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What changed in HEICO CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of HEICO CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+202 added−181 removedSource: 10-K (2023-12-20) vs 10-K (2022-12-21)

Top changes in HEICO CORP's 2023 10-K

202 paragraphs added · 181 removed · 161 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

50 edited+5 added−4 removed103 unchanged
Biggest changeCopies of the above referenced materials will be made available, free of charge, upon written request to the Corporate Secretary at HEICO Corporation, 3000 Taft Street, Hollywood, Florida 33021. 15 Index Information About Our Executive Officers Our executive officers are appointed by the Board of Directors and serve at the discretion of the Board.
Biggest changeAlso located on the website are our Corporate Governance Guidelines, Finance/Audit Committee Charter, Nominating & Corporate Governance Committee Charter, and Compensation Committee Charter. 15 Index Copies of the above referenced materials will be made available, free of charge, upon written request to the Corporate Secretary at HEICO Corporation, 3000 Taft Street, Hollywood, Florida 33021.
A life limited rotable has a designated number of allowable flight hours and/or cycles (one take-off and landing generally constitutes one cycle) after which it is rendered unusable. A repairable is similar to a rotable except that it can only be repaired a 3 Index limited number of times before it must be discarded.
A life limited rotable has a designated number of allowable 3 Index flight hours and/or cycles (one take-off and landing generally constitutes one cycle) after which it is rendered unusable. A repairable is similar to a rotable except that it can only be repaired a limited number of times before it must be discarded.
Our customers for these products include satellite and spacecraft manufacturers. Electromagnetic Interference (EMI) and Radio-Frequency Interference (RFI) Shielding and Suppression Filters . The ETG designs and manufactures shielding used to prevent electromagnetic energy and radio frequencies from interfering with other devices, such as computers, telecommunication devices, avionics, weapons systems and other electronic 7 Index equipment.
Our customers for these products include satellite and spacecraft manufacturers. 7 Index Electromagnetic Interference (EMI) and Radio-Frequency Interference (RFI) Shielding and Suppression Filters . The ETG designs and manufactures shielding used to prevent electromagnetic energy and radio frequencies from interfering with other devices, such as computers, telecommunication devices, avionics, weapons systems and other electronic equipment.
Our Code of Ethics for Senior Financial Officers and Other Officers is part of our Code of Business Conduct, which is located on our website at http://www.heico.com. Any amendments to or waivers from a provision of this code of ethics will be posted on the website.
Our Code of Ethics for Senior Financial and Other Officers is part of our Code of Business Conduct, which is located on our website at http://www.heico.com. Any amendments to or waivers from a provision of this code of ethics will be posted on the website.
Raw Materials We purchase a variety of raw materials, primarily consisting of high temperature alloy sheet metal and castings, forgings, pre-plated metals and electrical components from various vendors. The materials used by our operations are generally available from a number of sources and in sufficient quantities to meet current requirements subject to normal lead times.
Raw Materials We purchase a variety of raw materials, primarily consisting of high temperature alloy sheet metal and castings, forgings, pre-plated metals, electrical components and advanced composite materials from various vendors. The materials used by our operations are generally available from a number of sources and in sufficient quantities to meet current requirements subject to normal lead times.
Competition is based mainly on price, product performance, service and technical capability. Competition for the repair and overhaul of jet engine and aircraft components and avionics and navigation systems as well as the manufacture of specialty aircraft and defense related parts comes from three principal sources: OEMs, major commercial airlines and other independent service companies.
Competition is based mainly on price, product performance, service and technical capability. 11 Index Competition for the repair and overhaul of jet engine and aircraft components and avionics and navigation systems as well as the manufacture of specialty aircraft and defense related parts comes from three principal sources: OEMs, major commercial airlines and other independent service companies.
The ETG designs and manufactures silicone material for a variety of demanding applications used in aerospace, defense, research, oil and gas, testing, pharmaceuticals and other markets. 9 Index High-End Power Amplifiers. The ETG designs and manufactures precision power analog monolithic, hybrid and open frame components for a certain wide range of defense, industrial, measurement, medical and test applications.
The ETG designs and manufactures silicone material for a variety of demanding applications used in aerospace, defense, research, oil and gas, testing, pharmaceuticals and other markets. High-End Power Amplifiers. The ETG designs and manufactures precision power analog monolithic, hybrid and open frame components for a certain wide range of defense, industrial, measurement, medical and test applications.
The ETG designs and produces high performance active antenna systems and airborne antennas for commercial and military aircraft, precision guided munitions, and other defense applications and commercial uses. Nuclear Radiation Detectors. The ETG designs and manufactures highly sensitive, reliable and easy-to-use nuclear radiation detectors for law enforcement, homeland security and military applications. Specialty Silicone Products.
The ETG designs and produces high performance active antenna systems and airborne antennas for commercial and military aircraft, precision guided munitions, and other defense applications and commercial uses. Nuclear Radiation Detectors. The ETG designs and manufactures highly sensitive, reliable and easy-to-use nuclear radiation detectors for law enforcement, homeland security and military applications. 9 Index Specialty Silicone Products.
OEMs also maintain service centers that provide repair and overhaul services for the components they manufacture. Other independent service organizations also compete for the repair and overhaul business of other users of aircraft 11 Index components. We believe that the principal competitive factors in the repair and overhaul market are quality, turnaround time, overall customer service and price.
OEMs also maintain service centers that provide repair and overhaul services for the components they manufacture. Other independent service organizations also compete for the repair and overhaul business of other users of aircraft components. We believe that the principal competitive factors in the repair and overhaul market are quality, turnaround time, overall customer service and price.
Eric Mendelson is the son of Laurans Mendelson and the brother of Victor Mendelson. 16 Index Victor H. Mendelson has been associated with the Company since 1990, serving in various capacities. Mr. Mendelson has served as our Co-President since October 2009 and served as our Executive Vice President from 2001 through September 2009. Mr.
Eric Mendelson is the son of Laurans Mendelson and the brother of Victor Mendelson. Victor H. Mendelson has been associated with the Company since 1990, serving in various capacities. Mr. Mendelson has served as our Co-President since October 2009 and served as our Executive Vice President from 2001 through September 2009. Mr.
The ETG designs and manufactures TWTAs and MPMs predominately used in radar, electronic warfare, on-board jamming and countermeasure systems in aircraft, ships and detection platforms deployed by U.S. and allied non-U.S. military forces. 8 Index Memory Products and Specialty Semiconductors .
The ETG designs and manufactures TWTAs and MPMs predominately used in radar, electronic warfare, on-board jamming and countermeasure systems in aircraft, ships and detection platforms deployed by U.S. and allied non-U.S. military forces. Memory Products and Specialty Semiconductors .
Mendelson is a member of the Advisory Board of Trustees of Mount Sinai Medical Center in Miami Beach, Florida, and a member of the Board of Trustees and a Past Chairman of Ransom Everglades School in Coconut Grove, Florida, as well as a member of the Board of Visitors of Columbia College in New York City.
Mendelson is a member of the Advisory Board of Trustees of Mount Sinai Medical Center in Miami Beach, Florida and a Past Chairman of 16 Index Ransom Everglades School in Coconut Grove, Florida, as well as a member of the Board of Visitors of Columbia College in New York City.
He is a member of the American and North Carolina Institutes of Certified Public Accountants and a member of Financial Executives International. Carlos L. Macau, Jr. has served as our Executive Vice President - Chief Financial Officer and Treasurer since June 2012. Mr.
He is a member of the American and North Carolina Institutes of Certified Public Accountants. Carlos L. Macau, Jr. has served as our Executive Vice President - Chief Financial Officer and Treasurer since June 2012. Mr.
Upon activation, these safety-critical devices transmit a distress signal to alert search and rescue operations of the aircraft's location. Traveling Wave Tube Amplifiers (“TWTAs”) and Microwave Power Modules (“MPMs”) .
Upon activation, these safety-critical devices transmit a distress signal to alert search and rescue operations of the aircraft's location. 8 Index Traveling Wave Tube Amplifiers (“TWTAs”) and Microwave Power Modules (“MPMs”) .
High-Reliability Ceramic-to-Metal Feedthroughs and Connectors. The ETG designs and manufactures high-reliability ceramic-to-metal feedthroughs and connectors for demanding environments within the industrial, life science, medical, research, semiconductor, and other markets. Technical Surveillance Countermeasures ("TSCM") Equipment.
High-Reliability ("Hi-Rel") Ceramic-to-Metal Feedthroughs and Connectors. The ETG designs and manufactures high-reliability ceramic-to-metal feedthroughs and connectors for demanding environments within the industrial, life science, medical, research, semiconductor, and other markets. Technical Surveillance Countermeasures ("TSCM") Equipment.
We select the jet engine and aircraft component replacement parts to design and manufacture through a selection process which analyzes industry information to determine which replacement parts are suitable candidates. Repair and Overhaul Services .
We select the jet engine and aircraft component replacement parts to design and manufacture through a selection process which analyzes industry information to determine which replacement parts are suitable candidates. 4 Index Repair and Overhaul Services .
The FSG provides repair and overhaul services on selected jet engine and aircraft component parts, as well as on avionics, instruments, composites 4 Index and flight surfaces of commercial aircraft operated by domestic and foreign commercial airlines.
The FSG provides repair and overhaul services on selected jet engine and aircraft component parts, as well as on avionics, instruments, composites and flight surfaces of commercial aircraft operated by domestic and foreign commercial airlines.
In recent years, the FAA granted us PMAs for approximately 300 to 500 new parts and we develop numerous new proprietary repairs per year; however, no assurance can be given that the FAA will continue to grant PMAs or DER-approved 5 Index repairs or that we will achieve acceptable levels of net sales and gross profits on such parts or repairs in the future.
In recent years, the FAA granted us PMAs for 5 Index approximately 350 to 550 new parts and we develop numerous new proprietary repairs per year; however, no assurance can be given that the FAA will continue to grant PMAs or DER-approved repairs or that we will achieve acceptable levels of net sales and gross profits on such parts or repairs in the future.
The ETG collectively designs, manufactures and sells various types of electronic, data and microwave, and electro-optical products, including infrared simulation and test equipment, laser rangefinder receivers, electrical power supplies, back-up power supplies, power conversion products, underwater locator beacons, emergency locator transmission beacons, flight deck annunciators, panels, and indicators, electromagnetic and radio frequency interference shielding and filters, high power capacitor charging power supplies, amplifiers, traveling wave tube amplifiers, photodetectors, amplifier modules, microwave power modules, flash lamp drivers, laser diode drivers, arc lamp power supplies, custom power supply designs, cable assemblies, high voltage power supplies, high voltage interconnection devices and wire, high voltage energy generators, high frequency power delivery systems; memory products, including three-dimensional microelectronic and stacked memory, static random-access memory (SRAM), and electronically erasable programmable read-only memory (EEPROM); harsh environment electronic connectors and other interconnect products, radio frequency ("RF") and microwave amplifiers, transmitters, and receivers and integrated assemblies, sub-assemblies and components; RF sources, detectors and controllers, wireless cabin control systems, solid state power distribution and management systems, crashworthy and ballistically self-sealing auxiliary fuel systems, nuclear radiation detectors, communications and electronic intercept receivers and tuners, fuel level sensing systems, high-speed interface products that link devices, high performance active antenna systems and airborne antennas for commercial and military aircraft, precision guided munitions, other defense applications and commercial uses; silicone material for a variety of demanding applications; precision power analog monolithic, hybrid and open frame components; high-reliability ceramic-to-metal feedthroughs and connectors, technical surveillance countermeasures (TSCM) equipment to detect devices used for espionage and information theft; rugged small-form factor embedded computing solutions; custom high power filters and filter assemblies; test sockets and adapters for both engineering and production use of semiconductor devices; and radiation assurance services and products.
