling, general and administrative
expenses 16.2 % 17.8 % 15.1 % 17.5 %
Operating income 22.5 % 22.1 % 23.1 % 23.1 %
Interest expense .8 % 1.1 % .8 % 1.1 %
Other income - % .2 % - % .5 %
Income tax expense .1 % 3.1 % 5.0 % 5.1 %
Net income attributable to
noncontrolling interests 1.4 % 1.7 % 1.2 % 1.6 %
Net income attributable to HEICO 20.3 % 16.4 % 16.1 % 15.9 %


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Comparison of First Six Months of Fiscal 2020 to First Six Months of Fiscal 2019



Net Sales




Our consolidated net sales in the first six months of fiscal 2020 decreased by
1% to $974.4 million, as compared to net sales of $981.8 million in the first
six months of fiscal 2019. The decrease in consolidated net sales principally
reflects a decrease of $42.4 million (a 7% decrease) to $553.0 million in net
sales within the FSG partially offset by an increase of $28.5 million (a 7%
increase) to a record $427.4 million in net sales within the ETG. The net sales
decrease in the FSG is principally organic and reflects lower demand for the
majority of our products and services resulting from the significant decline in
global commercial air travel beginning in March 2020 due to the Outbreak. As a
result, net sales of our repair and overhaul parts and services, aftermarket
replacement parts, and specialty products product lines decreased by $18.7
million
, $17.2 million, and $6.5 million, respectively. The net sales increase
in the ETG reflects net sales of $28.2 million contributed by our fiscal 2019
and 2020 acquisitions as well as organic growth of 2%. The ETG's organic growth
is mainly attributable to increased demand for our defense products resulting in
a net sales increase of $22.0 million partially offset by lower demand for our
space products resulting in a net sales decrease of $14.8 million. Sales price
changes were not a significant contributing factor to the change in net sales of
the FSG and ETG in the first six months of fiscal 2020.


Gross Profit and Operating Expenses




Our consolidated gross profit margin decreased to 38.7% in the first six months
of fiscal 2020, as compared to 39.9% in the first six months of fiscal 2019,
principally reflecting a decrease of 2.2% and 1.1% in the ETG's and FSG's gross
profit margin, respectively. The decrease in the ETG's gross profit margin
principally reflects a decrease in net sales of certain space products and a
less favorable product mix of certain aerospace products, partially offset by
increased net sales of certain defense products. The decrease in the FSG's gross
profit margin principally reflects a decrease in net sales and less favorable
product mix within our repair and overhaul parts and services product line as
well as a less favorable product mix within our aftermarket replacement parts
product line. Total new product research and development expenses included
within our consolidated cost of sales were $33.9 million in the first six months
of fiscal 2020, up from $32.0 million in the first six months of fiscal 2019.

Our consolidated selling, general and administrative ("SG&A") expenses decreased
by 10% to $157.8 million in the first six months of fiscal 2020, as compared to
$174.5 million in the first six months of fiscal 2019. The decrease in
consolidated SG&A expenses principally reflects an $18.6 million decrease in
performance-based compensation expense and a $4.3 million reduction in other
selling expenses including outside sales commissions, marketing and travel,
partially offset by $7.5 million attributable to the fiscal 2019 and 2020
acquisitions.

Our consolidated SG&A expenses as a percentage of net sales decreased to
16.2% in the first six months of fiscal 2020, down from 17.8% in the first six
months of fiscal 2019. The
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decrease in consolidated SG&A expenses as a percentage of net sales is mainly
due to a 1.9% impact from the previously mentioned lower performance-based
compensation expense.



Operating Income




Our consolidated operating income increased by 1% to a record $219.2 million
in the first six months of fiscal 2020, up from $217.1 million in the first six
months of fiscal 2019. The increase in consolidated operating income principally
reflects a $4.1 million increase (a 3% increase) to a record $123.0 million in
operating income of the ETG partially offset by a $5.5 million decrease (a 5%
decrease) to $109.6 million in operating income of the FSG. The increase in
operating income of the ETG principally reflects the previously mentioned net
sales growth and a $4.3 million decrease in performance-based compensation
expense, partially offset by the previously mentioned lower gross profit margin.
The decrease in operating income of the FSG principally reflects the previously
mentioned decrease in net sales and lower gross profit margin, partially offset
by an $11.8 million decrease in performance-based compensation expense. Further,
the increase in consolidated operating income reflects $2.1 million of lower
corporate expenses mainly attributable to a decrease in performance-based
compensation expense.

