10q10k10q10k.net

What changed in HEICO CORP's 10-K — 2023 vs 2024

vs

Paragraph-level year-over-year comparison of HEICO CORP's 2023 and 2024 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 2024 report.

+177 added−202 removedSource: 10-K (2024-12-19) vs 10-K (2023-12-20)

Top changes in HEICO CORP's 2024 10-K

177 paragraphs added · 202 removed · 155 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

50 edited+5 added−10 removed98 unchanged
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.
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.
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.
In recent years, the FAA granted us PMAs for 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 5 Index repairs or that we will achieve acceptable levels of net sales and gross profits on such parts or repairs in the future.
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 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 7 Index computers, telecommunication devices, avionics, weapons systems and other electronic equipment.
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.
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, proprietary in-cabin power and entertainment components and subsystems, 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.
We believe that, based on our competitive pricing, reputation for high quality, short lead time requirements, strong relationships with domestic and foreign commercial air carriers and repair stations (companies that overhaul aircraft engines and/or components), and successful track record of receiving PMAs and repair approvals from the FAA and commercial air carriers, we are uniquely positioned to continue to increase the products and services offered and gain market share.
We believe that, based on our competitive pricing, reputation for high quality, short lead time requirements, strong relationships with domestic and foreign commercial air carriers and repair stations (companies that overhaul aircraft engines and/or components), and successful track record of receiving PMAs and DER repair approvals from the FAA and commercial air carriers, we are uniquely positioned to continue to increase the products and services offered and gain market share.
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 believe that the 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.
Further, we are subject to rules promulgated by the Securities Exchange Commission pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act regarding the use of certain materials (tantalum, tin, gold and tungsten), known as conflict minerals, which are mined from the Democratic Republic of the Congo and adjoining countries.
We are subject to rules promulgated by the Securities and Exchange Commission pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act regarding the use of certain materials (tantalum, tin, gold and tungsten), known as conflict minerals, which are mined from the Democratic Republic of the Congo and adjoining countries.
An expendable is generally a part which is used and not thereafter repaired for further use. Jet engine and aircraft component replacement parts are classified within the industry as (i) factory-new; (ii) new surplus; (iii) overhauled; (iv) repairable; and (v) as removed. A factory-new or new surplus part is one that has never been installed or used.
An expendable is generally a part which is used and not thereafter repaired for further use. 3 Index Jet engine and aircraft component replacement parts are classified within the industry as (i) factory-new; (ii) new surplus; (iii) overhauled; (iv) repairable; and (v) as removed. A factory-new or new surplus part is one that has never been installed or used.
The FSG also provides repair and overhaul services including avionics and navigation systems as well as subcomponents and other instruments utilized on military aircraft operated by the U.S. government and foreign military agencies and for aircraft repair and overhaul companies. Our repair and overhaul operations require a high level of expertise, advanced technology and sophisticated equipment.
The FSG also provides repair and overhaul services including avionics and navigation systems as well as subcomponents and other instruments utilized on military aircraft operated by the U.S. 4 Index government and foreign military agencies and for aircraft repair and overhaul companies. Our repair and overhaul operations require a high level of expertise, advanced technology and sophisticated equipment.
We believe that our FSG's research and development capabilities are a significant component of our historical success and an integral part of our growth strategy.
We believe that the FSG's research and development capabilities are a significant component of our historical success and an integral part of our growth strategy.
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.
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 limited number of times before it must be discarded.
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.
Notwithstanding these burdens, we believe that we are in material compliance with all federal, state and local environmental laws and regulations governing our operations. There has been no material adverse effect to our consolidated financial statements nor competitive positions as a result of these environmental regulations.
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.
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 https://www.heico.com. Any amendments to or waivers from a provision of this code of ethics will be posted on the website.
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 .
The ETG designs and manufactures TWTAs and MPMs predominately used in radar, electronic 8 Index 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 .
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.
We provide our employees upfront and ongoing safety training to ensure that safety policies and procedures are effectively communicated and implemented. Personal protective equipment is provided to those employees where needed for the employee to safely perform their job function.
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”) .
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”) .
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 .
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 .
In addition to healthy base wages, additional programs include annual bonus opportunities, a Company matched 401(k) Plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, flexible work schedules, and employee assistance programs.
In addition to paying healthy base wages, our programs include annual bonus opportunities, a company-matched 401(k) plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, flexible work schedules, and employee assistance programs.
Mendelson is a Trustee of Columbia University in the City of New York, a Trustee of St. Thomas University in Miami Gardens, Florida, a Director of Boys & Girls Clubs of Miami-Dade and is a Director and Past President of the Board of Directors of the Florida Grand Opera.
Mendelson is a Vice-Chair of the Board of Trustees of Columbia University in the City of New York, a Trustee of St. Thomas University in Miami Gardens, Florida, a Director of Boys & Girls Clubs of Miami-Dade and is a Director and Past President of the Board of Directors of the Florida Grand Opera.
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.
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 19%, 18% and 21% of total net sales in fiscal 2024, 2023 and 2022, respectively.
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.
The ETG derived approximately 51%, 49% and 56% of its net sales in fiscal 2024, 2023 and 2022, 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.
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.
Mendelson is a member of the Board of Directors of Partnership for Miami, a member of the Advisory Board of Trustees of Mount Sinai Medical Center in Miami Beach, Florida, a Past Chairman of Ransom Everglades 16 Index School in Coconut Grove, Florida, as well as a member of the Board of Visitors of Columbia College in New York City.
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.
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 68%, 60% and 57% of our net sales in fiscal 2024, 2023 and 2022, respectively.
He is a member of the Board of Governors, an Ex-Officio Member of the Executive Committee, and Chair of the Civil Aviation Leadership Council of the Aerospace Industries Association (“AIA”) in Washington, D.C., of which HEICO is a member. In addition, Mr.
He is a member of the Board of Governors, and has previously served as an Ex-Officio Member of the Executive Committee, and Chair of the Civil Aviation Leadership Council, of the Aerospace Industries Association (“AIA”) in Washington, D.C., of which HEICO is a member. In addition, Mr.
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.
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 $36.7 million in fiscal 2024, $26.4 million in fiscal 2023 and $22.2 million in fiscal 2022.
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.
We have developed for our customers approximately 20,000 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.
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.
As of October 31, 2024, we had approximately 10,000 full-time and part-time employees including approximately 5,100 in the Flight Support Group (of whom approximately 1,000 were employed by foreign subsidiaries) and approximately 4,900 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.
We recruit the best people for the job regardless of gender, ethnicity or other protected traits and it is our policy to fully comply with all laws (domestic and foreign) applicable to discrimination in the workplace. Our diversity, equity and inclusion principles are also reflected in our employee training and policies.
We recruit the best people for the job regardless of gender, ethnicity or other protected traits and it is our policy to fully comply with all laws (domestic and foreign) applicable to discrimination in the workplace. Our diversity and inclusion principles are also reflected in our employee training and policies. Available Information Our Internet website address is https://www.heico.com.
Insurance We are a named insured under policies which include the following coverage: (i) product liability, including grounding; (ii) personal property, inventory and business interruption at our facilities; (iii) general liability coverage; (iv) employee benefit liability; (v) international liability and automobile liability; (vi) umbrella liability coverage; and (vii) various other activities or items, each subject to certain limits and deductibles.
We believe that our operations are in material compliance with OSHA’s health and safety requirements. 13 Index Insurance We are a named insured under policies which include the following coverage: (i) product liability, including grounding; (ii) personal property, inventory and business interruption at our facilities; (iii) general liability coverage; (iv) employee benefit liability; (v) international liability and automobile liability; (vi) umbrella liability coverage; and (vii) various other activities or items, each subject to certain limits and deductibles.
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.
Macau, Jr. 57 Executive Vice President - Chief Financial Officer and Treasurer — Steven M. Walker 60 Chief Accounting Officer and Assistant Treasurer — Laurans A. Mendelson has served as our Chairman of the Board since December 1990.
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%.
