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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2024
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to _______
Commission File Number: 001-04604
HEICO CORPORATION
(Exact name of registrant as specified in its charter)
Florida65-0341002
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification No.)
3000 Taft Street, Hollywood, Florida
33021
(Address of principal executive offices)(Zip Code)
(954) 987-4000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $.01 par value per share HEINew York Stock Exchange
Class A Common Stock, $.01 par value per share HEI.ANew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer Non-accelerated filer
Smaller reporting company Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
The number of shares outstanding of each of the registrant’s classes of common stock as of May 28, 2024 is as follows:
Common Stock, $.01 par value
54,835,023 shares
Class A Common Stock, $.01 par value
83,660,813 shares


HEICO CORPORATION

INDEX TO QUARTERLY REPORT ON FORM 10-Q

Page
Part I.Financial Information
Item 1.
Item 2.
Item 3.
Item 4.
Part II.Other Information
Item 5.Other Events
Item 6.

1


PART I. FINANCIAL INFORMATION; Item 1. FINANCIAL STATEMENTS

HEICO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED
(in thousands, except per share data)
April 30, 2024October 31, 2023
ASSETS
Current assets:
Cash and cash equivalents$204,161 $171,048 
Accounts receivable, net504,362 509,075 
Contract assets110,158 111,702 
Inventories, net1,088,101 1,013,680 
Prepaid expenses and other current assets61,919 49,837 
Total current assets1,968,701 1,855,342 
Property, plant and equipment, net326,740 321,848 
Goodwill3,285,468 3,274,327 
Intangible assets, net1,333,337 1,357,281 
Other assets451,599 386,265 
Total assets$7,365,845 $7,195,063 
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt and current maturities of long-term debt$4,382 $17,801 
Trade accounts payable194,875 205,893 
Accrued expenses and other current liabilities353,874 433,101 
Income taxes payable6,032 8,547 
Total current liabilities559,163 665,342 
Long-term debt, net of current maturities2,385,267 2,460,277 
Deferred income taxes119,987 131,846 
Other long-term liabilities490,253 379,640 
Total liabilities3,554,670 3,637,105 
Commitments and contingencies (Note 11)
Redeemable noncontrolling interests (Note 3)368,369 364,807 
Shareholders’ equity:
Preferred Stock, $.01 par value per share; 10,000 shares authorized; none issued
  
Common Stock, $.01 par value per share; 150,000 shares authorized; 54,828 and 54,721 shares issued and outstanding
548 547 
Class A Common Stock, $.01 par value per share; 150,000 shares authorized; 83,644 and 83,507 shares issued and outstanding
836 835 
Capital in excess of par value598,699 578,809 
Deferred compensation obligation6,318 6,318 
HEICO stock held by irrevocable trust(6,318)(6,318)
Accumulated other comprehensive loss(35,677)(40,180)
Retained earnings2,825,021 2,605,984 
Total HEICO shareholders’ equity3,389,427 3,145,995 
Noncontrolling interests53,379 47,156 
Total shareholders’ equity3,442,806 3,193,151 
Total liabilities and equity$7,365,845 $7,195,063 

The accompanying notes are an integral part of these condensed consolidated financial statements.

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HEICO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS – UNAUDITED
(in thousands, except per share data)
Six months ended April 30,Three months ended April 30,
2024202320242023
Net sales$1,851,758 $1,308,756 $955,395 $687,841 
Operating costs and expenses:
Cost of sales1,133,194 798,445 583,600 421,329 
Selling, general and administrative expenses329,201 223,787 162,642 109,422 
Total operating costs and expenses1,462,395 1,022,232 746,242 530,751 
Operating income
389,363 286,524 209,153 157,090 
Interest expense(77,119)(17,441)(38,512)(11,373)
Other income 1,139 982 460 343 
Income before income taxes and noncontrolling interests
313,383 270,065 171,101 146,060 
Income tax expense53,000 52,000 36,200 31,000 
Net income from consolidated operations260,383 218,065 134,901 115,060 
Less: Net income attributable to noncontrolling interests
22,539 19,918 11,755 9,940 
Net income attributable to HEICO$237,844 $198,147 $123,146 $105,120 
Net income per share attributable to HEICO shareholders:
Basic$1.72 $1.45 $.89 $.77 
Diluted$1.70 $1.43 $.88 $.76 
Weighted average number of common shares outstanding:
Basic138,325 136,786 138,386 136,916 
Diluted139,976 138,590 140,059 138,600 

The accompanying notes are an integral part of these condensed consolidated financial statements.



