Third Consecutive Quarter of Sequential
Improvement in Net Sales and Operating Income at Flight Support
Group and Record Quarterly Net Sales at Electronic Technologies
Group
HEICO Corporation (NYSE: HEI.A) (NYSE: HEI) today reported net
income of $141.3 million, or $1.03 per diluted share, in the first
six months of fiscal 2021, as compared to $197.3 million, or $1.44
per diluted share, in the first six months of fiscal 2020. Net
income in the second quarter of fiscal 2021 was $70.7 million, or
$.51 per diluted share, as compared to $75.5 million, or 55 cents
per diluted share, in the second quarter of fiscal 2020.
Net income, operating income and net sales in the first six
months and second quarter of fiscal 2021 were adversely affected by
the COVID-19 global pandemic as discussed below.
Operating income was $177.0 million in the first six months of
fiscal 2021, as compared to $219.2 million in the first six months
of fiscal 2020. In the second quarter of fiscal 2021, operating
income was $96.7 million, as compared to $108.2 million in the
second quarter of fiscal 2020.
The Company's consolidated operating margin was 20.0% in the
first six months of fiscal 2021, as compared to 22.5% in the first
six months of fiscal 2020. The Company's consolidated operating
margin was 20.7% in the second quarter of fiscal 2021, as compared
to 23.1% in the second quarter of fiscal 2020.
Net sales were $884.6 million in the first six months of fiscal
2021, as compared to $974.4 million in the first six months of
fiscal 2020. In the second quarter of fiscal 2021, net sales were
$466.7 million, as compared to $468.1 million in the second quarter
of fiscal 2020.
EBITDA was $224.0 million in the first six months of fiscal
2021, as compared to $262.7 million in the first six months of
fiscal 2020. In the second quarter of fiscal 2021, EBITDA was
$120.0 million, as compared to $130.0 million in the second quarter
of fiscal 2020. 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 second quarter results stating, "We are pleased to report
record quarterly net sales in the Electronic Technologies Group and
our third sequential increase in quarterly net sales and operating
income within our Flight Support Group, despite the fact that the
COVID-19 global pandemic (the "Pandemic") moderated demand for our
commercial aerospace parts and services in the second quarter of
fiscal 2021 compared to the prior year.
Our total debt to shareholders' equity ratio improved to 27.1%
as of April 30, 2021, as compared to 36.8% as of October 31, 2020.
Our net debt (total debt less cash and cash equivalents) of $199.0
million as of April 30, 2021 to shareholders’ equity ratio improved
to 9.2% as of April 30, 2021, down from 16.6% as of October 31,
2020, which provides the Company with substantial acquisition
capital in the balance of our $1.5 billion revolving credit
facility and other available capital.
Our net debt to EBITDA ratio improved to .47x as of April 30,
2021, down from .71x as of October 31, 2020. During fiscal 2021, we
successfully completed one acquisition and we completed five
acquisitions over the past year. We have no significant debt
maturities until fiscal 2024 and plan to utilize our financial
strength and flexibility to aggressively pursue high quality
acquisitions of various sizes to accelerate growth and maximize
shareholder returns.
Cash flow provided by operating activities remained strong,
increasing 2% to $210.1 million in the first six months of fiscal
2021, up from $205.9 million in the first six months of fiscal
2020. Cash flow provided by operating activities was $102.9 million
in the second quarter of fiscal 2021, as compared to $124.7 million
in the second quarter of fiscal 2020.
As we look ahead to the remainder of fiscal 2021, we are
cautiously optimistic that the ongoing worldwide rollout of
COVID-19 vaccines will have a positive influence on commercial air
travel and generate favorable economic environments in the markets
we serve. However, the pace of recovery in global travel remains
difficult to predict and can be negatively influenced by new
COVID-19 variants and varying vaccine adoption rates. Given these
uncertainties, we cannot provide fiscal 2021 net sales and earnings
guidance at this time. However, we believe our ongoing fiscal
conservative policies, strong balance sheet, and high degree of
liquidity enable us to invest in new research and development,
execute on our successful acquisition program, and position HEICO
for market share gains as the industry recovers."
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, "Despite the Pandemic's continued
adverse impact on demand for commercial aerospace parts and
services, we are encouraged by sequential growth in operating
income and net sales in the second quarter of fiscal 2021, which
improved 37% and 16%, respectively, as compared to the first
quarter of fiscal 2021. Additionally, this growth marks the third
consecutive quarter of sequential growth for these financial
metrics.
