HEICO CORP [HEI] Filings

10-Q 1 hei-20240731.htm 10-Q hei-20240731

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 July 31, 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 August 26, 2024 is as follows:


Common Stock, $.01 par value	54,841,673	shares
Class A Common Stock, $.01 par value	83,756,208	shares

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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 July 31, 2024 and October 31, 2023	2

		Condensed Consolidated Statements of Operations (unaudited) for the nine and three months ended July 31, 2024 and 2023	3

		Condensed Consolidated Statements of Comprehensive Income (unaudited) for the nine and three months ended July 31, 2024 and 2023	4

		Condensed Consolidated Statements of Shareholders’ Equity (unaudited) for the nine and three months ended July 31, 2024 and 2023	5

		Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended July 31, 2024 and 2023	7

		Notes to Condensed Consolidated Financial Statements (unaudited)	8

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38

	Item 4.	Controls and Procedures	39

Part II.	Other Information

	Item 5.	Other Events	39

	Item 6.	Exhibits	40

Signatures			41

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PART I. FINANCIAL INFORMATION; Item 1. FINANCIAL STATEMENTS

HEICO CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED

(in thousands, except per share data)


	July 31, 2024	October 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$202,940	$171,048
Accounts receivable, net	525,750	509,075
Contract assets	104,412	111,702
Inventories, net	1,124,765	1,013,680
Prepaid expenses and other current assets	69,068	49,837
Total current assets	2,026,935	1,855,342

Property, plant and equipment, net	330,254	321,848
Goodwill	3,291,962	3,274,327
Intangible assets, net	1,299,870	1,357,281
Other assets	473,415	386,265
Total assets	$7,422,436	$7,195,063

LIABILITIES AND EQUITY
Current liabilities:
Short-term debt and current maturities of long-term debt	$4,208	$17,801
Trade accounts payable	207,463	205,893
Accrued expenses and other current liabilities	399,485	433,101
Income taxes payable	3,549	8,547
Total current liabilities	614,705	665,342

Long-term debt, net of current maturities	2,254,889	2,460,277
Deferred income taxes	117,033	131,846
Other long-term liabilities	509,632	379,640
Total liabilities	3,496,259	3,637,105

Commitments and contingencies (Note 11)

Redeemable noncontrolling interests (Note 3)	329,271	364,807

Shareholders’ equity:
Preferred Stock, $.01 par value per share; 10,000 shares authorized; none issued	—	—
Common Stock, $.01 par value per share; 150,000 shares authorized; 54,835 and 54,721 shares issued and outstanding	548	547
Class A Common Stock, $.01 par value per share; 150,000 shares authorized; 83,748 and 83,507 shares issued and outstanding	837	835
Capital in excess of par value	613,682	578,809
Deferred compensation obligation	6,318	6,318
HEICO stock held by irrevocable trust	(6,318)	(6,318)
Accumulated other comprehensive loss	(28,945)	(40,180)
Retained earnings	2,953,854	2,605,984
Total HEICO shareholders’ equity	3,539,976	3,145,995
Noncontrolling interests	56,930	47,156
Total shareholders’ equity	3,596,906	3,193,151
Total liabilities and equity	$7,422,436	$7,195,063

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

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HEICO CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS – UNAUDITED

(in thousands, except per share data)


	Nine months ended July 31,		Three months ended July 31,
	2024	2023	2024	2023

Net sales	$2,844,004	$2,031,658	$992,246	$722,902

Operating costs and expenses:
Cost of sales	1,736,170	1,242,613	602,976	444,168
Selling, general and administrative expenses	502,025	353,154	172,824	129,367

Total operating costs and expenses	2,238,195	1,595,767	775,800	573,535

Operating income	605,809	435,891	216,446	149,367

Interest expense	(113,907)	(29,561)	(36,788)	(12,120)
Other income	1,798	1,888	659	906

Income before income taxes and noncontrolling interests	493,700	408,218	180,317	138,153