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HEICO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME – UNAUDITED
(in thousands)
Six months ended April 30,Three months ended April 30,
2024202320242023
Net income from consolidated operations$260,383 $218,065 $134,901 $115,060 
Other comprehensive income (loss):
Foreign currency translation adjustments4,618 30,379 (10,143)1,994 
Amortization of unrealized loss on defined benefit pension plan, net of tax
26 28 13 13 
Total other comprehensive income (loss) 4,644 30,407 (10,130)2,007 
Comprehensive income from consolidated operations
265,027 248,472 124,771 117,067 
Net income attributable to noncontrolling interests
22,539 19,918 11,755 9,940 
Foreign currency translation adjustments attributable to noncontrolling interests
141 1,534 (415)275 
Comprehensive income attributable to noncontrolling interests
22,680 21,452 11,340 10,215 
Comprehensive income attributable to HEICO$242,347 $227,020 $113,431 $106,852 

The accompanying notes are an integral part of these condensed consolidated financial statements.



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HEICO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY - UNAUDITED
For the Six Months Ended April 30, 2024 and 2023
(in thousands, except per share data)
HEICO Shareholders' Equity
Redeemable Noncontrolling InterestsCommon StockClass A Common StockCapital in Excess of Par ValueDeferred Compensation ObligationHEICO Stock Held by Irrevocable TrustAccumulated Other Comprehensive LossRetained EarningsNoncontrolling InterestsTotal Shareholders' Equity
Balances as of October 31, 2023$364,807 $547 $835 $578,809 $6,318 ($6,318)($40,180)$2,605,984 $47,156 $3,193,151 
Comprehensive income 15,999 — — — — — 4,503 237,844 6,681 249,028 
Cash dividends ($.10 per share)
— — — — — — — (13,831)— (13,831)
Issuance of common stock to HEICO Savings and Investment Plan
— — — 9,300 — — — — — 9,300 
Share-based compensation expense
— — — 9,463 — — — — — 9,463 
Proceeds from stock option exercises
— 1 1 4,149 — — — — — 4,151 
Redemptions of common stock related to stock option exercises
— — — (2,352)— — — — — (2,352)
Distributions to noncontrolling interests
(14,967)— — — — — — — (458)(458)
Acquisitions of noncontrolling interests(3,165)— — — — — — — — — 
Adjustments to redemption amount of redeemable noncontrolling interests
4,608 — — — — — — (4,608)— (4,608)
Other
1,087 — — (670)— — — (368)— (1,038)
Balances as of April 30, 2024$368,369 $548 $836 $598,699 $6,318 ($6,318)($35,677)$2,825,021 $53,379 $3,442,806 
HEICO Shareholders' Equity
Redeemable Noncontrolling InterestsCommon StockClass A Common StockCapital in Excess of Par ValueDeferred Compensation ObligationHEICO Stock Held by Irrevocable TrustAccumulated Other Comprehensive LossRetained EarningsNoncontrolling InterestsTotal Shareholders' Equity
Balances as of October 31, 2022$327,601 $545 $821 $397,337 $5,297 ($5,297)($46,499)$2,253,932 $42,170 $2,648,306 
Comprehensive income 15,356 — — — — — 28,873 198,147 6,096 233,116 
Cash dividends ($.10 per share)
— — — — — — — (13,668)— (13,668)
Issuance of common stock to HEICO Savings and Investment Plan
— — — 7,760 — — — — — 7,760 
Share-based compensation expense
— — — 6,055 — — — — — 6,055 
Proceeds from stock option exercises
— 2 2 4,070 — — — — — 4,074 
Redemptions of common stock related to stock option exercises
— — — (14,811)— — — — — (14,811)
Noncontrolling interests assumed related to acquisitions14,642 — — — — — — — — — 
Distributions to noncontrolling interests
(16,161)— — — — — — — (6,489)(6,489)
Acquisitions of noncontrolling interests(1,059)— — (1,674)— — — — — (1,674)
Adjustments to redemption amount of redeemable noncontrolling interests
3,103 — — — — — — (3,103)— (3,103)
Deferred compensation obligation— — — — 874 (874)— — — — 
Other
2,351 — — 254 — — — (153)— 101 
Balances as of April 30, 2023$345,833 $547 $823 $398,991 $6,171 ($6,171)($17,626)$2,435,155 $41,777 $2,859,667 
The accompanying notes are an integral part of these condensed consolidated financial statements.



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HEICO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY - UNAUDITED
For the Three Months Ended April 30, 2024 and 2023
(in thousands, except per share data)
HEICO Shareholders' Equity
Redeemable Noncontrolling InterestsCommon StockClass A Common StockCapital in Excess of Par ValueDeferred Compensation ObligationHEICO Stock Held by Irrevocable TrustAccumulated Other Comprehensive LossRetained EarningsNoncontrolling InterestsTotal Shareholders' Equity
Balances as of January 31, 2024$365,865 $548 $836 $585,888 $6,318 ($6,318)($25,962)$2,705,128 $50,201 $3,316,639 
Comprehensive income8,003 — — — — — (9,715)123,146 3,337 116,768 
Issuance of common stock to HEICO Savings and Investment Plan
— — — 6,724 — — — — — 6,724 
Share-based compensation expense
— — — 4,582 — — — — — 4,582 
Proceeds from stock option exercises
— — — 1,897 — — — — — 1,897 
Redemptions of common stock related to stock option exercises
— — — (1,751)— — — — — (1,751)
Distributions to noncontrolling interests
(6,500)— — — — — — — (159)(159)
Acquisitions of noncontrolling interests(2,109)— — 1,156 — — — — — 1,156 
Adjustments to redemption amount of redeemable noncontrolling interests
3,165 — — — — — — (3,165)— (3,165)
Other
(55)— — 203 — — — (88)— 115 
Balances as of April 30, 2024$368,369 $548 $836 $598,699 $6,318 ($6,318)($35,677)$2,825,021 $53,379 $3,442,806 

