HEICO CORPORATION Reports Record Net Income, Operating Income and Net Sales for the Fourth Quarter and Full Year of Fiscal 2019; Increases Its Cash Dividend, and Expects Continued Growth in Fiscal 2020

HEICO CORPORATION Reports Record Net Income, Operating Income and Net Sales for the Fourth Quarter and Full Year of Fiscal 2019; Increases Its Cash Dividend, and Expects Continued Growth in Fiscal 2020

Fourth Quarter and Fiscal Year 2019 Net Income up 27% and 26% on Operating Income Increases of 16% and 21% and Net Sales Increases of 14% and 16%
HOLLYWOOD, Fla. & MIAMI–(BUSINESS WIRE)–HEICO CORPORATION (NYSE: HEI.A) (NYSE: HEI) today reported that net income increased 27% to a record $85.7 million, or 62 cents per diluted share, in the fourth quarter of fiscal 2019, up from $67.4 million, or 49 cents per diluted share, in the fourth quarter of fiscal 2018. In the fiscal year ended October 31, 2019, net income increased 26% to a record $327.9 million, or $2.39 per diluted share, up from $259.2 million, or $1.90 per diluted share, in the fiscal year ended October 31, 2018.

Operating income increased 16% to a record $120.6 million in the fourth quarter of fiscal 2019, up from $103.7 million in the fourth quarter of fiscal 2018. In the fiscal year ended October 31, 2019, operating income increased 21% to a record $457.1 million, up from $376.2 million in the fiscal year ended October 31, 2018.

The Company’s consolidated operating margin improved to 22.3% in the fourth quarter of fiscal 2019, up from 21.7% in the fourth quarter of fiscal 2018. The Company’s consolidated operating margin improved to 22.2% in the fiscal year ended October 31, 2019, up from 21.2% in the fiscal year ended October 31, 2018.

Net sales increased 14% to a record $541.5 million in the fourth quarter of fiscal 2019, up from $476.9 million in the fourth quarter of fiscal 2018. Net sales increased 16% to a record $2,055.6 million in the fiscal year ended October 31, 2019, up from $1,777.7 million in the fiscal year ended October 31, 2018.

EBITDA increased 15% to $142.4 million in the fourth quarter of fiscal 2019, up from $123.3 million in the fourth quarter of fiscal 2018. EBITDA increased 20% to $543.0 million in the fiscal year ended October 31, 2019, up from $453.4 million in the fiscal year ended October 31, 2018. See our reconciliation of net income attributable to HEICO to EBITDA at the end of this press release.

Consolidated Results

Laurans A. Mendelson, HEICO’s Chairman and CEO, commented on the Company’s fourth quarter results stating, “We are very pleased to report record quarterly results in consolidated net sales and operating income driven by record net sales at both of our operating segments. These record results principally reflect double-digit organic net sales growth within our Flight Support Group as well as mid-single digit organic net sales growth within the Electronic Technologies Group and the excellent operating performance of our fiscal 2019 acquisitions.

Cash flow provided by operating activities increased 33% to $437.4 million in fiscal 2019, up from $328.5 million in fiscal 2018. Cash flow provided by operating activities increased 9% to $124.0 million in the fourth quarter of fiscal 2019, up from $113.7 million in the fourth quarter of fiscal 2018.

Our total debt to shareholders’ equity ratio decreased to 33.2% as of October 31, 2019, down from 35.4% as of October 31, 2018. Our net debt (total debt less cash and cash equivalents) of $505.0 million to shareholders’ equity ratio decreased to 29.8% as of October 31, 2019, down from 31.5% as of October 31, 2018. Our net debt to EBITDA ratio improved to .93x as of October 31, 2019 compared to 1.04x as of October 31, 2018. During fiscal 2019, we successfully completed seven acquisitions. 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.

