In its upcoming report, Heico Corporation (HEI) is predicted by Wall Street analysts to post quarterly earnings of $0.73 per share, reflecting an increase of 9% compared to the same period last year. Revenues are forecasted to be $875.38 million, representing a year-over-year increase of 41%.The consensus EPS estimate for the quarter has undergone an upward revision of 0.5% in the past 30 days, bringing it to its present level. This represents how the covering analysts, as a whole, have reassessed their ini ...

The market expects Heico Corporation (HEI) to deliver a year-over-year increase in earnings on higher revenues when it reports results for the quarter ended January 2024. This widely-known consensus outlook is important in assessing the company's earnings picture, but a powerful factor that might influence its near-term stock price is how the actual results compare to these estimates.The earnings report, which is expected to be released on February 26, 2024, might help the stock move higher if these key num ...

BLACKSBURG, Va., Feb. 14, 2024 /PRNewswire/ -- VPT, Inc., a HEICO company (NYSE:HEI.A) (NYSE:HEI), announces the addition of the VSC100-2800S to the award-winning VSC Series of space COTS DC-DC converters. Designed for the "NewSpace" market, the VSC Series complements VPT's hermetic hybrid SV / SVL Series of rad hard products available on DLA SMDs. The VSC Series is intended for use in commercial rad tolerant satellite applications and NASA Class D missions where the balance of cost and guaranteed performan ...

BEVERLY HILLS, Calif., Jan. 24, 2024 (GLOBE NEWSWIRE) -- Kenn Ricci, Founder and Principal of Directional Aviation Capital and Chairman of Flexjet, Inc., presented Laurens "Larry" Mendelson, CEO of leading publicly-traded aviation and aerospace parts, components and technology manufacturer HEICO Corp. (NYSE:HEI), with the Living Legends of Aviation Kenn Ricci Lifetime Aviation Entrepreneur Award at the 21st annual awards ceremony held  in Beverly Hills, California. The annual event serves as one of the larg ...

Part I [Business](index=4&type=section&id=Item%201.%20Business) HEICO manufactures FAA-approved aerospace parts and electronic equipment, growing through organic development and strategic acquisitions across its FSG and ETG segments [Flight Support Group (FSG)](index=6&type=section&id=1.1%20Flight%20Support%20Group) The FSG is the largest independent supplier of FAA-approved non-OEM aircraft parts, providing sales, repair, and distribution services - The FSG is the largest independent supplier of non-OEM jet engine and aircraft component replacement parts and develops approximately **350 to 550 new PMA parts per year**[24](index=24&type=chunk)[34](index=34&type=chunk) - The group has developed approximately **19,500 parts** for which PMAs have been received from the FAA[24](index=24&type=chunk) FSG Research & Development Expenditures | Fiscal Year | R&D Expense (approx.) | | :--- | :--- | | 2023 | $26.4 million | | 2022 | $22.2 million | | 2021 | $18.3 million | [Electronic Technologies Group (ETG)](index=9&type=section&id=1.2%20Electronic%20Technologies%20Group) The ETG designs and manufactures mission-critical electronic subcomponents for defense, space, medical, and telecommunications industries - In fiscal 2023, approximately **49% of ETG's net sales** were from products and services to U.S. and foreign military agencies, prime defense contractors, and satellite/spacecraft manufacturers[18](index=18&type=chunk) ETG Research & Development Expenditures | Fiscal Year | R&D Expense | | :--- | :--- | | 2023 | $69.4 million | | 2022 | $53.9 million | | 2021 | $50.6 million | [Backlog](index=15&type=section&id=1.3%20Backlog) As of October 31, 2023, HEICO's total backlog increased 35% year-over-year to $1.863 billion, driven by acquisitions Backlog Comparison (in millions) | Segment | Oct 31, 2023 | Oct 31, 2022 | YoY Change | | :--- | :--- | :--- | :--- | | **Total Backlog** | **$1,863** | **$1,383** | **+35%** | | Flight Support Group (FSG) | $1,013 | $674 | +50% | | Electronic Technologies Group (ETG) | $850 | $709 | +20% | [Human Capital](index=17&type=section&id=1.4%20Human%20Capital) As of October 31, 2023, HEICO employed approximately 9,600 individuals, split evenly between its two segments - As of October 31, 2023, the company had approximately **9,600 employees**[86](index=86&type=chunk) - The workforce is split with approximately **4,800 employees** in the Flight Support Group and **4,800** in the Electronic Technologies Group[86](index=86&type=chunk) - None of the company's U.S. domestic employees are represented by a union, and management believes employee relations are good[86](index=86&type=chunk) [Information About Our Executive Officers](index=19&type=section&id=1.5%20Information%20About%20Our%20Executive%20Officers) The executive team is led by Laurans A. Mendelson and his sons, Eric and Victor, who head the FSG and ETG respectively - Laurans A. Mendelson serves as Chairman of the Board and CEO[95](index=95&type=chunk) - Eric A. Mendelson is Co-President and leads the HEICO Flight Support Group[95](index=95&type=chunk)[96](index=96&type=chunk) - Victor H. Mendelson is Co-President and leads the HEICO Electronic Technologies Group[95](index=95&type=chunk)[99](index=99&type=chunk) Net Sales Contribution by Segment (Fiscal 2023) | Operating Segment | FY 2023 Net Sales % | FY 2022 Net Sales % | FY 2021 Net Sales % | | :--- | :--- | :--- | :--- | | Flight Support Group (FSG) | 60% | 57% | 50% | | Electronic Technologies Group (ETG) | 40% | 43% | 50% | - The company's growth strategy combines internal product development with a disciplined acquisition approach, resulting in the completion of approximately **98 acquisitions since 1990**[22](index=22&type=chunk) Long-Term Growth (Fiscal 1990 vs. 2023) | Metric | Fiscal 1990 | Fiscal 2023 | Compound Annual Growth Rate | | :--- | :--- | :--- | :--- | | Net Sales | $26.2 million | $2,968.1 million | ~15% | | Net Income | $2.0 million | $403.6 million | ~18% | [Risk Factors](index=21&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from acquisition execution, new product development, intense competition, aviation industry cyclicality, and potential asset impairment - Key risks include the ability to execute its acquisition strategy, dependence on new product development, and intense competition[104](index=104&type=chunk)[106](index=106&type=chunk)[109](index=109&type=chunk) - The business is highly dependent on the performance of the aviation industry and is subject to risks from public health emergencies like the COVID-19 pandemic[128](index=128&type=chunk)[132](index=132&type=chunk) - Goodwill and other intangible assets represented **64% of total assets** as of October 31, 2023, posing a risk of impairment charges[124](index=124&type=chunk) [Properties](index=30&type=section&id=Item%202.%20Properties) HEICO operates numerous owned and leased facilities across its FSG and ETG segments, totaling approximately 4.7 million square feet Facility Space by Segment (Square Footage) | Segment | Leased | Owned | Total | | :--- | :--- | :--- | :--- | | Flight Support Group | 2,111,000 | 533,000 | 2,644,000 | | Electronic Technologies Group | 1,203,000 | 925,000 | 2,128,000 | | Corporate | — | 10,000 | 10,000 | [Legal Proceedings](index=31&type=section&id=Item%203.