HEI.A - Heico

[Guest Schwab711]

http://www.srr.com/article/price-differentials-between-voting-and-nonvoting-stock

 

I think it comes down to what share class would be in demand if a takeover attempt were to occur. The spread seems high in this case considering liquidity. For folks considering the arbitrage opportunity, you should read about LTCM's Shell trade first.

 

edit: one more link on the topic. I like Damodaran better so these are just alternative views on the topic.

http://www.willamette.com/insights_journal/12/summer_2012_5.pdf

 

[Liberty]

http://www.srr.com/article/price-differentials-between-voting-and-nonvoting-stock

 

I think it comes down to what share class would be in demand if a takeover attempt were to occur. The spread seems high in this case considering liquidity. For folks considering the arbitrage opportunity, you should read about LTCM's Shell trade first.

 

Thanks for the link. I understand that there's a difference in value, I'm just surprised that this difference would be 15%+ in the case of this family-controlled business.

 

Another one that is weird is LILA vs. LILAK, with the voting shares being worth less than the non-voting ones (in that case, it's probably a liquidity thing, but still, the spread is wide). I would expect that to close once LBTYA distributes its LiLAC stake to shareholder, increasing the float, but who knows?

[Guest Schwab711]

http://www.srr.com/article/price-differentials-between-voting-and-nonvoting-stock

 

I think it comes down to what share class would be in demand if a takeover attempt were to occur. The spread seems high in this case considering liquidity. For folks considering the arbitrage opportunity, you should read about LTCM's Shell trade first.

 

Thanks for the link. I understand that there's a difference in value, I'm just surprised that this difference would be 15%+ in the case of this family-controlled business.

 

Another one that is weird is LILA vs. LILAK, with the voting shares being worth less than the non-voting ones (in that case, it's probably a liquidity thing, but still, the spread is wide). I would expect that to close once LBTYA distributes its LiLAC stake to shareholder, increasing the float, but who knows?

 

Agreed. Anything over 3%-5% seems excessive.

[Liberty]

Heico's fiscal q2 is out:

 

 

http://globenewswire.com/newsroom/nitfitem/843435/en?f=22&fvtc=10&fvtv=4567

 

Revs up 20%, net income 17%, op income 20%, op margin was 19%, CFFO up 58% YTD, 147% of net income.

[Liberty]

Fiscal Q3:

 

http://globenewswire.com/newsroom/nitfitem/866697/en?f=22&fvtc=10&fvtv=4567

 

HEICO CORPORATION (NYSE:HEI.A) (NYSE:HEI) today reported that net income increased 22% to a record $42.0 million, or 62 cents per diluted share, in the third quarter of fiscal 2016, up from $34.4 million, or 51 cents per diluted share, in the third quarter of fiscal 2015.  In the first nine months of fiscal 2016, net income increased 18% to a record $111.9 million, or $1.64 per diluted share, up from $95.1 million, or $1.40 per diluted share, in the first nine months of fiscal 2015.

 

Net sales increased 19% to a record $356.1 million in the third quarter of fiscal 2016, up from $300.4 million in the third quarter of fiscal 2015.  In the first nine months of fiscal 2016, net sales increased 18% to a record $1,013.0 million, up from $860.0 million in the first nine months of fiscal 2015.

 

Operating income increased 19% to a record $69.9 million in the third quarter of fiscal 2016, up from $58.5 million in the third quarter of fiscal 2015.  In the first nine months of fiscal 2016, operating income increased 18% to a record $189.3 million, up from $160.7 million in the first nine months of fiscal 2015.

 

The Company's consolidated operating margin was 19.6% and 19.5% in the third quarter of fiscal 2016 and 2015, respectively.  The Company's consolidated operating margin was 18.7% in both the first nine months of fiscal 2016 and 2015.

[LongTermView]

This company came up for me in a screen.  I'll probably listen to tomorrow's conference call.

[Larry]

Seems like a decent quarter. Surprised by the market reaction, anything interesting on the call? Will read transcript later.

[LongTermView]

Seems like a decent quarter. Surprised by the market reaction, anything interesting on the call? Will read transcript later.

 

The call was good.  Here is the audio info from their press release:

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 60346184.

 

I liked these parts from the http://seekingalpha.com/article/4002193-heicos-hei-ceo-larry-mendelson-q3-2016-results-earnings-call-transcript?part=single transcript:

 

Larry Mendelson early in the call:

I'm very pleased with HEICO's laser focus on strong cash flow generation and the consistency of our growth in net income. As shareholders of HEICO I'm sure you are all aware of the focus that HEICO places on cash flow generation. We actually consider it more important to the operations than the results of earnings per share. Fortunately both have been very strong.

 

Larry Mendelson in the q&a after talking about having to amortize intangibles:

But those are the accounting rules and we’re abide by the accounting rules, but in my opinion to truly understand the business as the management does we focused very, very hard on cash flow, because that’s where the rubber meets the road. And as a brilliant friend of mine one time said earnings per share is opinion and cash flow is fact, we can't fudge the cash flow, nobody can. So that to us is the most critical and it shows me as the CEO where we're really going.