Our consolidated operating income as a percentage of net sales improved to 22.5%
in the first six months of fiscal 2020, up from 22.1% in the first six months of
fiscal 2019. The increase principally reflects an increase in the FSG's
operating income as a percentage of net sales to 19.8% in the first six months
of fiscal 2020, up from 19.3% in the first six months of fiscal 2019 and the
previously mentioned lower corporate expenses, partially offset by a decrease in
the ETG's operating income as a percentage of net sales to 28.8% in the first
six months of fiscal 2020 as compared to 29.8% in the first six months of fiscal
2019. The increase in the FSG's operating income as a percentage of net sales
principally reflects a 1.6% decrease in SG&A expenses as a percentage of net
sales mainly from lower performance-based compensation expense, partially offset
by the previously mentioned lower gross profit margin. The decrease in the ETG's
operating income as a percentage of net sales principally reflects the
previously mentioned lower gross profit margin partially offset by a 1.1%
decrease in SG&A expenses as a percentage of net sales mainly from lower
performance-based compensation expense.


Interest Expense



Interest expense decreased to $8.0 million in the first six months of fiscal
2020, down from $11.0 million in the first six months of fiscal 2019. The
decrease was principally due to a lower weighted average interest rate on
borrowings outstanding under our revolving credit facility.



Other Income



Other income in the first six months of fiscal 2020 and 2019 was not material.



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Income Tax Expense




Our effective tax rate in the first six months of fiscal 2020 was .3%, as
compared to 14.5% in the first six months of fiscal 2019. HEICO recognized a
discrete tax benefit from stock option exercises in both the first quarter of
fiscal 2020 and 2019 of $47.6 million and $16.6 million, respectively. The $31.0
million
larger benefit from stock option exercises recognized in the first
quarter of fiscal 2020 was the result of more stock options exercised and the
strong appreciation in HEICO's stock price during the optionees' holding
periods.

Net Income Attributable to Noncontrolling Interests
Net income attributable to noncontrolling interests relates to the 20%
noncontrolling interest held by Lufthansa Technik AG ("LHT") in HEICO Aerospace
Holdings Corp.
("HEICO Aerospace") and the noncontrolling interests held by
others in certain subsidiaries of the FSG and ETG. Net income attributable to
noncontrolling interests was $13.4 million in the first six months of fiscal
2020, as compared to $17.0 million in the first six months of fiscal 2019. The
decrease in net income attributable to noncontrolling interests in the first six
months of fiscal 2020 principally reflects the impact of a dividend paid by
HEICO Aerospace in June 2019 that effectively resulted in the transfer of the
20% noncontrolling interest held by LHT in eight of our existing subsidiaries
within HEICO Aerospace that are principally part of the FSG's repair and
overhaul parts and services product line to HEICO Flight Support Corp., a wholly
owned subsidiary of HEICO.


Net Income Attributable to HEICO




Net income attributable to HEICO increased to a record $197.3 million, or $1.44
per diluted share, in the first six months of fiscal 2020, up from $161.1
million
, or $1.18 per diluted share, in the first six months of fiscal 2019
principally reflecting the previously mentioned income tax benefit, increased
operating income and lower interest expense.


Comparison of Second Quarter of Fiscal 2020 to Second Quarter of Fiscal 2019



Net Sales




Our consolidated net sales in the second quarter of fiscal 2020 decreased by 9%
to $468.1 million, as compared to net sales of $515.6 million in the second
quarter of fiscal 2019. The decrease in consolidated net sales principally
reflects a decrease of $56.3 million (an 18% decrease) to $252.0 million in net
sales within the FSG partially offset by an increase of $4.5 million (a 2%
increase) to $219.0 million in net sales within the ETG. The net sales decrease
in the FSG is principally organic and reflects lower demand for the majority of
our products and services resulting from the significant decline in global
commercial air travel beginning in March 2020 due to the Outbreak. As a result,
net sales of our aftermarket replacement parts, repair and overhaul parts and
services, and specialty products product lines decreased by $26.0 million, $20.8
million
, and $9.5 million, respectively. The net sales increase in the ETG
reflects net sales of $13.3 million contributed by our fiscal 2019 and 2020
acquisitions, partially offset by an
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organic net sales decrease of 2%. The ETG's decrease in organic net sales is
mainly attributable to lower shipments of our space products resulting in a net
sales decrease of $7.3 million partially offset by increased demand for our
defense products resulting in a net sales increase of $2.7 million. Sales price
changes were not a significant contributing factor to the change in net sales of
the FSG and ETG in the second quarter of fiscal 2020.