%20Legal%20Proceedings) An FSG subsidiary is cooperating with a grand jury investigation, with other legal actions not expected to materially impact financials - An indirect subsidiary received a grand jury subpoena related to work on Navy vessels for a period prior to its acquisition by HEICO, and the company is cooperating with the investigation[148](index=148&type=chunk) - Management does not believe the outcome of this matter or other legal actions will have a material adverse effect on its financial position or cash flows[149](index=149&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=31&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) HEICO's common stock trades on the NYSE, with the company paying semi-annual dividends and no share repurchases in Q4 FY2023 - The company's Class A Common Stock and Common Stock trade on the NYSE under symbols **HEI.A** and **HEI**, respectively[152](index=152&type=chunk) - Paid an aggregate cash dividend of **$0.20 per share** in fiscal 2023, an **11% increase** over the $0.18 per share paid in fiscal 2022[161](index=161&type=chunk) - There were no issuer purchases of equity securities during the fourth quarter of fiscal 2023[159](index=159&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Fiscal 2023 saw record sales and net income, driven by strong FSG and ETG performance, acquisitions, and commercial aerospace recovery, despite increased debt [Results of Operations](index=37&type=section&id=7.1%20Results%20of%20Operations) Fiscal 2023 consolidated net sales increased 34% to $2.97 billion, driven by strong FSG and ETG growth from organic sales and acquisitions Net Sales by Segment (FY 2023 vs FY 2022, in millions) | Segment | FY 2023 Net Sales | FY 2022 Net Sales | % Change | | :--- | :--- | :--- | :--- | | Flight Support Group | $1,770.2 | $1,255.2 | +41% | | Electronic Technologies Group | $1,225.2 | $972.5 | +26% | | **Total** | **$2,968.1** | **$2,208.3** | **+34%** | Operating Income by Segment (FY 2023 vs FY 2022, in millions) | Segment | FY 2023 Op. Income | FY 2022 Op. Income | % Change | | :--- | :--- | :--- | :--- | | Flight Support Group | $387.3 | $267.2 | +45% | | Electronic Technologies Group | $285.1 | $269.5 | +6% | | **Total** | **$625.3** | **$496.8** | **+26%** | - SG&A expenses increased to **$528.1 million** from $365.9 million, primarily due to **$96.8 million from acquisitions**, **$15.8 million** in higher performance-based compensation, and a **$20.0 million** increase in acquisition-related costs[175](index=175&type=chunk)[176](index=176&type=chunk) [Liquidity and Capital Resources](index=41&type=section&id=7.2%20Liquidity%20and%20Capital%20Resources) Fiscal 2023 saw significant changes in liquidity due to major acquisitions, increasing total debt to $2.48 billion and raising the debt-to-capitalization ratio to 44% Capitalization Summary (in thousands) | Metric | As of Oct 31, 2023 | As of Oct 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $171,048 | $139,504 | | Total debt | $2,478,078 | $290,274 | | Shareholders' equity | $3,193,151 | $2,648,306 | | Total debt to total capitalization | 44% | 10% | - Net cash provided by operating activities was **$448.7 million** in FY2023, a decrease from **$467.9 million** in FY2022, mainly due to a larger increase in net working capital[192](index=192&type=chunk)[193](index=193&type=chunk) - Net cash used in investing activities was **$2.48 billion**, primarily for acquisitions of **$2.42 billion**, while financing activities provided **$2.07 billion**, mainly from **$1.2 billion** in senior notes and net borrowings of **$975 million** on the credit facility[195](index=195&type=chunk)[197](index=197&type=chunk) [Critical Accounting Estimates](index=47&type=section&id=7.3%20Critical%20Accounting%20Estimates) Critical accounting estimates involve revenue recognition, inventory valuation, and the fair value determination of assets acquired in business combinations - Key estimates involve revenue recognition for over-time contracts, which requires assumptions about costs, labor productivity, and manufacturing efficiency[217](index=217&type=chunk)[219](index=219&type=chunk) - Valuation of inventory requires estimates of future demand and sales patterns to assess slow-moving or obsolete items[225](index=225&type=chunk) - Business combinations require significant estimates for the fair value of acquired assets, liabilities, and contingent consideration, which is re-measured each period with changes impacting SG&A expenses[228](index=228&type=chunk)[229](index=229&type=chunk) Fiscal 2023 vs. 2022 Key Financials (in millions) | Metric | FY 2023 | FY 2022 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $2,968.1 | $2,208.3 | +34% | | Operating Income | $625.3 | $496.8 | +26% | | Net Income to HEICO | $403.6 | $351.7 | +15% | | Diluted EPS | $2.91 | $2.55 | +14% | - FSG net sales grew **41%** to a record **$1.77 billion**, reflecting **21% organic growth** and contributions from acquisitions, while ETG net sales grew **26%** to a record **$1.23 billion**, driven by acquisitions and **1% organic growth**[172](index=172&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=52&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from interest rate fluctuations on variable-rate debt and foreign currency exposure, primarily the Euro - Primary market risks are interest rate risk from its variable-rate debt and foreign currency risk from international operations[239](index=239&type=chunk)[241](index=241&type=chunk) - As of October 31, 2023, the company had **$1.25 billion** in outstanding variable-rate debt[239](index=239&type=chunk) [Financial Statements and Supplementary Data](index=53&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents HEICO's audited consolidated financial statements for FY2021-2023, with an unqualified auditor's opinion and detailed notes [Report of Independent Registered Public Accounting Firm](index=54&type=section&id=8.1%20Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) The independent auditor issued an unqualified opinion, highlighting critical audit matters related to inventory and intangible asset valuations - The auditor issued an unqualified opinion on the financial statements[245](index=245&type=chunk) - Critical Audit Matters identified were: 1) Valuation of inventories, net, and 2) Fair value of intangible assets acquired in business combinations (Exxelia and Wencor)[250](index=250&type=chunk)[251](index=251&type=chunk)[255](index=255&type=chunk) [Consolidated Financial Statements](index=58&type=section&id=8.2%20Consolidated%20Financial%20Statements) Consolidated financial statements reflect significant growth in assets, liabilities, and equity in FY2023, driven by acquisitions and new debt Consolidated Balance Sheet Highlights (in thousands) | Account | Oct 31, 2023 | Oct 31, 2022 | | :--- | :--- | :--- | | Total Assets | $7,195,063 | $4,095,496 | | Goodwill | $3,274,327 | $1,672,425 | | Total Liabilities | $3,637,105 | $1,119,589 | | Total HEICO shareholders' equity | $3,145,995 | $2,606,136 | Consolidated Statement of Operations Highlights (in thousands) | Account | FY 2023 | FY 2022 | FY 2021 | | :--- | :--- | :--- | :--- | | Net Sales | $2,968,105 | $2,208,322 | $1,865,682 | | Operating Income | $625,339 | $496,844 | $392,900 | | Net Income Attributable to HEICO | $403,596 | $351,675 | $304,220 | [Notes to Consolidated Financial Statements](index=64&type=section&id=8.3%20Notes%20to%20Consolidated%20Financial%20Statements) Notes detail accounting policies, the impact of major acquisitions, new debt structure, revenue disaggregation, and other financial disclosures - On August 4, 2023, HEICO acquired Wencor Group for total consideration of approximately **$2.05 billion**, consisting of **$1.9 billion** in cash and **1.14 million shares** of Class A Common Stock[324](index=324&type=chunk)[325](index=325&type=chunk) - On January 5, 2023, HEICO acquired Exxelia International for approximately **$504 million** in cash[332](index=332&type=chunk)[333](index=333&type=chunk) - In