2nd Quarter of Fiscal 2018 Net Income up 30%
on Operating Income Increase of 20% and Net Sales Increase of
17%
HEICO CORPORATION (NYSE:HEI.A) (NYSE:HEI) today reported that
net income increased 30% to $59.6 million, or 55 cents per
diluted share, in the second quarter of fiscal 2018, up from $45.7
million, or 42 cents per diluted share, in the second quarter
of fiscal 2017. In the first six months of fiscal 2018, net income
increased 44% to a record $124.8 million, or $1.14 per diluted
share, up from $86.6 million, or 80 cents per diluted share, in the
first six months of fiscal 2017.
All share and per share information has been adjusted
retrospectively to reflect a 5-for-4 stock split distributed by the
Company in January 2018.
Operating income increased 20% to a record $91.6 million in the
second quarter of fiscal 2018, up from $76.5 million in the second
quarter of fiscal 2017. In the first six months of fiscal 2018,
operating income increased 21% to a record $171.1 million, up from
$141.1 million in the first six months of fiscal 2017.
The Company's consolidated operating margin improved to 21.3% in
the second quarter of fiscal 2018, up from 20.8% in the second
quarter of fiscal 2017. The Company's consolidated operating margin
improved to 20.5% in the first six months of fiscal 2018, up from
19.8% in the first six months of fiscal 2017.
Net sales increased 17% to a record $430.6 million in the second
quarter of fiscal 2018, up from $368.7 million in the second
quarter of fiscal 2017. Net sales increased 17% to a record $835.0
million in the first six months of fiscal 2018, up from $712.1
million in the first six months 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
effective tax rate for the first six months of fiscal 2018 was
14.8%, down from 29.5% for the first six months of fiscal 2017. Net
income in the first six months of fiscal 2018 was favorably
impacted by approximately $23.7 million, or 22 cents per diluted
share, including approximately $11.9 million, or 11 cents per
diluted share, which resulted from one-time tax benefits
principally due to the remeasurement of the Company’s net deferred
tax liabilities in the first quarter of fiscal 2018.
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 and
operating income driven by record net sales and operating income at
the Flight Support Group and continued year-over-year increases in
both net sales and operating income at the Electronic Technologies
Group. Our performance principally reflects the outstanding
profitable contributions to earnings from our well-managed fiscal
2017 and 2018 acquisitions, continued mid- single digit organic
growth within our Flight Support Group and strong demand for
defense-related products within our Electronic Technologies
Group.
Our total debt to shareholders' equity ratio decreased to 49.9%
as of April 30, 2018, down from 54.0% as of October 31, 2017. Our
net debt (total debt less cash and cash equivalents) of $635.6
million to shareholders’ equity ratio decreased to 46.4% as of
April 30, 2018, down from 49.8% as of October 31, 2017. Our net
debt to EBITDA ratio improved to 1.55x as of April 30, 2018
compared to 1.67x as of October 31, 2017. During fiscal 2018, we
have successfully completed three acquisitions and 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 $95.0 million in the first six months 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
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 now estimate our
consolidated fiscal 2018 year-over-year growth in net sales to be
13% - 14% and in net income to be 33% - 35%, up from our prior
growth estimates in net sales of 12% - 14% and net income of 30% -
32%. Additionally, we now anticipate our consolidated operating
margin to approximate 21%, up from our prior estimate of 20% - 21%.
Further, we continue to anticipate cash flow from operations to
approximate $310 million and capital expenditures to approximate
$50 million, and we now estimate depreciation and amortization
expense to approximate $77 million. 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
second quarter results stating, "Our record quarterly results in
net sales and operating income principally reflects continued
strong contributions from our fiscal 2017 acquisitions and 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
$267.8 million in the second quarter of fiscal 2018, up from $231.8
million in the second quarter of fiscal 2017. The Flight Support
Group's net sales increased 15% to a record $522.6 million in the
first six months of fiscal 2018, up from $452.7 million in the
first six months of fiscal 2017. The increase in the second quarter
and first six months of fiscal 2018 is attributable to the impact
from our fiscal 2017 profitable acquisitions as well as organic
growth of 5% and 4%, respectively. The organic growth in the second
quarter and first six months of fiscal 2018 is principally from
increased demand and new product offerings within our aftermarket
replacement parts and repair and overhaul parts and services
product lines. Additionally, the increase in the first six months
of fiscal 2018 was partially offset by lower net sales within our
specialty products product line. Excluding the net sales decrease
in our specialty products product line, the Flight Support Group
experienced organic growth of 6% in the first six months of fiscal
2018.
