HEICO Corporation Reports Record Net Sales, Operating Income and Net Income for the Six Months Ended April 30, 2014; Full Year Fiscal 2014 Net Income Growth Estimates Raised

        Print
| Source: HEICO Corporation

2nd Quarter and Six-Month Net Income up 20% and 28% on Net Sales
Increases of 19% and 21% and Operating Income Increases of 10% and 25%

HOLLYWOOD, Fla. and MIAMI, May 20, 2014 (GLOBE NEWSWIRE) -- HEICO CORPORATION (NYSE:HEI.A) (NYSE:HEI) today reported that net income increased 20% to $28.4 million, or 42 cents per diluted share, in the second quarter of fiscal 2014, up from $23.7 million, or 35 cents per diluted share, in the second quarter of fiscal 2013.  In the first six months of fiscal 2014, net income increased 28% to a record $55.8 million, or 83 cents per diluted share, up from $43.7 million, or 65 cents per diluted share, in the first six months of fiscal 2013.

Operating income increased 10% to $49.2 million in the second quarter of fiscal 2014, up from $44.7 million in the second quarter of fiscal 2013.  In the first six months of fiscal 2014, operating income increased 25% to a record $99.6 million, up from $79.6 million in the first six months of fiscal 2013.

The Company's consolidated operating margin was 17.4% and 18.8% in the second quarter of fiscal 2014 and 2013, respectively.  The Company's consolidated operating margin improved to 18.1% in the first six months of fiscal 2014, up from 17.5% in the first six months of fiscal 2013.

Net sales increased 19% to $282.2 million in the second quarter of fiscal 2014, up from $237.7 million in the second quarter of fiscal 2013.  In the first six months of fiscal 2014, net sales increased 21% to a record $549.1 million, up from $454.2 million in the first six months of fiscal 2013.

Consolidated Results

Laurans A. Mendelson, HEICO's Chairman and CEO, commented on the Company's second quarter results stating, "We are pleased to report another outstanding quarter resulting from record net sales and operating income within the Flight Support Group and continued year-over- year growth in net sales within the Electronic Technologies Group.

Cash flow provided by operating activities increased to $55.0 million in the first six months of fiscal 2014 as compared to $44.5 million in the first six months of fiscal 2013.

Our net debt to shareholders' equity ratio was 57.9% as of April 30, 2014, with net debt (total debt less cash and cash equivalents) of $415.2 million principally incurred to fund acquisitions and the payment of special cash dividends in fiscal 2014 and 2013.  We have no significant debt maturities until fiscal 2019 and plan to utilize our financial flexibility to aggressively pursue high quality acquisition opportunities.

As we look ahead to the remainder of fiscal 2014, we continue to anticipate organic growth within our product lines that serve the commercial aviation markets.  We expect organic growth within the Electronic Technologies Group consistent with the prior year, reflecting higher demand for the majority of our products, moderated by lower demand for certain of our defense-related products.  During the remainder of fiscal 2014, we plan to remain focused on new product development, further market penetration, executing our acquisition strategies and maintaining our financial strength.

Based on our current economic visibility, we are increasing our estimate of fiscal 2014 year-over-year growth in net income to 12% - 14%, up from our prior growth estimate of 10% - 12%.  We continue to estimate fiscal 2014 year-over-year growth in net sales of 12% - 14%, our full year fiscal 2014 consolidated operating margin to approximate 18%, capital expenditures to approximate $25 million, depreciation and amortization expense to approximate $49 million and cash flow from operations to approximate $160 million."

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 record second quarter results stating, "We are very pleased to report another strong quarter for the Flight Support Group, with record net sales and operating income principally driven by strong organic growth and the successful integration of our fiscal 2013 acquisition.

The Flight Support Group's net sales increased 26% to a record $194.9 million and increased 28% to a record $376.5 million in the second quarter and first six months of fiscal 2014, respectively, up from $155.2 million and $294.2 million in the second quarter and first six months of fiscal 2013, respectively.  The increase in the second quarter and first six months of fiscal 2014 reflects organic growth of approximately 15% and 17%, respectively, as well as additional net sales of $15.7 million and $31.3 million, respectively, from a fiscal 2013 acquisition.  The organic growth in the second quarter and first six months of fiscal 2014 principally reflects an increase in net sales from new product offerings and improving market conditions within our aftermarket replacement parts and repair and overhaul services product lines.

The Flight Support Group's operating income in the second quarter of fiscal 2014 increased 22% to a record $36.9 million, up from $30.3 million in the second quarter of fiscal 2013, and increased 27% to a record $69.1 million in the first six months of fiscal 2014, up from $54.5 million in the first six months of fiscal 2013.  The increase in the second quarter and first six months of fiscal 2014 principally reflects the previously mentioned net sales growth.