The ETG collectively designs, manufactures and sells various types of electronic, data and microwave, and electro-optical products, including infrared simulation and test equipment, laser rangefinder receivers, electrical power supplies, back-up power supplies, power conversion products, underwater locator beacons, emergency locator transmission beacons, flight deck annunciators, panels, and indicators, electromagnetic and radio frequency interference shielding and filters, high power capacitor charging power supplies, amplifiers, traveling wave tube amplifiers, photodetectors, amplifier modules, microwave power modules, flash lamp drivers, laser diode drivers, arc lamp power supplies, custom power supply designs, cable assemblies, high voltage power supplies, high voltage interconnection devices and wire, high voltage energy generators, high frequency power delivery systems; memory products, including three-dimensional microelectronic and stacked memory, static random-access memory (SRAM), and electronically erasable programmable read-only memory (EEPROM); harsh environment electronic connectors and other interconnect products, radio frequency ("RF") and microwave amplifiers, transmitters, and receivers and integrated assemblies, sub-assemblies and components; RF sources, detectors and controllers, wireless cabin control systems, solid state power distribution and management systems, crashworthy and ballistically self-sealing auxiliary fuel systems, nuclear radiation detectors, communications and electronic intercept receivers and tuners, fuel level sensing systems, high-speed interface products that link devices, high performance active antenna systems and airborne antennas for commercial and military aircraft, precision guided munitions, other defense applications and commercial uses; silicone material for a variety of demanding applications; precision power analog monolithic, hybrid and open frame components; high-reliability ceramic-to-metal feedthroughs and connectors, technical surveillance countermeasures (TSCM) equipment to detect devices used for espionage and information theft; rugged small-form factor embedded computing solutions; custom high power filters and filter assemblies; test sockets and adapters for both engineering and production use of semiconductor devices; radiation assurance services and products; and high reliability ("Hi-Rel"), complex, passive electronic components and rotary joint assemblies for mostly aerospace and defense applications, in addition to other high-end applications, such as medical and energy uses, including emerging "clean energy" and electrification applications.
Navy; and performs tight-tolerance machining, brazing, fabricating and welding services for aerospace, defense and other industrial applications. 1 Index The Electronic Technologies Group . Our Electronic Technologies Group (“ETG”), consisting of HEICO Electronic Technologies Corp. and its subsidiaries, accounted for 43%, 50% and 48% of our net sales in fiscal 2022, 2021 and 2020, respectively.
Navy; and performs tight-tolerance machining, brazing, fabricating and welding services for aerospace, defense and other industrial applications. 1 Index The Electronic Technologies Group . Our Electronic Technologies Group (“ETG”), consisting of HEICO Electronic Technologies Corp. and its subsidiaries, accounted for 40%, 43% and 50% of our net sales in fiscal 2023, 2022 and 2021, respectively.
Disciplined Acquisition Strategy Acquisitions have been an important element of our growth strategy over the past thirty-one years, supplementing our organic growth. Since 1990, we have completed approximately 95 acquisitions complementing the niche segments of the aviation, defense, space, medical, telecommunications and electronics industries in which we operate.
Disciplined Acquisition Strategy Acquisitions have been an important element of our growth strategy over the past thirty-three years, supplementing our organic growth. Since 1990, we have completed approximately 98 acquisitions complementing the niche segments of the aviation, defense, space, medical, telecommunications and electronics industries in which we operate.
No one customer accounted for sales of 10% or more of total consolidated sales from continuing operations during any of the last three fiscal years. Net sales to our five largest customers accounted for approximately 21%, 22% and 24% of total net sales in fiscal 2022, 2021 and 2020, respectively.
No one customer accounted for sales of 10% or more of total consolidated sales from continuing operations during any of the last three fiscal years. Net sales to our five largest customers accounted for approximately 18%, 21% and 22% of total net sales in fiscal 2023, 2022 and 2021, respectively.
The ETG derived approximately 56%, 63% and 66% of its net sales in fiscal 2022, 2021 and 2020, respectively, from the sale of products and services to U.S. and foreign military agencies, prime defense contractors and both commercial and defense satellite and spacecraft manufacturers.
The ETG derived approximately 49%, 56% and 63% of its net sales in fiscal 2023, 2022 and 2021, respectively, from the sale of products and services to U.S. and foreign military agencies, prime defense contractors and both commercial and defense satellite and spacecraft manufacturers.
Our business is comprised of two operating segments: The Flight Support Group . Our Flight Support Group (“FSG”), consisting of HEICO Aerospace Holdings Corp. and HEICO Flight Support Corp. and their collective subsidiaries, accounted for 57%, 50% and 52% of our net sales in fiscal 2022, 2021 and 2020, respectively.
Our business is comprised of two operating segments: The Flight Support Group . Our Flight Support Group (“FSG”), consisting of HEICO Aerospace Holdings Corp. and HEICO Flight Support Corp. and their collective subsidiaries, accounted for 60%, 57% and 50% of our net sales in fiscal 2023, 2022 and 2021, respectively.
We have developed for our customers approximately 12,200 parts for which PMAs have been received from the FAA. Jet engine and aircraft component replacement parts can be categorized by their ongoing ability to be repaired and returned to service. The general categories in which we participate are as follows: (i) rotable; (ii) repairable; and (iii) expendable.
We have developed for our customers approximately 19,500 parts (inclusive of acquisitions) for which PMAs have been received from the FAA. Jet engine and aircraft component replacement parts can be categorized by their ongoing ability to be repaired and returned to service. The general categories in which we participate are as follows: (i) rotable; (ii) repairable; and (iii) expendable.
These rules may impose additional costs and may introduce new risks related to our ability to verify the origin of any conflict minerals used in our products. Backlog Our total backlog increased by 42% to $1,383 million as of October 31, 2022, up from $977 million as of October 31, 2021.
These rules may impose additional costs and may introduce new risks related to our ability to verify the origin of any conflict minerals used in our products. Backlog Our total backlog increased by 35% to $1,863 million as of October 31, 2023, up from $1,383 million as of October 31, 2022.
However, supply chain disruptions and recent cost inflation impacted our material prices during fiscal 2022. Additionally, continued inflationary pressures and lingering supply chain disruptions stemming from the Pandemic may lead to higher material costs in fiscal 2023.
However, supply chain disruptions and continued cost inflation impacted our material prices during fiscal 2023. Additionally, continued inflationary pressures and lingering supply chain disruptions stemming from the COVID-19 pandemic may lead to higher material costs in fiscal 2024.
As part of our growth strategy, we have continued to increase our research and development activities. Research and development expenditures by the FSG, which were approximately $.3 million in fiscal 1991, increased to approximately $22.2 million in fiscal 2022, $18.3 million in fiscal 2021 and $19.1 million in fiscal 2020.
As part of our growth strategy, we have continued to increase our research and development activities. Research and development expenditures by the FSG, which were approximately $.3 million in fiscal 1991, increased to approximately $26.4 million in fiscal 2023, $22.2 million in fiscal 2022 and $18.3 million in fiscal 2021.
The majority of our backlog of orders as of October 31, 2022 is expected to be filled during fiscal 2023. The FSG's backlog of unshipped orders was $674 million as of October 31, 2022, up from $397 million as of October 31, 2021.
The majority of our backlog of orders as of October 31, 2023 is expected to be filled during fiscal 2024. The FSG's backlog of unshipped orders was $1,013 million as of October 31, 2023, up from $674 million as of October 31, 2022.
As a result of internal growth and acquisitions, our net sales from continuing operations have grown from $26.2 million in fiscal 1990 to $2,208.3 million in fiscal 2022, representing a compound annual growth rate of approximately 15%.
As a result of internal growth and acquisitions, our net sales from continuing operations have grown from $26.2 million in fiscal 1990 to $2,968.1 million in fiscal 2023, representing a compound annual growth rate of approximately 15%.
While we believe that we are the largest independent supplier of non-OEM jet engine and aircraft component replacement parts, we have in recent years been adding new products to our line at a rate of approximately 300 to 500 Parts Manufacturer Approvals (“PMA” or “PMAs”) per year.
We believe that we are the largest independent supplier of non-OEM jet engine and aircraft component replacement parts, and in recent years and inclusive of acquisitions, we are now adding new products to our line at a rate of approximately 350 to 550 Parts Manufacturer Approvals (“PMA” or “PMAs”) per year.
Health and Safety The health and safety of our workforce is fundamental to the success of our business. We safeguard our people, projects and reputation by striving for zero employee injuries and illnesses, while operating and delivering our work responsibly and sustainably.
Our management believes that we have good relations with our employees. Health and Safety The health and safety of our workforce is fundamental to the success of our business. We safeguard our people, projects and reputation by striving for zero employee injuries and illnesses, while operating and delivering our work responsibly and sustainably.
Macau, Jr. 55 Executive Vice President - Chief Financial Officer and Treasurer — Steven M. Walker 58 Chief Accounting Officer and Assistant Treasurer — Laurans A. Mendelson has served as our Chairman of the Board since December 1990.
Irwin 77 Senior Executive Vice President — Carlos L. Macau, Jr. 56 Executive Vice President - Chief Financial Officer and Treasurer — Steven M. Walker 59 Chief Accounting Officer and Assistant Treasurer — Laurans A. Mendelson has served as our Chairman of the Board since December 1990.
In addition, specific safety standards have been promulgated for workplaces engaged in the treatment, disposal or storage of hazardous waste. Requirements under state law, in some circumstances, may mandate additional measures for facilities handling materials specified as extremely dangerous. We believe that our operations are in material compliance with OSHA’s health and safety requirements.
In particular, OSHA provides special procedures and measures for the handling of certain hazardous and toxic substances. In addition, specific safety standards have been promulgated for workplaces engaged in the treatment, disposal or storage of hazardous waste. Requirements under state law, in some circumstances, may mandate additional measures for facilities handling materials specified as extremely dangerous.
Generally, our in-house sales personnel receive a base salary plus commissions and manufacturers’ representatives receive a commission based on sales. 10 Index We believe that direct relationships are crucial to establishing and maintaining a strong customer base and, accordingly, our senior management is actively involved in our marketing activities, particularly with established customers.
We believe that direct relationships are crucial to establishing and maintaining a strong customer base and, accordingly, our senior management is actively involved in our marketing activities, particularly with established customers.
During the same period, we improved our net income from $2.0 million to $351.7 million, representing a compound annual growth rate of approximately 18%. Our results of operations in fiscal 2022 continued to reflect the adverse impact from the COVID-19 global pandemic (the “Pandemic”), including its impact on our supply chain.
During the same period, we improved our net income from $2.0 million to $403.6 million, representing a compound annual growth rate of approximately 18%. 2 Index Although we have largely emerged from the COVID-19 pandemic, our results of operations in fiscal 2023 reflected some of the COVID-19 pandemic's lingering impact, including its impact on our supply chain.
These products include infrared scene projector equipment, such as our MIRAGE IR Scene Simulator, high precision blackbody sources, software and integrated calibration systems. 6 Index Simulation equipment allows the U.S. government and allied foreign military to save money on missile testing as it allows infrared-based missiles to be tested on a multi-axis, rotating table instead of requiring the launch of a complete missile.
Simulation equipment allows the U.S. government and allied foreign military to save money on missile testing as it allows infrared-based missiles to be tested on a multi-axis, rotating table instead of requiring the launch of a complete missile.
Personal protective equipment is provided to those employees where needed for the employee to safely perform their job function. 14 Index Compensation and Benefits As part of our compensation philosophy, we believe that we must offer and maintain market competitive total rewards programs for our employees in order to attract and retain superior talent.
Compensation and Benefits As part of our compensation philosophy, we believe that we must offer and maintain market competitive total rewards programs for our employees in order to attract and retain superior talent.
The following table sets forth the names, ages of, and positions and offices held by our executive officers as of December 20, 2022: Name Age Position(s) Director Since Laurans A. Mendelson 84 Chairman of the Board; Chief Executive Officer; and Director 1989 Eric A.
Information About Our Executive Officers Our executive officers are appointed by the Board of Directors and serve at the discretion of the Board. The following table sets forth the names, ages of, and positions and offices held by our executive officers as of December 18, 2023: Name Age Position(s) Director Since Laurans A.
Mendelson 57 Co-President and Director; President and Chief Executive Officer of the HEICO Flight Support Group 1992 Victor H. Mendelson 55 Co-President and Director; President and Chief Executive Officer of the HEICO Electronic Technologies Group 1996 Thomas S. Irwin 76 Senior Executive Vice President — Carlos L.
Mendelson 85 Chairman of the Board; Chief Executive Officer; and Director 1989 Eric A. Mendelson 58 Co-President and Director; President and Chief Executive Officer of the HEICO Flight Support Group 1992 Victor H. Mendelson 56 Co-President and Director; President and Chief Executive Officer of the HEICO Electronic Technologies Group 1996 Thomas S.
There has been no material adverse effect to our consolidated financial statements nor competitive positions as a result of these environmental regulations. 13 Index Other Regulation We are also subject to a variety of other regulations including work-related and community safety laws.
Notwithstanding these burdens, we believe that we are in material compliance with all federal, state and local environmental laws and regulations governing our operations. 13 Index There has been no material adverse effect to our consolidated financial statements nor competitive positions as a result of these environmental regulations.
As of October 31, 2022, we had approximately 6,500 full-time and part-time employees including approximately 3,400 in the Flight Support Group and approximately 3,100 in the Electronic Technologies Group. None of our employees are represented by a U.S. domestic union. Our management believes that we have good relations with our employees.
As of October 31, 2023, we had approximately 9,600 full-time and part-time employees including approximately 4,800 in the Flight Support Group (of whom approximately 900 were employed by foreign subsidiaries) and approximately 4,800 in the Electronic Technologies Group (of whom approximately 2,000 were employed by foreign subsidiaries). None of our employees are represented by a U.S. domestic union.