Income tax expense	85,500	77,400	32,500	25,400

Net income from consolidated operations	408,200	330,818	147,817	112,753

Less: Net income attributable to noncontrolling interests	33,779	30,648	11,240	10,730

Net income attributable to HEICO	$374,421	$300,170	$136,577	$102,023

Net income per share attributable to HEICO shareholders:
Basic	$2.71	$2.19	$.99	$.74
Diluted	$2.67	$2.17	$.97	$.74

Weighted average number of common shares outstanding:
Basic	138,389	136,859	138,516	137,006
Diluted	140,086	138,616	140,305	138,668

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

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HEICO CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME – UNAUDITED

(in thousands)


	Nine months ended July 31,		Three months ended July 31,
	2024	2023	2024	2023

Net income from consolidated operations	$408,200	$330,818	$147,817	$112,753
Other comprehensive income:
Foreign currency translation adjustments	11,572	31,264	6,954	885
Amortization of unrealized loss on defined benefit pension plan, net of tax	39	43	13	15
Total other comprehensive income	11,611	31,307	6,967	900
Comprehensive income from consolidated operations	419,811	362,125	154,784	113,653
Net income attributable to noncontrolling interests	33,779	30,648	11,240	10,730
Foreign currency translation adjustments attributable to noncontrolling interests	376	1,465	235	(69)
Comprehensive income attributable to noncontrolling interests	34,155	32,113	11,475	10,661
Comprehensive income attributable to HEICO	$385,656	$330,012	$143,309	$102,992

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

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HEICO CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY - UNAUDITED

For the Nine Months Ended July 31, 2024 and 2023

(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, 2023	$364,807	$547	$835	$578,809	$6,318	($6,318)	($40,180)	$2,605,984	$47,156	$3,193,151
Comprehensive income	23,725	—	—	—	—	—	11,235	374,421	10,430	396,086
Cash dividends ($.21 per share)	—	—	—	—	—	—	—	(29,069)	—	(29,069)
Issuance of common stock to HEICO Savings and Investment Plan	—	—	—	11,613	—	—	—	—	—	11,613
Share-based compensation expense	—	—	—	14,088	—	—	—	—	—	14,088
Proceeds from stock option exercises	—	1	2	6,384	—	—	—	—	—	6,387
Redemptions of common stock related to stock option exercises	—	—	—	(4,836)	—	—	—	—	—	(4,836)

Acquisitions of noncontrolling interests	(26,567)	—	—	—	—	—	—	—	—	—
Distributions to noncontrolling interests	(22,699)	—	—	—	—	—	—	—	(656)	(656)
Adjustments to redemption amount of redeemable noncontrolling interests	(2,082)	—	—	—	—	—	—	2,082	—	2,082


Other	(7,913)	—	—	7,624	—	—	—	436	—	8,060
Balances as of July 31, 2024	$329,271	$548	$837	$613,682	$6,318	($6,318)	($28,945)	$2,953,854	$56,930	$3,596,906


		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	$2,648,306
Comprehensive income	22,745	—	—	—	—	—	29,842	300,170	9,368	339,380
Cash dividends ($.20 per share)	—	—	—	—	—	—	—	(27,370)	—	(27,370)
Issuance of common stock to HEICO Savings and Investment Plan	—	—	—	9,222	—	—	—	—	—	9,222
Share-based compensation expense	—	—	—	10,412	—	—	—	—	—	10,412
Proceeds from stock option exercises	—	2	2	5,480	—	—	—	—	—	5,484
Redemptions of common stock related to stock option exercises	—	—	—	(14,847)	—	—	—	—	—	(14,847)
Noncontrolling interests assumed related to acquisitions	12,137	—	—	—	—	—	—	—	—	—
Distributions to noncontrolling interests	(23,226)	—	—	—	—	—	—	—	(6,708)	(6,708)
Acquisitions of noncontrolling interests	(1,059)	—	—	(1,674)	—	—	—	—	—	(1,674)
Adjustments to redemption amount of redeemable noncontrolling interests	3,334	—	—	—	—	—	—	(3,334)	—	(3,334)

