Fourth Quarter and Full Year of Fiscal 2017
Net Income up 21% and 19% on Net Sales Increases of 16% and 11% and
Operating Income Increases of 18% and 16%
HEICO CORPORATION (NYSE:HEI.A) (NYSE:HEI) today reported that
net income increased 21% to a record $53.7 million, or
62 cents per diluted share, in the fourth quarter of fiscal
2017, up from $44.3 million, or 52 cents per diluted share, in
the fourth quarter of fiscal 2016. In the fiscal year ended October
31, 2017, net income increased 19% to a record $186.0 million, or
$2.14 per diluted share, up from $156.2 million, or $1.83 per
diluted share, in the fiscal year ended October 31, 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. Such share and per share information
has not been retrospectively adjusted for the pending 5-for-4 stock
split discussed below.
Net sales increased 16% to a record $421.2 million in the fourth
quarter of fiscal 2017, up from $363.3 million in the fourth
quarter of fiscal 2016. Net sales increased 11% to a record
$1,524.8 million in the fiscal year ended October 31, 2017, up from
$1,376.3 million in the fiscal year ended October 31, 2016.
Operating income increased 18% to $89.4 million in the fourth
quarter of fiscal 2017, up from $76.1 million in the fourth quarter
of fiscal 2016. In the fiscal year ended October 31, 2017,
operating income increased 16% to a record $306.7 million, up from
$265.3 million in the fiscal year ended October 31, 2016.
The Company's consolidated operating margin improved to 21.2% in
the fourth quarter of fiscal 2017, up from 20.9% in the fourth
quarter of fiscal 2016 and improved to 20.1% in the fiscal year
ended October 31, 2017, up from 19.3% in the fiscal year ended
October 31, 2016.
On December 15th, 2017 HEICO’s Board of Directors declared a
5-for-4 stock split on both classes of the Company's common stock.
The stock split is payable to shareholders of record as of January
3, 2018 and the Company expects to distribute the additional shares
to shareholders on January 17, 2018. Accordingly, the prices of
both the Company's Class A Common Stock and Common Stock are
anticipated to begin trading on a post-split basis on January 18,
2018. None of the applicable share and per share information in
this earnings release has been retrospectively adjusted to give
effect to the 5-for-4 stock split, pending the stock trading on a
post-split basis.
Consolidated Results
Laurans A. Mendelson, HEICO’s Chairman and CEO, commented on the
Company's record fourth quarter and full fiscal year results
stating, "HEICO's record fiscal 2017 fourth quarter and full year
results were principally driven by continued organic growth,
exemplary execution by our subsidiaries and the acquisition of
profitable, well-managed businesses within both our Electronic
Technologies Group and Flight Support Group.
Our total debt to shareholders' equity ratio was 54.0% as of
October 31, 2017. Our net debt to shareholders’ equity ratio was
approximately 50% as of October 31, 2017, with net debt (total debt
less cash and cash equivalents) of $621.9 million principally
incurred to fund acquisitions in fiscal 2017 and 2016. As
previously reported, we entered into a new $1.3 billion unsecured
revolving credit agreement ("New Credit Facility") with a bank
syndicate in November 2017, which matures in November 2022. Under
certain circumstances, the New Credit Facility may be extended for
two one-year periods and may be increased to become a $1.65 billion
facility through increased commitments from existing lenders or the
addition of new lenders.
In September 2017, we completed the acquisition of AeroAntenna
Technology, Inc., our largest acquisition in history. In November
2017, we completed the acquisition of Interface Displays &
Controls, Inc. We funded these acquisitions principally through our
existing revolving credit facility. Additionally, we expect these
acquisitions to be accretive to our earnings per share within the
first twelve months following closing.
Cash flow provided by operating activities was very strong,
totaling $274.9 million, or 148% of net income, in the fiscal year
ended October 31, 2017, up from $249.2 million in the fiscal year
ended October 31, 2016. Cash flow provided by operating activities
increased 25% to $95.6 million in the fourth quarter of fiscal
2017, up from $76.8 million in the fourth quarter of fiscal
2016.