Distribution, Sales, Marketing and Customers Each of our operating segments independently conducts distribution, sales and marketing efforts directed at their respective customers and industries and, in some cases, collaborates with other operating divisions and subsidiaries within its group for cross-marketing efforts. Sales and marketing efforts are conducted primarily by in-house personnel and, to a lesser extent, by independent manufacturers’ representatives.
We believe that our ETG's research and development capabilities are a significant component of our historical success and an integral part of our growth strategy. 10 Index Distribution, Sales, Marketing and Customers Each of our operating segments independently conducts distribution, sales and marketing efforts directed at their respective customers and industries and, in some cases, collaborates with other operating divisions and subsidiaries within its group for cross-marketing efforts.
We provide our employees upfront and ongoing safety training to ensure that safety policies and procedures are effectively communicated and implemented.
We provide our employees upfront and ongoing safety training to ensure that safety policies and procedures are effectively 14 Index communicated and implemented. Personal protective equipment is provided to those employees where needed for the employee to safely perform their job function.
Additionally, approximately $56 million of the increase in the FSG’s backlog reflects the backlogs of businesses acquired during fiscal 2022. The FSG's backlog excludes forecasted shipments for certain contracts pursuant to which customers provide only estimated annual usage and not firm purchase orders.
The FSG's backlog excludes forecasted shipments for certain contracts pursuant to which customers provide only 12 Index estimated annual usage and not firm purchase orders. Our backlogs within many of the FSG's subsidiaries are typically short-lead in nature with many product orders being received within the month of shipment.
The ETG offers radiation assurance services and products used in testing and simulating radiation effects on electronic components and materials. As part of our growth strategy, we have continued to invest in our research and development activities.
The ETG offers radiation assurance services and products used in testing and simulating radiation effects on electronic components and materials. Hi-Rel, Passive Electronic Components and Rotary Joint Assemblies.
The Occupational Safety and Health Act of 1970 mandates general requirements for safe workplaces for all employees and established the Occupational Safety and Health Administration (“OSHA”) in the Department of Labor. In particular, OSHA provides special procedures and measures for the handling of certain hazardous and toxic substances.
Other Regulation We are also subject to a variety of other regulations including work-related and community safety laws. The Occupational Safety and Health Act of 1970 mandates general requirements for safe workplaces for all employees and established the Occupational Safety and Health Administration (“OSHA”) in the Department of Labor.
Notwithstanding these burdens, we believe that we are in material compliance with all federal, state and local environmental laws and regulations governing our operations.
We believe that our operations are in material compliance with OSHA’s health and safety requirements.
Research and development expenditures by the ETG were $53.9 million in fiscal 2022, $50.6 million in fiscal 2021 and $46.5 million in fiscal 2020. We believe that our ETG's research and development capabilities are a significant component of our historical success and an integral part of our growth strategy.
Research and development expenditures by the ETG were $69.4 million in fiscal 2023, $53.9 million in fiscal 2022 and $50.6 million in fiscal 2021.
Our backlogs within many of the FSG's subsidiaries are typically short-lead in nature with many product orders being received within the month of shipment. The ETG’s backlog of unshipped orders was $709 million as of October 31, 2022, up from $580 million as of October 31, 2021.
The ETG’s backlog of unshipped orders was $850 million as of October 31, 2023, up from $709 million as of October 31, 2022. The increase in the ETG’s backlog is principally from the backlogs of businesses acquired during fiscal 2023.
Removed
The 2 Index effects of the Pandemic and related actions by governments around the world to mitigate its spread have impacted our employees, customers, suppliers and manufacturers. See Item 7, Management's Discussion and Analysi s , for additional details on the effects of the Pandemic on the Company.
Added
Despite the aforementioned, we experienced continued improvement in operating results in fiscal 2023 as compared to fiscal 2022 principally reflecting improved demand for our commercial aerospace products and services. See Item 7, Management's Discussion and Analysi s , for additional details on the effects of the COVID-19 pandemic on the Company.
Removed
The increase in the FSG’s backlog reflects increases across all of the FSG's product lines, but mainly within its specialty products product line resulting from increased orders at one of our businesses that manufactures advanced niche components and complex composite assemblies for commercial aviation, defense and space applications.
Added
These products include infrared scene projector equipment, such as our 6 Index MIRAGE IR Scene Simulator, high precision blackbody sources, software and integrated calibration systems.
Removed
The increase in the ETG’s backlog principally reflects an increase of $39 million from the backlogs of businesses acquired during fiscal 2022, increased orders at one of our businesses that produces high-power devices used in both defense and commercial applications, one of our businesses that manufactures electrical back-up power supplies and battery packs for commercial aircraft 12 Index applications and one of our businesses that manufactures high performance, high reliability microwave modules, units, and integrated sub-systems for commercial and military satellites.
Added
The ETG offers Hi-Rel, complex, passive electronic components and rotary joint assemblies for mostly aerospace and defense applications, in addition to other high-end applications, such as medical and energy uses, including emerging "clean energy" and electrification applications. As part of our growth strategy, we have continued to invest in our research and development activities.
Removed
Also located on the website are our Corporate Governance Guidelines, Finance/Audit Committee Charter, Nominating & Corporate Governance Committee Charter, and Compensation Committee Charter.
Added
Sales and marketing efforts are conducted primarily by in-house personnel and, to a lesser extent, by independent manufacturers’ representatives. Generally, our in-house sales personnel receive a base salary plus commissions and manufacturers’ representatives receive a commission based on sales.
Added
The increase in the FSG’s backlog is principally from the backlog of a business acquired during fiscal 2023 as well as increased orders for its aftermarket replacement parts resulting from continued recovery in global commercial air travel as compared to the prior year.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

21 edited+6 added−1 removed51 unchanged
Biggest changeIn addition, certain product sales to foreign countries of our Electronic Technologies Group and Flight Support Group require export approval or licensing from the United States ("U.S.") government. Denial of export licenses could reduce our sales to those countries and could have a material adverse effect on our business.
Biggest changeNew and more stringent government regulations, if adopted and enacted, could have an adverse effect on our business, financial condition and results of operations. In addition, certain product sales to foreign countries of our Electronic Technologies Group and Flight Support Group require export approval or licensing from the United States ("U.S.") government.
If aircraft or engines for which we offer replacement parts or supply repair and overhaul services 23 Index are retired or grounded for prolonged periods of time and there are fewer aircraft that require these parts or services, our revenues may decline as well as the value of any related inventory.
If aircraft or engines for which we offer replacement parts or supply repair and overhaul services are retired or grounded for prolonged periods of time and there are fewer aircraft that require these parts or services, our revenues may decline as well as the value of any related inventory.
The extent to which the Pandemic may have a material adverse effect on our future business, financial condition and results of operations will depend on many factors that are not within HEICO’s control, including but not limited to the Pandemic's path and effect, including factors like new variants and vaccination rates, potential supply chain disruptions and inflation, which can impact our key markets.
The extent to which Health Emergencies may have a material adverse effect on our future business, financial condition and results of operations will depend on many factors that are not within HEICO’s control, including but not limited to the path and effect of Health Emergencies, including factors like new variants and vaccination rates, potential supply chain disruptions and inflation, which can impact our key markets.
We carry limited specific environmental insurance, thus, losses could occur for uninsurable or uninsured risks or in amounts in excess of existing insurance coverage. The occurrence of an event that is not covered in full or in part by insurance could have a material adverse effect on our business, financial condition and results of operations.
We carry limited specific environmental insurance, thus, losses could occur for uninsurable or uninsured risks or in amounts in excess of existing insurance coverage. The occurrence of an event that is not covered in full or in part by insurance could have a material adverse effect on our business, financial condition and results of operations. 26 Index Item 1B.
As a result, we are subject to risks of doing business internationally, including the following: • Fluctuations in currency exchange rates; • Volatility in foreign political, regulatory, and economic environments; • Ability to obtain required export licenses or approvals; • Uncertainty of the ability of foreign customers to finance purchases; • Uncertainties and restrictions concerning the availability of funding credit or guarantees; • Imposition of taxes, export controls, tariffs, embargoes and other trade restrictions; and • Compliance with a variety of international laws, as well as U.S. laws affecting the activities of U.S. companies abroad such as the U.S.
As a result, we are subject to risks of doing business internationally, including the following: • Fluctuations in currency exchange rates; • Geopolitical unrest, war, terrorism and other acts of violence; • Volatility in foreign political, regulatory, and economic environments; • Ability to obtain required export licenses or approvals; • Uncertainty of the ability of foreign customers to finance purchases; • Uncertainties and restrictions concerning the availability of funding credit or guarantees; • Imposition of taxes, export controls, tariffs, embargoes and other trade restrictions; and • Compliance with a variety of international laws, as well as U.S. laws affecting the activities of U.S. companies abroad such as the U.S.
As of October 31, 2022 and 2021, goodwill and intangible assets, net of amortization, accounted for 59% and 58% of our total assets, respectively. We test our goodwill and intangible assets for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the carrying amount of such assets may not be fully recoverable.
As of October 31, 2023 and 2022, goodwill and intangible assets, net of amortization, accounted for 64% and 59% of our total assets, respectively. We test our goodwill and intangible assets for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the carrying amount of such assets may not be fully recoverable.
Our results of operations may continue to reflect the adverse impact from the Pandemic, including its impact on our supply chain and inflationary pressures.
Our results of operations may continue to reflect the adverse impact from the COVID-19 pandemic, including its impact on our supply chain and inflationary pressures.
Any such violations could have a material adverse effect on our business. Tax changes could affect our effective tax rate and future profitability. We file income tax returns in the U.S. federal jurisdiction, multiple state jurisdictions and certain jurisdictions outside the U.S. In fiscal 2022, our effective tax rate was 20.4%.
Any such violations could have a material adverse effect on our business. Tax changes could affect our effective tax rate and future profitability. We file income tax returns in the U.S. federal jurisdiction, multiple state jurisdictions and certain jurisdictions outside the U.S. In fiscal 2023, our effective tax rate was 20.0%.
Our future effective tax rate may be adversely affected by a number of factors, including the following: • Changes in statutory tax rates in any of the various jurisdictions where we file tax returns; • Changes in available tax credits or tax deductions; • Changes in tax laws or the interpretation of such tax laws including interpretations, amendments and technical corrections of the recently enacted Tax Cuts and Jobs Act; • Changes to the accounting for income taxes in accordance with generally accepted accounting principles; • The amount of net income attributable to noncontrolling interests in our subsidiaries structured as partnerships; • Changes in the mix of earnings in jurisdictions with differing statutory tax rates; • Adjustments to estimated taxes upon finalization of various tax returns; • Resolution of issues arising from tax audits with various tax authorities; and • The reversal of any previously experienced tax-exempt unrealized gains in the cash surrender values of life insurance policies related to the HEICO Corporation Leadership Compensation Plan, a nonqualified deferred compensation plan. 25 Index Any significant increase in our future effective tax rates could have a material adverse effect on net income for future periods.
Our future effective tax rate may be adversely affected by a number of factors, including the following: • Changes in statutory tax rates in any of the various jurisdictions where we file tax returns; • Changes in available tax credits or tax deductions; • Changes in tax laws or the interpretation of such tax laws including interpretations, amendments and technical corrections of the Tax Cuts and Jobs Act; • Changes to the accounting for income taxes in accordance with generally accepted accounting principles; 25 Index • The amount of net income attributable to noncontrolling interests in our subsidiaries structured as partnerships; • Changes in the mix of earnings in jurisdictions with differing statutory tax rates; • Adjustments to estimated taxes upon finalization of various tax returns; • Resolution of issues arising from tax audits with various tax authorities; and • The reversal of any previously experienced tax-exempt unrealized gains in the cash surrender values of life insurance policies related to the HEICO Corporation Leadership Compensation Plan, a nonqualified deferred compensation plan.
We market our products and services to approximately 125 countries, with approximately 35% of our consolidated net sales in fiscal 2022 derived from sales to foreign customers. We expect that sales to foreign customers will continue to account for a significant portion of our revenues in the foreseeable future.
We market our products and services to approximately 125 countries, with approximately 34% of our consolidated net sales in fiscal 2023 derived from sales to foreign customers. We expect that sales to foreign customers will continue to account for a significant portion of our revenues in the foreseeable future.
As of December 20, 2022, collectively our executive officers and entities controlled by them, the HEICO Savings and Investment Plan (our 401(k) Plan) and members of the Board of Directors beneficially owned approximately 19% of our outstanding Common Stock and approximately 3% of our outstanding Class A Common Stock.
