HEICO Corporation Reports 20% Growth in Adjusted Net Income and Adjusted Diluted Earnings per Share of 49 Cents for the First Quarter of Fiscal 2016; Full Year Fiscal 2016 Net Sales and Net Income Growth Estimates Raised
1st Quarter Adjusted Net Income up 20% on Net Sales Increase of 14% and Adjusted Operating Income Increase of 20%
HOLLYWOOD, Fla. and MIAMI, Feb. 25, 2016 (GLOBE NEWSWIRE) -- HEICO CORPORATION (NYSE:HEI.A) (NYSE:HEI) today reported that adjusted net income increased 20% to $33.2 million, or 49 cents per diluted share, in the first quarter of fiscal 2016, up from $27.6 million, or 41 cents per diluted share, in the first quarter of fiscal 2015.
Adjusted operating income increased 20% to $55.8 million in the first quarter of fiscal 2016, up from $46.4 million in the first quarter of fiscal 2015. The Company's adjusted operating margin increased to 18.2% in the first quarter of fiscal 2016, up from 17.3% in the first quarter of fiscal 2015.
The adjusted results above exclude the impact of $3.2 million of pre-tax acquisition costs which the Company incurred in connection with a fiscal 2016 acquisition. These are one-time nonrecurring costs. A reconciliation between GAAP and Non-GAAP financial measures is provided at the end of this press release.
Net sales increased by 14% to $306.2 million in the first quarter of fiscal 2016, up from $268.2 million in the first quarter of fiscal 2015.
Consolidated Results
Laurans A. Mendelson, HEICO’s Chairman and CEO, commented on the Company's first quarter results stating, "Our first quarter year-over-year growth principally reflects the impact of our profitable fiscal 2015 and 2016 acquisitions, overall moderate organic growth within the Electronic Technologies Group and increased demand for certain products within the Flight Support Group's specialty products and aftermarket replacement parts product lines.
Cash flow provided by operating activities was very strong, increasing 53% to $45.2 million in the first quarter of fiscal 2016, representing 144% of net income, as compared to $29.5 million in the first quarter of fiscal 2015.
Our net debt to shareholders' equity ratio was a low 61.3% as of January 31, 2016, with net debt (total debt less cash and cash equivalents) of $565.0 million principally incurred to fund acquisitions in fiscal 2016 and 2015. We have no significant debt maturities until fiscal 2019 and plan to utilize our financial flexibility to aggressively pursue high quality acquisition opportunities, such as our recently completed acquisition of Robertson Fuel Systems, to accelerate growth and maximize shareholder returns.
As we look ahead to the remainder of fiscal 2016, we anticipate overall moderate organic growth within the Flight Support Group resulting from increased demand across all product lines. Additionally, we expect overall moderate organic growth within the Electronic Technologies Group resulting from increased net sales for the majority of our products. During the remainder of fiscal 2016, we plan to continue our focus on new product development, further market penetration, executing our disciplined acquisition strategies and maintaining our financial strength.
Based on our current economic visibility, we are increasing our estimated consolidated fiscal 2016 year-over-year growth in net sales to 14% - 16% and GAAP net income to 10% - 13%, up from prior growth estimates in both net sales and net income of 8% - 10%, with our consolidated operating margin approximating 18.5% - 19.0%. Additionally, we anticipate depreciation and amortization expense of approximately $63 million, capital expenditures to approximate $32 million and cash flow from operations to approximate $220 million representing a 10% increase over our prior estimate of $200 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 first quarter results stating, "We are pleased to report strong contributions from our fiscal 2015 acquisitions in addition to moderate organic growth within the Flight Support Group's specialty products and aftermarket replacement parts product lines.
The Flight Support Group's net sales increased 12% to $204.6 million in the first quarter of fiscal 2016, up from $182.1 million in the first quarter of fiscal 2015. The increase mostly reflects net sales contributed by our fiscal 2015 acquisitions as well as additional net sales from our specialty products and aftermarket replacement parts product lines principally from increased demand and new product offerings. These increases were partially offset by lower organic net sales from our repair and overhaul services product line. Our repair and overhaul services product line was adversely impacted by the mix of products repaired during the first quarter of fiscal 2016, which required less extensive repair and overhaul services, in addition to softer demand from our South American market. The Flight Support Group experienced overall organic growth of 1% in the first quarter of fiscal 2016. Excluding the net sales decrease in our repair and overhaul services product line, the Flight Support Group experienced organic revenue growth of 6% in the first quarter of fiscal 2016.
The Flight Support Group's operating income increased 16% to $35.5 million in the first quarter of fiscal 2016, up from $30.7 million in the first quarter of fiscal 2015. The increase is mainly attributed to the previously mentioned net sales growth and a more favorable product mix within our specialty products and aftermarket replacement parts product lines. These increases were partially offset by the previously mentioned decrease in net sales and a less favorable product mix within our repair and overhaul services product line, an increase in amortization expense of intangible assets recognized in connection with the fiscal 2015 acquired businesses and higher performance-based compensation expense.