Gross Profit and Operating Expenses




Our consolidated gross profit margin decreased to 38.2% in the second quarter of
fiscal 2020, as compared to 40.6% in the second quarter of fiscal 2019,
principally reflecting a decrease of 3.5% and 2.7% in the FSG's and ETG's gross
profit margin, respectively. The decrease in the FSG's gross profit margin
principally reflects a decrease in net sales and a less favorable product mix
within our repair and overhaul parts and services and aftermarket replacement
parts product lines. The decrease in the ETG's gross profit margin principally
reflects a decrease in net sales and less favorable product mix of certain space
and commercial aerospace products partially offset by increased net sales of
certain defense products. Total new product research and development expenses
included within our consolidated cost of sales were $16.8 million in both the
second quarter of fiscal 2020 and 2019.

Our consolidated SG&A expenses decreased by 22% to $70.7 million in the second
quarter of fiscal 2020, as compared to $90.2 million in the second quarter of
fiscal 2019. The decrease in consolidated SG&A expenses principally reflects an
$18.2 million decrease in performance-based compensation expense and a $3.7
million
reduction in other selling expenses including outside sales commissions,
marketing and travel, partially offset by $3.3 million attributable to the
fiscal 2019 and 2020 acquisitions.

Our consolidated SG&A expenses as a percentage of net sales decreased to
15.1% in the second quarter of fiscal 2020, down from 17.5% in the second
quarter of fiscal 2019. The decrease in consolidated SG&A expenses as a
percentage of net sales is mainly due to a 3.5% impact from the previously
mentioned lower performance-based compensation expense partially offset by some
inefficiencies resulting from the overall impacts of the Outbreak.


Operating Income




Our consolidated operating income decreased by 9% to $108.2 million in the
second quarter of fiscal 2020, as compared to operating income of $119.2 million
in the second quarter of fiscal 2019. The decrease in consolidated operating
income principally reflects a $14.6 million decrease (a 24% decrease) to $47.5
million
in operating income of the FSG and a $1.8 million decrease (a 3%
decrease) to $65.5 million in operating income of the ETG. The decrease in
operating income of the FSG principally reflects the previously mentioned
decrease in net sales and lower gross profit margin, partially offset by an
$11.5 million decrease in performance-based compensation expense. The decrease
in operating income of the ETG principally reflects the previously mentioned
lower gross profit margin partially offset by a $4.0 million decrease in
performance-based compensation expense and the previously mentioned increase in
net sales.

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Further, the decreases in operating income of the FSG and ETG were partially
moderated by lower corporate expenses of $4.1 million mainly attributable to a
decrease in performance-based compensation expense.

Our consolidated operating income as a percentage of net sales was 23.1% in both
the second quarter of fiscal 2020 and 2019 principally reflecting a 1.5% and
1.3% decrease in the ETG's and FSG's operating income as a percentage of net
sales, respectively, offset by the previously mentioned lower corporate
expenses. The decrease in the ETG's operating income as a percentage of net
sales to 29.9% in the second quarter of fiscal 2020 from 31.4% in the second
quarter of fiscal 2019 principally reflects the previously mentioned lower gross
profit margin partially offset by a 1.2% decrease in SG&A expenses as a
percentage of net sales mainly reflecting lower performance-based compensation
expense. The decrease in the FSG's operating income as a percentage of net sales
to 18.9% in the second quarter of fiscal 2020 from 20.2% in the second quarter
of fiscal 2019 principally reflects the previously mentioned lower gross profit
margin partially offset by a 2.2% decrease in SG&A expenses as a percentage of
net sales mainly from lower performance-based compensation expense partially
offset by some inefficiencies resulting from the overall impacts of the
Outbreak.


Interest Expense




Interest expense decreased to $3.8 million in the second quarter of fiscal 2020,
down from $5.5 million in the second quarter of fiscal 2019. The decrease was
principally due to a lower weighted average interest rate on borrowings
outstanding under our revolving credit facility.


Other Income



Other income in the second quarter of fiscal 2020 and 2019 was not material.