Based on our continued strong cash flows from operations, the
Board of Directors declared a $.0875 cents per share regular
semi-annual cash dividend payable on January 17, 2018. This cash
dividend represents a 9% increase over the prior semi-annual per
share amount of $.08 paid in July 2017. On a proforma basis for the
pending 5-for-4 stock split, the January 17, 2018 cash dividend
will be $.07 per share. By declaring this semi-annual cash
dividend, our Board of Directors' goal is to confirm its confidence
in HEICO's consistent growth strategies and to continue to reward
our shareholders, while retaining sufficient capital to fund our
internal growth objectives and acquisition strategies.
Considering the impact of cash dividends, prior stock splits and
stock dividends, one share of HEI worth $8.38 in 1990 has become
worth on a combined basis approximately $2,122, representing an
increase of approximately 253 times the 1990 value and a compound
annual growth rate of approximately 23% as of December 15,
2017.
As we look ahead to fiscal 2018, we anticipate net sales growth
within the Flight Support Group's commercial aviation and defense
product lines. We also expect growth within the Electronic
Technologies Group, principally driven by demand for the majority
of our products. During 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 estimating 10%
- 12% growth in full year net sales and in full year net income
over fiscal 2017 levels. We anticipate our fiscal year 2018
consolidated operating margin to approximate 20%, depreciation and
amortization expense of approximately $75 million, capital
expenditures to approximate $50 million and cash flow from
operations to approximate $290 million. These estimates exclude the
impact of any pending tax reforms that are currently being
legislated in Congress. Furthermore, these estimates 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
fourth quarter and full fiscal year results stating, "The Flight
Support Group's strong fiscal 2017 fourth quarter and full year
results were principally attributed to our 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 12% to $256.9
million in the fourth quarter of fiscal 2017, up from $228.5
million in the fourth quarter of fiscal 2016. The increase reflects
aggregate organic growth of 6% in our aftermarket replacement parts
and repair and overhaul parts and services product lines and the
impact of our recent profitable acquisitions, partially offset by
lower demand within our specialty products product line for certain
aerospace and defense products. Overall, organic growth for the
Flight Support Group was 2% in the fourth quarter of fiscal
2017.
The Flight Support Group's net sales increased 10% to a record
$967.5 million in the fiscal year ended October 31, 2017, up from
$875.9 million in the fiscal year ended October 31, 2016. The
increase reflects aggregate organic growth of 9% in our aftermarket
replacement parts and repair and overhaul parts and services
product lines and the impact of our recent profitable acquisition,
partially offset by lower demand within our specialty products
product line for certain aerospace, industrial and defense
products. Overall, organic growth for the Flight Support Group was
5% for fiscal 2017.
The Flight Support Group's operating income increased 4% to
$46.5 million in the fourth quarter of fiscal 2017, up from $44.7
million in the fourth quarter of fiscal 2016. The Flight Support
Group's operating income increased 10% to a record $179.3 million
in the fiscal year ended October 31, 2017, up from $163.4 million
in the fiscal year ended October 31, 2016. The increase in the
fourth quarter and fiscal year ended October 31, 2017 principally
reflects the previously mentioned net sales growth partially offset
by an increase in performance-based compensation expense, an
unfavorable gross profit margin impact mainly from a decrease in
net sales within our specialty products product line and an
increase in amortization expense of intangible assets.
The Flight Support Group's operating margin was 18.1% and 19.6%
in the fourth quarter of fiscal 2017 and 2016, respectively. The
Flight Support Group's operating margin was 18.5% and 18.7% in the
fiscal year ended October 31, 2017 and 2016, respectively. The
decrease in the fourth quarter of fiscal 2017 reflects the
previously mentioned lower gross profit margin and the increase in
both performance-based compensation expense and amortization
expense of intangible assets.
With respect to fiscal 2018, we are estimating 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 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 record fourth quarter and full fiscal year
results stating, "Our record fiscal 2017 fourth quarter and full
year results in net sales and operating income were driven
principally by our strong organic growth and the impact of recent
acquisitions as well as the continued strong demand for the
majority of our products.
The Electronic Technologies Group's net sales increased 22% to a
record $169.1 million in the fourth quarter of fiscal 2017, up from
$138.3 million in the fourth quarter of fiscal 2016. The increase
resulted from strong organic growth of 14%, principally from
increased demand for our defense, space and aerospace products, as
well as the contribution from our profitable fiscal 2017
acquisition.
