SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


☒						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

						For the quarterly period ended ~~April 30, 2022~~January 31, 2023

						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


Florida						65-0341002
(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)

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 23, 2022~~February 27, 2023 is as follows:


Common Stock, $.01 par value	~~54,503,703~~54,660,048	shares
Class A Common Stock, $.01 par value	~~81,453,412~~82,231,513	shares

INDEX TO QUARTERLY REPORT ON FORM 10-Q

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, 2022 October 31, 2021
ASSETS
Current assets:
Cash and cash equivalents $117,318 $108,298
Accounts receivable, net 269,850 244,919
Contract assets 79,598 80,073
Inventories, net 519,498 478,050
Prepaid expenses and other current assets 46,461 26,045
Total current assets 1,032,725 937,385
Property, plant and equipment, net 193,558 193,638
Goodwill 1,511,466 1,450,395
Intangible assets, net 624,917 582,307
Other assets 322,667 334,682
Total assets $3,685,333 $3,498,407
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt $1,781 $1,515
Trade accounts payable 97,089 85,544
Accrued expenses and other current liabilities 203,289 206,857
Income taxes payable 2,033 964
Total current liabilities 304,192 294,880
Long-term debt, net of current maturities 264,095 234,983
Deferred income taxes 42,629 40,761
Other long-term liabilities 350,016 378,257
Total liabilities 960,932 948,881
Commitments and contingencies (Note 11) 0 0
Redeemable noncontrolling interests (Note 3) 303,927 252,587
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; 54,504 and 54,264 shares issued and outstanding 545 543
Class A Common Stock, $.01 par value per share; 150,000 shares authorized; 81,449 and 81,224 shares issued and outstanding 814 812
Capital in excess of par value 311,053 320,747
Deferred compensation obligation 5,297 5,297
HEICO stock held by irrevocable trust (5,297) (5,297)
Accumulated other comprehensive loss (30,554) (8,552)
Retained earnings 2,100,178 1,949,521
Total HEICO shareholders’ equity 2,382,036 2,263,071
Noncontrolling interests 38,438 33,868
Total shareholders’ equity 2,420,474 2,296,939
Total liabilities and equity $3,685,333 $3,498,407


	January 31, 2023	October 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$142,619	$139,504
Accounts receivable, net	325,764	294,848
Contract assets	101,540	93,978
Inventories, net	697,495	582,471
Prepaid expenses and other current assets	51,381	41,929
Total current assets	1,318,799	1,152,730

Property, plant and equipment, net	274,403	225,879
Goodwill	1,994,347	1,672,425
Intangible assets, net	873,722	733,327
Other assets	343,349	311,135
Total assets	$4,804,620	$4,095,496

LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt	$1,615	$1,654
Trade accounts payable	134,836	116,551
Accrued expenses and other current liabilities	290,693	290,199
Income taxes payable	26,352	12,455
Total current liabilities	453,496	420,859

Long-term debt, net of current maturities	781,174	288,620
Deferred income taxes	113,477	71,162
Other long-term liabilities	372,012	338,948
Total liabilities	1,720,159	1,119,589

Commitments and contingencies (Note 11)

Redeemable noncontrolling interests (Note 3)	340,287	327,601

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; 54,660 and 54,519 shares issued and outstanding	547	545
Class A Common Stock, $.01 par value per share; 150,000 shares authorized; 82,218 and 82,093 shares issued and outstanding	822	821
Capital in excess of par value	388,603	397,337
Deferred compensation obligation	6,171	5,297
HEICO stock held by irrevocable trust	(6,171)	(5,297)
Accumulated other comprehensive loss	(19,358)	(46,499)
Retained earnings	2,328,523	2,253,932
Total HEICO shareholders’ equity	2,699,137	2,606,136
Noncontrolling interests	45,037	42,170
Total shareholders’ equity	2,744,174	2,648,306
Total liabilities and equity	$4,804,620	$4,095,496

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

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,
2022 2021 2022 2021
Net sales $1,029,156 $884,553 $538,813 $466,651
Operating costs and expenses:
Cost of sales 627,717 546,346 327,584 286,878
Selling, general and administrative expenses 179,840 161,174 88,452 83,025
Total operating costs and expenses 807,557 707,520 416,036 369,903
Operating income 221,599 177,033 122,777 96,748
Interest expense (1,775) (4,531) (979) (2,083)
Other income 540 1,017 314 306
Income before income taxes and noncontrolling interests 220,364 173,519 122,112 94,971
Income tax expense 33,000 20,800 29,000 18,500
Net income from consolidated operations 187,364 152,719 93,112 76,471
Less: Net income attributable to noncontrolling interests 15,433 11,450 8,102 5,798
Net income attributable to HEICO $171,931 $141,269 $85,010 $70,673
Net income per share attributable to HEICO shareholders:
Basic $1.27 $1.04 $.63 $.52
Diluted $1.25 $1.03 $.62 $.51
Weighted average number of common shares outstanding:
Basic 135,763 135,252 135,891 135,294
Diluted 137,916 137,778 137,867 137,814


	Three months ended January 31,
	2023	2022

Net sales	$620,915	$490,343

Operating costs and expenses:
Cost of sales	377,116	300,133
Selling, general and administrative expenses	114,365	91,388

Total operating costs and expenses	491,481	391,521

Operating income	129,434	98,822

Interest expense	(6,068)	(796)
Other income	639	226

Income before income taxes and noncontrolling interests	124,005	98,252

Income tax expense	21,000	4,000

Net income from consolidated operations	103,005	94,252

Less: Net income attributable to noncontrolling interests	9,978	7,331

Net income attributable to HEICO	$93,027	$86,921

Net income per share attributable to HEICO shareholders:
Basic	$.68	$.64
Diluted	$.67	$.63

Weighted average number of common shares outstanding:
Basic	136,655	135,635
Diluted	138,579	137,966

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

HEICO CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME – UNAUDITED

Six months ended April 30, Three months ended April 30,
2022 2021 2022 2021
Net income from consolidated operations $187,364 $152,719 $93,112 $76,471
Other comprehensive (loss) income:
Foreign currency translation adjustments (23,028) 11,109 (14,277) (539)
Amortization of unrealized loss on defined benefit pension plan, net of tax 33 68 22 34
Total other comprehensive (loss) income (22,995) 11,177 (14,255) (505)
Comprehensive income from consolidated operations 164,369 163,896 78,857 75,966
Net income attributable to noncontrolling interests 15,433 11,450 8,102 5,798
Foreign currency translation adjustments attributable to noncontrolling interests (993) 354 (663) (50)
Comprehensive income attributable to noncontrolling interests 14,440 11,804 7,439 5,748
Comprehensive income attributable to HEICO $149,929 $152,092 $71,418 $70,218


	Three months ended January 31,
	2023	2022

Net income from consolidated operations	$103,005	$94,252
Other comprehensive income (loss):
Foreign currency translation adjustments	28,385	(8,751)
Amortization of unrealized loss on defined benefit pension plan, net of tax	15	11
Total other comprehensive income (loss)	28,400	(8,740)
Comprehensive income from consolidated operations	131,405	85,512
Net income attributable to noncontrolling interests	9,978	7,331
Foreign currency translation adjustments attributable to noncontrolling interests	1,259	(330)
Comprehensive income attributable to noncontrolling interests	11,237	7,001
Comprehensive income attributable to HEICO	$120,168	$78,511

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

Index

HEICO CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY - UNAUDITED

~~For the Six Months Ended April 30, 2022 and 2021~~

(in thousands, except per share data)


			HEICO Shareholders' Equity											HEICO Shareholders' Equity
		Redeemable Noncontrolling Interests	Common Stock	Class A Common Stock	Capital in Excess of Par Value	Deferred Compensation Obligation	HEICO Stock Held by Irrevocable Trust	Accumulated Other Comprehensive Loss	Retained Earnings	Noncontrolling Interests	Total Shareholders' Equity		Redeemable Noncontrolling Interests	Common Stock	Class A Common Stock	Capital in Excess of Par Value	Deferred Compensation Obligation	HEICO Stock Held by Irrevocable Trust	Accumulated Other Comprehensive Loss	Retained Earnings	Noncontrolling Interests	Total Shareholders' Equity
Balances as of October 31, 2021		$252,587	$543	$812	$320,747	$5,297	($5,297)	($8,552)	$1,949,521	$33,868	$2,296,939
Comprehensive income (loss)		9,262	—	—	—	—	—	(22,002)	171,931	5,178	155,107
Cash dividends ($.09 per share)		—	—	—	—	—	—	—	(12,227)	—	(12,227)
Balances as of October 31, 2022												Balances as of October 31, 2022	$327,601	$545	$821	$397,337	$5,297	($5,297)	($46,499)	$2,253,932	$42,170	$2,648,306
Comprehensive income												Comprehensive income	7,980	—	—	—	—	—	27,141	93,027	3,257	123,425
Cash dividends ($.10 per share)												Cash dividends ($.10 per share)	—	—	—	—	—	—	—	(13,668)	—	(13,668)
Issuance of common stock to HEICO Savings and Investment Plan	Issuance of common stock to HEICO Savings and Investment Plan	—	—	—	7,739	—	—	—	—	—	7,739	Issuance of common stock to HEICO Savings and Investment Plan	—	—	—	1,964	—	—	—	—	—	1,964
Share-based compensation expense	Share-based compensation expense	—	—	—	6,855	—	—	—	—	—	6,855	Share-based compensation expense	—	—	—	2,812	—	—	—	—	—	2,812
Proceeds from stock option exercises	Proceeds from stock option exercises	—	3	3	1,604	—	—	—	—	—	1,610	Proceeds from stock option exercises	—	2	1	2,842	—	—	—	—	—	2,845
Redemptions of common stock related to stock option exercises	Redemptions of common stock related to stock option exercises	—	(1)	(1)	(23,690)	—	—	—	—	—	(23,692)	Redemptions of common stock related to stock option exercises	—	—	—	(14,805)	—	—	—	—	—	(14,805)
Noncontrolling interests assumed related to acquisitions	Noncontrolling interests assumed related to acquisitions	39,235	—	—	—	—	—	—	—	—	—	Noncontrolling interests assumed related to acquisitions	12,050	—	—	—	—	—	—	—	—	—
Distributions to noncontrolling interests	Distributions to noncontrolling interests	(9,968)	—	—	—	—	—	—	—	(608)	(608)	Distributions to noncontrolling interests	(10,901)	—	—	—	—	—	—	—	(390)	(390)
Acquisitions of noncontrolling interests												Acquisitions of noncontrolling interests	(1,059)	—	—	(1,674)	—	—	—	—	—	(1,674)
Adjustments to redemption amount of redeemable noncontrolling interests	Adjustments to redemption amount of redeemable noncontrolling interests	9,047	—	—	—	—	—	—	(9,047)	—	(9,047)	Adjustments to redemption amount of redeemable noncontrolling interests	4,616	—	—	—	—	—	—	(4,616)	—	(4,616)

Deferred compensation obligation												Deferred compensation obligation	—	—	—	—	874	(874)	—	—	—	—
Other	Other	3,764	—	—	(2,202)	—	—	—	—	—	(2,202)	Other	—	—	—	127	—	—	—	(152)	—	(25)
Balances as of April 30, 2022		$303,927	$545	$814	$311,053	$5,297	($5,297)	($30,554)	$2,100,178	$38,438	$2,420,474
Balances as of January 31, 2023												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