[Larry]

Thanks, I read the transcript yesterday when I saw it was available. Decent q, some softness with ETG's organic growth but its lumpier like they state. They were also hopeful to close a few acquisitions in the next 6 months. They have also paid down debt they took to pay for Robinson nicely out of their cash flow. A lot to like.

 

I love the quotes you put, I like the way how they always emphasize on cash flow and that has surely been strong.

[Liberty]

Fiscal Q4:

 

https://globenewswire.com/newsarchive/hei/pages/news_releases.html?id=897387

 

net income increased 17% to a record $156.2 million, or $2.29 per diluted share, in the fiscal year ended October 31, 2016, up from $133.4 million, or $1.97 per diluted share, in the fiscal year ended October 31, 2015.  Net income increased 16% to a record $44.3 million, or 65 cents per diluted share, in the fourth quarter of fiscal 2016, up from $38.3 million, or 56 cents per diluted share, in the fourth quarter of fiscal 2015.

 

Net sales increased 16% to a record $1,376.3 million in the fiscal year ended October 31, 2016, up from $1,188.6 million in the fiscal year ended October 31, 2015.  Net sales increased 11% to a record $363.3 million in the fourth quarter of fiscal 2016, up from $328.7 million in the fourth quarter of fiscal 2015.

 

Operating income increased 16% to a record $265.3 million in the fiscal year ended October 31, 2016, up from $229.7 million in the fiscal year ended October 31, 2015 and increased 10% to a record $76.1 million in the fourth quarter of fiscal 2016, up from $69.0 million in the fourth quarter of fiscal 2015.

 

The Company's consolidated operating margin was 19.3% in both the fiscal year ended October 31, 2016 and 2015.  The Company's consolidated operating margin was 20.9% and 21.0% in the fourth quarter of fiscal 2016 and 2015, respectively.

 

Cash flow provided by operating activities was very strong, increasing 44% to a record $249.2 million in the fiscal year ended October 31, 2016, representing 160% of net income, as compared to $172.9 million in the fiscal year ended October 31, 2015.

[Liberty]

Q4 is out:

 

https://globenewswire.com/newsarchive/hei/pages/news_releases.html?id=928935

 

HEICO CORPORATION today reported that net income increased 31% to $40.9 million, or 59 cents per diluted share, in the first quarter of fiscal 2017, up from $31.3 million, or 46 cents per diluted share, in the first quarter of fiscal 2016.

 

Operating income increased 23% to $64.6 million in the first quarter of fiscal 2017, up from $52.6 million in the first quarter of fiscal 2016.  The Company's consolidated operating margin increased to 18.8% in the first quarter of fiscal 2017, up from 17.2% in the first quarter of fiscal 2016.

 

Net sales increased 12% to $343.4 million in the first quarter of fiscal 2017, up from $306.2 million in the first quarter of fiscal 2016.

[Larry]

Very strong quarter. They've reduced the debt nicely during the year that they took to fund Robertson acquisition a year ago.

 

They will probably do 5/4 split again like they have done before. Wondering why dont they just do 2/1 split so they wouldn't have to do this every couple of years. Also I dont really get it why do they talk about stock dividends, they make it sound like they are returning money to shareholders when they aren't. Other than that a lot to like about this company.

[Liberty]

New acquisition:

 

https://globenewswire.com/newsarchive/hei/pages/news_releases.html?id=933338

 

HEICO Corporation (NYSE:HEI.A) (NYSE:HEI) today announced that its Flight Support Group has signed an agreement to acquire 80.1% of the operating units of Air Cost Control (“A2C”).  A2C’s founders, Laurent and Laure Parelle will continue to own 19.9% of A2C.  The purchase price and financial details were not disclosed. [...]

 

Founded by the Parelles in 2000, A2C is a leading aviation electrical interconnect product distributor of items such as connectors, wire, cable, protection and fastening systems.  It also distributes a wide range of electromechanical parts.  A2C’s customers include aircraft manufacturers and their sub-tier suppliers, as well as airlines and maintenance, repair and overhaul (“MRO”) organizations worldwide.

 

"The purchase price and financial details were not disclosed."

[Liberty]

5-for-4 stock split on April 18:

 

http://www.nasdaq.com/press-release/heico-corporation-declares-5for4-stock-split-20170320-00494

 

Wonder what's the point of these. Why not 101 for 100 while at it? If you're going to split, at least make it so you won't have to do these all the time and do a 2:1.

[marazul]

love the company, but don´t understand these share "dividends" and their comments on share repurchases (very odd).

