UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

						For the quarterly period ended January 31, ~~2023~~2024

						OR

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

						For the transition period from ______ to _______

Commission File Number: 001-04604

HEICO CORPORATION

(Exact name of registrant as specified in its charter)


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)

(954) 987-4000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $.01 par value per share

HEI

New York Stock Exchange

Class A Common Stock, $.01 par value per share

HEI.A

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐

Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of each of the registrant’s classes of common stock as of February 27, ~~2023~~2024 is as follows:


Common Stock, $.01 par value	~~54,660,048~~54,772,494	shares
Class A Common Stock, $.01 par value	~~82,231,513~~83,591,871	shares

Index

HEICO CORPORATION

INDEX TO QUARTERLY REPORT ON FORM 10-Q


			Page
Part I.	Financial Information

	Item 1.	Financial Statements:

		Condensed Consolidated Balance Sheets (unaudited) as of January 31, ~~202~~3 2024 and October 31, ~~202~~22023	2

		Condensed Consolidated Statements of Operations (unaudited) for the three months ended January 31, ~~202~~3 2024 and ~~202~~22023	3

		Condensed Consolidated Statements of Comprehensive Income (unaudited) for the three months ended January 31, ~~202~~3 2024 and ~~202~~22023	4

		Condensed Consolidated Statements of Shareholders’ Equity (unaudited) for the three months ended January 31, ~~202~~3 2024 and ~~202~~22023	5

		Condensed Consolidated Statements of Cash Flows (unaudited) for the three months ended January 31, ~~202~~3 2024 and ~~202~~22023	6

		Notes to Condensed Consolidated Financial Statements (unaudited)	7

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2422

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32

	Item 4.	Controls and Procedures	32

Part II.	Other Information

	Item 5.	Other Events	33

	Item 6.	Exhibits	33

Signatures			34

Index

PART I. FINANCIAL INFORMATION; Item 1. FINANCIAL STATEMENTS

HEICO CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED

(in thousands, except per share data)

January 31, 2023

October 31, 2022

January 31, 2024

October 31, 2023

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

Property, plant and equipment, net

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

Short-term debt and current maturities of long-term debt

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

Long-term debt, net of current maturities

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

Preferred Stock, $.01 par value per share; 10,000 shares authorized; none issued

Common Stock, $.01 par value per share; 150,000 shares authorized; 54,772 and 54,721 shares issued and outstanding

Class A Common Stock, $.01 par value per share; 150,000 shares authorized; 83,566 and 83,507 shares issued and outstanding

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.

Index

HEICO CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS – UNAUDITED

(in thousands, except per share data)

Three months ended January 31,

2024

2023

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

Total operating costs and expenses

Operating income

129,434

98,822

Operating income

Interest expense

(6,068)

(796)

Other income

639

226

Income before income taxes and noncontrolling interests

124,005

98,252

Income before income taxes and noncontrolling interests

Income tax expense

21,000

4,000

Net income from consolidated operations

103,005

94,252

Net income from consolidated operations

Less: Net income attributable to noncontrolling interests

9,978

7,331

Net income attributable to HEICO

$93,027

$86,921

Net income attributable to HEICO

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.

Index

HEICO CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME – UNAUDITED

(in thousands)


			Three months ended January 31,
			2023	2022
		Three months ended January 31,				Three months ended January 31,
		2024			2024		2023

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

(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 October 31, 2022		$327,601		$545	$821	$397,337	$5,297	($5,297)	($46,499)	$2,253,932	$42,170	$2,648,306
			HEICO Shareholders' Equity
		Redeemable Noncontrolling Interests
		Redeemable Noncontrolling Interests
		Redeemable Noncontrolling Interests											Common Stock	Class A Common Stock	Capital in Excess of Par Value	Deferred Compensation Obligation	HEICO Stock Held by Irrevocable Trust	Accumulated Other Comprehensive Loss	Retained Earnings	Noncontrolling Interests	Total Shareholders' Equity
Balances as of October 31, 2023
Comprehensive income	Comprehensive income	7,980		—	—	—	—	—	27,141	93,027	3,257	123,425
Cash dividends ($.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	—		—	—	1,964	—	—	—	—	—	1,964
Share-based compensation expense	Share-based compensation expense	—		—	—	2,812	—	—	—	—	—	2,812
Proceeds from stock option exercises	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	—		—	—	(14,805)	—	—	—	—	—	(14,805)
Noncontrolling interests assumed related to acquisitions		12,050		—	—	—	—	—	—	—	—	—
Distributions to noncontrolling interests	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	4,616		—	—	—	—	—	—	(4,616)	—	(4,616)
Deferred compensation obligation		—		—	—	—	874	(874)	—	—	—	—
Other	Other	—		—	—	127	—	—	—	(152)	—	(25)
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
Balances as of January 31, 2024


				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)
			HEICO Shareholders' Equity
		Redeemable Noncontrolling Interests
		Redeemable Noncontrolling Interests
		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, 2022
Comprehensive income
Cash dividends ($.10 per share)
Issuance of common stock to HEICO Savings and Investment Plan	Issuance of common stock to HEICO Savings and Investment Plan	—		—	—	1,670	—	—	—	—	—	1,670
Share-based compensation expense	Share-based compensation expense	—		—	—	3,614	—	—	—	—	—	3,614
Proceeds from stock option exercises	Proceeds from stock option exercises	—		3	3	763	—	—	—	—	—	769
Redemptions of common stock related to stock option exercises	Redemptions of common stock related to stock option exercises	—		(1)	(1)	(23,621)	—	—	—	—	—	(23,623)
Noncontrolling interests assumed related to acquisitions	Noncontrolling interests assumed related to acquisitions	172		—	—	—	—	—	—	—	—	—
Distributions to noncontrolling interests	Distributions to noncontrolling interests	(5,883)		—	—	—	—	—	—	—	(163)	(163)
Acquisitions of noncontrolling interests
Adjustments to redemption amount of redeemable noncontrolling interests	Adjustments to redemption amount of redeemable noncontrolling interests	5,225		—	—	—	—	—	—	(5,225)	—	(5,225)
Deferred compensation obligation
Other	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
Balances as of January 31, 2023

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

HEICO CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

(in thousands)


		Three months ended January 31,
		2023	2022
	Three months ended January 31,				Three months ended January 31,
	2024			2024		2023
Operating Activities:	Operating Activities:
Net income from consolidated operations
Net income from consolidated operations
Net income from consolidated operations	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:
Depreciation and amortization	Depreciation and amortization	27,060	23,222
Depreciation and amortization
Depreciation and amortization
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	2,812	3,614
Increase (decrease) in accrued contingent consideration, net		1,336	(114)
Deferred income tax provision (benefit)		980	(322)
Increase in accrued contingent consideration, net
Deferred income tax (benefit) provision
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:
(Increase) decrease in accounts receivable		(7,095)	16,191
Increase in contract assets		(7,303)	(1,780)
Decrease (increase) in accounts receivable
Decrease (increase) in accounts receivable
Decrease (increase) in accounts receivable
Decrease (increase) in contract assets
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	(860)	(9,005)
(Decrease) increase in trade accounts payable		(1,992)	2,469
Decrease in trade accounts payable
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		13,839	(72)
Increase in income taxes payable
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	8,892	11,603
Other	Other	(1,879)	449
Net cash provided by operating activities	Net cash provided by operating activities	76,686	77,980

Investing Activities:	Investing Activities:
Investing Activities:
Investing Activities:
Acquisitions, net of cash acquired	Acquisitions, net of cash acquired	(503,736)	—
Acquisitions, net of cash acquired
Acquisitions, net of cash acquired
Capital expenditures
Investments related to HEICO Leadership Compensation Plan	Investments related to HEICO Leadership Compensation Plan	(11,800)	(10,100)
Capital expenditures		(10,846)	(8,691)
Other	Other	402	(1,168)
Net cash used in investing activities	Net cash used in investing activities	(525,980)	(19,959)

