HEICO CORP [HEI] Filings

10-Q 1 hei-20220430.htm 10-Q hei-20220430

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

						For the quarterly period ended April 30, 2022

						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 May 23, 2022 is as follows:


Common Stock, $.01 par value	54,503,703	shares
Class A Common Stock, $.01 par value	81,453,412	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 April 30, 2022 and October 31, 2021	2

		Condensed Consolidated Statements of Operations (unaudited) for the six and three months ended April 30, 202 2 and 202 1	3

		Condensed Consolidated Statements of Comprehensive Income (unaudited) for the six and three months ended April 30, 202 2 and 202 1	4

		Condensed Consolidated Statements of Shareholders’ Equity (unaudited) for the six and three months ended April 30, 202 2 and 202 1	5

		Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended April 30, 202 2 and 202 1	7

		Notes to Condensed Consolidated Financial Statements (unaudited)	8

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

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35

	Item 4.	Controls and Procedures	35

Part II.	Other Information

	Item 6.	Exhibits	36

Signatures			37

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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)


	April 30, 2022	October 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$117,318	$108,298
Accounts receivable, net	269,850	244,919
Contract assets	79,598	80,073
Inventories, net	519,498	478,050
Prepaid expenses and other current assets	46,461	26,045
Total current assets	1,032,725	937,385

Property, plant and equipment, net	193,558	193,638
Goodwill	1,511,466	1,450,395
Intangible assets, net	624,917	582,307
Other assets	322,667	334,682
Total assets	$3,685,333	$3,498,407

LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt	$1,781	$1,515
Trade accounts payable	97,089	85,544
Accrued expenses and other current liabilities	203,289	206,857
Income taxes payable	2,033	964
Total current liabilities	304,192	294,880

Long-term debt, net of current maturities	264,095	234,983
Deferred income taxes	42,629	40,761
Other long-term liabilities	350,016	378,257
Total liabilities	960,932	948,881

Commitments and contingencies (Note 11)

Redeemable noncontrolling interests (Note 3)	303,927	252,587

Shareholders’ equity:
Preferred Stock, $.01 par value per share; 10,000 shares authorized; none issued	—	—
Common Stock, $.01 par value per share; 150,000 shares authorized; 54,504 and 54,264 shares issued and outstanding	545	543
Class A Common Stock, $.01 par value per share; 150,000 shares authorized; 81,449 and 81,224 shares issued and outstanding	814	812
Capital in excess of par value	311,053	320,747
Deferred compensation obligation	5,297	5,297
HEICO stock held by irrevocable trust	(5,297)	(5,297)
Accumulated other comprehensive loss	(30,554)	(8,552)
Retained earnings	2,100,178	1,949,521
Total HEICO shareholders’ equity	2,382,036	2,263,071
Noncontrolling interests	38,438	33,868
Total shareholders’ equity	2,420,474	2,296,939
Total liabilities and equity	$3,685,333	$3,498,407

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

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HEICO CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS – UNAUDITED

(in thousands, except per share data)


	Six months ended April 30,		Three months ended April 30,
	2022	2021	2022	2021

Net sales	$1,029,156	$884,553	$538,813	$466,651

Operating costs and expenses:
Cost of sales	627,717	546,346	327,584	286,878
Selling, general and administrative expenses	179,840	161,174	88,452	83,025

Total operating costs and expenses	807,557	707,520	416,036	369,903

Operating income	221,599	177,033	122,777	96,748

Interest expense	(1,775)	(4,531)	(979)	(2,083)
Other income	540	1,017	314	306

Income before income taxes and noncontrolling interests	220,364	173,519	122,112	94,971

Income tax expense	33,000	20,800	29,000	18,500

Net income from consolidated operations	187,364	152,719	93,112	76,471

Less: Net income attributable to noncontrolling interests	15,433	11,450	8,102	5,798