As a result of internal growth and acquisitions, our net sales from continuing operations have grown from $26.2 million in fiscal 1990 to $3,857.7 million in fiscal 2024, representing a compound annual growth rate of approximately 16%.
Certification and conformance is required prior to installation of a part on an aircraft. Aircraft operators must maintain logs concerning the utilization and condition of aircraft engines, life-limited engine parts and airframes. In addition, the FAA requires that various maintenance routines be performed on aircraft engines, some engine parts, and airframes at regular intervals based on cycles or flight time.
Aircraft operators must maintain logs concerning the utilization and condition of aircraft engines, life-limited engine parts and airframes. In addition, the FAA requires that various maintenance routines be performed on 12 Index aircraft engines, some engine parts, and airframes at regular intervals based on cycles or flight time.
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.
Research and development expenditures by the ETG were $74.5 million in fiscal 2024, $69.4 million in fiscal 2023 and $53.9 million in fiscal 2022.
Additionally, the FSG manufactures advanced niche components and complex composite assemblies for commercial aviation, defense and space applications, manufactures expanded foil mesh, which is integrated into composite aerospace structures for lightning strike protection in fixed and rotary wing aircraft and performs tight-tolerance machining, brazing, fabricating and welding for aerospace, defense and other industrial applications.
Additionally, the FSG manufactures advanced niche components and complex composite assemblies for commercial aviation, defense and space applications; manufactures expanded foil mesh, which is integrated into composite aerospace structures for lightning strike protection in fixed and rotary wing aircraft; performs tight-tolerance machining, brazing, fabricating and welding services for aerospace, defense and other industrial applications; and designs, manufactures and distributes emergency descent devices ("EDDs"), personnel and cargo parachute products, heavy airdrop platforms, and other highly-engineered products.
Our power electronics products include capacitor charger power supplies, laser diode drivers, arc lamp power supplies and custom power supply designs. Our microwave products are used in both commercial and military satellites, spacecraft and in electronic warfare systems.
We offer custom or standard designs that solve challenging OEM requirements and meet stringent safety and emissions requirements. Our power electronics products include capacitor charger power supplies, laser diode drivers, arc lamp power supplies and custom power supply designs. Our microwave products are used in both commercial and military satellites, spacecraft and in electronic warfare systems.
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 offering and maintaining market competitive total rewards programs is essential to attract and retain superior talent.
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.
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.
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.
The following table sets forth the names, ages of, and positions and offices held by our executive officers as of December 18, 2024: Name Age Position(s) Director Since Laurans A. Mendelson 86 Chairman of the Board; Chief Executive Officer; and Director 1989 Eric A.
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.
Mendelson 59 Co-President and Director; President and Chief Executive Officer of the HEICO Flight Support Group 1992 Victor H. Mendelson 57 Co-President and Director; President and Chief Executive Officer of the HEICO Electronic Technologies Group 1996 Thomas S. Irwin 78 Senior Executive Vice President — Carlos L.
All aircraft must be maintained under a continuous condition monitoring program and must periodically undergo thorough inspection and maintenance. The inspection, maintenance and repair procedures for the various types of aircraft and equipment are prescribed by regulatory authorities and can be performed only by certified repair facilities utilizing certified technicians.
The inspection, maintenance and repair procedures for the various types of aircraft and equipment are prescribed by regulatory authorities and can be performed only by certified repair facilities utilizing certified technicians. Certification and conformance is required prior to installation of a part on an aircraft.
Government Regulation The FAA regulates the manufacture, repair and operation of all aircraft and aircraft parts operated in the United States. Its regulations are designed to ensure that all aircraft and aviation equipment are continuously maintained in proper condition to ensure safe operation of the aircraft. Similar rules apply in other countries.
Its regulations are designed to ensure that all aircraft and aviation equipment are continuously maintained in proper condition to ensure safe operation of the aircraft. Similar rules apply in other countries. All aircraft must be maintained under a continuous condition monitoring program and must periodically undergo thorough inspection and maintenance.
Mendelson has also served as President and Chief Executive Officer of the HEICO Flight Support Group since its formation in 1993, as well as President of various Flight Support Group subsidiaries. Mr. Mendelson is a co-founder, and, since 1987, has been Managing Director of Mendelson International Corporation, a private investment company, which is a shareholder of HEICO.
Mendelson has served as our Co-President since October 2009 and served as our Executive Vice President from 2001 through September 2009. Mr. Mendelson has also served as President and Chief Executive Officer of the HEICO Flight Support Group since its formation in 1993, as well as President of various Flight Support Group subsidiaries. Mr.
We design and manufacture next generation wireless cabin control systems, solid state power distribution and management systems and fuel level sensing systems for business jets and for general aviation, as well as for the military/defense market. We offer custom or standard designs that solve challenging OEM requirements and meet stringent safety and emissions requirements.
We design and manufacture next generation wireless cabin control systems, solid state power distribution and management systems, fuel level sensing systems, power distribution solutions and proprietary in-cabin power and entertainment components and subsystems primarily for business jets, general aviation, and the military/defense market.
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.
Our Electronic Technologies Group (“ETG”), consisting of HEICO Electronic Technologies Corp. and its subsidiaries, accounted for 32%, 40% and 43% of our net sales in fiscal 2024, 2023 and 2022, respectively.
Mendelson is a Trustee Emeritus of Columbia University in the City of New York, where he previously served as Trustee and Chairman of the Trustees’ Audit Committee. Early in his career, Mr. Mendelson was a licensed and practicing Certified Public Accountant in the states of Florida and New York, though he no longer practices and his license is inactive.
Mendelson is a Trustee Emeritus of Columbia University in the City of New York, where he previously served as Trustee and Chairman of the Trustees’ Audit Committee. Mr. Mendelson was awarded the honor of Chevalier in France’s Légion d'honneur. Mr.
We typically target acquisition opportunities that allow us to broaden our product offerings, services and technologies while expanding our customer base and geographic presence.
Since 1990, we have completed approximately 103 acquisitions complementing the niche segments of the aviation, defense, space, medical, telecommunications and electronics industries in which we operate. We typically target acquisition opportunities that allow us to broaden our product offerings, services and technologies while expanding our customer base and geographic presence.
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.
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. Government Regulation The FAA regulates the manufacture, repair and operation of all aircraft and aircraft parts operated in the United States.
Diversity and Inclusion We are committed to our continued efforts to increase diversity and foster an inclusive work environment that supports the global workforce and the communities we serve.
Additionally, certain team member are granted stock options, further aligning their success with HEICO's growth. 14 Index Diversity and Inclusion We are committed to remaining a diverse and inclusive work environment that supports our global workforce and the communities we serve.
Laurans Mendelson is the father of Eric Mendelson and Victor Mendelson. Eric A. 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.
Mendelson was a licensed and practicing Certified Public Accountant in the states of Florida and New York, though he no longer practices and his license is inactive. Laurans Mendelson is the father of Eric Mendelson and Victor Mendelson. Eric A. Mendelson has been associated with the Company since 1990, serving in various capacities. Mr.
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.
During the same period, we improved our net income 2 Index from $2.0 million to $514.1 million, representing a compound annual growth rate of approximately 18%. Disciplined Acquisition Strategy Acquisitions have been an important element of our growth strategy over the past thirty-four years, supplementing our organic growth.
Removed
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.
Added
Navy; performs tight-tolerance machining, brazing, fabricating and welding services for aerospace, defense and other industrial applications; and manufactures emergency descent devices ("EDDs") and personnel and cargo parachute products. 1 Index The Electronic Technologies Group .
Removed
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.
Added
Equity compensation is also a key component of our compensation strategy, with all domestic team members receiving an annual 401(k) employer contribution in HEICO stock based on Company performance, and employer 401(k) matching contributions are also made using HEICO stock.
Removed
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.
Added
Also located on the website are our Corporate Governance Guidelines, Finance/Audit Committee Charter, Nominating & Corporate Governance Committee Charter, and Compensation Committee Charter.
Removed
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.
Added
Mendelson was previously named Best CEO in the Aerospace & Defense Electronics Sector by Institutional Investor magazine and recently received the Ultimate CEO Award from the South Florida Business Journal . Early in his career, Mr.
Removed
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.
Added
Mendelson is a co-founder, and, since 1987, has been Managing Director of Mendelson International Corporation, a private investment company, which is a shareholder of HEICO.
Removed
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.
Removed
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.
Removed
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
We believe that our operations are in material compliance with OSHA’s health and safety requirements.
Removed
We continue to enhance our diversity, equity and inclusion policies which are guided by our executive leadership team. Available Information Our Internet website address is http://www.heico.com.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