HEICO Shareholders' Equity
Redeemable Noncontrolling InterestsCommon StockClass A Common StockCapital in Excess of Par ValueDeferred Compensation ObligationHEICO Stock Held by Irrevocable TrustAccumulated Other Comprehensive LossRetained EarningsNoncontrolling InterestsTotal Shareholders' Equity
Balances as of January 31, 2023$340,287 $547 $822 $388,603 $6,171 ($6,171)($19,358)$2,328,523 $45,037 $2,744,174 
Comprehensive income7,376 — — — — — 1,732 105,120 2,839 109,691 
Issuance of common stock to HEICO Savings and Investment Plan
— — — 5,796 — — — — — 5,796 
Share-based compensation expense
— — — 3,243 — — — — — 3,243 
Proceeds from stock option exercises
— — 1 1,228 — — — — — 1,229 
Redemptions of common stock related to stock option exercises
— — — (6)— — — — — (6)
Noncontrolling interests assumed related to acquisitions2,592 — — — — — — — — — 
Distributions to noncontrolling interests
(5,260)— — — — — — — (6,099)(6,099)
Adjustments to redemption amount of redeemable noncontrolling interests
(1,513)— — — — — — 1,513 — 1,513 
Other
2,351 — — 127 — — — (1)— 126 
Balances as of April 30, 2023$345,833 $547 $823 $398,991 $6,171 ($6,171)($17,626)$2,435,155 $41,777 $2,859,667 

The accompanying notes are an integral part of these condensed consolidated financial statements.




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HEICO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(in thousands)
Six months ended April 30,
20242023
Operating Activities:
Net income from consolidated operations$260,383 $218,065 
Adjustments to reconcile net income from consolidated operations to net cash provided by operating activities:
Depreciation and amortization86,336 56,784 
Share-based compensation expense9,463 6,055 
Employer contributions to HEICO Savings and Investment Plan8,802 6,533 
Deferred income tax benefit(11,532)(9,596)
Amendment and termination of contingent consideration agreement (9,057)
Payment of contingent consideration(6,203)(6,299)
(Decrease) increase in accrued contingent consideration, net(5,326)1,842 
Changes in operating assets and liabilities, net of acquisitions:
Decrease (increase) in accounts receivable5,309 (21,222)
Decrease (increase) in contract assets 3,172 (9,267)
Increase in inventories(71,103)(75,251)
(Increase) decrease in prepaid expenses and other current assets(9,243)1,738 
(Decrease) increase in trade accounts payable(11,406)6,797 
Decrease in accrued expenses and other current liabilities(58,102)(2,671)
Decrease in income taxes payable(6,830)(13,824)
Net changes in other long-term liabilities and assets related to
   HEICO Leadership Compensation Plan
17,319 10,563 
Other41,753 (6,754)
Net cash provided by operating activities252,792 154,436 
Investing Activities:
Acquisitions, net of cash acquired(46,208)(524,231)
Capital expenditures(26,325)(21,921)
Investments related to HEICO Leadership Compensation Plan (14,410)(14,000)
Other1,657 362 
Net cash used in investing activities(85,286)(559,790)
Financing Activities:
Payments on revolving credit facility(125,000)(108,000)
Borrowings on revolving credit facility50,000 556,000 
Distributions to noncontrolling interests(15,372)(22,650)
(Payments) borrowings on short-term debt, net(13,924)1,672 
Cash dividends paid(13,831)(13,668)
Payment of contingent consideration(13,797)(12,610)
Acquisitions of noncontrolling interests(3,165)(2,733)
Redemptions of common stock related to stock option exercises(2,352)(14,811)
Proceeds from stock option exercises4,151 4,074 
Other(1,905)1,491 
Net cash (used in) provided by financing activities(135,195)388,765 
Effect of exchange rate changes on cash802 4,246 
Net increase (decrease) in cash and cash equivalents33,113 (12,343)
Cash and cash equivalents at beginning of year171,048 139,504 
Cash and cash equivalents at end of period$204,161 $127,161 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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HEICO CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

1.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of HEICO Corporation and its subsidiaries (collectively, “HEICO,” or the “Company”) have been prepared in conformity with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the instructions to Form 10-Q. Therefore, the condensed consolidated financial statements do not include all information and footnotes normally included in annual consolidated financial statements and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended October 31, 2023. The October 31, 2023 Condensed Consolidated Balance Sheet has been derived from the Company’s audited consolidated financial statements. In the opinion of management, the unaudited condensed consolidated financial statements contain all adjustments (consisting principally of normal recurring accruals) necessary for a fair presentation of the condensed consolidated balance sheets, statements of operations, statements of comprehensive income, statements of shareholders' equity and statements of cash flows for such interim periods presented. The results of operations for the six months ended
April 30, 2024 are not necessarily indicative of the results which may be expected for the entire
fiscal year.