Net income attributable to HEICO	$171,931	$141,269	$85,010	$70,673

Net income per share attributable to HEICO shareholders:
Basic	$1.27	$1.04	$.63	$.52
Diluted	$1.25	$1.03	$.62	$.51

Weighted average number of common shares outstanding:
Basic	135,763	135,252	135,891	135,294
Diluted	137,916	137,778	137,867	137,814

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

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HEICO CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME – UNAUDITED

(in thousands)


	Six months ended April 30,		Three months ended April 30,
	2022	2021	2022	2021

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

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

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HEICO CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY - UNAUDITED

For the Six Months Ended April 30, 2022 and 2021

(in thousands, except per share data)


		HEICO Shareholders' Equity
	Redeemable Noncontrolling Interests	Common Stock	Class A Common Stock	Capital in Excess of Par Value	Deferred Compensation Obligation	HEICO Stock Held by Irrevocable Trust	Accumulated Other Comprehensive Loss	Retained Earnings	Noncontrolling Interests	Total Shareholders' Equity
Balances as of October 31, 2021	$252,587	$543	$812	$320,747	$5,297	($5,297)	($8,552)	$1,949,521	$33,868	$2,296,939
Comprehensive income (loss)	9,262	—	—	—	—	—	(22,002)	171,931	5,178	155,107
Cash dividends ($.09 per share)	—	—	—	—	—	—	—	(12,227)	—	(12,227)
Issuance of common stock to HEICO Savings and Investment Plan	—	—	—	7,739	—	—	—	—	—	7,739
Share-based compensation expense	—	—	—	6,855	—	—	—	—	—	6,855
Proceeds from stock option exercises	—	3	3	1,604	—	—	—	—	—	1,610
Redemptions of common stock related to stock option exercises	—	(1)	(1)	(23,690)	—	—	—	—	—	(23,692)
Noncontrolling interests assumed related to acquisitions	39,235	—	—	—	—	—	—	—	—	—
Distributions to noncontrolling interests	(9,968)	—	—	—	—	—	—	—	(608)	(608)
Adjustments to redemption amount of redeemable noncontrolling interests	9,047	—	—	—	—	—	—	(9,047)	—	(9,047)

Other	3,764	—	—	(2,202)	—	—	—	—	—	(2,202)
Balances as of April 30, 2022	$303,927	$545	$814	$311,053	$5,297	($5,297)	($30,554)	$2,100,178	$38,438	$2,420,474


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

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

Index

HEICO CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY - UNAUDITED

For the Three Months Ended April 30, 2022 and 2021

(in thousands, except per share data)


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


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

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)


	Six months ended April 30,
	2022	2021
Operating Activities:
Net income from consolidated operations	$187,364	$152,719
Adjustments to reconcile net income from consolidated operations to net cash provided by operating activities:
Depreciation and amortization	46,707	45,919
Share-based compensation expense	6,855	4,271
Employer contributions to HEICO Savings and Investment Plan	5,364	5,046
Deferred income tax provision (benefit)	2,080	(8,487)
(Decrease) increase in accrued contingent consideration, net	(1,773)	659
Changes in operating assets and liabilities, net of acquisitions:
Increase in accounts receivable	(20,263)	(3,795)
Decrease in contract assets	1,778	596
(Increase) decrease in inventories	(42,766)	2,932
Increase in prepaid expenses and other current assets	(8,974)	(12,032)
Increase in trade accounts payable	8,137	10,843
(Decrease) increase in accrued expenses and other current liabilities	(15,946)	1,981
Decrease in income taxes payable	(9,343)	(4,076)
Net changes in other long-term liabilities and assets related to HEICO Leadership Compensation Plan	13,356	11,826
Other	2,177	1,710
Net cash provided by operating activities	174,753	210,112

