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Original Source: FD (FAIR DISCLOSURE) WIRE
OPERATOR: Welcome to HEICO Corporation fiscal 2007 second quarter earnings results conference call. At this time all participants are in a listen-only mode. Later we'll conduct a question and answer session. (OPERATOR INSTRUCTIONS) I would now like to introduce our host for today's call, Laurans Mendelson. Mr. Mendelson, you may begin.
ERIC MENDELSON, PRESIDENT FLIGHT SUPPORT GROUP, HEICO: Thank you and good morning to everyone on the call. We welcome you to the HEICO second quarter fiscal '07 earnings announcement teleconference. I am Larry Mendelson, the CEO of HEICO Corporation, and I am joined here this morning by Eric Mendelson, President of HEICO's Flight Support Group; Victor Mendelson, President of HEICO's Electronic Technologies Group and our General Counsel, and Tom Irwin, HEICO's Executive Vice President and CFO. Before we begin, Victor Mendelson will read a statement. 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 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 or space spending by U.S. 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 would 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.
Parties receiving this -- excuse me, Parties listening to today's call are encouraged to review all of HEICO's filings with the Securities & Exchange Commission including but not limited to filings on Forms 10-K, 10-Q, and 8- K. We undertake no obligation to you publicly update or revise any forward-looking statements whether is a result of new information, future events or otherwise. Thank you. Okay, Victor. Thank you very much. Now, before reviewing our second quarter operating results in detail, I would like to take a few moment to say summarize the highlights. One, both our flight support and electronic technologies groups reported higher sales and earnings in the second quarter of '07 and that combined for an overall 32% improvement in consolidated sales and a 27% increase in consolidated operating income over the second quarter of the prior year. Next, our consolidated second quarter net sales and operating income represent all time record quarterly results for your company. The higher sales contributed to a 25% increase in consolidated net income over the prior year's second quarter.
In April 2007, we completed our 31st acquisition since 1990 with the addition of Ferris Shield Inc. Ferris Shield designs and manufacturers radio frequency, interference and electro magnetic frequency interference suppressor for a wide variety of markets. We believe this acquisition fits well with HEICO's Electronic Technologies Group criteria of offering niche subcomponents, supplied on multiple platforms in multiple industries. Ferris Shield's operations are being consolidated into Leader Tech's Tampa operations. Next, I am pleased to report that Eric Mendelson, the President of our Flight Support Group was awarded the Coveted Nuts and Bolts Award by the Air Transport Association of America, last month. This prestige award has for 41 years annually recognized leaders in the Aerospace Supply and Maintenance industry. All of us at HEICO are proud of this recognition. Earlier in this month HEICO entered into a strategic alliance with British Airways, our 7th such unique relationship with a major international carrier.
Under the new agreement HEICO will exclusively manage British Airways alternative parts program, helping the airline to maximize savings through the use of alternative parts in the most timely way. We believe that each of these events are further indication of the concentrated efforts for long-term sustainable growth at HEICO. Now drilling down into the details, our consolidated net sales in the second quarter of '07 increased by $29.1 million or up 32% from the second quarter of '06 reflecting revenue growth of 45% within flight support and 2% within Electronic Technologies. Net sales of Flight support increased to do a record $92.4 million in the second quarter of '07, up from 63.8 in the second quarter of '06. The increase in Flight support revenue represents strong organic growth of approximately 19% as well as the acquisitions of Arger Enterprises in May '06 and Prime Air in September '06. The organic increase in Flight support's revenue, reflects our success in developing and bringing to market new products and services as well as the continued increased demand for after-market replacement parts and repair and overhaul services within the commercial airline industry.
Net sales of electronic technologies increased to 28.8 million in the second quarter of '07, up from 28.3 in the second quarter of '06, and this reflects principally organic growth which were consistent with our near-term expectations. Overall, the consolidated net sales increased 30% to a record 234.9 million in the first half of '07, up from 180.2 million in the prior year. The $55 million increase is represented by approximately 30 million attributable to organic growth and 25 million attributable to acquisition. Our consolidated operating income in the second quarter of '07 increased 27% to a record 21.1 million, up from 16.6 in the second quarter of '06. Consolidated operating income in the first half of '07 increased 20% to a record 38.2 million and this was up from 31.9 in the first half of '06. Operating income of Flight support in the second quarter of '07 increased what I think is a phenomenal 66% to a record 17.9 million, up from 10.7 million in the second quarter of '06, and increased 44% in the first half of '07 to a record 32.3 million. That's up from 22.4 in the first half of '06. These increases reflect an increase in net sales and higher operating margins resulting principally from improved operating efficiencies and favorable product mixes.
Operating income of electronic technologies in the second quarter of '07 totaled 7.4 million versus 8.9 in the second quarter of '06 and 13.1 in the first half of '07 versus 15.3 million in the first half of '06, and this reflects a less favorable product sales mix. Corporate expenses in the second quarter of '07 were 4.2 million versus 3.1 in the second quarter of '06 and 7.2 in the first half of '07 versus 5.8 in the first half of '06. The increases principally reflect higher accrued performance awards based on the improvement in consolidated operating results. Operating margins of Flight support improved to 19.3% for the second quarter of '07 up very nicely from 16.8 in the second quarter of '06, and they increased to 17.9% in the first half of '07, up from 17.5 in the first half of '06. Operating margins of Electronic technologies were 25.6 for the second quarter of '07 versus 31.6 for the second quarter of '06. They were 24.1% for the first half of '07 versus 29.1 for the first half of '06.
Although the operating margins of Electronic technologies are down from last year principally as a result of a less favorable product mix, we are pleased to note that the group's operating margins in the second quarter of '07 increased by 3.1% over the first quarter of '07. As we've commented before, electronic technologies operating margins vary …