The Flight Support Group's operating margin increased to 17.3% in the first quarter of fiscal 2016, up from 16.9% in the first quarter of fiscal 2015. The increase principally reflects the previously mentioned more favorable product mix in our specialty products and aftermarket replacement parts products lines, partially offset by the increase in amortization expense of intangible assets and higher performance-based compensation expense.
With respect to the remainder of fiscal 2016, we continue to estimate the Flight Support Group’s full year net sales growth to be between 8% - 10% and the full year Flight Support Group operating margin to approximate that of fiscal year 2015.”
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, "We are pleased to report another quarter with year-over-year growth in net sales and operating income driven principally by overall moderate organic growth stemming from improved demand for certain of our space and defense products and the favorable impact from our fiscal 2016 acquisitions.
The Electronic Technologies Group's net sales increased 17% to $104.2 million in the first quarter of fiscal 2016, up from $89.2 million in the first quarter of fiscal 2015. The increase mostly reflects net sales contributed by our fiscal 2016 and 2015 acquisitions as well as organic growth of 4% principally resulting from increased demand for certain space and defense products.
The Electronic Technologies Group's operating income increased 15% to $22.3 million in the first quarter of fiscal 2016, up from $19.4 million in the first quarter of fiscal 2015. The increase is mainly attributed to the previously mentioned net sales growth and a more favorable product mix for certain space and defense products, partially offset by an increase in acquisition costs associated with a fiscal 2016 acquisition and an increase in amortization expense of intangible assets recognized in connection with the fiscal 2016 and 2015 acquired businesses.
The Electronic Technologies Group's operating margin was 21.4% and 21.8% in the first quarter of fiscal 2016 and 2015, respectively. The slight decrease principally reflects the previously mentioned increase in acquisition costs and amortization expense of intangible assets, partially offset by the previously mentioned higher net sales and more favorable product mix for certain space and defense products.
With respect to the remainder of fiscal 2016, we are increasing estimates for the Electronic Technologies Group’s full year net sales growth to between 27% - 30% and the full year operating margin to approximate 24%.”
(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 40.0 million shares of HEICO's Class A Common Stock (HEI.A) outstanding and 26.9 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 Friday, February 26, 2016 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 49115159. 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 49115159.
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, 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 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 January 31, | |||||||
| 2016 | 2015 | |||||||
| Net sales | $ | 306,227 | $ | 268,185 | ||||
| Cost of sales | 194,031 | 174,388 | ||||||
| Selling, general and administrative expenses | 59,575 | 47,391 | ||||||
| Operating income | 52,621 | (a) | 46,406 | |||||
| Interest expense | (1,567 | ) | (1,112 | ) | ||||
| Other (expense) income | (430 | ) | 197 | |||||
| Income before income taxes and noncontrolling interests | 50,624 | 45,491 | ||||||
| Income tax expense | 14,700 | 13,400 | ||||||
| Net income from consolidated operations | 35,924 | 32,091 | ||||||
| Less: Net income attributable to noncontrolling interests | 4,653 | 4,451 | ||||||
| Net income attributable to HEICO | $ | 31,271 | (a) | $ | 27,640 | |||
| Net income per share attributable to HEICO shareholders: | ||||||||
| Basic | $ .47 | (a) | $ .42 | |||||
| Diluted | $ .46 | (a) | $ .41 | |||||
| Weighted average number of common shares outstanding: | ||||||||
| Basic | 66,875 | 66,595 | ||||||
| Diluted | 67,940 | 67,669 | ||||||
| Three Months Ended January 31, | ||||||||
| 2016 | 2015 | |||||||
| Operating segment information: | ||||||||
| Net sales: | ||||||||
| Flight Support Group | $ | 204,576 | $ | 182,057 | ||||
| Electronic Technologies Group | 104,152 | 89,221 | ||||||
| Intersegment sales | (2,501 | ) | (3,093 | ) | ||||
| $ | 306,227 | $ | 268,185 | |||||
| Operating income: | ||||||||
| Flight Support Group | $ | 35,480 | $ | 30,703 | ||||
| Electronic Technologies Group | 22,269 | 19,418 | ||||||
| Other, primarily corporate | (5,128 | ) | (3,715 | ) | ||||
| $ | 52,621 | $ | 46,406 | |||||
HEICO CORPORATION
Footnotes to Condensed Consolidated Statements of Operations (Unaudited)
(a) During the first quarter of fiscal 2016, the Company incurred $3.2 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 $.03 per basic and diluted share.