The Flight Support Group's operating income increased 15% to a
record $51.5 million in the second quarter of fiscal 2018, up from
$44.7 million in the second quarter of fiscal 2017. The Flight
Support Group's operating income increased 13% to a record $97.4
million in the first six months of fiscal 2018, up from $86.1
million in the first six months of fiscal 2017. The increase in the
second quarter and first six months of fiscal 2018 is mainly
attributable to the previously mentioned net sales growth and the
impact from an improved gross profit margin, partially offset by an
increase in performance-based compensation expense. Additionally,
the first six months of fiscal 2018 reflects an increase in
intangible asset amortization expense mainly resulting from the
fiscal 2017 acquisitions.
The Flight Support Group's operating margin was a strong 19.2%
in the second quarter of fiscal 2018, compared to 19.3% in the
second quarter of fiscal 2017. The Flight Support Group's operating
margin decreased slightly to 18.6% in the first six months of
fiscal 2018 from 19.0% in the first six months of fiscal 2017. The
decrease in the first six months of fiscal 2018 principally
reflects the previously mentioned increases in performance-based
compensation expense and intangible asset amortization expense,
partially offset by the previously mentioned improved gross profit
margin.
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 we now estimate the full year Flight Support Group
operating margin to approximate 18.5% - 19.0%, up from the prior
estimate of 18.0% - 18.5%. Further, we estimate the Flight Support
Group's full year organic net sales growth rate to be in the
mid-single digits. 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 second quarter results stating, "Our quarterly
results mainly reflect strong contributions from our fiscal 2017
and 2018 acquisitions as well as continued increased demand for our
defense products.
The Electronic Technologies Group's net sales increased 20% to
$168.7 million in the second quarter of fiscal 2018, up from $141.2
million in the second quarter of fiscal 2017. The Electronic
Technologies Group's net sales increased 21% to a record $324.4
million in the first six months of fiscal 2018, up from $267.3
million in the first six months of fiscal 2017. The increase in the
second quarter and first six months of fiscal 2018 was favorably
impacted by our fiscal 2017 and 2018 acquisitions. Additionally,
the increase in the first six months of fiscal 2018 reflects
organic growth of 3% principally from increased demand for our
defense and space products.
The Electronic Technologies Group's operating income increased
24% to $48.1 million in the second quarter of fiscal 2018, up from
$38.8 million in the second quarter of fiscal 2017. The Electronic
Technologies Group's operating income increased 35% to a record
$91.4 million in the first six months of fiscal 2018, up from $67.9
million in the first six months of fiscal 2017. The increase in the
second quarter and first six months of fiscal 2018 came primarily
from the previously mentioned net sales growth and an improved
gross profit margin impact mainly reflecting increased net sales
and a more favorable product mix for certain defense products,
partially offset by a less favorable product mix for certain space
and other electronics products. Further, the increase in the second
quarter and first six months of fiscal 2018 reflects an increase in
intangible asset amortization expense mainly from the fiscal 2017
and 2018 acquisitions.
The Electronic Technologies Group's operating margin improved to
28.5% in the second quarter of fiscal 2018, up from 27.5% in the
second quarter of fiscal 2017. The Electronic Technologies Group's
operating margin improved to 28.2% in the first six months of
fiscal 2018, up from 25.4% in the first six months of fiscal 2017.
The increase in the second quarter and first six months of fiscal
2018 principally reflects the previously mentioned net sales growth
and improved gross profit margin, partially offset by the
previously mentioned increase in intangible asset amortization
expense.
With respect to the remainder of fiscal 2018, we now estimate
full year net sales growth of approximately 18% - 20% over the
prior year, up from the prior estimate of 15% - 17%, and anticipate
the full year Electronic Technologies Group's operating margin to
approximate 28.0% - 29.0%, up from the prior estimate of 27.0% -
28.0%. Further, we now estimate the Electronic Technologies Group’s
organic net sales growth rate to be in the mid-single digits. 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 63.5 million shares of HEICO's
Class A Common Stock (HEI.A) outstanding and 42.7 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 30, 2018 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
2364879. 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 2364879.