Income Tax Expense



Our effective tax rate in the second quarter of fiscal 2020 was 22.6%, as
compared to 22.5% in the second quarter of fiscal 2019.



Net Income Attributable to Noncontrolling Interests




Net income attributable to noncontrolling interests relates to the 20%
noncontrolling interest held by LHT in HEICO Aerospace and the noncontrolling
interests held by others in certain subsidiaries of the FSG and ETG. Net income
attributable to noncontrolling interests was $5.5 million in the second quarter
of fiscal 2020, as compared to $8.3 million in the second quarter of fiscal
2019. The decrease in net income attributable to noncontrolling interests in the
second quarter of fiscal 2020 principally reflects the impact of a dividend paid
by HEICO Aerospace in June 2019 that effectively resulted in the transfer of the
20% noncontrolling interest held by LHT in eight of our existing subsidiaries
within HEICO Aerospace that are

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principally part of the FSG's repair and overhaul parts and services product
line to HEICO Flight Support Corp., a wholly owned subsidiary of HEICO.



Net Income Attributable to HEICO




Net income attributable to HEICO was $75.5 million, or $.55 per diluted share,
in the second quarter of fiscal 2020, as compared to $81.8 million, or $.60 per
diluted share, in the second quarter of fiscal 2019 principally reflecting the
previously mentioned lower operating income, partially offset by less net income
attributable to noncontrolling interests and lower interest expense.


Outlook




In our Quarterly Report on Form 10-Q for the three months ended January 31,
2020
, we provided net sales and net income estimates for fiscal 2020, but noted
that it excluded any impact from the coronavirus outbreak as it was at such an
early stage. As noted within our Form 8-K, filed on April 15, 2020, we withdrew
our fiscal 2020 financial guidance due to the COVID-19 outbreak, classified by
the World Health Organization as a global pandemic in March 2020 (the
"Outbreak"). The Outbreak has resulted in a significant reduction in global
demand for commercial air travel beginning in March 2020. As such, the results
of operations for the six and three months ended April 30, 2020 are not
indicative of the results to be expected for the full fiscal 2020 year.

We entered the Outbreak with a healthy balance sheet that included a strong cash
position and nominal debt. We cannot estimate the duration and magnitude of the
Outbreak and cannot confidently predict when demand for our commercial aerospace
products will return to pre-Outbreak levels. However, we believe HEICO is
favorably positioned for long-term success despite the short-term challenges
created by the Outbreak in the global economy.


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Liquidity and Capital Resources




Our principal uses of cash include acquisitions, capital expenditures, cash
dividends, distributions to noncontrolling interests and working capital needs.
At the onset of the Outbreak, we borrowed $200.0 million on our revolving credit
facility as a precautionary measure to ensure we have additional cash on hand to
pay our employees and vendors and for potential acquisition opportunities. As a
result of this borrowing and through net cash provided by operating activities,
our cash and cash equivalents increased to $346.8 million as of April 30, 2020,
up from $57.0 million as of October 31, 2019. We finance our business activities
primarily from our operating and financing activities, including borrowings
under our revolving credit facility. The revolving credit facility contains both
financial and non-financial covenants. As of April 30, 2020, we were in
compliance with all such covenants and our total debt to shareholders' equity
ratio was 39.2%.

Based on our current outlook, we believe that our net cash provided by operating
activities, available borrowings under our revolving credit facility and cash
and cash equivalents on hand will be sufficient to fund cash requirements for at
least the next twelve months.


Operating Activities




Net cash provided by operating activities was $205.9 million in the first six
months of fiscal 2020 and consisted primarily of net income from consolidated
operations of $210.7 million, depreciation and amortization expense of $43.3
million
(a non-cash item), net changes in other long-term liabilities and assets
related to the HEICO Leadership Compensation Plan of $14.0 million (principally
participant deferrals and employer contributions), $5.3 million in share-based
compensation expense (a non-cash item), and $4.8 million in employer
contributions to the HEICO Savings and Investment Plan (a non-cash item),
partially offset by a $69.0 million increase in working capital and a $5.1
million
deferred income tax benefit. The increase in working capital is
inclusive of a $47.7 million decrease in accrued expenses and other current
liabilities mainly reflecting the payment of fiscal 2019 accrued
performance-based compensation; a $37.8 million increase in inventories as a
result of certain inventory purchase commitments based on pre-Outbreak net sales
expectations and to support the backlog of certain of our businesses; a $15.6
million
increase in prepaid expenses and other current assets due to the timing
of income tax payments; and a $13.0 million increase in contract assets,
partially offset by a $44.4 million decrease in accounts receivable resulting
from strong cash collections and lower net sales.

