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 HEICO Corporation Reports Record Net Income, Operating Income and Net Sales for the Second Quarter of Fiscal 2017; Full Fiscal Year 2017 Growth Estimates Raised in Net Sales, Net Income and Cash Flow
   Tuesday, May 23, 2017 4:15:10 PM ET

HEICO CORPORATION (HEI.A ) (HEI ) today reported that net income increased 18% to a record $45.7 million, or 53 cents per diluted share, in the second quarter of fiscal 2017, up from $38.7 million, or 45 cents per diluted share, in the second quarter of fiscal 2016. In the first six months of fiscal 2017, net income increased 24% to a record $86.6 million, or $1.00 per diluted share, up from $69.9 million, or 82 cents per diluted share, in the first six months of fiscal 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.

Operating income increased 15% to a record $76.5 million in the second quarter of fiscal 2017, up from $66.8 million in the second quarter of fiscal 2016. In the first six months of fiscal 2017, operating income increased 18% to a record $141.1 million, up from $119.4 million in the first six months of fiscal 2016.

The Company’s consolidated operating margin improved to 20.8% in the second quarter of fiscal 2017 up from 19.0% in the second quarter of fiscal 2016. The Company’s consolidated operating margin improved to 19.8% in the first six months of fiscal 2017, up from 18.2% in the first six months of fiscal 2016.

Net sales increased 5% to a record $368.7 million in the second quarter of fiscal 2017, up from $350.6 million in the second quarter of fiscal 2016. Net sales increased 8% to a record $712.1 million in the first six months of fiscal 2017, up from $656.9 million in the first six months of fiscal 2016.

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, operating income and net income driven by record net sales and operating income at both operating segments. Our outstanding performance principally reflects increased demand and operating efficiencies within both of our operating segments, as well as the excellent performance of our well managed and profitable fiscal 2016 acquisition.

Cash flow provided by operating activities remained very strong, totaling $97.7 million, or 113% of net income, in the first six months of fiscal 2017. For the full fiscal year 2017, we anticipate cash flow provided by operating activities to approximate 150% of net income.

Our total debt to shareholders’ equity ratio was 40.5% as of April 30, 2017. Our net debt to shareholders’ equity ratio was 37.3% as of April 30, 2017, with net debt (total debt less cash and cash equivalents) of $424.1 million principally incurred to fund acquisitions in fiscal 2017 and 2016. Additionally, we increased the aggregate principal amount of our revolving credit facility by $200 million to $1.0 billion through increased commitments from existing lenders in April 2017. We have no significant debt maturities until fiscal 2019 and plan to utilize our financial flexibility to aggressively pursue high quality acquisition opportunities to accelerate growth and maximize shareholder returns.

As we look ahead to the remainder of fiscal 2017, 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 are increasing our estimated consolidated fiscal 2017 year-over-year growth in net sales to 8% - 10% and in net income to 12% - 14%, up from prior growth estimates in net sales of 6% - 8% and in net income of 9% - 11%. Additionally, we now anticipate our consolidated operating margin to approximate 20%, depreciation and amortization expense to approximate $65 million, capital expenditures to approximate $35 million and cash flow from operations to approximate $270 million, up from the previous estimate of $260 million in cash flow from operations. These estimates include our recent acquisition of Air Cost Control (A2C), but 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 organic growth within the Flight Support Group’s aftermarket replacement parts and repair and overhaul parts and services product lines.

The Flight Support Group’s net sales increased 5% to a record $231.8 million in the second quarter of fiscal 2017, up from $220.3 million in the second quarter of fiscal 2016. The Flight Support Group’s net sales increased 7% to a record $452.7 million in the first six months of fiscal 2017, up from $424.9 million in the first six months of fiscal 2016. The increase in the second quarter and first six months of fiscal 2017 mainly reflects organic growth of 5% and 6%, respectively. The organic growth in the second quarter and first six months of fiscal 2017 is principally attributed to increased demand and new product offerings within our aftermarket replacement parts and repair and overhaul parts and services product lines, partially offset by lower net sales within our specialty products product line.

The Flight Support Group’s operating income increased 8% to a record $44.7 million in the second quarter of fiscal 2017, up from $41.3 million in the second quarter of fiscal 2016. The Flight Support Group’s operating income increased 12% to a record $86.1 million in the first six months of fiscal 2017, up from $76.8 million in the first six months of fiscal 2016. The increase in the second quarter and first six months of fiscal 2017 is mainly attributed to the previously mentioned net sales growth and efficiencies realized from the benefit of our growth in net sales on relatively consistent period-over-period selling, general and administrative expenses.