Investing Activities:
Acquisitions, net of cash acquired	(105,533)	(20,226)
Capital expenditures	(16,211)	(21,938)
Investments related to HEICO Leadership Compensation Plan	(11,700)	(10,900)
Other	(10,511)	1,017
Net cash used in investing activities	(143,955)	(52,047)

Financing Activities:
Borrowings on revolving credit facility	93,000	—
Payments on revolving credit facility	(65,000)	(155,000)
Redemptions of common stock related to stock option exercises	(23,692)	(3,624)
Cash dividends paid	(12,227)	(10,818)
Distributions to noncontrolling interests	(10,576)	(13,823)
Revolving credit facility issuance costs	(1,010)	(1,468)
Proceeds from stock option exercises	1,610	3,838
Other	(210)	(522)
Net cash used in financing activities	(18,105)	(181,417)

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

Net increase (decrease) in cash and cash equivalents	9,020	(21,408)
Cash and cash equivalents at beginning of year	108,298	406,852
Cash and cash equivalents at end of period	$117,318	$385,444

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, 2021. The October 31, 2021 Condensed Consolidated Balance Sheet has been derived from the Company’s audited consolidated financial statements. In the opinion of management, the unaudited condensed consolidated financial statements contain all adjustments (consisting principally of normal recurring accruals) necessary for a fair presentation of the condensed consolidated balance sheets, statements of operations, statements of comprehensive income, statements of shareholders' equity and statements of cash flows for such interim periods presented. The results of operations for the six months ended April 30, 2022 are not necessarily indicative of the results which may be expected for the entire fiscal year.

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

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

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New Accounting Pronouncement

In October 2021, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2021-08, "Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers," which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, "Revenue from Contracts with Customers," as if the acquirer had originated the contracts. ASU 2021-08 is effective for fiscal years and interim reporting periods within those fiscal years beginning after December 15, 2022, or in fiscal 2024 for HEICO. Early adoption is permitted and ASU 2021-08 shall be applied on a prospective basis to business combinations that occur on or after the adoption date. The Company is currently evaluating the effect, if any, the adoption of this guidance will have on its consolidated results of operations, financial position and cash flows.

2. ACQUISITIONS

In March 2022, the Company, through a subsidiary of HFSC, acquired 74% of the membership interests of Pioneer Industries, LLC ("Pioneer"). Pioneer is a specialty distributor of spares for military aviation, marine, and ground platforms. The remaining 26% interest continues to be owned by certain members of Pioneer's management team (see Note 3, Selected Financial Statement Information - Redeemable Noncontrolling Interests, for additional information). The total consideration includes an accrual of $9.8 million as of the acquisition date representing the estimated fair value of contingent consideration the Company may be obligated to pay should Pioneer meet a certain earnings objective following the acquisition. See Note 8, Fair Value Measurements, for additional information regarding the Company’s contingent consideration obligation. The purchase price of this acquisition was paid in cash, principally using proceeds from the Company's revolving credit facility.

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

The purchase price of Pioneer and Flight Microwave is not material or significant to the Company's condensed consolidated financial statements. The allocation of the total consideration for the fiscal 2022 acquisitions to the tangible and identifiable intangible assets acquired and liabilities and noncontrolling interests assumed is preliminary until the Company obtains final information regarding their fair values. However, the 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 2022 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 2022 acquisitions included in the Condensed Consolidated Statements of Operations for the six and three months ended April 30, 2022 is not material. Had the fiscal 2022 acquisitions

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occurred as of November 1, 2020, net sales, net income from consolidated operations, net income attributable to HEICO, and basic and diluted net income per share attributable to HEICO shareholders on a pro forma basis for the six and three months ended April 30, 2022 and 2021 would not have been materially different than the reported amounts.