HEICO Shareholders' Equity
Redeemable Noncontrolling Interests Common Stock Class A Common Stock Capital in Excess of Par Value Deferred Compensation Obligation HEICO Stock Held by Irrevocable Trust Accumulated Other Comprehensive Income (Loss) Retained Earnings Noncontrolling Interests Total Shareholders' Equity
Balances as of October 31, 2020 $221,208 $542 $809 $299,930 $4,886 ($4,886) ($9,149) $1,688,045 $30,430 $2,010,607
Comprehensive income 9,061 — — — — — 10,823 141,269 2,743 154,835
Cash dividends ($.08 per share) — — — — — — — (10,818) — (10,818)
Issuance of common stock to HEICO Savings and Investment Plan — — — 7,440 — — — — — 7,440
Share-based compensation expense — — — 4,271 — — — — — 4,271
Proceeds from stock option exercises — — 2 3,836 — — — — — 3,838
Redemptions of common stock related to stock option exercises — — — (3,624) — — — — — (3,624)
Distributions to noncontrolling interests (12,720) — — — — — — — (1,103) (1,103)
Adjustments to redemption amount of redeemable noncontrolling interests 5,698 — — — — — — (5,698) — (5,698)
Deferred compensation obligation — — — — (109) 109 — — — —
Other 19 — — 142 — — — — — 142
Balances as of April 30, 2021 $223,266 $542 $811 $311,995 $4,777 ($4,777) $1,674 $1,812,798 $32,070 $2,159,890

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

~~HEICO CORPORATION AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY - UNAUDITED~~

~~For the Three Months Ended April 30, 2022 and 2021~~

~~(in thousands, except per share data)~~

HEICO Shareholders' Equity
Redeemable Noncontrolling Interests Common Stock Class A Common Stock Capital in Excess of Par Value Deferred Compensation Obligation HEICO Stock Held by Irrevocable Trust Accumulated Other Comprehensive Loss Retained Earnings Noncontrolling Interests Total Shareholders' Equity
Balances as of January 31, 2022 $258,289 $545 $814 $302,104 $5,297 ($5,297) ($16,962) $2,018,990 $36,565 $2,342,056
Comprehensive income (loss) 5,121 — — — — — (13,592) 85,010 2,318 73,736
Issuance of common stock to HEICO Savings and Investment Plan — — — 6,069 — — — — — 6,069
Share-based compensation expense — — — 3,241 — — — — — 3,241
Proceeds from stock option exercises — — — 841 — — — — — 841
Redemptions of common stock related to stock option exercises — — — (69) — — — — — (69)
Noncontrolling interests assumed related to acquisitions 39,063 — — — — — — — — —
Distributions to noncontrolling interests (4,085) — — — — — — — (445) (445)
Adjustments to redemption amount of redeemable noncontrolling interests 3,822 — — — — — — (3,822) — (3,822)
Other 1,717 — — (1,133) — — — — — (1,133)
Balances as of April 30, 2022 $303,927 $545 $814 $311,053 $5,297 ($5,297) ($30,554) $2,100,178 $38,438 $2,420,474

HEICO Shareholders' Equity
Redeemable Noncontrolling Interests Common Stock Class A Common Stock Capital in Excess of Par Value Deferred Compensation Obligation HEICO Stock Held by Irrevocable Trust Accumulated Other Comprehensive Income Retained Earnings Noncontrolling Interests Total Shareholders' Equity
Balances as of January 31, 2021 $222,225 $542 $811 $301,107 $4,777 ($4,777) $2,129 $1,744,247 $31,323 $2,080,159
Comprehensive income (loss) 4,264 — — — — — (455) 70,673 1,484 71,702
Issuance of common stock to HEICO Savings and Investment Plan — — — 7,440 — — — — — 7,440
Share-based compensation expense — — — 2,042 — — — — — 2,042
Proceeds from stock option exercises — — — 1,388 — — — — — 1,388
Redemptions of common stock related to stock option exercises — — — (53) — — — — — (53)
Distributions to noncontrolling interests (5,342) — — — — — — — (737) (737)
Adjustments to redemption amount of redeemable noncontrolling interests 2,122 — — — — — — (2,122) — (2,122)
Other (3) — — 71 — — — — — 71
Balances as of April 30, 2021 $223,266 $542 $811 $311,995 $4,777 ($4,777) $1,674 $1,812,798 $32,070 $2,159,890


		HEICO Shareholders' Equity
	Redeemable Noncontrolling Interests	Common Stock	Class A Common Stock	Capital in Excess of Par Value	Deferred Compensation Obligation	HEICO Stock Held by Irrevocable Trust	Accumulated Other Comprehensive Loss	Retained Earnings	Noncontrolling Interests	Total Shareholders' Equity
Balances as of October 31, 2021	$252,587	$543	$812	$320,747	$5,297	($5,297)	($8,552)	$1,949,521	$33,868	$2,296,939
Comprehensive income (loss)	4,141	—	—	—	—	—	(8,410)	86,921	2,860	81,371
Cash dividends ($.09 per share)	—	—	—	—	—	—	—	(12,227)	—	(12,227)
Issuance of common stock to HEICO Savings and Investment Plan	—	—	—	1,670	—	—	—	—	—	1,670
Share-based compensation expense	—	—	—	3,614	—	—	—	—	—	3,614
Proceeds from stock option exercises	—	3	3	763	—	—	—	—	—	769
Redemptions of common stock related to stock option exercises	—	(1)	(1)	(23,621)	—	—	—	—	—	(23,623)
Noncontrolling interests assumed related to acquisitions	172	—	—	—	—	—	—	—	—	—
Distributions to noncontrolling interests	(5,883)	—	—	—	—	—	—	—	(163)	(163)
Adjustments to redemption amount of redeemable noncontrolling interests	5,225	—	—	—	—	—	—	(5,225)	—	(5,225)
Other	2,047	—	—	(1,069)	—	—	—	—	—	(1,069)
Balances as of January 31, 2022	$258,289	$545	$814	$302,104	$5,297	($5,297)	($16,962)	$2,018,990	$36,565	$2,342,056

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

HEICO CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

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

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, ~~2021.~~2022. The October 31, ~~2021~~2022 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~~three months ended ~~April 30, 2022~~January 31, 2023 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. ~~(“HEICO Electronic”)~~ and its subsidiaries.

The ~~Company's~~Company’s results of operations in the first quarter of fiscal ~~2022 continue~~2023 continued to reflect the adverse impact from the COVID-19 ~~global~~ pandemic, ~~(the “Pandemic”).~~including its impact on the Company's supply chain. Despite the aforementioned, the Company experienced continued improvement in operating results in the first ~~six months and second~~ quarter of fiscal ~~2022~~2023 as compared to the first ~~six months and second~~ quarter of fiscal ~~2021~~2022 principally reflecting improved demand for its commercial aerospace products. The Flight Support Group has reported ~~seven~~ten consecutive quarters of improvement in net sales and operating income resulting from ~~signs of~~ commercial air travel recovery in certain domestic travel markets, moderated by a slower recovery in international travel markets.

New Accounting Pronouncement

In October 2021, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2021-08, "Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers," which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, "Revenue from Contracts with

Customers," as if the acquirer had originated the contracts. The Company adopted ASU 2021-08 ~~is effective for~~in the first quarter of fiscal ~~years and interim reporting periods within those fiscal years beginning after December 15, 2022, or~~2023, resulting in ~~fiscal 2024 for HEICO. Early adoption is permitted and ASU 2021-08 shall be applied~~no material effect on ~~a prospective basis to business combinations that occur on or after~~ the ~~adoption date. The Company is currently evaluating the effect, if any, the adoption of this guidance will have on its~~Company's consolidated results of operations, financial position ~~and~~or cash flows.

2. ~~ACQUISITIONS~~ACQUISITION

~~In March 2022,~~On January 5, 2023, the Company, through ~~a subsidiary of HFSC,~~HEICO Electronic, acquired ~~74%~~93.69% of the ~~membership interests~~outstanding common stock and all of ~~Pioneer Industries, LLC ("Pioneer"~~the preferred stock of Exxelia International SAS (“Exxelia”). ~~Pioneer is a specialty distributor~~Exxelia designs, manufactures and sells high reliability (“Hi-Rel”), complex, passive electronic components and rotary joint assemblies for mostly aerospace and defense applications, in addition to other high-end applications, such as medical and energy uses, including emerging “clean energy” and electrification applications. The Company believes that this acquisition will further HEICO's strategy of ~~spares~~expanding its already wide range of mission-critical and Hi-Rel components for ~~military aviation, marine,~~the most demanding applications, as well as provide HEICO with added broad geographic and ~~ground platforms.~~product diversity, including in the important European market. The remaining ~~26%~~6.31% interest continues to be owned by certain members of ~~Pioneer's~~Exxelia's management team (see Note 3, Selected Financial Statement Information - Redeemable Noncontrolling Interests, for additional information). ~~The total consideration includes an accrual~~Additionally, as a result of ~~$9.8 million as of the~~this acquisition, ~~date representing the estimated fair value of contingent consideration~~ the Company ~~may~~also obtained a 90% ownership interest in Alcon Electronics Pvt. Ltd. (“Alcon”), which is an existing subsidiary of Exxelia. The remaining 10% interest continues to be ~~obligated to pay should Pioneer meet~~owned by a certain ~~earnings objective following the acquisition. See~~member of Alcon’s management team (See Note ~~8, Fair Value Measurements,~~3, Selected Financial Statement Information – Redeemable Noncontrolling Interests, for additional ~~information regarding the Company’s contingent consideration obligation.~~information). The purchase price of this acquisition was paid in cash, ~~principally~~ using proceeds from the Company's revolving credit facility.

~~In March 2022,~~The following table summarizes the ~~Company, through a subsidiary~~total consideration for the acquisition of HEICO Electronic, acquired 100% of the stock of Flight Microwave Corporation ("Flight Microwave"). Flight Microwave is a designer and manufacturer of custom high power filters and filter assemblies used in space and defense applications. The purchase price of this acquisition was paid in cash using cash provided by operating activities.Exxelia (in thousands):


Cash paid						$515,785
Less: cash acquired						(14,257)
Total consideration paid, net						$501,528

~~The purchase price~~As noted above, the Company acquired all of ~~Pioneer and Flight Microwave is not material or significant~~the preferred stock of Exxelia. Pursuant to the ~~Company's condensed consolidated financial statements.~~terms of the acquisition, Exxelia’s preferred stock accrues dividends at 5.18% per annum. Additionally, in connection with the acquisition, HEICO issued Exxelia a ten-year €150 million note, which accrues interest at 4.7% per annum on the principal outstanding. The Company records foreign currency transaction adjustments on the note receivable within selling, general and administrative ("SG&A") expenses in its Condensed Consolidated Statements of Operations.

The following table summarizes the allocation of the total consideration for the ~~fiscal 2022 acquisitions~~acquisition of Exxelia to the estimated fair values of the tangible and identifiable intangible assets acquired and liabilities and noncontrolling interests assumed (in thousands):


Assets acquired:
Goodwill						$306,356
Customer relationships						66,844
Intellectual property						56,307
Trade name						29,271
Inventories						55,875
Property, plant and equipment						43,704
Accounts receivable						21,056
Other assets						17,031
Total assets acquired, excluding cash						596,444

Liabilities assumed:
Deferred income taxes						40,593
Accounts payable						18,671
Accrued expenses						15,004
Other liabilities						8,585
Total liabilities assumed						82,853

Noncontrolling interests in consolidated subsidiaries						12,063

Net assets acquired, excluding cash						$501,528

The allocation of the total consideration to the tangible and identifiable intangible assets acquired and liabilities and noncontrolling interests assumed is preliminary until the Company obtains final information regarding their fair values. ~~However,~~The primary items that generated the goodwill recognized were the premiums paid by the Company ~~does~~for the future earnings potential of Exxelia and the value of its assembled workforce that do not ~~expect any adjustment to such allocations to be material to~~qualify for separate recognition, however, benefit both the Company and the noncontrolling interest holders. The fair value of the noncontrolling interests were determined based on the consideration paid by the Company for its controlling ownership interest adjusted for a lack of control that a market participant would consider when estimating the fair value of the noncontrolling interest. The amortization period of the customer relationships, intellectual property and trade name acquired is 18 years, 16 years and indefinite, respectively. Acquisition costs associated with the purchase of Exxelia totaled $5.1 million for the three months ended January 31, 2023 and were recorded as a component of SG&A expenses in the Company's ~~consolidated financial statements.~~Condensed Consolidated Statement of Operations. The operating results of ~~the fiscal 2022 acquisitions~~Exxelia were included in the Company’s results of operations ~~as of each~~from the effective acquisition date. ~~The amount of net sales and earnings of~~For the ~~fiscal 2022 acquisitions included in the Condensed Consolidated Statements of Operations for the six and~~ three months ended ~~April 30, 2022 is~~January 31, 2023, the Company's consolidated net sales includes $15.0 million from the acquisition of Exxelia, and the acquisition did not ~~material. Had the fiscal 2022 acquisitions~~have a material impact on net income attributable to HEICO.