14 edited+4 added−2 removed62 unchanged
Biggest changeOur 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.
Biggest changeOur 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; 25 Index • 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; • 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; and • The Organization of Economic Cooperation and Development (OECD) has issued Pillar Two model rules to ensure large corporations pay a global minimum tax of 15%, which will begin to be effective for our operations in fiscal 2025.
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 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; • 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.
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.
Lower commercial air travel caused by risks arising from public health threats, such as the COVID-19 global pandemic, and their aftermath, airline fleet changes or airline purchasing decisions, could cause lower demand for our goods and services.
Further, the aviation industry has historically been subject to downward cycles from time to time which reduce the overall demand for jet engine and aircraft component replacement parts and repair and overhaul services, and such downward cycles result in lower sales and greater credit risk.
Historically, the aviation industry has been subject to downward cycles from time to time which reduce the overall demand for jet engine and aircraft component replacement parts and repair and overhaul services, and such downward cycles result in lower sales and greater credit risk.
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.
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. Item 1B.
Although management believes that our operations and facilities are in material compliance with environmental laws and regulations, future changes in them or interpretations thereof or the nature of our operations may require us to make significant additional capital expenditures to ensure compliance in the future.
Although management believes that our operations and facilities are in material compliance with 26 Index environmental laws and regulations, future changes in them or interpretations thereof or the nature of our operations may require us to make significant additional capital expenditures to ensure compliance in the future.
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.
As of December 18, 2024, 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 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.
As of October 31, 2024 and 2023, goodwill and intangible assets, net of amortization, accounted for 62% and 64% 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.
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.
Reductions in defense, space or homeland security spending by U.S. and/or foreign customers could reduce our revenues. In fiscal 2024, approximately 32% of our net sales were derived from the sale of defense, commercial and defense satellite and spacecraft components, and homeland security products.
Foreign Corrupt Practices Act. While the impact of these factors is difficult to predict, any one or more of these factors may have a material adverse effect on our business, financial condition and results of operations. 21 Index Cyber security events or other disruptions of our information technology systems could adversely affect our business.
While the impact of these factors is difficult to predict, any one or more of these factors may have a material adverse effect on our business, financial condition and results of operations. 21 Index Cybersecurity events or other disruptions of our information technology systems could adversely affect our business.
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.
We market our products and services to approximately 135 countries, with approximately 37% of our consolidated net sales in fiscal 2024 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 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 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.
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.
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.
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%.
We file income tax returns in the U.S. federal jurisdiction, multiple state jurisdictions and certain jurisdictions outside the U.S. In fiscal 2024, our effective tax rate was 17.5%.
Removed
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
Foreign Corrupt Practices Act; and • Transportation delays and other supply chain disruptions.
Removed
UNRESOLVED STAFF COMMENTS None. Item 1C. CYBERSECURITY Not applicable.
Added
Furthermore, disruptions within the aviation industry, such as production delays or regulatory challenges affecting major manufacturers, can reduce demand for our products and services and strain our supply chain.
Added
Additionally, we are subject to regulations such as the Canadian Forced and Child Labour Act, which prohibits the importation of goods produced wholly or in part by forced or child labor. Any such violations could have a material adverse effect on our business. Tax changes could affect our effective tax rate and future profitability.
Added
The OECD has issued administrative guidance and safe harbor rules around the implementation of Pillar Two. We currently do not expect Pillar Two will have a significant impact on our fiscal 2025 consolidated financial statements, but will continue to monitor the potential impact of future legislation and guidance.

