3rd Quarter of Fiscal 2018 Net Income up 47%
on Operating Income Increase of 33% and Net Sales Increase of
19%
HEICO CORPORATION (NYSE: HEI.A) (NYSE: HEI) today reported that
net income increased 47% to a record $67.1 million, or
49 cents per diluted share, in the third quarter of fiscal
2018, up from $45.7 million, or 34 cents per diluted share, in
the third quarter of fiscal 2017. In the first nine months of
fiscal 2018, net income increased 45% to a record $191.9 million,
or $1.40 per diluted share, up from $132.3 million, or 98 cents per
diluted share, in the first nine months of fiscal 2017.
All share and per share information has been adjusted
retrospectively to reflect 5-for-4 stock splits distributed
by the Company in January 2018 and June 2018.
Operating income increased 33% to a record $101.4 million in the
third quarter of fiscal 2018, up from $76.1 million in the third
quarter of fiscal 2017. In the first nine months of fiscal 2018,
operating income increased 25% to a record $272.5 million, up from
$217.2 million in the first nine months of fiscal 2017.
The Company's consolidated operating margin improved to 21.8% in
the third quarter of fiscal 2018, up from 19.4% in the third
quarter of fiscal 2017. The Company's consolidated operating margin
improved to 21.0% in the first nine months of fiscal 2018, up from
19.7% in the first nine months of fiscal 2017.
Net sales increased 19% to a record $465.8 million in the third
quarter of fiscal 2018, up from $391.5 million in the third quarter
of fiscal 2017. Net sales increased 18% to a record $1,300.8
million in the first nine months of fiscal 2018, up from $1,103.6
million in the first nine 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 nine months of fiscal 2018 was
17.9%, down from 29.8% for the first nine months of fiscal 2017.
Net income in the first nine months of fiscal 2018 was favorably
impacted by approximately $30.7 million, or 22 cents per diluted
share, including approximately $11.9 million, or 9 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 third quarter results stating, "We are very pleased to
report record quarterly highs in consolidated net sales, operating
income and net income on the strength of record net sales and
operating income at both the Flight Support Group and the
Electronic Technologies Group. Our outstanding quarterly
performance principally reflects double-digit organic revenue
growth at both operating segments, strong cash flow and the
profitable contributions to earnings from our well-managed fiscal
2017 and 2018 acquisitions.
Our total debt to shareholders' equity ratio decreased to 43.6%
as of July 31, 2018, down from 54.0% as of October 31, 2017. Our
net debt (total debt less cash and cash equivalents) of $556.8
million to shareholders’ equity ratio decreased to 38.9% as of July
31, 2018, down from 49.8% as of October 31, 2017. Our net debt to
EBITDA ratio improved to 1.27x as of July 31, 2018 compared to
1.67x as of October 31, 2017. During fiscal 2018, we have
successfully completed three acquisitions and have completed four
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 increased 14% to
$204.7 million in the first nine months of fiscal 2018, up from
$179.3 million in the first nine months of fiscal 2017. Cash flow
provided by operating activities increased 34% to $109.7 million in
the third quarter of fiscal 2018, up from $81.6 million in the
third quarter of fiscal 2017. 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 the 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
15% - 16% and in net income to be 35% - 37%, up from our prior
growth estimates in net sales of 13% - 14% and in net income of 33%
- 35%. Additionally, we continue to anticipate our consolidated
operating margin to approximate 21%, cash flow from operations to
approximate $310 million, depreciation and amortization expense to
approximate $77 million and capital expenditures to now approximate
$45 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 third
quarter results stating, "Our record quarterly results in net sales
and operating income principally reflects strong organic growth
within all of the Flight Support Group's product lines.
The Flight Support Group's net sales increased 11% to a record
$285.1 million in the third quarter of fiscal 2018, up from $258.0
million in the third quarter of fiscal 2017. The Flight Support
Group's net sales increased 14% to a record $807.7 million in the
first nine months of fiscal 2018, up from $710.7 million in the
first nine months of fiscal 2017. The increase in the third quarter
and first nine months of fiscal 2018 is attributable to organic
growth of 10% and 6%, respectively, as well as the impact from our
fiscal 2017 profitable acquisitions. The organic growth in the
third quarter and first nine months of fiscal 2018 reflects
increased demand and new product offerings within our aftermarket
replacement parts, specialty products, and repair and overhaul
parts and services product lines.
The Flight Support Group's operating income increased 17% to a
record $54.7 million in the third quarter of fiscal 2018, up from
$46.7 million in the third quarter of fiscal 2017. The Flight
Support Group's operating income increased 15% to a record $152.1
million in the first nine months of fiscal 2018, up from $132.8
million in the first nine months of fiscal 2017. The increase in
the third quarter of fiscal 2018 and first nine months of fiscal
2018 is mainly attributable to the previously mentioned net sales
growth. The operating income increase in the third quarter of
fiscal 2018 also reflects a favorable impact from efficiencies
realized from the benefit of our growth in net sales on relatively
consistent period-over-period SG&A expenses and changes in the
estimated fair value of accrued contingent consideration associated
with a prior year acquisition, partially offset by a slightly lower
gross profit margin mainly due to a less favorable product mix
within our aftermarket replacement parts product line.
