3rd Quarter Net Income and Operating Income
up 9% on Net Sales Increase of 10%
HEICO CORPORATION (NYSE: HEI.A) (NYSE: HEI) today reported that
net income increased 9% to a record $45.7 million, or 53 cents
per diluted share, in the third quarter of fiscal 2017, up from
$42.0 million, or 49 cents per diluted share, in the third
quarter of fiscal 2016. In the first nine months of fiscal 2017,
net income increased 18% to a record $132.3 million, or $1.53 per
diluted share, up from $111.9 million, or $1.32 per diluted share,
in the first nine 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 9% to $76.1 million in the third
quarter of fiscal 2017, up from $69.9 million in the third quarter
of fiscal 2016. In the first nine months of fiscal 2017, operating
income increased 15% to a record $217.2 million, up from $189.3
million in the first nine months of fiscal 2016.
The Company's consolidated operating margin was 19.4% and 19.6%
in the third quarter of fiscal 2017 and 2016, respectively. The
Company's consolidated operating margin improved to 19.7% in the
first nine months of fiscal 2017, up from 18.7% in the first nine
months of fiscal 2016.
Net sales increased 10% to a record $391.5 million in the third
quarter of fiscal 2017, up from $356.1 million in the third quarter
of fiscal 2016. Net sales increased 9% to a record $1,103.6 million
in the first nine months of fiscal 2017, up from $1,013.0 million
in the first nine months of fiscal 2016.
Consolidated Results
Laurans A. Mendelson, HEICO’s Chairman and CEO, commented on the
Company's third quarter and year-to-date results stating, "HEICO's
operating segments have continued to execute at a high level of
profitable performance and I am very pleased with the record
financial results. These outstanding results reflect record net
sales and operating income for the first nine months of fiscal 2017
within both the Flight Support Group and Electronic Technologies
Group, achieved through increased demand for the majority of our
products. Additionally, our subsidiaries continue to deliver strong
cash flows in support of our overall corporate strategy of high
cash flow generation.
We recently announced our largest acquisition in history when we
entered into an agreement to acquire AeroAntenna Technology, Inc.,
(“AAT”). Closing, which is subject to governmental approval and
standard closing conditions, is expected to occur during the fourth
quarter of fiscal 2017 and we expect the acquisition to be
accretive to our earnings per share within the first twelve months
following closing. We plan to fund our acquisition of AAT through
our existing credit facility and available cash.
Cash flow provided by operating activities remained robust,
totaling $179.3 million, or 136% of net income, in the first nine
months of fiscal 2017, up from $172.4 million in the first nine
months of fiscal 2016. Cash flow provided by operating activities
increased 17% to $81.6 million in the third quarter of fiscal 2017,
up from $69.7 million in the third quarter of fiscal 2016. For the
full fiscal year 2017, we continue to anticipate cash flow provided
by operating activities to approximate 150% of consolidated net
income.
Our total debt to shareholders' equity ratio was 36.3% as of
July 31, 2017. Our net debt to shareholders’ equity ratio was 32.2%
as of July 31, 2017, with net debt (total debt less cash and cash
equivalents) of $385.3 million principally incurred to fund
acquisitions in fiscal 2017 and 2016. We have no significant debt
maturities until fiscal 2019 and plan to utilize our financial
flexibility to continue 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 moderated by short-term lower
defense-related net sales principally due to customer delays in
getting some anticipated new orders under contract. 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 9% - 11% and in net income to 14% - 16%, up from prior
growth estimates in net sales of 8% - 10% and in net income of 12%
- 14%. Additionally, we continue to anticipate our consolidated
operating margin to approximate 20%, depreciation and amortization
expense to approximate $65 million and cash flow from operations to
approximate $270 million. Further, we now anticipate capital
expenditures to approximate $31 million. These estimates include
our pending acquisition of AAT (from estimated closing through
10/31/17), but exclude any other 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 third
quarter results stating, "The Flight Support Group's record net
sales and operating income in the third quarter of fiscal 2017 were
principally attributed to our recent acquisitions and continued
strong organic growth within our aftermarket replacement parts and
repair and overhaul parts and services product lines.
The Flight Support Group's net sales increased 16% to a record
$258.0 million in the third quarter of fiscal 2017, up from $222.6
million in the third quarter of fiscal 2016. The Flight Support
Group's net sales increased 10% to a record $710.7 million in the
first nine months of fiscal 2017, up from $647.4 million in the
first nine months of fiscal 2016. The increase in the third quarter
and first nine months of fiscal 2017 reflects organic growth of 6%
in both periods and the impact of our recent profitable
acquisitions. The organic growth in the third quarter and first
nine 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 and
were partially offset by lower demand within our specialty products
product line for certain commercial aerospace and defense products
in the third quarter of fiscal 2017 and for certain industrial and
defense products in the first nine months of fiscal 2017.