The Flight Support Group's net sales were $429.6 million in the
first six months of fiscal 2021, as compared to $553.0 million in
the first six months of fiscal 2020. The Flight Support Group's net
sales were $230.3 million in the second quarter of fiscal 2021, as
compared to $252.0 million in the second quarter of fiscal 2020.
The net sales decrease in the first six months and second quarter
of fiscal 2021 is principally organic and reflects lower demand for
the majority of our commercial aerospace products and services
resulting from the significant decline in global commercial air
travel attributable to the Pandemic.
The Flight Support Group's operating income was $61.3 million in
the first six months of fiscal 2021, as compared to $109.6 million
in the first six months of fiscal 2020. The operating income
decrease principally reflects the previously mentioned lower net
sales as well as a lower gross profit margin, higher
performance-based compensation expense and the impact from lost
fixed cost efficiencies stemming from the Pandemic. The Flight
Support Group's operating income was $35.5 million in the second
quarter of fiscal 2021, as compared to $47.5 million in the second
quarter of fiscal 2020. The operating income decrease principally
reflects the previously mentioned lower net sales as well as higher
performance-based compensation expense, directly resulting from the
strong improvement in operations during the past three consecutive
quarters.
The Flight Support Group's operating margin was 14.3% in the
first six months of fiscal 2021, as compared to 19.8% in the first
six months of fiscal 2020. The operating margin decrease
principally reflects an increase in SG&A expenses as a
percentage of net sales mainly from the previously mentioned higher
performance-based compensation expense and lost fixed cost
efficiencies, and the lower gross profit margin. The Flight Support
Group's operating margin was 15.4% in the second quarter of fiscal
2021, as compared to 18.9% in the second quarter of fiscal 2020.
The operating margin decrease principally reflects the previously
mentioned higher performance-based compensation expense."
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 net sales reflect the impact from our profitable fiscal
2020 and 2021 acquisitions, as well as very strong organic growth
of 19% for our other electronic products. These record operating
results were achieved despite the Pandemic's continued impact on
demand for our commercial aerospace products.
The Electronic Technologies Group's net sales increased 9% to a
record $466.6 million in the first six months of fiscal 2021, up
from $427.4 million in the first six months of fiscal 2020. The net
sales increase principally reflects our fiscal 2020 and 2021
acquisitions as well as organic growth of 1%. The organic growth
principally reflects increased demand for our other electronic and
space products, partially offset by decreased demand for our
commercial aerospace products.
The Electronic Technologies Group's net sales increased 11% to a
record $243.1 million in the second quarter of fiscal 2021, up from
$219.0 million in the second quarter of fiscal 2020. The net sales
increase principally resulted from our fiscal 2020 and 2021
acquisitions as well as organic growth of 3%. The organic growth
principally reflects increased demand for our other electronic and
defense products, partially offset by decreased demand for our
commercial aerospace products.
The Electronic Technologies Group's operating income increased
7% to a record $131.4 million in the first six months of fiscal
2021, up from $123.0 million in the first six months of fiscal
2020. The operating income increase principally reflects the
previously mentioned net sales growth, partially offset by a lower
gross profit margin mainly from lower net sales of defense and
commercial aerospace products, partially offset by an increase in
net sales of certain other electronic products.
The Electronic Technologies Group's operating income increased
9% to $71.3 million in the second quarter of fiscal 2021, up from
$65.5 million in the second quarter of fiscal 2020. The operating
income increase principally reflects the previously mentioned net
sales growth, partially offset by a lower gross profit margin
mainly from a less favorable product mix for our defense products
as well as a decrease in net sales of commercial aerospace
products, partially offset by an increase in net sales of certain
other electronic products.
The Electronic Technologies Group's operating margin was 28.2%
in the first six months of fiscal 2021, as compared to 28.8% in the
first six months of fiscal 2020. The Electronic Technologies
Group's operating margin was 29.3% in the second quarter of fiscal
2021, as compared to 29.9% in the second quarter of fiscal 2020.
The operating margin decrease in the first six months and second
quarter of fiscal 2021 principally reflects the previously
mentioned lower gross profit margin, partially offset by a decrease
in SG&A expenses as a percentage of net sales mainly from
efficiencies gained from the previously mentioned net sales
growth."
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 depreciation and
amortization expense, net income attributable to noncontrolling
interests, interest expense and income tax 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) carries 1/10 vote per share and the
Common Stock (HEI) carries one vote per share.)
There are currently approximately 81.1 million shares of HEICO's
Class A Common Stock (HEI.A) outstanding and 54.2 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 26, 2021 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
2195997. 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 2195997.
