Heico Corp 10-Q for FY2023 Q1

Heico Corp (HEI)

10-Q 2023-03-01 For: 2023-01-31

Added on April 07, 2026

About this 10-Q

Heico Corp filed this 10-Q on March 1, 2023, covering the quarter ended January 31, 2023 (FY2023 Q1).

Headline figures

Quarter ended January 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $620.92M; up 26.6% from $490.34M a year earlier
Net income: $93.03M; up 7.0% from net income of $86.92M a year earlier
Diluted EPS: $0.67; up 6.3% from $0.63 a year earlier

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

						For the quarterly period ended January 31, 2023

						OR

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

						For the transition period from ______ to _______


Florida						65-0341002
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

3000 Taft Street, Hollywood, Florida						33021
(Address of principal executive offices)						(Zip Code)


Common Stock, $.01 par value	54,660,048	shares
Class A Common Stock, $.01 par value	82,231,513	shares


			Page
Part I.	Financial Information

	Item 1.	Financial Statements:

		Condensed Consolidated Balance Sheets (unaudited) as of January 31, 202 3 and October 31, 202 2	2

		Condensed Consolidated Statements of Operations (unaudited) for the three months ended January 31, 202 3 and 202 2	3

		Condensed Consolidated Statements of Comprehensive Income (unaudited) for the three months ended January 31, 202 3 and 202 2	4

		Condensed Consolidated Statements of Shareholders’ Equity (unaudited) for the three months ended January 31, 202 3 and 202 2	5

		Condensed Consolidated Statements of Cash Flows (unaudited) for the three months ended January 31, 202 3 and 202 2	6

		Notes to Condensed Consolidated Financial Statements (unaudited)	7

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

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32

	Item 4.	Controls and Procedures	32

Part II.	Other Information

	Item 6.	Exhibits	33

Signatures			34


	January 31, 2023	October 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$142,619	$139,504
Accounts receivable, net	325,764	294,848
Contract assets	101,540	93,978
Inventories, net	697,495	582,471
Prepaid expenses and other current assets	51,381	41,929
Total current assets	1,318,799	1,152,730

Property, plant and equipment, net	274,403	225,879
Goodwill	1,994,347	1,672,425
Intangible assets, net	873,722	733,327
Other assets	343,349	311,135
Total assets	$4,804,620	$4,095,496

LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt	$1,615	$1,654
Trade accounts payable	134,836	116,551
Accrued expenses and other current liabilities	290,693	290,199
Income taxes payable	26,352	12,455
Total current liabilities	453,496	420,859

Long-term debt, net of current maturities	781,174	288,620
Deferred income taxes	113,477	71,162
Other long-term liabilities	372,012	338,948
Total liabilities	1,720,159	1,119,589

Commitments and contingencies (Note 11)

Redeemable noncontrolling interests (Note 3)	340,287	327,601

Shareholders’ equity:
Preferred Stock, $.01 par value per share; 10,000 shares authorized; none issued	—	—
Common Stock, $.01 par value per share; 150,000 shares authorized; 54,660 and 54,519 shares issued and outstanding	547	545
Class A Common Stock, $.01 par value per share; 150,000 shares authorized; 82,218 and 82,093 shares issued and outstanding	822	821
Capital in excess of par value	388,603	397,337
Deferred compensation obligation	6,171	5,297
HEICO stock held by irrevocable trust	(6,171)	(5,297)
Accumulated other comprehensive loss	(19,358)	(46,499)
Retained earnings	2,328,523	2,253,932
Total HEICO shareholders’ equity	2,699,137	2,606,136
Noncontrolling interests	45,037	42,170
Total shareholders’ equity	2,744,174	2,648,306
Total liabilities and equity	$4,804,620	$4,095,496


	Three months ended January 31,
	2023	2022

Net sales	$620,915	$490,343

Operating costs and expenses:
Cost of sales	377,116	300,133
Selling, general and administrative expenses	114,365	91,388

Total operating costs and expenses	491,481	391,521

Operating income	129,434	98,822

Interest expense	(6,068)	(796)
Other income	639	226

Income before income taxes and noncontrolling interests	124,005	98,252

Income tax expense	21,000	4,000

Net income from consolidated operations	103,005	94,252

Less: Net income attributable to noncontrolling interests	9,978	7,331

Net income attributable to HEICO	$93,027	$86,921

Net income per share attributable to HEICO shareholders:
Basic	$.68	$.64
Diluted	$.67	$.63

Weighted average number of common shares outstanding:
Basic	136,655	135,635
Diluted	138,579	137,966