The Flight Support Group’s operating margin increased to 19.3% in the second quarter of fiscal 2017, up from 18.8% in the second quarter of fiscal 2016. The Flight Support Group’s operating margin increased to 19.0% in the first six months of fiscal 2017, up from 18.1% in the first six months of fiscal 2016. The increase in the second quarter and first six months of fiscal 2017 principally reflects the previously mentioned net sales growth and efficiencies realized within selling, general and administrative expenses.

With respect to the remainder of fiscal 2017, we now estimate mid to high-single digit growth in the Flight Support Group’s net sales over fiscal 2016 levels and the full year Flight Support Group operating margin to approximate 19.0% - 19.5%. These estimates include our recent acquisition of A2C, but 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 record quarterly results in net sales and operating income were driven principally by increased customer demand for the majority of our products, most notably for certain aerospace, other electronics and medical products.

"The Electronic Technologies Group’s net sales increased 6% to a record $141.2 million in the second quarter of fiscal 2017, up from $132.6 million in the second quarter of fiscal 2016. The Electronic Technologies Group’s net sales increased 13% to a record $267.3 million in the first six months of fiscal 2017, up from $236.7 million in the first six months of fiscal 2016. The increase in the second quarter and first six months of fiscal 2017 principally reflects organic growth of 5% and 6%, respectively. The organic growth in the second quarter and first six months of fiscal 2017 resulted from increased demand in certain aerospace, other electronics and medical products. Additionally, the increase in the first six months of fiscal 2017 reflects the contribution from our profitable fiscal 2016 acquisition.

The Electronic Technologies Group’s operating income increased 16% to a record $38.8 million in the second quarter of fiscal 2017, up from $33.4 million in the second quarter of fiscal 2016. The Electronic Technologies Group’s operating income increased 22% to a record $67.9 million in the first six months of fiscal 2017, up from $55.7 million in the first six months of fiscal 2016. The increase in the second quarter and first six months of fiscal 2017 came primarily from the previously mentioned net sales growth and efficiencies realized from the benefit of our growth in net sales on relatively consistent period-over-period selling, general and administrative expenses. Further, the increase in operating income in the first six months of fiscal 2017 reflects a decrease in acquisition costs due to the first quarter of fiscal 2016 reflecting $3.1 million in acquisition costs associated with a prior year acquisition, partially offset by higher performance-based compensation expense.

The Electronic Technologies Group’s operating margin improved to 27.5% in the second quarter of fiscal 2017, up from 25.2% in the second quarter of fiscal 2016. The Electronic Technologies Group’s operating margin improved to 25.4% in the first six months of fiscal 2017, up from 23.5% in the first six months of fiscal 2016. The increase in the second quarter and first six months of fiscal 2017 principally reflects the previously mentioned net sales growth and efficiencies realized within selling, general and administrative expenses.

With respect to the remainder of fiscal 2017, we are continuing to estimate mid to high-single digit growth in the Electronic Technologies Group’s net sales over fiscal 2016 levels, and now anticipate the full year Electronic Technologies Group’s operating margin to approximate 25%. 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 50.6 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 Wednesday, May 24, 2017 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 19264407. 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 19264407.

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 April 30,
                                                                                  -----------------------------------------------------------------------------------
                                                                                               2017                             2016
                                                                                  ------------------------------                     --------------------------------
Net sales                                                                         $368,657                                             $350,648
Cost of sales                                                                      228,275                                              216,619
Selling, general and administrative expenses                                        63,840                            67,235  
                                                                                  -------- --------------------                      ---------- --------------------
Operating income                                                                    76,542                                               66,794
Interest expense                                                                    (1,960 )                                             (2,333 )
Other income                                                                           151                               568  
                                                                                  -------- --------------------                      ---------- --------------------
Income before income taxes and noncontrolling interests                             74,733                                               65,029
Income tax expense                                                                  23,900                            21,300  
                                                                                  -------- --------------------                      ---------- --------------------
Net income from consolidated operations                                             50,833                                               43,729
Less: Net income attributable to noncontrolling interests                            5,147                             5,072  
                                                                                  -------- --------------------                      ---------- --------------------
Net income attributable to HEICO                                                   $45,686                           $38,657  
                                                                                  ======== ====================                      ========== ====================
                                                                                                                                      
Net income per share attributable to HEICO shareholders: (a)
   Basic                                                                                                   $.54                                                 $.46
   Diluted                                                                                                 $.53                                                 $.45
                                                                                                                                      
Weighted average number of common shares outstanding: (a)
   Basic                                                                                                 84,221                                               83,653
   Diluted                                                                                               86,637                                               85,035
                                                                                                                                      