Item 2. Properties

Properties — owned and leased real estate

3 edited+0 added−0 removed1 unchanged
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.
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) 1,580,000 233,000 Manufacturing, engineering and distribution facilities, and corporate headquarters United States facilities (10 states) 652,000 127,000 Repair and overhaul facilities International facilities (10 countries) - France, Germany, India, Laos, Netherlands, Singapore, Thailand, Turkey, United Arab Emirates and United Kingdom 139,000 173,000 Manufacturing, engineering and distribution facilities, and sales offices Electronic Technologies Group United States facilities (19 states) 849,000 634,000 Manufacturing and engineering facilities International facilities (7 countries) - Canada, France, India, Morocco, South Korea, United Kingdom and Vietnam 416,000 346,000 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, 2023, 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, 2024, 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 (18 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.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

2 edited+0 added−3 removed0 unchanged
Biggest changeWith the exception of the matter noted above, we are involved in various legal actions arising in the normal course of business.
Biggest changeItem 3. LEGAL PROCEEDINGS We are involved in various legal actions arising in the normal course of business.
Based upon our and our legal counsel’s evaluations of any claims or assessments, management is of the opinion that the outcome of these matters will not have a material adverse effect on our results of operations, financial position or cash flows. Item 4. MINE SAFETY DISCLOSURES Not applicable. PART II
Based upon our and our legal counsel’s evaluations of any claims or assessments, management is of the opinion that the outcome of these matters will not have a material adverse effect on our results of operations, financial position or cash flows. 29 Index Item 4. MINE SAFETY DISCLOSURES Not applicable. PART II
Removed
LEGAL PROCEEDINGS On April 20, 2021, an indirect subsidiary of HEICO Flight Support Corp., which was acquired in June 2020, received a grand jury subpoena from the United States District Court for the Southern District of California requiring the production of documents for the time period December 1, 2017 through February 4, 2019 related to the subsidiary's employment of a certain individual and its performance of work on certain Navy vessels during that time period.
Removed
We are cooperating with the investigation. We have completed our production of documents responsive to the subpoena, although we have a continuing obligation to produce such documents should any be located.
Removed
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.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 4. Mine Safety Disclosures 28 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 28 Item 6. [Reserved] 31 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 32 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 49 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 30 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 30 Item 6. [Reserved] 33 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 34 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 50 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

11 edited+0 added−1 removed6 unchanged
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.
Biggest changeIn July 2024, we paid our 92nd consecutive semi-annual cash dividend since 1979 of $.11 per share, which represented a 10% increase over the semiannual cash dividend of $.10 per share paid in January 2024. In December 2024, our Board of Directors declared a semi-annual cash dividend of $.11 per share payable in January 2025.
As with the five-year performance graph, the total returns include the reinvestment of cash dividends. 29 Index Cumulative Total Return as of October 31, 1990 1991 1992 1993 1994 HEICO Common Stock $100.00 $141.49 $158.35 $173.88 $123.41 NYSE Composite Index 100.00 130.31 138.76 156.09 155.68 Dow Jones U.S.
As with the five-year performance graph, the total returns include the reinvestment of cash dividends. 31 Index Cumulative Total Return as of October 31, 1990 1991 1992 1993 1994 HEICO Common Stock $100.00 $141.49 $158.35 $173.88 $123.41 NYSE Composite Index 100.00 130.31 138.76 156.09 155.68 Dow Jones U.S.
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.
The NYSE Composite Index measures the 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.
Aerospace Index 926.75 995.11 1,070.15 1,645.24 1,687.41 30 Index Cumulative Total Return as of October 31, 2015 2016 2017 2018 2019 HEICO Common Stock $10,776.88 $14,652.37 $23,994.03 $33,876.95 $49,277.28 NYSE Composite Index 595.37 596.57 702.38 694.81 749.66 Dow Jones U.S.
Aerospace Index 926.75 995.11 1,070.15 1,645.24 1,687.41 32 Index Cumulative Total Return as of October 31, 2015 2016 2017 2018 2019 HEICO Common Stock $10,776.88 $14,652.37 $23,994.03 $33,876.95 $49,277.28 NYSE Composite Index 595.37 596.57 702.38 694.81 749.66 Dow Jones U.S.
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.
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, 2019 through October 31, 2024.
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.
Aerospace Index 1,766.94 1,878.10 2,807.42 3,373.52 3,725.15 2020 2021 2022 2023 2024 HEICO Common Stock $44,877.75 $60,000.11 $65,650.39 $64,751.68 $99,188.00 NYSE Composite Index 707.40 968.47 839.31 849.11 1,094.96 Dow Jones U.S. Aerospace Index 2,233.00 3,400.98 3,147.04 3,440.63 4,731.25 Issuer Purchases of Equity Securities There were no issuer purchases of our equity securities during the fourth quarter of fiscal 2024.
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.
As of December 18, 2024, there were 247 holders of record of our Common Stock and 280 holders of record of our Class A Common Stock.
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.
Aerospace Index 100.00 59.94 91.30 84.48 92.36 127.01 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 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 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.
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.
Recent Sales of Unregistered Securities There were no unregistered sales of our equity securities during fiscal 2024. Dividend Policy We have historically paid semi-annual cash dividends on both our Class A Common Stock and Common Stock.
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.
The total returns include the reinvestment of cash dividends. 30 Index Cumulative Total Return as of October 31, 2019 2020 2021 2022 2023 2024 HEICO Common Stock $100.00 $85.30 $113.33 $132.40 $129.11 $199.85 HEICO Class A Common Stock 100.00 98.32 132.35 134.27 134.29 203.09 NYSE Composite Index 100.00 94.36 129.19 111.96 113.27 146.06 Dow Jones U.S.
Removed
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.

