2nd Quarter Net Income up 18% on Operating
Income Increase of 15%
HEICO CORPORATION (NYSE: HEI.A) (NYSE: HEI) today reported that
net income increased 18% to a record $45.7 million, or
53 cents per diluted share, in the second quarter of fiscal
2017, up from $38.7 million, or 45 cents per diluted share, in
the second quarter of fiscal 2016. In the first six months of
fiscal 2017, net income increased 24% to a record $86.6 million, or
$1.00 per diluted share, up from $69.9 million, or 82 cents per
diluted share, in the first six months of fiscal 2016.
All share and per share information has been adjusted
retrospectively to reflect a 5-for-4 stock split distributed by the
Company in April 2017.
Operating income increased 15% to a record $76.5 million in the
second quarter of fiscal 2017, up from $66.8 million in the second
quarter of fiscal 2016. In the first six months of fiscal 2017,
operating income increased 18% to a record $141.1 million, up from
$119.4 million in the first six months of fiscal 2016.
The Company's consolidated operating margin improved to 20.8% in
the second quarter of fiscal 2017 up from 19.0% in the second
quarter of fiscal 2016. The Company's consolidated operating margin
improved to 19.8% in the first six months of fiscal 2017, up from
18.2% in the first six months of fiscal 2016.
Net sales increased 5% to a record $368.7 million in the second
quarter of fiscal 2017, up from $350.6 million in the second
quarter of fiscal 2016. Net sales increased 8% to a record $712.1
million in the first six months of fiscal 2017, up from $656.9
million in the first six months of fiscal 2016.
Consolidated Results
Laurans A. Mendelson, HEICO’s Chairman and CEO, commented on the
Company's second quarter results stating, "We are very pleased to
report record quarterly results in consolidated net sales,
operating income and net income driven by record net sales and
operating income at both operating segments. Our outstanding
performance principally reflects increased demand and operating
efficiencies within both of our operating segments, as well as the
excellent performance of our well managed and profitable fiscal
2016 acquisition.
Cash flow provided by operating activities remained very strong,
totaling $97.7 million, or 113% of net income, in the first six
months of fiscal 2017. For the full fiscal year 2017, we anticipate
cash flow provided by operating activities to approximate 150% of
net income.
Our total debt to shareholders' equity ratio was 40.5% as of
April 30, 2017. Our net debt to shareholders’ equity ratio was
37.3% as of April 30, 2017, with net debt (total debt less cash and
cash equivalents) of $424.1 million principally incurred to fund
acquisitions in fiscal 2017 and 2016. Additionally, we increased
the aggregate principal amount of our revolving credit facility by
$200 million to $1.0 billion through increased commitments from
existing lenders in April 2017. We have no significant debt
maturities until fiscal 2019 and plan to utilize our financial
flexibility to aggressively pursue high quality acquisition
opportunities to accelerate growth and maximize shareholder
returns.
As we look ahead to the remainder of fiscal 2017, we anticipate
net sales growth within the Flight Support Group and Electronic
Technologies Group resulting from increased demand across the
majority of our product lines. Also, we will continue our
commitments to developing new products and services, further market
penetration, and an aggressive acquisition strategy while
maintaining our financial strength and flexibility.
Based on our current economic visibility, we are increasing our
estimated consolidated fiscal 2017 year-over-year growth in net
sales to 8% - 10% and in net income to 12% - 14%, up from prior
growth estimates in net sales of 6% - 8% and in net income of 9% -
11%. Additionally, we now anticipate our consolidated operating
margin to approximate 20%, depreciation and amortization expense to
approximate $65 million, capital expenditures to approximate $35
million and cash flow from operations to approximate $270 million,
up from the previous estimate of $260 million in cash flow from
operations. These estimates include our recent acquisition of Air
Cost Control (A2C), but exclude additional acquired businesses, if
any."
Flight Support Group
Eric A. Mendelson, HEICO's Co-President and President of HEICO's
Flight Support Group, commented on the Flight Support Group's
second quarter results stating, "Our record quarterly results in
net sales and operating income principally reflects organic growth
within the Flight Support Group's aftermarket replacement parts and
repair and overhaul parts and services product lines.
The Flight Support Group's net sales increased 5% to a record
$231.8 million in the second quarter of fiscal 2017, up from $220.3
million in the second quarter of fiscal 2016. The Flight Support
Group's net sales increased 7% to a record $452.7 million in the
first six months of fiscal 2017, up from $424.9 million in the
first six months of fiscal 2016. The increase in the second quarter
and first six months of fiscal 2017 mainly reflects organic growth
of 5% and 6%, respectively. The organic growth in the second
quarter and first six months of fiscal 2017 is principally
attributed to increased demand and new product offerings within our
aftermarket replacement parts and repair and overhaul parts and
services product lines, partially offset by lower net sales within
our specialty products product line.