The Flight Support Group's operating income increased 11% to a
record $46.7 million in the third quarter of fiscal 2017, up from
$42.0 million in the third quarter of fiscal 2016. The Flight
Support Group's operating income increased 12% to $132.8 million in
the first nine months of fiscal 2017, up from $118.8 million in the
first nine months of fiscal 2016. The increase in the third quarter
and first nine months of fiscal 2017 principally reflects the
previously mentioned net sales growth. Additionally, the first nine
months of fiscal 2017 reflects efficiencies realized from the
benefit of our net sales growth on relatively consistent
period-over-period SG&A expenses.
The Flight Support Group's operating margin was 18.1% and 18.9%
in the third quarter of fiscal 2017 and 2016, respectively. The
Flight Support Group's operating margin increased to 18.7% in the
first nine months of fiscal 2017, up from 18.3% in the first nine
months of fiscal 2016. The decrease in the third quarter of fiscal
2017 principally reflects an increase in intangible asset
amortization and depreciation expense associated with our
profitable fiscal 2017 acquisitions, as well as the impact from
changes in the estimated fair value of accrued contingent
consideration, principally due to foreign currency transaction
adjustments, associated with a prior year acquisition. The increase
in the first nine months of fiscal 2017 is mainly attributed to the
previously mentioned SG&A efficiencies.
With respect to the remainder of fiscal 2017, we now estimate
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%. Further, we continue to
estimate that approximately half our fiscal 2017 growth will be
generated organically.”
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 third quarter results stating, "Our strong
quarterly results in net sales were driven principally by increased
customer demand for the majority of our products.
The Electronic Technologies Group's net sales increased 1% to
$137.9 million in the third quarter of fiscal 2017, up from $136.2
million in the third quarter of fiscal 2016. The Electronic
Technologies Group's net sales increased 9% to a record $405.2
million in the first nine months of fiscal 2017, up from $372.9
million in the first nine months of fiscal 2016. The increase in
the third quarter and first nine months of fiscal 2017 reflects
increased demand for our aerospace, space, other electronics and
medical products, partially offset by a decrease in defense-related
net sales principally due to customer delays in getting some
anticipated new orders under contract. Additionally, the increase
in the first nine months of fiscal 2017 reflects organic growth of
4% as well as the contribution from our profitable fiscal 2016
acquisition.
The Electronic Technologies Group's operating income increased
15% to $38.5 million in the third quarter of fiscal 2017, up from
$33.6 million in the third quarter of fiscal 2016. The increase
principally reflects a favorable gross margin impact from increased
net sales, as well as lower legal expenses and a more favorable
product mix for certain of our space, other electronics, aerospace
and medical products partially offset by a decrease in net sales
and less favorable product mix for certain of our defense
products
The Electronic Technologies Group's operating income increased
19% to a record $106.5 million in the first nine months of fiscal
2017, up from $89.3 million in the first nine months of fiscal
2016. The increase principally reflects the previously mentioned
net sales growth and a decrease in acquisition costs associated
with a prior year acquisition as well as the previously mentioned
decrease in legal expenses. Additionally, the increase reflects the
gross margin impact from higher net sales and a more favorable
product mix for our aerospace, other electronics and medical
products partially offset by a decrease in net sales for certain of
our defense products and a less favorable product mix for certain
of our space products.
The Electronic Technologies Group's operating margin improved to
28.0% in the third quarter of fiscal 2017, up from 24.7% in the
third quarter of fiscal 2016. The Electronic Technologies Group's
operating margin improved to 26.3% in the first nine months of
fiscal 2017, up from 23.9% in the first nine months of fiscal 2016.
The increase in the third quarter and first nine months of fiscal
2017 principally reflects the previously mentioned improved gross
profit margin and impact from a decrease in legal expenses.
Additionally, the first nine months of fiscal 2017 reflects the
previously mentioned decrease in acquisition costs.
With respect to the remainder of fiscal 2017, we now estimate
high-single digit growth in the Electronic Technologies Group's net
sales over fiscal 2016 levels, and anticipate the full year
Electronic Technologies Group's operating margin to approximate
26%. Further, we continue to estimate that approximately half our
fiscal 2017 growth will be generated organically. These estimates
include our pending acquisition of AAT, but exclude any other
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 50.7 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
Thursday, August 24, 2017 at 9:00 a.m. Eastern Daylight Time to
discuss its third 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
65293197. 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 65293197.