July 2023, the company issued **$1.2 billion** in senior unsecured notes (**$600 million** due 2028 at 5.25% and **$600 million** due 2033 at 5.35%) to help fund the Wencor acquisition[382](index=382&type=chunk) [Controls and Procedures](index=120&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective, excluding recent acquisitions, with an unqualified auditor's opinion - Management concluded that disclosure controls and procedures and internal control over financial reporting (ICFR) were effective as of October 31, 2023[476](index=476&type=chunk)[479](index=479&type=chunk) - The assessment of ICFR excluded the Wencor Group and Exxelia acquisitions, which were completed in fiscal 2023, representing **9.0% of total assets** (excluding goodwill/intangibles) and **12.3% of net sales** for the year[480](index=480&type=chunk)[486](index=486&type=chunk) - The independent registered public accounting firm, Deloitte & Touche LLP, issued an unqualified opinion on the company's internal control over financial reporting[484](index=484&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=123&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the forthcoming proxy statement - This section incorporates information by reference from the company's forthcoming definitive proxy statement[496](index=496&type=chunk) [Executive Compensation](index=124&type=section&id=Item%2011.%20Executive%20Compensation) Detailed executive compensation information is incorporated by reference from the forthcoming definitive proxy statement - This section incorporates information by reference from the company's forthcoming definitive proxy statement[499](index=499&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=124&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Security ownership and equity compensation plan details are incorporated by reference from the proxy statement Equity Compensation Plan Information (as of Oct 31, 2023) | Description | Value (in thousands, except price) | | :--- | :--- | | Securities to be issued upon exercise of outstanding options | 4,054 | | Weighted-average exercise price of outstanding options | $83.74 | | Securities remaining available for future issuance | 2,362 | [Certain Relationships and Related Transactions, and Director Independence](index=125&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on related party transactions and director independence is incorporated by reference from the forthcoming proxy statement - This section incorporates information by reference from the company's forthcoming definitive proxy statement[502](index=502&type=chunk) [Principal Accountant Fees and Services](index=125&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information on principal accountant fees and services is incorporated by reference from the forthcoming definitive proxy statement - This section incorporates information by reference from the company's forthcoming definitive proxy statement[503](index=503&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=125&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all financial statements, schedules, and exhibits filed with the Form 10-K, including key agreements and certifications - Lists all financial statements, schedules, and exhibits filed with the 10-K[505](index=505&type=chunk) - Includes key agreements such as the Wencor merger agreement (Exhibit 2.2), the Indenture for the senior notes (Exhibit 4.2), and the amended Revolving Credit Agreement (Exhibit 10.13)[508](index=508&type=chunk)[512](index=512&type=chunk) [Form 10-K Summary](index=129&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item indicates that no Form 10-K summary is provided - No summary is provided under this item[514](index=514&type=chunk)

Financial Data and Key Metrics Changes - Consolidated net sales for Q3 fiscal '23 increased by 27% to a record level, driven by strong demand in the Flight Support Group and contributions from recent acquisitions [7][10] - Consolidated operating income improved by 16% compared to Q3 fiscal '22, reflecting a 12% organic net sales growth [8] - Net income attributable to HEICO increased by 24% to $102 million or $0.74 per diluted share, adjusted for acquisition costs [10][9] - Cash flow from operating activities was strong at $145.9 million, slightly down from $149.2 million in Q3 fiscal '22, reflecting increased working capital [11] Business Line Data and Key Metrics Changes - Flight Support Group's net sales rose 23% to $405 million, with 19% organic growth attributed to increased demand for commercial aerospace products [17] - Operating income for the Flight Support Group increased by 26% to $89.2 million, with an operating margin of 22.0% [18][38] - Electronic Technologies Group's net sales increased by 33% to $325.9 million, driven by acquisitions and increased sales in commercial aviation, despite lower defense product sales [20][21] Market Data and Key Metrics Changes - The overall market for commercial aerospace products remains strong, with continued global air travel growth contributing to demand [17] - The defense market has shown signs of recovery, with a 10% sequential growth in defense product net sales [62] Company Strategy and Development Direction - The acquisition of Wencor for $2.05 billion is expected to be transformative, providing a complementary portfolio of cost-saving solutions for airline and OEM customers [14][34] - Management emphasizes a focus on maintaining healthy operating margins while pursuing strategic acquisitions and investments in R&D [23][29] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about future growth, citing strong demand in the aftermarket and a robust backlog [52][93] - There are expectations for continued net sales growth in both the Flight Support Group and Electronic Technologies Group, driven by demand for their products [64] Other Important Information - The company incurred approximately $3.5 million in acquisition costs related to the Wencor acquisition, impacting net income [9] - The net debt-to-EBITDA ratio increased to approximately 0.75x as of July 31, 2023, due to the acquisition financing [30] Q&A Session Summary Question: Impact of Wencor acquisition on margins and synergies - Management anticipates significant synergies from the Wencor acquisition, with major customers expressing support for the business combination [66] Question: Outlook for aftermarket spending - Management does not foresee a slowdown in aftermarket spending, citing strong demand and a substantial backlog [72][93] Question: Growth profile of Wencor business - Wencor has shown organic growth rates comparable to HEICO, with strong performance in PMA, repair, and distribution [112] Question: Expectations for future margins - Management is optimistic about increasing margins over time, although they caution against setting high expectations prematurely [106][83]

For the quarterly period ended July 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to _______ Commission File Number: 001-04604 HEICO CORPORATION (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) 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 EXC ...

HEICO Corporation (NYSE:HEI) Q2 2023 Earnings Conference Call May 23, 2023 9:00 AM ET Company Participants Laurans Mendelson - Chairman & CEO Eric Mendelson - Co-President & Director Victor Mendelson - Co-President & Director Carlos Macau - EVP, CFO & Treasurer Conference Call Participants Robert Spingarn - Melius Research Peter Arment - Robert W. Baird & Co. Lawrence Solow - CJS Securities Gautam Khanna - TD Cowen Colin Ducharme - Sterling Capital Joshua Sullivan - The Benchmark Company George Bancroft - G ...