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 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: the
severity, magnitude and duration of the COVID-19 Pandemic; HEICO’s
liquidity and the amount and timing of cash generation; lower
commercial air travel caused by the COVID-19 Pandemic and its
aftermath, 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 and manufacturing
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)
Six Months Ended April
30,
2021
2020
Net sales
$
884,553
$
974,421
Cost of sales
546,346
597,484
Selling, general and administrative
expenses
161,174
157,786
Operating income
177,033
219,151
Interest expense
(4,531
)
(8,042
)
Other income
1,017
302
Income before income taxes and
noncontrolling interests
173,519
211,411
Income tax expense
20,800
(a)
700
(b)
Net income from consolidated
operations
152,719
210,711
Less: Net income attributable to
noncontrolling interests
11,450
13,370
Net income attributable to HEICO
$
141,269
(a)
$
197,341
(b)
Net income per share attributable to HEICO
shareholders:
Basic
$
1.04
(a)
$
1.47
(b)
Diluted
$
1.03
(a)
$
1.44
(b)
Weighted average number of common shares
outstanding:
Basic
135,252
134,596
Diluted
137,778
137,269
Six Months Ended April
30,
2021
2020
Operating segment information:
Net sales:
Flight Support Group
$
429,614
$
553,031
Electronic Technologies Group
466,639
427,366
Intersegment sales
(11,700
)
(5,976
)
$
884,553
$
974,421
Operating income:
Flight Support Group
$
61,298
$
109,576
Electronic Technologies Group
131,422
123,017
Other, primarily corporate
(15,687
)
(13,442
)
$
177,033
$
219,151
HEICO CORPORATION
Condensed Consolidated Statements of
Operations (Unaudited)
(in thousands, except per share data)
Three Months Ended April
30,
2021
2020
Net sales
$
466,651
$
468,146
Cost of sales
286,878
289,256
Selling, general and administrative
expenses
83,025
70,729
Operating income
96,748
108,161
Interest expense
(2,083
)
(3,759
)
Other income
306
107
Income before income taxes and
noncontrolling interests
94,971
104,509
Income tax expense
18,500
23,600
Net income from consolidated
operations
76,471
80,909
Less: Net income attributable to
noncontrolling interests
5,798
5,456
Net income attributable to HEICO
$
70,673
$
75,453
Net income per share attributable to HEICO
shareholders:
Basic
$
.52
$
.56
Diluted
$
.51
$
.55
Weighted average number of common shares
outstanding:
Basic
135,294
134,669
Diluted
137,814
137,117
Three Months Ended April
30,
2021
2020
Operating segment information:
Net sales:
Flight Support Group
$
230,280
$
251,964
Electronic Technologies Group
243,089
218,955
Intersegment sales
(6,718
)
(2,773
)
$
466,651
$
468,146
Operating income:
Flight Support Group
$
35,476
$
47,531
Electronic Technologies Group
71,294
65,526
Other, primarily corporate
(10,022
)
(4,896
)
$
96,748
$
108,161
HEICO CORPORATION
Footnotes to Condensed Consolidated
Statements of Operations (Unaudited)
(a)
During the first quarter of fiscal 2021, the Company recognized
a $13.5 million discrete tax benefit from stock option exercises,
which, net of noncontrolling interests, increased net income
attributable to HEICO by $13.4 million, or $.10 per basic and
diluted share.
(b)
During the first quarter of fiscal 2020, the Company recognized
a $47.6 million discrete tax benefit from stock option exercises,
which, net of noncontrolling interests, increased net income
attributable to HEICO by $46.3 million, or $.34 per basic and
diluted share.