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 April 30,
2018 2017 Net sales $ 430,602 $ 368,657 Cost
of sales 262,745 228,275 Selling, general and administrative
expenses 76,292 63,840 Operating income
91,565 76,542 Interest expense (4,904 ) (1,960 ) Other (expense)
income (250 ) 151 Income before income taxes
and noncontrolling interests 86,411 74,733 Income tax expense
20,400 23,900 Net income from
consolidated operations 66,011 50,833 Less: Net income attributable
to noncontrolling interests 6,393 5,147
Net income attributable to HEICO $ 59,618 $ 45,686
Net income per share attributable to HEICO shareholders: (a)
Basic $.56 $.43 Diluted $.55 $.42 Weighted average number of
common shares outstanding: (a) Basic 105,940 105,276 Diluted
109,271 108,296
Three Months Ended April 30,
2018 2017 Operating segment information: Net sales:
Flight Support Group $ 267,836 $ 231,809 Electronic Technologies
Group 168,722 141,169 Intersegment sales (5,956 )
(4,321 ) $ 430,602 $ 368,657 Operating income:
Flight Support Group $ 51,488 $ 44,744 Electronic Technologies
Group 48,130 38,826 Other, primarily corporate (8,053 )
(7,028 ) $ 91,565 $ 76,542
HEICO
CORPORATION
Condensed Consolidated Statements of
Operations (Unaudited)
(in thousands, except per share data)
Six Months Ended April 30, 2018 2017
Net sales $ 835,012 $ 712,089 Cost of sales 512,364 446,290
Selling, general and administrative expenses 151,523
124,707 Operating income 171,125 141,092 Interest
expense (9,629 ) (3,929 ) Other income 110 635
Income before income taxes and noncontrolling interests
161,606 137,798 Income tax expense 23,900 (b)
40,700 Net income from consolidated operations 137,706
97,098 Less: Net income attributable to noncontrolling interests
12,936 10,485 Net income attributable
to HEICO $ 124,770 (b) $ 86,613 Net income per
share attributable to HEICO shareholders: (a) Basic $1.18 (b) $.82
Diluted $1.14 (b) $.80 Weighted average number of common
shares outstanding: (a) Basic 105,789 105,227 Diluted 109,191
108,150
Six Months Ended April 30, 2018
2017 Operating segment information: Net sales: Flight
Support Group $ 522,557 $ 452,710 Electronic Technologies Group
324,380 267,334 Intersegment sales (11,925 ) (7,955 )
$ 835,012 $ 712,089 Operating income: Flight
Support Group $ 97,357 $ 86,107 Electronic Technologies Group
91,350 67,910 Other, primarily corporate (17,582 )
(12,925 ) $ 171,125 $ 141,092
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
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 in the first six
months of fiscal 2018.
HEICO CORPORATION
Condensed Consolidated Balance
Sheets (Unaudited)
(in thousands)
April 30, 2018 October 31, 2017
Cash and cash equivalents $ 48,227 $ 52,066 Accounts receivable,
net 238,233 222,456 Inventories, net 382,669 343,628 Prepaid
expenses and other current assets 25,597
13,742 Total current assets 694,726 631,892 Property, plant and
equipment, net 148,114 129,883 Goodwill 1,104,555 1,081,306
Intangible assets, net 532,263 538,081 Other assets 148,223
131,269 Total assets $ 2,627,881 $ 2,512,431
Current maturities of long-term debt $ 480 $ 451 Other
current liabilities 229,573 248,986 Total
current liabilities 230,053 249,437 Long-term debt, net of current
maturities 683,362 673,528 Deferred income taxes 46,875 59,026
Other long-term liabilities 164,050 151,025
Total liabilities 1,124,340 1,133,016 Redeemable noncontrolling
interests 134,034 131,123 Shareholders’ equity 1,369,507
1,248,292 Total liabilities and equity $ 2,627,881
$ 2,512,431
HEICO CORPORATION
Condensed Consolidated Statements of
Cash Flows (Unaudited)
(in thousands)
Six Months Ended April 30, 2018
2017 Operating Activities: Net income from consolidated
operations $ 137,706 $ 97,098 Depreciation and amortization 38,089
30,501 Employer contributions to HEICO Savings and Investment Plan
4,083 3,679 Share-based compensation expense 4,459 3,110 (Decrease)
increase in accrued contingent consideration, net (3,412 ) 1,148
Foreign currency transaction adjustments, net 117 (280 ) Deferred
income tax benefit (13,157 ) (2,909 ) (Increase) decrease in
accounts receivable (14,337 ) 1,358 Increase in inventories (29,814
) (14,251 ) Decrease in current liabilities, net (25,336 ) (20,766
) Other (3,398 ) (975 ) Net cash provided by
operating activities 95,000 97,713
Investing Activities: Acquisitions, net of cash acquired
(39,364 ) (80,838 ) Capital expenditures (29,457 ) (13,538 ) Other
(2,744 ) (944 ) Net cash used in investing activities
(71,565 ) (95,320 ) Financing Activities:
Borrowings on revolving credit facility, net 10,000 3,000
Redemptions on common stock related to stock option exercises
(24,623 ) — Cash dividends paid (7,395 ) (6,059 ) Distributions to
noncontrolling interests (4,449 ) (3,897 ) Revolving credit
facility issuance costs (4,067 ) (270 ) Acquisitions of
noncontrolling interests — (3,848 ) Payment of contingent
consideration (300 ) — Proceeds from stock option exercises 1,993
2,297 Other (232 ) (371 ) Net cash used in financing
activities (29,073 ) (9,148 ) Effect of
exchange rate changes on cash 1,799 532
Net decrease in cash and cash equivalents (3,839 ) (6,223 )
Cash and cash equivalents at beginning of year 52,066
42,955 Cash and cash equivalents at end of period $
48,227 $ 36,732
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180529006223/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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