Financing Activities:	Financing Activities:
Financing Activities:
Financing Activities:
Borrowings on revolving credit facility
Borrowings on revolving credit facility
Borrowings on revolving credit facility	Borrowings on revolving credit facility	531,000	26,000
Payments on revolving credit facility	Payments on revolving credit facility	(38,000)	(25,000)
Payments on short-term debt, net
Cash dividends paid
Payment of contingent consideration
Distributions to noncontrolling interests
Acquisitions of noncontrolling interests
Redemptions of common stock related to stock option exercises	Redemptions of common stock related to stock option exercises	(14,805)	(23,623)
Cash dividends paid		(13,668)	(12,227)
Distributions to noncontrolling interests		(11,291)	(6,046)
Payment of contingent consideration		(3,710)	—
Acquisitions of noncontrolling interests		(2,733)	—
Proceeds from stock option exercises	Proceeds from stock option exercises	2,845	769
Other	Other	(463)	207
Net cash provided by (used in) financing activities		449,175	(39,920)
Net cash (used in) provided by financing activities

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

Net increase in cash and cash equivalents	Net increase in cash and cash equivalents	3,115	16,520
Net increase in cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year	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	$142,619	$124,818

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

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HEICO CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of HEICO Corporation and its subsidiaries (collectively, “HEICO,” or the “Company”) have been prepared in conformity with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the instructions to Form 10-Q. Therefore, the condensed consolidated financial statements do not include all information and footnotes normally included in annual consolidated financial statements and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended October 31, ~~2022.~~2023. The October 31, ~~2022~~2023 Condensed Consolidated Balance Sheet has been derived from the Company’s audited consolidated financial statements. In the opinion of management, the unaudited condensed consolidated financial statements contain all adjustments (consisting principally of normal recurring accruals) necessary for a fair presentation of the condensed consolidated balance sheets, statements of operations, statements of comprehensive income, statements of shareholders' equity and statements of cash flows for such interim periods presented. The results of operations for the three months ended January 31, ~~2023~~2024 are not necessarily indicative of the results which may be expected for the entire fiscal year.

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

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

New Accounting ~~Pronouncement~~Pronouncements

In ~~October 2021,~~November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") ~~2021-08, "Business Combinations~~2023-07, “Segment Reporting (Topic ~~805)~~280): ~~Accounting for Contract Assets~~Improvements to Reportable Segment Disclosures,” which expands reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and ~~Contract Liabilities from Contracts with Customers," which~~included within each reported measure of a segment's profit or loss. The ASU also requires ~~contract~~disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment's profit or loss in assessing segment performance and deciding how to allocate resources. Additionally, ASU 2023-07 requires all segment profit or loss and assets ~~and contract liabilities acquired in a business combination~~disclosures to be ~~recognized~~provided on an annual and ~~measured by~~interim basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, or in fiscal 2025 for HEICO, and interim periods within fiscal years beginning one year later. Early adoption is permitted and the ~~acquirer on~~amendments must be applied retrospectively to all prior periods presented. The adoption of this guidance will not affect the ~~acquisition date in accordance with ASC 606, "Revenue from Contracts with~~Company's consolidated results of operations, financial position or

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~~Customers," as if~~cash flows and the ~~acquirer had originated~~Company is currently evaluating the ~~contracts. The Company adopted~~effect the guidance will have on its disclosures.

In December 2023, the FASB issued ASU ~~2021-08~~2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which requires disclosure of specific categories in the ~~first quarter~~annual effective tax rate reconciliation table and further disaggregation for reconciling items that meet a quantitative threshold. The ASU also requires the disaggregation of income taxes paid by jurisdiction. ASU 2023-09 may be applied either prospectively or retrospectively and is effective for fiscal ~~2023, resulting~~years beginning after December 15, 2024, or in ~~no material effect on~~fiscal 2026 for HEICO. Early adoption is permitted. The adoption of this guidance will not affect the Company's consolidated results of operations, financial position or cash ~~flows.~~flows and the Company is currently evaluating the effect the guidance will have on its disclosures.

2. ACQUISITION

~~On January 5,~~In December 2023, the Company, through ~~HEICO Electronic,~~a subsidiary of HFSC, entered into an exclusive license and acquired 93.69% of the outstanding common stock and all of the preferred stock of Exxelia International SAS (“Exxelia”). 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 expanding its already wide range of mission-critical and Hi-Rel componentscertain assets for the ~~most demanding applications,~~capability to support the Boeing 737NG/777 Cockpit Display and Legacy Displays product lines from Honeywell International. The transaction provides the HFSC subsidiary with the exclusive capability to produce, sell, and repair Boeing 737NG/777 Cockpit Displays as well as ~~provide HEICO with added broad geographic~~other Legacy Displays for Boeing 717, ATR, and product diversity, including in the important European market. The remaining 6.31% interest continues to be owned by certain members of Exxelia's management team (see Note 3, Selected Financial Statement Information - Redeemable Noncontrolling Interests, for additional information). Additionally, as a result of this acquisition, the Company 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 owned by a certain member of Alcon’s management team (See Note 3, Selected Financial Statement Information – Redeemable Noncontrolling Interests, for additional information).select business and general aviation aircraft. The purchase price of this acquisition was paid in cash using proceeds from the Company's revolving credit ~~facility.~~

~~The following table summarizes the total consideration for the acquisition of Exxelia (in thousands):~~


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

~~As noted above, the Company acquired all of the preferred stock of Exxelia. Pursuant~~facility, and is not material or significant to the 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.

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The following table summarizes the allocation of the total consideration for the 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~~

Company's condensed consolidated financial statements.

The allocation of the total consideration for this acquisition 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. ~~The primary items that generated the goodwill recognized were the premiums paid by~~However, the Company ~~for the future earnings potential of Exxelia and the value of its assembled workforce that do~~does not 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 inexpect any adjustment to such allocation to be material to the Company's ~~Condensed Consolidated Statement of Operations. The~~consolidated financial statements. This acquisition’s operating results ~~of Exxelia~~ were included in the Company’s results of operations from the effective acquisition date. ~~For the three months ended January 31, 2023, the Company's consolidated~~The amount of net sales ~~includes $15.0 million from~~and earnings of this acquisition included in the ~~acquisition~~Condensed Consolidated Statement of ~~Exxelia, and the acquisition did not have a material impact on net income attributable to HEICO.~~

~~Inde~~x

~~The following table presents unaudited pro forma financial information~~Operations for the three months ended January 31, ~~2023 and January 31, 2022 as if the~~2024 is not material. Had this acquisition ~~of Exxelia had~~ occurred as of November 1, ~~2021 (in thousands, except~~2022, net sales, net income from consolidated operations, net income attributable to HEICO, and basic and diluted net income per share ~~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~~attributable to HEICO shareholders on a pro forma ~~financial information is presented~~basis for ~~comparative purposes only~~the three months ended January 31, 2024 and is2023 would not ~~necessarily indicative of the results of operations that actually would~~ have been ~~achieved if~~materially different than the 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.reported amounts.