The Electronic Technologies Group's net sales increased 12% to a
record $574.3 million in the fiscal year ended October 31, 2017, up
from $511.3 million in the fiscal year ended October 31, 2016. The
increase resulted from organic growth of 7%, principally from
increased demand for our space, aerospace and other electronics
products, as well as the contributions from our profitable fiscal
2017 and 2016 acquisitions.
The Electronic Technologies Group's operating income increased
39% to a record $51.0 million in the fourth quarter of fiscal 2017,
up from $36.8 million in the fourth quarter of fiscal 2016. The
Electronic Technologies Group's operating income increased 25% to a
record $157.5 million in the fiscal year ended October 31, 2017, up
from $126.0 million in the fiscal year ended October 31, 2016. The
increase in the fourth quarter and fiscal year ended October 31,
2017 principally reflects the previously mentioned net sales
growth, an improved gross profit margin impact mainly from higher
net sales and a favorable product mix for certain of our aerospace
and defense products and the benefit from net sales growth on
relatively consistent period-over-period SG&A expenses.
Further, the fiscal year ended October 31, 2017 reflects a decrease
in acquisition costs associated with a prior year acquisition.
The Electronic Technologies Group's operating margin improved to
30.2% in the fourth quarter of fiscal 2017, up from 26.6% in the
fourth quarter of fiscal 2016. The Electronic Technologies Group's
operating margin improved to 27.4% in the fiscal year ended October
31, 2017, up from 24.7% in the fiscal year ended October 31, 2016.
The increase in the fourth quarter and fiscal year ended October
31, 2017 is principally attributed to the previously mentioned
SG&A efficiencies and improved gross profit margin. Further,
the fiscal year ended October 31, 2017 reflects a decrease in
acquisition costs.
With respect to fiscal 2018, we are estimating net sales growth
of approximately 12% over the prior year and anticipate the full
year Electronic Technologies Group's operating margin to
approximate 27%. Further, we estimate that approximately half our
fiscal 2018 growth in net sales will be generated organically. The
estimates exclude any 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
Tuesday, December 19, 2017 at 9:00 a.m. Eastern Standard Time to
discuss its fourth quarter and fiscal year 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
2758099. 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 2758099.
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 October 31, 2017
2016 Net sales $ 421,224 $ 363,299 Cost of sales 261,195
227,615 Selling, general and administrative expenses 70,585 59,608
Operating income 89,444 76,076 Interest expense (3,414) (2,078)
Other income (expense) 257 (177) Income before income taxes and
noncontrolling interests 86,287 73,821 Income tax expense 27,200
24,300 Net income from consolidated operations 59,087 49,521 Less:
Net income attributable to noncontrolling interests 5,413 5,259 Net
income attributable to HEICO $ 53,674 $ 44,262 Net income
per share attributable to HEICO shareholders: (a) Basic $.64 $.53
Diluted $.62 $.52 Weighted average number of common shares
outstanding: (a) Basic 84,454 84,071 Diluted 87,171 85,544
Three Months Ended October 31, 2017 2016
Operating segment information: Net sales: Flight Support Group $
256,864 $ 228,451 Electronic Technologies Group 169,067 138,339
Intersegment sales (4,707) (3,491) $ 421,224 $
363,299 Operating income: Flight Support Group $ 46,507 $
44,670 Electronic Technologies Group 50,998 36,751 Other, primarily
corporate (8,061) (5,345) $ 89,444 $ 76,076
HEICO CORPORATION
Condensed Consolidated Statements of
Operations (Unaudited)
(in thousands, except per share data)
Fiscal Year Ended October 31, 2017
2016 Net sales $ 1,524,813 $ 1,376,258 Cost of sales
950,088 860,766 Selling, general and administrative expenses
268,067 250,147 Operating income 306,658 265,345 (c) Interest
expense (9,790) (8,272) Other income (expense) 1,092 (23) Income
before income taxes and noncontrolling interests 297,960 257,050
Income tax expense 90,300 (b) 80,900 (d) Net income from
consolidated operations 207,660 176,150 Less: Net income
attributable to noncontrolling interests 21,675 19,958 Net income
attributable to HEICO $ 185,985 (b) $ 156,192 (c)(d) Net
income per share attributable to HEICO shareholders: (a) Basic $
2.21 (b) $ 1.86 (c)(d) Diluted $ 2.14 (b) $ 1.83 (c)(d)
Weighted average number of common shares outstanding: (a) Basic
84,290 83,807 Diluted 86,776 85,213
Fiscal Year Ended
October 31, 2017 2016 Operating segment
information: Net sales: Flight Support Group $ 967,540 $ 875,870
Electronic Technologies Group 574,261 511,272 Intersegment sales
(16,988) (10,884) $ 1,524,813 $ 1,376,258
Operating income: Flight Support Group $ 179,278 $ 163,427
Electronic Technologies Group 157,451 126,031 Other, primarily
corporate (30,071) (24,113) $ 306,658 $ 265,345
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. Such share and per share information has not been
retrospectively adjusted for the pending 5-for-4 stock split.