Item 7. Management's Discussion & Analysis

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

71 edited+13 added−31 removed36 unchanged
Biggest changeResults 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.
Biggest changeA similar discussion and analysis that compares fiscal 2023 to fiscal 2022 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, 2023. 35 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, 2024 2023 Net sales $3,857,669 $2,968,105 Cost of sales 2,355,943 1,814,617 Selling, general and administrative expenses 677,271 528,149 Total operating costs and expenses 3,033,214 2,342,766 Operating income $824,455 $625,339 Net sales by segment: Flight Support Group $2,639,354 $1,770,185 Electronic Technologies Group 1,263,626 1,225,222 Intersegment sales (45,311) (27,302) $3,857,669 $2,968,105 Operating income by segment: Flight Support Group $593,074 $387,297 Electronic Technologies Group 288,193 285,053 Other, primarily corporate (56,812) (47,011) $824,455 $625,339 Net sales 100.0 % 100.0 % Gross profit 38.9 % 38.9 % Selling, general and administrative expenses 17.6 % 17.8 % Operating income 21.4 % 21.1 % Interest expense (3.9 %) (2.5 %) Other income .1 % .1 % Income tax expense 3.1 % 3.7 % Net income attributable to noncontrolling interests 1.2 % 1.4 % Net income attributable to HEICO 13.3 % 13.6 % 36 Index Comparison of Fiscal 2024 to Fiscal 2023 Net Sales Our consolidated net sales in fiscal 2024 increased by 30% to a record $3,857.7 million, up from net sales of $2,968.1 million in fiscal 2023.
Financing Activities Net cash provided by financing activities in fiscal 2023 totaled $2,065.0 million.
Net cash provided by financing activities in fiscal 2023 totaled $2,065.0 million.
Guarantor Group Summarized Financial Information The Notes were issued pursuant to an Indenture, dated as of July 27, 2023 (the “Base Indenture”), between HEICO and certain of its subsidiaries (collectively, the "Subsidiary Guarantors") and Truist Bank, as trustee (the “Trustee”), as supplemented by a First Supplemental Indenture, dated as of July 27, 2023 (the “First Supplemental Indenture” and, together with the Base Indenture, the “Indenture”), between us, Subsidiary Guarantors and the Trustee.
Guarantor Group Summarized Financial Information The Notes were issued pursuant to an Indenture, dated as of July 27, 2023 (the “Base Indenture”), between HEICO and certain of its subsidiaries (collectively, the "Subsidiary Guarantors") and Truist Bank, as trustee (the “Trustee”), as supplemented by a First Supplemental Indenture, dated as of July 27, 2023 (the “First Supplemental Indenture” and, together with the Base Indenture, the “Indenture”), between us, the Subsidiary Guarantors and the Trustee.
(“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.
(“HEICO Electronic”) and its subsidiaries, which primarily: • Designs and Manufactures Electronic, Microwave, Electro-Optical and Other Power 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.
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.
The ETG collectively designs, manufactures and sells various types of electronic, data and microwave, and electro-optical 34 Index 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, 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, proprietary in-cabin power and entertainment components and subsystems, 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.
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
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. 49 Index
As of the acquisition date, contingent consideration is recorded at fair value as determined through the use of a probability-based scenario analysis approach. Under this method, a set of discrete potential future subsidiary earnings is determined using internal estimates based on various revenue growth rate assumptions for each scenario.
As of the acquisition date, contingent consideration is recorded at fair value as determined through the use of a probability-based scenario analysis approach. Under 46 Index this method, a set of discrete potential future subsidiary earnings is determined using internal estimates based on various revenue growth rate assumptions for each scenario.
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.
A fee is charged on the amount of the unused commitment ranging from .15% to .35% (depending on the Company’s 42 Index 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 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 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, 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%. 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%.
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 Applicable Rate for Base Rate Loans ranges from .125% to 1.00%.
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.
Also, forward-looking statements are based upon management’s estimates of fair values and of future 48 Index costs, using currently available information. Therefore, actual results may differ materially from those expressed in or implied by those forward-looking statements.
The subsidiary guarantee of a subsidiary guarantor also will be released if we exercise our legal defeasance, covenant defeasance option or discharge the Indenture. 42 Index We conduct our operations almost entirely through our subsidiaries.
The subsidiary guarantee of a subsidiary guarantor also will be released if we exercise our legal defeasance, covenant defeasance option or discharge the Indenture. 44 Index We conduct our operations almost entirely through our subsidiaries.
Interest on the Notes is payable semi-annually in arrears on February 1 and August 1 of each year, commencing February 1, 2024. The 2028 Notes and 2033 Notes each have an effective interest rate of 5.5%.
Interest on the Notes is payable semi-annually in arrears on February 1 and August 1 of each year, and commenced on February 1, 2024. The 2028 Notes and 2033 Notes each have an effective interest rate of 5.5%.
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.
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; • Cybersecurity events or other disruptions of our information technology systems could adversely affect our business; 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.
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.
Capital expenditures in fiscal 2025 are anticipated to be approximately $65 to $70 million. We finance our activities primarily from our operating and financing activities, including borrowings under our revolving credit facility. As of December 18, 2024, we had approximately $995 million of unused committed availability under the terms of our revolving credit facility.
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.
As of October 31, 2024, management’s estimate of the aggregate Redemption Amount of all Put Rights that we could be required to pay is approximately $366.2 million, which is included within redeemable noncontrolling interests in our Consolidated Balance Sheet.
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.
Net income attributable to noncontrolling interests was $45.0 million in fiscal 2024, as compared to $40.8 million in fiscal 2023. 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.
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.
As of October 31, 2024, the estimated fair value of contingent consideration payable in fiscal 2025 was $8.4 million. 43 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.
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.
Total new product research and development expenses included within our consolidated cost of sales were $111.3 million in fiscal 2024, up from $95.8 million in fiscal 2023. Our consolidated selling, general and administrative ("SG&A") expenses were $677.3 million in fiscal 2024, as compared to $528.1 million in fiscal 2023.
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.
Our net sales in fiscal 2024 and 2023 by market consisted of approximately 56% and 48% from the commercial aviation industry, respectively, 32% and 35% from the defense and space industries, respectively, and 12% and 17% from other industrial markets including electronics, medical and telecommunications, respectively.
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.