Index

3. SELECTED FINANCIAL STATEMENT INFORMATION

Accounts Receivable

(in thousands)

January 31, 2023

October 31, 2022

(in thousands)

January 31, 2024

October 31, 2023

Accounts receivable

$335,706

$303,181

Less: Allowance for doubtful accounts

(9,942)

(8,333)

Accounts receivable, net

$325,764

$294,848

Inventories

(in thousands)

January 31, 2023

October 31, 2022

(in thousands)

January 31, 2024

October 31, 2023

Finished products

$338,764

$285,024

Work in process

80,861

59,739

Materials, parts, assemblies and supplies

277,870

237,708

Inventories, net of valuation reserves

$697,495

$582,471

~~Inde~~x

Property, Plant and Equipment


(in thousands)	(in thousands)		January 31, 2023	October 31, 2022	(in thousands)	January 31, 2024	October 31, 2023
Land	Land		$19,161	$17,579
Buildings and improvements	Buildings and improvements		168,765	148,598
Machinery, equipment and tooling	Machinery, equipment and tooling		353,710	322,252
Construction in progress	Construction in progress		22,040	14,533
			563,676	502,962
		653,948
Less: Accumulated depreciation and amortization	Less: Accumulated depreciation and amortization		(289,273)	(277,083)
Property, plant and equipment, net	Property, plant and equipment, net		$274,403	$225,879

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 ~~$19.3~~$27.5 million as of January 31, ~~2023~~2024 and ~~$17.9~~$24.5 million as of October 31, ~~2022.~~2023. The total customer rebates and credits deducted within net sales for the three months ended January 31, 2024 and 2023 ~~and 2022~~ was ~~$2.2~~$3.5 million and ~~$1.7~~$2.2 million, respectively.

Research and Development Expenses

The amount of new product research and development ("R&D") expenses included in cost of sales for the three months ended January 31, ~~2023~~2024 and ~~2022~~2023 is as follows (in thousands):

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


	Three months ended January 31,
	2024	2023
R&D expenses	$25,096	$20,238

Index

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):

January 31, 2023 October 31, 2022
Redeemable at fair value $300,522 $300,693
Redeemable based on a multiple of future earnings 39,765 26,908
Redeemable noncontrolling interests $340,287 $327,601

~~Inde~~x

~~As discussed in Note 2, Acquisition, the Company, through HEICO Electronic,~~

acquired 93.69% of the common stock of Exxelia in January 2023. As part of the liquidity agreement, the noncontrolling interest holders have the right to cause the Company to purchase their equity interest beginning in fiscal 2028, or sooner under certain conditions, and the Company has the right to purchase the same equity interest beginning in the same period.

As discussed in Note 2, Acquisition, the Company, as a result of its acquisition of Exxelia, acquired 90% of the stock of Alcon in January 2023. As part of the shareholders' agreement, the noncontrolling interest holder has the right to cause the Company to purchase their equity interest beginning in fiscal 2025, or sooner under certain conditions, and the Company has the right to purchase the same equity interest beginning in the same period.


	January 31, 2024	October 31, 2023
Redeemable at fair value	$308,586	$308,472
Redeemable based on a multiple of future earnings	57,279	56,335
Redeemable noncontrolling interests	$365,865	$364,807

During fiscal 2022, the holder of a 19.9% noncontrolling equity interest in a subsidiary of the FSG that was acquired in fiscal 2015 exercised their option to cause the Company to purchase their noncontrolling interest over a four-year period ending in fiscal 2026. ~~Accordingly,~~In December 2023, the Company acquired an additional one-fourth of such interest, ~~in December 2022,~~ which increased the Company's ownership interest in the subsidiary to ~~85.1%~~90.1%.

Accumulated Other Comprehensive Loss

Changes in the components of accumulated other comprehensive loss for the three months ended January 31, ~~2023~~2024 are as follows (in thousands):


			Foreign Currency Translation	Defined Benefit Pension Plan	Accumulated Other Comprehensive Loss
Balances as of October 31, 2022			($45,369)	($1,130)	($46,499)
		Foreign Currency Translation				Foreign Currency Translation	Defined Benefit Pension Plan	Accumulated Other Comprehensive Loss
Balances as of October 31, 2023
Unrealized gain	Unrealized gain		27,126	—	27,126
Amortization of unrealized loss	Amortization of unrealized loss		—	15	15
Balances as of January 31, 2023			($18,243)	($1,115)	($19,358)
Balances as of January 31, 2024

1210

~~Inde~~xIndex

4. GOODWILL AND OTHER INTANGIBLE ASSETS

Changes in the carrying amount of goodwill by operating segment for the three months ended January 31, ~~2023~~2024 are as follows (in thousands):


			Segment		Consolidated Totals
			FSG	ETG
Balances as of October 31, 2022			$561,961	$1,110,464	$1,672,425
		Segment				Segment	Consolidated Totals
		FSG
Balances as of October 31, 2023
Balances as of October 31, 2023
Balances as of October 31, 2023
Goodwill acquired	Goodwill acquired		—	306,356	306,356
Foreign currency translation adjustments	Foreign currency translation adjustments		3,157	10,914	14,071
Adjustments to goodwill	Adjustments to goodwill		(955)	2,450	1,495
Balances as of January 31, 2023			$564,163	$1,430,184	$1,994,347
Balances as of January 31, 2024

The goodwill acquired pertains to the fiscal ~~2023~~2024 acquisition described in Note 2, Acquisition, and represents the residual value after the allocation of the total consideration to the tangible and identifiable intangible assets ~~acquired and liabilities and noncontrolling interests assumed.~~acquired. The Company ~~is assessing how much, if any,~~estimates that $7 million of the goodwill acquired in fiscal ~~2023~~2024 will be deductible for income tax purposes. Foreign currency translation adjustments are included in other comprehensive income (loss) in the Company's Condensed Consolidated Statements of Comprehensive Income. The adjustments to goodwill represent immaterial measurement period adjustments to the allocation of the purchase consideration ~~allocation~~ of certain fiscal ~~2022~~2023 acquisitions.

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


			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
		As of January 31, 2024									As of January 31, 2024			As of October 31, 2023
		Gross Carrying Amount							Gross Carrying Amount	Accumulated Amortization		Net Carrying Amount	Gross Carrying Amount		Accumulated Amortization	Net Carrying Amount
Amortizing Assets:	Amortizing Assets:
Customer relationships
Customer relationships
Customer relationships	Customer relationships		$605,707	($217,828)	$387,879	$539,529	($208,127)	$331,402
Intellectual property	Intellectual property		342,994	(105,341)	237,653	284,171	(98,983)	185,188
Other	Other		8,783	(7,175)	1,608	8,700	(7,017)	1,683
			957,484	(330,344)	627,140	832,400	(314,127)	518,273
		1,445,102
Non-Amortizing Assets:	Non-Amortizing Assets:
Trade names	Trade names		246,582	—	246,582	215,054	—	215,054
			$1,204,066	($330,344)	$873,722	$1,047,454	($314,127)	$733,327
Trade names
Trade names
		$1,735,028

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 recognized in connection with the fiscal 2023 acquisition (see Note 2, Acquisition).

Amortization expense related to intangible assets for the three months ended January 31, 2024 and 2023 ~~and 2022~~ was ~~$17.8~~$30.2 million and ~~$15.0~~$17.8 million, respectively. Amortization expense related

~~Inde~~x

to intangible assets for the remainder of fiscal ~~2023~~2024 is estimated to be ~~$55.9~~$91.1 million. Amortization expense for each of the next five fiscal years and thereafter is estimated to be ~~$70.1 million in fiscal 2024, $65.4~~$116.4 million in fiscal 2025, ~~$60.7~~$110.6 million in fiscal 2026, ~~$57.4~~$106.2 million in fiscal 2027, ~~$53.1~~$100.7 million in fiscal 2028, $95.2 million in fiscal 2029, and ~~$264.5~~$455.6 million thereafter.

Index

5. SHORT-TERM AND LONG-TERM DEBT

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

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


			January 31, 2023	October 31, 2022
		January 31, 2024			January 31, 2024	October 31, 2023
Borrowings under revolving credit facility	Borrowings under revolving credit facility		$768,000	$275,000
Finance leases and note payable			14,789	15,274
			782,789	290,274
2028 senior unsecured notes
2033 senior unsecured notes
Finance leases and notes payable
Less: Debt discount and debt issuance costs
		2,500,465
Less: Current maturities of long-term debt	Less: Current maturities of long-term debt		(1,615)	(1,654)
			$781,174	$288,620
		$2,495,726

Revolving Credit Facility

The Company's borrowings under its revolving credit facility mature in fiscal ~~2025.~~2028. As of January 31, ~~2023~~2024 and October 31 ~~2022,~~2023, the weighted average interest rate on borrowings under the Company's revolving credit facility ("Credit Facility") was ~~5.5%~~6.9% and ~~4.6%~~6.7%, respectively. The revolving credit facility contains both financial and non-financial covenants. As of January 31, ~~2023,~~2024, the Company was in compliance with all such covenants.