The following table presents unaudited pro forma financial information for the three months ended January 31, 2023 and January 31, 2022 as if the acquisition of Exxelia had occurred as of November 1, ~~2020, net sales, net income from consolidated operations, net income attributable to HEICO, and basic and diluted net income~~2021 (in thousands, except per share ~~attributable to HEICO shareholders on a~~data):


	Three months ended
	January 31, 2023	January 31, 2022
Net sales	$660,318	$539,014
Net income from consolidated operations	$119,116	$87,151
Net income attributable to HEICO	$108,417	$79,993
Net income per share attributable to HEICO shareholders:
Basic	$.79	$.59
Diluted	$.78	$.58

The pro forma ~~basis~~financial information is presented for comparative purposes only and is not necessarily indicative of the ~~six and three months ended April 30, 2022 and 2021~~results of operations that actually would ~~not~~ have been ~~materially different than~~achieved if the ~~reported amounts.~~acquisition had taken place as of November 1, 2021. The unaudited pro forma financial information includes adjustments to historical amounts such as increased interest expense associated with borrowings to finance the acquisition, foreign currency transaction adjustments on the note receivable from Exxelia, the reclassification of acquisition costs associated with the purchase of Exxelia from fiscal 2023 to fiscal 2022, additional amortization expense related to the intangible assets acquired, and inventory purchase accounting adjustments charged to cost of sales as the inventory is sold.

3. SELECTED FINANCIAL STATEMENT INFORMATION

Property, Plant and Equipment

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 ~~$15.9~~$19.3 million as of ~~April 30, 2022~~January 31, 2023 and ~~$13.2~~$17.9 million as of October 31, ~~2021. The total customer rebates and credits deducted within net sales for the six months ended April 30, 2022 and 2021 was $3.7 million and $1.8 million, respectively.~~2022. The total customer rebates and credits deducted within net sales for the three months ended ~~April 30,~~January 31, 2023 and 2022 ~~and 2021~~ was ~~$2.0~~$2.2 million and ~~$1.0~~$1.7 million, respectively.

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,~~January 31, 2023 and 2022 ~~and 2021~~ is as follows (in thousands):

Six months ended April 30, Three months ended April 30,
2022 2021 2022 2021
R&D expenses $37,147 $34,203 $18,751 $18,022


	Three months ended January 31,
	2023	2022
R&D expenses	$20,238	$18,396

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):

As discussed in Note 2, ~~Acquisitions,~~Acquisition, the Company, through ~~a subsidiary of HFSC,~~ HEICO Electronic,

acquired ~~74%~~93.69% of the ~~membership interests~~common stock of ~~Pioneer~~Exxelia in ~~March 2022.~~January 2023. As part of the ~~operating~~liquidity agreement, the noncontrolling interest holders have the right to cause the Company to purchase their ~~membership interest over a four-year period beginning in fiscal 2029, or sooner under certain conditions, and the Company has the right to purchase the same membership interest over the same period.~~

~~During fiscal 2022, the Company sold a 3%~~ equity interest in a subsidiary of the FSG that was acquired in fiscal 2015, which decreased the Company's ownership interest in the subsidiary to 82%. As part of the operating agreement, the noncontrolling interest holder has the right to cause the Company to purchase its equity interest over a five-year period beginning in fiscal 2028, or sooner under certain conditions, and the Company has the right to purchase the same equity interest ~~over~~beginning in the same period.

~~During fiscal 2022,~~As discussed in Note 2, Acquisition, the Company, ~~sold 10%~~as a result of its acquisition of Exxelia, acquired 90% of the ~~membership interests~~stock of ~~a subsidiary of the FSG that was acquired~~Alcon in ~~fiscal 2018, which decreased the Company's ownership interest in the subsidiary to 90%.~~January 2023. As part of the ~~operating~~shareholders' agreement, the noncontrolling interest holder has the right to cause the Company to purchase ~~its membership~~their equity interest ~~over a four-year period~~ beginning in fiscal ~~2027,~~2025, or sooner under certain conditions, and the Company has the right to purchase the same ~~membership~~equity interest ~~over~~beginning in the same period.

11During 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. Accordingly, the Company acquired one-fourth of such interest in December 2022, which increased the Company's ownership interest in the subsidiary to 85.1%.

Accumulated Other Comprehensive Loss

Changes in the components of accumulated other comprehensive loss for the ~~six~~three months ended ~~April 30, 2022~~January 31, 2023 are as follows (in thousands):

Foreign Currency Translation Defined Benefit Pension Plan Accumulated
Other
Comprehensive Loss
Balances as of October 31, 2021 ($6,989) ($1,563) ($8,552)
Unrealized loss (22,035) — (22,035)
Amortization of unrealized loss — 33 33
Balances as of April 30, 2022 ($29,024) ($1,530) ($30,554)


	Foreign Currency Translation	Defined Benefit Pension Plan	Accumulated Other Comprehensive Loss
Balances as of October 31, 2022	($45,369)	($1,130)	($46,499)
Unrealized gain	27,126	—	27,126
Amortization of unrealized loss	—	15	15
Balances as of January 31, 2023	($18,243)	($1,115)	($19,358)

4. GOODWILL AND OTHER INTANGIBLE ASSETS

Changes in the carrying amount of goodwill by operating segment for the ~~six~~three months ended ~~April 30, 2022~~January 31, 2023 are as follows (in thousands):

The goodwill acquired pertains to the fiscal ~~2022 acquisitions~~2023 acquisition described in Note 2, ~~Acquisitions,~~Acquisition, and represents the residual value after the allocation of the total consideration to the tangible and identifiable intangible assets acquired and liabilities and noncontrolling interests assumed. The Company is assessing how much, if any, of the goodwill acquired in fiscal 2023 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 ~~principally~~ represent immaterial measurement period adjustments to the purchase ~~price~~consideration allocation of certain fiscal ~~2021~~2022 acquisitions. ~~The Company estimates that $70 million of the goodwill acquired in fiscal 2022 will be deductible for income tax purposes.~~

Identifiable intangible assets consist of the following (in thousands):

~~Amortization expense related~~The increase in the gross carrying amount of customer relationships, intellectual property and trade names as of January 31, 2023 compared to October 31, 2022 principally relates to such intangible assets ~~for~~recognized in connection with the ~~six months ended April 30, 2022 and 2021 was $30.2 million and $30.3 million, respectively.~~ fiscal 2023 acquisition (see Note 2, Acquisition).

Amortization expense related to intangible assets for the three months ended ~~April 30,~~January 31, 2023 and 2022 ~~and 2021~~ was ~~$15.2~~$17.8 million and ~~$15.1~~$15.0 million, respectively. Amortization expense related

to intangible assets for the remainder of fiscal ~~2022~~2023 is estimated to be ~~$30.3~~$55.9 million. Amortization expense for each of the next five fiscal years and thereafter is estimated to be ~~$56.5 million in fiscal 2023, $51.5~~$70.1 million in fiscal 2024, ~~$47.1~~$65.4 million in fiscal 2025, ~~$42.6~~$60.7 million in fiscal 2026, ~~$39.6~~$57.4 million in fiscal 2027, $53.1 million in fiscal 2028, and ~~$166.5~~$264.5 million thereafter.

Long-term debt consists of the following (in thousands):

The Company's borrowings under its revolving credit facility mature in fiscal ~~2025 as discussed further below.~~2025. As of ~~April 30, 2022~~January 31, 2023 and October 31 ~~2021,~~2022, the weighted average interest rate on borrowings under the Company's revolving credit facility was ~~1.7%~~5.5% and ~~1.1%~~4.6%, respectively. The revolving credit facility contains both financial and non-financial covenants. As of ~~April 30, 2022,~~January 31, 2023, the Company was in compliance with all such covenants.

On April 7, 2022, the Company entered into an amendment to extend the maturity date of its Revolving Credit Facility Agreement ("Credit Facility") by one year to November 2024 and to replace the Eurocurrency Rate with Adjusted Term SOFR as an election in which borrowings under the Credit Facility accrue interest, as such capitalized terms are defined in the Credit Facility.

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 in the Company’s Condensed Consolidated Balance Sheets.

Changes in the Company’s contract assets and liabilities for the ~~six~~three months ended ~~April 30, 2022~~January 31, 2023 are as follows (in thousands):

The increase in the Company's contract assets during the first quarter of fiscal 2023 mainly reflects additional unbilled receivables on certain customer contracts using an over-time recognition model in excess of billings on certain customer contracts at both the ETG and FSG.

The increase in the Company's contract liabilities during the first ~~six months~~quarter of fiscal ~~2022~~2023 principally reflects the receipt of advance deposits on certain customer contracts mainly at ~~both~~ the ~~ETG and~~ FSG.

The amount of revenue that the Company recognized during the ~~six and three months ended April 30, 2022~~first quarter of fiscal 2023 that was included in contract liabilities as of the beginning of fiscal ~~2022~~2023 was ~~$19.6 million and $6.1 million, respectively.~~$20.3 million.

Remaining Performance Obligations

As of ~~April 30, 2022,~~January 31, 2023, the Company had ~~$447.1~~$580.3 million of remaining performance obligations associated with contracts with an original duration of greater than one year pertaining to the majority of the products offered by the ETG as well as certain products of the FSG's specialty products and aftermarket replacement parts product ~~line.~~lines. The Company will recognize net sales as these obligations are satisfied. The Company expects to recognize ~~$204.6~~$251.8 million of this amount during the remainder of fiscal ~~2022~~2023 and ~~$242.5~~$328.5 million thereafter, of which ~~the majority~~a little over half is expected to occur in fiscal ~~2023.~~2024.

Disaggregation of Revenue

The following table summarizes the Company’s net sales by product line for each operating segment (in thousands):

Aftermarket replacement parts (1)

Repair and overhaul parts and services (2)

Specialty products (3)

Specialty products (2)

Repair and overhaul parts and services (3)

Electronic component parts primarily for

defense, space and aerospace equipment (4)

Electronic component parts primarily for

defense, space and aerospace equipment (4)

Electronic component parts primarily for defense,

space and aerospace equipment (4)

Electronic component parts for equipment

in various other industries (5)

Electronic component parts for equipment

in various other industries (5)

Electronic component parts for equipment

in various other industries (5)

(1) Includes ~~primarily~~ 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)~~

(2) 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.

(3) 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.

(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.~~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 connectivity products, custom molded cable assemblies, silicone material for a variety of demanding applications, and rugged small form-factor embedded computing ~~solutions.~~

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):

(1) Principally industrial products.

(2) Principally other electronics and medical products.