The Company has two operating segments: the Flight Support Group (“FSG”), consisting of HEICO Aerospace Holdings Corp. and HEICO Flight Support Corp. ("HFSC") and their respective subsidiaries; and the Electronic Technologies Group (“ETG”), consisting of HEICO Electronic Technologies Corp. and its subsidiaries.

New Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which expands reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a segment's profit or loss. The ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment's profit or loss in assessing segment performance and deciding how to allocate resources. Additionally, ASU 2023-07 requires all segment profit or loss and assets disclosures to be provided on an annual and interim basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, or in fiscal 2025 for HEICO, and interim periods within fiscal years beginning one year later. Early adoption is permitted and the amendments must be applied retrospectively to all prior periods presented. The adoption of this
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guidance will not affect the Company's consolidated results of operations, financial position or cash flows and the Company is currently evaluating the effect the guidance will have on its disclosures.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which requires disclosure of specific categories in the annual effective tax rate reconciliation table and further disaggregation for reconciling items that meet a quantitative threshold. The ASU also requires the disaggregation of income taxes paid by jurisdiction. ASU 2023-09 may be applied either prospectively or retrospectively and is effective for fiscal years beginning after December 15, 2024, or in fiscal 2026 for HEICO. Early adoption is permitted. The adoption of this guidance will not affect the Company's consolidated results of operations, financial position or cash flows and the Company is currently evaluating the effect the guidance will have on its disclosures.


2.     ACQUISITION

In December 2023, the Company, through a subsidiary of HFSC, entered into an exclusive license and acquired certain assets for the capability to support the Boeing 737NG/777 Cockpit Display and Legacy Displays product lines from Honeywell International. The transaction provides the HFSC subsidiary with the exclusive capability to produce, sell, and repair Boeing 737NG/777 Cockpit Displays as well as other Legacy Displays for Boeing 717, ATR, and select business and general aviation aircraft. The purchase price of this acquisition was paid in cash using proceeds from the Company's revolving credit facility and is not material or significant to the Company's condensed consolidated financial statements.

The allocation of the total consideration for this acquisition to the tangible and identifiable intangible assets acquired is preliminary until the Company obtains final information regarding their fair values. However, the Company does not expect any adjustment to such allocation to be material to the Company's consolidated financial statements. This acquisition’s operating results were included in the Company’s results of operations from the effective acquisition date. The amount of net sales and earnings of this acquisition included in the Condensed Consolidated Statements of Operations for the six and three months ended April 30, 2024 is not material. Had this acquisition occurred as of November 1, 2022, net sales, net income from consolidated operations, net income attributable to HEICO, and basic and diluted net income per share attributable to HEICO shareholders on a pro forma basis for the six and three months ended April 30, 2024 and 2023 would not have been materially different than the reported amounts.






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3.     SELECTED FINANCIAL STATEMENT INFORMATION

Accounts Receivable
(in thousands)April 30, 2024October 31, 2023
Accounts receivable$517,633 $521,696 
Less: Allowance for doubtful accounts(13,271)(12,621)
Accounts receivable, net$504,362 $509,075 

Inventories
(in thousands)April 30, 2024October 31, 2023
Finished products$659,590 $622,395 
Work in process91,326 79,789 
Materials, parts, assemblies and supplies337,185 311,496 
Inventories, net of valuation reserves$1,088,101 $1,013,680 

Property, Plant and Equipment
(in thousands)April 30, 2024October 31, 2023
Land$19,809 $19,706 
Buildings and improvements207,253 202,499 
Machinery, equipment and tooling403,944 386,602 
Construction in progress30,518 25,867 
661,524 634,674 
Less: Accumulated depreciation and amortization(334,784)(312,826)
Property, plant and equipment, net$326,740 $321,848 

Accrued Customer Rebates and Credits

The aggregate amount of accrued customer rebates and credits included within accrued expenses and other current liabilities in the accompanying Condensed Consolidated Balance Sheets was $25.5 million as of April 30, 2024 and $24.5 million as of October 31, 2023. The total customer rebates and credits deducted within net sales for the six months ended April 30, 2024 and 2023 was $5.8 million and $4.2 million, respectively. The total customer rebates and credits deducted within net sales for the three months ended April 30, 2024 and 2023 was $2.3 million and $2.0 million, respectively.


