hei-20240131

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, 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, 2024 is as follows:


Common Stock, $.01 par value	54,772,494	shares
Class A Common Stock, $.01 par value	83,591,871	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 January 31, 2024 and October 31, 2023	2

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

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

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

		Condensed Consolidated Statements of Cash Flows (unaudited) for the three months ended January 31, 2024 and 2023	6

		Notes to Condensed Consolidated Financial Statements (unaudited)	7

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

	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

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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)


	January 31, 2024	October 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$196,323	$171,048
Accounts receivable, net	471,697	509,075
Contract assets	108,888	111,702
Inventories, net	1,068,735	1,013,680
Prepaid expenses and other current assets	66,716	49,837
Total current assets	1,912,359	1,855,342

Property, plant and equipment, net	327,661	321,848
Goodwill	3,290,494	3,274,327
Intangible assets, net	1,365,682	1,357,281
Other assets	439,873	386,265
Total assets	$7,336,069	$7,195,063

LIABILITIES AND EQUITY
Current liabilities:
Short-term debt and current maturities of long-term debt	$4,739	$17,801
Trade accounts payable	194,894	205,893
Accrued expenses and other current liabilities	381,837	433,101
Income taxes payable	22,625	8,547
Total current liabilities	604,095	665,342

Long-term debt, net of current maturities	2,495,726	2,460,277
Deferred income taxes	128,203	131,846
Other long-term liabilities	425,541	379,640
Total liabilities	3,653,565	3,637,105

Commitments and contingencies (Note 11)

Redeemable noncontrolling interests (Note 3)	365,865	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; 54,772 and 54,721 shares issued and outstanding	548	547
Class A Common Stock, $.01 par value per share; 150,000 shares authorized; 83,566 and 83,507 shares issued and outstanding	836	835
Capital in excess of par value	585,888	578,809
Deferred compensation obligation	6,318	6,318
HEICO stock held by irrevocable trust	(6,318)	(6,318)
Accumulated other comprehensive loss	(25,962)	(40,180)
Retained earnings	2,705,128	2,605,984
Total HEICO shareholders’ equity	3,266,438	3,145,995
Noncontrolling interests	50,201	47,156
Total shareholders’ equity	3,316,639	3,193,151
Total liabilities and equity	$7,336,069	$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)


	Three months ended January 31,
	2024	2023

Net sales	$896,363	$620,915

Operating costs and expenses:
Cost of sales	549,594	377,116
Selling, general and administrative expenses	166,559	114,365

Total operating costs and expenses	716,153	491,481

Operating income	180,210	129,434

Interest expense	(38,607)	(6,068)
Other income	679	639

Income before income taxes and noncontrolling interests	142,282	124,005

Income tax expense	16,800	21,000

Net income from consolidated operations	125,482	103,005

Less: Net income attributable to noncontrolling interests	10,784	9,978

Net income attributable to HEICO	$114,698	$93,027

Net income per share attributable to HEICO shareholders:
Basic	$.83	$.68
Diluted	$.82	$.67

Weighted average number of common shares outstanding:
Basic	138,265	136,655
Diluted	139,893	138,579

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)


	Three months ended January 31,
	2024	2023

Net income from consolidated operations	$125,482	$103,005
Other comprehensive income:
Foreign currency translation adjustments	14,761	28,385
Amortization of unrealized loss on defined benefit pension plan, net of tax	13	15
Total other comprehensive income	14,774	28,400
Comprehensive income from consolidated operations	140,256	131,405
Net income attributable to noncontrolling interests	10,784	9,978
Foreign currency translation adjustments attributable to noncontrolling interests	556	1,259
Comprehensive income attributable to noncontrolling interests	11,340	11,237
Comprehensive income attributable to HEICO	$128,916	$120,168

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

(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	$3,193,151
Comprehensive income	7,996	—	—	—	—	—	14,218	114,698	3,344	132,260
Cash dividends ($.10 per share)	—	—	—	—	—	—	—	(13,831)	—	(13,831)
Issuance of common stock to HEICO Savings and Investment Plan	—	—	—	2,576	—	—	—	—	—	2,576
Share-based compensation expense	—	—	—	4,881	—	—	—	—	—	4,881
Proceeds from stock option exercises	—	1	1	2,252	—	—	—	—	—	2,254
Redemptions of common stock related to stock option exercises	—	—	—	(601)	—	—	—	—	—	(601)
Distributions to noncontrolling interests	(8,467)	—	—	—	—	—	—	—	(299)	(299)
Acquisitions of noncontrolling interests	(1,056)	—	—	(1,156)	—	—	—	—	—	(1,156)
Adjustments to redemption amount of redeemable noncontrolling interests	1,443	—	—	—	—	—	—	(1,443)	—	(1,443)
Other	1,142	—	—	(873)	—	—	—	(280)	—	(1,153)
Balances as of January 31, 2024	$365,865	$548	$836	$585,888	$6,318	($6,318)	($25,962)	$2,705,128	$50,201	$3,316,639


		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	$2,648,306
Comprehensive income	7,980	—	—	—	—	—	27,141	93,027	3,257	123,425
Cash dividends ($.10 per share)	—	—	—	—	—	—	—	(13,668)	—	(13,668)
Issuance of common stock to HEICO Savings and Investment Plan	—	—	—	1,964	—	—	—	—	—	1,964
Share-based compensation expense	—	—	—	2,812	—	—	—	—	—	2,812
Proceeds from stock option exercises	—	2	1	2,842	—	—	—	—	—	2,845
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	(10,901)	—	—	—	—	—	—	—	(390)	(390)
Acquisitions of noncontrolling interests	(1,059)	—	—	(1,674)	—	—	—	—	—	(1,674)
Adjustments to redemption amount of redeemable noncontrolling interests	4,616	—	—	—	—	—	—	(4,616)	—	(4,616)
Deferred compensation obligation	—	—	—	—	874	(874)	—	—	—	—
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