Senior Unsecured Notes

The Company's senior unsecured notes consist of $600 million principal amount of 5.25% Senior Notes due August 1, 2028 (the "2028 Notes") and $600 million principal amount of 5.35% Senior Notes due August 1, 2033 (the "2033 Notes" and, collectively with the 2028 Notes, the "Notes"). Interest on the Notes is payable semi-annually in arrears on February 1 and August 1 of each year, and commenced on February 1, 2024. The 2028 Notes and 2033 Notes each have an effective interest rate of 5.5%. The Notes are fully and unconditionally guaranteed on a senior unsecured basis by all of the Company's existing and future subsidiaries that guarantee the Company's obligations under the Credit Facility (the "Guarantor Group"). As of January 31, 2024 the Company was in compliance with all covenants related to the Notes.

Index

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


	January 31, 2024		October 31, 2023
	Carrying Value	Fair Value	Carrying Value	Fair Value
2028 Notes	$594,428	$611,262	$594,158	$579,762
2033 Notes	592,512	610,080	592,364	552,594
Total	$1,186,940	$1,221,342	$1,186,522	$1,132,356

6. REVENUE

Contract Balances

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

Changes in the Company’s contract assets and liabilities for the three months ended January 31, ~~2023~~2024 are as follows (in thousands):


		January 31, 2023	October 31, 2022	Change
	January 31, 2024				January 31, 2024	October 31, 2023	Change
Contract assets	Contract assets	$101,540	$93,978	$7,562
Contract liabilities	Contract liabilities	83,876	58,757	25,119
Net contract assets	Net contract assets	$17,664	$35,221	($17,557)

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.

~~Inde~~x

The increase in the Company's contract liabilities during the first quarter of ~~fiscal 2023~~2024 principally reflects the receipt of advance deposits on certain customer contracts, mainly at the FSG.

The amount of revenue that the Company recognized during the first quarter of fiscal ~~2023~~2024 that was included in contract liabilities as of the beginning of fiscal ~~2023~~2024 was ~~$20.3~~$26.7 million.

Remaining Performance Obligations

Backlog, which the Company believes to be the equivalent of its remaining performance obligations, represents contractually committed or firm customer orders. As of January 31, ~~2023,~~2024, the Company had ~~$580.3~~$1,444.3 million of remaining performance obligations associated with firm 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 lines.~~FSG. The Company

Index

will recognize net sales as these obligations are satisfied. The Company expects to recognize ~~$251.8~~$952.6 million of this amount during the remainder of fiscal ~~2023~~2024 and ~~$328.5~~$491.7 million thereafter, of which ~~a little over half~~the majority is expected to occur in fiscal ~~2024.~~2025.

Disaggregation of Revenue

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

Three months ended January 31,

2023

2022

Three months ended January 31,

2024

2023

Flight Support Group:

Aftermarket replacement parts (1)

$208,643

$150,901

Aftermarket replacement parts (1)

Repair and overhaul parts and services (2)

Specialty products ~~(2)~~(3)

91,485

59,293

Repair and overhaul parts and services (3)

71,150

62,487

Total net sales

371,278

272,681

Electronic Technologies Group:

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 primarily for defense,

space and aerospace equipment (4)

174,578

157,468

Electronic component parts for equipment

in various other industries (5)

Electronic component parts for equipment

in various other industries (5)

80,481

64,868

Total net sales

255,059

222,336

Intersegment sales

(5,422)

(4,674)

Intersegment sales

Total consolidated net sales

$620,915

$490,343

Total consolidated net sales

(1) Includes various jet engine and aircraft component replacement parts.

15(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.

~~Inde~~x

~~(2)~~(3) Includes primarily the sale of specialty components such as thermal insulation blankets, renewable/reusable insulation systems, advanced niche components, complex composite assemblies, and expanded foil mesh as well as machining, brazing, fabricating and welding services generally to original equipment manufacturers.

~~(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, custom high power filters and filter assemblies,

Index

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, and high performance test sockets and adaptors.

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


			Three months ended January 31,
			2023	2022
		Three months ended January 31,				Three months ended January 31,
		2024			2024		2023
Flight Support Group:	Flight Support Group:
Aerospace
Aerospace
Aerospace	Aerospace		$254,540	$202,405
Defense and Space	Defense and Space		95,642	58,655
Other (1)	Other (1)		21,096	11,621
Total net sales	Total net sales		371,278	272,681

Electronic Technologies Group:	Electronic Technologies Group:
Electronic Technologies Group:
Electronic Technologies Group:
Defense and Space
Defense and Space
Defense and Space	Defense and Space		121,962	131,447
Other (2)	Other (2)		97,770	73,363
Aerospace	Aerospace		35,327	17,526
Total net sales	Total net sales		255,059	222,336

Intersegment sales	Intersegment sales		(5,422)	(4,674)
Intersegment sales
Intersegment sales

Total consolidated net sales	Total consolidated net sales		$620,915	$490,343
Total consolidated net sales
Total consolidated net sales

~~Inde~~x

(1) Principally industrial products.

(2) Principally other electronics and medical products.

7. INCOME TAXES

The Company's effective tax rate ~~was~~decreased to 11.8% in the first quarter of fiscal 2024, down from 16.9% in the first quarter of fiscal ~~2023, as compared to 4.1% in the first quarter of fiscal 2022.~~2023. The ~~increase~~decrease in the Company's effective tax rate principally reflects a larger tax benefit from stock option exercises recognized in the first quarter of fiscal ~~2022.~~2024. The Company recognized a discrete tax benefit from stock option exercises in both the first quarter of fiscal 2024 and 2023 ~~and 2022~~ of ~~$6.2~~$13.6 million and ~~$17.8~~$6.2 million, respectively.

Index

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

As of January 31, 2024

Quoted Prices
in Active Markets for Identical Assets
(Level 1)

Significant
Other Observable Inputs
(Level 2)

Significant Unobservable Inputs
(Level 3)

Total

Assets:

Deferred compensation plan:

Corporate-owned life insurance

$—

$218,964

$—

$218,964

Money market fund

15,317

—

15,317

Total assets

$15,317

$218,964

$—

$234,281

Liabilities:

Contingent consideration

$—

$74,385

Contingent consideration

As of October 31, 2022
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 $— $201,239 $— $201,239
Money market fund 3,477 — — 3,477
Total assets $3,477 $201,239 $— $204,716
Liabilities:
Contingent consideration $— $— $82,803 $82,803


	As of October 31, 2023
	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total
Assets:
Deferred compensation plan:
Corporate-owned life insurance	$—	$227,710	$—	$227,710
Money market fund	5,829	—	—	5,829
Total assets	$5,829	$227,710	$—	$233,539

Liabilities:
Contingent consideration	$—	$—	$71,136	$71,136

~~Inde~~x

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~~an investment in a money market ~~funds~~fund that ~~are~~is classified within Level 1. The assets of the LCP are held within an irrevocable trust and classified within other assets in the Company’s Condensed Consolidated Balance Sheets. The related liabilities of the LCP are included within other long-term liabilities and accrued expenses and other current liabilities in the Company’s Condensed Consolidated Balance Sheets and have an aggregate value of ~~$232.9~~$274.1 million as of January 31, ~~2023~~2024 and ~~$203.0~~$226.2 million as of October 31, ~~2022.~~2023.

Index

In connection with a fiscal 2023 acquisition that is part of the FSG, the Company assumed an agreement which now obligates it to pay contingent consideration of $17.5 million as certain operating entities of the acquired company met a calendar year 2023 earnings objective and obtained a certain level of new orders with deliveries scheduled in calendar year 2024, of which both targets were tied to a specific customer contract. The $17.5 million of contingent consideration accrued as of January 31, 2024 is expected to be paid in the second quarter of fiscal 2024.