10

Research and Development Expenses

The amount of new product research and development ("R&D") expenses included in cost of sales for the six and three months ended April 30, 2024 and 2023 is as follows (in thousands):
Six months ended April 30,Three months ended April 30,
2024202320242023
R&D expenses$53,031 $43,134 $27,935 $22,896 

Redeemable Noncontrolling Interests

The holders of equity interests in certain of the Company's subsidiaries have rights ("Put Rights") that may be exercised on varying dates causing the Company to purchase their equity interests through fiscal 2032. The Put Rights, all of which relate either to common shares or membership interests in limited liability companies, provide that the cash consideration to be paid for their equity interests (the "Redemption Amount") be at fair value or a formula that management intended to reasonably approximate fair value based solely on a multiple of future earnings over a measurement period. Management's estimate of the aggregate Redemption Amount of all Put Rights that the Company could be required to pay is as follows (in thousands):
April 30, 2024October 31, 2023
Redeemable at fair value $309,005 $308,472 
Redeemable based on a multiple of future earnings59,364 56,335 
Redeemable noncontrolling interests$368,369 $364,807 

During fiscal 2024, the holders of a 15% noncontrolling equity interest in a subsidiary of the ETG that was acquired in fiscal 2019 exercised their option to cause the Company to purchase their noncontrolling interest over a four-year period ending in fiscal 2027. Accordingly, the Company acquired one-fourth of such interest in March 2024, which increased the Company's ownership interest in the subsidiary to 88.75%.

During fiscal 2022, the holder of a 19.9% noncontrolling equity interest in a subsidiary of the FSG that was acquired in fiscal 2015 exercised their option to cause the Company to purchase their noncontrolling interest over a four-year period ending in fiscal 2026. In December 2023, the Company acquired an additional one-fourth of such interest, which increased the Company's ownership interest in the subsidiary to 90.05%.


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Accumulated Other Comprehensive Loss

Changes in the components of accumulated other comprehensive loss for the six months ended April 30, 2024 are as follows (in thousands):
Foreign Currency TranslationDefined Benefit Pension PlanAccumulated
Other
Comprehensive Loss
Balances as of October 31, 2023($39,165)($1,015)($40,180)
Unrealized gain4,477 — 4,477 
Amortization of unrealized loss — 26 26 
Balances as of April 30, 2024($34,688)($989)($35,677)


4.     GOODWILL AND OTHER INTANGIBLE ASSETS

Changes in the carrying amount of goodwill by operating segment for the six months ended April 30, 2024 are as follows (in thousands):
SegmentConsolidated Totals
FSGETG
Balances as of October 31, 2023$1,824,305 $1,450,022 $3,274,327 
Goodwill acquired7,577  7,577 
Foreign currency translation adjustments649 2,190 2,839 
Adjustments to goodwill(88)813 725 
Balances as of April 30, 2024$1,832,443 $1,453,025 $3,285,468 
    
The goodwill acquired pertains to the fiscal 2024 acquisition described in Note 2, Acquisition, and represents the residual value after the allocation of the total consideration to the tangible and identifiable intangible assets acquired. The Company estimates that $7 million of the goodwill acquired in fiscal 2024 will be deductible for income tax purposes. Foreign currency translation adjustments are included in other comprehensive income (loss) in the Company's Condensed Consolidated Statements of Comprehensive Income. The adjustments to goodwill represent immaterial measurement period adjustments to the allocation of the purchase consideration of certain fiscal 2023 acquisitions.


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Identifiable intangible assets consist of the following (in thousands):
As of April 30, 2024As of October 31, 2023
Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Amortizing Assets:
Customer relationships$988,166 ($271,612)$716,554 $967,090 ($227,089)$740,001 
Intellectual property446,307 (120,027)326,280 448,336 (121,503)326,833 
Other8,627 (7,559)1,068 8,685 (7,404)1,281 
1,443,100 (399,198)1,043,902 1,424,111 (355,996)1,068,115 
Non-Amortizing Assets:
Trade names289,435 — 289,435 289,166 — 289,166 
$1,732,535 ($399,198)$1,333,337 $1,713,277 ($355,996)$1,357,281 
    Amortization expense related to intangible assets for the six months ended April 30, 2024 and 2023 was $60.8 million and $36.9 million, respectively. Amortization expense related to intangible assets for the three months ended April 30, 2024 and 2023 was $30.6 million and $19.1 million, respectively. Amortization expense related to intangible assets for the remainder of fiscal 2024 is estimated to be $60.4 million. Amortization expense for each of the next five fiscal years and thereafter is estimated to be $116.2 million in fiscal 2025, $110.5 million in fiscal 2026, $106.1 million in fiscal 2027, $100.6 million in fiscal 2028, $95.1 million in fiscal 2029, and $455.0 million thereafter.


5.     SHORT-TERM AND LONG-TERM DEBT

A subsidiary of the Company acquired in the first quarter of fiscal 2023 ended its short-term borrowing arrangement in the first quarter of fiscal 2024 during which it made net payments of $13.9 million.