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: 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 July
31, 2017 2016 Net sales
$391,500 $356,084 Cost of sales 242,603 222,501 Selling, general
and administrative expenses 72,775 63,729 Operating
income 76,122 69,854 Interest expense (2,447 ) (2,294 ) Other
income 200 16 Income before income taxes and
noncontrolling interests 73,875 67,576 Income tax expense 22,400
20,600 Net income from consolidated operations 51,475
46,976 Less: Net income attributable to noncontrolling interests
5,777 4,974 Net income attributable to HEICO $45,698
$42,002 Net income per share attributable to
HEICO shareholders: (a) Basic $.54 $.50 Diluted $.53 $.49
Weighted average number of common shares outstanding: (a) Basic
84,343 83,908 Diluted 86,893 85,348
Three Months Ended
July 31, 2017 2016 Operating segment information:
Net sales: Flight Support Group $257,966 $222,553 Electronic
Technologies Group 137,860 136,215 Intersegment sales (4,326 )
(2,684 ) $391,500 $356,084 Operating income:
Flight Support Group $46,664 $41,969 Electronic Technologies Group
38,543 33,609 Other, primarily corporate (9,085 ) (5,724 ) $76,122
$69,854
HEICO CORPORATION
Condensed Consolidated Statements of
Operations (Unaudited)
(in thousands, except per share data)
Nine Months Ended July
31, 2017 2016 Net sales $1,103,589
$1,012,959 Cost of sales 688,893 633,151 Selling, general and
administrative expenses 197,482 190,539 Operating
income 217,214 189,269
(c)
Interest expense (6,376 ) (6,194 ) Other income 835 154
Income before income taxes and noncontrolling interests
211,673 183,229 Income tax expense 63,100
(b)
56,600
(d)
Net income from consolidated operations 148,573 126,629 Less: Net
income attributable to noncontrolling interests 16,262
14,699 Net income attributable to HEICO $132,311
(b)
$111,930
(c)(d)
Net income per share attributable to HEICO shareholders: (a)
Basic $1.57
(b)
$1.34
(c)(d)
Diluted $1.53
(b)
$1.32
(c)(d)
Weighted average number of common shares outstanding: (a)
Basic 84,235 83,718 Diluted 86,645 85,102
Nine Months
Ended July 31, 2017 2016 Operating segment
information: Net sales: Flight Support Group $710,676 $647,419
Electronic Technologies Group 405,194 372,933 Intersegment sales
(12,281 ) (7,393 ) $1,103,589 $1,012,959
Operating income: Flight Support Group $132,771 $118,757 Electronic
Technologies Group 106,453 89,280 Other, primarily corporate
(22,010 ) (18,768 ) $217,214 $189,269
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 745,000 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 nine 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)
July 31, 2017 October 31, 2016 Cash and cash
equivalents $49,489 $42,955 Accounts receivable, net 206,405
202,227 Inventories, net 340,471 286,302 Prepaid expenses and other
current assets 59,564 52,737 Total current assets 655,929
584,221 Property, plant and equipment, net 129,905 121,611 Goodwill
921,978 865,717 Intangible assets, net 390,926 366,863 Other assets
124,985 101,063 Total assets $2,223,723 $2,039,475
Current maturities of long-term debt $450 $411 Other current
liabilities 226,652 214,010 Total current liabilities
227,102 214,421 Long-term debt, net of current maturities 434,312
457,814 Deferred income taxes 106,866 105,962 Other long-term
liabilities 131,893 114,061 Total liabilities 900,173
892,258 Redeemable noncontrolling interests 126,881 99,512
Shareholders’ equity 1,196,669 1,047,705 Total liabilities
and equity $2,223,723 $2,039,475
HEICO
CORPORATION
Condensed Consolidated Statements of
Cash Flows (Unaudited)
(in thousands)
Nine Months Ended July 31, 2017
2016 Operating Activities: Net income from consolidated
operations $148,573 $126,629 Depreciation and amortization 46,912
44,603 Employer contributions to HEICO Savings and Investment Plan
5,732 5,219 Share-based compensation expense 5,207 4,905 Increase
in accrued contingent consideration 1,227 2,635 Foreign currency
transaction adjustments, net 3,316 876 Deferred income tax benefit
(6,998 ) (6,053 ) Tax benefit from stock option exercises — 867
Excess tax benefit from stock option exercises — (880 ) Decrease
(increase) in accounts receivable 13,343 (2,974 ) Increase in
inventories (22,415 ) (13,914 ) (Decrease) increase in current
liabilities (10,460 ) 14,776 Other (5,134 ) (4,273 ) Net cash
provided by operating activities 179,303 172,416
Investing Activities: Acquisitions, net of cash acquired
(95,759 ) (263,811 ) Capital expenditures (20,445 ) (23,113 ) Other
(685 ) (3,005 ) Net cash used in investing activities (116,889 )
(289,929 ) Financing Activities: (Payments) borrowings on
revolving credit facility, net (26,000 ) 142,000 Distributions to
noncontrolling interests (12,924 ) (16,156 ) Cash dividends paid
(12,807 ) (10,724 ) Payment of contingent consideration (7,039 )
(6,960 ) Acquisitions of noncontrolling interests (3,848 ) (3,599 )
Proceeds from stock option exercises 4,171 4,831 Excess tax benefit
from stock option exercises — 880 Revolving credit facility
issuance costs (270 ) — Other (241 ) (272 ) Net cash (used in)
provided by financing activities (58,958 ) 110,000
Effect of exchange rate changes on cash 3,078 1,101
Net increase (decrease) increase in cash and cash
equivalents 6,534 (6,412 ) Cash and cash equivalents at beginning
of year 42,955 33,603 Cash and cash equivalents at
end of period $49,489 $27,191
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170823006069/en/
HEICO CorporationVictor H. Mendelson, 305-374-1745 ext.
7590orCarlos L. Macau, Jr., 954-987-4000 ext. 7570
HEICO (NYSE:HEI)
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