Based on our continued strong cash flows from operations, HEICO’s Board of Directors declared an $.08 per share regular semi-annual cash dividend on both classes of common stock, payable on January 23, 2020 to shareholders of record as of January 9, 2020. The cash dividend represents a 14% increase over the prior semi-annual per share amount of $.07. This cash dividend is HEICO’s 83rd consecutive semi-annual cash dividend since 1979. The increased semi-annual cash dividend confirms our confidence in HEICO’s consistent growth strategies and our desire to continue rewarding our shareholders, while retaining sufficient capital to fund our internal growth and our acquisitions.

Considering the impact of cash dividends, prior stock splits and stock dividends, one share of HEI worth $8.38 in 1990 has become worth on a combined basis approximately $4,213, representing an increase of approximately 503 times the 1990 value and a compound annual growth rate of approximately 24% as of December 13, 2019.

As we look ahead to fiscal 2020, 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 pursuing an aggressive acquisition strategy while maintaining our financial strength and flexibility.

Based on our current economic visibility, we believe fiscal 2020 will be another record year. We are currently estimating approximately 13% – 14% growth in full year net income and 6% – 8% growth in full year net sales over fiscal 2019 levels. We anticipate our fiscal year 2020 consolidated operating margin to approximate 21.5% – 22.0%, depreciation and amortization expense of approximately $89 million, capital expenditures to approximate $42 million and cash flow from operations to approximate $475 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 fourth quarter results stating, “Our record quarterly results in net sales principally reflect strong double-digit organic growth within our aftermarket repair and overhaul services and replacement parts product lines.

The Flight Support Group’s net sales increased 12% to a record $324.7 million in the fourth quarter of fiscal 2019, up from $290.3 million in the fourth quarter of fiscal 2018. The Flight Support Group’s net sales increased 13% to a record $1,240.2 million in the fiscal year ended October 31, 2019, up from $1,097.9 million in the fiscal year ended October 31, 2018. The increase in the fourth quarter and fiscal year ended October 31, 2019 is attributable to continued strong organic growth of 12% and 13%, respectively, mainly due to increased demand and new product offerings across all of our product lines.

The Flight Support Group’s operating income increased 14% to $62.2 million in the fourth quarter of fiscal 2019, up from $54.6 million in the fourth quarter of fiscal 2018. The increase principally reflects the previously mentioned net sales growth and the favorable impact from changes in the estimated fair value of accrued contingent consideration, partially offset by a decrease in gross profit margin mainly reflecting a less favorable product mix within our specialty products product line.

The Flight Support Group’s operating income increased 17% to a record $242.0 million in the fiscal year ended October 31, 2019, up from $206.6 million in the fiscal year ended October 31, 2018. The increase mainly results from the previously mentioned net sales growth as well as an improved gross profit margin mainly attributable to higher net sales within our aftermarket replacement parts product line as well as efficiencies realized from the net sales growth.

The Flight Support Group’s operating margin increased to 19.2% in the fourth quarter of fiscal 2019, up from 18.8% in the fourth quarter of fiscal 2018. The increase in the fourth quarter of fiscal 2019 principally reflects the previously mentioned changes in the estimated fair value of accrued contingent consideration partially offset by the less favorable gross profit margin.

The Flight Support Group’s operating margin increased to 19.5% in the fiscal year ended October 31, 2019, up from 18.8% in the fiscal year ended October 31, 2018. The increase in the fiscal year ended October 31, 2019 principally reflects the previously mentioned improved gross profit margin.

With respect to fiscal 2020, we are estimating net sales growth of approximately 7% – 8% over the prior year and the full year Flight Support Group operating margin to approximate 19.5% – 20.0%. Further, we estimate mid to high single-digit organic growth in fiscal 2020. 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 fourth quarter results stating, “Our record quarterly results in net sales reflects strong demand for our defense-related products and the impact of our well-managed and profitable fiscal 2019 acquisitions.

The Electronic Technologies Group’s net sales increased 15% to a record $219.5 million in the fourth quarter of fiscal 2019, up from $191.1 million in the fourth quarter of fiscal 2018. The increase in the fourth quarter of fiscal 2019 is attributable to the favorable impact from our fiscal 2019 acquisitions as well as organic growth of 4% mainly due to increased demand for our defense products.