As of December 18, 2023, collectively our executive officers and entities controlled by them, the HEICO Savings and Investment Plan (our 401(k) Plan) and members of the Board of Directors beneficially owned approximately 19% of our outstanding Common Stock and approximately 3% of our outstanding Class A Common Stock.
A decline in defense, space or homeland security budgets or additional restrictions imposed by the U.S. government on sales of products or services to foreign military agencies could lower sales of our products and services. We are subject to risks arising from the COVID-19 global pandemic (the "Pandemic").
A decline in defense, space or homeland security budgets or additional restrictions imposed by the U.S. government on sales of products or services to foreign military agencies could lower sales of our products and services. We are subject to risks arising from public health threats, such as the the COVID-19 global pandemic ("Health Emergencies").
A pandemic or other public health epidemic, poses the risk that we or our employees, customers, suppliers, manufacturers and other commercial partners may be prevented from conducting business activities for an indefinite period of time, including due to the spread of the disease or shutdowns requested or mandated by governmental authorities.
Health Emergencies pose a risk that we or our employees, customers, suppliers, manufacturers and other commercial partners may be prevented from conducting business activities for an indefinite period of time, including due to the spread of the disease or shutdowns requested or mandated by governmental authorities.
Reductions in defense, space or homeland security spending by U.S. and/or foreign customers could reduce our revenues. In fiscal 2022, approximately 56% of the net sales of our Electronic Technologies Group were derived from the sale of defense, commercial and defense satellite and spacecraft components, and homeland security products.
Reductions in defense, space or homeland security spending by U.S. and/or foreign customers could reduce our revenues. In fiscal 2023, approximately 35% of our net sales were derived from the sale of defense, commercial and defense satellite and spacecraft components, and homeland security products.
We may not realize the full value of our goodwill and intangible assets, and to the extent that impairment has occurred, we would be required to recognize the impaired portion of such assets in our earnings. An impairment of a significant portion of such assets could have a material adverse effect on our business, financial condition and results of operations.
We may not realize the full value of our goodwill and intangible assets, and to the extent that impairment has occurred, we would be required to recognize the impaired portion of such assets in our earnings.
We are dependent on key personnel and the loss of these key personnel could have a material adverse effect on our success. Our success substantially depends on the performance, contributions and expertise of our senior management team led by Laurans A. Mendelson, our Chairman and Chief Executive 22 Index Officer, and Eric A. Mendelson and Victor H. Mendelson, our Co-Presidents.
Our success substantially depends on the performance, contributions and expertise of our senior management team led by Laurans A. Mendelson, our Chairman and Chief Executive Officer, and Eric A. Mendelson and Victor H. Mendelson, our Co-Presidents.
Demand for commercial air travel can be influenced by airline industry profitability, world trade policies, government-to-government relations, terrorism, disease outbreaks, environmental constraints imposed upon aircraft operations, technological changes, price and other competitive factors. These global industry and economic conditions may have a material adverse effect on our business, financial condition and results of operations.
Demand for commercial air travel can be influenced by airline industry profitability, world trade policies, government-to-government relations, terrorism, disease outbreaks, environmental constraints imposed upon aircraft operations, technological changes, price and other competitive factors.
Governmental agencies throughout the world, including the FAA, highly regulate the manufacture, repair and overhaul of aircraft parts and accessories. We include, with the replacement parts that we sell to our customers, documentation certifying that each part complies with applicable regulatory requirements and meets applicable standards of airworthiness established by the FAA or the equivalent regulatory agencies in other countries.
We include, with the replacement parts that we sell to our customers, documentation certifying that each part complies with applicable regulatory requirements and meets applicable standards of airworthiness 24 Index established by the FAA or the equivalent regulatory agencies in other countries. In addition, our repair and overhaul operations are subject to certification pursuant to regulations established by the FAA.
The retirement or prolonged grounding of commercial aircraft could reduce our revenues and the value of any related inventory. Our Flight Support Group designs and manufactures jet engine and aircraft component replacement parts and also repairs, overhauls and distributes jet engine and aircraft components.
Our Flight Support Group designs and manufactures jet engine and aircraft component replacement parts and also repairs, overhauls and distributes jet engine and aircraft components.
We may incur product liability claims that are not fully insured and such insurance may not be available at commercially reasonable rates.
Any significant increase in our future effective tax rates could have a material adverse effect on net income for future periods. We may incur product liability claims that are not fully insured and such insurance may not be available at commercially reasonable rates.
The revocation or suspension of any of our material authorizations or approvals would have an adverse effect on our business, financial condition and results of operations. New and more stringent government regulations, if adopted and enacted, could have an adverse effect on our business, financial 24 Index condition and results of operations.
Specific regulations vary from country to country, although compliance with FAA requirements generally satisfies regulatory requirements in other countries. The revocation or suspension of any of our material authorizations or approvals would have an adverse effect on our business, financial condition and results of operations.
Removed
In addition, our repair and overhaul operations are subject to certification pursuant to regulations established by the FAA. Specific regulations vary from country to country, although compliance with FAA requirements generally satisfies regulatory requirements in other countries.
Added
An impairment of a significant portion of such assets could have a material adverse effect on our business, financial condition and results of operations. 22 Index We are dependent on key personnel and the loss of these key personnel could have a material adverse effect on our success.
Added
Lower commercial air travel caused by risks arising from public health threats, such as the the COVID-19 global pandemic and their aftermath, airline fleet changes or airline purchasing decisions, could cause lower demand for our goods and services.
Added
These global industry and economic conditions may have a material adverse effect on our business, financial condition and results of operations. 23 Index The retirement or prolonged grounding of commercial aircraft could reduce our revenues and the value of any related inventory.
Added
Governmental agencies throughout the world, including the FAA, highly regulate the manufacture, repair and overhaul of aircraft parts and accessories.
Added
Denial of export licenses could reduce our sales to those countries and could have a material adverse effect on our business.
Added
UNRESOLVED STAFF COMMENTS None. Item 1C. CYBERSECURITY Not applicable.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeSummary information on the facilities utilized within the FSG, ETG and our corporate offices to support their principal operating activities is as follows: Square Footage Location Leased Owned Description Flight Support Group United States facilities (14 states) 1,068,000 218,000 Manufacturing, engineering and distribution facilities, and corporate headquarters United States facilities (7 states) 260,000 127,000 Repair and overhaul facilities International facilities (10 countries) - China, France, Germany, India, Laos, Netherlands, Singapore, Thailand, United Arab Emirates and United Kingdom 105,000 173,000 Manufacturing, engineering and distribution facilities, and sales offices Electronic Technologies Group United States facilities (18 states) 818,000 502,000 Manufacturing and engineering facilities International facilities (4 countries) - Canada, France, South Korea and United Kingdom 81,000 86,000 Manufacturing and engineering facilities Corporate United States facilities (1 state) — 10,000 (1) Administrative offices (1) Represents the square footage of our corporate offices in Miami, Florida.
Biggest changeSummary information on the facilities utilized within the FSG, ETG and our corporate offices to support their principal operating activities is as follows: Square Footage Location Leased Owned Description Flight Support Group United States facilities (18 states) 1,483,000 233,000 Manufacturing, engineering and distribution facilities, and corporate headquarters United States facilities (10 states) 610,000 127,000 Repair and overhaul facilities International facilities (10 countries) - France, Germany, India, Laos, Netherlands, Singapore, Thailand, Turkey, United Arab Emirates and United Kingdom 118,000 173,000 Manufacturing, engineering and distribution facilities, and sales offices Electronic Technologies Group United States facilities (18 states) 821,000 612,000 Manufacturing and engineering facilities International facilities (7 countries) - Canada, France, India, Morocco, South Korea, United Kingdom and Vietnam 382,000 313,000 Manufacturing and engineering facilities Corporate United States facilities (1 state) — 10,000 (1) Administrative offices (1) Represents the square footage of our corporate offices in Miami, Florida.
Item 2. PROPERTIES We own or lease a number of facilities, which are utilized by our Flight Support Group (“FSG”), Electronic Technologies Group (“ETG”), and corporate offices. As of October 31, 2022, all of the facilities listed below were in good operating condition, well maintained and in regular use.
Item 2. PROPERTIES We own or lease a number of facilities, which are utilized by our Flight Support Group (“FSG”), Electronic Technologies Group (“ETG”), and corporate offices. As of October 31, 2023, all of the facilities listed below were in good operating condition, well maintained and in regular use.
The square footage of our corporate headquarters in Hollywood, Florida is included within Square Footage-Owned of the caption “United States facilities (14 states)” under Flight Support Group. 27 Index
The square footage of our corporate headquarters in Hollywood, Florida is included within Square Footage-Owned of the caption “United States facilities (18 states)” under Flight Support Group. 27 Index

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAt this early stage in the investigation, we cannot predict the outcome of the investigation or when the investigation will ultimately be resolved; nor can we reasonably estimate the possible range of loss or impact to our business, if any, that may result from this matter.
Biggest changeWe cannot predict the outcome of the investigation or when the investigation will ultimately be resolved; nor can we reasonably estimate the possible range of loss or impact to our business, if any, that may result from this matter.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIn December 2022, our Board of Directors declared our 89th consecutive semi-annual cash dividend of $.10 per share payable in January 2023. This cash dividend represents an 11% increase over the prior semi-annual per share mount of $.09.
Biggest changeIn December 2023, our Board of Directors declared our 91st consecutive semi-annual cash dividend of $.10 per share payable in January 2024. Our Board of Directors will continue to review our dividend policy and will regularly evaluate whether dividends should be paid in cash or stock, as well as what amounts should be paid.
The NYSE Composite Index measures the 28 Index performance of all common stocks listed on the NYSE. The Dow Jones U.S. Aerospace Index is comprised of large companies which make aircraft, major weapons, radar and other defense equipment and systems as well as providers of satellites and spacecraft used for defense purposes.
The NYSE Composite Index measures the performance of all common stocks listed on the NYSE. The Dow Jones U.S. Aerospace Index is 28 Index comprised of large companies which make aircraft, major weapons, radar and other defense equipment and systems as well as providers of satellites and spacecraft used for defense purposes.
Performance Graphs The following graph and table compare the total return on $100 invested in HEICO Common Stock and HEICO Class A Common Stock with the total return on $100 invested in the NYSE Composite Index and the Dow Jones U.S. Aerospace Index for the five-year period from October 31, 2017 through October 31, 2022.
Performance Graphs The following graph and table compare the total return on $100 invested in HEICO Common Stock and HEICO Class A Common Stock with the total return on $100 invested in the NYSE Composite Index and the Dow Jones U.S. Aerospace Index for the five-year period from October 31, 2018 through October 31, 2023.
Aerospace Index 1,766.94 1,878.10 2,807.42 3,373.52 3,725.15 2020 2021 2022 HEICO Common Stock $44,877.75 $60,000.11 $65,650.39 NYSE Composite Index 707.40 968.47 839.31 Dow Jones U.S. Aerospace Index 2,233.00 3,400.98 3,147.04 Issuer Purchases of Equity Securities There were no issuer purchases of our equity securities during the fourth quarter of fiscal 2022.
Aerospace Index 1,766.94 1,878.10 2,807.42 3,373.52 3,725.15 2020 2021 2022 2023 HEICO Common Stock $44,877.75 $60,000.11 $65,650.39 $64,751.68 NYSE Composite Index 707.40 968.47 839.31 849.11 Dow Jones U.S. Aerospace Index 2,233.00 3,400.98 3,147.04 3,440.63 Issuer Purchases of Equity Securities There were no issuer purchases of our equity securities during the fourth quarter of fiscal 2023.
Dividend Policy We have historically paid semi-annual cash dividends on both our Class A Common Stock and Common Stock. During fiscal 2022, we paid an aggregate cash dividend of $.18 per share, which represents a 6% increase over the aggregate cash dividend of $.17 per share paid during fiscal 2021.
Dividend Policy We have historically paid semi-annual cash dividends on both our Class A Common Stock and Common Stock. During fiscal 2023, we paid an aggregate cash dividend of $.20 per share, which represents an 11% increase over the aggregate cash dividend of $.18 per share paid during fiscal 2022.
As of December 20, 2022, there were 275 holders of record of our Common Stock and 280 holders of record of our Class A Common Stock.
As of December 18, 2023, there were 265 holders of record of our Common Stock and 327 holders of record of our Class A Common Stock.
Aerospace Index 100.00 120.16 132.69 79.54 121.14 112.10 The following graph and table compare the total return on $100 invested in HEICO Common Stock since October 31, 1990 using the same indices shown on the five-year performance graph above.
Aerospace Index 100.00 110.42 66.19 100.81 93.29 101.99 The following graph and table compare the total return on $100 invested in HEICO Common Stock since October 31, 1990 using the same indices shown on the five-year performance graph above.