As part of the agreement to acquire 80.36% of the stock of a subsidiary by the ETG in fiscal 2022, the Company may be obligated to pay contingent consideration of up to $12.1 million in fiscal 2027 based on the earnings of the acquired entity during fiscal years 2025 and 2026 provided the entity meets a certain earnings objective during each of fiscal years 2024 to 2026. As of January 31, ~~2023,~~2024, the estimated fair value of the contingent consideration was ~~$6.1~~$5.6 million.

As part of the agreement to acquire 96% of the stock of a subsidiary by the FSG in fiscal 2022, the Company may be obligated to pay contingent consideration of up to $27.4 million in fiscal 2027 based on the earnings of the acquired entity during fiscal years 2025 and 2026 provided the entity meets certain earnings objectives during each of fiscal years 2022 to 2024. As of January 31, ~~2023,~~2024, the estimated fair value of the contingent consideration was ~~$13.3~~$20.3 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~~would be obligated to pay contingent consideration of $14.1 million in fiscal 2027 ~~should~~only if the acquired entity ~~meet~~met a certain earnings objective during the five-year period following the acquisition. AsBased on the actual earnings of the acquired entity subsequent to the acquisition and forecasted earnings over the remainder of the earnout period, the Company does not expect that the required earnings objective will be met. Accordingly, as of January 31, 2024 and October 31, 2023, the estimated fair value of the contingent consideration was ~~$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 January 31, 2023, the estimated fair value of the contingent consideration was $18.0$0.0 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 $13.5 million, or ~~$10.0~~$10.1 million, in fiscal 2025 should the acquired entity meet certain earnings objectives during fiscal 2023 and 2024. As of January 31, ~~2023,~~2024, the estimated fair

~~Inde~~x

value of the contingent consideration was CAD ~~$11.1~~$12.3 million, or ~~$8.3~~$9.1 million. Additionally, the acquired entity achieved a required earnings objective during fiscal years 2021 and 2022 that entitled it to additional contingent consideration of CAD $13.5 million, or $10.0 million, which was paid in the first quarter of fiscal 2023.

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

Index

The following unobservable inputs were used to derive the estimated fair value of the Company's Level 3 contingent consideration liabilities as of January 31, ~~2023~~2024 ($ in thousands):


			Unobservable								Unobservable				Weighted
Acquisition Date							Acquisition Date	Fair Value	Input	Range		Average (1)
8-4-2023							8-4-2023	$17,500	Discount rate	0.0% - 0.0%		0.0%
				Unobservable		Weighted
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%
9-1-2022
9-1-2022								5,577	Compound annual revenue growth rate	9% - 22%		17%
			Discount rate								Discount rate		8.6% - 8.6%	8.6%

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		9,494		Compound annual revenue growth rate	(3%) - 7%	2%
				Discount rate	6.9% - 6.9%	6.9%

8-4-2021		17,957		Compound annual revenue growth rate	3% - 10%	8%
				Discount rate	7.9% - 8.6%	8.1%
7-18-2022
7-18-2022								20,295	Compound annual revenue growth rate	1% - 11%		6%
			Discount rate								Discount rate		8.6% - 8.6%	8.6%

8-18-2020	8-18-2020	8,280		Compound annual revenue growth rate	15% - 24%	22%
8-18-2020
8-18-2020								9,142	Compound annual revenue growth rate	11% - 20%		17%
			Discount rate								Discount rate		9.5% - 9.5%	9.5%
				Discount rate	8.6% - 8.6%	8.6%

9-15-2017		19,233		Compound annual revenue growth rate	0% - 6%	5%
				Discount rate	5.9% - 5.9%	5.9%

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

~~Inde~~x

Changes in the Company’s contingent consideration liabilities measured at fair value on a recurring basis using unobservable inputs (Level 3) for the three months ended January 31, ~~2023~~2024 are as follows (in thousands):


						Liabilities
Balance as of October 31, ~~2022~~2023						$~~82,803~~71,136
Payment of contingent consideration						~~(10,009)~~(20,000)
Increase in accrued contingent consideration ~~net~~						~~1,336~~1,095
Foreign currency transaction adjustments						~~255~~283
						$~~74,385~~52,514

Included in the accompanying Condensed Consolidated Balance Sheet under the following captions:
Accrued expenses and other current liabilities						$~~19,233~~26,642
Other long-term liabilities						~~55,152~~25,872
						$~~74,385~~52,514

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

Index

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 January 31, ~~2023~~2024 due to the relatively short maturity of the respective instruments. The carrying amount of ~~long-term debt~~borrowings under the Company's credit facility approximates fair value due to its variable interest ~~rates.~~rate. See Note 5, Short-Term and Long-Term Debt, for the estimated fair value of the Company’s senior unsecured notes.

~~Inde~~x

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):

Three months ended January 31,

2023

2022

Three months ended January 31,

2024

2023

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

Anti-dilutive stock options excluded

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10. OPERATING SEGMENTS

Information on the Company’s two operating segments, the FSG and the ETG, for the three months ended January 31, ~~2023~~2024 and ~~2022, respectively,~~2023 is as follows (in thousands):


						Other, Primarily Corporate and Intersegment (1)		Consolidated Totals
			Segment
			FSG	ETG
Three months ended January 31, 2023:
					Other, Primarily Corporate and Intersegment (1)					Other, Primarily Corporate and Intersegment (1)	Consolidated Totals
		Segment
			FSG
			FSG
			FSG
Three months ended January 31, 2024:
Three months ended January 31, 2024:
Three months ended January 31, 2024:
Net sales
Net sales
Net sales	Net sales		$371,278	$255,059			($5,422)		$620,915
Depreciation	Depreciation		4,178	3,938			270		8,386
Amortization	Amortization		6,731	11,669		274		18,674
Operating income	Operating income		83,609	56,537		(10,712)		129,434
Capital expenditures	Capital expenditures		6,653	4,089		104		10,846

Three months ended January 31, 2022:
Three months ended January 31, 2023:
Three months ended January 31, 2023:
Three months ended January 31, 2023:
Net sales
Net sales
Net sales	Net sales		$272,681	$222,336		($4,674)		$490,343
Depreciation	Depreciation		3,718	3,366		246		7,330
Amortization	Amortization		5,513	10,092		287		15,892
Operating income	Operating income		52,376	55,588		(9,142)		98,822
Capital expenditures	Capital expenditures		3,582	5,070		39		8,691

(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 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


			Other, Primarily Corporate	Consolidated Totals
	Segment
	FSG	ETG
Total assets as of January 31, 2024	$4,093,956	$2,889,878	$352,235	$7,336,069
Total assets as of October 31, 2023	4,006,748	2,915,300	273,015	7,195,063

11. COMMITMENTS AND CONTINGENCIES

Guarantees

As of January 31, ~~2023,~~2024, the Company has arranged for standby letters of credit aggregating ~~$22.9~~$10.8 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.~~claims.

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Product Warranty

Changes in the Company’s product warranty liability for the three months ended January 31, ~~2023~~2024 and ~~2022, respectively,~~2023 are as follows (in thousands):


			Three months ended January 31,
			2023	2022
		Three months ended January 31,				Three months ended January 31,
		2024			2024		2023
Balances as of beginning of fiscal year	Balances as of beginning of fiscal year		$3,296	$3,379
Accruals for warranties	Accruals for warranties		775	641

Warranty claims settled	Warranty claims settled		(591)	(541)
Warranty claims settled
Warranty claims settled
Balances as of January 31	Balances as of January 31		$3,480	$3,479

Litigation

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 pre-acquisition time period of 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. In connection with this investigation, the individual pled guilty to a charge of a misdemeanor conflict of interest, and has been suspended by the Company pending determination by the Navy whether the suspended employee should be debarred from government contracting. The Company is cooperating with the ~~investigation.~~investigation, and is cooperating with the Navy. 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~~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.