The Electronic Technologies Group’s net sales increased 19% to a record $834.5 million in the fiscal year ended October 31, 2019, up from $701.8 million in the fiscal year ended October 31, 2018. The increase in the fiscal year ended October 31, 2019 is attributable to organic growth of 10% mainly due to increased demand for certain of our aerospace and defense products and the impact from our fiscal 2019 acquisitions.

The Electronic Technologies Group’s operating income increased 13% to $64.6 million in the fourth quarter of fiscal 2019, up from $57.1 million in the fourth quarter of fiscal 2018. The increase in the fourth quarter of fiscal 2019 principally reflects the previously mentioned net sales growth partially offset by higher acquisition-related costs.

The Electronic Technologies Group’s operating income increased 20% to a record $245.7 million in the fiscal year ended October 31, 2019, up from $204.5 million in the fiscal year ended October 31, 2018. The increase in the fiscal year ended October 31, 2019 principally reflects the previously mentioned net sales growth and an improved gross profit margin mainly driven by increased net sales and a more favorable product mix for certain defense products and efficiencies realized from the net sales growth, partially offset by higher performance-based compensation expense and acquisition-related costs.

The Electronic Technologies Group’s operating margin remained strong at 29.4% in the fourth quarter of fiscal 2019 compared to 29.9% as reported in the fourth quarter of fiscal 2018. The operating margin in the fourth quarter of fiscal 2019 is inclusive of the higher acquisition-related costs associated with a recent acquisition.

The Electronic Technologies Group’s operating margin improved to 29.4% in the fiscal year ended October 31, 2019, up from 29.1% in the fiscal year ended October 31, 2018. The increase in the fiscal year ended October 31, 2019 resulted mainly from an improved gross profit margin partially offset by increased SG&A expenses as a percentage of net sales, inclusive of higher acquisition-related costs and higher performance-based compensation expense.

With respect to fiscal 2020, we are estimating net sales growth of approximately 5% – 6% over the prior year and anticipate the full year Electronic Technologies Group’s operating margin to approximate 28.0% – 29.0%. Further, we estimate low to mid single-digit organic growth in fiscal 2020. These estimates exclude additional acquired businesses, if any.”

Non-GAAP Financial Measures

To provide additional information about the Company’s results, HEICO has discussed in this press release its EBITDA (calculated as net income attributable to HEICO adjusted for net income attributable to noncontrolling interests, income tax expense, interest expense and depreciation and amortization expense), its net debt (calculated as total debt less cash and cash equivalents), its net debt to shareholders’ equity ratio (calculated as net debt divided by shareholders’ equity) and its net debt to EBITDA ratio (calculated as net debt divided by EBITDA) which are not prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These non-GAAP measures are included to supplement the Company’s financial information presented in accordance with GAAP and because the Company uses such measures to monitor and evaluate the performance of its business and believes the presentation of these measures enhance an investors’ ability to analyze trends in the Company’s business and to evaluate the Company’s performance relative to other companies in its industry. However, these non-GAAP measures have limitations and should not be considered in isolation or as a substitute for analysis of the Company’s financial results as reported under GAAP.

These non-GAAP measures are not in accordance with, or an alternative to, measures prepared in accordance with GAAP and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. These measures should only be used to evaluate the Company’s results of operations in conjunction with their corresponding GAAP measures. Pursuant to the requirements of Regulation G of the Securities and Exchange Act of 1934, the Company has provided a reconciliation of these non-GAAP measures in the last table included in this press release.

(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 80.4 million shares of HEICO’s Class A Common Stock (HEI.A) outstanding and 54.1 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, December 17, 2019 at 9:00 a.m. Eastern Standard Time to discuss its fourth quarter and fiscal year 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 6379327. 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 6379327.