Long-term debt consists of the following (in thousands):
April 30, 2024October 31, 2023
Borrowings under revolving credit facility$1,175,000 $1,250,000 
2028 senior unsecured notes600,000 600,000 
2033 senior unsecured notes600,000 600,000 
Finance leases and notes payable27,280 28,024 
Less: Debt discount and debt issuance costs(12,631)(13,478)
2,389,649 2,464,546 
Less: Current maturities of long-term debt(4,382)(4,269)
$2,385,267 $2,460,277 



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Revolving Credit Facility
The Company's borrowings under its revolving credit facility mature in fiscal 2028. As of April 30, 2024 and October 31 2023, the weighted average interest rate on borrowings under the Company's revolving credit facility ("Credit Facility") was 6.9% and 6.7%, respectively. The Credit Facility contains both financial and non-financial covenants. As of April 30, 2024, the Company was in compliance with all such covenants.

Senior Unsecured Notes

The Company's senior unsecured notes consist of $600 million principal amount of 5.25% Senior Notes due August 1, 2028 (the "2028 Notes") and $600 million principal amount of 5.35% Senior Notes due August 1, 2033 (the "2033 Notes" and, collectively with the 2028 Notes, the "Notes"). Interest on the Notes is payable semi-annually in arrears on February 1 and August 1 of each year, and commenced on February 1, 2024. The 2028 Notes and 2033 Notes each have an effective interest rate of 5.5%. The Notes are fully and unconditionally guaranteed on a senior unsecured basis by all of the Company's existing and future subsidiaries that guarantee the Company's obligations under the Credit Facility (the "Guarantor Group"). As of April 30, 2024, the Company was in compliance with all covenants related to the Notes.

The following table sets forth the carrying value and estimated fair value of the Company’s Notes, which are classified as Level 1 financial instruments in the fair value hierarchy (in thousands). The Company estimated the fair value of the Notes by taking the weighted average of market quotes for the exact security that was actively traded on April 30, 2024 and October 31, 2023.

April 30, 2024October 31, 2023
Carrying ValueFair ValueCarrying ValueFair Value
2028 Notes$594,705 $594,792 $594,158 $579,762 
2033 Notes592,664 590,118 592,364 552,594 
Total $1,187,369 $1,184,910 $1,186,522 $1,132,356 



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6.     REVENUE
    
Contract Balances

    Contract assets (unbilled receivables) represent revenue recognized on contracts using an over-time recognition model in excess of amounts invoiced to the customer. Contract liabilities (deferred revenue) represent customer advances and billings in excess of revenue recognized and are included within accrued expenses and other current liabilities and other long-term liabilities in the Company’s Condensed Consolidated Balance Sheets.

    Changes in the Company’s contract assets and liabilities for the six months ended April 30, 2024 are as follows (in thousands):
April 30, 2024October 31, 2023Change
Contract assets, current $110,158 $111,702 ($1,544)
Contract liabilities, current 76,65087,556 (10,906)
Contract liabilities, long-term52,186  52,186 
Total contract liabilities 128,836 87,556 41,280 
Net contract (liabilities) assets ($18,678)$24,146 ($42,824)

The increase in the Company's total contract liabilities during the first six months of fiscal 2024 principally reflects the receipt of advance deposits on certain customer contracts, mainly at the FSG.

The amount of revenue that the Company recognized during the six and three months ended April 30, 2024 that was included in contract liabilities as of the beginning of fiscal 2024 was $42.9 million and $16.2 million, respectively.
    
Remaining Performance Obligations

Backlog, which the Company believes to be the equivalent of its remaining performance obligations, represents contractually committed or firm customer orders. As of April 30, 2024, the Company had $1,846.2 million of remaining performance obligations associated with firm contracts pertaining to the majority of the products offered by the ETG and FSG. The Company will recognize net sales as these obligations are satisfied. The Company expects to recognize $820.5 million of this amount during the remainder of fiscal 2024 and $1,025.7 million thereafter, of which approximately half is expected to occur in fiscal 2025.     
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Disaggregation of Revenue

    The following table summarizes the Company’s net sales by product line for each operating segment (in thousands):
Six months ended April 30,Three months ended April 30,
2024202320242023
Flight Support Group:
Aftermarket replacement parts (1)
$798,879 $426,986 $403,725 $218,343 
Repair and overhaul parts and services (2)
283,763 149,001 148,181 77,851 
Specialty products (3)
183,306 187,493 95,326 96,008 
Total net sales1,265,948 763,480 647,232 392,202 
Electronic Technologies Group:
Electronic component parts primarily for
defense, space and aerospace equipment (4)
474,404 395,320 253,758 220,742 
Electronic component parts for equipment
in various other industries (5)
130,860 161,498 65,564 81,017 
Total net sales605,264 556,818 319,322 301,759 
Intersegment sales(19,454)(11,542)(11,159)(6,120)
Total consolidated net sales$1,851,758 $1,308,756 $955,395 $687,841 

