First Quarter of Fiscal 2018 Net Income up
59% on Operating Income Increase of 23% and Net Sales Increase of
18%
HEICO Corporation (NYSE:HEI.A) (NYSE:HEI) today reported that
net income increased 59% to a record $65.2 million, or
60 cents per diluted share, in the first quarter of fiscal
2018, up from $40.9 million, or 38 cents per diluted share, in
the first quarter of fiscal 2017.
Operating income increased 23% to $79.6 million in the first
quarter of fiscal 2018, up from $64.6 million in the first quarter
of fiscal 2017. The Company's consolidated operating margin
improved to 19.7% in the first quarter of fiscal 2018, up from
18.8% in the first quarter of fiscal 2017.
In the first quarter of fiscal 2018, the United States (U.S.)
government enacted significant changes to existing tax law,
including a reduction in the U.S. corporate tax rate. The Company’s
first quarter of fiscal 2018 effective tax rate was 4.7%, down from
26.6% in the first quarter of fiscal 2017. Net income was favorably
impacted by approximately $16.5 million, or 15 cents per diluted
earnings per share, as a result of the lower federal tax rate and
is inclusive of approximately $11.9 million, or 11 cents per
diluted earnings per share, as a result of one-time tax benefits
principally due to the remeasurement of the Company's net deferred
tax liabilities.
All share and per share information has been adjusted
retrospectively to reflect 5-for-4 stock splits distributed by the
Company in April 2017 and January 2018.
Net sales increased 18% to $404.4 million in the first quarter
of fiscal 2018, up from $343.4 million in the first quarter of
fiscal 2017.
Consolidated Results
Laurans A. Mendelson, HEICO’s Chairman and CEO, commented on the
Company's first quarter results stating, "We are pleased to report
strong first quarter year-over-year increases in net sales and
operating income within both our Electronic Technologies Group and
Flight Support Group. These results principally reflect the
excellent performance of our well-managed and profitable fiscal
2017 and 2018 acquisitions, as well as consolidated organic growth
of 5%.
Our total debt to shareholders' equity ratio decreased to 50.3%
as of January 31, 2018, down from 54.0% as of October 31, 2017. Our
net debt (total debt less cash and cash equivalents) of $603.3
million as of January 31, 2018 to shareholders’ equity ratio
decreased to 45.4% as of January 31, 2018, down from 49.8% as of
October 31, 2017. Our net debt to EBITDA ratio was 1.54x as of
January 31, 2018 compared to 1.67x as of October 31, 2017. During
fiscal 2018, we have successfully completed two acquisitions and we
have completed five acquisitions over the past year. We have no
significant debt maturities until fiscal 2023 and plan to utilize
our financial flexibility to aggressively pursue high quality
acquisitions to accelerate growth and maximize shareholder
returns.
Cash flow provided by operating activities remained strong,
totaling $45.0 million in the first quarter of fiscal 2018. We
continue to forecast record cash flow from operations for fiscal
2018.
As we look ahead to the remainder of fiscal 2018, we anticipate
continued net sales growth within the Flight Support Group's
commercial aviation and defense product lines. We also anticipate
growth within the Electronic Technologies Group, principally driven
by demand for the majority of our products. During the remainder of
fiscal 2018, 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 2018 year-over-year growth in net
sales to 12% - 14% and in net income to 30% - 32%, up from prior
growth estimates in net sales and net income of 10% - 12%. The
increased net income guidance reflects the impact of a lower
federal income tax rate and the continued improvements in our
consolidated operating results. Additionally, we now anticipate our
consolidated operating margin to approximate 20% - 21%, up from our
prior estimate of 20%, and cash flow from operations to approximate
$310 million, up from our prior estimate of $290 million. Further,
we continue to anticipate depreciation and amortization expense to
approximate $75 million and capital expenditures to approximate $50
million. These estimates include our recent acquisition of Sensor
Technology Engineering, Inc., 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 first
quarter results stating, "Our year-over-year net sales and
operating income increase in the first quarter of fiscal 2018 was
driven by recent acquisitions and continued organic growth within
our aftermarket replacement parts and repair and overhaul parts and
services product lines.
