Heico Corporation (HEI)

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HEICO Corporation (HEI)

F3Q09 (Qtr End 7/31/09) Earnings Call

August 27, 2009 09:00 am ET


Laurans Mendelson - Chairman, President, and CEO

Tom Irwin - EVP and CFO

Eric Mendelson - President, Flight Support Group

Victor Mendelson - President, Elec. Tech. Group.

Joe Pallot - General Counsel


Arnie Ursaner - CJS Securities

Tyler Hojo - Sidoti & Company

Mickey Schleien - Ladenburg Thalmann

Chris Donaghey - SunTrust Robinson

Steve Levinson - Stifel Nicolaus

Eric Hugel - Stevens Inc

Jim Foung - Gabelli & Company

Ryan Rackley - Raymond James



Welcome to the HEICO Corporation Fiscal 2009 Third Quarter Earnings Conference Call. I will now turn the call over to your host Laurans Mendelson.

Laurans Mendelson

Thank you and good morning to everybody on this call, and we again thank you for joining us and we welcome you to HEICO's third quarter fiscal '09 earnings announcement teleconference. I am Larry Mendelson, I am the CEO of HEICO Corporation, and I'm joined here this morning by Eric Mendelson, President of HEICO's Flight Support Group; Victor Mendelson, President of HEICO's Electronic Technologies Group; and Tom Irwin, HEICO's Executive Vice President and CFO and Joe Pallot, who is our General Counsel

Before we begin, Victor are you going to read this statement.

Victor Mendelson

Good morning. Certain statements in today's conference call will constitute forward-looking statements, which are subject to risks, uncertainties and contingencies. HEICO's actual results may differ materially from those expressed and/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, 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 US and/or foreign customers; or competition from existing and new competitors, which could reduce our sales; HEICO's ability to introduce new products and product-pricing levels, which could reduce our sales or sales growth; HEICO's ability to make acquisitions and achieve operating synergies from acquired businesses, customer credit risk, interest rates and economic conditions within and outside of the aviation, defense, space and electronics industries, which could negatively impact our cost and revenues; and HEICO's ability to maintain effective internal controls, which could adversely affect our business and the market price of our common stock.

Those listening to today's call are encouraged to review all of HEICO's filings with the Securities and Exchange Commission, including but not limited to filings on Forms 10-K, 10-Q and 8-K. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Thank you.

Laurans Mendelson

Victor, thank you. Now, before reviewing our third quarter results in detail, I would like to take a few moments to summarize the highlights of our third quarter, in which the continued effects of a global recession impacted both of our business sections and segments, but in which we were able to maintain customer focus and carefully manage our resources in order to keep our operating income at the level achieved in both the first and the second quarter's.

As you know, consolidated net income was $11.1 million or $0.41 per diluted share for the third quarter of '09, compared to $12.8 million or $0.47 per diluted share in the third quarter of '08. The current quarter was up from $10.5 million or $0.39 per diluted share in the second quarter of '09.

In July '09 we paid our 62nd consecutive semi-annual cash dividend since 1979. Our cash flow and balance sheet remain extremely strong and as of July 31, the company's net debt to equity was a very low 11% with net debt, which is total debt less cash being slightly less than $50 million, $49.5 million, and, of course, we have no significant debt maturities until fiscal 2013.

We also completed our 39th acquisition since 1990 with the acquisition of VPT. Inc., which is a leading designer and provider of innovative power conversion products, principally serving the defense, space, and aviation industries and this allowed to us further enhance our product offering and expands our market share.

Moving down into the detail, our net sales consolidated in the third quarter '09 were $134.1 million, which compared to $147.3 million in the third quarter of '08 and $130.2 million in the second quarter of '09. There was a about a $4 million increase in the third quarter over the second quarter of the current year. Overall consolidated net sales totaled $394.7 million in the first nine months of '09 and this compared to $425.6 million in the prior year.

Flight Support reported net sales of $97.2 million and $297.5 million respectively for the third quarter and the first nine months of '09 and this compared to $110 million and $320.3 million respectively in the same periods in '08. Within Flight Support we do continue to face challenges caused by the ongoing weak demand for passenger air travel and cargo shipments and this has forced airlines to cut capacity, reduce spending to conserve cash. This resulted in less demand for our products and services.

Electronic Technologies reported net sales of $37.1 million, and $97.5 million respectively for the third quarter, and first nine months of '09; as compared to $37.7 million and $105.7 million respectively in the same period in '08. Within Electronic Technologies, some strength in our defense and space business, as well as the acquisition of VPT have had a positive effect on net sales, but the global economic recession has continued to result in lower overall demands, including certain of our medical tech communication and electronics products.

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