(1)    Includes various jet engine and aircraft component replacement parts.
(2)    Includes primarily the sale of parts consumed in various repair and overhaul services on selected jet engine and aircraft components, avionics, instruments, composites and flight surfaces of commercial and military aircraft.
(3)    Includes primarily the sale of specialty components such as thermal insulation blankets, renewable/reusable insulation systems, advanced niche components, complex composite assemblies, and expanded foil mesh as well as machining, brazing, fabricating and welding services generally to original equipment manufacturers.
(4)    Includes various component parts such as electro-optical infrared simulation and test equipment, electro-optical laser products, electro-optical, microwave and other power equipment, high-speed interface products, power conversion products, underwater locator beacons, emergency locator transmission beacons, traveling wave tube amplifiers, microwave power modules, a wide variety of memory products and radio frequency (RF) and microwave products, crashworthy and ballistically self-sealing auxiliary fuel systems, high performance communications and electronic intercept receivers and tuners, high performance active antenna systems and airborne antennas, technical surveillance countermeasures (TSCM) equipment, custom high power filters and filter assemblies, radiation assurance services and products, and high-reliability, complex, passive electronic components and rotary joint assemblies.
(5)    Includes various component parts such as electromagnetic and radio frequency interference shielding, high voltage interconnection devices, high voltage advanced power electronics, harsh environment
16

connectivity products, custom molded cable assemblies, silicone material for a variety of demanding applications, and rugged small form-factor embedded computing solutions, and high performance test sockets and adaptors.

    The following table summarizes the Company’s net sales by industry for each operating segment (in thousands):
Six months ended April 30,Three months ended April 30,
2024202320242023
Flight Support Group:
Aerospace$939,590 $523,893 $478,349 $269,353 
Defense and Space 288,678 196,909 149,906 101,267 
Other (1)
37,680 42,678 18,977 21,582 
Total net sales1,265,948 763,480 647,232 392,202 
Electronic Technologies Group:
Defense and Space 300,757 260,571 164,981 138,609 
Other (2)
200,442 215,794 99,832 118,024 
Aerospace 104,065 80,453 54,509 45,126 
Total net sales605,264 556,818 319,322 301,759 
Intersegment sales (19,454)(11,542)(11,159)(6,120)
Total consolidated net sales$1,851,758 $1,308,756 $955,395 $687,841 

(1)    Principally industrial products.
(2)    Principally other electronics and medical products.


7.     INCOME TAXES

The Company's effective tax rate decreased to 16.9% in the first six months of fiscal 2024, down from 19.3% in the first six months of fiscal 2023. The decrease in the Company's effective tax rate principally reflects a larger tax benefit from stock option exercises recognized in the first quarter of fiscal 2024. The Company recognized a discrete tax benefit from stock option exercises in both the first quarter of fiscal 2024 and 2023 of $13.6 million and $6.2 million, respectively.

The Company's effective tax rate was 21.2% in both the second quarter of fiscal 2024 and 2023.

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8.    FAIR VALUE MEASUREMENTS

The Company's assets and liabilities that were measured at fair value on a recurring basis are set forth by level within the fair value hierarchy in the following tables (in thousands):

As of April 30, 2024
Quoted Prices
in Active Markets for Identical Assets (Level 1)
Significant
Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
Total
Assets:
Deferred compensation plan:
Corporate-owned life insurance$ $275,579 $ $275,579 
Money market fund10,460   10,460 
Total assets$10,460 $275,579 $ $286,039 
Liabilities:
Contingent consideration $ $ $45,917 $45,917 
As of October 31, 2023
Quoted Prices
in Active Markets for Identical Assets (Level 1)
Significant
Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
Total
Assets:
Deferred compensation plan:
Corporate-owned life insurance$ $227,710 $ $227,710 
Money market fund5,829   5,829 
Total assets$5,829 $227,710 $ $233,539 
Liabilities:
Contingent consideration $ $ $71,136 $71,136 

The Company maintains the HEICO Corporation Leadership Compensation Plan (the "LCP"), which is a non-qualified deferred compensation plan. The assets of the LCP principally represent cash surrender values of life insurance policies, which derive their fair values from investments in mutual funds that are managed by an insurance company, and are classified within Level 2 and valued using a market approach. Certain other assets of the LCP represent an investment in a money market fund that is classified within Level 1. The assets of the LCP are held within an irrevocable trust and classified within other assets in the Company’s Condensed Consolidated Balance Sheets. The related liabilities of the LCP are included within other long-term liabilities and accrued expenses and other current liabilities in the Company’s Condensed Consolidated Balance Sheets and have an aggregate value of $284.0 million as of April 30, 2024 and $226.2 million as of October 31, 2023.