The Flight Support Group's net sales increased 15% to $254.7
million in the first quarter of fiscal 2018, up from $220.9 million
in the first quarter of fiscal 2017. The increase is attributable
to the impact from our recent profitable acquisitions as well as 4%
organic growth. The organic growth in the Flight Support Group
mainly reflects higher demand and new product offerings within our
aftermarket replacement parts, as well as repair and overhaul parts
and services product lines, partially offset by lower demand for
certain defense components within our specialty products product
line. Excluding the net sales decrease in our specialty products
product line, the Flight Support Group experienced 6% organic
growth in the first quarter of fiscal 2018, principally in our
aftermarket replacement parts product line.
The Flight Support Group's operating income increased 11% to
$45.9 million in the first quarter of fiscal 2018, up from $41.4
million in the first quarter of fiscal 2017. The increase
principally reflects the previously mentioned net sales growth
partially offset by higher performance-based compensation expense
and an increase in intangible asset amortization expense mainly
resulting from the fiscal 2017 acquisitions.
The Flight Support Group's operating margin was 18.0% and 18.7%
in the first quarters of fiscal 2018 and 2017, respectively. The
decrease principally reflects the previously mentioned higher
performance-based compensation expense and increase in intangible
asset amortization expense.
With respect to the remainder of fiscal 2018, we continue to
estimate full year net sales growth of approximately 10% over the
prior year and the full year Flight Support Group operating margin
to approximate 18.0% - 18.5%. Further, we continue to estimate that
approximately half our fiscal 2018 net sales growth will be
generated organically. These estimates 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 first quarter results stating, "Our strong
performance was driven principally by the impact of recent
acquisitions, as well as continued favorable organic growth.
The Electronic Technologies Group's net sales increased 23% to
$155.7 million in the first quarter of fiscal 2018, up from $126.2
million in the first quarter of fiscal 2017. The increase resulted
from the contribution by our profitable fiscal 2017 and 2018
acquisitions, as well as 6% organic growth, principally from
increased demand for our space and defense products.
The Electronic Technologies Group's operating income increased
49% to $43.2 million in the first quarter of fiscal 2018, up from
$29.1 million in the first quarter of fiscal 2017. The increase
principally reflects the previously mentioned net sales growth and
an improved gross profit margin impact mainly attributed to higher
net sales and a more favorable product mix for certain defense
products.
The Electronic Technologies Group's operating margin improved to
27.8% in the first quarter of fiscal 2018, up from 23.1% in the
first quarter of fiscal 2017. The increase is principally
attributed to the previously mentioned improved gross profit
margin.
With respect to the remainder of fiscal 2018, we now estimate
full year net sales growth of approximately 15% - 17% over the
prior year, up from the prior estimate of 12%, and anticipate the
full year Electronic Technologies Group's operating margin to
approximate 27% - 28%, up from the prior estimate of 27%. Further,
we estimate the Electronic Technologies Group’s organic net sales
growth rate to be in the mid- to high-single digits. These
estimates include the recently announced acquisition of Sensor
Technology Engineering, Inc., but 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 63.5 million shares of HEICO's
Class A Common Stock (HEI.A) outstanding and 42.2 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, February 28, 2018 at 9:00 a.m. Eastern Standard
Time to discuss its first 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
4496699. 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 4496699.
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 spending or
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 January 31, 2018
2017 Net sales $404,410 $343,432 Cost of sales 249,619
218,015 Selling, general and administrative expenses 75,231 60,867
Operating income 79,560 64,550 Interest expense (4,725 ) (1,969)
Other income 360 484 Income before income taxes and noncontrolling
interests 75,195 63,065 Income tax expense 3,500 (b) 16,800 Net
income from consolidated operations 71,695 46,265 Less: Net income
attributable to noncontrolling interests 6,543 5,338 Net income
attributable to HEICO $65,152 (b) $40,927 Net income per
share attributable to HEICO shareholders: (a) Basic $.62 (b) $.39
Diluted $.60 (b) $.38 Weighted average number of common
shares outstanding: (a) Basic 105,639 105,178 Diluted 109,112
108,005
Three Months Ended January 31, 2018
2017 Operating segment information: Net sales: Flight
Support Group $254,721 $220,901 Electronic Technologies Group
155,658 126,165 Intersegment sales (5,969) (3,634) $404,410
$343,432 Operating income: Flight Support Group $45,869
$41,363 Electronic Technologies Group 43,220 29,084 Other,
primarily corporate (9,529) (5,897) $79,560 $64,550
HEICO CORPORATION
Footnotes to Condensed Consolidated
Statements of Operations (Unaudited)
(a) All share and per share information
has been adjusted retrospectively to reflect 5-for-4 stock
splits effected in April 2017 and January
2018.