HEICO CORPORATION
Condensed Consolidated Balance
Sheets (Unaudited)
(in thousands)
April 30, 2021
October 31, 2020
Cash and cash equivalents
$
385,444
$
406,852
Accounts receivable, net
215,736
210,433
Contract assets
59,881
60,429
Inventories, net
462,586
463,205
Prepaid expenses and other current
assets
39,774
24,706
Total current assets
1,163,421
1,165,625
Property, plant and equipment, net
177,315
168,848
Goodwill
1,400,048
1,383,167
Intangible assets, net
557,550
579,041
Other assets
296,834
251,030
Total assets
$
3,595,168
$
3,547,711
Current maturities of long-term debt
$
1,111
$
1,045
Other current liabilities
255,647
240,116
Total current liabilities
256,758
241,161
Long-term debt, net of current
maturities
583,352
738,786
Deferred income taxes
47,409
55,658
Other long-term liabilities
324,493
280,291
Total liabilities
1,212,012
1,315,896
Redeemable noncontrolling interests
223,266
221,208
Shareholders’ equity
2,159,890
2,010,607
Total liabilities and equity
$
3,595,168
$
3,547,711
HEICO CORPORATION
Condensed Consolidated Statements of
Cash Flows (Unaudited)
(in thousands)
Six Months Ended April
30,
2021
2020
Operating Activities:
Net income from consolidated
operations
$
152,719
$
210,711
Depreciation and amortization
45,919
43,276
Share-based compensation expense
4,271
5,275
Employer contributions to HEICO Savings
and Investment Plan
5,046
4,811
Deferred income tax benefit
(8,487
)
(5,137
)
Increase in accrued contingent
consideration
659
1,167
(Increase) decrease in accounts
receivable
(3,795
)
44,419
Decrease (increase) in contract assets
596
(12,985
)
Decrease (increase) in inventories
2,932
(37,790
)
Increase (decrease) in current
liabilities, net
8,748
(47,064
)
Other
1,504
(801
)
Net cash provided by operating
activities
210,112
205,882
Investing Activities:
Acquisitions, net of cash acquired
(20,226
)
(45,343
)
Capital expenditures
(21,938
)
(12,435
)
Investments related to HEICO Leadership
Compensation Plan
(10,900
)
(13,600
)
Other
1,017
473
Net cash used in investing activities
(52,047
)
(70,905
)
Financing Activities:
(Payments) borrowings on revolving credit
facility, net
(155,000
)
177,000
Distributions to noncontrolling
interests
(13,823
)
(9,742
)
Cash dividends paid
(10,818
)
(10,762
)
Redemptions of common stock related to
stock option exercises
(3,624
)
(2,567
)
Revolving credit facility issuance
costs
(1,468
)
—
Proceeds from stock option exercises
3,838
2,392
Other
(522
)
(769
)
Net cash (used in) provided by financing
activities
(181,417
)
155,552
Effect of exchange rate changes on
cash
1,944
(744
)
Net (decrease) increase in cash and cash
equivalents
(21,408
)
289,785
Cash and cash equivalents at beginning of
year
406,852
57,001
Cash and cash equivalents at end of
period
$
385,444
$
346,786
HEICO CORPORATION
Non-GAAP Financial Measures
(Unaudited)
(in thousands, except ratios)
Six Months Ended April
30,
EBITDA Calculation
2021
2020
Net income attributable to HEICO
$
141,269
$
197,341
Plus: Depreciation and amortization
45,919
43,276
Plus: Net income attributable to
noncontrolling interests
11,450
13,370
Plus: Interest expense
4,531
8,042
Plus: Income tax expense
20,800
700
EBITDA (a)
$
223,969
$
262,729
Three Months Ended April
30,
EBITDA Calculation
2021
2020
Net income attributable to HEICO
$
70,673
$
75,453
Plus: Depreciation and amortization
22,916
21,693
Plus: Net income attributable to
noncontrolling interests
5,798
5,456
Plus: Interest expense
2,083
3,759
Plus: Income tax expense
18,500
23,600
EBITDA (a)
$
119,970
$
129,961
Trailing Twelve Months
Ended
EBITDA Calculation
April 30, 2021
October 31, 2020
Net income attributable to HEICO
$
257,912
$
313,984
Plus: Depreciation and amortization
91,204
88,561
Plus: Net income attributable to
noncontrolling interests
19,951
21,871
Plus: Interest expense
9,648
13,159
Plus: Income tax expense
49,100
29,000
EBITDA (a)
$
427,815
$
466,575
Net Debt Calculation
April 30, 2021
October 31, 2020
Total debt
$
584,463
$
739,831
Less: Cash and cash equivalents
(385,444
)
(406,852
)
Net debt (a)
$
199,019
$
332,979
Net debt
$
199,019
$
332,979
Shareholders' equity
$
2,159,890
$
2,010,607
Net debt to shareholders' equity ratio
(a)
9.2
%
16.6
%
Net debt
$
199,019
$
332,979
EBITDA (trailing twelve months)
$
427,815
$
466,575
Net debt to EBITDA ratio (a)
.47
.71
(a) See the "Non-GAAP Financial Measures"
section of this press release.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210525005965/en/
Victor H. Mendelson, (305) 374-1745 ext. 7590 Carlos L. Macau,
Jr., (954) 987-4000 ext. 7570
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