The Flight Support Group's operating income increased 8% to a
record $44.7 million in the second quarter of fiscal 2017, up from
$41.3 million in the second quarter of fiscal 2016. The Flight
Support Group's operating income increased 12% to a record $86.1
million in the first six months of fiscal 2017, up from $76.8
million in the first six months of fiscal 2016. The increase in the
second quarter and first six months of fiscal 2017 is mainly
attributed to the previously mentioned net sales growth and
efficiencies realized from the benefit of our growth in net sales
on relatively consistent period-over-period selling, general and
administrative expenses.
The Flight Support Group's operating margin increased to 19.3%
in the second quarter of fiscal 2017, up from 18.8% in the second
quarter of fiscal 2016. The Flight Support Group's operating margin
increased to 19.0% in the first six months of fiscal 2017, up from
18.1% in the first six months of fiscal 2016. The increase in the
second quarter and first six months of fiscal 2017 principally
reflects the previously mentioned net sales growth and efficiencies
realized within selling, general and administrative expenses.
With respect to the remainder of fiscal 2017, we now estimate
mid to high-single digit growth in the Flight Support Group's net
sales over fiscal 2016 levels and the full year Flight Support
Group operating margin to approximate 19.0% - 19.5%. These
estimates include our recent acquisition of A2C, but exclude
additional acquired businesses, if any.”
Electronic Technologies Group
Victor H. Mendelson, HEICO's Co-President and President of
HEICO’s Electronic Technologies Group, commented on the Electronic
Technologies Group's second quarter results stating, "Our record
quarterly results in net sales and operating income were driven
principally by increased customer demand for the majority of our
products, most notably for certain aerospace, other electronics and
medical products.
"The Electronic Technologies Group's net sales increased 6% to a
record $141.2 million in the second quarter of fiscal 2017, up from
$132.6 million in the second quarter of fiscal 2016. The Electronic
Technologies Group's net sales increased 13% to a record $267.3
million in the first six months of fiscal 2017, up from $236.7
million in the first six months of fiscal 2016. The increase in the
second quarter and first six months of fiscal 2017 principally
reflects organic growth of 5% and 6%, respectively. The organic
growth in the second quarter and first six months of fiscal 2017
resulted from increased demand in certain aerospace, other
electronics and medical products. Additionally, the increase in the
first six months of fiscal 2017 reflects the contribution from our
profitable fiscal 2016 acquisition.
The Electronic Technologies Group's operating income increased
16% to a record $38.8 million in the second quarter of fiscal 2017,
up from $33.4 million in the second quarter of fiscal 2016. The
Electronic Technologies Group's operating income increased 22% to a
record $67.9 million in the first six months of fiscal 2017, up
from $55.7 million in the first six months of fiscal 2016. The
increase in the second quarter and first six months of fiscal 2017
came primarily from the previously mentioned net sales growth and
efficiencies realized from the benefit of our growth in net sales
on relatively consistent period-over-period selling, general and
administrative expenses. Further, the increase in operating income
in the first six months of fiscal 2017 reflects a decrease in
acquisition costs due to the first quarter of fiscal 2016
reflecting $3.1 million in acquisition costs associated with a
prior year acquisition, partially offset by higher
performance-based compensation expense.
The Electronic Technologies Group's operating margin improved to
27.5% in the second quarter of fiscal 2017, up from 25.2% in the
second quarter of fiscal 2016. The Electronic Technologies Group's
operating margin improved to 25.4% in the first six months of
fiscal 2017, up from 23.5% in the first six months of fiscal 2016.
The increase in the second quarter and first six months of fiscal
2017 principally reflects the previously mentioned net sales growth
and efficiencies realized within selling, general and
administrative expenses.
With respect to the remainder of fiscal 2017, we are continuing
to estimate mid to high-single digit growth in the Electronic
Technologies Group's net sales over fiscal 2016 levels, and now
anticipate the full year Electronic Technologies Group's operating
margin to approximate 25%. These estimates exclude additional
acquired businesses, if any.”
(NOTE: HEICO has two classes of common stock traded on
the NYSE. Both classes, the Class A Common Stock (HEI.A) and
the Common Stock (HEI), are virtually identical in all economic
respects. The only difference between the share classes is
the voting rights. The Class A Common Stock (HEI.A) has 1/10
vote per share and the Common Stock (HEI) has one vote per
share.)