                                                                                                             Three Months Ended April 30,
                                                                                  -----------------------------------------------------------------------------------
                                                                                               2017                                                2016
                                                                                  ------------------------------                     --------------------------------
Operating segment information:
   Net sales:
     Flight Support Group                                                         $231,809                                             $220,290
     Electronic Technologies Group                                                 141,169                                              132,566
     Intersegment sales                                                             (4,321 )                                             (2,208 )
                                                                                  -------- --------------------                      ---------- --------------------
                                                                                  $368,657                          $350,648  
                                                                                  ======== ====================                      ========== ====================
                                                                                                                                      
   Operating income:
     Flight Support Group                                                          $44,744                                              $41,308
     Electronic Technologies Group                                                  38,826                                               33,402
     Other, primarily corporate                                                     (7,028 )                                             (7,916 )
                                                                                  -------- --------------------                      ---------- --------------------
                                                                                   $76,542                           $66,794  
                                                                                  ======== ====================                      ========== ====================
 
                                                                             HEICO CORPORATION
                                                        Condensed Consolidated Statements of Operations (Unaudited)
                                                                   (in thousands, except per share data)
 
                                                                                    Six Months Ended April 30,
                                                                                  --------------------------------------------------------------------
                                                                                               2017                                  2016
                                                                                  ------------------------------        ------------------------------
Net sales                                                                         $712,089                              $656,875
Cost of sales                                                                      446,290                               410,650
Selling, general and administrative expenses                                       124,707            126,810  
                                                                                  -------- --------------------         -------- --------------------
Operating income                                                                   141,092                               119,415                      (c)
Interest expense                                                                    (3,929 )                              (3,900 )
Other income                                                                           635                138  
                                                                                  -------- --------------------         -------- --------------------
Income before income taxes and noncontrolling interests                            137,798                               115,653
Income tax expense                                                                  40,700   (b)       36,000   (d)
                                                                                  -------- --------------------         -------- --------------------
Net income from consolidated operations                                             97,098                                79,653
Less: Net income attributable to noncontrolling interests                           10,485              9,725  
                                                                                  -------- --------------------         -------- --------------------
Net income attributable to HEICO                                                   $86,613            $69,928   (c)(d)
                                                                                  ======== ====================         ======== ====================
                                                                                                                                                       
Net income per share attributable to HEICO shareholders: (a)
   Basic                                                                                                  $1.03 (b)                              $.84 (c)(d)
   Diluted                                                                                                $1.00 (b)                              $.82 (c)(d)
                                                                                                                                                       
Weighted average number of common shares outstanding: (a)
   Basic                                                                            84,182                                83,624
   Diluted                                                                          86,520                                84,980
                                                                                                                                                       
                                                                                                       Six Months Ended April 30,
                                                                                  --------------------------------------------------------------------
                                                                                               2017                                  2016
                                                                                  ------------------------------        ------------------------------
Operating segment information:
   Net sales:
     Flight Support Group                                                         $452,710                              $424,866
     Electronic Technologies Group                                                 267,334                               236,718
     Intersegment sales                                                             (7,955 )                              (4,709 )
                                                                                  -------- --------------------         -------- --------------------
                                                                                  $712,089           $656,875  
                                                                                  ======== ====================         ======== ====================
                                                                                                                                                       
Operating income:
    Flight Support Group                                                           $86,107                               $76,788
    Electronic Technologies Group                                                   67,910                                55,671
    Other, primarily corporate                                                     (12,925 )                             (13,044 )
                                                                                  -------- --------------------         -------- --------------------
                                                                                  $141,092           $119,415  
                                                                                  ======== ====================         ======== ====================
 

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.

(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 712,000 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 $.02 per diluted share in the first six months of 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)
                                                                                   
                                                                              April 30, 2017                                October 31, 2016
                                                                     --------------------------------                     --------------------
Cash and cash equivalents                                               $36,732                                                        $42,955
Accounts receivable, net                                                213,107                                                        202,227
Inventories, net                                                        325,661                                                        286,302
Prepaid expenses and other current assets                                54,335                                      52,737
                                                                     ---------- --------------------                      --------------------
   Total current assets                                                 629,835                                                        584,221
Property, plant and equipment, net                                      126,402                                                        121,611
Goodwill                                                                912,539                                                        865,717
Intangible assets, net                                                  388,366                                                        366,863
Other assets                                                            120,197                                     101,063
                                                                     ---------- --------------------                      --------------------
   Total assets                                                      $2,177,339                                  $2,039,475
                                                                     ========== ====================                      ====================
                                                                                                                           