		HEICO Shareholders' Equity
	Redeemable Noncontrolling Interests	Common Stock	Class A Common Stock	Capital in Excess of Par Value	Deferred Compensation Obligation	HEICO Stock Held by Irrevocable Trust	Accumulated Other Comprehensive Loss	Retained Earnings	Noncontrolling Interests	Total Shareholders' Equity
Balances as of October 31, 2022	$327,601	$545	$821	$397,337	$5,297	($5,297)	($46,499)	$2,253,932	$42,170	$2,648,306
Comprehensive income	7,980	—	—	—	—	—	27,141	93,027	3,257	123,425
Cash dividends ($.10 per share)	—	—	—	—	—	—	—	(13,668)	—	(13,668)
Issuance of common stock to HEICO Savings and Investment Plan	—	—	—	1,964	—	—	—	—	—	1,964
Share-based compensation expense	—	—	—	2,812	—	—	—	—	—	2,812
Proceeds from stock option exercises	—	2	1	2,842	—	—	—	—	—	2,845
Redemptions of common stock related to stock option exercises	—	—	—	(14,805)	—	—	—	—	—	(14,805)
Noncontrolling interests assumed related to acquisitions	12,050	—	—	—	—	—	—	—	—	—
Distributions to noncontrolling interests	(10,901)	—	—	—	—	—	—	—	(390)	(390)
Acquisitions of noncontrolling interests	(1,059)	—	—	(1,674)	—	—	—	—	—	(1,674)
Adjustments to redemption amount of redeemable noncontrolling interests	4,616	—	—	—	—	—	—	(4,616)	—	(4,616)
Deferred compensation obligation	—	—	—	—	874	(874)	—	—	—	—
Other	—	—	—	127	—	—	—	(152)	—	(25)
Balances as of January 31, 2023	$340,287	$547	$822	$388,603	$6,171	($6,171)	($19,358)	$2,328,523	$45,037	$2,744,174


Cash paid						$515,785
Less: cash acquired						(14,257)
Total consideration paid, net						$501,528


Assets acquired:
Goodwill						$306,356
Customer relationships						66,844
Intellectual property						56,307
Trade name						29,271
Inventories						55,875
Property, plant and equipment						43,704
Accounts receivable						21,056
Other assets						17,031
Total assets acquired, excluding cash						596,444

Liabilities assumed:
Deferred income taxes						40,593
Accounts payable						18,671
Accrued expenses						15,004
Other liabilities						8,585
Total liabilities assumed						82,853

Noncontrolling interests in consolidated subsidiaries						12,063

Net assets acquired, excluding cash						$501,528


	Three months ended
	January 31, 2023	January 31, 2022
Net sales	$660,318	$539,014
Net income from consolidated operations	$119,116	$87,151
Net income attributable to HEICO	$108,417	$79,993
Net income per share attributable to HEICO shareholders:
Basic	$.79	$.59
Diluted	$.78	$.58


(in thousands)	January 31, 2023	October 31, 2022
Accounts receivable	$335,706	$303,181
Less: Allowance for doubtful accounts	(9,942)	(8,333)
Accounts receivable, net	$325,764	$294,848


	January 31, 2023	October 31, 2022
Redeemable at fair value	$300,522	$300,693
Redeemable based on a multiple of future earnings	39,765	26,908
Redeemable noncontrolling interests	$340,287	$327,601


	Foreign Currency Translation	Defined Benefit Pension Plan	Accumulated Other Comprehensive Loss
Balances as of October 31, 2022	($45,369)	($1,130)	($46,499)
Unrealized gain	27,126	—	27,126
Amortization of unrealized loss	—	15	15
Balances as of January 31, 2023	($18,243)	($1,115)	($19,358)


	Segment		Consolidated Totals
	FSG	ETG
Balances as of October 31, 2022	$561,961	$1,110,464	$1,672,425
Goodwill acquired	—	306,356	306,356
Foreign currency translation adjustments	3,157	10,914	14,071
Adjustments to goodwill	(955)	2,450	1,495
Balances as of January 31, 2023	$564,163	$1,430,184	$1,994,347


	As of January 31, 2023			As of October 31, 2022
	Gross Carrying Amount	Accumulated Amortization	Net Carrying Amount	Gross Carrying Amount	Accumulated Amortization	Net Carrying Amount
Amortizing Assets:
Customer relationships	$605,707	($217,828)	$387,879	$539,529	($208,127)	$331,402
Intellectual property	342,994	(105,341)	237,653	284,171	(98,983)	185,188
Other	8,783	(7,175)	1,608	8,700	(7,017)	1,683
	957,484	(330,344)	627,140	832,400	(314,127)	518,273
Non-Amortizing Assets:
Trade names	246,582	—	246,582	215,054	—	215,054
	$1,204,066	($330,344)	$873,722	$1,047,454	($314,127)	$733,327