Our Board of Directors will continue to review our dividend policy and will regularly evaluate whether dividends should be paid in cash or stock, as well as what amounts should be paid. Our ability to pay dividends could be affected by future business performance, liquidity, capital needs, alternative investment opportunities and loan covenants under our revolving credit facility.
Our ability to pay dividends could be affected by future business performance, liquidity, capital needs, alternative investment opportunities and loan covenants under our revolving credit facility.
The total returns include the reinvestment of cash dividends. Cumulative Total Return as of October 31, 2017 2018 2019 2020 2021 2022 HEICO Common Stock $100.00 $144.69 $213.18 $181.84 $241.59 $282.24 HEICO Class A Common Stock 100.00 137.14 196.34 193.05 259.87 263.63 NYSE Composite Index 100.00 98.92 106.73 100.72 137.89 119.50 Dow Jones U.S.
The total returns include the reinvestment of cash dividends. Cumulative Total Return as of October 31, 2018 2019 2020 2021 2022 2023 HEICO Common Stock $100.00 $147.34 $125.68 $166.97 $195.07 $190.22 HEICO Class A Common Stock 100.00 143.17 140.77 189.49 192.23 192.26 NYSE Composite Index 100.00 107.89 101.81 139.39 120.80 122.21 Dow Jones U.S.
Removed
Recent Sales of Unregistered Securities On August 10, 2022, we acquired 100% of the stock of Sensor Systems, Inc. ("Sensor"). The purchase price of this acquisition was paid for with a proportional combination of cash using proceeds from the Company's revolving credit facility and 576,338 shares of HEICO Class A Common Stock.
Added
Recent Sales of Unregistered Securities There were no unregistered sales of our equity securities during fiscal 2023, except in connection with the Wencor Group acquisition as disclosed in our Current Report on Form 8-K filed with the Securities and Exchange Commission on August 10, 2023.
Removed
The HEICO Class A Common Stock issued in connection with the acquisition of Sensor was not registered under the Securities Act of 1933, in accordance with Section 4(a)(2) and Rule 506(b) of Regulation D thereunder, as a transaction by an issuer not involving any public offering.
Removed
The shares of Class A Common Stock issued in connection with this acquisition were registered for resale pursuant to a Registration Statement on Form S-3 declared effective on August 31, 2022. See Note 2, Acquisitions, of the Notes to Consolidated Financial Statements for additional information.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeNet cash provided by operating activities was $444.1 million in fiscal 2021 and consisted primarily of net income from consolidated operations of $329.8 million, depreciation and amortization expense of $93.0 million (a non-cash item), net changes in other long-term liabilities and assets related to the LCP of $12.8 million (principally participant deferrals and employer contributions), $10.1 million in employer contributions to the HEICO Savings and Investment Plan (a non-cash item), and $9.1 million in share-based compensation expense (a non-cash item), partially offset by a $15.6 million deferred income tax benefit.
Biggest changeBased on our current outlook, we believe that net cash provided by operating activities and available borrowings under our revolving credit facility will be sufficient to fund our cash requirements for at least the next twelve months. 38 Index Operating Activities Net cash provided by operating activities was $448.7 million in fiscal 2023 and consisted primarily of net income from consolidated operations of $444.4 million, depreciation and amortization expense of $130.0 million (a non-cash item), $15.5 million in share-based compensation expense (a non-cash item) and $15.3 million in employer contributions to the HEICO Savings and Investment Plan (a non-cash item), partially offset by a $117.4 million increase in net working capital, a $26.5 million deferred income tax benefit (a non-cash item), and a $9.1 million impact from the amendment and termination of a contingent consideration agreement (a non-cash item).
Operating Activities Net cash provided by operating activities was $467.9 million in fiscal 2022 and consisted primarily of net income from consolidated operations of $390.6 million, depreciation and amortization expense of $96.3 million (a non-cash item), net changes in other long-term liabilities and assets related to the LCP of $15.4 million (principally participant deferrals and employer contributions), $12.6 million in share-based compensation expense (a non-cash item), and $12.2 million in employer contributions to the HEICO Savings and Investment Plan (a non-cash item), partially offset by a $61.4 million increase in net working capital.
Net cash provided by operating activities was $467.9 million in fiscal 2022 and consisted primarily of net income from consolidated operations of $390.6 million, depreciation and amortization expense of $96.3 million (a non-cash item), net changes in other long-term liabilities and assets related to the LCP of $15.4 million (principally participant deferrals and employer contributions), $12.6 million in share-based compensation expense (a non-cash item), and $12.2 million in employer contributions to the HEICO Savings and Investment Plan (a non-cash item), partially offset by a $61.4 million increase in net working capital.
For further information on these and other factors that potentially could materially affect our financial results, see Item 1A, Risk Factors . We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except to the extent required by applicable law.
For further information on these and other factors that potentially could materially affect our financial results, see Item 1A, Risk Factors . We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except to the extent required by applicable law. 48 Index
Changes in estimates did not have a material effect on net income from consolidated operations in fiscal 2022, 2021 and 2020. Valuation of Inventory Inventory is stated at the lower of cost or net realizable value, with cost being determined on the first-in, first-out or the average cost basis. Losses, if any, are recognized fully in the period when identified.
Changes in estimates did not have a material effect on net income from consolidated operations in fiscal 2023, 2022 and 2021. Valuation of Inventory Inventory is stated at the lower of cost or net realizable value, with cost being determined on the first-in, first-out or the average cost basis. Losses, if any, are recognized fully in the period when identified.
Subsequent to the acquisition date, the fair value of such contingent consideration is measured each reporting period and any changes are recorded to SG&A expenses within our Consolidated Statements of Operations. Changes in either the revenue growth rates, related earnings or the discount rate could result in a material change to the 43 Index amount of contingent consideration accrued.
Subsequent to the acquisition date, the fair value of such contingent consideration is measured each reporting period and any changes are recorded to SG&A expenses within our Consolidated Statements of Operations. Changes in either the revenue growth rates, related earnings or the discount rate could result in a material change to the amount of contingent consideration accrued.
We estimate variable consideration by applying the most likely amount method when there are a limited number of outcomes related to the resolution of the variable consideration. 42 Index Changes in estimates that result in adjustments to net sales and cost of sales are recognized as necessary in the period they become known on a cumulative catch-up basis.
We estimate variable consideration by applying the most likely amount method when there are a limited number of outcomes related to the resolution of the variable consideration. Changes in estimates that result in adjustments to net sales and cost of sales are recognized as necessary in the period they become known on a cumulative catch-up basis.
Investing Activities Net cash used in investing activities totaled $395.8 million in fiscal 2022 and related primarily to acquisitions of $347.3 million, capital expenditures of $32.0 million, and investments related to the LCP of $15.3 million. Further details regarding our acquisitions may be found in Note 2, Acquisitions, of the Notes to Consolidated Financial Statements.
Further details regarding our acquisitions may be found in Note 2, Acquisitions, of the Notes to Consolidated Financial Statements. 39 Index Net cash used in investing activities totaled $395.8 million in fiscal 2022 and related primarily to acquisitions of $347.3 million, capital expenditures of $32.0 million, and investments related to the LCP of $15.3 million.
The Credit Facility is unsecured and contains covenants that require, among other things, the maintenance of a Total Leverage Ratio and an Interest Coverage Ratio, as such capitalized terms are defined in the Credit Facility. We were in compliance with all financial and nonfinancial covenants of the Credit Facility as of October 31, 2022.
The Credit Facility is unsecured and contains covenants that require, among other things, the maintenance of a Total Leverage Ratio and an Interest Coverage Ratio, as such capitalized terms are defined in the Credit Facility. We were in compliance with all financial and nonfinancial covenants of the Credit Facility as of October 31, 2023.
The increase in net working capital principally reflects an $89.2 million increase in inventories to support the increase in our consolidated backlog, partially offset by a $34.1 million increase in accrued 38 Index expenses and other current liabilities mainly reflecting an increase in contingent consideration and contract liabilities.
The increase in net working capital principally reflects an $89.2 million increase in inventories to support the increase in our consolidated backlog, partially offset by a $34.1 million increase in accrued expenses and other current liabilities mainly reflecting an increase in contingent consideration and contract liabilities.
The majority of our revenue is recognized at a point-in-time when 41 Index control is transferred, which is generally evidenced by the shipment or delivery of the product to the customer, a transfer of title, a transfer of the significant risks and rewards of ownership, and customer acceptance.
The majority of our revenue is recognized at a point-in-time when control is transferred, which is generally evidenced by the shipment or delivery of the product to the customer, a transfer of title, a transfer of the significant risks and rewards of ownership, and customer acceptance.
Also, forward-looking statements are based upon management’s estimates of fair values and of future costs, using currently available information. Therefore, actual results may differ materially from those expressed in or implied by those forward-looking statements.
Also, 47 Index forward-looking statements are based upon management’s estimates of fair values and of future costs, using currently available information. Therefore, actual results may differ materially from those expressed in or implied by those forward-looking statements.
Other Obligations and Commitments The holders of equity interests in certain of the Company’s subsidiaries have rights (“Put Rights”) that require the Company to provide cash consideration for their equity interests (the “Redemption Amount”) at fair value or at a formula that management intended to reasonably approximate fair value based solely on a multiple of future earnings over a measurement period.
Other Obligations and Commitments The holders of equity interests in certain of our subsidiaries have rights (“Put Rights”) that require us to provide cash consideration for their equity interests (the “Redemption Amount”) at fair value or at a formula that management intended to reasonably approximate fair value based solely on a multiple of future earnings over a measurement period.
The ETG collectively designs, manufactures and sells various types of electronic, data and microwave, and electro-optical products, including infrared simulation and test equipment, laser rangefinder receivers, electrical power supplies, back-up power supplies, power conversion products, underwater locator beacons, emergency locator transmission beacons, flight deck 32 Index annunciators, panels and indicators, electromagnetic and radio frequency interference shielding and filters, high power capacitor charging power supplies, amplifiers, traveling wave tube amplifiers, photodetectors, amplifier modules, microwave power modules, flash lamp drivers, laser diode drivers, arc lamp power supplies, custom power supply designs, cable assemblies, high voltage power supplies, high voltage interconnection devices and wire, high voltage energy generators, high frequency power delivery systems; memory products, including three-dimensional microelectronic and stacked memory, static random-access memory (SRAM) and electronically erasable programmable read-only memory (EEPROM); harsh environment electronic connectors and other interconnect products, RF and microwave amplifiers, transmitters, and receivers and integrated assemblies, sub-assemblies and components; RF sources, detectors and controllers, wireless cabin control systems, solid state power distribution and management systems, crashworthy and ballistically self-sealing auxiliary fuel systems, nuclear radiation detectors, communications and electronic intercept receivers and tuners, fuel level sensing systems, high-speed interface products that link devices, high performance active antenna systems and airborne antennas for commercial and military aircraft, precision guided munitions, other defense applications and commercial uses; silicone material for a variety of demanding applications; precision power analog monolithic, hybrid and open frame components; high-reliability ceramic-to-metal feedthroughs and connectors, technical surveillance countermeasures (TSCM) equipment to detect devices used for espionage and information theft; rugged small-form factor embedded computing solutions; custom high power filters and filter assemblies; test sockets and adapters for both engineering and production use of semiconductor devices, and radiation assurance services and products.
The ETG collectively designs, manufactures and sells various types of electronic, data and microwave, and electro-optical products, including infrared simulation and test equipment, laser rangefinder receivers, electrical power supplies, back-up power supplies, power conversion products, underwater locator beacons, 32 Index emergency locator transmission beacons, flight deck annunciators, panels and indicators, electromagnetic and radio frequency interference shielding and filters, high power capacitor charging power supplies, amplifiers, traveling wave tube amplifiers, photodetectors, amplifier modules, microwave power modules, flash lamp drivers, laser diode drivers, arc lamp power supplies, custom power supply designs, cable assemblies, high voltage power supplies, high voltage interconnection devices and wire, high voltage energy generators, high frequency power delivery systems; memory products, including three-dimensional microelectronic and stacked memory, static random-access memory (SRAM) and electronically erasable programmable read-only memory (EEPROM); harsh environment electronic connectors and other interconnect products, RF and microwave amplifiers, transmitters, and receivers and integrated assemblies, sub-assemblies and components; RF sources, detectors and controllers, wireless cabin control systems, solid state power distribution and management systems, crashworthy and ballistically self-sealing auxiliary fuel systems, nuclear radiation detectors, communications and electronic intercept receivers and tuners, fuel level sensing systems, high-speed interface products that link devices, high performance active antenna systems and airborne antennas for commercial and military aircraft, precision guided munitions, other defense applications and commercial uses; silicone material for a variety of demanding applications; precision power analog monolithic, hybrid and open frame components; high-reliability ceramic-to-metal feedthroughs and connectors, technical surveillance countermeasures (TSCM) equipment to detect devices used for espionage and information theft; rugged small-form factor embedded computing solutions; custom high power filters and filter assemblies; test sockets and adapters for both engineering and production use of semiconductor devices, and radiation assurance services and products; and Hi-Rel, complex, passive electronic components and rotary joint assemblies for mostly aerospace and defense applications, in addition to other high-end applications, such as medical and energy uses including emerging "clean energy" and electrification applications.