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,
	2024	2023
Operating Activities:
Net income from consolidated operations	$125,482	$103,005
Adjustments to reconcile net income from consolidated operations to net cash provided by operating activities:
Depreciation and amortization	43,505	27,060
Employer contributions to HEICO Savings and Investment Plan	5,665	3,814
Share-based compensation expense	4,881	2,812
Increase in accrued contingent consideration, net	1,095	1,336
Deferred income tax (benefit) provision	(3,759)	980
Payment of contingent consideration	(6,203)	(6,299)
Changes in operating assets and liabilities, net of acquisitions:
Decrease (increase) in accounts receivable	38,940	(7,095)
Decrease (increase) in contract assets	4,560	(7,303)
Increase in inventories	(49,846)	(52,041)
Increase in prepaid expenses and other current assets	(15,784)	(860)
Decrease in trade accounts payable	(11,609)	(1,992)
Decrease in accrued expenses and other current liabilities	(50,450)	(7,583)
Increase in income taxes payable	12,345	13,839
Net changes in other long-term liabilities and assets related to HEICO Leadership Compensation Plan	14,753	8,892
Other	(1,923)	(1,879)
Net cash provided by operating activities	111,652	76,686

Investing Activities:
Acquisitions, net of cash acquired	(46,208)	(503,736)
Capital expenditures	(13,377)	(10,846)
Investments related to HEICO Leadership Compensation Plan	(12,710)	(11,800)
Other	1,156	402
Net cash used in investing activities	(71,139)	(525,980)

Financing Activities:
Borrowings on revolving credit facility	50,000	531,000
Payments on revolving credit facility	(15,000)	(38,000)
Payments on short-term debt, net	(13,924)	—
Cash dividends paid	(13,831)	(13,668)
Payment of contingent consideration	(13,797)	(3,710)
Distributions to noncontrolling interests	(8,766)	(11,291)
Acquisitions of noncontrolling interests	(2,212)	(2,733)
Redemptions of common stock related to stock option exercises	(601)	(14,805)
Proceeds from stock option exercises	2,254	2,845
Other	(852)	(463)
Net cash (used in) provided by financing activities	(16,729)	449,175

Effect of exchange rate changes on cash	1,491	3,234

Net increase in cash and cash equivalents	25,275	3,115
Cash and cash equivalents at beginning of year	171,048	139,504
Cash and cash equivalents at end of period	$196,323	$142,619

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 three months ended January 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. 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 guidance will not affect the Company's consolidated results of operations, financial position or

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cash flows and the Company is currently evaluating the effect the guidance will have on its disclosures.

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

2. ACQUISITION

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

The allocation of the total consideration for this acquisition to the tangible and identifiable intangible assets acquired is preliminary until the Company obtains final information regarding their fair values. However, the Company does not expect any adjustment to such allocation to be material to the Company's consolidated financial statements. This acquisition’s operating results were included in the Company’s results of operations from the effective acquisition date. The amount of net sales and earnings of this acquisition included in the Condensed Consolidated Statement of Operations for the three months ended January 31, 2024 is not material. Had this acquisition occurred as of November 1, 2022, net sales, net income from consolidated operations, net income attributable to HEICO, and basic and diluted net income per share attributable to HEICO shareholders on a pro forma basis for the three months ended January 31, 2024 and 2023 would not have been materially different than the reported amounts.

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3. SELECTED FINANCIAL STATEMENT INFORMATION

Accounts Receivable


(in thousands)	January 31, 2024	October 31, 2023
Accounts receivable	$484,465	$521,696
Less: Allowance for doubtful accounts	(12,768)	(12,621)
Accounts receivable, net	$471,697	$509,075

Inventories


(in thousands)	January 31, 2024	October 31, 2023
Finished products	$652,265	$622,395
Work in process	87,266	79,789
Materials, parts, assemblies and supplies	329,204	311,496
Inventories, net of valuation reserves	$1,068,735	$1,013,680

Property, Plant and Equipment


(in thousands)	January 31, 2024	October 31, 2023
Land	$19,893	$19,706
Buildings and improvements	206,189	202,499
Machinery, equipment and tooling	397,013	386,602
Construction in progress	30,853	25,867
	653,948	634,674
Less: Accumulated depreciation and amortization	(326,287)	(312,826)
Property, plant and equipment, net	$327,661	$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 $27.5 million as of January 31, 2024 and $24.5 million as of October 31, 2023. The total customer rebates and credits deducted within net sales for the three months ended January 31, 2024 and 2023 was $3.5 million and $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, 2024 and 2023 is as follows (in thousands):


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

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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, 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. In December 2023, the Company acquired an additional one-fourth of such interest, which increased the Company's ownership interest in the subsidiary to 90.1%.

Accumulated Other Comprehensive Loss

Changes in the components of accumulated other comprehensive loss for the three months ended January 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	14,205	—	14,205
Amortization of unrealized loss	—	13	13
Balances as of January 31, 2024	($24,960)	($1,002)	($25,962)

SEC Form 10-Q filed by Heico Corporation