Deferred compensation obligation	—	—	—	—	1,021	(1,021)	—	—	—	—
Other	2,351	—	—	512	—	—	—	(186)	(1)	325
Balances as of July 31, 2023	$343,883	$547	$823	$406,442	$6,318	($6,318)	($16,657)	$2,523,212	$44,829	$2,959,196

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

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HEICO CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY - UNAUDITED

For the Three Months Ended July 31, 2024 and 2023

(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 April 30, 2024	$368,369	$548	$836	$598,699	$6,318	($6,318)	($35,677)	$2,825,021	$53,379	$3,442,806
Comprehensive income	7,726	—	—	—	—	—	6,732	136,577	3,749	147,058
Cash dividends ($.11 per share)	—	—	—	—	—	—	—	(15,238)	—	(15,238)
Issuance of common stock to HEICO Savings and Investment Plan	—	—	—	2,313	—	—	—	—	—	2,313
Share-based compensation expense	—	—	—	4,625	—	—	—	—	—	4,625
Proceeds from stock option exercises	—	—	1	2,235	—	—	—	—	—	2,236
Redemptions of common stock related to stock option exercises	—	—	—	(2,484)	—	—	—	—	—	(2,484)
Acquisitions of noncontrolling interests	(23,402)	—	—	—	—	—	—	—	—	—
Distributions to noncontrolling interests	(7,732)	—	—	—	—	—	—	—	(198)	(198)
Adjustments to redemption amount of redeemable noncontrolling interests	(6,690)	—	—	—	—	—	—	6,690	—	6,690

Other	(9,000)	—	—	8,294	—	—	—	804	—	9,098
Balances as of July 31, 2024	$329,271	$548	$837	$613,682	$6,318	($6,318)	($28,945)	$2,953,854	$56,930	$3,596,906


		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 April 30, 2023	$345,833	$547	$823	$398,991	$6,171	($6,171)	($17,626)	$2,435,155	$41,777	$2,859,667
Comprehensive income	7,389	—	—	—	—	—	969	102,023	3,272	106,264
Cash dividends ($.10 per share)	—	—	—	—	—	—	—	(13,702)	—	(13,702)
Issuance of common stock to HEICO Savings and Investment Plan	—	—	—	1,462	—	—	—	—	—	1,462
Share-based compensation expense	—	—	—	4,357	—	—	—	—	—	4,357
Proceeds from stock option exercises	—	—	—	1,410	—	—	—	—	—	1,410
Redemptions of common stock related to stock option exercises	—	—	—	(36)	—	—	—	—	—	(36)
Noncontrolling interests assumed related to acquisitions	(2,505)	—	—	—	—	—	—	—	—	—
Distributions to noncontrolling interests	(7,065)	—	—	—	—	—	—	—	(219)	(219)
Adjustments to redemption amount of redeemable noncontrolling interests	231	—	—	—	—	—	—	(231)	—	(231)
Deferred compensation obligation	—	—	—	—	147	(147)	—	—	—	—
Other	—	—	—	258	—	—	—	(33)	(1)	224
Balances as of July 31, 2023	$343,883	$547	$823	$406,442	$6,318	($6,318)	($16,657)	$2,523,212	$44,829	$2,959,196

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)


	Nine months ended July 31,
	2024	2023
Operating Activities:
Net income from consolidated operations	$408,200	$330,818
Adjustments to reconcile net income from consolidated operations to net cash provided by operating activities:
Depreciation and amortization	130,646	86,315
Share-based compensation expense	14,088	10,412
Employer contributions to HEICO Savings and Investment Plan	13,677	10,647
Impairment of intangible assets	6,000	—
Deferred income tax benefit	(15,227)	(22,974)
(Decrease) increase in accrued contingent consideration, net	(10,892)	1,218
Payment of contingent consideration	(6,203)	(6,299)
Amendment and termination of contingent consideration agreement	—	(9,057)
Changes in operating assets and liabilities, net of acquisitions:
Increase in accounts receivable	(15,334)	(15,615)
Decrease (increase) in contract assets	9,009	(7,863)
Increase in inventories	(102,183)	(86,681)
(Increase) decrease in prepaid expenses and other current assets	(14,821)	1,302
Increase (decrease) in trade accounts payable	995	(1,685)
(Decrease) increase in accrued expenses and other current liabilities	(1,113)	12,164
Decrease in income taxes payable	(9,534)	(4,967)
Net changes in other long-term liabilities and assets related to HEICO Leadership Compensation Plan	19,550	11,734
Other	39,889	(9,112)
Net cash provided by operating activities	466,747	300,357