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In connection with a fiscal 2023 acquisition that is part of the FSG, the Company assumed an agreement which may have obligated it to pay contingent consideration of $17.5 million if certain operating entities of the acquired company met a calendar year 2023 earnings objective and obtained a certain level of new orders with deliveries scheduled in calendar year 2024, of which both targets were tied to a specific customer contract. Both requirements were met as of October 31,2023. However, payment of the earnout is also predicated on no indication of a significant change with respect to the underlying customer agreement. In the second quarter of fiscal 2024, the customer notified the Company that it intends to reduce its future orders. As a result, the parties to this agreement agreed to settle on a specific contingent consideration amount of $11.0 million, which is expected to be paid in the third quarter of fiscal 2024. Accordingly, the $17.3 million estimated fair value of contingent consideration as of October 31, 2023 was reduced to $11.0 million as of April 30, 2024.

As part of the agreement to acquire 80.36% of the stock of a subsidiary by the ETG in fiscal 2022, the Company may be obligated to pay contingent consideration of up to $12.1 million in fiscal 2027 based on the earnings of the acquired entity during fiscal years 2025 and 2026 provided the entity meets a certain earnings objective during each of fiscal years 2024 to 2026. As of April 30, 2024, the estimated fair value of the contingent consideration was $5.6 million.

As part of the agreement to acquire 96% of the stock of a subsidiary by the FSG in fiscal 2022, the Company may be obligated to pay contingent consideration of up to $27.4 million in fiscal 2027 based on the earnings of the acquired entity during fiscal years 2025 and 2026 provided the entity meets certain earnings objectives during each of fiscal years 2022 to 2024. As of April 30, 2024, the estimated fair value of the contingent consideration was $20.4 million.

As part of the agreement to acquire 74% of the membership interests of a subsidiary by the FSG in fiscal 2022, the Company would be obligated to pay contingent consideration of $14.1 million in fiscal 2027 only if the acquired entity met a certain earnings objective during the five-year period following the acquisition. Based on the actual earnings of the acquired entity subsequent to the acquisition and forecasted earnings over the remainder of the earnout period, the Company does not expect that the required earnings objective will be met. Accordingly, as of April 30, 2024 and October 31, 2023, the Company did not accrue any contingent consideration for this agreement.

As part of the agreement to acquire 89.99% of the equity interests of a subsidiary by the ETG in fiscal 2020, the Company may be obligated to pay contingent consideration of up to CAD $13.5 million, or $9.9 million, in fiscal 2025 should the acquired entity meet certain earnings objectives during fiscal 2023 and 2024. As of April 30, 2024, the estimated fair value of the contingent consideration was CAD $12.3 million, or $9.0 million.

As part of the agreement to acquire a subsidiary by the ETG in fiscal 2017, the Company paid contingent consideration of $20.0 million in December 2023 as the acquired entity met a certain earnings objective during the first six years following the acquisition.

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The following unobservable inputs were used to derive the estimated fair value of the Company's Level 3 contingent consideration liabilities as of April 30, 2024 ($ in thousands):
Unobservable Weighted
Acquisition Date Fair Value Input Range
Average (1)
8-4-2023$11,000
9-1-2022$5,577Compound annual revenue growth rate
9% - 26%
18%
Discount rate
9.3% - 9.3%
9.3%
7-18-202220,370Compound annual revenue growth rate
1% - 11%
6%
Discount rate
9.3% - 9.3%
9.3%
8-18-20208,970Compound annual revenue growth rate
10% - 15%
14%
Discount rate
9.9% - 9.9%
9.9%

(1)    Unobservable inputs were weighted by the relative fair value of the contingent consideration liability.

Changes in the Company’s contingent consideration liabilities measured at fair value on a recurring basis using unobservable inputs (Level 3) for the six months ended April 30, 2024 are as follows (in thousands):
Liabilities
Balance as of October 31, 2023$71,136 
Payment of contingent consideration(20,000)
Decrease in accrued contingent consideration, net(5,326)
Foreign currency transaction adjustments107 
 $45,917 
Included in the accompanying Condensed Consolidated Balance Sheet
 under the following captions:
Accrued expenses and other current liabilities$19,970 
Other long-term liabilities25,947 
$45,917 

The Company records changes in accrued contingent consideration and foreign currency transaction adjustments within SG&A expenses in its Condensed Consolidated Statements of Operations.

20

The carrying amounts of the Company’s cash and cash equivalents, accounts receivable, trade accounts payable and accrued expenses and other current liabilities approximate fair value as of April 30, 2024 due to the relatively short maturity of the respective instruments. The carrying amount of borrowings under the Company's credit facility approximates fair value due to its variable interest rate. See Note 5, Short-Term and Long-Term Debt, for the estimated fair value of the Company’s senior unsecured notes.


9.    NET INCOME PER SHARE ATTRIBUTABLE TO HEICO SHAREHOLDERS

    The computation of basic and diluted net income per share attributable to HEICO shareholders is as follows (in thousands, except per share data):
Six months ended April 30,Three months ended April 30,
2024202320242023
Numerator:
Net income attributable to HEICO
$237,844 $198,147 $123,146 $105,120 
Denominator:
Weighted average common shares outstanding - basic
138,325 136,786 138,386 136,916 
Effect of dilutive stock options1,651 1,804