3. SELECTED FINANCIAL STATEMENT INFORMATION

Accounts Receivable


(in thousands)	April 30, 2022	October 31, 2021
Accounts receivable	$282,088	$255,793
Less: Allowance for doubtful accounts	(12,238)	(10,874)
Accounts receivable, net	$269,850	$244,919

Inventories


(in thousands)	April 30, 2022	October 31, 2021
Finished products	$260,130	$238,867
Work in process	48,798	44,887
Materials, parts, assemblies and supplies	210,570	194,296
Inventories, net of valuation reserves	$519,498	$478,050

Property, Plant and Equipment


(in thousands)	April 30, 2022	October 31, 2021
Land	$11,065	$11,363
Buildings and improvements	134,970	134,150
Machinery, equipment and tooling	301,558	297,297
Construction in progress	12,940	7,784
	460,533	450,594
Less: Accumulated depreciation and amortization	(266,975)	(256,956)
Property, plant and equipment, net	$193,558	$193,638

Accrued Customer Rebates and Credits

The aggregate amount of accrued customer rebates and credits included within accrued expenses and other current liabilities in the accompanying Condensed Consolidated Balance Sheets was $15.9 million as of April 30, 2022 and $13.2 million as of October 31, 2021. The total customer rebates and credits deducted within net sales for the six months ended April 30, 2022 and 2021 was $3.7 million and $1.8 million, respectively. The total customer rebates and credits deducted within net sales for the three months ended April 30, 2022 and 2021 was $2.0 million and $1.0 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 six and three months ended April 30, 2022 and 2021 is as follows (in thousands):


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

Redeemable Noncontrolling Interests

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


	April 30, 2022	October 31, 2021
Redeemable at fair value	$270,107	$217,416
Redeemable based on a multiple of future earnings	33,820	35,171
Redeemable noncontrolling interests	$303,927	$252,587

As discussed in Note 2, Acquisitions, the Company, through a subsidiary of HFSC, acquired 74% of the membership interests of Pioneer in March 2022. As part of the operating agreement, the noncontrolling interest holders have the right to cause the Company to purchase their membership interest over a four-year period beginning in fiscal 2029, or sooner under certain conditions, and the Company has the right to purchase the same membership interest over the same period.

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

During fiscal 2022, the Company sold 10% of the membership interests of a subsidiary of the FSG that was acquired in fiscal 2018, which decreased the Company's ownership interest in the subsidiary to 90%. As part of the operating agreement, the noncontrolling interest holder has the right to cause the Company to purchase its membership interest over a four-year period beginning in fiscal 2027, or sooner under certain conditions, and the Company has the right to purchase the same membership interest over the same period.

Index

Accumulated Other Comprehensive Loss

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


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

4. GOODWILL AND OTHER INTANGIBLE ASSETS

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


	Segment		Consolidated Totals
	FSG	ETG
Balances as of October 31, 2021	$468,288	$982,107	$1,450,395
Goodwill acquired	69,130	2,565	71,695
Foreign currency translation adjustments	(4,344)	(5,139)	(9,483)
Adjustments to goodwill	(266)	(875)	(1,141)
Balances as of April 30, 2022	$532,808	$978,658	$1,511,466

The goodwill acquired pertains to the fiscal 2022 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 and liabilities and noncontrolling interests assumed. Foreign currency translation adjustments are included in other comprehensive income (loss) in the Company's Condensed Consolidated Statements of Comprehensive Income. The adjustments to goodwill principally represent immaterial measurement period adjustments to the purchase price allocation of certain fiscal 2021 acquisitions. The Company estimates that $70 million of the goodwill acquired in fiscal 2022 will be deductible for income tax purposes.

Index

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


	As of April 30, 2022			As of October 31, 2021
	Gross Carrying Amount	Accumulated Amortization	Net Carrying Amount	Gross Carrying Amount	Accumulated Amortization	Net Carrying Amount
Amortizing Assets:
Customer relationships	$470,592	($189,664)	$280,928	$464,506	($221,098)	$243,408
Intellectual property	253,133	(101,736)	151,397	255,011	(94,313)	160,698
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HEICO CORP [HEI] Filings

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