There are currently approximately 50.6 million shares of HEICO's
Class A Common Stock (HEI.A) outstanding and 33.8 million shares of
HEICO's Common Stock (HEI) outstanding. The stock symbols for
HEICO’s two classes of common stock on most websites are HEI.A and
HEI. However, some websites change HEICO's Class A Common Stock
trading symbol (HEI.A) to HEI/A or HEIa.
As previously announced, HEICO will hold a conference call on
Wednesday, May 24, 2017 at 9:00 a.m. Eastern Daylight Time to
discuss its second quarter results. Individuals wishing to
participate in the conference call should dial: U.S. and Canada
(877) 586-4323, International (706) 679-0934, wait for the
conference operator and provide the operator with the Conference ID
19264407. A digital replay will be available two hours after the
completion of the conference for 14 days. To access, dial: (404)
537-3406, and enter the Conference ID 19264407.
HEICO Corporation is engaged primarily in the design,
production, servicing and distribution of products and services to
certain niche segments of the aviation, defense, space, medical,
telecommunications and electronics industries through its
Hollywood, Florida-based Flight Support Group and its Miami,
Florida-based Electronic Technologies Group. HEICO's customers
include a majority of the world's airlines and overhaul shops, as
well as numerous defense and space contractors and military
agencies worldwide, in addition to medical, telecommunications and
electronics equipment manufacturers. For more information about
HEICO, please visit our website at http://www.heico.com.
Certain statements in this press release constitute
forward-looking statements, which are subject to risks,
uncertainties and contingencies. HEICO's actual results may differ
materially from those expressed in or implied by those
forward-looking statements as a result of factors including, but
not limited to: lower demand for commercial air travel or 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 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 budget cuts,
which could reduce our defense-related revenue. Parties receiving
this material are encouraged to review all of HEICO's filings with
the Securities and Exchange Commission, including, but not limited
to filings on Form 10-K, Form 10-Q and Form 8-K. 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.
HEICO CORPORATION
Condensed Consolidated Statements of
Operations (Unaudited)
(in thousands, except per share data)
Three Months Ended April 30, 2017
2016 Net sales $368,657 $350,648 Cost of sales
228,275 216,619 Selling, general and administrative expenses 63,840
67,235 Operating income 76,542 66,794 Interest
expense (1,960 ) (2,333 ) Other income 151 568 Income
before income taxes and noncontrolling interests 74,733 65,029
Income tax expense 23,900 21,300 Net income from
consolidated operations 50,833 43,729 Less: Net income attributable
to noncontrolling interests 5,147 5,072 Net income
attributable to HEICO $45,686 $38,657 Net
income per share attributable to HEICO shareholders: (a) Basic $.54
$.46 Diluted $.53 $.45 Weighted average number of common
shares outstanding: (a) Basic 84,221 83,653 Diluted 86,637 85,035
Three Months Ended April 30, 2017 2016
Operating segment information: Net sales: Flight Support Group
$231,809 $220,290 Electronic Technologies Group 141,169 132,566
Intersegment sales (4,321 ) (2,208 ) $368,657 $350,648
Operating income: Flight Support Group $44,744
$41,308 Electronic Technologies Group 38,826 33,402 Other,
primarily corporate (7,028 ) (7,916 ) $76,542 $66,794
HEICO CORPORATION
Condensed Consolidated Statements of
Operations (Unaudited)
(in thousands, except per share data)
Six Months Ended April 30, 2017 2016
Net sales $712,089 $656,875 Cost of sales 446,290 410,650 Selling,
general and administrative expenses 124,707 126,810
Operating income 141,092 119,415 (c) Interest expense (3,929 )
(3,900 ) Other income 635 138 Income before income
taxes and noncontrolling interests 137,798 115,653 Income tax
expense 40,700 (b) 36,000 (d) Net income from
consolidated operations 97,098 79,653 Less: Net income attributable
to noncontrolling interests 10,485 9,725 Net income
attributable to HEICO $86,613 $69,928 (c)(d)
Net income per share attributable to HEICO shareholders: (a) Basic
$1.03 (b) $.84 (c)(d) Diluted $1.00 (b) $.82 (c)(d) Weighted
average number of common shares outstanding: (a) Basic 84,182
83,624 Diluted 86,520 84,980
Six Months Ended April
30, 2017 2016 Operating segment information: Net
sales: Flight Support Group $452,710 $424,866 Electronic
Technologies Group 267,334 236,718 Intersegment sales (7,955 )
(4,709 ) $712,089 $656,875 Operating income:
Flight Support Group $86,107 $76,788 Electronic Technologies Group
67,910 55,671 Other, primarily corporate (12,925 ) (13,044 )
$141,092 $119,415
HEICO CORPORATION
Footnotes to Condensed Consolidated Statements of
Operations (Unaudited)
(a) All share and per share information has been adjusted
retrospectively to reflect a 5-for-4 stock split effected in April
2017.