The increase in consolidated operating income as a percentage of net sales principally reflects an increase in the FSG’s operating income as a percentage of net sales to 22.5% in fiscal 2024, up from 21.9% in fiscal 2023, partially offset by a decrease in the ETG's operating income as a percentage of net sales to 22.8% in fiscal 2024, as compared to 23.3% in fiscal 2023.
We test each non-amortizing intangible asset (principally trade names) for impairment annually as of October 31, or more frequently if events or changes in circumstances indicate that the asset might be impaired. To derive the fair value of our trade names, we utilize an income approach, which relies upon management's assumptions of royalty rates, projected revenues and discount rates.
To derive the fair value of our trade names, we utilize an income approach, which relies upon management's assumptions of royalty rates, projected revenues and discount rates. We also test each amortizing intangible asset for impairment if events or circumstances indicate that the asset might be impaired.
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.
The estimated aggregate Redemption Amount of the Put Rights that are currently puttable, previously put, or becoming puttable during fiscal 2025 is approximately $194.2 million, of which approximately $91.0 million would be payable in fiscal 2025 should all of the eligible associated noncontrolling interest holders elect to exercise their Put Rights during fiscal 2025.
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.
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 LCP funding of $18.9 million. 41 Index Financing Activities Net cash used in financing activities in fiscal 2024 totaled $389.4 million.
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.
The increase in the FSG’s operating income as a percentage of net sales principally reflects a .9% impact from lower acquisition costs, a .5% impact from the previously mentioned improved gross profit margin and a .4% impact from lower performance-based compensation expense as a percentage of net sales, partially offset by a .7% impact from the previously mentioned higher intangible asset amortization expense and a .5% prior year impact from the previously mentioned amendment and termination of a contingent consideration agreement.
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.
The increase in the ETG's gross profit margin principally reflects the previously mentioned higher net sales of defense and aerospace products, partially offset by the previously mentioned decrease in net sales of other electronics and medical products.
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.
Liquidity and Capital Resources The following table summarizes our capitalization (in thousands): As of October 31, 2024 2023 Cash and cash equivalents $162,103 $171,048 Total debt (including current portion) 2,229,374 2,478,078 Shareholders’ equity 3,697,406 3,193,151 Total capitalization (debt plus equity) 5,926,780 5,671,229 Total debt to total capitalization 38% 44% Our principal uses of cash include acquisitions, capital expenditures, interest payments, cash dividends, distributions to noncontrolling interests and working capital needs.
Navy; and performs tight-tolerance machining, brazing, fabricating and welding services for aerospace, defense and other industrial applications. The ETG consists of HEICO Electronic Technologies Corp.
Navy; performs tight-tolerance machining, brazing, fabricating and welding services for aerospace, defense and other industrial applications; and manufactures emergency descent devices ("EDDs") and personnel and cargo parachute products. The ETG consists of HEICO Electronic Technologies Corp.
If the total of the undiscounted future cash flows is less than the carrying amount of those assets, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets.
The test consists of determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the undiscounted future cash flows is less than the carrying amount of those assets, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets.
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.
The net sales increase in the FSG reflects $643.5 million contributed by fiscal 2023 and 2024 acquisitions as well as strong organic growth of 13%.
Based 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).
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).
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.
Our consolidated SG&A expenses as a percentage of net sales decreased to 17.6% in fiscal 2024, down from 17.8% in fiscal 2023.
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.
Operating Income Our consolidated operating income increased by 32% to a record $824.5 million in fiscal 2024, up from $625.3 million in fiscal 2023.
We recognized a discrete tax benefit from stock option exercises in both the first quarter of fiscal 2023 and 2022 of $6.2 million and $17.8 million, respectively.
The decrease in our effective tax rate reflects a larger tax benefit from stock option exercises recognized in the first quarter of fiscal 2024. We recognized a discrete tax benefit from stock option exercises in both the first quarter of fiscal 2024 and 2023 of $13.6 million and $6.2 million, respectively.
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.
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.
We calculate fair values under the income approach by taking estimated future cash flows that are based on internal projections and other assumptions deemed reasonable by management and discounting them using an estimated weighted average cost of capital.
The income approach estimates fair value by taking estimated future cash flows that are based on internal projections and other assumptions deemed reasonable by management and discounting them using an estimated weighted average cost of capital. Assumptions used in the analysis include estimated future revenues and expenses, the weighted average cost of working capital, capital expenditures, and other variables.
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.
Sales price changes were not a significant contributing factor to the change in net sales of the FSG and ETG in fiscal 2024.
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.
Investing Activities Net cash used in investing activities totaled $293.2 million in fiscal 2024 and related primarily to acquisitions of $219.3 million, capital expenditures of $58.3 million, and LCP funding of $19.9 million. Further details regarding our acquisitions may be found in Note 2, Acquisitions, of the Notes to Consolidated Financial Statements.
All statements contained herein that are not clearly historical in nature may be forward-looking and the words “anticipate,” “believe,” “expect,” “estimate” and similar expressions are generally intended to identify forward-looking statements.
Forward-Looking Statements Certain statements in this report constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained herein that are not clearly historical in nature may be forward-looking and the words “anticipate,” “believe,” “expect,” “estimate” and similar expressions are generally intended to identify forward-looking statements.
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.
Additionally, the increase in consolidated SG&A expenses includes costs incurred to support the previously mentioned net sales growth resulting in increases of $23.7 million and $10.2 million in other general and administrative expenses and other selling expenses, respectively, a $9.1 37 Index million prior year impact from the amendment and termination of a contingent consideration agreement pertaining to a fiscal 2021 acquisition and a $7.6 million increase in performance-based compensation expense, partially offset by a $19.8 million decrease in acquisition costs.
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 increase in operating income of the FSG principally reflects the previously mentioned net sales growth, a $15.0 million decrease in acquisition costs and the previously mentioned improved gross profit margin, partially offset by a $36.6 million increase in intangible asset amortization expense, a $15.9 million increase in performance-based compensation expense and a $9.1 million prior year impact from the previously mentioned termination of a contingent consideration agreement.