Investing Activities:
Acquisitions, net of cash acquired	(55,208)	(526,702)
Capital expenditures	(42,175)	(34,176)
Investments related to HEICO Leadership Compensation Plan	(16,510)	(14,000)
Other	1,743	689
Net cash used in investing activities	(112,150)	(574,189)

Financing Activities:
Payments on revolving credit facility	(255,000)	(839,000)
Proceeds from issuance of senior unsecured notes	—	1,189,452
Borrowings on revolving credit facility	50,000	564,000
Cash dividends paid	(29,069)	(27,370)
Acquisitions of noncontrolling interests	(26,567)	(2,733)
Payment of contingent consideration	(24,797)	(12,610)
Distributions to noncontrolling interests	(23,302)	(29,934)
Payments on short-term debt, net	(13,924)	(404)
Redemptions of common stock related to stock option exercises	(4,836)	(14,847)
Debt issuance costs	—	(9,055)
Proceeds from stock option exercises	6,387	5,484
Other	(2,939)	1,098
Net cash (used in) provided by financing activities	(324,047)	824,081

Effect of exchange rate changes on cash	1,342	4,510

Net increase in cash and cash equivalents	31,892	554,759
Cash and cash equivalents at beginning of year	171,048	139,504
Cash and cash equivalents at end of period	$202,940	$694,263

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

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

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

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

New Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which expands reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a segment's profit or loss. The ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment's profit or loss in assessing segment performance and deciding how to allocate resources. Additionally, ASU 2023-07 requires all segment profit or loss and assets disclosures to be provided on an annual and interim basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, or in fiscal 2025 for HEICO, and interim periods within fiscal years beginning one year later. Early adoption is permitted and the amendments must be applied retrospectively to all prior periods presented. The adoption of this

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guidance will not affect the Company's consolidated results of operations, financial position or cash flows and the Company is currently evaluating the effect the guidance will have on its disclosures.

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

2. ACQUISITIONS

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

In May 2024, the Company, through the same subsidiary of HFSC that completed the above referenced acquisition in December 2023, completed a second arrangement with Honeywell International under which it acquired licenses and certain assets to further enhance the manufacturing of new products, including screens for a military variant of the Boeing 737NG/777 Cockpit Display and Legacy Displays product lines. The purchase price was paid in cash using cash provided by operating activities and is not material or significant to the Company's condensed consolidated financial statements.

The allocation of the total consideration for the fiscal 2024 acquisitions to the tangible and identifiable intangible assets acquired is preliminary until the Company obtains final information regarding their fair values. However, the Company does not expect any adjustment to such allocations to be material to the Company's consolidated financial statements. The operating results of the fiscal 2024 acquisitions were included in the Company’s results of operations as of each effective acquisition date. The amount of net sales and earnings of the fiscal 2024 acquisitions included in the Condensed Consolidated Statements of Operations for the nine and three months ended July 31, 2024, is not material. Had the fiscal 2024 acquisitions occurred as of November 1, 2022, net sales, net income from consolidated operations, net income attributable to HEICO, and basic and diluted net income per share attributable to HEICO

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shareholders on a pro forma basis for the nine and three months ended July 31, 2024, and 2023 would not have been materially different from the reported amounts.