The Company's effective tax rate was ~~15.0%~~16.9% in the first ~~six months~~quarter of fiscal ~~2022,~~2023, as compared to ~~12.0%~~4.1% in the first ~~six months~~quarter of fiscal ~~2021.~~2022. The increase in the Company's effective tax rate principally reflects an unfavorable impact from tax-exempt unrealized losses in the cash surrender values of life insurance policies related to the HEICO Leadership Compensation Plan ("HEICO LCP") in the first six months of fiscal 2022 as compared to the tax-exempt unrealized gains recognized on such policies in the first six months of fiscal 2021, partially offset by a larger tax benefit from stock option exercises recognized in the first quarter of fiscal 2022. The Company recognized a discrete tax benefit from stock option exercises in both the first quarter of fiscal 2023 and 2022 of $6.2 million and ~~2021 of~~ $17.8 million, ~~and $13.5 million,~~ respectively. ~~The tax benefit from stock option exercises in both periods was the result of strong appreciation in HEICO's stock price during the optionees' holding periods.~~

The Company's effective tax rate was 23.7% in the second quarter of fiscal 2022, as compared to 19.5% in the second quarter of fiscal 2021. The increase in the Company's effective tax rate principally reflects an unfavorable impact from tax-exempt unrealized losses in the cash surrender values of life insurance policies related to the HEICO LCP in the second quarter of

~~fiscal 2022 as compared to the tax-exempt unrealized gains recognized on such policies in the second quarter of fiscal 2021.~~

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 January 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	$—	$218,964	$—	$218,964
Money market fund	15,317	—	—	15,317
Total assets	$15,317	$218,964	$—	$234,281

Liabilities:
Contingent consideration	$—	$—	$74,385	$74,385

As of October 31, 2021
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 $— $245,580 $— $245,580
Money market fund 4 — — 4
Total assets $4 $245,580 $— $245,584
Liabilities:
Contingent consideration $— $— $62,286 $62,286

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 investments in money market funds that are 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 ~~$217.7~~$232.9 million as of ~~April 30, 2022~~January 31, 2023 and ~~$244.3~~$203.0 million as of October 31, ~~2021.~~2022.

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 January 31, 2023, the estimated fair value of the contingent consideration was $6.1 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 January 31, 2023, the estimated fair value of the contingent consideration was $13.3 million.

As part of the agreement to acquire 74% of the membership interests of a subsidiary by the FSG in fiscal 2022, the Company may be obligated to pay contingent consideration of $14.1 million in fiscal 2027 should the acquired entity meet a certain earnings objective during the five-year period following the acquisition. As of ~~April 30, 2022,~~January 31, 2023, the estimated fair value of the contingent consideration was ~~$9.4~~$9.5 million.

As part of the agreement to acquire 89% of the membership interests of a subsidiary by the FSG in fiscal 2021, the Company may be obligated to pay contingent consideration of $8.9 million as early as in fiscal 2024 should the acquired entity meet a certain earnings objective during the three-year period following the acquisition. Additionally, the Company may be obligated to pay contingent consideration of up to $17.8 million as early as in fiscal 2026 should the acquired entity meet a certain earnings objective during the three-year period following the second anniversary of the acquisition. As of ~~April 30, 2022,~~January 31, 2023, the estimated fair value of the contingent consideration was ~~$17.0~~$18.0 million.

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 ~~$27.0~~$13.5 million, or ~~$21.0~~$10.0 million, in fiscal 2025 should the acquired entity meet certain earnings objectives during fiscal 2023 and 2024. However, should the acquired entity achieve a certain earnings objective over any two consecutive fiscal years beginning in fiscal 2021 and ending in fiscal 2023, half of the contingent consideration obligation, or CAD $13.5 million, would be payable in the following year. As of ~~April 30, 2022,~~January 31, 2023, the estimated fair

value of the contingent consideration was CAD ~~$15.7~~$11.1 million, or ~~$12.2~~$8.3 million.

~~As part of~~ Additionally, the ~~agreement~~acquired entity achieved a required earnings objective during fiscal years 2021 and 2022 that entitled it to ~~acquire a subsidiary by the ETG in fiscal 2020, the Company may be obligated to pay~~additional contingent consideration of ~~up to $35.0~~CAD $13.5 million, or $10.0 million, which was paid in the first quarter of fiscal 2025 based on the earnings of the acquired entity during calendar years 2023 and 2024 provided the entity meets certain earnings objectives during each of calendar years 2021 to 2024. As of April 30, 2022, the estimated fair value of the contingent consideration was $12.9 million. The obligation to pay any contingent consideration would be payable by a consolidated subsidiary of HEICO that is 75% owned by HEICO Electronic.2023.

As part of the agreement to acquire a subsidiary by the ETG in fiscal 2017, the Company may be obligated to pay contingent consideration of $20.0 million in fiscal 2023 should the acquired entity meet a certain earnings objective during the first six years following the acquisition. As of ~~April 30, 2022,~~January 31, 2023, the estimated fair value of the contingent consideration was ~~$18.4~~$19.2 million.

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, 2022~~January 31, 2023 ($ in thousands):

(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~~three months ended ~~April 30, 2022~~January 31, 2023 are as follows (in thousands):


						Liabilities
Balance as of October 31, ~~2021~~2022						$~~62,286~~82,803
~~Contingent~~Payment of contingent consideration ~~related to acquisition~~						~~9,835~~ (10,009)
~~Decrease~~Increase in accrued contingent consideration, net						~~(1,773)~~1,336
Foreign currency transaction adjustments						~~(438)~~255
~~Balance as of April 30, 2022~~						$~~69,910~~74,385

Included in the accompanying Condensed Consolidated Balance Sheet under the following captions:
Accrued expenses and other current liabilities						$~~10,148~~19,233
Other long-term liabilities						~~59,762~~55,152
						$~~69,910~~74,385

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

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, 2022~~January 31, 2023 due to the relatively short maturity of the respective instruments. The carrying amount of long-term debt approximates fair value due to its variable interest rates.

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,
2022 2021 2022 2021
Numerator:
Net income attributable to HEICO $171,931 $141,269 $85,010 $70,673
Denominator:
Weighted average common shares outstanding - basic 135,763 135,252 135,891 135,294
Effect of dilutive stock options 2,153 2,526 1,976 2,520
Weighted average common shares outstanding - diluted 137,916 137,778 137,867 137,814
Net income per share attributable to HEICO shareholders:
Basic $1.27 $1.04 $.63 $.52
Diluted $1.25 $1.03 $.62 $.51
Anti-dilutive stock options excluded 739 20 749 11


	Three months ended January 31,
	2023	2022
Numerator:
Net income attributable to HEICO	$93,027	$86,921

Denominator:
Weighted average common shares outstanding - basic	136,655	135,635
Effect of dilutive stock options	1,924	2,331
Weighted average common shares outstanding - diluted	138,579	137,966

Net income per share attributable to HEICO shareholders:
Basic	$.68	$.64
Diluted	$.67	$.63

Anti-dilutive stock options excluded	750	728

~~Index~~Inde

10. OPERATING SEGMENTS

Information on the Company’s two operating segments, the FSG and the ETG, for the ~~six and~~ three months ended ~~April 30,~~January 31, 2023 and 2022, ~~and 2021,~~ respectively, is as follows (in thousands):


				Other, Primarily Corporate and Intersegment (1)		Consolidated Totals								Other, Primarily Corporate and Intersegment (1)		Consolidated Totals
		Segment					Segment
		FSG	ETG				FSG			ETG
Six months ended April 30, 2022:
Three months ended January 31, 2023:							Three months ended January 31, 2023:
Net sales	Net sales	$578,994	$459,729		($9,567)			$1,029,156	Net sales		$371,278		$255,059		($5,422)		$620,915
Depreciation	Depreciation	7,411	6,792	493		14,696	Depreciation		4,178			3,938		270		8,386
Amortization	Amortization	11,262	20,179	570		32,011	Amortization		6,731			11,669		274		18,674
Operating income	Operating income	118,573	121,576	(18,550)		221,599	Operating income		83,609			56,537		(10,712)		129,434
Capital expenditures	Capital expenditures	8,113	7,995	103		16,211	Capital expenditures		6,653			4,089		104		10,846

Six months ended April 30, 2021:
Three months ended January 31, 2022:							Three months ended January 31, 2022:
Net sales	Net sales	$429,614	$466,639	($11,700)		$884,553	Net sales		$272,681			$222,336		($4,674)		$490,343
Depreciation	Depreciation	6,829	6,219	486		13,534	Depreciation		3,718			3,366		246		7,330
Amortization	Amortization	10,107	21,717	561		32,385	Amortization		5,513			10,092		287		15,892
Operating income	Operating income	61,298	131,422	(15,687)		177,033	Operating income		52,376			55,588		(9,142)		98,822
Capital expenditures	Capital expenditures	4,093	17,828	17		21,938	Capital expenditures		3,582			5,070		39		8,691

Three months ended April 30, 2022:
Net sales		$306,313	$237,393	($4,893)		$538,813
Depreciation		3,693	3,426	247		7,366
Amortization		5,749	10,087	283		16,119
Operating income		66,197	65,988	(9,408)		122,777
Capital expenditures		4,531	2,925	64		7,520

Three months ended April 30, 2021:
Net sales		$230,280	$243,089	($6,718)		$466,651
Depreciation		3,379	3,160	240		6,779
Amortization		4,971	10,879	287		16,137
Operating income		35,476	71,294	(10,022)		96,748
Capital expenditures		2,105	4,307	17		6,429

(1) Intersegment activity principally consists of net sales from the ETG to the FSG.

Total assets by operating segment are as follows (in thousands):

Other,
Primarily Corporate Consolidated
Totals
Segment
FSG ETG
Total assets as of April 30, 2022 $1,492,367 $1,930,680 $262,286 $3,685,333
Total assets as of October 31, 2021 1,274,462 1,952,413 271,532 3,498,407


			Other, Primarily Corporate	Consolidated Totals
	Segment
	FSG	ETG
Total assets as of January 31, 2023	$1,678,148	$2,859,097	$267,375	$4,804,620
Total assets as of October 31, 2022	1,635,229	2,230,744	229,523	4,095,496

11. COMMITMENTS AND CONTINGENCIES

As of ~~April 30, 2022,~~January 31, 2023, the Company has arranged for standby letters of credit aggregating ~~$15.9~~$22.9 million, which are supported by its revolving credit facility and principally pertain to performance guarantees related to customer contracts entered into by certain of the Company's subsidiaries as well as payment guarantees related to potential workers' compensation claims and a facility lease.

Changes in the Company’s product warranty liability for the ~~six~~three months ended ~~April 30,~~January 31, 2023 and 2022, ~~and 2021,~~ respectively, are as follows (in thousands):

On April 20, 2021, an indirect subsidiary of HFSC, which was acquired in June 2020, received a grand jury subpoena from the United States District Court for the Southern District of California requiring the production of documents for the time period December 1, 2017 through February 4, 2019 related to the subsidiary's employment of a certain individual and its performance of work on certain Navy vessels during that time period. The Company is cooperating with the investigation. The Company has completed its production of documents responsive to the subpoena, although the Company has a continuing obligation to produce such documents should any be located. At this early stage in the investigation, the Company cannot predict the outcome of the investigation or when the investigation will ultimately be resolved; nor can the Company reasonably estimate the possible range of loss or impact to its business, if any, that may result from this matter.

With the exception of the matter noted above, the Company is involved in various legal actions arising in the normal course of business. Based upon the Company’s and its legal counsel’s evaluations of any claims or assessments, management is of the opinion that the outcome of these matters will not have a material adverse effect on the Company’s results of operations, financial position or cash flows.

~~Index~~Inde x

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

This discussion of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and notes thereto included herein. The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates if different assumptions were used or different events ultimately transpire.

Our critical accounting policies, which require management to make judgments about matters that are inherently uncertain, are described in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Critical Accounting Policies” in our Annual Report on Form 10-K for the year ended October 31, ~~2021.~~2022. There have been no material changes to our critical accounting policies during the ~~six~~three months ended ~~April 30, 2022.~~January 31, 2023.

Our business is comprised of two operating segments: the Flight Support Group (“FSG”), consisting of HEICO Aerospace Holdings Corp. and HEICO Flight Support Corp. and their respective subsidiaries; and the Electronic Technologies Group (“ETG”), consisting of HEICO Electronic Technologies Corp. and its subsidiaries.

