Heico Corporation (HEI)

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F1Q08 (01/31/08) Earnings Call

February 29, 2008 9:00 am ET


Larry Mendelson - Chairman, President, and CEO

Eric Mendelson - President, HEICO's Flight Support Group

Victor Mendelson - General Counsel

Tom Irwin - EVP and CFO


Arnie Ursaner - CJS Securities

Tyler Hojo - Sidoti & Co.

J.B. Groh - D.A. Davidson

James Foung - Gabelli & Company

Chris Donaghey - SunTrust Robinson Humphrey



Welcome to this HEICO Corporation fiscal 2008 first quarter Earnings Call. During this call, there will be breaks for questions. (Operator Instructions)

At this time, I will turn the call over to Larry Mendelson, Chairman, President, and CEO of HEICO Corporation.

Larry Mendelson

Thank you very much and good morning to everybody on the call. We welcome you to the HEICO first quarter fiscal '08 earnings announcement teleconference. I am Larry Mendelson, the CEO of HEICO, and I'm joined this morning here by Eric Mendelson , President of HEICO's Flight Support Group; Victor Mendelson, President of HEICO's Electronic Technologies Group; and HEICO's General Counsel; and Tom Irwin, HEICO's Executive VP and CFO

Before we begin, Victor Mendelson will read a statement.

Victor Mendelson

Thank you. Certain statements made 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 in or implied by the 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 stability 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 shares.

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 advise any forward-looking statements whether as a result of new information, future events or otherwise. Thank you.

Larry Mendelson

Thank you, Victor. Before reviewing our first quarter operating results in detail, I would like to take a few moments to summarize the highlights of what we consider to be an outstanding first quarter. Both Flight Support and Electronic Technologies reported higher sales and earnings in the first quarter of '08, combining for an overall 18% improvement in consolidated net sales and a big 36% increase in consolidated net operating income over the first quarter of last year.

Consolidated operating margins increased 2.2 percentage points to 17.3% in the first quarter of '08, up 15.1% in the first quarter of last year. I would like to point out that as most of you know, at HEICO we focused on operating income and not so much on the top line growth and our guidance at $580 million is about 14% top line growth over the prior year. We do show very strong growth in operating income.

The higher sales and operating margins contributed to a 27% increase in consolidated net income over the prior years first quarter, again that’s what we focus on. In the first quarter of '08 we completed our 36th and 37th acquisition since 1990, with the addition of two small companies, one a PMA company and one an MRO services company. These were both acquisitions that were easy fold ins for us and just added to our product line, very, very synergistic, very compatible.

In January '08 we paid our 59th consecutive semi-annual cash dividend since 1979. The cash dividend of $0.05 per share represented a 25% increase over the prior per share amount of $0.04. We do believe that our operating results and our acquisition successes are a further indication of the concentrated efforts for long-term sustainable growth at HEICO. As I have said many times before we consider HEICO a growth company and we expect this year’s performance to continue to prove it.

Moving down to net sales, we note that consolidated net sales in the first quarter increased by just under $21 million up about 18% from the first quarter of '07 reflecting revenue growth of 16% in Flight Support and 25% within Electronic Technologies. Net sales of Flight Support increased to $102.3 million in the first quarter of '08 up 16% from $88.1 million in the first quarter of '07. The increase in Flight Support revenue reflects organic growth of approximately 12%, as well as three small acquisitions completed since the first quarter of last year. Again to repeat they were product line acquisitions very synergistic easy fold-ins very typical type of acquisition for us.

Net sales of Electronic Technologies increased to $31.9 million in the first quarter of '08, up 25% from $25.6 million in the first quarter of '07. The increase reflects organic growth of approximately 14% and the strategic acquisitions of FerriShield in April '07 and EMD Technologies in September '07.

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