3. SELECTED FINANCIAL STATEMENT INFORMATION

Accounts Receivable


(in thousands)	July 31, 2024	October 31, 2023
Accounts receivable	$537,690	$521,696
Less: Allowance for doubtful accounts	(11,940)	(12,621)
Accounts receivable, net	$525,750	$509,075

Inventories


(in thousands)	July 31, 2024	October 31, 2023
Finished products	$666,436	$622,395
Work in process	95,866	79,789
Materials, parts, assemblies and supplies	362,463	311,496
Inventories, net of valuation reserves	$1,124,765	$1,013,680

Property, Plant and Equipment


(in thousands)	July 31, 2024	October 31, 2023
Land	$19,883	$19,706
Buildings and improvements	211,443	202,499
Machinery, equipment and tooling	410,971	386,602
Construction in progress	32,677	25,867
	674,974	634,674
Less: Accumulated depreciation and amortization	(344,720)	(312,826)
Property, plant and equipment, net	$330,254	$321,848

Accrued Customer Rebates and Credits

The aggregate amount of accrued customer rebates and credits included within accrued expenses and other current liabilities in the accompanying Condensed Consolidated Balance Sheets was $25.9 million as of July 31, 2024 and $24.5 million as of October 31, 2023. The total customer rebates and credits deducted within net sales for the nine months ended July 31, 2024 and 2023 was $8.5 million and $6.1 million, respectively. The total customer rebates and credits deducted within net sales for the three months ended July 31, 2024 and 2023 was $2.7 million and $1.9 million, respectively.

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Research and Development Expenses

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


	Nine months ended July 31,		Three months ended July 31,
	2024	2023	2024	2023
R&D expenses	$82,810	$68,499	$29,779	$25,365

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):


	July 31, 2024	October 31, 2023
Redeemable at fair value	$291,213	$308,472
Redeemable based on a multiple of future earnings	38,058	56,335
Redeemable noncontrolling interests	$329,271	$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 2017 exercised their option to cause the Company to purchase one-half of the noncontrolling interest in fiscal 2022 and the remaining one-half in fiscal 2024. Accordingly, the Company acquired the remaining 9.95% equity interest in May 2024.

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

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

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Accumulated Other Comprehensive Loss

Changes in the components of accumulated other comprehensive loss for the nine months ended July 31, 2024 are as follows (in thousands):


	Foreign Currency Translation	Defined Benefit Pension Plan	Accumulated Other Comprehensive Loss
Balances as of October 31, 2023	($39,165)	($1,015)	($40,180)
Unrealized gain	11,196	—	11,196
Amortization of unrealized loss	—	39	39
Balances as of July 31, 2024	($27,969)	($976)	($28,945)

4. GOODWILL AND OTHER INTANGIBLE ASSETS

Changes in the carrying amount of goodwill by operating segment for the nine months ended July 31, 2024 are as follows (in thousands):


	Segment		Consolidated Totals
	FSG	ETG
Balances as of October 31, 2023	$1,824,305	$1,450,022	$3,274,327
Goodwill acquired	12,158	—	12,158
Foreign currency translation adjustments	950	4,963	5,913
Adjustments to goodwill	(1,249)	813	(436)
Balances as of July 31, 2024	$1,836,164	$1,455,798	$3,291,962

The goodwill acquired pertains to the fiscal 2024 acquisitions described in Note 2, Acquisitions, and represents the residual value after the allocation of the total consideration to the tangible and identifiable intangible assets acquired. The Company estimates that $11 million of the goodwill acquired in fiscal 2024 will be deductible for income tax purposes. Foreign currency translation adjustments are included in other comprehensive income (loss) in the Company's Condensed Consolidated Statements of Comprehensive Income. The adjustments to goodwill represent immaterial measurement period adjustments to the allocation of the purchase consideration of certain fiscal 2023 acquisitions.