Our results of operations in the first quarter of fiscal ~~2022 continue~~2023 continued to reflect the adverse impact from the COVID-19 ~~global~~ pandemic, ~~(the “Pandemic”).~~including its impact on our supply chain. Despite the aforementioned, we experienced continued improvement in operating results in the first ~~six months and second~~ quarter of fiscal ~~2022~~2023 as compared to the first ~~six months and second~~ quarter of fiscal ~~2021~~2022 principally reflecting improved demand for our commercial aerospace products. The Flight Support Group has reported ~~seven~~ten consecutive quarters of improvement in net sales and operating income resulting from ~~signs of~~ commercial air travel recovery in certain domestic travel markets, moderated by a slower recovery in international travel markets.

Additionally, our results of operations for the ~~six and~~ three months ended ~~April 30, 2022~~January 31, 2023 have been affected by the fiscal ~~2021~~2022 acquisitions as further detailed in Note 2, Acquisitions, of the Notes to Consolidated Financial Statements of our Annual Report on Form 10-K for the year ended October 31, ~~2021~~2022 and the fiscal ~~2022 acquisitions~~2023 acquisition as further detailed in Note 2, ~~Acquisitions,~~Acquisition, of the Notes to the Condensed Consolidated Financial Statements of this quarterly report.

~~Index~~Inde

Results of Operations

The following table sets forth the results of our operations, net sales and operating income by segment and the percentage of net sales represented by the respective items in our Condensed Consolidated Statements of Operations (in thousands):


		Six months ended April 30,				Three months ended April 30,					Three months ended January 31,
		2022		2021		2022		2021			2023		2022
Net sales	Net sales	$1,029,156		$884,553		$538,813		$466,651		Net sales	$620,915		$490,343
Cost of sales	Cost of sales	627,717		546,346		327,584		286,878		Cost of sales	377,116		300,133
Selling, general and administrative expenses	Selling, general and administrative expenses	179,840		161,174		88,452		83,025		Selling, general and administrative expenses	114,365		91,388
Total operating costs and expenses	Total operating costs and expenses	807,557		707,520		416,036		369,903		Total operating costs and expenses	491,481		391,521
Operating income	Operating income	$221,599		$177,033		$122,777		$96,748		Operating income	$129,434		$98,822

Net sales by segment:	Net sales by segment:									Net sales by segment:
Flight Support Group	Flight Support Group	$578,994		$429,614		$306,313		$230,280		Flight Support Group	$371,278		$272,681
Electronic Technologies Group	Electronic Technologies Group	459,729		466,639		237,393		243,089		Electronic Technologies Group	255,059		222,336
Intersegment sales	Intersegment sales	(9,567)		(11,700)		(4,893)		(6,718)		Intersegment sales	(5,422)		(4,674)
		$1,029,156		$884,553		$538,813		$466,651			$620,915		$490,343

Operating income by segment:	Operating income by segment:									Operating income by segment:
Flight Support Group	Flight Support Group	$118,573		$61,298		$66,197		$35,476		Flight Support Group	$83,609		$52,376
Electronic Technologies Group	Electronic Technologies Group	121,576		131,422		65,988		71,294		Electronic Technologies Group	56,537		55,588
Other, primarily corporate	Other, primarily corporate	(18,550)		(15,687)		(9,408)		(10,022)		Other, primarily corporate	(10,712)		(9,142)
		$221,599		$177,033		$122,777		$96,748			$129,434		$98,822

Net sales	Net sales	100.0	%	100.0	%	100.0	%	100.0	%	Net sales	100.0	%	100.0	%
Gross profit	Gross profit	39.0	%	38.2	%	39.2	%	38.5	%	Gross profit	39.3	%	38.8	%
Selling, general and administrative expenses	Selling, general and administrative expenses	17.5	%	18.2	%	16.4	%	17.8	%	Selling, general and administrative expenses	18.4	%	18.6	%
Operating income	Operating income	21.5	%	20.0	%	22.8	%	20.7	%	Operating income	20.8	%	20.2	%
Interest expense	Interest expense	.2	%	.5	%	.2	%	.4	%	Interest expense	(1.0	%)	(.2	%)
Other income	Other income	.1	%	.1	%	.1	%	.1	%	Other income	.1	%	—	%
Income tax expense	Income tax expense	3.2	%	2.4	%	5.4	%	4.0	%	Income tax expense	3.4	%	.8	%
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	1.5	%	1.3	%	1.5	%	1.2	%	Net income attributable to noncontrolling interests	1.6	%	1.5	%
Net income attributable to HEICO	Net income attributable to HEICO	16.7	%	16.0	%	15.8	%	15.1	%	Net income attributable to HEICO	15.0	%	17.7	%

~~Index~~Inde

Comparison of First ~~Six Months~~Quarter of Fiscal ~~2022~~2023 to First ~~Six Months~~Quarter of Fiscal ~~2021~~2022

Net Sales

Our consolidated net sales in the first ~~six months~~quarter of fiscal ~~2022~~2023 increased by ~~16%~~27% to a record ~~$1,029.2~~$620.9 million, up from net sales of ~~$884.6~~$490.3 million in the first ~~six months~~quarter of fiscal ~~2021.~~2022. The increase in consolidated net sales principally reflects an increase of ~~$149.4~~$98.6 million (a ~~35%~~36% increase) to ~~$579.0~~a record $371.3 million ~~in net sales~~ within the FSG ~~partially offset by a decrease~~and an increase of ~~$6.9~~$32.7 million (a ~~1% decrease)~~15% increase) to ~~$459.7~~$255.1 million ~~in net sales~~ within the ETG. The net sales increase in the FSG reflects strong organic growth of ~~26%~~25% as well as net sales of ~~$36.3~~$31.5 million contributed by our fiscal ~~2021 and~~ 2022 acquisitions. The FSG's organic growth reflects increased demand for the majority of our commercial aerospace products and services resulting from continued recovery in global commercial air travel as compared to the prior year. As such, organic net sales increased by ~~$62.8~~$41.6 million, ~~$30.5~~$16.9 million and ~~$19.8~~$8.7 million within our aftermarket replacement parts, specialty products, and repair and overhaul parts and services ~~and specialty products~~ product lines, respectively. The net sales ~~decrease~~increase in the ETG principally reflects ~~a 3% decrease in organic net sales, partially offset by $10.4~~$32.8 million contributed by our fiscal ~~2021~~2022 and ~~2022~~2023 acquisitions. The ETG's organic net sales ~~decline is mainly attributable to~~were consistent with the prior year and principally reflected increased demand for our other electronics, aerospace and medical products resulting in net sales increases of $11.2 million, $4.5 million and $1.8 million, respectively, offset by decreased demand for our defense products resulting in a net sales decrease of $36.7 million, partially offset by increased demand for our medical, other electronics, telecommunications and space products resulting in net sales increases of $9.2 million, $4.9 million, $3.3 million and $2.2 million, respectively.$18.2 million. Although sales price changes were not a significant contributing factor to the change in net sales of the FSG and ETG in the first ~~six months~~quarter of fiscal ~~2022,~~2023, recent cost inflation and potential supply chain disruptions may lead to higher sales prices during the remainder of fiscal ~~2022.~~2023.

Gross Profit and Operating Expenses

Our consolidated gross profit margin ~~increased~~improved to ~~39.0%~~39.3% in the first ~~six months~~quarter of fiscal 2023, up from 38.8% in the first quarter of fiscal 2022 ~~up from 38.2% in the first six months of fiscal 2021,~~ principally reflecting a ~~3.8%~~2.7% improvement in the FSG's gross profit margin, partially offset by a ~~.6%~~1.5% decrease in the ETG's gross profit margin. The increase in the FSG's gross profit margin principally reflects lower inventory obsolescence expenses in the first quarter of fiscal 2023 mainly due to increased demand within our aftermarket replacement parts product line, and the previously mentioned higher net sales ~~across all~~within our aftermarket replacement parts and specialty products product lines. The reduction in the ETG's gross profit margin principally reflects the previously mentioned decrease in net sales offor our defense products, ~~and an~~partially offset by the previously mentioned increase in ~~new product research and development expenses as a percentage of~~ net sales ~~to support ongoing new product research~~for our other electronics and ~~development activities.~~aerospace products. Total new product research and development expenses included within our consolidated cost of sales were ~~$37.1~~$20.2 million in the first ~~six months~~quarter of fiscal ~~2022,~~2023, up from ~~$34.2~~$18.4 million in the first ~~six months~~quarter of fiscal ~~2021.~~2022.

Our consolidated selling, general and administrative ("SG&A") expenses were ~~$179.8~~$114.4 million in the first ~~six months~~quarter of fiscal ~~2022,~~2023, as compared to ~~$161.2~~$91.4 million in the first ~~six months~~quarter of fiscal ~~2021.~~2022. The increase in consolidated SG&A expenses principally reflects costs incurred to support the previously mentioned net sales growth resulting in increases of $6.3 million and $6.1 million in general and administrative expenses and selling expenses, respectively. Additionally, the increase in consolidated SG&A expenses reflects $6.3$9.9 million attributable to our fiscal ~~2021~~2022 and ~~2022 acquisitions.~~2023 acquisitions, a $4.8 million increase in acquisition costs mainly related to the fiscal 2023 acquisition and a $3.9 million increase in performance-based compensation expense.

~~Index~~Inde

Our consolidated SG&A expenses as a percentage of net sales decreased to ~~17.5%~~18.4% in the first ~~six months~~quarter of fiscal ~~2022,~~2023, down from ~~18.2%~~18.6% in the first ~~six months~~quarter of fiscal ~~2021.~~2022. The decrease in consolidated SG&A expenses as a percentage of net sales principally reflects ~~the~~ efficiencies realized from the higher net sales, aspartially offset by a ~~well as a .4%~~.8% impact from ~~lower intangible asset amortization expense and a .2% favorable impact from changes~~the previously mentioned increase in ~~the estimated fair value of accrued contingent consideration.~~acquisition costs.

Operating Income

Our consolidated operating income increased by ~~25%~~31% to ~~a record $221.6~~$129.4 million in the first ~~six months~~quarter of fiscal ~~2022,~~2023, up from ~~$177.0~~$98.8 million in the first ~~six months~~quarter of fiscal ~~2021.~~2022. The increase in consolidated operating income principally reflects a ~~$57.3~~$31.2 million increase (a ~~93%~~60% increase) to a record ~~$118.6~~$83.6 million in operating income of the FSG ~~partially offset by~~and a ~~$9.8~~$.9 million ~~decrease~~increase (a ~~7% decrease)~~2% increase) to ~~$121.6~~$56.5 million in operating income of the ETG. The increase in operating income of the FSG principally reflects the previously mentioned net sales growth, improved gross profit margin ~~net sales growth,~~ and efficiencies realized from the higher net sales volume. The ~~decrease~~increase in operating income of the ETG principally reflects ~~a lower level of efficiencies resulting from~~ the previously mentioned net sales ~~decrease, as well as~~increase, partially offset by a $5.1 million increase in acquisition costs related to the fiscal 2023 acquisition, and the previously mentioned lower gross profit margin. Further, the increase in consolidated operating income was partially offset by $4.5 million of higher corporate expenses mainly attributable to an increase in performance-based compensation expense and the suspension of corporate salary reductions as of the end of the first quarter of fiscal 2021.