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=2&type=section&id=Item%201.%20Financial%20Statements) This section presents HEICO Corporation's unaudited condensed consolidated financial statements for the period ended April 30, 2023, including balance sheets, statements of operations, comprehensive income, shareholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, acquisitions, and other financial information [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the company's financial position, detailing assets, liabilities, and equity at specific points in time Condensed Consolidated Balance Sheets (in thousands) | ASSETS | April 30, 2023 (in thousands) | October 31, 2022 (in thousands) | | :--------------------------------- | :------------- | :--------------- | | Total current assets | $1,366,639 | $1,152,730 | | Property, plant and equipment, net | 273,856 | 225,879 | | Goodwill | 2,031,235 | 1,672,425 | | Intangible assets, net | 844,319 | 733,327 | | Other assets | 354,150 | 311,135 | | **Total assets** | **$4,870,199** | **$4,095,496** | | LIABILITIES AND EQUITY | | | | Total current liabilities | $466,828 | $420,859 | | Long-term debt, net | 735,779 | 288,620 | | Deferred income taxes | 94,468 | 71,162 | | Other long-term liabilities | 367,624 | 338,948 | | **Total liabilities** | **1,664,699** | **1,119,589** | | Redeemable noncontrolling interests| 345,833 | 327,601 | | Total shareholders' equity | 2,859,667 | 2,648,306 | | **Total liabilities and equity** | **$4,870,199** | **$4,095,496** | - Total assets **increased by** **$774.7 million (18.9%)** from October 31, 2022, to April 30, 2023, **primarily driven by** increases in goodwill, intangible assets, and inventories[9](index=9&type=chunk) - Total liabilities **increased by** **$545.1 million (48.7%)** over the six-month period, **largely due to** a **significant increase** in long-term debt[9](index=9&type=chunk) [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section outlines the company's financial performance over periods, including net sales, operating income, and net income Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Six months ended April 30, 2023 (in thousands) | Six months ended April 30, 2022 (in thousands) | Three months ended April 30, 2023 (in thousands) | Three months ended April 30, 2022 (in thousands) | | :------------------------------------- | :------------------------------ | :------------------------------ | :-------------------------------- | :-------------------------------- | | Net sales | $1,308,756 | $1,029,156 | $687,841 | $538,813 | | Operating income | 286,524 | 221,599 | 157,090 | 122,777 | | Interest expense | (17,441) | (1,775) | (11,373) | (979) | | Income before income taxes | 270,065 | 220,364 | 146,060 | 122,112 | | Income tax expense | 52,000 | 33,000 | 31,000 | 29,000 | | Net income attributable to HEICO | $198,147 | $171,931 | $105,120 | $85,010 | | Diluted EPS | $1.43 | $1.25 | $.76 | $.62 | - Net sales **increased by** **27.2%** for the six months ended April 30, 2023, and by **27.7%** for the three months ended April 30, 2023, compared to the prior year periods[10](index=10&type=chunk) - Net income attributable to HEICO **increased by** **15.2%** for the six months and **23.7%** for the three months ended April 30, 2023, year-over-year[10](index=10&type=chunk) - Interest expense **significantly increased** for both periods, rising from **$1.8 million** to **$17.4 million** for the six-month period and from **$1.0 million** to **$11.4 million** for the three-month period, **primarily due to higher interest rates**[10](index=10&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This section details the company's comprehensive income, including net income and other comprehensive income components Condensed Consolidated Statements of Comprehensive Income (in thousands) | Metric | Six months ended April 30, 2023 (in thousands) | Six months ended April 30, 2022 (in thousands) | Three months ended April 30, 2023 (in thousands) | Three months ended April 30, 2022 (in thousands) | | :------------------------------------------ | :------------------------------ | :------------------------------ | :-------------------------------- | :-------------------------------- | | Net income from consolidated operations | $218,065 | $187,364 | $115,060 | $93,112 | | Total other comprehensive income (loss) | 30,407 | (22,995) | 2,007 | (14,255) | | Comprehensive income attributable to HEICO | $227,020 | $149,929 | $106,852 | $71,418 | - Comprehensive income attributable to HEICO **increased significantly by** **51.4%** for the six months and **49.6%** for the three months ended April 30, 2023, **primarily due to positive foreign currency translation adjustments** compared to losses in the prior year[13](index=13&type=chunk) [Condensed Consolidated Statements of Shareholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders%27%20Equity) This section tracks changes in the company's shareholders' equity over time, reflecting contributions, distributions, and earnings Changes in HEICO Shareholders' Equity (in thousands) | Item | Balances as of Oct 31, 2022 (in thousands) | Six Months Ended Apr 30, 2023 Changes (in thousands) | Balances as of Apr 30, 2023 (in thousands) | | :------------------------------------------ | :-------------------------- | :------------------------------------ | :-------------------------- | | Redeemable Noncontrolling Interests | $327,601 | $18,232 | $345,833 | | Common Stock | $545 | $2 | $547 | | Class A Common Stock | $821 | $2 | $823 | | Capital in Excess of Par Value | $397,337 | $1,654 | $398,991 | | Accumulated Other Comprehensive Loss | ($46,499) | $28,873 | ($17,626) | | Retained Earnings | $2,253,932 | $181,223 | $2,435,155 | | Total HEICO Shareholders' Equity | $2,606,136 | $211,754 | $2,817,890 | - Total HEICO shareholders' equity **increased by** **$211.8 million** from October 31, 2022, to April 30, 2023, **primarily driven by comprehensive income and share-based compensation**, partially offset by cash dividends[15](index=15&type=chunk)[16](index=16&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section summarizes the company's cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in thousands) | Activity | Six months ended April 30, 2023 (in thousands) | Six months ended April 30, 2022 (in thousands) | | :------------------------------------------ | :------------------------------ | :------------------------------ | | Net cash provided by operating activities | $154,436 | $174,753 | | Net cash used in investing activities | (559,790) | (143,955) | | Net cash provided by (used in) financing activities | 388,765 | (18,105) | | Effect of exchange rate changes on cash | 4,246 | (3,673) | | Net (decrease) increase in cash and cash equivalents | (12,343) | 9,020 | | Cash and cash equivalents at end of period | $127,161 | $117,318 | - Net cash provided by operating activities **decreased by** **$20.3 million (11.6%)** year-over-year, **primarily due to increased working capital needs**, particularly in inventories[17](index=17&type=chunk)[127](index=127&type=chunk) - Net cash used in investing activities **significantly increased to** **$559.8 million** from **$144.0 million**, **mainly driven by higher acquisition spending** (**$524.2 million** in 2023 vs **$105.5 million** in 2022)[17](index=17&type=chunk)[129](index=129&type=chunk) - Net cash provided by financing activities **dramatically shifted from** a net use of **$18.1 million** in 2022 to a net provision of **$388.8 million** in 2023, **largely due to increased borrowings on the revolving credit facility**[17](index=17&type=chunk)[130](index=130&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed notes on accounting policies, acquisitions, and other financial information [1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=9&type=section&id=1.