(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 781,000 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 $.01 per diluted share in 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)
October 31, 2017 October 31, 2016 Cash
and cash equivalents $ 52,066 $ 42,955 Accounts receivable, net
222,456 202,227 Inventories, net 343,628 286,302 Prepaid expenses
and other current assets 13,742 11,674 Total current assets
631,892 543,158 Property, plant and equipment, net 129,883 121,611
Goodwill 1,081,306 865,717 Intangible assets, net 538,081 366,863
Other assets 131,269 101,063 Total assets $ 2,512,431 $
1,998,412 Current maturities of long-term debt $ 451 $ 411
Other current liabilities 248,986 214,010 Total current
liabilities 249,437 214,421 Long-term debt, net of current
maturities 673,528 457,814 Deferred income taxes 59,026 64,899
Other long-term liabilities 151,025 114,061 Total
liabilities 1,133,016 851,195 Redeemable noncontrolling interests
131,123 99,512 Shareholders’ equity 1,248,292 1,047,705
Total liabilities and equity $ 2,512,431 $ 1,998,412
HEICO CORPORATION
Condensed Consolidated Statements of
Cash Flows (Unaudited)
(in thousands)
Fiscal Year Ended October 31, 2017
2016 Operating Activities: Net income from consolidated
operations $ 207,660 $ 176,150 Depreciation and amortization 64,823
60,277 Employer contributions to HEICO Savings and Investment Plan
7,768 7,020 Share-based compensation expense 7,415 6,434 Increase
in accrued contingent consideration, net 1,100 3,063 Foreign
currency transaction adjustments, net 3,347 13 Deferred income tax
benefit (11,096 ) (9,194 ) Tax benefit from stock option exercises
— 868 Excess tax benefit from stock option exercises — (881 )
Payment of contingent consideration — (631 ) Decrease (increase) in
accounts receivable 2,846 (15,955 ) Increase in inventories (21,204
) (14,421 ) Increase in current liabilities 14,251 40,796 Other
(2,025 ) (4,355 ) Net cash provided by operating
activities 274,885 249,184
Investing Activities: Acquisitions, net of cash acquired (418,265 )
(263,811 ) Capital expenditures (25,998 ) (30,863 ) Other
(552 ) (2,942 ) Net cash used in investing activities
(444,815 ) (297,616 ) Financing Activities:
Borrowings on revolving credit facility, net 213,123 90,000
Distributions to noncontrolling interests (18,401 ) (19,017 ) Cash
dividends paid (12,807 ) (10,724 ) Payment of contingent
consideration (7,039 ) (6,329 ) Acquisitions of noncontrolling
interests (3,848 ) (3,599 ) Proceeds from stock option exercises
5,659 5,924 Excess tax benefit from stock option exercises — 881
Revolving credit facility issuance costs (270 ) — Other (545
) (364 ) Net cash provided by financing activities
175,872 56,772 Effect of exchange rate
changes on cash 3,169 1,012 Net
increase in cash and cash equivalents 9,111 9,352 Cash and cash
equivalents at beginning of year 42,955 33,603
Cash and cash equivalents at end of year $ 52,066 $
42,955
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version on businesswire.com: http://www.businesswire.com/news/home/20171218006149/en/
HEICO CorporationVictor H. Mendelson, 305-374-1745 Ext.
7590orCarlos L. Macau, Jr., 954-987-4000 Ext. 7570
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