Our consolidated operating income as a percentage of net sales increased to ~~21.5%~~20.8% in the first ~~six months~~quarter of fiscal ~~2022,~~2023, up from ~~20.0%~~20.2% in the first ~~six months~~quarter of fiscal ~~2021.~~2022. The increase principally reflects an increase in the FSG’s operating income as a percentage of net sales to ~~20.5%~~22.5% in the first ~~six months~~quarter of fiscal ~~2022,~~2023, up from ~~14.3%~~19.2% in the first ~~six months~~quarter of fiscal ~~2021,~~2022, partially offset by a decrease in the ETG's operating income as a percentage of net sales to ~~26.4%~~22.2% in the first ~~six months~~quarter of fiscal ~~2022,~~2023, as compared to ~~28.2%~~25.0% in the first ~~six months~~quarter of fiscal ~~2021.~~2022. The increase in the FSG’s operating income as a percentage of net sales principally reflects the previously mentioned improved gross profit margin ~~as well as~~and a ~~2.4%~~.6% impact from a decrease in SG&A expenses as a percentage of net sales mainly reflecting the previously mentioned efficiencies. The decrease in the ETG's operating income as a percentage of net sales principally reflects the previously mentioned lower gross profit margin and a ~~1.1%~~1.3% impact from an increase in SG&A expenses as a percentage of net sales mainly from a 2.0% impact from the previously mentioned ~~lower level of efficiencies, as well as the previously mentioned lower gross profit margin.~~higher acquisition costs, partially offset by a .4% favorable impact from a decrease in performance-based compensation expense.

Interest Expense

Interest expense ~~decreased~~increased to ~~$1.8~~$6.1 million in the first ~~six months~~quarter of fiscal ~~2022, down~~2023, up from ~~$4.5~~$.8 million in the first ~~six months~~quarter of fiscal ~~2021.~~2022. The ~~decrease~~increase was principally due to ~~a lower weighted average balance of borrowings outstanding under our revolving credit facility.~~

higher interest rates.

~~Index~~Inde

Other Income

Other income in the first ~~six months~~quarter of fiscal ~~2022~~2023 and ~~2021~~2022 was not material.

Income Tax Expense

Our effective tax rate was ~~15.0%~~16.9% in the first ~~six months~~quarter of fiscal ~~2022,~~2023, as compared to ~~12.0%~~4.1% in the first ~~six months~~quarter of fiscal ~~2021.~~2022. The increase in our effective tax rate principally reflects an unfavorable impact from tax-exempt unrealized losses in the cash surrender values of life insurance policies related to the HEICO Leadership Compensation Plan ("HEICO LCP") in the first six months of fiscal 2022 as compared to the tax-exempt unrealized gains recognized on such policies in the first six months of fiscal 2021, partially offset by a larger tax benefit from stock option exercises recognized in the first quarter of fiscal 2022. We recognized a discrete tax benefit from stock option exercises in both the first quarter of fiscal 2023 and 2022 of $6.2 million and ~~2021 of~~ $17.8 million, ~~and $13.5 million,~~ respectively. ~~The tax benefit from stock option exercises in both periods was the result of strong appreciation in HEICO's stock price during the optionees' holding periods.~~

Net Income Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests relates to the 20% noncontrolling interest held by Lufthansa Technik AG in HEICO Aerospace Holdings Corp. and the noncontrolling interests held by others in certain subsidiaries of the FSG and ETG. Net income attributable to noncontrolling interests was ~~$15.4~~$10.0 million in the first ~~six months~~quarter of fiscal ~~2022,~~2023, as compared to ~~$11.5~~$7.3 million in the first ~~six months~~quarter of fiscal ~~2021.~~2022. The increase in net income attributable to noncontrolling interests principally reflects improved operating results of certain subsidiaries of the FSG and ETG in which noncontrolling interests are held, inclusive of fiscal ~~2021~~2022 and ~~2022 acquisitions, partially offset by a decrease in the operating results of certain subsidiaries of the ETG in which noncontrolling interests are held.~~2023 acquisitions.

Net Income Attributable to HEICO

Net income attributable to HEICO increased by ~~22%~~7% to ~~$171.9~~$93.0 million, or ~~$1.25~~$.67 per diluted share, in the first ~~six months~~quarter of fiscal ~~2022,~~2023, up from ~~$141.3~~$86.9 million, or ~~$1.03~~$.63 per diluted share, in the first ~~six months~~quarter of fiscal ~~2021~~2022 principally reflecting the previously mentioned higher consolidated operating ~~income.~~

~~Index~~

~~Comparison of Second Quarter of Fiscal 2022 to Second Quarter of Fiscal 2021~~

~~Net Sales~~

Our consolidated net sales in the second quarter of fiscal 2022 increased by 15% to $538.8 million, up from net sales of $466.7 million in the second quarter of fiscal 2021. The increase in consolidated net sales principally reflects an increase of $76.0 million (a 33% increase) to $306.3 million in net sales within the FSG,income, partially offset by ~~a decrease of $5.7 million (a 2% decrease) to $237.4 million in net sales within~~ the ~~ETG. The net sales~~ increase in the FSG reflects strong organic growth of 23% as well as net sales of $22.7 million contributed by our fiscal 2021 and 2022 acquisitions. The FSG's organic growth reflects increased demand for the majority of our commercial aerospace products and services resulting from continued recovery in global commercial air travel as compared to the prior year. As such, organic net sales increased by $30.3 million, $12.2 million and $10.8 million within our aftermarket replacement parts, repair and overhaul parts and services and specialty products product lines, respectively. The net sales decrease in the ETG principally reflects a 4% decrease in organic net sales, partially offset by $5.2 million contributed by our fiscal 2021 and 2022 acquisitions. The ETG's organic net sales decline is mainly attributable to decreased demand for our defense products resulting in a net sales decrease of $22.1 million, partially offset by increased demand for our space, medical, other electronics and telecommunications products resulting in net sales increases of $4.4 million, $4.2 million, $2.1 million and $1.9 million, respectively. Although sales price changes were not a significant contributing factor to the change in net sales of the FSG and ETG in the second quarter of fiscal 2022, recent cost inflation and potential supply chain disruptions may lead to higher sales prices during the remainder of fiscal 2022.

~~Gross Profit and Operating Expenses~~

Our consolidated gross profit margin increased to 39.2% in the second quarter of fiscal 2022, up from 38.5% in the second quarter of fiscal 2021, principally reflecting a 3.4% improvement in the FSG's gross profit margin, partially offset by a .4% decrease in the ETG's gross profit margin. The increase in the FSG's gross profit margin principally reflects the previously mentioned higher net sales across all product lines. The reduction in the ETG's gross profit margin principally reflects the decrease in net sales of defense products and an increase in new product research and development expenses as a percentage of net sales to support ongoing new product research and development activities. Total new product research and development expenses included within our consolidated cost of sales were $18.8 million in the second quarter of fiscal 2022, up from $18.0 million in the second quarter of fiscal 2021.

Our consolidated SG&A expenses were $88.5 million in the second quarter of fiscal 2022, as compared to $83.0 million in the second quarter of fiscal 2021. The increase in consolidated SG&A expenses principally reflects $3.4 million attributable to our fiscal 2021 and 2022 acquisitions and an increase of $3.1 million in selling expenses to support the previously mentioned net sales growth, partially offset by a $1.1 million decrease in general and administrative expenses.

~~Index~~

Our consolidated SG&A expenses as a percentage of net sales decreased to 16.4% in the second quarter of fiscal 2022, down from 17.8% in the second quarter of fiscal 2021. The decrease in consolidated SG&A expenses as a percentage of net sales principally reflects the efficiencies realized from the higher net sales, as well as a .6% impact from lower accrued performance-based compensation expense, a .4% favorable impact from changes in the estimated fair value of accrued contingent consideration, and a .3% impact from lower intangible asset amortization expense.

~~Operating Income~~

Our consolidated operating income increased by 27% to a record $122.8 million in the second quarter of fiscal 2022, up from $96.7 million in the second quarter of fiscal 2021. The increase in consolidated operating income principally reflects a $30.7 million increase (an 87% increase) to a record $66.2 million in operating income of the FSG, partially offset by a $5.3 million decrease (a 7% decrease) to $66.0 million in operating income of the ETG. The increase in operating income of the FSG principally reflects the previously mentioned net sales growth, improved gross profit margin, and efficiencies realized from the higher net sales volume. The decrease in operating income of the ETG principally reflects a lower level of efficiencies resulting from the net sales decrease, as well as the previously mentioned lower gross profit margin.

Our consolidated operating income as a percentage of net sales increased to 22.8% in the second quarter of fiscal 2022, up from 20.7% in the second quarter of fiscal 2021. The increase principally reflects an increase in the FSG’s operating income as a percentage of net sales to 21.6% in the second quarter of fiscal 2022, up from 15.4% in the second quarter of fiscal 2021, partially offset by a decrease in the ETG's operating income as a percentage of net sales to 27.8% in the second quarter of fiscal 2022, as compared to 29.3% in the second quarter of fiscal 2021. The increase in the FSG’s operating income as a percentage of net sales principally reflects the previously mentioned improved gross profit margin, as well as a 2.9% impact from a decrease in SG&A expenses as a percentage of net sales mainly reflecting the previously mentioned efficiencies. The decrease in the ETG's operating income as a percentage of net sales principally reflects a 1.1% impact from an increase in SG&A expenses as a percentage of net sales mainly from the previously mentioned lower level of efficiencies, as well as the previously mentioned lower gross profit margin.

~~Interest Expense~~

Interest expense decreased to $1.0 million in the second quarter of fiscal 2022, down from $2.1 million in the second quarter of fiscal 2021. The decrease was principally due to a lower weighted average balance of borrowings outstanding under our revolving credit facility.

~~Other Income~~

~~Other income in the second quarter of fiscal 2022 and 2021 was not material.~~

~~Index~~

~~Income Tax Expense~~

~~Our~~ effective tax rate was 23.7% in the second quarter of fiscal 2022, as compared to 19.5% in the second quarter of fiscal 2021. The increase in our effective tax rate principally reflects an unfavorable impact from tax-exempt unrealized losses in the cash surrender values of life insurance policies related to the HEICO LCP in the second quarter of fiscal 2022 as compared to the tax-exempt unrealized gains recognized on such policies in the second quarter of fiscal 2021.

~~Net Income Attributable to Noncontrolling Interests~~

Net income attributable to noncontrolling interests relates to the 20% noncontrolling interest held by Lufthansa Technik AG in HEICO Aerospace Holdings Corp. and the noncontrolling interests held by others in certain subsidiaries of the FSG and ETG. Net income attributable to noncontrolling interests was $8.1 million in the second quarter of fiscal 2022, as compared to $5.8 million in the second quarter of fiscal 2021. The increase in net income attributable to noncontrolling interests principally reflects improved operating results of certain subsidiaries of the FSG in which noncontrolling interests are held, inclusive of fiscal 2021 and 2022 acquisitions.

~~Net Income Attributable to HEICO~~

Net income attributable to HEICO increased by 20% to $85.0 million, or $.62 per diluted share, in the second quarter of fiscal 2022, up from $70.7 million, or $.51 per diluted share, in the second quarter of fiscal 2021 principally reflecting the previously mentioned higher consolidated operating income.rate.

Outlook

As we look ahead to the remainder of fiscal ~~2022,~~2023, we expect global commercial air travel to continue growing despite the potential for additional Pandemic variants. We remain cautiously optimistic that the ongoing worldwide rollout of Pandemic vaccines, including boosters, will continue to ~~positively influence global commercial air travel~~anticipate net sales growth in both the FSG and ~~benefit~~ETG, principally driven by demand for the ~~markets we serve. But, it still remains very difficult to predict the Pandemic's path~~majority of our products. Additionally, continued inflationary pressures and ~~effect, including factors like new variants and vaccination rates, potential~~lingering supply chain disruptions stemming from the COVID-19 pandemic may lead to higher material and ~~inflation, which can impact~~labor costs. During fiscal 2023, we plan to continue our ~~key markets. Therefore, we feel it would not be responsible~~commitments to ~~provide fiscal 2022 net sales~~developing new products and ~~earnings guidance at this time. However, we believe~~services, further market penetration, and an aggressive acquisition strategy while maintaining our ~~ongoing conservative policies, strong balance sheet,~~financial strength and high degree of liquidity enable us to continuously invest in new research and development, take advantage of periodic strategic inventory purchasing opportunities, and execute on our successful acquisition program, which collectively position HEICO for market share gains.flexibility.