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This section describes key accounting principles, segment reporting, and recent accounting standard adoptions - The financial statements are prepared in conformity with GAAP for interim financial information and should be read with the annual Form 10-K[18](index=18&type=chunk) - HEICO operates in two segments: Flight Support Group (FSG) and Electronic Technologies Group (ETG)[19](index=19&type=chunk) - Operating results in fiscal 2023 continue to reflect lingering COVID-19 effects, including supply chain impacts, but show improved demand for commercial aerospace products and services[20](index=20&type=chunk) - The company adopted ASU 2021-08 in Q1 fiscal 2023, with **no material effect** on financial statements[22](index=22&type=chunk) [2. ACQUISITIONS](index=10&type=section&id=2.%20ACQUISITIONS) This section details recent business acquisitions, including financial terms, strategic rationale, and their impact on results - In March 2023, HEICO Electronic acquired an exclusive license and assets for the Aircraft Emergency Locator Transmitter (ELT) product line from Honeywell International, paid in cash from operating activities[23](index=23&type=chunk) - On January 5, 2023, HEICO Electronic acquired **93.69%** of Exxelia International SAS for **$515.8 million** cash (net **$501.6 million**), expanding its Hi-Rel electronic components for aerospace and defense, and gaining geographic diversity in Europe. The acquisition was financed by the revolving credit facility[24](index=24&type=chunk)[25](index=25&type=chunk) Exxelia Acquisition Allocation (in thousands) | Assets acquired: | (in thousands) | | :--------------------------------- | :------- | | Goodwill | $332,033 | | Customer relationships | 64,935 | | Intellectual property | 44,044 | | Trade name | 21,703 | | Inventories | 55,922 | | Property, plant and equipment | 42,165 | | Accounts receivable | 41,113 | | Other assets | 11,254 | | Total assets acquired, excluding cash | 613,169 | | Liabilities assumed: | (in thousands) | | Deferred income taxes | 31,975 | | Accounts payable | 22,369 | | Accrued expenses | 18,383 | | Other liabilities | 24,231 | | Total liabilities assumed | 96,958 | | Noncontrolling interests | 14,660 | | Net assets acquired, excluding cash | $501,551 | - Exxelia contributed approximately **$69.6 million** to consolidated net sales for the six months ended April 30, 2023, and **$54.6 million** for the three months ended April 30, 2023[29](index=29&type=chunk) [3. SELECTED FINANCIAL STATEMENT INFORMATION](index=13&type=section&id=3.%20SELECTED%20FINANCIAL%20STATEMENT%20INFORMATION) This section provides additional details on specific financial statement line items such as accounts receivable, inventories, and R&D expenses Accounts Receivable (in thousands) | Metric | April 30, 2023 (in thousands) | October 31, 2022 (in thousands) | | :--------------- | :------------- | :--------------- | | Accounts receivable, net | $361,057 | $294,848 | Inventories (in thousands) | Metric | April 30, 2023 (in thousands) | October 31, 2022 (in thousands) | | :--------------- | :------------- | :--------------- | | Inventories, net | $721,569 | $582,471 | Research and Development Expenses (in thousands) | R&D expenses | Six months ended April 30, 2023 (in thousands) | Six months ended April 30, 2022 (in thousands) | Three months ended April 30, 2023 (in thousands) | Three months ended April 30, 2022 (in thousands) | | :------------- | :------------------------------ | :------------------------------ | :-------------------------------- | :-------------------------------- | | | $43,134 | $37,147 | $22,896 | $18,751 | - Redeemable noncontrolling interests **increased to** **$345.8 million** as of April 30, 2023, from **$327.6 million** as of October 31, 2022, reflecting new acquisitions and adjustments[38](index=38&type=chunk) [4. GOODWILL AND OTHER INTANGIBLE ASSETS](index=15&type=section&id=4.%20GOODWILL%20AND%20OTHER%20INTANGIBLE%20ASSETS) This section outlines the composition and changes in goodwill and other intangible assets, including acquisition-related increases and amortization Goodwill by Operating Segment (in thousands) | Segment | FSG (in thousands) | ETG (in thousands) | Consolidated Totals (in thousands) | | :-------------------------- | :-------- | :---------- | :------------------ | | Balances as of Oct 31, 2022 | $561,961 | $1,110,464 | $1,672,425 | | Goodwill acquired | — | 340,173 | 340,173 | | Foreign currency adjustments| 4,242 | 12,559 | 16,801 | | Adjustments to goodwill | (955) | 2,791 | 1,836 | | Balances as of Apr 30, 2023 | $565,248 | $1,465,987 | $2,031,235 | - Goodwill **increased by** **$358.8 million** to **$2.03 billion** as of April 30, 2023, **primarily due to the Exxelia acquisition** (**$340.2 million**)[43](index=43&type=chunk) Identifiable Intangible Assets (in thousands) | Asset Type | April 30, 2023 Net Carrying Amount (in thousands) | October 31, 2022 Net Carrying Amount (in thousands) | | :------------------- | :--------------------------------- | :----------------------------------- | | Amortizing Assets | $605,169 | $518,273 | | Non-Amortizing Assets| $239,150 | $215,054 | | Total Intangible Assets | $844,319 | $733,327 | - Amortization expense for intangible assets **increased to** **$36.9 million** for the six months ended April 30, 2023, from **$30.2 million** in the prior year, and is **estimated to be** **$37.5 million** for the remainder of fiscal 2023[47](index=47&type=chunk) [5. SHORT-TERM AND LONG-TERM DEBT](index=16&type=section&id=5.%20SHORT-TERM%20AND%20LONG-TERM%20DEBT) This section details the company's debt structure, including revolving credit facilities and other long-term obligations, and associated interest rates Long-term Debt (in thousands) | Debt Type | April 30, 2023 (in thousands) | October 31, 2022 (in thousands) | | :-------------------------------- | :------------- | :--------------- | | Borrowings under revolving credit facility | $723,000 | $275,000 | | Finance leases and note payable | 14,397 | 15,274 | | Less: Current maturities | (1,618) | (1,654) | | Total Long-term debt, net | $735,779 | $288,620 | - Long-term debt **significantly increased to** **$735.8 million** as of April 30, 2023, from **$288.6 million** as of October 31, 2022, **primarily due to increased borrowings** under the revolving credit facility to fund acquisitions[49](index=49&type=chunk)[130](index=130&type=chunk) - The weighted average interest rate on revolving credit facility borrowings **increased to** **6.1%** as of April 30, 2023, from **4.6%** as of October 31, 2022[50](index=50&type=chunk) [6. REVENUE](index=17&type=section&id=6.