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 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.
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 ETG's organic net sales decline is mainly attributable to decreased demand for its other electronics and medical products resulting in net sales decreases of $45.0 million and $14.0 million, respectively, partially offset by increased demand for its defense and aerospace products resulting in net sales increases of $24.4 million and $12.9 million, respectively.
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.
Additionally, our results of operations in fiscal 2024 have been affected by recent acquisitions as further detailed in Note 2, Acquisitions, of the Notes to Consolidated Financial Statements.
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 decrease in consolidated SG&A expenses as a percentage of net sales principally reflects a .7% impact from the previously mentioned lower acquisition costs, partially offset by a .3% impact from both the previously mentioned higher intangible asset amortization expense and amendment and termination of a contingent consideration agreement.
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 increase in consolidated operating income principally reflects a $205.8 million increase (a 53% increase) to a record $593.1 million in operating income of the FSG and a $3.1 million increase (a 1% increase) to a record $288.2 million in operating income of the ETG.
Determining the fair value of assets acquired and liabilities and noncontrolling interests assumed requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, asset lives and market multiples, among other items.
Determining the fair value of assets acquired and liabilities and noncontrolling interests assumed requires management’s judgment and often involves the use of significant estimates and assumptions. For example, the fair value of intangible assets acquired considers forecasts of future cash flows, revenue, earnings, royalty rates, discount rates and asset lives.
During fiscal 2022, we made $212.0 million in payments on our revolving credit facility, redeemed common stock related to stock option exercises aggregating $25.9 million, made $25.1 million of distributions to noncontrolling interests, paid $24.5 million in cash dividends on our common stock and paid $8.7 million to acquire certain noncontrolling interests, which were partially offset by $262.0 million of borrowings under our revolving credit facility.
During fiscal 2024, we made $365.0 million of payments on our revolving credit facility and $34.3 million of distributions to noncontrolling interests, redeemed $29.9 million of common stock related to stock option exercises, paid $29.1 million of cash dividends on our common stock and $26.6 million to acquire certain noncontrolling interests, and made $24.8 million of contingent consideration payments and $13.9 million of net payments on short-term debt, partially offset by $130.0 million of borrowings on our revolving credit facility to fund certain fiscal 2024 acquisitions.
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.
Operating Activities Net cash provided by operating activities was $672.4 million in fiscal 2024 and consisted primarily of net income from consolidated operations of $559.1 million, depreciation and amortization expense of $175.3 million (a non-cash item), net changes of $53.5 million included in the "Other" caption (principally the receipt of advance deposits on certain long-term customer contracts), net changes in other long-term liabilities and assets related to the HEICO Corporation Leadership Compensation Plan (the "LCP") of $21.6 million (principally participant deferrals and employer contributions), and $7.5 million of intangible asset impairment expense (a non- 40 Index cash item), partially offset by a $143.0 million increase in net working capital.
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 increase in consolidated net sales principally reflects an increase of $869.2 million (a 49% increase) to a record $2,639.4 million in net sales of the FSG and an increase of $38.4 million (a 3% increase) to a record $1,263.6 million in net sales of the ETG.
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 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.
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.
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. When testing goodwill for impairment, we may perform a qualitative assessment as the initial step for all or selected reporting units.
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.
Additionally, the decrease in our effective tax rate reflects a larger favorable impact from tax-exempt unrealized gains in the cash surrender values of life insurance policies related to the HEICO Leadership Compensation Plan (the “LCP”) in fiscal 2024, net of the nondeductible portion of the related gains in the LCP accounts of certain executive officers, as well as increased foreign-derived intangible income, which is subject to a lower 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.
Net Income Attributable to HEICO Net income attributable to HEICO increased by 27% to a record $514.1 million, or $3.67 per diluted share, in fiscal 2024, up from $403.6 million, or $2.91 per diluted share, in fiscal 2023 principally reflecting the previously mentioned higher consolidated operating income, partially offset by the previously mentioned higher interest expense.
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.
During fiscal 2024, 2023 and 2022, such fair value measurement adjustments resulted in net decreases to SG&A expenses of ($9.9) million, ($.7) million and ($7.6) million, respectively. For further information regarding our contingent consideration arrangements, see Note 8, Fair Value Measurements, of the Notes to Consolidated Financial Statements.
As of October 31, 2023 Current assets (excluding net intercompany receivable from non-guarantor subsidiaries) $1,440,062 Noncurrent assets 4,490,490 Net intercompany receivable from/ (payable to) non-guarantor subsidiaries 182,795 Current liabilities (excluding net intercompany payable to non-guarantor subsidiaries) 531,466 Noncurrent liabilities 2,895,592 Redeemable noncontrolling interests 252,013 Noncontrolling interests 37,786 Year ended October 31, 2023 Net sales $2,365,569 Gross profit 889,226 Operating income 507,881 Net income from consolidated operations 356,640 Net income attributable to HEICO 327,669 Year ended October 31, 2023 Intercompany net sales $1,986 Intercompany management fee 3,430 Intercompany interest income 7,120 Intercompany dividends 57,080 43 Index Critical Accounting Estimates We believe that the following are our most critical accounting estimates, which require management to make judgments about matters that are inherently uncertain.
As of October 31, 2024 Current assets (excluding net intercompany receivable from non-guarantor subsidiaries) $1,642,341 Noncurrent assets 4,627,711 Net intercompany receivable from/ (payable to) non-guarantor subsidiaries 243,421 Current liabilities (excluding net intercompany payable to non-guarantor subsidiaries) 546,677 Noncurrent liabilities 2,793,193 Redeemable noncontrolling interests 243,277 Noncontrolling interests 49,900 Year ended October 31, 2024 Net sales $3,216,400 Gross profit 1,230,374 Operating income 697,691 Net income from consolidated operations 559,493 Net income attributable to HEICO 525,970 Year ended October 31, 2024 Intercompany net sales $12,493 Intercompany management fee 3,319 Intercompany interest income 8,738 Intercompany dividends 94,359 45 Index Critical Accounting Estimates We believe that the following are our most critical accounting estimates, which require management to make judgments about matters that are inherently uncertain.
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.
The decrease in the ETG's operating income as a percentage of net sales principally reflects a 1.0% impact from an increase in SG&A expenses as a percentage of net sales principally reflecting the previously mentioned lower level of efficiencies, which was partially offset by the previously mentioned improved gross profit margin. 38 Index Interest Expense Interest expense increased to $149.3 million in fiscal 2024, as compared to $73.0 million in fiscal 2023.