~~Index~~Inde

Liquidity and Capital Resources

Our principal uses of cash include acquisitions, capital expenditures, cash dividends, distributions to noncontrolling interests and working capital needs. We now anticipate fiscal ~~2022~~2023 capital expenditures to be approximately ~~$40~~$45 to $50 million. We finance our activities primarily from our operating and financing activities, including borrowings under our revolving credit facility. The revolving credit facility contains both financial and non-financial covenants. As of ~~April 30, 2022,~~January 31, 2023, we were in compliance with all such covenants and our total debt to shareholders’ equity ratio was ~~11.0%~~28.5%.

On April 7, 2022, we entered into an amendment to extend the maturity date of our Revolving Credit Facility Agreement ("Credit Facility") by one year to November 2024 and to replace the Eurocurrency Rate with Adjusted Term SOFR as an election in which borrowings under the Credit Facility accrue interest, as such capitalized terms are defined in the Credit Facility.

Based on our current outlook, we believe that ~~our~~ net cash provided by operating activities and available borrowings under our revolving credit facility will be sufficient to fund our cash requirements for at least the next twelve months.

Operating Activities

Net cash provided by operating activities was ~~$174.8~~$76.7 million in the first ~~six months~~quarter of fiscal ~~2022~~2023 and consisted primarily of net income from consolidated operations of ~~$187.4~~$103.0 million, depreciation and amortization expense of ~~$46.7~~$27.1 million (a non-cash item), net changes in other long-term liabilities and assets related to the HEICO LCP of ~~$13.4~~$8.9 million (principally participant deferrals and employer contributions), ~~$6.9 million in share-based compensation expense (a non-cash item), and $5.4~~$3.8 million in employer contributions to the HEICO Savings and Investment Plan (a non-cash item), and $2.8 million in share-based compensation expense (a non-cash item), partially offset by ~~an $87.4~~a $63.0 million increase in net working ~~capital.~~capital and a $6.3 million payment of contingent consideration. The increase in net working capital is inclusive of a ~~$42.8~~$52.0 million increase in inventories ~~reflecting strategic buys within our distribution businesses and~~ to support an increase in consolidated backlog, a ~~$20.3~~$7.3 million increase in contract assets and a $7.1 million increase in accounts receivable resulting from the ~~previously mentioned net sales growth, a $15.9 million decrease in accrued expenses and other current liabilities mainly reflecting the payment~~timing of ~~fiscal 2021 accrued performance-based compensation, and a $9.0 million increase in prepaid expenses and other current assets.~~collections.

Net cash provided by operating activities decreased by ~~$35.4~~$1.3 million in the first ~~six months~~quarter of fiscal ~~2022~~2023 from ~~$210.1~~$78.0 million in the first ~~six months~~quarter of fiscal ~~2021.~~2022. The decrease is principally attributable to a ~~$83.8~~$6.3 million payment of contingent consideration and a $5.1 million increase in net working capital, partially offset by ~~a $34.6~~an $8.8 million increase in net income from consolidated ~~operations, a $10.6 million decrease in deferred income tax benefits and a $2.6 million increase in share-based compensation expense.~~operations. The increase in net working capital primarily resulted from the previously mentioned ~~increase~~increases in inventories ~~the payment of a larger amount of accrued performance-based compensation in the first six months of fiscal 2022 resulting from the much improved fiscal 2021 operating results,~~ and ~~the increase in~~ accounts receivable, ~~as a result of the previously mentioned net sales growth.~~

partially offset by increases in accrued expenses and other current liabilities and income taxes payable.

~~Index~~

Investing Activities

Net cash used in investing activities totaled ~~$144.0~~$526.0 million in the first ~~six months~~quarter of fiscal ~~2022~~2023 and related primarily to acquisitions of ~~$105.5 million, capital expenditures of $16.2~~$503.7 million, investments related to the ~~HEICO~~ LCP of ~~$11.7~~$11.8 million and ~~$10.5 million~~capital expenditures of ~~other investing activities.~~$10.8 million. Further details regarding our fiscal ~~2022 acquisitions~~2023 acquisition may be found in Note 2, ~~Acquisitions,~~Acquisition, of the Notes to Condensed Consolidated Financial Statements.

Inde x

Financing Activities

Net cash ~~used in~~provided by financing activities in the first ~~six months~~quarter of fiscal ~~2022~~2023 totaled ~~$18.1~~$449.2 million. During the first ~~six months~~quarter of fiscal ~~2022,~~2023, we ~~made $65.0~~borrowed $531.0 million under our revolving credit facility, which was partially offset by $38.0 million in payments made on our revolving credit facility, ~~redeemed~~redemptions of common stock related to stock option exercises aggregating ~~$23.7~~$14.8 million, ~~paid $12.2~~$13.7 million inof cash dividends on our common stock, ~~and made $10.6~~$11.3 million of distributions to noncontrolling interests ~~which were partially offset by $93.0~~and $3.7 million of ~~borrowings under our revolving credit facility.~~contingent consideration payments.

Other Obligations and Commitments

There have not been any material changes to our other obligations and commitments that were included in our Annual Report on Form 10-K for the year ended October 31, ~~2021.~~2022.

New Accounting ~~Pronouncements~~Pronouncement

See Note 1, Summary of Significant Accounting Policies - New Accounting ~~Pronouncements,~~Pronouncement, of the Notes to Condensed Consolidated Financial Statements for additional information.

Inde x

Forward-Looking Statements

Certain statements in this report constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained herein that are not clearly historical in nature may be forward-looking and the words “anticipate,” “believe,” “expect,” “estimate” and similar expressions are generally intended to identify forward-looking statements. Any forward-looking statement contained herein, in press releases, written statements or other documents filed with the Securities and Exchange Commission or in communications and discussions with investors and analysts in the normal course of business through meetings, phone calls and conference calls, concerning our operations, economic performance and financial condition are subject to risks, uncertainties and contingencies. We have based these forward-looking statements on our current expectations and projections about future events. All forward-looking statements involve risks and uncertainties, many of which are beyond our control, which may cause actual results, performance or achievements to differ materially from anticipated results, performance or achievements. Also, forward-looking statements are based upon management’s estimates of fair values and of future costs, using currently available information. Therefore, actual results may differ materially from

~~Index~~

those expressed in or implied by those forward-looking ~~statements. Factors that could cause such differences include:~~statements as a result of factors including, but not limited to: the severity, magnitude and duration of public health threats, such as the ~~Pandemic; our~~COVID-19 pandemic ("Health Emergencies"); HEICO's liquidity and the amount and timing of cash generation; lower commercial air travel caused by ~~the Pandemic~~Health Emergencies and ~~its~~their aftermath, airline fleet changes or airline purchasing decisions, 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 U.S. and/or foreign customers or competition from existing and new competitors, which could reduce our sales; our ability to introduce new products and services at profitable pricing levels, which could reduce our sales or sales growth; product development or manufacturing difficulties, which could increase our product development and manufacturing costs and delay sales; our ability to make acquisitions, including obtaining any applicable domestic and/or foreign governmental approvals, and achieve operating synergies from acquired businesses; customer credit risk; interest, foreign currency exchange and income tax rates; economic conditions, including the effects of inflation, within and outside of the aviation, defense, space, medical, telecommunications and electronics industries, which could negatively impact our costs and revenues; and defense spending or budget cuts, which could reduce our defense-related revenue. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except to the extent required by applicable law.

~~Index~~Inde x

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET

RISK

There have not been any material changes in our assessment of HEICO’s sensitivity to market risk that was disclosed in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” in our Annual Report on Form 10-K for the year ended October 31, ~~2021.~~2022, except as discussed below:

In connection with our acquisition of Exxelia, we issued Exxelia a ten-year €150 million note, which accrues interest at 4.7% per annum on the principal outstanding. A hypothetical 10% strengthening of the United States ("U.S.") dollar in comparison to the Euro as of January 31, 2023 would decrease the U.S. dollar equivalent of our Euro note receivable by approximately $16.3 million and decrease operating income by the same amount.

Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this quarterly report. Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that HEICO’s disclosure controls and procedures are effective as of the end of the period covered by this quarterly report.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the ~~second~~first quarter ended ~~April 30, 2022~~January 31, 2023 that have materially affected, or are reasonably likely to materially affect, HEICO's internal control over financial reporting.

~~Index~~Inde

PART II. OTHER INFORMATION

Item 6. EXHIBITS


Exhibit						Description
~~10.1~~						~~HEICO~~ ~~Savings and~~ I ~~nvestment Plan, as amended and restated effective as of March~~ 30 ~~, 2022~~. *

~~10.2~~						~~Second Amendment to Revolving Credit Agreement, effective as of April 7,2022, among HEICO Corporation, as Borrower, the Lenders from time to timeparty thereto and Truist Bank (as successor by merger to SunTrust Bank), asAdministrative Agent is incorporated by reference to Exhibit 10.1 to the Form 8-K filed on April 12, 2022.***~~

31.1						Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer. *

31.2						Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer. *

32.1						Section 1350 Certification of Chief Executive Officer. **

32.2						Section 1350 Certification of Chief Financial Officer. **

101.INS						Inline XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL Document. *

101.SCH						Inline XBRL Taxonomy Extension Schema Document. *

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document. *

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document. *

101.LAB						Inline XBRL Taxonomy Extension Labels Linkbase Document. *

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document. *

104						Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). *

* Filed herewith.

** Furnished herewith.

*** Previously filed.

~~Index~~Inde

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		HEICO CORPORATION

Date:	~~May 25, 2022~~March 1, 2023	By:	/s/ CARLOS L. MACAU, JR.
			Carlos L. Macau, Jr. Executive Vice President - Chief Financial Officer and Treasurer (Principal Financial Officer)

		By:	/s/ STEVEN M. WALKER
			Steven M. Walker Chief Accounting Officer and Assistant Treasurer (Principal Accounting Officer)


			Page
Part I.	Financial Information

	Item 1.	Financial Statements:

		Condensed Consolidated Balance Sheets (unaudited) as of ~~April 30, 2022~~January 31, 202 3 and October 31, ~~2021~~202 2	2

		Condensed Consolidated Statements of Operations (unaudited) for the ~~six and~~ three months ended ~~April 30,~~January 31, 202 23 and 202 12	3

		Condensed Consolidated Statements of Comprehensive Income (unaudited) for the ~~six and~~ three months ended ~~April 30,~~January 31, 202 23 and 202 12	4

		Condensed Consolidated Statements of Shareholders’ Equity (unaudited) for the ~~six and~~ three months ended ~~April 30,~~January 31, 202 23 and 202 12	5

		Condensed Consolidated Statements of Cash Flows (unaudited) for the ~~six~~three months ended ~~April 30,~~January 31, 202 23 and 202 12	76