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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”~~Estimates” in our Annual Report on Form 10-K for the year ended October 31, ~~2022.~~2023. There have been no material changes to our critical accounting policies during the three months ended January 31, ~~2023.~~2024.

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 2023 continued to reflect the adverse impact from the COVID-19 pandemic, including its impact on our supply chain. Despite the aforementioned, we experienced continued improvement in operating results in the first quarter of fiscal 2023 as compared to the first quarter of fiscal 2022 principally reflecting improved demand for our commercial aerospace products. The Flight Support Group has reported ten consecutive quarters of improvement in net sales and operating income resulting from 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 three months ended January 31, ~~2023~~2024 have been affected by the fiscal ~~2022~~2023 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, ~~2022 and the fiscal 2023 acquisition as further detailed in Note 2, Acquisition, of the Notes to the Condensed Consolidated Financial Statements of this quarterly report.~~2023.

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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):


			Three months ended January 31,
			2023		2022
		Three months ended January 31,												Three months ended January 31,
		2024									2024				2023
Net sales	Net sales		$620,915		$490,343
Cost of sales	Cost of sales		377,116		300,133
Selling, general and administrative expenses	Selling, general and administrative expenses		114,365		91,388
Total operating costs and expenses	Total operating costs and expenses		491,481		391,521
Operating income	Operating income		$129,434		$98,822

Net sales by segment:	Net sales by segment:
Net sales by segment:
Net sales by segment:
Flight Support Group
Flight Support Group
Flight Support Group	Flight Support Group		$371,278		$272,681
Electronic Technologies Group	Electronic Technologies Group		255,059		222,336
Intersegment sales	Intersegment sales		(5,422)		(4,674)
			$620,915		$490,343
		$896,363

Operating income by segment:	Operating income by segment:
Operating income by segment:
Operating income by segment:
Flight Support Group
Flight Support Group
Flight Support Group	Flight Support Group		$83,609		$52,376
Electronic Technologies Group	Electronic Technologies Group		56,537		55,588
Other, primarily corporate	Other, primarily corporate		(10,712)		(9,142)
		$180,210
			$129,434		$98,822

Net sales
Net sales
Net sales	Net sales		100.0	%	100.0	%		100.0	%		100.0	%
Gross profit	Gross profit		39.3	%	38.8	%	Gross profit		38.7	%		39.3	%
Selling, general and administrative expenses	Selling, general and administrative expenses		18.4	%	18.6	%	Selling, general and administrative expenses		18.6	%		18.4	%
Operating income	Operating income		20.8	%	20.2	%	Operating income		20.1	%		20.8	%
Interest expense	Interest expense		(1.0	%)	(.2	%)	Interest expense		(4.3	%)		(1.0	%)
Other income	Other income		.1	%	—	%	Other income		.1	%		.1	%
Income tax expense	Income tax expense		3.4	%	.8	%	Income tax expense		1.9	%		3.4	%
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests		1.6	%	1.5	%	Net income attributable to noncontrolling interests		1.2	%		1.6	%
Net income attributable to HEICO	Net income attributable to HEICO		15.0	%	17.7	%	Net income attributable to HEICO		12.8	%		15.0	%

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Comparison of First Quarter of Fiscal ~~2023~~2024 to First Quarter of Fiscal ~~2022~~2023

Net Sales

Our consolidated net sales in the first quarter of fiscal ~~2023~~2024 increased by ~~27%~~44% to ~~a record $620.9~~$896.4 million, up from net sales of ~~$490.3~~$620.9 million in the first quarter of fiscal ~~2022.~~2023. The increase in consolidated net sales principally reflects an increase of ~~$98.6~~$247.4 million (a ~~36%~~67% increase) to a record ~~$371.3~~$618.7 million within the FSG and an increase of ~~$32.7~~$30.9 million (a ~~15%~~12% increase) to ~~$255.1~~$285.9 million within the ETG. The net sales increase in the FSG reflects $202.0 million contributed by a fiscal 2023 acquisition as well as strong organic growth of ~~25% as well as net sales of $31.5 million contributed by our fiscal 2022 acquisitions.~~12%. The FSG's organic net sales 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 $41.6 million, $16.9 million and $8.7 million within ~~our~~its aftermarket replacement parts ~~specialty products,~~ and repair and overhaul parts and services product lines resulting in net sales increases of $37.9 million and $11.0 million, respectively. The net sales increase in the ETG ~~principally~~ reflects ~~$32.8~~net sales of $39.4 million contributed by ~~our~~a fiscal ~~2022 and~~ 2023 ~~acquisitions.~~acquisition, partially offset by a 5% organic net sales decline. The ETG's organic net sales ~~were consistent with the prior year and principally reflected increased~~decline is mainly attributable to decreased demand for ~~our~~its other electronics, ~~aerospace~~medical and ~~medical~~space products resulting in net sales ~~increases~~decreases of ~~$11.2~~$7.3 million, ~~$4.5~~$4.7 million and ~~$1.8~~$2.8 million, respectively, partially offset by ~~decreased~~increased demand for ~~our defense~~its aerospace products resulting in a net sales ~~decrease~~increase of ~~$18.2~~$3.3 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 quarter of fiscal ~~2023, recent~~2024, continued cost inflation ~~and potential supply chain disruptions~~ may lead to higher sales prices during the remainder of fiscal ~~2023.~~2024.

Gross Profit and Operating Expenses

Our consolidated gross profit margin ~~improved~~was 38.7% in the first quarter of fiscal 2024, as compared to 39.3% in the first quarter of fiscal 2023 ~~up from 38.8% in the first quarter of fiscal 2022~~ principally reflecting ~~a 2.7% improvement~~decreases of .3% and .2% in the FSG's and ETG's gross profit margin, ~~partially offset by a 1.5%~~respectively. The decrease ~~in the ETG's gross profit margin. The increase~~ in the FSG's gross profit margin principally reflects ~~lower~~a .9% impact from higher inventory obsolescence ~~expenses in the first quarter of fiscal 2023 mainly due to increased demand within our aftermarket replacement parts product line, and~~expense, partially offset by the previously mentioned higher net ~~sales within our aftermarket replacement parts and specialty products product lines.~~sales. The reduction in the ETG's gross profit margin principally reflects a .5% impact from an increase in new product research and development expenses as well as the previously mentioned ~~decrease~~decreases in net sales for ~~our defense~~its other electronics, space and medical products, partially offset by ~~the previously mentioned increase in net sales~~increased demand for ~~our other electronics and~~its aerospace products. Total new product research and development expenses included within our consolidated cost of sales were $25.1 million in the first quarter of fiscal 2024, up from $20.2 million in the first quarter of fiscal ~~2023, up from $18.4 million in the first quarter of fiscal 2022.~~2023.

Our consolidated selling, general and administrative ("SG&A") expenses were $166.6 million in the first quarter of fiscal 2024, as compared to $114.4 million in the first quarter of fiscal ~~2023, as compared to $91.4 million in the first quarter of fiscal 2022.~~2023. The increase in consolidated SG&A expenses principally reflects ~~$9.9~~$49.1 million attributable to our fiscal ~~2022 and~~ 2023 acquisitions and costs incurred to support the previously mentioned net sales growth resulting in increases of $5.5 million and $2.6 million in other general and administrative expenses and other selling expenses, respectively, partially offset by a ~~$4.8~~$5.0 million ~~increase~~reduction in acquisition ~~costs mainly related to the fiscal 2023 acquisition and a $3.9 million increase in performance-based compensation expense.~~costs.