The Flight Support Group's operating margin increased to 19.2%
in the third quarter of fiscal 2018, up from 18.1% in the third
quarter of fiscal 2017. The Flight Support Group's operating margin
increased to 18.8% in the first nine months of fiscal 2018, up
slightly from 18.7% in the first nine months of fiscal 2017. The
increase in the third quarter of fiscal 2018 principally reflects
the previously mentioned SG&A efficiencies and changes in the
estimated fair value of accrued contingent consideration, partially
offset by the previously mentioned lower gross profit margin.
With respect to the remainder of fiscal 2018, we now estimate
full year net sales growth of approximately 11% - 12% over the
prior year, up from the prior estimate of 10% and the full year
Flight Support Group's operating margin to approximate 19.0%, up
from the prior estimate of 18.5% - 19.0%. Further, we now estimate
the Flight Support Group's full year organic net sales growth rate
to be in the mid- to high-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 third quarter results stating, "Our record
quarterly results mainly reflect strong organic growth stemming
from increased demand for our defense products and continued
contributions from our well-managed and profitable fiscal 2017 and
2018 acquisitions.
The Electronic Technologies Group's net sales increased 35% to a
record $186.4 million in the third quarter of fiscal 2018, up from
$137.9 million in the third quarter of fiscal 2017. The Electronic
Technologies Group's net sales increased 26% to a record $510.8
million in the first nine months of fiscal 2018, up from $405.2
million in the first nine months of fiscal 2017. The increase in
the third quarter and first nine months of fiscal 2018 reflects
organic growth of 16% and 8%, respectively, as well as the
favorable impact from our fiscal 2017 and 2018 acquisitions. The
organic growth in the third quarter and first nine months of fiscal
2018 principally reflects increased demand for certain defense
products. Further, the organic growth in the third quarter was
partially moderated by lower demand for certain space products.
The Electronic Technologies Group's operating income increased
45% to a record $56.0 million in the third quarter of fiscal 2018,
up from $38.5 million in the third quarter of fiscal 2017. The
Electronic Technologies Group's operating income increased 38% to a
record $147.4 million in the first nine months of fiscal 2018, up
from $106.5 million in the first nine months of fiscal 2017. The
increase in the third quarter and first nine months of fiscal 2018
is principally attributable to the previously mentioned net sales
growth and an improved gross profit margin 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 third quarter and first nine months of fiscal 2018
reflects efficiencies realized from the benefit of our growth in
net sales on relatively consistent period-over-period SG&A
expenses.
The Electronic Technologies Group's operating margin improved to
30.1% in the third quarter of fiscal 2018, up from 28.0% in the
third quarter of fiscal 2017. The Electronic Technologies Group's
operating margin improved to 28.9% in the first nine months of
fiscal 2018, up from 26.3% in the first nine months of fiscal 2017.
The increase in the third quarter and first nine months of fiscal
2018 principally reflects the previously mentioned improved gross
profit margin and SG&A efficiencies.
With respect to the remainder of fiscal 2018, we now estimate
full year net sales growth of approximately 20% - 21% over the
prior year, up from the prior estimate of 18% - 20%, and the full
year Electronic Technologies Group's operating margin to
approximate 28.5% - 29.0%, up from the prior estimate of 28.0% -
29.0%. Further, we continue to 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 79.5 million shares of HEICO's
Class A Common Stock (HEI.A) outstanding and 53.3 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, August 28, 2018 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
1796867. 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 1796867.