%20REVENUE) This section provides a breakdown of net sales by operating segment, product line, and industry, along with contract balances Contract Balances (in thousands) | Item | April 30, 2023 (in thousands) | October 31, 2022 (in thousands) | Change (in thousands) | | :---------------- | :------------- | :--------------- | :----- | | Contract assets | $103,448 | $93,978 | $9,470 | | Contract liabilities | 85,381 | 58,757 | 26,624 | | Net contract assets | $18,067 | $35,221 | ($17,154) | - Remaining performance obligations for contracts with duration greater than one year **totaled** **$606.7 million** as of April 30, 2023, with **$217.4 million expected to be recognized in the remainder of fiscal 2023 and $389.3 million thereafter (more than half in fiscal 2024)**[54](index=54&type=chunk)[55](index=55&type=chunk) Net Sales by Operating Segment and Product Line (in thousands) | Product Line | Six months ended April 30, 2023 (in thousands) | Six months ended April 30, 2022 (in thousands) | Three months ended April 30, 2023 (in thousands) | Three months ended April 30, 2022 (in thousands) | | :-------------------------------------------------------------------------------- | :------------------------------ | :------------------------------ | :-------------------------------- | :-------------------------------- | | **Flight Support Group:** | | | | | | Aftermarket replacement parts | $426,986 | $324,882 | $218,343 | $173,981 | | Specialty products | 187,493 | 126,579 | 96,008 | 67,286 | | Repair and overhaul parts and services | 149,001 | 127,533 | 77,851 | 65,046 | | **Total FSG net sales** | **763,480** | **578,994** | **392,202** | **306,313** | | **Electronic Technologies Group:** | | | | | | Electronic component parts (defense, space, aerospace) | 395,320 | 319,909 | 220,742 | 162,441 | | Electronic component parts (other industries) | 161,498 | 139,820 | 81,017 | 74,952 | | **Total ETG net sales** | **556,818** | **459,729** | **301,759** | **237,393** | | Intersegment sales | (11,542) | (9,567) | (6,120) | (4,893) | | **Total consolidated net sales** | **$1,308,756** | **$1,029,156** | **$687,841** | **$538,813** | Net Sales by Industry for Operating Segments (in thousands) | Industry | Six months ended April 30, 2023 (in thousands) | Six months ended April 30, 2022 (in thousands) | Three months ended April 30, 2023 (in thousands) | Three months ended April 30, 2022 (in thousands) | | :-------------------------------- | :------------------------------ | :------------------------------ | :-------------------------------- | :-------------------------------- | | **Flight Support Group:** | | | | | | Aerospace | $523,893 | $417,724 | $269,353 | $215,319 | | Defense and Space | 196,909 | 136,258 | 101,267 | 77,603 | | Other | 42,678 | 25,012 | 21,582 | 13,391 | | **Electronic Technologies Group:**| | | | | | Defense and Space | 260,571 | 265,861 | 138,609 | 134,414 | | Other | 215,794 | 156,135 | 118,024 | 82,772 | | Aerospace | 80,453 | 37,733 | 45,126 | 20,207 | [7. INCOME TAXES](index=19&type=section&id=7.%20INCOME%20TAXES) This section explains the company's income tax expense and effective tax rates, highlighting factors influencing tax variations Effective Tax Rate | Period | Effective Tax Rate | | :-------------------------------- | :----------------- | | Six months ended April 30, 2023 | 19.3% | | Six months ended April 30, 2022 | 15.0% | | Three months ended April 30, 2023 | 21.2% | | Three months ended April 30, 2022 | 23.7% | - The effective tax rate for the six months ended April 30, 2023, **increased to** **19.3%** from **15.0%** in the prior year, **mainly due to** a **smaller tax benefit** (**$6.2 million** in 2023 vs **$17.8 million** in 2022) from stock option exercises[58](index=58&type=chunk) - The effective tax rate for the three months ended April 30, 2023, **decreased to** **21.2%** from **23.7%** in the prior year, **reflecting a favorable impact** from tax-exempt unrealized gains in life insurance policies related to the HEICO Leadership Compensation Plan[60](index=60&type=chunk) [8. FAIR VALUE MEASUREMENTS](index=20&type=section&id=8.%20FAIR%20VALUE%20MEASUREMENTS) This section describes assets and liabilities measured at fair value, including contingent consideration and deferred compensation plans, and their valuation inputs Fair Value Measurements (in thousands) | Item | As of April 30, 2023 Total (in thousands) | As of October 31, 2022 Total (in thousands) | | :-------------------------------- | :------------------------- | :--------------------------- | | Assets: Deferred compensation plan | $236,918 | $204,716 | | Liabilities: Contingent consideration | $56,831 | $82,803 | - Contingent consideration liabilities **decreased to** **$56.8 million** as of April 30, 2023, from **$82.8 million** as of October 31, 2022, **due to payments and the amendment/termination** of an agreement related to a fiscal 2021 acquisition[61](index=61&type=chunk)[66](index=66&type=chunk)[71](index=71&type=chunk) Unobservable Inputs for Level 3 Contingent Consideration Liabilities (as of April 30, 2023) | Acquisition Date | Fair Value (in thousands) | Unobservable Input | Range | Weighted Average | | :--------------- | :----------------------- | :----------------- | :---------- | :--------------- | | 9-1-2022 | $6,296 | CAGR | 0% - 17% | 13% | | | | Discount rate | 7.6% - 7.6% | 7.6% | | 7-18-2022 | 16,068 | CAGR | 2% - 9% | 5% | | | | Discount rate | 7.6% - 7.6% | 7.6% | | 3-17-2022 | 6,513 | CAGR | (3%) - 5% | 0% | | | | Discount rate | 6.6% - 6.6% | 6.6% | | 8-18-2020 | 8,475 | CAGR | 15% - 24% | 22% | | | | Discount rate | 8.2% - 8.2% | 8.2% | | 9-15-2017 | 19,479 | CAGR | 4% - 5% | 5% | | | | Discount rate | 6.3% - 6.3% | 6.3% | [9. NET INCOME PER SHARE ATTRIBUTABLE TO HEICO SHAREHOLDERS](index=24&type=section&id=9.%20NET%20INCOME%20PER%20SHARE%20ATTRIBUTABLE%20TO%20HEICO%20SHAREHOLDERS) This section presents the calculation of basic and diluted net income per share attributable to HEICO shareholders Net Income Per Share Attributable to HEICO Shareholders | Metric | Six months ended April 30, 2023 (in thousands, except EPS) | Six months ended April 30, 2022 (in thousands, except EPS) | Three months ended April 30, 2023 (in thousands, except EPS) | Three months ended April 30, 2022 (in thousands, except EPS) | | :------------------------------------------ | :------------------------------ | :------------------------------ | :-------------------------------- | :-------------------------------- | | Net income attributable to HEICO (thousands)| $198,147 | $171,931 | $105,120 | $85,010 | | Diluted EPS | $1.43 | $1.25 | $.76 | $.62 | | Weighted average common shares outstanding - diluted (thousands) | 138,590 | 137,916 | 138,600 | 137,867 | - Diluted EPS **increased by** **14.4%** to **$1.43** for the six months and **22.6%** to **$0.76** for the three months ended April 30, 2023, compared to the prior year periods[74](index=74&type=chunk) [10. OPERATING SEGMENTS](index=25&type=section&id=10.