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 October 31,

 

 

2019

 

2018

 

Net sales

$541,529

 

 

$476,884

 

 

Cost of sales

332,144

 

 

290,426

 

 

Selling, general and administrative expenses

88,832

 

 

82,761

 

 

Operating income

120,553

 

 

103,697

 

 

Interest expense

(5,199

)

 

(5,060

)

 

Other income (expense)

19

 

 

(56

)

 

Income before income taxes and noncontrolling interests

115,373

 

 

98,581

 

 

Income tax expense

22,800

 

 

24,500

 

 

Net income from consolidated operations

92,573

 

 

74,081

 

 

Less: Net income attributable to noncontrolling interests

6,889

 

 

6,704

 

 

Net income attributable to HEICO

$85,684

 

 

$67,377

 

 

 

 

 

 

 

Net income per share attributable to HEICO shareholders:

 

 

 

 

Basic

$.64

 

$.51

 

Diluted

$.62

 

$.49

 

 

 

 

 

 

Weighted average number of common shares outstanding:

 

 

 

 

Basic

134,343

 

 

132,903

 

 

Diluted

137,579

 

 

137,071

 

 

 

 

 

 

 

 

Three Months Ended October 31,

 

 

2019

 

2018

 

Operating segment information:

 

 

 

 

Net sales:

 

 

 

 

Flight Support Group

$324,703

 

 

$290,254

 

 

Electronic Technologies Group

219,513

 

 

191,077

 

 

Intersegment sales

(2,687

)

 

(4,447

)

 

 

$541,529

 

 

$476,884

 

 

 

 

 

 

 

Operating income:

 

 

 

 

Flight Support Group

$62,186

 

 

$54,554

 

 

Electronic Technologies Group

64,583

 

 

57,137

 

 

Other, primarily corporate

(6,216

)

 

(7,994

)

 

 

$120,553

 

 

$103,697

 

 

HEICO CORPORATION

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except per share data)

 

 

Fiscal Year Ended October 31,

 

 

2019

 

2018

 

Net sales

$2,055,647

 

 

$1,777,721

 

 

Cost of sales

1,241,807

 

 

1,087,006

 

 

Selling, general and administrative expenses

356,743

 

 

314,470

 

 

Operating income

457,097

 

 

376,245

 

 

Interest expense

(21,695

)

 

(19,901

)

 

Other income (expense)

2,439

 

 

(58

)

 

Income before income taxes and noncontrolling interests

437,841

 

 

356,286

 

 

Income tax expense

78,100

 

(a)

70,600

 

(b)

Net income from consolidated operations

359,741

 

 

285,686

 

 

Less: Net income attributable to noncontrolling interests

31,845

 

 

26,453

 

 

Net income attributable to HEICO

$327,896

 

(a)

$259,233

 

(b)

 

 

 

 

 

Net income per share attributable to HEICO shareholders:

 

 

 

 

Basic

$2.45

(a)

$1.96

(b)

Diluted

$2.39

(a)

$1.90

(b)

 

 

 

 

 

Weighted average number of common shares outstanding:

 

 

 

 

Basic

133,640

 

 

132,543

 

 

Diluted

137,350

 

 

136,696

 

 

 

 

 

 

 

 

Fiscal Year Ended October 31,

 

 

2019

 

2018

 

Operating segment information:

 

 

 

 

Net sales:

 

 

 

 

Flight Support Group

$1,240,183

 

 

$1,097,937

 

 

Electronic Technologies Group

834,522

 

 

701,827

 

 

Intersegment sales

(19,058

)

 

(22,043

)

 

 

$2,055,647

 

 

$1,777,721

 

 

 

 

 

 

 

Operating income:

 

 

 

 

Flight Support Group

$242,029

 

 

$206,623

 

 

Electronic Technologies Group

245,743

 

 

204,508

 

 

Other, primarily corporate

(30,675

)

 

(34,886

)

 

 

$457,097

 

 

$376,245

 

 

HEICO CORPORATION
Footnotes to Condensed Consolidated Statements of Operations (Unaudited)
________________________

a.

During the first quarter of fiscal 2019, the Company recognized a $16.6 million discrete tax benefit from stock option exercises, which, net of noncontrolling interests, increased net income attributable to HEICO by $15.1 million, or $.11 per basic and diluted share. During the first quarter of fiscal 2018, the Company recognized a net benefit from stock option exercises that increased net income attributable to HEICO by $2.1 million, or $.02 per basic and diluted share.