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


	As of July 31, 2024			As of October 31, 2023
	Gross Carrying Amount	Accumulated Amortization	Net Carrying Amount	Gross Carrying Amount	Accumulated Amortization	Net Carrying Amount
Amortizing Assets:
Customer relationships	$989,714	($294,271)	$695,443	$967,090	($227,089)	$740,001
Intellectual property	448,196	(128,504)	319,692	448,336	(121,503)	326,833
Other	8,639	(7,678)	961	8,685	(7,404)	1,281
	1,446,549	(430,453)	1,016,096	1,424,111	(355,996)	1,068,115
Non-Amortizing Assets:
Trade names	283,774	—	283,774	289,166	—	289,166
	$1,730,323	($430,453)	$1,299,870	$1,713,277	($355,996)	$1,357,281

During the third quarter of fiscal 2024, the Company recognized an impairment loss of $6.0 million from the write-down of a trade name of a subsidiary within the ETG due to a reduction in the expected future cash flows associated with such intangible asset. The impairment loss was recorded as a component of selling, general and administrative ("SG&A") expenses in the Company's Condensed Consolidated Statement of Operations. See Note 8, Fair Value Measurements, for additional information regarding the Company’s impairment loss.

Amortization expense related to intangible assets for the nine months ended July 31, 2024 and 2023 was $91.5 million and $55.5 million, respectively. Amortization expense related to intangible assets for the three months ended July 31, 2024 and 2023 was $30.7 million and $18.6 million, respectively. Amortization expense related to intangible assets for the remainder of fiscal 2024 is estimated to be $30.3 million. Amortization expense for each of the next five fiscal years and thereafter is estimated to be $117.3 million in fiscal 2025, $111.5 million in fiscal 2026, $106.8 million in fiscal 2027, $100.8 million in fiscal 2028, $95.4 million in fiscal 2029, and $454.0 million thereafter.

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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):


	July 31, 2024	October 31, 2023
Borrowings under revolving credit facility	$1,045,000	$1,250,000
2028 senior unsecured notes	600,000	600,000
2033 senior unsecured notes	600,000	600,000
Finance leases and notes payable	26,298	28,024
Less: Debt discount and debt issuance costs	(12,201)	(13,478)
	2,259,097	2,464,546
Less: Current maturities of long-term debt	(4,208)	(4,269)
	$2,254,889	$2,460,277

Revolving Credit Facility

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

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

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	July 31, 2024		October 31, 2023
	Carrying Value	Fair Value	Carrying Value	Fair Value
2028 Notes	$594,982	$609,360	$594,158	$579,762
2033 Notes	592,817	607,248	592,364	552,594
Total	$1,187,799	$1,216,608	$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 and other long-term liabilities in the Company’s Condensed Consolidated Balance Sheets.

Changes in the Company’s contract assets and liabilities for the nine months ended July 31, 2024 are as follows (in thousands):


	July 31, 2024	October 31, 2023	Change
Contract assets, current	$104,412	$111,702	($7,290)

Contract liabilities, current	69,727	87,556	(17,829)
Contract liabilities, long-term	54,953	—	54,953
Total contract liabilities	124,680	87,556	37,124

Net contract (liabilities) assets	($20,268)	$24,146	($44,414)

The decrease in the Company's contract assets during the first nine months of fiscal 2024 principally reflects billings on certain customer contracts in excess of amounts recorded as unbilled receivables on certain other customer contracts using an over-time revenue recognition model, mainly at the ETG.

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

The amount of revenue that the Company recognized during the nine and three months ended July 31, 2024 that was included in contract liabilities as of the beginning of fiscal 2024 was $51.3 million and $8.4 million, respectively.

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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 July 31, 2024, the Company had $1,862.7 million of remaining performance obligations associated with firm contracts pertaining to the majority of the products offered by the FSG and ETG. The Company will recognize net sales as these obligations are satisfied. The Company expects to recognize $542.8 million of this amount during the remainder of fiscal 2024 and $1,319.9 million thereafter, of which a little more than half is expected to occur in fiscal 2025.