HEICO CORPORATION
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands)
| January 31, 2016 | October 31, 2015 | ||||||
| Cash and cash equivalents | $ | 29,886 | $ | 33,603 | |||
| Accounts receivable, net | 173,915 | 181,593 | |||||
| Inventories, net | 273,494 | 243,517 | |||||
| Prepaid expenses and other current assets | 46,134 | 44,899 | |||||
| Total current assets | 523,429 | 503,612 | |||||
| Property, plant and equipment, net | 112,686 | 105,670 | |||||
| Goodwill | 863,916 | 766,639 | |||||
| Intangible assets, net | 391,907 | 272,593 | |||||
| Other assets | 89,562 | 87,873 | |||||
| Total assets | $ | 1,981,500 | $ | 1,736,387 | |||
| Current maturities of long-term debt | $ | 346 | $ | 357 | |||
| Other current liabilities | 155,104 | 168,030 | |||||
| Total current liabilities | 155,450 | 168,387 | |||||
| Long-term debt, net of current maturities | 594,575 | 367,241 | |||||
| Deferred income taxes | 110,469 | 110,588 | |||||
| Other long-term liabilities | 107,652 | 105,618 | |||||
| Total liabilities | 968,146 | 751,834 | |||||
| Redeemable noncontrolling interests | 91,136 | 91,282 | |||||
| Shareholders’ equity | 922,218 | 893,271 | |||||
| Total liabilities and equity | $ | 1,981,500 | $ | 1,736,387 | |||
HEICO CORPORATION
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
| Three Months Ended January 31, | |||||||
| 2016 | 2015 | ||||||
| Operating Activities: | |||||||
| Net income from consolidated operations | $ | 35,924 | $ | 32,091 | |||
| Depreciation and amortization | 13,921 | 10,904 | |||||
| Deferred income tax provision | 2,276 | 1,557 | |||||
| Share-based compensation expense | 1,680 | 1,422 | |||||
| Employer contributions to HEICO Savings and Investment Plan | 1,417 | 1,393 | |||||
| Tax benefit from stock option exercises | 871 | 1,407 | |||||
| Excess tax benefit from stock option exercises | (871 | ) | (1,407 | ) | |||
| Increase in accrued contingent consideration | 847 | 20 | |||||
| Foreign currency transaction adjustments, net | (839 | ) | (1,374 | ) | |||
| Decrease in accounts receivable | 12,348 | 2,082 | |||||
| Increase in inventories | (2,326 | ) | (2,851 | ) | |||
| Decrease in current liabilities | (16,632 | ) | (13,148 | ) | |||
| Other | (3,449 | ) | (2,641 | ) | |||
| Net cash provided by operating activities | 45,167 | 29,455 | |||||
| Investing Activities: | |||||||
| Acquisitions, net of cash acquired | (264,324 | ) | (49,312 | ) | |||
| Capital expenditures | (5,690 | ) | (4,254 | ) | |||
| Other | 474 | 76 | |||||
| Net cash used in investing activities | (269,540 | ) | (53,490 | ) | |||
| Financing Activities: | |||||||
| Borrowings on revolving credit facility, net | 228,000 | 27,696 | |||||
| Cash dividends paid | (5,350 | ) | (4,666 | ) | |||
| Distributions to noncontrolling interests | (2,696 | ) | (2,557 | ) | |||
| Proceeds from stock option exercises | 94 | 1,516 | |||||
| Excess tax benefit from stock option exercises | 871 | 1,407 | |||||
| Other | (86 | ) | (112 | ) | |||
| Net cash provided by financing activities | 220,833 | 23,284 | |||||
| Effect of exchange rate changes on cash | (177 | ) | (1,106 | ) | |||
| Net decrease in cash and cash equivalents | (3,717 | ) | (1,857 | ) | |||
| Cash and cash equivalents at beginning of year | 33,603 | 20,229 | |||||
| Cash and cash equivalents at end of period | $ | 29,886 | $ | 18,372 | |||
HEICO CORPORATION
Reconciliation of Non-GAAP Measures (Unaudited)
(in thousands, except per share data)
| Three Months Ended January 31, | ||||||||||||||||
| 2016 | 2015 | |||||||||||||||
| Operating income, as reported | $ | 52,621 | $ | 46,406 | ||||||||||||
| Acquisition costs | 3,151 | — | ||||||||||||||
| Operating income, as adjusted | $ | 55,772 | $ | 46,406 | ||||||||||||
| Operating margin, as reported | 17.2 | % | 17.3 | % | ||||||||||||
| Acquisition costs - operating margin adjustment | 1.0 | % | — | % | ||||||||||||
| Operating margin, as adjusted | 18.2 | % | 17.3 | % | ||||||||||||
| Net income attributable to HEICO, as reported | $ | 31,271 | $ | 27,640 | ||||||||||||
| Acquisition costs, net of tax | 1,976 | — | ||||||||||||||
| Net income attributable to HEICO, as adjusted | $ | 33,247 | $ | 27,640 | ||||||||||||
| Net income per share attributable to HEICO shareholders: | ||||||||||||||||
| Basic, as reported | $ .47 | $ .42 | ||||||||||||||
| Diluted, as reported | $ .46 | $ .41 | ||||||||||||||
| Basic, as adjusted | $ .50 | $ .42 | ||||||||||||||
| Diluted, as adjusted | $ .49 | $ .41 | ||||||||||||||
| Weighted average number of common shares outstanding: | ||||||||||||||||
| Basic | 66,875 | 66,595 | ||||||||||||||
| Diluted | 67,940 | 67,669 | ||||||||||||||
Victor H. Mendelson (305) 374-1745 ext. 7590 Carlos L. Macau, Jr. (954) 987- 4000 ext.7570
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