(b) During the first quarter of fiscal 2017, the Company adopted
Accounting Standards Update ("ASU") 2016-09, "Improvements to
Employee Share-Based Payment Accounting," resulting in the
recognition of a $3.1 million discrete income tax benefit, which,
net of noncontrolling interests, increased net income attributable
to HEICO by $2.6 million. Additionally, the adoption of ASU 2016-09
resulted in a 712,000 increase in the Company's weighted average
number of diluted common shares outstanding and an increase in net
income per share attributable to HEICO shareholders of $.03 per
basic and $.02 per diluted share in the first six months of fiscal
2017.
(c) During the first quarter of fiscal 2016, the Company
incurred $3.1 million of acquisition costs in connection with a
fiscal 2016 acquisition. These are one-time nonrecurring costs.
These expenses, net of tax, decreased net income attributable to
HEICO by $2.0 million, or $.02 per basic and diluted share.
(d) During the first quarter of fiscal 2016, the Company
recognized additional income tax credits for qualified R&D
activities related to the last ten months of fiscal 2015 upon the
retroactive and permanent extension of the U.S. federal R&D tax
credit in December 2015. The tax credits, net of expenses,
increased net income attributable to HEICO by $1.7 million, or $.02
per basic and diluted share.
HEICO CORPORATION
Condensed Consolidated Balance
Sheets (Unaudited)
(in thousands)
April 30, 2017 October 31, 2016 Cash
and cash equivalents $36,732 $42,955 Accounts receivable, net
213,107 202,227 Inventories, net 325,661 286,302 Prepaid expenses
and other current assets 54,335 52,737 Total current assets
629,835 584,221 Property, plant and equipment, net 126,402 121,611
Goodwill 912,539 865,717 Intangible assets, net 388,366 366,863
Other assets 120,197 101,063 Total assets $2,177,339
$2,039,475 Current maturities of long-term debt $407 $411
Other current liabilities 211,571 214,010 Total current
liabilities 211,978 214,421 Long-term debt, net of current
maturities 460,465 457,814 Deferred income taxes 108,429 105,962
Other long-term liabilities 132,804 114,061 Total
liabilities 913,676 892,258 Redeemable noncontrolling interests
125,132 99,512 Shareholders’ equity 1,138,531 1,047,705
Total liabilities and equity $2,177,339 $2,039,475
HEICO CORPORATION
Condensed Consolidated Statements of
Cash Flows (Unaudited)
(in thousands)
Six Months Ended April 30, 2017
2016 Operating Activities: Net income from consolidated
operations $97,098 $79,653 Depreciation and amortization 30,501
29,183 Employer contributions to HEICO Savings and Investment Plan
3,679 3,266 Share-based compensation expense 3,110 3,286 Increase
in accrued contingent consideration 1,148 1,679 Foreign currency
transaction adjustments, net (280 ) 2,186 Deferred income tax
benefit (2,909 ) (1,168 ) Tax benefit from stock option exercises —
870 Excess tax benefit from stock option exercises — (870 )
Decrease in accounts receivable 1,358 7,875 Increase in inventories
(14,251 ) (9,855 ) Decrease in current liabilities (20,766 ) (9,595
) Other (975 ) (3,805 ) Net cash provided by operating activities
97,713 102,705 Investing Activities:
Acquisitions, net of cash acquired (80,838 ) (263,811 ) Capital
expenditures (13,538 ) (15,546 ) Other (944 ) (3,241 ) Net cash
used in investing activities (95,320 ) (282,598 ) Financing
Activities: Borrowings on revolving credit facility, net 3,000
194,000 Cash dividends paid (6,059 ) (5,350 ) Distributions to
noncontrolling interests (3,897 ) (5,507 ) Acquisitions of
noncontrolling interests (3,848 ) (3,599 ) Proceeds from stock
option exercises 2,297 1,471 Excess tax benefit from stock option
exercises — 870 Revolving credit facility issuance costs (270 ) —
Other (371 ) (181 ) Net cash (used in) provided by financing
activities (9,148 ) 181,704 Effect of exchange rate
changes on cash 532 1,375 Net (decrease)
increase in cash and cash equivalents (6,223 ) 3,186 Cash and cash
equivalents at beginning of year 42,955 33,603 Cash
and cash equivalents at end of period $36,732 $36,789
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version on businesswire.com: http://www.businesswire.com/news/home/20170523006478/en/
HEICO CorporationVictor H. Mendelson, 305-374-1745, Ext.
7590orCarlos L. Macau, Jr., 954-987-4000, Ext. 7570
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