		Notes to Condensed Consolidated Financial Statements (unaudited)	87

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3532

	Item 4.	Controls and Procedures	3532

Part II.	Other Information

	Item 6.	Exhibits	3633

Signatures			3734


		Six months ended April 30,			Three months ended January 31,
		2022	2021		2023	2022
Operating Activities:	Operating Activities:			Operating Activities:
Net income from consolidated operations	Net income from consolidated operations	$187,364	$152,719	Net income from consolidated operations	$103,005	$94,252
Adjustments to reconcile net income from consolidated operations to net cash provided by operating activities:	Adjustments to reconcile net income from consolidated operations to net cash provided by operating activities:			Adjustments to reconcile net income from consolidated operations to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	46,707	45,919	Depreciation and amortization	27,060	23,222
Employer contributions to HEICO Savings and Investment Plan				Employer contributions to HEICO Savings and Investment Plan	3,814	3,165
Share-based compensation expense	Share-based compensation expense	6,855	4,271	Share-based compensation expense	2,812	3,614
Employer contributions to HEICO Savings and Investment Plan		5,364	5,046
Increase (decrease) in accrued contingent consideration, net				Increase (decrease) in accrued contingent consideration, net	1,336	(114)
Deferred income tax provision (benefit)	Deferred income tax provision (benefit)	2,080	(8,487)	Deferred income tax provision (benefit)	980	(322)
(Decrease) increase in accrued contingent consideration, net		(1,773)	659
Payment of contingent consideration				Payment of contingent consideration	(6,299)	—
Changes in operating assets and liabilities, net of acquisitions:	Changes in operating assets and liabilities, net of acquisitions:			Changes in operating assets and liabilities, net of acquisitions:
Increase in accounts receivable		(20,263)	(3,795)
Decrease in contract assets		1,778	596
(Increase) decrease in inventories		(42,766)	2,932
(Increase) decrease in accounts receivable				(Increase) decrease in accounts receivable	(7,095)	16,191
Increase in contract assets				Increase in contract assets	(7,303)	(1,780)
Increase in inventories				Increase in inventories	(52,041)	(26,967)
Increase in prepaid expenses and other current assets	Increase in prepaid expenses and other current assets	(8,974)	(12,032)	Increase in prepaid expenses and other current assets	(860)	(9,005)
Increase in trade accounts payable		8,137	10,843
(Decrease) increase in accrued expenses and other current liabilities		(15,946)	1,981
Decrease in income taxes payable		(9,343)	(4,076)
(Decrease) increase in trade accounts payable				(Decrease) increase in trade accounts payable	(1,992)	2,469
Decrease in accrued expenses and other current liabilities				Decrease in accrued expenses and other current liabilities	(7,583)	(38,725)
Increase (decrease) in income taxes payable				Increase (decrease) in income taxes payable	13,839	(72)
Net changes in other long-term liabilities and assets related to HEICO Leadership Compensation Plan	Net changes in other long-term liabilities and assets related to HEICO Leadership Compensation Plan	13,356	11,826	Net changes in other long-term liabilities and assets related to HEICO Leadership Compensation Plan	8,892	11,603
Other	Other	2,177	1,710	Other	(1,879)	449
Net cash provided by operating activities	Net cash provided by operating activities	174,753	210,112	Net cash provided by operating activities	76,686	77,980

Investing Activities:	Investing Activities:			Investing Activities:
Acquisitions, net of cash acquired	Acquisitions, net of cash acquired	(105,533)	(20,226)	Acquisitions, net of cash acquired	(503,736)	—
Investments related to HEICO Leadership Compensation Plan				Investments related to HEICO Leadership Compensation Plan	(11,800)	(10,100)
Capital expenditures	Capital expenditures	(16,211)	(21,938)	Capital expenditures	(10,846)	(8,691)
Investments related to HEICO Leadership Compensation Plan		(11,700)	(10,900)
Other	Other	(10,511)	1,017	Other	402	(1,168)
Net cash used in investing activities	Net cash used in investing activities	(143,955)	(52,047)	Net cash used in investing activities	(525,980)	(19,959)

Financing Activities:	Financing Activities:			Financing Activities:
Borrowings on revolving credit facility	Borrowings on revolving credit facility	93,000	—	Borrowings on revolving credit facility	531,000	26,000
Payments on revolving credit facility	Payments on revolving credit facility	(65,000)	(155,000)	Payments on revolving credit facility	(38,000)	(25,000)
Redemptions of common stock related to stock option exercises	Redemptions of common stock related to stock option exercises	(23,692)	(3,624)	Redemptions of common stock related to stock option exercises	(14,805)	(23,623)
Cash dividends paid	Cash dividends paid	(12,227)	(10,818)	Cash dividends paid	(13,668)	(12,227)
Distributions to noncontrolling interests	Distributions to noncontrolling interests	(10,576)	(13,823)	Distributions to noncontrolling interests	(11,291)	(6,046)
Revolving credit facility issuance costs		(1,010)	(1,468)
Payment of contingent consideration				Payment of contingent consideration	(3,710)	—
Acquisitions of noncontrolling interests				Acquisitions of noncontrolling interests	(2,733)	—
Proceeds from stock option exercises	Proceeds from stock option exercises	1,610	3,838	Proceeds from stock option exercises	2,845	769
Other	Other	(210)	(522)	Other	(463)	207
Net cash used in financing activities		(18,105)	(181,417)
Net cash provided by (used in) financing activities				Net cash provided by (used in) financing activities	449,175	(39,920)

Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	(3,673)	1,944	Effect of exchange rate changes on cash	3,234	(1,581)

Net increase (decrease) in cash and cash equivalents		9,020	(21,408)
Net increase in cash and cash equivalents				Net increase in cash and cash equivalents	3,115	16,520
Cash and cash equivalents at beginning of year	Cash and cash equivalents at beginning of year	108,298	406,852	Cash and cash equivalents at beginning of year	139,504	108,298
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$117,318	$385,444	Cash and cash equivalents at end of period	$142,619	$124,818


(in thousands)	(in thousands)	April 30, 2022	October 31, 2021	(in thousands)	January 31, 2023	October 31, 2022
Accounts receivable	Accounts receivable	$282,088	$255,793	Accounts receivable	$335,706	$303,181
Less: Allowance for doubtful accounts	Less: Allowance for doubtful accounts	(12,238)	(10,874)	Less: Allowance for doubtful accounts	(9,942)	(8,333)
Accounts receivable, net	Accounts receivable, net	$269,850	$244,919	Accounts receivable, net	$325,764	$294,848


(in thousands)	(in thousands)	April 30, 2022	October 31, 2021	(in thousands)	January 31, 2023	October 31, 2022
Finished products	Finished products	$260,130	$238,867	Finished products	$338,764	$285,024
Work in process	Work in process	48,798	44,887	Work in process	80,861	59,739
Materials, parts, assemblies and supplies	Materials, parts, assemblies and supplies	210,570	194,296	Materials, parts, assemblies and supplies	277,870	237,708
Inventories, net of valuation reserves	Inventories, net of valuation reserves	$519,498	$478,050	Inventories, net of valuation reserves	$697,495	$582,471


(in thousands)	(in thousands)	April 30, 2022	October 31, 2021	(in thousands)	January 31, 2023	October 31, 2022
Land	Land	$11,065	$11,363	Land	$19,161	$17,579
Buildings and improvements	Buildings and improvements	134,970	134,150	Buildings and improvements	168,765	148,598
Machinery, equipment and tooling	Machinery, equipment and tooling	301,558	297,297	Machinery, equipment and tooling	353,710	322,252
Construction in progress	Construction in progress	12,940	7,784	Construction in progress	22,040	14,533
		460,533	450,594		563,676	502,962
Less: Accumulated depreciation and amortization	Less: Accumulated depreciation and amortization	(266,975)	(256,956)	Less: Accumulated depreciation and amortization	(289,273)	(277,083)
Property, plant and equipment, net	Property, plant and equipment, net	$193,558	$193,638	Property, plant and equipment, net	$274,403	$225,879


		Segment		Consolidated Totals		Segment		Consolidated Totals
		FSG	ETG			FSG	ETG
Balances as of October 31, 2021		$468,288	$982,107	$1,450,395
Balances as of October 31, 2022					Balances as of October 31, 2022	$561,961	$1,110,464	$1,672,425
Goodwill acquired	Goodwill acquired	69,130	2,565	71,695	Goodwill acquired	—	306,356	306,356
Foreign currency translation adjustments	Foreign currency translation adjustments	(4,344)	(5,139)	(9,483)	Foreign currency translation adjustments	3,157	10,914	14,071
Adjustments to goodwill	Adjustments to goodwill	(266)	(875)	(1,141)	Adjustments to goodwill	(955)	2,450	1,495
Balances as of April 30, 2022		$532,808	$978,658	$1,511,466
Balances as of January 31, 2023					Balances as of January 31, 2023	$564,163	$1,430,184	$1,994,347


		As of April 30, 2022			As of October 31, 2021				As of January 31, 2023			As of October 31, 2022
		Gross Carrying Amount	Accumulated Amortization	Net Carrying Amount	Gross Carrying Amount	Accumulated Amortization	Net Carrying Amount		Gross Carrying Amount	Accumulated Amortization	Net Carrying Amount	Gross Carrying Amount	Accumulated Amortization	Net Carrying Amount
Amortizing Assets:	Amortizing Assets:							Amortizing Assets:
Customer relationships	Customer relationships	$470,592	($189,664)	$280,928	$464,506	($221,098)	$243,408	Customer relationships	$605,707	($217,828)	$387,879	$539,529	($208,127)	$331,402
Intellectual property	Intellectual property	253,133	(101,736)	151,397	255,011	(94,313)	160,698	Intellectual property	342,994	(105,341)	237,653	284,171	(98,983)	185,188
Licenses		6,559	(5,254)	1,305	6,559	(5,072)	1,487
Patents		1,105	(795)	310	1,110	(793)	317
Non-compete agreements		640	(640)	—	722	(722)	—
Trade names		450	(277)	173	450	(257)	193
Other								Other	8,783	(7,175)	1,608	8,700	(7,017)	1,683
		732,479	(298,366)	434,113	728,358	(322,255)	406,103		957,484	(330,344)	627,140	832,400	(314,127)	518,273
Non-Amortizing Assets:	Non-Amortizing Assets:							Non-Amortizing Assets:
Trade names	Trade names	190,804	—	190,804	176,204	—	176,204	Trade names	246,582	—	246,582	215,054	—	215,054
		$923,283	($298,366)	$624,917	$904,562	($322,255)	$582,307		$1,204,066	($330,344)	$873,722	$1,047,454	($314,127)	$733,327


		April 30, 2022	October 31, 2021	Change		January 31, 2023	October 31, 2022	Change
Contract assets	Contract assets	$79,598	$80,073	($475)	Contract assets	$101,540	$93,978	$7,562
Contract liabilities	Contract liabilities	54,385	32,738	21,647	Contract liabilities	83,876	58,757	25,119
Net contract assets	Net contract assets	$25,213	$47,335	($22,122)	Net contract assets	$17,664	$35,221	($17,557)


			Unobservable		Weighted			Unobservable		Weighted
Acquisition Date	Acquisition Date	Fair Value	Input	Range	Average (1)	Acquisition Date	Fair Value	Input	Range	Average (1)
9-1-2022						9-1-2022	$6,112	Compound annual revenue growth rate	0% - 17%	13%
								Discount rate	7.9% - 7.9%	7.9%

7-18-2022						7-18-2022	13,309	Compound annual revenue growth rate	(1%) - 6%	3%
								Discount rate	7.9% - 7.9%	7.9%

3-17-2022	3-17-2022	$9,373	Compound annual revenue growth rate	(3%) - 8%	3%	3-17-2022	9,494	Compound annual revenue growth rate	(3%) - 7%	2%
			Discount rate	6.1% - 6.1%	6.1%			Discount rate	6.9% - 6.9%	6.9%

8-4-2021	8-4-2021	17,028	Compound annual revenue growth rate	0% - 9%	8%	8-4-2021	17,957	Compound annual revenue growth rate	3% - 10%	8%
			Discount rate	7.1% - 7.1%	7.1%			Discount rate	7.9% - 8.6%	8.1%

8-18-2020	8-18-2020	12,218	Compound annual revenue growth rate	9% - 20%	14%	8-18-2020	8,280	Compound annual revenue growth rate	15% - 24%	22%
			Discount rate	6.6% - 7.1%	6.7%			Discount rate	8.6% - 8.6%	8.6%

8-11-2020		12,923	Compound annual revenue growth rate	2% - 15%	10%
			Discount rate	7.1% - 7.1%	7.1%

9-15-2017	9-15-2017	18,368	Compound annual revenue growth rate	(1%) - 5%	3%	9-15-2017	19,233	Compound annual revenue growth rate	0% - 6%	5%
			Discount rate	6.0% - 6.0%	6.0%			Discount rate	5.9% - 5.9%	5.9%