The Flight Support Group's operating margin was 18.9% and 18.4% in the second quarter and first six months of fiscal 2014, respectively, as compared to 19.5% and 18.5% in the second quarter and first six months of fiscal 2013.  The decrease in the second quarter of fiscal 2014 principally reflects the impact of additional amortization expense from our fiscal 2013 acquisition."

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, "The Electronic Technologies Group reported year-over-year net sales growth despite continued soft demand for certain of our defense products.

The Electronic Technologies Group's net sales increased 7% to $89.7 million in the second quarter of fiscal 2014, up from $83.9 million in the second quarter of fiscal 2013, and increased 9% to a record $177.2 million in the first six months of fiscal 2014, up from $162.8 million in the first six months of fiscal 2013.  The increase in the second quarter and first six months of fiscal 2014 resulted from additional net sales of $4.1 million and $12.2 million from a fiscal 2013 acquisition, as well as organic growth of approximately 2% and 1%, respectively.

The Electronic Technologies Group's operating income decreased 10% to $18.1 million in the second quarter of fiscal 2014, down from $20.2 million in the second quarter of fiscal 2013.  The decrease in the second quarter of fiscal 2014 principally reflects a less favorable product mix for certain of our space and defense products, partially offset by a $2.3 million reduction in the fair value of the contingent consideration related to a fiscal 2013 acquisition principally due to less favorable projected market conditions attributable to the future earnout period.  The Electronic Technologies Group's operating income increased 15% to a record $41.0 million in the first six months of fiscal 2014, up from $35.8 million in the first six months of fiscal 2013.  The increase in the first six months of fiscal 2014 is principally attributed to the overall impact of the acquired business.

The Electronic Technologies Group's operating margin was 20.2% and 24.1% in the second quarter of fiscal 2014 and fiscal 2013, respectively.  The decrease in the second quarter of fiscal 2014 principally reflects the aforementioned less favorable product mix.  The Electronic Technologies Group's operating margin increased to 23.2% in the first six months of fiscal 2014, up from 22.0% in the first six months of fiscal 2013.  The increase in the first six months of fiscal 2014 principally reflects the overall impact of the acquired business, partially offset by the aforementioned less favorable product mix."

(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 39.7 million shares of HEICO's Class A Common Stock (HEI.A) outstanding and 26.8 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 Wednesday, May 21, 2014 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 33581100.  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 33581100.

HEICO Corporation is engaged primarily in 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, but not limited to: 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 development or 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 product pricing levels, which could reduce our sales or sales growth; product development 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 and income tax rates and 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 April 30,
  2014   2013
Net sales $282,232   $237,708
Cost of sales 182,310   148,260
Selling, general and administrative expenses 50,751   44,760
Operating income 49,171   44,688
Interest expense (1,441)   (803)
Other income 350   161
Income before income taxes and noncontrolling interests 48,080   44,046
Income tax expense 15,300   15,000
Net income from consolidated operations 32,780   29,046
Less: Net income attributable to noncontrolling interests 4,413   5,346
Net income attributable to HEICO $28,367   $23,700
       
Net income per share attributable to HEICO shareholders: (c)      
Basic $.43   $.36
Diluted $.42   $.35
       
Weighted average number of common shares outstanding: (c)      
Basic 66,437   66,294
Diluted 67,455   66,872
       
  Three Months Ended April 30,
  2014   2013
Operating segment information:      
Net sales:      
Flight Support Group $194,892   $155,231
Electronic Technologies Group 89,741   83,937
Intersegment sales (2,401)   (1,460)
  $282,232   $237,708
       
Operating income:      
Flight Support Group $36,886   $30,296
Electronic Technologies Group 18,136   20,249
Other, primarily corporate (5,851)   (5,857)
  $49,171   $44,688
       
       
HEICO CORPORATION  
Condensed Consolidated Statements of Operations (Unaudited)  
(in thousands, except per share data)  
         
  Six Months Ended April 30,  
  2014   2013  
Net sales $549,058   $454,198  
Cost of sales 357,019   287,161  
Selling, general and administrative expenses 92,483   87,410  
Operating income 99,556   79,627  
Interest expense (2,722)   (1,443)  
Other income 508   446  
Income before income taxes and noncontrolling interests 97,342   78,630  
Income tax expense 32,000   24,600  
Net income from consolidated operations 65,342   54,030  
Less: Net income attributable to noncontrolling interests 9,520   10,372  
Net income attributable to HEICO $55,822 (a) $43,658 (b)
         
Net income per share attributable to HEICO shareholders: (c)        
Basic $.84 (a) $.66 (b)
Diluted $.83 (a) $.65 (b)
         