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Our consolidated SG&A expenses as a percentage of net sales ~~decreased~~were 18.6% in the first quarter of fiscal 2024, as compared to 18.4% in the first quarter of fiscal ~~2023, down from 18.6% in the first quarter of fiscal 2022.~~2023. The ~~decrease~~increase in consolidated SG&A expenses as a percentage of net sales principally reflects ~~efficiencies realized~~a .6% impact from ~~the~~ higher ~~net sales,~~intangible asset amortization expense and depreciation expense, partially offset by aan .8% impact from the previously mentioned ~~increase in~~lower acquisition costs.

Operating Income

Our consolidated operating income increased by ~~31%~~39% to $180.2 million in the first quarter of fiscal 2024, up from $129.4 million in the first quarter of fiscal ~~2023, up from $98.8 million in the first quarter of fiscal 2022.~~2023. The increase in consolidated operating income principally reflects a ~~$31.2~~$52.5 million increase (a ~~60%~~63% increase) to a record ~~$83.6~~$136.1 million in operating income of the FSG, ~~and~~partially offset by a ~~$.9~~$1.2 million ~~increase~~decrease (a 2% ~~increase)~~decrease) to ~~$56.5~~$55.3 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~~partially offset by an $11.1 million increase in intangible asset amortization expense and ~~efficiencies realized from the higher net sales volume.~~a $5.0 million increase in inventory obsolescence expense. The ~~increase~~decrease in operating income of the ETG principally reflects a lower level of SG&A efficiencies, partially offset by the previously mentioned net sales increase ~~partially offset by~~and a ~~$5.1~~$5.0 million ~~increase~~decrease in acquisition ~~costs related to the fiscal 2023 acquisition, and the previously mentioned lower gross profit margin.~~costs.

Our consolidated operating income as a percentage of net sales ~~increased~~was 20.1% in the first quarter of fiscal 2024, as compared to 20.8% in the first quarter of fiscal ~~2023, up from 20.2% in the first quarter of fiscal 2022.~~2023. The ~~increase~~decrease principally reflects ~~an increase in the FSG’s operating income as a percentage of net sales to 22.5% in the first quarter of fiscal 2023, up from 19.2% in the first quarter of fiscal 2022, partially offset by~~ a decrease in the ETG's operating income as a percentage of net sales to 19.3% in the first quarter of fiscal 2024, as compared to 22.2% in the first quarter of fiscal 2023 ~~as compared to 25.0% in the first quarter of fiscal 2022. The increase~~and a decrease in the FSG’s operating income as a percentage of net sales to 22.0% in the first quarter of fiscal 2024, as compared to 22.5% in the first quarter of fiscal 2023. The decrease in the ETG's operating income as a percentage of net sales principally reflects ~~the previously mentioned improved gross profit margin and~~ a ~~.6%~~2.7% impact from ~~a decrease~~an increase in SG&A expenses as a percentage of net sales ~~mainly reflecting~~as well as the previously mentioned ~~efficiencies.~~decrease in gross profit margin. The increase in the ETG's SG&A expenses as a percentage of net sales mainly reflects the previously mentioned lower level of efficiencies, partially offset by a 2.0% impact from the previously mentioned lower acquisition costs. The decrease in the ~~ETG's~~FSG’s operating income as a percentage of net sales principally reflects the previously mentioned lower gross profit margin and a ~~1.3% impact from an increase in SG&A expenses as a percentage of net sales mainly from a 2.0%~~.9% impact from the previously mentioned higher ~~acquisition costs,~~intangible asset amortization expense, partially offset by a ~~.4% favorable~~.9% impact from ~~a decrease in~~lower performance-based compensation expense.

Interest Expense

Interest expense increased to $38.6 million in the first quarter of fiscal 2024, up from $6.1 million in the first quarter of fiscal ~~2023, up from $.8 million~~2023. The increase in ~~the first quarter of fiscal 2022. The increase~~interest expense was principally due to ~~higher interest rates.~~an increase in the amount of outstanding debt related to fiscal 2023 acquisitions.

~~Inde~~x

Other Income

Other income in the first quarter of fiscal ~~2023~~2024 and ~~2022~~2023 was not material.

Index

Income Tax Expense

Our effective tax rate ~~was~~decreased to 11.8% in the first quarter of fiscal 2024, down from 16.9% in the first quarter of fiscal ~~2023, as compared to 4.1% in the first quarter of fiscal 2022.~~2023. The ~~increase~~decrease in our effective tax rate principally reflects a larger tax benefit from stock option exercises recognized in the first quarter of fiscal ~~2022.~~2024. We recognized a discrete tax benefit from stock option exercises in both the first quarter of fiscal 2024 and 2023 ~~and 2022~~ of ~~$6.2~~$13.6 million and ~~$17.8~~$6.2 million, respectively.

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 $10.8 million in the first quarter of fiscal 2024, as compared to $10.0 million in the first quarter of fiscal ~~2023, as compared to $7.3 million in the first quarter of fiscal 2022.~~2023. 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 2022 and 2023 acquisitions.~~held.

Net Income Attributable to HEICO

Net income attributable to HEICO increased by 7%23% to $114.7 million, or $.82 per diluted share, in the first quarter of fiscal 2024, up from $93.0 million, or $.67 per diluted share, in the first quarter of fiscal 2023 ~~up from $86.9 million, or $.63 per diluted share, in the first quarter of fiscal 2022~~ principally reflecting the previously mentioned higher consolidated operating income and lower effective tax rate, partially offset by the ~~increase in the effective tax rate.~~previously mentioned higher interest expense.

Outlook

As we look ahead to the remainder of fiscal ~~2023,~~2024, we continue to anticipate net sales growth in both the FSG and ETG, principally driven by contributions from our fiscal 2023 acquisitions and demand for the majority of our products. Additionally, ~~continued inflationary pressures and lingering supply chain disruptions stemming from the COVID-19 pandemic may lead to higher material and labor costs. During fiscal 2023,~~ we plan to continue our ~~commitments~~commitment to developing new products and services and further market penetration, ~~and an aggressive acquisition strategy~~ while maintaining our financial strength and flexibility.

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Liquidity and Capital Resources

Our principal uses of cash include acquisitions, capital expenditures, interest payments, cash dividends, distributions to noncontrolling interests and working capital needs. We ~~now~~continue to anticipate fiscal ~~2023~~2024 capital expenditures to be approximately ~~$45 to $50~~$65 million. We finance our activities primarily from our operating and financing activities, including borrowings under our revolving credit facility. The revolving credit facility ~~contains~~and senior unsecured notes contain both financial and non-financial covenants. As of January 31, ~~2023,~~2024, we were in compliance with all such covenants and our total debt to shareholders’ equity ratio was ~~28.5%~~75.4%.

Based on our current outlook, we believe that 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 ~~$76.7~~$111.7 million in the first quarter of fiscal ~~2023~~2024 and consisted primarily of net income from consolidated operations of ~~$103.0~~$125.5 million, depreciation and amortization expense of ~~$27.1~~$43.5 million (a non-cash item), and net changes in other long-term liabilities and assets related to the ~~HEICO~~ LCP of ~~$8.9~~$14.8 million (principally participant deferrals and employer contributions), ~~$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 a ~~$63.0~~$71.8 million increase in net working ~~capital and a $6.3 million payment of contingent consideration.~~capital. The increase in net working capital is inclusive of a ~~$52.0~~$50.5 million decrease in accrued expenses and other current liabilities mainly reflecting the payment of fiscal 2023 accrued performance-based compensation, a $49.8 million increase in inventories to support an increase in consolidated backlog, and a ~~$7.3~~$15.8 million increase in ~~contract~~prepaid expenses and other current assets, ~~and~~partially offset by a ~~$7.1~~$38.9 million ~~increase~~decrease in accounts receivable resulting from the timing of collections.