Disaggregation of Revenue

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


	Nine months ended July 31,		Three months ended July 31,
	2024	2023	2024	2023
Flight Support Group:
Aftermarket replacement parts (1)	$1,231,578	$665,936	$432,699	$238,950
Repair and overhaul parts and services (2)	433,658	229,925	149,895	80,924
Specialty products (3)	282,338	272,659	99,032	85,166
Total net sales	1,947,574	1,168,520	681,626	405,040

Electronic Technologies Group:
Electronic component parts primarily for defense, space and aerospace equipment (4)	732,378	644,239	257,974	248,919
Electronic component parts for equipment in various other industries (5)	195,015	238,446	64,155	76,948
Total net sales	927,393	882,685	322,129	325,867

Intersegment sales	(30,963)	(19,547)	(11,509)	(8,005)

Total consolidated net sales	$2,844,004	$2,031,658	$992,246	$722,902

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

(2) Includes primarily the sale of parts consumed in various repair and overhaul services on selected jet engine and aircraft components, avionics, instruments, composites and flight surfaces of commercial and military aircraft.

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

(4) Includes various component parts such as electro-optical infrared simulation and test equipment, electro-optical laser products, electro-optical, microwave and other power equipment, high-speed

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interface products, power conversion products, underwater locator beacons, emergency locator transmission beacons, traveling wave tube amplifiers, microwave power modules, a wide variety of memory products and radio frequency (RF) and microwave products, crashworthy and ballistically self-sealing auxiliary fuel systems, high performance communications and electronic intercept receivers and tuners, high performance active antenna systems and airborne antennas, technical surveillance countermeasures (TSCM) equipment, custom high power filters and filter assemblies, radiation assurance services and products, and high-reliability, complex, passive electronic components and rotary joint assemblies.

(5) Includes various component parts such as electromagnetic and radio frequency interference shielding, high voltage interconnection devices, high voltage advanced power electronics, harsh environment 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):


	Nine months ended July 31,		Three months ended July 31,
	2024	2023	2024	2023
Flight Support Group:
Aerospace	$1,439,507	$811,962	$499,917	$288,069
Defense and Space	449,838	295,686	161,160	98,777
Other (1)	58,229	60,872	20,549	18,194
Total net sales	1,947,574	1,168,520	681,626	405,040

Electronic Technologies Group:
Defense and Space	470,427	413,761	169,670	153,190
Other (2)	295,089	335,786	94,647	119,992
Aerospace	161,877	133,138	57,812	52,685
Total net sales	927,393	882,685	322,129	325,867

Intersegment sales	(30,963)	(19,547)	(11,509)	(8,005)

Total consolidated net sales	$2,844,004	$2,031,658	$992,246	$722,902

(1) Principally industrial products.

(2) Principally other electronics and medical products.

7. INCOME TAXES

The Company's effective tax rate decreased to 17.3% in the first nine months of fiscal 2024, down from 19.0% in the first nine months of fiscal 2023. The decrease in the Company's effective tax rate principally reflects a larger tax benefit from stock option exercises recognized in the first quarter of fiscal 2024. The Company recognized a discrete tax benefit from stock

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option exercises in both the first quarter of fiscal 2024 and 2023 of $13.6 million and $6.2 million, respectively. Additionally, the decrease in the Company's effective tax rate reflects the prior year unfavorable impact of the portion of acquisition expenses that was not deductible for income tax purposes.

The Company's effective tax rate decreased to 18.0% in the third quarter of fiscal 2024, down from 18.4% in the third quarter of fiscal 2023. The decrease in the Company's effective tax rate principally reflects the prior year unfavorable impact of the portion of acquisition expenses that was not deductible for income tax purposes.

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 July 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	$—	$302,432	$—	$302,432
Money market fund	6,771	—	—	6,771
Total assets	$6,771	$302,432	$—	$309,203

Liabilities:
Contingent consideration	$—	$—	$29,253	$29,253


	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

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

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represent cash surrender values of life insurance policies, which derive their fair values from investments in mutual funds that are managed by an insurance company, and are classified within Level 2 and valued using a market approach. Certain other assets of the LCP represent an investment in a money market fund that is classified within Level 1. The assets of the LCP are held within an irrevocable trust and classified within other assets in the Company’s Condensed Consolidated Balance Sheets. The related liabilities of the LCP are included within other long-term liabilities and accrued expenses and other current liabilities in the Company’s Condensed Consolidated Balance Sheets and have an aggregate value of $307.4 million as of July 31, 2024 and $226.2 million as of October 31, 2023.