Current maturities of long-term debt                                       $407                                                           $411
Other current liabilities                                               211,571                                     214,010
                                                                     ---------- --------------------                      --------------------
   Total current liabilities                                            211,978                                                        214,421
Long-term debt, net of current maturities                               460,465                                                        457,814
Deferred income taxes                                                   108,429                                                        105,962
Other long-term liabilities                                             132,804                                     114,061
                                                                     ---------- --------------------                      --------------------
   Total liabilities                                                    913,676                                                        892,258
Redeemable noncontrolling interests                                     125,132                                                         99,512
Shareholders’ equity                       1,138,531                                   1,047,705
                                                                     ---------- --------------------                      --------------------
   Total liabilities and equity                                      $2,177,339                                  $2,039,475
                                                                     ========== ====================                      ====================
                                                                                                                           
                                                                               HEICO CORPORATION
                                                          Condensed Consolidated Statements of Cash Flows (Unaudited)
                                                                                (in thousands)
                                                              
                                                                                                                   Six Months Ended April 30,
                                                                                  ---------------------------------------------------------------------------------------------
                                                                                                  2017                                  2016
                                                                                  ------------------------------------                     ------------------------------------
Operating Activities:
 Net income from consolidated operations                                                 $97,098                                                  $79,653
 Depreciation and amortization                                                            30,501                                                   29,183
 Employer contributions to HEICO Savings and Investment Plan                               3,679                                                    3,266
 Share-based compensation expense                                                          3,110                                                    3,286
 Increase in accrued contingent consideration                                              1,148                                                    1,679
 Foreign currency transaction adjustments, net                                              (280 )                                                  2,186
 Deferred income tax benefit                                                              (2,909 )                                                 (1,168 )
 Tax benefit from stock option exercises                                          --                                                      870
 Excess tax benefit from stock option exercises                                   --                                                     (870 )
 Decrease in accounts receivable                                                           1,358                                                    7,875
 Increase in inventories                                                                 (14,251 )                                                 (9,855 )
 Decrease in current liabilities                                                         (20,766 )                                                 (9,595 )
 Other                                                                                      (975 )                                                 (3,805 )
                                                                                  -------------- --------------------                      -------------- --------------------
  Net cash provided by operating activities                                               97,713                               102,705  
                                                                                  -------------- --------------------                      -------------- --------------------
                                                                                                                                            
Investing Activities:
 Acquisitions, net of cash acquired                                                      (80,838 )                                               (263,811 )
 Capital expenditures                                                                    (13,538 )                                                (15,546 )
 Other                                                                                      (944 )                                                 (3,241 )
                                                                                  -------------- --------------------                      -------------- --------------------
  Net cash used in investing activities                                                  (95,320 )                                               (282,598 )
                                                                                  -------------- --------------------                      -------------- --------------------
                                                                                                                                            
Financing Activities:
 Borrowings on revolving credit facility, net                                              3,000                                                  194,000
 Cash dividends paid                                                                      (6,059 )                                                 (5,350 )
 Distributions to noncontrolling interests                                                (3,897 )                                                 (5,507 )
 Acquisitions of noncontrolling interests                                                 (3,848 )                                                 (3,599 )
 Proceeds from stock option exercises                                                      2,297                                                    1,471
 Excess tax benefit from stock option exercises                                   --                                                      870
 Revolving credit facility issuance costs                                                   (270 )                                         --
 Other                                                                                      (371 )                                                   (181 )
                                                                                  -------------- --------------------                      -------------- --------------------
   Net cash (used in) provided by financing activities                                    (9,148 )                                                181,704  
                                                                                  -------------- --------------------                      -------------- --------------------
                                                                                                                                            
Effect of exchange rate changes on cash                                                      532                                 1,375  
                                                                                  -------------- --------------------                      -------------- --------------------
                                                                                                                                            
Net (decrease) increase in cash and cash equivalents                                      (6,223 )                                                  3,186
Cash and cash equivalents at beginning of year                                            42,955                                33,603  
                                                                                  -------------- --------------------                      -------------- --------------------
Cash and cash equivalents at end of period                                               $36,732                               $36,789  
                                                                                  ============== ====================                      ============== ====================

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20170523006478r1&sid=cmtx6&distro=nx&

View source version on businesswire.com: http://www.businesswire.com/news/home/20170523006478/en/

SOURCE: HEICO CORPORATION

HEICO Corporation 
Victor H. Mendelson, 305-374-1745, Ext. 7590 
or 
Carlos L. Macau, Jr., 954-987-4000, Ext. 7570


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