(“HEICO Electronic”) and its subsidiaries, which primarily: • Designs and Manufactures Electronic, Microwave and Electro-Optical Equipment, High-Speed Interface Products, High Voltage Interconnection Devices, EMI and RFI Shielding and Filters, High Voltage Advanced Power Electronics, Power Conversion Products, Underwater Locator Beacons, Memory Products, Self-Sealing Auxiliary Fuel Systems, Active Antenna Systems, Airborne Antennas, and TSCM Equipment.
(“HEICO Electronic”) and its subsidiaries, which primarily: • Designs and Manufactures Electronic, Microwave and Electro-Optical Equipment, High-Speed Interface Products, High Voltage Interconnection Devices, EMI and RFI Shielding and Filters, High Voltage Advanced Power Electronics, Power Conversion Products, Underwater Locator Beacons, Memory Products, Self-Sealing Auxiliary Fuel Systems, Active Antenna Systems, Airborne Antennas, TSCM Equipment and high reliability ("Hi-Rel") electronic components.
New Accounting Pronouncement See Note 1, Summary of Significant Accounting Policies - New Accounting Pronouncement, of the Notes to Consolidated Financial Statements for additional information. 44 Index Forward-Looking Statements Certain statements in this report constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.
New Accounting Pronouncements See Note 1, Summary of Significant Accounting Policies - New Accounting Pronouncements, of the Notes to Consolidated Financial Statements for additional information. Forward-Looking Statements Certain statements in this report constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.
The fair values of our reporting units were determined using a weighted average of a market approach and an income approach. Under the market approach, fair values are estimated using published market multiples for comparable companies.
The 46 Index fair values of our reporting units are determined using a weighted average of a market approach and an income approach. Under the market approach, fair values are estimated using published market multiples for comparable companies.
For further information regarding our contingent consideration arrangements, see Note 8, Fair Value Measurements, of the Notes to Consolidated Financial Statements. Valuation of Goodwill and Other Intangible Assets We test goodwill for impairment annually as of October 31, or more frequently if events or changes in circumstances indicate that the carrying amount of goodwill may not be fully recoverable.
For further information regarding our contingent consideration arrangements, see Note 8, Fair Value Measurements, of the Notes to Consolidated Financial Statements. Valuation of Goodwill and Other Intangible Assets We test goodwill for impairment annually as of October 31, or more frequently if events or changes in circumstances indicate that the carrying amount of goodwill may exceed its fair value.
The determination of fair value requires us to make a number of estimates, assumptions and judgments of underlying factors such as projected revenues and related earnings as well as discount rates. Based on the intangible asset impairment tests conducted, we did not recognize any impairment losses in fiscal 2022, 2021 and 2020.
The determination of fair value requires us to make a number of estimates, assumptions and judgments of underlying factors such as projected revenues and related earnings as well as discount rates. Based on the intangible asset impairment tests conducted, we incurred an immaterial impairment loss in fiscal 2023 and did not recognize any impairment losses in fiscal 2022 and 2021.
The FSG's organic growth reflects increased demand for the majority of our commercial aerospace products and services resulting from continued recovery in global commercial air travel as compared to the prior year.
The FSG's organic net sales increase reflects increased demand for the majority of our commercial aerospace products and services resulting from continued recovery in global commercial air travel as compared to the prior year.
As of October 31, 2022 and 2021, $82.8 million and $62.3 million of contingent consideration was accrued within our Consolidated Balance Sheets, respectively. During fiscal 2022, 2021 and 2020, such fair value measurement adjustments resulted in net (decreases) increases to SG&A expenses of ($7.6) million, $1.2 million and $.5 million, respectively.
As of October 31, 2023 and 2022, $71.1 million and $82.8 million of contingent consideration was accrued within our Consolidated Balance Sheets, respectively. During fiscal 2023, 2022 and 2021, such fair value measurement adjustments resulted in net (decreases) increases to SG&A expenses of ($.7) million, ($7.6) million and $1.2 million, respectively.
Our net sales in fiscal 2022 and 2021 by market consisted of approximately 43% and 39% from the commercial aviation industry, respectively, 39% and 44% from the defense and space industries, respectively, and 18% and 17% from other industrial markets including electronics, medical and telecommunications, respectively.
Our net sales in fiscal 2023 and 2022 by market consisted of approximately 48% and 43% from the commercial aviation industry, respectively, 35% and 39% from the defense and space industries, respectively, and 17% and 18% from other industrial markets including electronics, medical and telecommunications, respectively.
Factors that could cause such differences include: • The severity, magnitude and duration of the Pandemic, including supply chain disruptions and inflationary pressures; • Our liquidity and the amount and timing of cash generation; • Lower commercial air travel caused by the Pandemic and its aftermath, airline fleet changes or airline purchasing decisions, which could cause lower demand for our goods and services; • Product specification costs and requirements, which could cause an increase to our costs to complete contracts; • Governmental and regulatory demands, export policies and restrictions, reductions in defense, space or homeland security spending by U.S. and/or foreign customers or competition from existing and new competitors, which could reduce our sales; • Our ability to introduce new products and services at profitable pricing levels, which could reduce our sales or sales growth; • Product development or manufacturing difficulties, which could increase our product development and manufacturing costs and delay sales; • Our ability to make acquisitions, including obtaining any applicable domestic and/or foreign governmental approvals, and achieve operating synergies from acquired businesses; customer credit risk; interest, foreign currency exchange and income tax 45 Index rates; economic conditions, including the effects of inflation, within and outside of the aviation, defense, space, medical, telecommunications and electronics industries, which could negatively impact our costs and revenues; and • Defense spending or budget cuts, which could reduce our defense-related revenue.
Factors that could cause such differences include: • The severity, magnitude and duration of public health threats, such as the COVID-19 pandemic; • Our liquidity and the amount and timing of cash generation; • Lower commercial air travel, airline fleet changes or airline purchasing decisions, which could cause lower demand for our goods and services; • Product specification costs and requirements, which could cause an increase to our costs to complete contracts; • Governmental and regulatory demands, export policies and restrictions, reductions in defense, space or homeland security spending by U.S. and/or foreign customers or competition from existing and new competitors, which could reduce our sales; • Our ability to introduce new products and services at profitable pricing levels, which could reduce our sales or sales growth; • Product development or manufacturing difficulties, which could increase our product development and manufacturing costs and delay sales; and • Our ability to make acquisitions, including obtaining any applicable domestic and/or foreign governmental approvals, and achieve operating synergies from acquired businesses; customer credit risk; interest, foreign currency exchange and income tax rates; and economic conditions, including the effects of inflation, within and outside of the aviation, defense, space, medical, telecommunications and electronics industries, which could negatively impact our costs and revenues.
Based on the annual goodwill impairment test as of October 31, 2022, 2021 and 2020, we determined there was no impairment of our goodwill. The fair value of each of our reporting units as of October 31, 2022 significantly exceeded its carrying value.
Based on the annual goodwill impairment test as of October 31, 2023, 2022 and 2021, we determined there was no impairment of our goodwill. The fair value of each of our reporting units calculated as part of our quantitative impairment test significantly exceeded its carrying value as of October 31, 2023.
As of October 31, 2022, management’s estimate of the aggregate Redemption Amount of all Put Rights that we could be required to pay is approximately $327.6 million, which is included within redeemable noncontrolling interests in our Consolidated Balance Sheet.
As of October 31, 2023, management’s estimate of the aggregate Redemption Amount of all Put Rights that we could be required to pay is approximately $364.8 million, which is included within redeemable noncontrolling interests in our Consolidated Balance Sheet.
Although sales price changes were not a significant contributing factor to the change in net sales of the FSG and ETG in fiscal 2022, recent cost inflation and potential supply chain disruptions may lead to higher sales prices during fiscal 2023.
Although sales price changes were not a significant contributing factor to the change in net sales of the FSG and ETG in fiscal 2023, recent cost inflation may lead to higher sales prices during fiscal 2024.
In evaluating the recoverability of goodwill, we compare the fair value of each of our reporting units to its carrying value to determine potential impairment and an impairment loss is recognized in the amount by which the carrying value of a reporting unit’s goodwill exceeds its fair value.
When performing the quantitative impairment test, we compare the fair value of each of our reporting units to its carrying value to determine potential impairment and an impairment loss is recognized in the amount by which the carrying value of a reporting unit’s goodwill exceeds its fair value.
Borrowings under the Credit Facility accrue interest at our election of the Base Rate or Adjusted Term SOFR, plus in each case, the Applicable Rate (based on the Company’s Total Leverage Ratio).
Borrowings under the Credit Facility accrue interest at our election of the Base Rate or Adjusted Term SOFR, plus in each case, the Applicable Rate (based on the Company’s Total Leverage Ratio), as such capitalized terms are defined in the Credit Facility.
Total new product research and development expenses included within our consolidated cost of sales were $76.1 million in fiscal 2022, up from $68.9 million in fiscal 2021. Our consolidated selling, general and administrative ("SG&A") expenses were $365.9 million in fiscal 2022, as compared to $334.5 million in fiscal 2021.
Total new product research and development expenses included within our consolidated cost of sales were $95.8 million in fiscal 2023, up from $76.1 million in fiscal 2022. Our consolidated selling, general and administrative ("SG&A") expenses were $528.1 million in fiscal 2023, as compared to $365.9 million in fiscal 2022.
The increase principally reflects an increase in the FSG’s operating income as a percentage of net sales to 21.3% in fiscal 2022, up from 16.4% in fiscal 2021, partially offset by a decrease in the ETG's operating income as a percentage of net sales to 27.7% in fiscal 2022, as compared to 28.9% in fiscal 2021.
Our consolidated operating income as a percentage of net sales in fiscal 2023 principally reflects a decrease in the ETG's operating income as a percentage of net sales to 23.3% in fiscal 2023, as compared to 27.7% in fiscal 2022, partially offset by an increase in the FSG’s operating income as a percentage of net sales to 21.9% in fiscal 2023, up from 21.3% in fiscal 2022.
Net income attributable to noncontrolling interests was $38.9 million in fiscal 2022, as compared to $25.5 million in fiscal 2021. The increase in net income attributable to noncontrolling interests principally reflects improved operating results of certain subsidiaries of the FSG and ETG in which noncontrolling interests are held, inclusive of fiscal 2021 and 2022 acquisitions.
Net income attributable to noncontrolling interests was $40.8 million in fiscal 2023, as compared to $38.9 million in fiscal 2022. The increase in net income attributable to noncontrolling interests principally reflects improved operating results of certain subsidiaries of the FSG and ETG in which noncontrolling interests are held.
However, continued cost inflation and supply chain disruptions during fiscal 2023 may require additional sales price increases in order to mitigate their impact on net income attributable to HEICO.
However, continued cost inflation during fiscal 2024 may require additional sales price increases in order to mitigate their impact on net income attributable to HEICO.
In November 2017, we entered into a $1.3 billion Revolving Credit Facility Agreement ("Credit Facility") with a bank syndicate. The Credit Facility may be used to finance acquisitions and for working capital and other general corporate purposes, including capital expenditures. In December 2020, we entered into an amendment to increase the capacity by $200 million to $1.5 billion.
Revolving Credit Facility In November 2017, we entered into a $1.3 billion Revolving Credit Facility Agreement ("Credit Facility") with a bank syndicate. The Credit Facility may be used to finance acquisitions and for working capital and other general corporate purposes, including capital expenditures.
Capital expenditures in fiscal 2023 are anticipated to approximate $40 million. We finance our activities primarily from our operating and financing activities, including borrowings under our revolving credit facility. As of December 20, 2022, we had approximately $1,202 million of unused committed availability under the terms of our revolving credit facility.
Capital expenditures in fiscal 2024 are anticipated to be approximately $65 million. We finance our activities primarily from our operating and financing activities, including borrowings under our revolving credit facility. As of December 18, 2023, we had approximately $739 million of unused committed availability under the terms of our revolving credit facility.
The net sales increase in the FSG reflects strong organic growth of 25% as well as net sales of $100.0 million contributed by our fiscal 2022 and 2021 acquisitions.
The net sales increase in the FSG reflects strong organic growth of 21% as well as net sales of $251.0 million contributed by fiscal 2023 and 2022 acquisitions.