[Liberty]

Fiscal Q2 is out:

 

http://www.businesswire.com/news/home/20170523006478/en/HEICO-Corporation-Reports-Record-Net-Income-Operating

[Liberty]

Profile of Victor Mendelson and Heico:

 

http://www.law.miami.edu/news/2017/february/victor-mendelson-jd-%E2%80%9992-building-successful-global-business

 

Good anecdote about when they took control in early 1990s:

 

At that time, HEICO had about $26 million in annual sales with a market cap of about $25 million. One of the first things the Mendelsons did was to allocate about 12 percent of the company stock—priced at less than $1 share—to the employees’ 401(k) defined contribution plan. Since then the value of those shares has grown exponentially. As Mendelson said, “We are proud to have rewarded our company’s loyal employees turning many of them into millionaires.

[Jurgis]

Profiled in Barron's this week: http://www.barrons.com/articles/heico-a-niche-business-with-extraordinary-returns-1498884070

[Liberty]

https://seekingalpha.com/pr/16919072-heico-corporation-announces-largest-acquisition

 

Big acquisition: AeroAntenna Technology for $316m. "This transaction is the largest purchase in HEICO’s history."

[Liberty]

Fiscal Q3:

 

http://www.businesswire.com/news/home/20170823006069/en/HEICO-Corporation-Reports-Record-Net-Income-Net

[rishig]

Interesting stuff from transcript:

 

Herbert_Wertheim

 

It was interesting that you mentioned that 28 years ago is when we got involved with HEICO with our single-engine part and what you've been able to achieve in these really quite few years. I want to congratulate all 3 of you and your team. As a result of that, as you know, I'm your largest single shareholder. So many, many millions of shares, and we are excited to maintain that relationship. Very much -- yes, go ahead, please.

 

Laurans A. Mendelson HEICO Corporation – Chairman and CEO

 

No, no, go ahead. I thought you'd -- go ahead.

 

Herbert Wertheim

 

I was going to say as a result of what you have been able to achieve over these years, it has enabled us to give away almost $200 million in charitable donations through our foundation and our own self personally. So we would like to thank you on behalf of all of those organizations, whether it's the college of engineering, the University of Florida or the medical school at FIU or the nursing school or many of the other things that we have done. We've built public radio stations, television stations as a result of the good fortunes that you have provided us. So we thank you for doing those things. It's been a wonderful relationship. As you know, I have been one of your greatest cheerleaders. And I applaud what you've been able to do for you and your sons.

 

Laurans A. Mendelson HEICO Corporation – Chairman and CEO

 

Well, Herb, it's very hard for me to respond to something so complimentary, and we appreciate your involvement and your support over the many years and the confidence that you had basically from the first time you visited the facility and understood what HEICO was doing and how we were going about it. You are a great investor. You've been an extremely successful investor your whole life. You're a brilliant scientist yourself. We know that. I know that. And I've known you for over 40 years. And we're very, very happy that this program worked out so well. We also salute you for being so charitable in the Miami community and giving to hospitals, universities and other charitable organizations, which you are a very, very charitable family and a great asset to our community. So we will continue to try to live up to the standards that you have mentioned. And we, again, thank you so much for being part of the team that roots for the success of HEICO. And that's about it all I can say. Maybe Eric wants to add some.

 

Eric A. Mendelson HEICO Corporation – Co-President, Director, CEO of Heico Flight Support Group & President of Heico Flight Support Group

 

Yes, Herb, this is Eric. Also, I remember you visiting with us up in Hollywood about, I don't know, 27 years or so ago and sitting in my dad's office and looking at the JT8D combustor. And you were one of the few people who saw the opportunity in creating a competitive marketplace, and you've been a great friend and supporter along the way, cheerleader. And we just greatly appreciate your friendship and support over many, many decades, so thank you.

[rogermunibond]

For the LT holders, as HEI gets larger and does more acquisitions, any concerns about their ability to find targets, buy at a good price, and/or integrate the new co?

 

Also, what's the organic versus non-org growth rates, any concerns there?

[Liberty]

For the LT holders, as HEI gets larger and does more acquisitions, any concerns about their ability to find targets, buy at a good price, and/or integrate the new co?

 

It's a concern, though it's a general concern, not a specific concern (ie. it's general to any company that redeploys capital by M&A, not specific to this company).

 

The only thing you can do is monitor their acquisitions and make sure they don't lose their discipline.

 

Also, what's the organic versus non-org growth rates, any concerns there?

 

If you read the transcripts, they usually break out the organic growth, including by division.

[Liberty]

Another acquisition, the 4th one this year so far:

 

http://www.businesswire.com/news/home/20171106005696/en/HEICO-Corporation-Subsidiary-Acquires-Interface-Displays-Controls

 

Probably not very big since the price wasn't disclosed. Looks like a bolt-on for the Radiant Power Corp subsidiary, part of the ETG.

[Liberty]

Q3 (fiscal Q4):

 

https://www.businesswire.com/news/home/20171218006149/en/HEICO-Corporation-Reports-Record-Net-Sales-Operating

 

Fourth Quarter and Full Year of Fiscal 2017 Net Income up 21% and 19% on Net Sales Increases of 16% and 11% and Operating Income Increases of 18% and 16%. DEPS of 62 cents.