 

b.

During 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 amounts increased net income attributable to HEICO by $11.9 million, or $.09 per basic and diluted share.

 

HEICO CORPORATION

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands)

 

 

October 31, 2019

 

October 31, 2018

Cash and cash equivalents

$57,001

 

$59,599

Accounts receivable, net

274,326

 

237,286

Contract assets

43,132

 

14,183

Inventories, net

420,319

 

401,553

Prepaid expenses and other current assets

18,953

 

21,187

Total current assets

813,731

 

733,808

Property, plant and equipment, net

173,345

 

154,739

Goodwill

1,268,703

 

1,114,832

Intangible assets, net

550,693

 

506,360

Other assets

162,739

 

143,657

Total assets

$2,969,211

 

$2,653,396

 

 

 

 

Current maturities of long-term debt

$906

 

$859

Other current liabilities

288,232

 

281,570

Total current liabilities

289,138

 

282,429

Long-term debt, net of current maturities

561,049

 

531,611

Deferred income taxes

51,496

 

46,644

Other long-term liabilities

184,604

 

157,658

Total liabilities

1,086,287

 

1,018,342

Redeemable noncontrolling interests

188,264

 

132,046

Shareholders’ equity

1,694,660

 

1,503,008

Total liabilities and equity

$2,969,211

 

$2,653,396

HEICO CORPORATION

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

 

 

Fiscal Year Ended October 31,

 

2019

 

2018

Operating Activities:

 

 

 

Net income from consolidated operations

$359,741

 

 

$285,686

 

Depreciation and amortization

83,497

 

 

77,191

 

Share-based compensation expense

10,334

 

 

9,283

 

Employer contributions to HEICO Savings and Investment Plan

9,528

 

 

8,019

 

Increase (decrease) in accrued contingent consideration, net

2,630

 

 

(1,365

)

Deferred income tax benefit

(6,392

)

 

(12,977

)

Payment of contingent consideration

(3,105

)

 

 

Increase in accounts receivable

(28,976

)

 

(23,763

)

Decrease (increase) in contract assets

11,583

 

 

(4,806

)

Increase in inventories

(30,077

)

 

(49,455

)

Increase in current liabilities, net

14,596

 

 

26,994

 

Other

14,019

 

 

13,680

 

Net cash provided by operating activities

437,378

 

 

328,487

 

 

 

 

 

Investing Activities:

 

 

 

Acquisitions, net of cash acquired

(240,841

)

 

(59,775

)

Capital expenditures

(28,938

)

 

(41,871

)

Investments related to HEICO Leadership Compensation Plan, net

(13,701

)

 

(11,500

)

Other

2,834

 

 

(365

)

Net cash used in investing activities

(280,646

)

 

(113,511

)

 

 

 

 

Financing Activities:

 

 

 

Borrowings (payments) on revolving credit facility, net

30,000

 

 

(148,000

)

Distributions to noncontrolling interests

(110,869

)

 

(13,059

)

Redemptions of common stock related to stock option exercises

(64,014

)

 

(24,983

)

Cash dividends paid

(18,691

)

 

(15,363

)

Payments of contingent consideration

(4,073

)

 

(5,425

)

Revolving credit facility issuance costs

 

 

(4,067

)

Proceeds from stock option exercises

8,547

 

 

4,031

 

Other

(620

)

 

(669

)

Net cash used in financing activities

(159,720

)

 

(207,535

)

 

 

 

 

Effect of exchange rate changes on cash

390

 

 

92

 

 

 

 

 

Net (decrease) increase in cash and cash equivalents

(2,598

)

 

7,533

 

Cash and cash equivalents at beginning of year

59,599

 

 

52,066

 

Cash and cash equivalents at end of year

$57,001

 

 

$59,599

 

 

Contacts
Victor H. Mendelson, (305) 374-1745 ext. 7590Carlos L. Macau, Jr., (954) 987-4000 ext. 7570
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