In connection with a fiscal 2023 acquisition that is part of the FSG, the Company assumed an agreement which may have obligated it to pay contingent consideration of $17.5 million if certain operating entities of the acquired company met a calendar year 2023 earnings objective and obtained a certain level of new orders with deliveries scheduled in calendar year 2024, of which both targets were tied to a specific customer contract. Both requirements were met as of October 31, 2023. However, payment of the earnout was also predicated on no indication of a significant change with respect to the underlying customer agreement. In the second quarter of fiscal 2024, the customer notified the Company that it intends to reduce its future orders. As a result, the parties to this agreement agreed to settle on a specific contingent consideration amount of $11.0 million. Accordingly, the $17.3 million estimated fair value of the contingent consideration as of October 31, 2023 was reduced to $11.0 million as of April 30, 2024 and paid in the third 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. Based on the fiscal 2024 forecasted earnings of the acquired entity, the Company does not expect that the required earnings objective will be met. Accordingly, the $5.5 million estimated fair value of the contingent consideration as of October 31, 2023 was reversed in the third quarter of fiscal 2024.

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 July 31, 2024, the estimated fair value of the contingent consideration was $21.1 million.

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

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of July 31, 2024 and October 31, 2023, the Company did not accrue any contingent consideration for this agreement.

As part of the agreement to acquire 89.99% of the equity interests of a subsidiary by the ETG in fiscal 2020, the Company may be obligated to pay contingent consideration of up to CAD $13.5 million, or $9.8 million, in fiscal 2025 should the acquired entity meet certain earnings objectives during fiscal 2023 and 2024. As of July 31, 2024, the estimated fair value of the contingent consideration was CAD $11.2 million, or $8.1 million.

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

The following unobservable inputs were used to derive the estimated fair value of the Company's Level 3 contingent consideration liabilities as of July 31, 2024:



Acquisition	Fair Value	Unobservable		Weighted
Date	(in thousands)	Input	Range	Average (1)
7-18-2022	$21,134	Compound annual revenue growth rate	1% - 11%	6%
		Discount rate	8.7% - 8.7%	8.7%

8-18-2020	8,119	Compound annual revenue growth rate	11% - 13%	12%
		Discount rate	9.8% - 9.8%	9.8%

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

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

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						Liabilities
Balance as of October 31, 2023						$71,136
Payment of contingent consideration						(31,000)
Decrease in accrued contingent consideration, net						(10,892)
Foreign currency transaction adjustments						9
						$29,253

Included in the accompanying Condensed Consolidated Balance Sheet under the following captions:
Accrued expenses and other current liabilities						$8,119
Other long-term liabilities						21,134
						$29,253

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

The carrying amounts of the Company’s cash and cash equivalents, accounts receivable, trade accounts payable and accrued expenses and other current liabilities approximate fair value as of July 31, 2024 due to the relatively short maturity of the respective instruments. The carrying amount of borrowings under the Company's credit facility approximates fair value due to its variable interest rate. See Note 5, Short-Term and Long-Term Debt, for the estimated fair value of the Company’s senior unsecured notes.

During the third quarter of fiscal 2024, a non-amortizing trade name within the ETG was measured at fair value on a nonrecurring basis, resulting in the recognition of an impairment loss of $6.0 million (see Note 4, Goodwill and Other Intangible Assets). The fair value of this nonfinancial asset as of July 31, 2024, which is classified within Level 3, and the related impairment loss recognized in the third quarter of fiscal 2024 are as follows (in thousands):

Carrying Amount

Impairment Loss

Fair Value (Level 3)

Asset:

Trade name

$7,800

($6,000)

HEICO CORP [HEI] Filings

HEICO CORP [HEI-A] Filings