Weighted average number of common shares outstanding: (c)        
Basic 66,415   66,242  
Diluted 67,403   66,835  
         
  Six Months Ended April 30,  
  2014   2013  
Operating segment information:        
Net sales:        
Flight Support Group $376,477   $294,229  
Electronic Technologies Group 177,233   162,778  
Intersegment sales (4,652)   (2,809)  
  $549,058   $454,198  
         
Operating income:        
Flight Support Group $69,089   $54,541  
Electronic Technologies Group 41,040   35,795  
Other, primarily corporate (10,573)   (10,709)  
  $99,556   $79,627  
         
         
HEICO CORPORATION
Footnotes to Condensed Consolidated Statements of Operations (Unaudited)
 
(a)  During the first six months of fiscal 2014, the Company recorded a reduction in the fair value of the contingent consideration related to a fiscal 2013 acquisition that was partially offset by lower than expected operating income at the acquired business resulting in an increase in net income attributable to HEICO of approximately $3.3 million, or $.05 per basic and diluted share. 
 
(b)  During the first quarter of fiscal 2013, the Company recognized an income tax credit for qualified research and development activities for the last ten months of fiscal 2012 upon the retroactive extension in January 2013 of Section 41 of the Internal Revenue Code, "Credit for Increasing Research Activities," to cover the period from January 1, 2012 to December 31, 2013.  The tax credit, net of expenses, increased net income attributable to HEICO by $1.0 million, or $.01 per basic and diluted share, for the six months of fiscal 2013.
 
(c)  All fiscal 2013 share and per share information has been adjusted retrospectively to reflect a 5-for-4 stock split effected in October 2013. 
 
 
HEICO CORPORATION
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands)
     
  April 30, 2014 October 31, 2013
Cash and cash equivalents $21,402 $15,499
Accounts receivable, net 165,053 157,022
Inventories, net 225,021 218,893
Prepaid expenses and other current assets 51,235 50,058
Total current assets 462,711 441,472
Property, plant and equipment, net 95,502 97,737
Goodwill 688,088 688,489
Intangible assets, net 227,517 241,558
Other assets 73,624 63,759
Total assets $1,547,442 $1,533,015
     
Current maturities of long-term debt $519 $697
Other current liabilities 136,352 160,589
Total current liabilities 136,871 161,286
Long-term debt, net of current maturities 436,074 376,818
Deferred income taxes 122,109 128,482
Other long-term liabilities 97,338 83,976
Total liabilities 792,392 750,562
Redeemable noncontrolling interests 37,833 59,218
Shareholders' equity 717,217 723,235
Total liabilities and equity $1,547,442 $1,533,015
     
     
HEICO CORPORATION
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
     
  Six Months Ended April 30,
  2014 2013
Operating Activities:    
Net income from consolidated operations $65,342 $54,030
Depreciation and amortization 24,139 16,405
Share-based compensation expense 4,189 2,154
Issuance of common stock to HEICO Savings and Investment Plan 3,071 1,159
Tax benefit from stock option exercises 93 5,177
Excess tax benefit from stock option exercises (93) (5,112)
Deferred income tax benefit (3,146) (856)
Decrease in value of contingent consideration (9,295) (1,203)
Increase in accounts receivable (8,113) (4,673)
Increase in inventories (6,199) (9,696)
Decrease in current liabilities (16,645) (10,665)
Other 1,658 (2,188)
Net cash provided by operating activities 55,001 44,532
     
Investing Activities:    
Capital expenditures (7,485) (9,265)
Acquisitions, net of cash acquired (569) (1,242)
Other (8) (6)
Net cash used in investing activities (8,062) (10,513)
     
Financing Activities:    
Borrowings on revolving credit facility, net 60,000 97,000
Distributions to noncontrolling interests (71,112) (4,457)
Cash dividends paid (27,225) (116,645)
Acquisitions of noncontrolling interests (1,243) (16,610)
Revolving credit facility issuance costs (767) (570)
Redemptions of common stock related to share-based compensation (273) (2,364)
Excess tax benefit from stock option exercises 93 5,112
Proceeds from stock option exercises 400 286
Other (936) (325)
Net cash used in financing activities (41,063) (38,573)
     
Effect of exchange rate changes on cash 27 (19)
     
Net increase (decrease) in cash and cash equivalents 5,903 (4,573)
Cash and cash equivalents at beginning of year 15,499 21,451
Cash and cash equivalents at end of period $21,402 $16,878
     
Thomas S. Irwin (954) 987-4000 ext. 7560
Victor H. Mendelson (305) 374-1745 ext. 7590
Carlos L. Macau, Jr. (954) 987-4000 ext. 7570