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.
Changes in estimates did not have a material effect on net income from consolidated operations in fiscal 2024, 2023 and 2022. 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.
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.
The increase in interest expense was principally due to an increase in the amount of outstanding debt related to fiscal 2023 acquisitions. Other Income Other income in fiscal 2024 and 2023 was not material. Income Tax Expense Our effective tax rate decreased to 17.5% in fiscal 2024, down from 20.0% in fiscal 2023.
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.
The increase in operating income of the ETG principally reflects the previously mentioned net sales growth and improved gross profit margin, partially offset by a lower level of SG&A efficiencies. Our consolidated operating income as a percentage of net sales improved to 21.4% in fiscal 2024, up from 21.1% in fiscal 2023.
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.
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. As of October 31, 2024 and 2023, $30.2 million and $71.1 million of contingent consideration was accrued within our Consolidated Balance Sheets, respectively.
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%.
The FSG's organic net sales growth reflects increased demand within its aftermarket replacement parts, repair and overhaul parts and services, and specialty products product lines resulting in net sales increases of $172.1 million, $33.5 million and $20.1 million, respectively.
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.
Gross Profit and Operating Expenses Our consolidated gross profit margin was 38.9% in both fiscal 2024 and 2023 and reflects increases of .5% in both the FSG’s and ETG’s gross profit margin.
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.
See Note 8, Fair Value Measurements, for additional information regarding the Company’s fiscal 2024 impairment loss. New Accounting Pronouncements See Note 1, Summary of Significant Accounting Policies - New Accounting Pronouncements, of the Notes to Consolidated Financial Statements for additional information.
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.
The increase is principally attributable to a $114.7 million increase in net income from consolidated operations, a $63.5 million increase in the "Other" caption mainly from the previously mentioned receipt of advance long-term customer deposits in fiscal 2024, a $45.3 million increase in depreciation and amortization expense, a $9.1 million prior year impact from the amendment and termination of a contingent consideration agreement, an $8.1 million increase in net changes in other long-term liabilities and assets related to the LCP and a $7.5 million impact from intangible asset impairment expense, partially offset by a $25.6 million increase in net working capital mainly reflecting a $50.5 million increase in accrued expenses and other current liabilities and a $28.6 million increase in prepaid expenses and other current assets partially offset by a $44.8 million decrease in accounts receivable.
When testing goodwill for impairment, we have the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more-likely-than-not that the estimated fair value of a reporting unit is less than its carrying amount.
If, after completing this assessment, it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying value, we proceed to a quantitative impairment test.
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.
The fair values of our reporting units are determined using a weighted average of a market approach and an income approach. The market approach estimates the value of reporting units by comparing to guideline public companies or guideline transactions. Various valuation multiples are calculated utilizing financial data of companies that are economically and operationally similar resulting in ranges of multiples.
We periodically evaluate the carrying value of inventory, giving consideration to factors such as its physical condition, sales patterns and expected future demand in order to estimate the amount necessary to write down any slow moving, obsolete or damaged inventory.
We regularly assess the carrying value of inventory, considering factors such as its physical condition, sales trends, and anticipated future demand to estimate provisions for slow-moving, obsolete, or damaged inventory. Our inventory valuation reserves are established through analysis and estimates that consider many factors such as current order levels, forecasted demand, market conditions, and expected product life cycles.
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.
The discount rate utilized for each reporting unit is indicative of the return an investor would expect to receive for investing in such a business. Based on the annual goodwill impairment test as of October 31, 47 Index 2024, 2023 and 2022, we determined there was no impairment of our goodwill.
We also test each amortizing intangible asset for impairment if events or circumstances indicate that the asset might be impaired. The test consists of determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows.
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, 2024. We test each non-amortizing intangible asset (principally trade names) for impairment annually as of October 31, or more frequently if events or changes in circumstances indicate that the asset might be impaired.
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.
See Item 1A., Risk Factors , for a list of factors which may cause our actual results to differ materially from anticipated results. Valuation of Inventory Inventory is reported at the lower of cost or net realizable value, determined using either the first-in, first-out method or the average cost basis. Any losses are recognized entirely in the period of identification.
Removed
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.
Added
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 2024 to fiscal 2023.
Removed
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.
Added
The net sales increase in the ETG includes $40.7 million contributed by fiscal 2023 and 2024 acquisitions, partially offset by a 2% organic net sales decline.
Removed
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.
Added
The increase in consolidated SG&A expenses principally reflects $118.4 million attributable to our fiscal 2023 and 2024 acquisitions, inclusive of $32.9 million of intangible asset amortization expense.
Removed
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.
Added
Outlook As we look ahead to fiscal 2025, we anticipate net sales growth in both the FSG and ETG, driven primarily by organic growth supported by strong demand for the majority of our products. Additionally, we plan to drive growth through our recently completed acquisitions while positioning ourselves to capitalize on potential opportunities from future acquisitions.
Removed
Our consolidated operating income as a percentage of net sales was 21.1% in fiscal 2023, as compared to 22.5% in fiscal 2022.

… 35 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+0 added−0 removed3 unchanged
Biggest changeBased 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.
Biggest changeBased on our aggregate outstanding variable rate debt balance of $1,015.0 million as of October 31, 2024, a hypothetical 10% increase in interest rates would not have a material effect on our results of operations, financial position or cash flows.
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.
Due to the short duration of these financial instruments, a hypothetical 10% increase in interest rates as of October 31, 2024 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.
A 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
A hypothetical 10% weakening in the exchange rate of the Euro to the U.S. dollar as of October 31, 2024 would not have a material effect on our results of operations, financial position or cash flows. 50 Index

Other HEI 10-K year-over-year comparisons