Net cash provided by operating activities ~~decreased~~increased by ~~$1.3~~$35.0 million in the first quarter of fiscal ~~2023~~2024, up from ~~$78.0~~$76.7 million in the first quarter of fiscal ~~2022.~~2023. The ~~decrease~~increase is principally attributable to a ~~$6.3 million payment of contingent consideration and a $5.1 million increase in net working capital, partially offset by an $8.8~~$22.5 million increase in net income from consolidated ~~operations. The~~operations and a $16.4 million increase in ~~net working capital primarily resulted from the previously mentioned increases in inventories~~depreciation and ~~accounts receivable, partially offset by increases in accrued expenses and other current liabilities and income taxes payable.~~amortization expense.

Investing Activities

Net cash used in investing activities totaled ~~$526.0~~$71.1 million in the first quarter of fiscal ~~2023~~2024 and related primarily to acquisitions of ~~$503.7~~$46.2 million, capital expenditures of $13.4 million and investments related to the LCP of ~~$11.8 million and capital expenditures of $10.8~~$12.7 million. Further details regarding our fiscal ~~2023~~2024 acquisition may be found in Note 2, Acquisition, of the Notes to Condensed Consolidated Financial Statements.

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Financing Activities

Net cash ~~provided by~~used in financing activities in the first quarter of fiscal ~~2023~~2024 totaled ~~$449.2~~$16.7 million. During the first quarter of fiscal ~~2023,~~2024, we borrowed ~~$531.0~~$50.0 million under our revolving credit facility, which was partially offset by ~~$38.0~~$15.0 million in payments made on our revolving credit facility, ~~redemptions~~$13.9 million of ~~common stock related to stock option exercises aggregating $14.8 million, $13.7~~net payments on short-term debt, $13.8 million of cash dividends paid on our common stock, ~~$11.3~~$13.8 million of contingent consideration payments and $8.8 million of distributions to noncontrolling ~~interests and $3.7 million of contingent consideration payments.~~interests.

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, ~~2022.~~2023.

New Accounting ~~Pronouncement~~Pronouncements

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

Guarantor Group Summarized Financial Information

On July 27, 2023, we completed the public offer and sale of senior unsecured notes, which consisted of $600 million principal amount of 5.25% Senior Notes due August 1, 2028 (the "2028 Notes") and $600 million principal amount of 5.35% Senior Notes due August 1, 2033 (the "2033 Notes" and, collectively with the 2028 Notes, the "Notes"). The Notes are fully and unconditionally guaranteed on a senior unsecured basis by all of our existing and future subsidiaries that guarantee our obligations under our revolving credit facility ("Credit Facility") (the “Guarantor Group”).

The Notes were issued pursuant to an Indenture, dated as of July 27, 2023 (the “Base Indenture”), between HEICO and certain of its subsidiaries (collectively, the "Subsidiary Guarantors") and Truist Bank, as trustee (the “Trustee”), as supplemented by a First Supplemental Indenture, dated as of July 27, 2023 (the “First Supplemental Indenture” and, together with the Base Indenture, the “Indenture”), between us, the Subsidiary Guarantors and the Trustee. The Notes are direct, unsecured senior obligations of HEICO and rank equally in right of payment with all of our existing and future senior unsecured indebtedness. Each Subsidiary Guarantor is owned either directly or indirectly by the Company and jointly and severally guarantee our obligations under the Notes. None of the Subsidiary Guarantors are organized outside of the U.S.

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Under the Indenture, holders of the Notes will be deemed to have consented to the release of a subsidiary guarantee provided by a subsidiary guarantor, without any action required on the part of the Trustee or any holder of the Notes, upon such subsidiary guarantor ceasing to guarantee or to be an obligor with respect to the Credit Facility. Accordingly, if the lenders under the Credit Facility release a subsidiary guarantor from its guarantee of, or obligations as a borrower under, the Credit Facility, the obligations of the subsidiary guarantors to guarantee the Notes will immediately terminate. If any of our future subsidiaries incur obligations under the Credit Facility while the Notes are outstanding, then such subsidiary will be required to guarantee the Notes.

In addition, a subsidiary guarantor will be released and relieved from all its obligations under its subsidiary guarantee in the following circumstances, each of which is permitted by the indenture:

•upon the sale or other disposition (including by way of consolidation or merger), in one transaction or a series of related transactions, of a majority of the total voting stock of such subsidiary guarantor (other than to us or any of our affiliates); or

•upon the sale or disposition of all or substantially all the property of such subsidiary guarantor (other than to any of our affiliates or another subsidiary guarantor);

provided, however, that, in each case, such transaction is permitted by the Credit Facility and after giving effect to such transaction, such subsidiary guarantor is no longer liable for any subsidiary guarantee or other obligations in respect of the Credit Facility. The subsidiary guarantee of a subsidiary guarantor also will be released if we exercise our legal defeasance, covenant defeasance option or discharge the Indenture.

We conduct our operations almost entirely through our subsidiaries. Accordingly, the Guarantor Group’s cash flow and ability to service any guaranteed registered debt securities will depend on the earnings of our subsidiaries and the distribution of those earnings to the Guarantor Group, including the earnings of the non-guarantor subsidiaries, whether by dividends, loans or otherwise. Holders of the guaranteed registered debt securities will have a direct claim only against the Guarantor Group.

The following tables include summarized financial information for the Guarantor Group (in thousands). The information for the Guarantor Group is presented on a combined basis, excluding intercompany balances and transactions between us and the Guarantor Group and excluding investments in and equity in the earnings of non-guarantor subsidiaries. The Guarantor Group’s amounts due from, amounts due to, and transactions with non-guarantor subsidiaries have been presented in separate line items. The consolidating schedules are provided in accordance with the reporting requirements of Rule 13-01 under SEC Regulation S-X for the issuer and guarantor subsidiaries.

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	As of	As of
	January 31, 2024	October 31, 2023
Current assets (excluding net intercompany receivable from non-guarantor subsidiaries)	$1,500,432	$1,440,062
Noncurrent assets	4,557,886	4,490,490
Net intercompany receivable from/ (payable to) non-guarantor subsidiaries	203,923	182,795
Current liabilities (excluding net intercompany payable to non-guarantor subsidiaries)	491,650	531,466
Noncurrent liabilities	2,978,330	2,895,592
Redeemable noncontrolling interests	250,046	252,013
Noncontrolling interests	40,663	37,786


			Three months ended
			January 31, 2024
Net sales			$734,097
Gross profit			275,205
Operating income			150,301
Net income from consolidated operations			111,617
Net income attributable to HEICO			103,945


			Three months ended
			January 31, 2024
Intercompany net sales			$557
Intercompany management fee			616
Intercompany interest income			2,156
Intercompany dividends			8,239

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,

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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 those expressed in or implied by those forward-looking ~~statements as a result of factors including, but not limited to: the~~statements. Factors that could cause such differences include:

•The severity, magnitude and duration of public health threats, such as the COVID-19 ~~pandemic ("Health Emergencies"); HEICO's~~pandemic;

•Our liquidity and the amount and timing of cash generation; ~~lower~~

•Lower commercial air travel, ~~caused by Health Emergencies and their aftermath,~~ airline fleet changes or airline purchasing decisions, which could cause lower demand for our goods and services; ~~product~~

•Product specification costs and requirements, which could cause an increase to our costs to complete contracts; ~~governmental~~

•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~~

•Our ability to introduce new products and services at profitable pricing levels, which could reduce our sales or sales growth; ~~product~~

•Product development or manufacturing difficulties, which could increase our product development and manufacturing costs and delay sales; ~~our~~and

•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; and 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.~~ revenues.

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.

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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, ~~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.2023.

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 first quarter ended January 31, ~~2023~~2024 that have materially affected, or are reasonably likely to materially affect, HEICO's internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 5. Other Events.

None of our directors or officers adopted, modified or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K, during the first quarter ended January 31, 2024.

Item 6. EXHIBITS


Exhibit						Description
22.1						Subsidiary Guarantors and Issuers of Guaranteed Securities, is incorporated by reference to Exhibit 22.1 to the Form 10-K for the year ended October 31, 2023.***

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.

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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:	~~March 1, 2023~~February 28, 2024	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)


	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