%20OPERATING%20SEGMENTS) This section provides detailed financial performance and asset information for the Flight Support Group and Electronic Technologies Group segments Segment Performance (in thousands) | Metric | FSG (6M 2023, in thousands) | ETG (6M 2023, in thousands) | FSG (6M 2022, in thousands) | ETG (6M 2022, in thousands) | | :---------------- | :------------ | :------------ | :------------ | :------------ | | Net sales | $763,480 | $556,818 | $578,994 | $459,729 | | Operating income | $183,521 | $124,516 | $118,573 | $121,576 | | Capital expenditures | $10,643 | $11,058 | $8,113 | $7,995 | - FSG net sales **increased by** **31.9%** and operating income by **54.8%** for the six months ended April 30, 2023, **driven by strong commercial aerospace demand**[75](index=75&type=chunk) - ETG net sales **increased by** **21.1%** and operating income by **2.4%** for the six months ended April 30, 2023, with **consistent organic growth** from acquisitions and other electronics, **offset by decreased defense product demand**[75](index=75&type=chunk) Total Assets by Operating Segment (in thousands) | Segment | FSG (Apr 30, 2023, in thousands) | ETG (Apr 30, 2023, in thousands) | FSG (Oct 31, 2022, in thousands) | ETG (Oct 31, 2022, in thousands) | | :-------- | :----------------- | :----------------- | :----------------- | :----------------- | | Total assets | $1,685,580 | $2,914,082 | $1,635,229 | $2,230,744 | [11. COMMITMENTS AND CONTINGENCIES](index=26&type=section&id=11.%20COMMITMENTS%20AND%20CONTINGENCIES) This section discloses the company's various commitments, such as standby letters of credit, product warranty liabilities, and legal contingencies - The Company has **$22.5 million in standby letters of credit**, **primarily for** performance and payment guarantees[77](index=77&type=chunk) Product Warranty Liability (in thousands) | Item | Six months ended April 30, 2023 (in thousands) | Six months ended April 30, 2022 (in thousands) | | :-------------------- | :------------------------------ | :------------------------------ | | Balances at beginning of fiscal year | $3,296 | $3,379 | | Accruals for warranties | 1,222 | 622 | | Warranty claims settled | (1,074) | (1,012) | | Balances as of April 30 | $3,444 | $2,989 | - An indirect subsidiary of HFSC received a **grand jury subpoena related to employment and work on Navy vessels**, with the Company **cooperating but unable to predict the outcome or financial impact**[79](index=79&type=chunk) [12. SUBSEQUENT EVENT](index=27&type=section&id=12.%20SUBSEQUENT%20EVENT) This section reports significant events occurring after the balance sheet date, notably the agreement to acquire Wencor Group - On May 15, 2023, HEICO **agreed to acquire Wencor Group for $1.9 billion cash and 1,137,656 shares** of HEICO Class A Common Stock. Wencor is a commercial and military aircraft aftermarket company[81](index=81&type=chunk) - The Wencor acquisition is **subject to customary closing conditions**, including regulatory approvals, and is **expected to close by the end of calendar 2023**[82](index=82&type=chunk) - HEICO **secured financing commitments**, including **increasing its existing credit facility to $2.0 billion** and a **new $1.5 billion Bridge Facility**, **to fund the Wencor acquisition**[83](index=83&type=chunk)[84](index=84&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on HEICO's financial performance and condition for the six and three months ended April 30, 2023, highlighting record net sales and operating income, segment-specific drivers, and the impact of acquisitions and macroeconomic factors. It also discusses the company's outlook, liquidity, capital resources, and the significant Wencor acquisition [Overview](index=29&type=section&id=Overview) This section provides a high-level summary of HEICO's business segments, operational performance, and key drivers for the reporting period - HEICO's operations are divided into two segments: Flight Support Group (FSG) and Electronic Technologies Group (ETG)[88](index=88&type=chunk) - The company experienced continued improvement in operating results in the first six months and second quarter of fiscal 2023, **driven by improved demand** for commercial aerospace products and services, despite lingering COVID-19 supply chain effects[89](index=89&type=chunk) - FSG reported **eleven consecutive quarters of sequential growth** in net sales and operating income due to **commercial air travel recovery**[89](index=89&type=chunk) - ETG's results reflect **consistent organic growth** from **increased demand** for most product offerings and the impact of the January 2023 acquisition, partially offset by **decreased demand for defense products**[89](index=89&type=chunk) [Recent Developments](index=30&type=section&id=Recent%20Developments) This section highlights significant recent events impacting the company, including major acquisition announcements - On May 15, 2023, HEICO **agreed to acquire Wencor Group for $1.9 billion in cash and 1,137,656 shares** of HEICO Class A Common Stock, a **significant** commercial and military aircraft aftermarket company[92](index=92&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) This section presents a summary of the company's consolidated and segment-level financial performance metrics, including net sales and operating income Consolidated and Segment Financial Highlights (in thousands, except percentages) | Metric | Six months ended April 30, 2023 (in thousands) | Six months ended April 30, 2022 (in thousands) | Three months ended April 30, 2023 (in thousands) | Three months ended April 30, 2022 (in thousands) | | :-------------------------------- | :------------------------------ | :------------------------------ | :-------------------------------- | :-------------------------------- | | Net sales | $1,308,756 | $1,029,156 | $687,841 | $538,813 | | Operating income | $286,524 | $221,599 | $157,090 | $122,777 | | FSG Net sales | $763,480 | $578,994 | $392,202 | $306,313 | | ETG Net sales | $556,818 | $459,729 | $301,759 | $237,393 | | FSG Operating income | $183,521 | $118,573 | $99,912 | $66,197 | | ETG Operating income | $124,516 | $121,576 | $67,979 | $65,988 | | Gross profit margin | 39.0% | 39.0% | 38.7% | 39.2% | | SG&A as % of net sales | 17.1% | 17.5% | 15.9% | 16.4% | | Operating income as % of net sales| 21.9% | 21.5% | 22.8% | 22.8% | [Comparison of First Six Months of Fiscal 2023 to First Six Months of Fiscal 2022](index=32&type=section&id=Comparison%20of%20First%20Six%20Months%20of%20Fiscal%202023%20to%20First%20Six%20Months%20of%20Fiscal%202022) This section analyzes the financial performance of the company for the first six months of fiscal 2023 compared to the prior year, detailing revenue and income changes - Consolidated net sales **increased by** **27%** to a **record** **$1,308.8 million**, with FSG sales up **32%** (**$184.5 million**) and ETG sales up **21%** (**$97.1 million**)[95](index=95&type=chunk) - FSG's organic growth was **22%**, **driven by increased demand** for commercial aerospace products and services, while ETG's organic net sales **declined by** **2%** **due to decreased demand for defense products**, partially offset by other electronics and aerospace[95](index=95&type=chunk) - Consolidated gross profit margin remained flat at **39.0%**, with FSG's margin **increasing by** **2.4%** and ETG's **decreasing by** **2.6%**[96](index=96&type=chunk) - Consolidated operating income **increased by** **29%** to a **record** **$286.5 million**, with FSG operating income up **55%** (**$64.9 million**) and ETG operating income up **2%** (**$2.9 million**)[100](index=100&type=chunk) - Interest expense **surged to** **$17.4 million** from **$1.8 million**, **primarily due to higher interest rates**[102](index=102&type=chunk) - Net income attributable to HEICO **increased by** **15%** to **$198.1 million**, or **$1.43** per diluted share[107](index=107&type=chunk) [Comparison of Second Quarter of Fiscal 2023 to Second Quarter of Fiscal 2022](index=35&type=section&id=Comparison%20of%20Second%20Quarter%20of%20Fiscal%202023%20to%20Second%20Quarter%20of%20Fiscal%202022) This