(b) In the first quarter of fiscal 2018,
the United States (U.S.) government enacted significant
changes to existing tax law resulting in
the Company recording a provisional discrete tax
benefit from remeasuring its U.S. federal
net deferred tax liabilities partially offset by a
provisional discrete tax expense related
to a one-time transition tax on the unremitted
earnings of the Company's foreign
subsidiaries. The net impact of these provisional
amounts increased net income attributable
to HEICO by $11.9 million, or $.11 per basic and
diluted share.
HEICO CORPORATION
Condensed Consolidated Balance
Sheets (Unaudited)
(in thousands)
January 31, 2018 October 31,
2017 Cash and cash equivalents $65,688 $52,066 Accounts
receivable, net 210,278 222,456 Inventories, net 367,395 343,628
Prepaid expenses and other current assets 19,071 13,742 Total
current assets 662,432 631,892 Property, plant and equipment, net
133,115 129,883 Goodwill 1,090,864 1,081,306 Intangible assets, net
530,987 538,081 Other assets 153,044 131,269 Total assets
$2,570,442 $2,512,431 Current maturities of long-term debt
$485 $451 Other current liabilities 228,571 248,986 Total current
liabilities 229,056 249,437 Long-term debt, net of current
maturities 668,527 673,528 Deferred income taxes 42,526 59,026
Other long-term liabilities 167,964 151,025 Total liabilities
1,108,073 1,133,016 Redeemable noncontrolling interests 132,355
131,123 Shareholders’ equity 1,330,014 1,248,292 Total liabilities
and equity $2,570,442 $2,512,431
HEICO CORPORATION
Condensed Consolidated Statements of
Cash Flows (Unaudited)
(in thousands)
Three Months Ended January 31, 2018
2017 Operating Activities: Net income from consolidated
operations $71,695 $46,265 Depreciation and amortization 19,024
15,248 Employer contributions to HEICO Savings and Investment Plan
1,860 1,714 Share-based compensation expense 2,168 1,451 (Decrease)
increase in accrued contingent consideration (3,195 ) 537 Foreign
currency transaction adjustments, net 75 (956 ) Deferred income tax
benefit (17,292 ) (346 ) Decrease in accounts receivable 14,463
25,998 Increase in inventories (18,301 ) (14,989 ) Decrease in
current liabilities, net (20,581 ) (18,000 ) Other (4,911 ) (947 )
Net cash provided by operating activities 45,005 55,975
Investing Activities: Capital expenditures (7,577 )
(6,422 ) Acquisitions, net of cash acquired (6,126 ) — Other (2,790
) 419 Net cash used in investing activities (16,493 ) (6,003
) Financing Activities: Payments on revolving credit
facility (5,000 ) (40,000 ) Cash dividends paid (7,395 ) (6,059 )
Revolving credit facility issuance costs (4,067 ) — Distributions
to noncontrolling interests (1,882 ) (1,986 ) Payment of contingent
consideration (300 ) — Proceeds from stock option exercises 1,425
1,230 Other (114 ) (108 ) Net cash used in financing activities
(17,333 ) (46,923 ) Effect of exchange rate changes on cash
2,443 (99 ) Net increase in cash and cash equivalents
13,622 2,950 Cash and cash equivalents at beginning of year 52,066
42,955 Cash and cash equivalents at end of period
$65,688 $45,905
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version on businesswire.com: http://www.businesswire.com/news/home/20180227006585/en/
HEICO CorporationVictor H. Mendelson, 305-374-1745 Ext.
7590orCarlos L. Macau, Jr., 954-987-4000 Ext. 7570
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