Operating Income Our consolidated operating income increased by 26% to a record $496.8 million in fiscal 2022, up from $392.9 million in fiscal 2021.
Operating Income Our consolidated operating income increased by 26% to a record $625.3 million in fiscal 2023, up from $496.8 million in fiscal 2022.
The increase in our effective tax rate principally reflects a 5.7% unfavorable impact from tax-exempt unrealized losses in the cash surrender values of life insurance policies related to the HEICO Leadership Compensation Plan (the "LCP") recognized in fiscal 2022 as compared to the tax-exempt unrealized gains recognized on such policies in fiscal 2021.
The decrease in our effective tax rate principally reflects a favorable impact from tax-exempt unrealized gains in the cash surrender values of life insurance policies related to the HEICO Leadership Compensation Plan in fiscal 2023 as compared to tax-exempt unrealized losses recognized in fiscal 2022.
The estimated aggregate Redemption Amount of the Put Rights that are currently puttable, previously put, or becoming puttable during fiscal 2023 is approximately $103.2 million, of which approximately 40 Index $56.3 million would be payable in fiscal 2023 should all of the eligible associated noncontrolling interest holders elect to exercise their Put Rights during fiscal 2023.
The estimated aggregate Redemption Amount of the Put Rights that are currently puttable, previously put, or becoming puttable during fiscal 2024 is approximately $152.9 million, of which approximately $92.4 million would be payable in fiscal 2024 should all of the eligible associated noncontrolling interest holders elect to exercise their Put Rights during fiscal 2024.
Adjusted Term SOFR is the rate per annum equal to Term SOFR plus a Term SOFR Adjustment of .10%; provided that Adjusted Term SOFR as so determined shall never be less than 0%, as such capitalized terms are defined in the Credit Facility. The Applicable Rate for SOFR Loans ranges from 1.00% to 2.00%.
Adjusted Term SOFR is the rate per annum equal to Term SOFR plus a Term SOFR Adjustment of .10%; provided that Adjusted Term SOFR as so determined shall never be less than 0%. The Applicable Rate for SOFR Loans ranges from 1.125% to 2.00%. The 40 Index Applicable Rate for Base Rate Loans ranges from .125% to 1.00%.
Our consolidated operating income as a percentage of net sales increased to 22.5% in fiscal 2022, up from 21.1% in fiscal 2021.
Our consolidated operating income as a percentage of net sales was 21.1% in fiscal 2023, as compared to 22.5% in fiscal 2022.
The impact of such increases on net income attributable to HEICO has been generally minimized by efforts to lower costs through manufacturing efficiencies and cost reductions as well as selective price increases, as was done in fiscal 2022.
Inflation We have generally experienced increases in our costs of labor, materials and services consistent with overall rates of inflation. The impact of such increases on net income attributable to HEICO has been generally minimized by efforts to lower costs through manufacturing efficiencies and cost reductions as well as selective price increases, as was done in fiscal 2023.
The Credit Facility includes a feature that will allow us to increase the capacity by $350 million to become a $1.85 billion facility through increased commitments from existing lenders or the addition of new lenders.
The Credit Facility includes a feature that will allow us to increase the capacity by $750 million to become a $2.75 billion facility through increased commitments from existing lenders.
Our results of operations in fiscal 2022 continued to reflect the adverse impact from the COVID-19 global pandemic (the “Pandemic”), including its impact on our supply chain. Despite the aforementioned, we experienced continued improvement in operating results in fiscal 2022 as compared to fiscal 2021 principally reflecting improved demand for our commercial aerospace products.
Although we have largely emerged from the COVID-19 pandemic, our results of operations in fiscal 2023 reflected some of the pandemic's lingering impact, including its impact on our supply chain. Despite the aforementioned, we experienced continued improvement in operating results in fiscal 2023 as compared to fiscal 2022 principally reflecting improved demand for our commercial aerospace products and services.
The increase in the FSG’s operating income as a percentage of net sales principally reflects the previously mentioned improved gross profit margin, as well as a 2.3% impact from a decrease in SG&A expenses as a percentage of net sales mainly reflecting the previously mentioned efficiencies.
The decrease in the ETG's operating income as a percentage of net sales principally reflects the previously mentioned lower gross profit margin and a 2.2% impact from an increase in SG&A expenses as a percentage of net sales.
Liquidity and Capital Resources The following table summarizes our capitalization (in thousands): As of October 31, 2022 2021 Cash and cash equivalents $139,504 $108,298 Total debt (including current portion) 290,274 236,498 Shareholders’ equity 2,648,306 2,296,939 Total capitalization (debt plus equity) 2,938,580 2,533,437 Total debt to total capitalization 10% 9% Our principal uses of cash include acquisitions, capital expenditures, cash dividends, distributions to noncontrolling interests and working capital needs.
Liquidity and Capital Resources The following table summarizes our capitalization (in thousands): As of October 31, 2023 2022 Cash and cash equivalents $171,048 $139,504 Total debt (including current portion) 2,478,078 290,274 Shareholders’ equity 3,193,151 2,648,306 Total capitalization (debt plus equity) 5,671,229 2,938,580 Total debt to total capitalization 44% 10% Our principal uses of cash include acquisitions, capital expenditures, cash dividends, distributions to noncontrolling interests, interest payments and working capital needs.
The ETG's organic net sales decline is mainly attributable to decreased demand for our defense products resulting in a net sales decrease of $70.3 million, partially offset by increased demand for our other electronics, medical and aerospace products resulting in net sales increases of $29.5 million, $17.8 million and $4.3 million, respectively.
The ETG's organic net sales increase is mainly attributable to increased demand for our aerospace, space and other electronics products resulting in net sales increases of $23.7 million, $12.9 million and $9.5 million, respectively, partially offset by decreased demand for our defense products resulting in a net sales decrease of $28.2 million.
The increase in consolidated SG&A expenses principally reflects $17.0 million attributable to our fiscal 2021 35 Index and 2022 acquisitions, increases of $11.8 million and $4.0 million in other selling and other general and administrative expenses, respectively, mainly incurred to support the previously mentioned net sales growth and a $6.1 million increase in performance-based compensation expense, partially offset by a $7.6 million impact from changes in the estimated fair value of accrued contingent consideration.
The increase in 35 Index consolidated SG&A expenses principally reflects $96.8 million attributable to our fiscal 2023 and 2022 acquisitions, costs incurred to support the previously mentioned net sales growth resulting in increases of $28.0 million and $10.8 million in other general and administrative expenses and other selling expenses, respectively, a $15.8 million increase in performance-based compensation expense and a $20.0 million increase in acquisition costs mainly related to fiscal 2023 acquisitions, partially offset by a $9.1 million impact from the amendment and termination of a contingent consideration agreement pertaining to a fiscal 2021 acquisition.
Our consolidated SG&A expenses as a percentage of net sales decreased to 16.6% in fiscal 2022, down from 17.9% in fiscal 2021.
Our consolidated SG&A expenses as a percentage of net sales were 17.8% in fiscal 2023, as compared to 16.6% in fiscal 2022.
Gross Profit and Operating Expenses Our consolidated gross profit margin improved to 39.1% in fiscal 2022, up from 39.0% in fiscal 2021 principally reflecting a 2.6% improvement in the FSG's gross profit margin, partially offset by a 1.0% decrease in the ETG's gross profit margin.
Gross Profit and Operating Expenses Our consolidated gross profit margin was 38.9% in fiscal 2023, as compared to 39.1% in fiscal 2022, principally reflecting a 2.3% decrease in the ETG's gross profit margin, partially offset by a 1.7% improvement in the FSG's gross profit margin.
The Credit Facility also includes $100 million sublimits for borrowings made in foreign currencies and for swingline borrowings, and a $50 million sublimit for letters of credit. Outstanding principal, accrued and unpaid interest and other amounts payable under the Credit Facility may be accelerated upon an event of default, as such events are described in the Credit Facility.
Outstanding principal, accrued and unpaid interest and other amounts payable under the Credit Facility may be accelerated upon an event of default, as such events are described in the Credit Facility.
Additionally, our results of operations in fiscal 2022 have been affected by recent acquisitions as further detailed in Note 2, Acquisitions, of the Notes to Consolidated Financial Statements.
Additionally, our results of operations in fiscal 2023 have been affected by recent acquisitions as further detailed in Note 2, Acquisitions, of the Notes to Consolidated Financial Statements. 33 Index Presentation of Results of Operations and Liquidity and Capital Resources The following discussion and analysis of our Results of Operations and Liquidity and Capital Resources includes a comparison of fiscal 2023 to fiscal 2022.
The Flight Support Group has reported nine 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.
The FSG has reported thirteen consecutive quarters of sequential growth in net sales resulting from commercial air travel recovery in certain domestic travel markets, moderated by a slower recovery in international travel markets.
A similar discussion and analysis that compares fiscal 2021 to fiscal 2020 may be found in Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our Form 10-K for the fiscal year ended October 31, 2021. 33 Index Results of Operations The following table sets forth the results of our operations, net sales and operating income by segment and the percentage of net sales represented by the respective items in our Consolidated Statements of Operations (in thousands) : Year ended October 31, 2022 2021 Net sales $2,208,322 $1,865,682 Cost of sales 1,345,563 1,138,259 Selling, general and administrative expenses 365,915 334,523 Total operating costs and expenses 1,711,478 1,472,782 Operating income $496,844 $392,900 Net sales by segment: Flight Support Group $1,255,212 $927,089 Electronic Technologies Group 972,475 959,170 Intersegment sales (19,365) (20,577) $2,208,322 $1,865,682 Operating income by segment: Flight Support Group $267,167 $151,930 Electronic Technologies Group 269,473 277,306 Other, primarily corporate (39,796) (36,336) $496,844 $392,900 Net sales 100.0 % 100.0 % Gross profit 39.1 % 39.0 % Selling, general and administrative expenses 16.6 % 17.9 % Operating income 22.5 % 21.1 % Interest expense .3 % .4 % Other income — % .1 % Income tax expense 4.5 % 3.1 % Net income attributable to noncontrolling interests 1.8 % 1.4 % Net income attributable to HEICO 15.9 % 16.3 % 34 Index Comparison of Fiscal 2022 to Fiscal 2021 Net Sales Our consolidated net sales in fiscal 2022 increased by 18% to a record $2,208.3 million, up from net sales of $1,865.7 million in fiscal 2021.
Results of Operations The following table sets forth the results of our operations, net sales and operating income by segment and the percentage of net sales represented by the respective items in our Consolidated Statements of Operations (in thousands) : Year ended October 31, 2023 2022 Net sales $2,968,105 $2,208,322 Cost of sales 1,814,617 1,345,563 Selling, general and administrative expenses 528,149 365,915 Total operating costs and expenses 2,342,766 1,711,478 Operating income $625,339 $496,844 Net sales by segment: Flight Support Group $1,770,185 $1,255,212 Electronic Technologies Group 1,225,222 972,475 Intersegment sales (27,302) (19,365) $2,968,105 $2,208,322 Operating income by segment: Flight Support Group $387,297 $267,167 Electronic Technologies Group 285,053 269,473 Other, primarily corporate (47,011) (39,796) $625,339 $496,844 Net sales 100.0 % 100.0 % Gross profit 38.9 % 39.1 % Selling, general and administrative expenses 17.8 % 16.6 % Operating income 21.1 % 22.5 % Interest expense 2.5 % .3 % Other income .1 % — % Income tax expense 3.7 % 4.5 % Net income attributable to noncontrolling interests 1.4 % 1.8 % Net income attributable to HEICO 13.6 % 15.9 % 34 Index Comparison of Fiscal 2023 to Fiscal 2022 Net Sales Our consolidated net sales in fiscal 2023 increased by 34% to a record $2,968.1 million, up from net sales of $2,208.3 million in fiscal 2022.
Net cash used in financing activities in fiscal 2021 totaled $559.0 million.
Net cash used in financing activities in fiscal 2022 totaled $33.8 million.
The decrease in operating income of the ETG principally reflects the previously mentioned lower gross profit margin and a lower level of efficiencies resulting from the organic net sales decrease, partially offset by a favorable impact from changes in the estimated fair value of accrued contingent consideration.
The increase in operating income of the ETG principally reflects the previously mentioned net sales increase, partially offset by the previously mentioned lower gross profit margin, higher costs resulting from the impact of our January 2023 acquisition, $7.2 million in unfavorable changes in the estimated fair value of accrued contingent consideration, and a $4.2 million increase in acquisition costs mainly related to a fiscal 2023 acquisition.
As such, organic net sales increased by $118.5 million, $58.0 million and $51.7 million within our aftermarket replacement parts, specialty products, and repair and overhaul parts and services product lines, respectively. The net sales increase in the ETG principally reflects $31.0 million contributed by our fiscal 2022 and 2021 acquisitions, partially offset by a 2% decrease in organic net sales.