Net cash provided by operating activities increased by $27.6 million in the
first six months of fiscal 2020, up from $178.3 million in the first six months
of fiscal 2019. The increase is principally attributable to a $32.6 million
increase in net income from consolidated operations partially offset by a $6.8
million
increase in net working capital.

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Investing Activities




Net cash used in investing activities totaled $70.9 million in the first six
months of fiscal 2020 and related primarily to acquisitions of $45.3 million
(net of cash acquired), investments related to the HEICO LCP of $13.6 million
and capital expenditures of $12.4 million. Further details regarding our fiscal
2020 acquisitions may be found in Note 2, Acquisitions, of the Notes to
Condensed Consolidated Financial Statements.


Financing Activities




Net cash provided by financing activities in the first six months of fiscal 2020
totaled $155.6 million. During the first six months of fiscal 2020, we borrowed
$200.0 million under our revolving credit facility to provide a cushion of
liquidity during this period of economic uncertainty resulting from the Outbreak
and $45.0 million to fund our fiscal 2020 acquisitions. Additionally, we made
$68.0 million in payments on our revolving credit facility, paid $10.8 million
in cash dividends on our common stock, and made $9.7 million of distributions to
noncontrolling interests.

Contractual Obligations

There have not been any material changes to the amounts presented in the table
of contractual obligations that was included in our Annual Report on Form 10-K
for the year ended October 31, 2019.


Off-Balance Sheet Arrangements



Guarantees




As of April 30, 2020, we have arranged for standby letters of credit aggregating
$4.8 million, which are supported by our revolving credit facility and pertain
to payment guarantees related to potential workers' compensation claims and a
facility lease as well as performance guarantees related to customer contracts
entered into by certain of our subsidiaries.


New Accounting Pronouncements



See Note 1, Summary of Significant Accounting Policies - New Accounting
Pronouncements, of the Notes to Condensed Consolidated Financial Statements for
additional information.




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Forward-Looking Statements




Certain statements in this report constitute "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. All
statements contained herein that are not clearly historical in nature may be
forward-looking and the words "anticipate," "believe," "expect," "estimate" and
similar expressions are generally intended to identify forward-looking
statements. Any forward-looking statement contained herein, in press releases,
written statements or other documents filed with the Securities and Exchange
Commission
or in communications and discussions with investors and analysts in
the normal course of business through meetings, phone calls and conference
calls, concerning our operations, economic performance and financial condition
are subject to risks, uncertainties and contingencies. We have based these
forward-looking statements on our current expectations and projections about
future events. All forward-looking statements involve risks and uncertainties,
many of which are beyond our control, which may cause actual results,
performance or achievements to differ materially from anticipated results,
performance or achievements. Also, forward-looking statements are based upon
management's estimates of fair values and of future costs, using currently
available information. Therefore, actual results may differ materially from
those expressed in or implied by those forward-looking statements. Factors that
could cause such differences include: the severity, magnitude and duration of
the Outbreak; our liquidity and the amount and timing of cash generation; the
continued decline in commercial air travel caused by the Outbreak, airline fleet
changes or airline purchasing decisions, which could cause lower demand for our
goods and services; product specification costs and requirements, which could
cause an increase to our costs to complete contracts; governmental and
regulatory demands, export policies and restrictions, reductions in defense,
space or homeland security spending by U.S. and/or foreign customers or
competition from existing and new competitors, which could reduce our sales; our
ability to introduce new products and services at profitable pricing levels,
which could reduce our sales or sales growth; product development or
manufacturing difficulties, which could increase our product development and
manufacturing costs and delay sales; our ability to make acquisitions and
achieve operating synergies from acquired businesses; customer credit risk;
interest, foreign currency exchange and income tax rates; economic conditions
within and outside of the aviation, defense, space, medical, telecommunications
and electronics industries, which could negatively impact our costs and
revenues; and defense spending or budget cuts, which could reduce our
defense-related revenue. We undertake no obligation to publicly update or revise
any forward-looking statement, whether as a result of new information, future
events or otherwise, except to the extent required by applicable law.


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