section analyzes the financial performance of the company for the second quarter of fiscal 2023 compared to the prior year, detailing revenue and income changes - Consolidated net sales **increased by** **28%** to a **record** **$687.8 million**, with FSG sales up **28%** (**$85.9 million**) and ETG sales up **27%** (**$64.4 million**)[109](index=109&type=chunk) - FSG's organic growth was **20%**, **driven by commercial aerospace recovery**, while ETG's organic net sales **declined by** **3%** **due to decreased defense product demand**[109](index=109&type=chunk) - Consolidated gross profit margin **decreased to** **38.7%** from **39.2%**, reflecting a **2.0%** improvement in FSG's margin offset by a **3.5%** decrease in ETG's margin[110](index=110&type=chunk) - Consolidated operating income **increased by** **28%** to a **record** **$157.1 million**, with FSG operating income up **51%** (**$33.7 million**) and ETG operating income up **3%** (**$2.0 million**)[114](index=114&type=chunk) - Interest expense **increased to** **$11.4 million** from **$1.0 million** **due to higher interest rates**[117](index=117&type=chunk) - Net income attributable to HEICO **increased by** **24%** to **$105.1 million**, or **$0.76** per diluted share[121](index=121&type=chunk) [Outlook](index=37&type=section&id=Outlook) This section provides management's expectations for future financial performance, strategic priorities, and anticipated challenges - HEICO anticipates **continued net sales growth** in both FSG and ETG for the remainder of fiscal 2023, **driven by product demand**[122](index=122&type=chunk) - The company expects ongoing inflationary pressures and supply chain disruptions to **lead to higher material and labor costs**[122](index=122&type=chunk) - **Strategic priorities** include new product development, market penetration, and an **aggressive acquisition strategy** while **maintaining financial strength**[123](index=123&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash flow, funding sources, capital expenditures, and ability to meet its financial obligations - Principal uses of cash include acquisitions, capital expenditures, dividends, distributions to noncontrolling interests, and working capital[124](index=124&type=chunk) - Fiscal 2023 capital expenditures are **anticipated to be** **$45 to $50 million**[124](index=124&type=chunk) - Net cash provided by operating activities was **$154.4 million** for the first six months of fiscal 2023, a **decrease of $20.3 million (11.6%)** from the prior year, **mainly due to increased working capital** (inventories)[126](index=126&type=chunk)[127](index=127&type=chunk) - Net cash used in investing activities **totaled** **$559.8 million**, **primarily for acquisitions** (**$524.2 million**)[129](index=129&type=chunk) - Net cash provided by financing activities was **$388.8 million**, **driven by $556.0 million in revolving credit facility borrowings**, partially offset by payments and distributions[130](index=130&type=chunk) - Committed credit facilities and cash on hand are **sufficient to fund the Wencor Acquisition and other cash requirements for at least the next twelve months**[125](index=125&type=chunk)[132](index=132&type=chunk) [Forward-Looking Statements](index=40&type=section&id=Forward-Looking%20Statements) This section cautions readers about inherent risks and uncertainties associated with forward-looking statements, including those related to acquisitions and market conditions - The report contains forward-looking statements **subject to risks and uncertainties**, including public health threats, supply chain issues, demand fluctuations, regulatory demands, acquisition integration, and economic conditions[135](index=135&type=chunk) - Specific risks related to the Wencor acquisition include **financing challenges**, **regulatory approval delays**, and the potential for the business **not to perform as expected**[135](index=135&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section updates the company's market risk disclosures, specifically noting a new foreign currency exposure related to a Euro-denominated note issued as part of the Exxelia acquisition - A **new market risk** relates to a **ten-year, €150 million note** issued for the Exxelia acquisition, **accruing interest at 4.7% per annum**[137](index=137&type=chunk) - A **hypothetical 10% strengthening of the U.S. dollar against the Euro would decrease the U.S. dollar equivalent of the Euro note receivable by approximately $16.8 million and decrease operating income by the same amount**[137](index=137&type=chunk) [Item 4. Controls and Procedures](index=41&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that HEICO's disclosure controls and procedures were effective as of April 30, 2023, and reported no material changes in internal control over financial reporting during the second quarter - Disclosure controls and procedures were evaluated and **deemed effective** as of April 30, 2023[138](index=138&type=chunk) - **No material changes** in internal control over financial reporting occurred during the second quarter ended April 30, 2023[139](index=139&type=chunk) PART II. OTHER INFORMATION [Item 1A. Risk Factors](index=42&type=section&id=Item%201A.%20Risk%20Factors) This section outlines updated risk factors, primarily focusing on those related to the pending Wencor Acquisition, including conditions for completion, potential negative impacts if the acquisition fails, substantial associated costs, and increased indebtedness - **Completion of the Wencor Acquisition is subject to various conditions**, including **regulatory approvals (Hart-Scott-Rodino Antitrust Improvements Act)**, and the absence of certain legal impediments or material adverse changes[143](index=143&type=chunk) - **Failure to complete the Wencor Acquisition could negatively impact stock price**, **incur significant transaction costs (including a $143.5 million termination fee under specified circumstances)**, and divert management resources[145](index=145&type=chunk)[146](index=146&type=chunk) - The Wencor Acquisition will involve **substantial transaction and regulatory costs**, and the company will **incur additional indebtedness**, **increasing interest expense and potentially reducing financial flexibility**[147](index=147&type=chunk)[148](index=148&type=chunk) [Item 6. Exhibits](index=44&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the Merger Agreement for the Wencor acquisition, financing commitment letters, and certifications from the Chief Executive Officer and Chief Financial Officer - **Exhibit 2.1 is the Agreement and Plan of Merger for the Wencor acquisition**[149](index=149&type=chunk) - **Exhibit 10.1 is the Commitment letter for financing related to the Wencor acquisition**[149](index=149&type=chunk) - **Certifications from the CEO and CFO (Rule 13a-14(a)/15d-14(a) and Section 1350) are included as Exhibits 31.1, 31.2, 32.1, and 32.2**[149](index=149&type=chunk) SIGNATURES - The report was **signed on May 24, 2023, by Carlos L. Macau, Jr., Executive Vice President - Chief Financial Officer and Treasurer, and Steven M. Walker, Chief Accounting Officer and Assistant Treasurer**[154](index=154&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended January 31, 2023 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 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12 ...