As such, organic net sales increased by $188.4 million, $49.3 million and $26.2 million within our aftermarket replacement parts, repair and overhaul parts and services, and specialty products product lines, respectively. The net sales increase in the ETG principally reflects $232.8 million contributed by fiscal 2023 and 2022 acquisitions and organic growth of 1%.
We review our cost estimates on a periodic basis, or when circumstances change and warrant a modification to a previous estimate. Cost estimates are largely based on negotiated or estimated purchase contract terms, historical performance trends and other economic projections.
We review our cost estimates on a periodic basis, or when circumstances change and warrant a modification to a previous estimate.
Net cash used in investing activities totaled $183.5 million in fiscal 2021 and related primarily to acquisitions of $136.5 million (net of cash acquired), capital expenditures of $36.2 million, and investments related to the LCP of $14.0 million. Financing Activities Net cash used in financing activities in fiscal 2022 totaled $33.8 million.
Investing Activities Net cash used in investing activities totaled $2,484.5 million in fiscal 2023 and related primarily to acquisitions of $2,421.8 million, capital expenditures of $49.4 million, and investments related to the LCP of $18.9 million.
See Note 8, Fair Value Measurements, of the Notes to Consolidated Financial Statements for information pertaining to contingent consideration obligations. As of October 31, 2022, the estimated fair value of contingent consideration payable in fiscal 2023 was $28.8 million.
As of October 31, 2023, the estimated fair value of contingent consideration payable in fiscal 2024 was $37.3 million. 41 Index See Note 9, Leases, of the Notes to Consolidated Financial Statements for information pertaining to future minimum lease payments relating to the Company’s operating and finance lease obligations.
For certain contracts with similar characteristics and for which revenue is recognized using an over-time model, we use a portfolio approach to estimate the amount of revenue to recognize.
Cost estimates are largely based on negotiated or estimated purchase contract terms, historical performance trends and other economic projections. 44 Index For certain contracts with similar characteristics and for which revenue is recognized using an over-time model, we use a portfolio approach to estimate the amount of revenue to recognize.
The increase in the FSG's gross profit margin principally reflects the previously mentioned higher net sales within our specialty products and aftermarket replacement parts product lines.
The increase in the FSG's gross profit margin principally reflects the previously mentioned higher net sales within our aftermarket replacement parts and repair and overhaul parts and services product lines, and lower inventory obsolescence expenses in fiscal 2023 mainly due to increased demand within our aftermarket replacement parts product line.
Business Combinations We allocate the purchase price of acquired entities to the underlying tangible and identifiable intangible assets acquired and liabilities and any noncontrolling interests assumed based on their estimated fair values, with any excess recorded as goodwill.
In accordance with industry practice, all inventories are classified as a current asset including portions with long production cycles, some of which may not be realized within one year. 45 Index Business Combinations We allocate the purchase price of acquired entities to the underlying tangible and identifiable intangible assets acquired and liabilities and any noncontrolling interests assumed based on their estimated fair values, with any excess recorded as goodwill.
During fiscal 2021, we made $505.0 million in payments on our revolving credit facility, made $28.0 million of distributions to noncontrolling interests, paid $23.0 million in cash dividends on our common stock, redeemed common stock related to stock option exercises aggregating $3.8 million, paid $2.3 million to acquire certain noncontrolling interests, and paid revolving credit facility 39 Index issuance costs of $1.5 million, which were partially offset by $5.3 million in proceeds from stock option exercises.
During fiscal 2023, we borrowed $1,964.0 million under our revolving credit facility and received $1,189.5 million in proceeds from the issuance of senior unsecured notes, which were partially offset by $989.0 million in payments made on our revolving credit facility, $36.6 million of distributions to noncontrolling interests, $27.4 million of cash dividends on our common stock, redemptions of common stock related to stock option exercises aggregating $14.8 million, $12.6 million of contingent consideration payments, and $10.1 million paid of debt issuance costs.
The increase in consolidated net sales principally reflects an increase of $328.1 million (a 35% increase) to a record $1,255.2 million within the FSG and an increase of $13.3 million (a 1% increase) to a record $972.5 million within the ETG.
The increase in consolidated net sales principally reflects an increase of $515.0 million (a 41% increase) to a record $1,770.2 million in net sales of the FSG and an increase of $252.7 million (a 26% increase) to a record $1,225.2 million in net sales of the ETG.
The reduction in the ETG's gross profit margin principally reflects the decrease in net sales of defense products, partially offset by a more favorable product mix in net sales of space products as well as the increases in net sales of medical, other electronics and aerospace products.
The reduction in the ETG's gross profit margin principally reflects the previously mentioned decrease in net sales of our defense products, partially offset by the previously mentioned increase in net sales of our aerospace products.
Net cash provided by operating activities increased by $23.8 million in fiscal 2022, up from $444.1 million in fiscal 2021.
Net cash provided by operating activities decreased by $19.1 million in fiscal 2023 from $467.9 million in fiscal 2022.
See Note 13, Redeemable Noncontrolling Interests, of the Notes to Consolidated Financial Statements for further information.
See Note 13, Redeemable Noncontrolling Interests, of the Notes to Consolidated Financial Statements for further information. See Note 5, Short-Term and Long-Term Debt, of the Notes to Consolidated Financial Statements for information regarding our long-term debt obligations. See Note 8, Fair Value Measurements, of the Notes to Consolidated Financial Statements for information pertaining to contingent consideration obligations.
The decrease in the ETG's operating income as a percentage of net sales principally reflects the previously mentioned lower gross profit margin and a 1.0% impact from an increase in SG&A expenses as a percentage of net sales mainly from the previously mentioned lower level of efficiencies, partially offset by a .8% favorable impact from changes in the estimated fair value of accrued contingent consideration. 36 Index Interest Expense Interest expense decreased to $6.4 million in fiscal 2022, down from $7.3 million in fiscal 2021.
The increase in consolidated SG&A expenses as a percentage of net sales principally reflects a .7% impact from the previously mentioned increase in acquisition costs, a .4% impact attributable to the fiscal 2023 and 2022 acquisitions, and a .3% impact from changes in the estimated fair value of contingent consideration, partially offset by a .3% impact from the previously mentioned amendment and termination of a contingent consideration agreement.
The increase is principally attributable to a $60.9 million increase in net income from consolidated operations and a $24.5 million decrease in deferred income tax benefits, partially offset by a $62.9 million increase in net working capital principally reflecting the previously mentioned increase in inventories.
The decrease is principally attributable to a $56.0 million increase in net working capital, a $35.4 million increase in deferred income tax benefits, and a $9.1 million impact from the amendment and termination of a contingent consideration agreement, partially offset by a $53.8 million increase in net income from consolidated operations and a $33.7 million increase in depreciation and amortization expense.
Net Income Attributable to HEICO Net income attributable to HEICO increased by 16% to a record $351.7 million, or $2.55 per diluted share, in fiscal 2022, up from $304.2 million, or $2.21 per diluted share, in fiscal 2021 principally reflecting the previously mentioned higher consolidated operating income, partially offset by the increase in the effective tax rate.
Net Income Attributable to HEICO Net income attributable to HEICO increased by 15% to a record $403.6 million, or $2.91 per diluted share, in fiscal 2023, up from $351.7 million, or $2.55 per diluted share, in fiscal 2022 principally reflecting the previously mentioned higher consolidated operating income, partially offset by the increase in interest expense. 37 Index Outlook As we look ahead to fiscal 2024, we anticipate net sales growth in both the FSG and ETG, principally driven by contributions from our fiscal 2023 acquisitions and demand for the majority of our products.
The increase in consolidated operating income principally reflects a $115.2 million increase (a 76% increase) to a record $267.2 million in operating income of the FSG, partially offset by a $7.8 million decrease (a 3% decrease) to $269.5 million in operating income of the ETG.
The increase in consolidated operating income principally reflects a $120.1 million increase (a 45% increase) to a record $387.3 million in operating income of the FSG and a $15.6 million increase (a 6% increase) to a record $285.1 million in operating income of the ETG.
The decrease in consolidated SG&A expenses as a percentage of net sales principally reflects efficiencies realized from the higher net sales, a .4% favorable impact from changes in the estimated fair value of accrued contingent consideration, as well as a .3% impact from lower intangible asset amortization expense.
The increase in the ETG's SG&A expenses as a percentage of net sales is inclusive of a .7% impact from the previously mentioned higher costs of our January 2023 acquisition, a .7% impact from the previously mentioned changes in the estimated fair value of contingent consideration, and a .3% impact from the previously mentioned higher acquisition expenses.
The Applicable Rate for Base Rate Loans ranges from 0% to 1.00%. A fee is charged on the amount of the unused commitment ranging from .125% to .30% (depending on the Company’s Total Leverage Ratio).
A fee is charged on the amount of the unused commitment ranging from .15% to .35% (depending on the Company’s Total Leverage Ratio). The Credit Facility also includes a $200 million sublimit for swingline borrowings and $100 million sublimits for borrowings made in foreign currencies and for letters of credit.
The increase in operating income of the FSG principally reflects the previously mentioned net sales growth, improved gross profit margin and efficiencies realized from the higher net sales volume.
The increase in operating income of the FSG principally reflects the previously mentioned net sales growth, improved gross profit margin, and the previously mentioned amendment and termination of a contingent consideration agreement, partially offset by a $21.6 million increase in performance-based compensation expense and a $15.8 million increase in acquisition costs mainly related to a fiscal 2023 acquisition.
The decrease was principally due to a lower weighted average balance of borrowings outstanding under our revolving credit facility, partially offset by a higher weighted average interest rate. Other Income Other income in fiscal 2022 and 2021 was not material. Income Tax Expense Our effective tax rate was 20.4% in fiscal 2022, as compared to 14.8% in fiscal 2021.
Interest Expense Interest expense increased to $73.0 million in fiscal 2023, as compared to $6.4 million in fiscal 2022. The increase in interest expense was principally due to an increase in the amount of outstanding debt as well as higher interest rates. Other Income Other income in fiscal 2023 and 2022 was not material.
Removed
Presentation of Results of Operations and Liquidity and Capital Resources The following discussion and analysis of our Results of Operations and Liquidity and Capital Resources includes a comparison of fiscal 2022 to fiscal 2021.
Added
A similar discussion and analysis that compares fiscal 2022 to fiscal 2021 may be found in Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our Form 10-K for the fiscal year ended October 31, 2022.
Removed
Further, the increase in consolidated operating income was partially offset by $5.6 million of higher corporate expenses mainly attributable to an increase in performance-based compensation expense and the suspension of corporate salary reductions as of the end of the first quarter of fiscal 2021.
Added
The increase in the FSG's operating 36 Index income as a percentage of net sales principally reflects the previously mentioned improved gross profit margin and a .5% impact from the previously mentioned amendment and termination of a contingent consideration agreement, partially offset by a .9% and .4% impact from the previously mentioned increases in acquisition costs and performance-based compensation expense, respectively.
Removed
Outlook As we look ahead to fiscal 2023, we anticipate net sales growth in both the FSG and ETG, principally driven by demand for the majority of our products. Additionally, continued inflationary pressures and lingering supply chain disruptions stemming from the Pandemic may lead to higher material and labor costs.
Added
Income Tax Expense Our effective tax rate decreased to 20.0% in fiscal 2023, down from 20.4% in fiscal 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeA hypothetical 10% weakening in the exchange rate of the Euro to the U.S. dollar as of October 31, 2022 would not have a material effect on our results of operations, financial position or cash flows. 46 Index
Biggest changeA hypothetical 10% weakening in the exchange rate of the Euro to the U.S. dollar as of October 31, 2023 would not have a material effect on our results of operations, financial position or cash flows. 49 Index
Due to the short duration of these financial instruments, a hypothetical 10% increase in interest rates as of October 31, 2022 would not have a material effect on our results of operations, financial position or cash flows. Foreign Currency Risk We have several foreign subsidiaries that utilize a functional currency other than the U.S. dollar, or principally the Euro.
Due to the short duration of these financial instruments, a hypothetical 10% increase in interest rates as of October 31, 2023 would not have a material effect on our results of operations, financial position or cash flows. Foreign Currency Risk We have several foreign subsidiaries that utilize a functional currency other than the U.S. dollar, or principally the Euro.
Based on our aggregate outstanding variable rate debt balance of $275.0 million as of October 31, 2022, a hypothetical 10% increase in interest rates would not have a material effect on our results of operations, financial position or cash flows.
Based on our aggregate outstanding variable rate debt balance of $1,250.0 million as of October 31, 2023, a hypothetical 10% increase in interest rates would not have a material effect on our results of operations, financial position or cash flows.

Other HEI 10-K year-over-year comparisons