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 July 31, 2018
2017 Net sales $465,825 $391,500 Cost of sales 284,216
242,603 Selling, general and administrative expenses 80,186
72,775 Operating income 101,423 76,122 Interest expense
(5,212 ) (2,447 ) Other (expense) income (112 ) 200 Income
before income taxes and noncontrolling interests 96,099 73,875
Income tax expense 22,200 22,400 Net income from
consolidated operations 73,899 51,475 Less: Net income attributable
to noncontrolling interests 6,813 5,777 Net income
attributable to HEICO $67,086 $45,698 Net
income per share attributable to HEICO shareholders: (a) Basic $.51
$.35 Diluted $.49 $.34 Weighted average number of common
shares outstanding: (a) Basic 132,794 131,786 Diluted 136,733
135,771
Three Months Ended July 31, 2018
2017 Operating segment information: Net sales: Flight
Support Group $285,126 $257,966 Electronic Technologies Group
186,370 137,860 Intersegment sales (5,671 ) (4,326 ) $465,825
$391,500 Operating income: Flight Support
Group $54,712 $46,664 Electronic Technologies Group 56,021 38,543
Other, primarily corporate (9,310 ) (9,085 ) $101,423
$76,122
HEICO CORPORATION
Condensed Consolidated Statements of
Operations (Unaudited)
(in thousands, except per share data)
Nine Months Ended July 31, 2018 2017
Net sales $1,300,837 $1,103,589 Cost of sales 796,580 688,893
Selling, general and administrative expenses 231,709 197,482
Operating income 272,548 217,214 Interest expense (14,841 )
(6,376 ) Other (expense) income (2 ) 835 Income before
income taxes and noncontrolling interests 257,705 211,673 Income
tax expense 46,100 (b) 63,100 Net income from
consolidated operations 211,605 148,573 Less: Net income
attributable to noncontrolling interests 19,749 16,262
Net income attributable to HEICO $191,856 (b)
$132,311 Net income per share attributable to HEICO
shareholders: (a) Basic $1.45 (b) $1.01 Diluted $1.40 (b) $.98
Weighted average number of common shares outstanding: (a)
Basic 132,422 131,618 Diluted 136,570 135,382
Nine Months
Ended July 31, 2018 2017 Operating segment
information: Net sales: Flight Support Group $807,683 $710,676
Electronic Technologies Group 510,750 405,194 Intersegment sales
(17,596 ) (12,281 ) $1,300,837 $1,103,589
Operating income: Flight Support Group $152,069 $132,771 Electronic
Technologies Group 147,371 106,453 Other, primarily corporate
(26,892 ) (22,010 ) $272,548 $217,214 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 January 2018 and June 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 that was 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 $.09 per basic and diluted share, in the
first nine months of fiscal 2018.
HEICO CORPORATION
Condensed Consolidated Balance
Sheets (Unaudited)
(in thousands)
July 31, 2018 October 31, 2017 Cash and cash
equivalents $66,981 $52,066 Accounts receivable, net 249,326
222,456 Inventories, net 391,788 343,628 Prepaid expenses and other
current assets 20,063 13,742 Total current assets 728,158 631,892
Property, plant and equipment, net 154,614 129,883 Goodwill
1,102,352 1,081,306 Intangible assets, net 516,454 538,081 Other
assets 153,261 131,269 Total assets $2,654,839 $2,512,431
Current maturities of long-term debt $929 $451 Other current
liabilities 253,828 248,986 Total current liabilities 254,757
249,437 Long-term debt, net of current maturities 622,889 673,528
Deferred income taxes 46,469 59,026 Other long-term liabilities
166,803 151,025 Total liabilities 1,090,918 1,133,016 Redeemable
noncontrolling interests 133,599 131,123 Shareholders’ equity
1,430,322 1,248,292 Total liabilities and equity $2,654,839
$2,512,431
HEICO CORPORATION
Condensed Consolidated Statements of
Cash Flows (Unaudited)
(in thousands)
Nine Months Ended July 31, 2018
2017 Operating Activities: Net income from consolidated
operations $211,605 $148,573 Depreciation and amortization 57,523
46,912 Share-based compensation expense 6,933 5,207 Employer
contributions to HEICO Savings and Investment Plan 6,015 5,732
Foreign currency transaction adjustments, net 183 3,316 (Decrease)
increase in accrued contingent consideration, net (3,789 ) 1,227
Deferred income tax benefit (13,485 ) (6,998 ) (Increase) decrease
in accounts receivable (26,315 ) 13,343 Increase in inventories
(40,965 ) (22,415 ) Increase (decrease) in current liabilities, net
4,647 (10,460 ) Other 2,351 (5,134 ) Net cash provided by
operating activities 204,703 179,303 Investing
Activities: Acquisitions, net of cash acquired (40,599 ) (95,759 )
Capital expenditures (35,898 ) (20,445 ) Other (2,736 ) (685 ) Net
cash used in investing activities (79,233 ) (116,889 )
Financing Activities: Payments on revolving credit facility, net
(57,000 ) (26,000 ) Redemptions of common stock related to stock
option exercises (24,941 ) — Cash dividends paid (15,363 ) (12,807
) Distributions to noncontrolling interests (7,129 ) (12,924 )
Payment of contingent consideration (5,425 ) (7,039 ) Revolving
credit facility issuance costs (4,067 ) (270 ) Acquisitions of
noncontrolling interests — (3,848 ) Proceeds from stock option
exercises 3,036 4,171 Other (376 ) (241 ) Net cash used in
financing activities (111,265 ) (58,958 ) Effect of exchange
rate changes on cash 710 3,078 Net increase in
cash and cash equivalents 14,915 6,534 Cash and cash equivalents at
beginning of year 52,066 42,955 Cash and cash
equivalents at end of period $66,981 $49,489
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HEICO CORPORATIONVictor H. Mendelson, 305-374-1745 ext.
7590Carlos L. Macau, Jr., 954-987-4000 ext. 7570
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