	Three months ended January 31,
	2023	2022
Operating Activities:
Net income from consolidated operations	$103,005	$94,252
Adjustments to reconcile net income from consolidated operations to net cash provided by operating activities:
Depreciation and amortization	27,060	23,222
Employer contributions to HEICO Savings and Investment Plan	3,814	3,165
Share-based compensation expense	2,812	3,614
Increase (decrease) in accrued contingent consideration, net	1,336	(114)
Deferred income tax provision (benefit)	980	(322)
Payment of contingent consideration	(6,299)	—
Changes in operating assets and liabilities, net of acquisitions:
(Increase) decrease in accounts receivable	(7,095)	16,191
Increase in contract assets	(7,303)	(1,780)
Increase in inventories	(52,041)	(26,967)
Increase in prepaid expenses and other current assets	(860)	(9,005)
(Decrease) increase in trade accounts payable	(1,992)	2,469
Decrease in accrued expenses and other current liabilities	(7,583)	(38,725)
Increase (decrease) in income taxes payable	13,839	(72)
Net changes in other long-term liabilities and assets related to HEICO Leadership Compensation Plan	8,892	11,603
Other	(1,879)	449
Net cash provided by operating activities	76,686	77,980

Investing Activities:
Acquisitions, net of cash acquired	(503,736)	—
Investments related to HEICO Leadership Compensation Plan	(11,800)	(10,100)
Capital expenditures	(10,846)	(8,691)
Other	402	(1,168)
Net cash used in investing activities	(525,980)	(19,959)

Financing Activities:
Borrowings on revolving credit facility	531,000	26,000
Payments on revolving credit facility	(38,000)	(25,000)
Redemptions of common stock related to stock option exercises	(14,805)	(23,623)
Cash dividends paid	(13,668)	(12,227)
Distributions to noncontrolling interests	(11,291)	(6,046)
Payment of contingent consideration	(3,710)	—
Acquisitions of noncontrolling interests	(2,733)	—
Proceeds from stock option exercises	2,845	769


(in thousands)	January 31, 2023	October 31, 2022
Finished products	$338,764	$285,024
Work in process	80,861	59,739
Materials, parts, assemblies and supplies	277,870	237,708
Inventories, net of valuation reserves	$697,495	$582,471


(in thousands)	January 31, 2023	October 31, 2022
Land	$19,161	$17,579
Buildings and improvements	168,765	148,598
Machinery, equipment and tooling	353,710	322,252
Construction in progress	22,040	14,533
	563,676	502,962
Less: Accumulated depreciation and amortization	(289,273)	(277,083)
Property, plant and equipment, net	$274,403	$225,879


	January 31, 2023	October 31, 2022
Borrowings under revolving credit facility	$768,000	$275,000
Finance leases and note payable	14,789	15,274
	782,789	290,274
Less: Current maturities of long-term debt	(1,615)	(1,654)
	$781,174	$288,620


	January 31, 2023	October 31, 2022	Change
Contract assets	$101,540	$93,978	$7,562
Contract liabilities	83,876	58,757	25,119
Net contract assets	$17,664	$35,221	($17,557)


	As of January 31, 2023
	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total
Assets:
Deferred compensation plan:
Corporate-owned life insurance	$—	$218,964	$—	$218,964
Money market fund	15,317	—	—	15,317
Total assets	$15,317	$218,964	$—	$234,281

Liabilities:
Contingent consideration	$—	$—	$74,385	$74,385


		Unobservable		Weighted
Acquisition Date	Fair Value	Input	Range	Average (1)
9-1-2022	$6,112	Compound annual revenue growth rate	0% - 17%	13%
		Discount rate	7.9% - 7.9%	7.9%

7-18-2022	13,309	Compound annual revenue growth rate	(1%) - 6%	3%
		Discount rate	7.9% - 7.9%	7.9%

3-17-2022	9,494	Compound annual revenue growth rate	(3%) - 7%	2%
		Discount rate	6.9% - 6.9%	6.9%

8-4-2021	17,957	Compound annual revenue growth rate	3% - 10%	8%
		Discount rate	7.9% - 8.6%	8.1%

8-18-2020	8,280	Compound annual revenue growth rate	15% - 24%	22%
		Discount rate	8.6% - 8.6%	8.6%

9-15-2017	19,233	Compound annual revenue growth rate	0% - 6%	5%
		Discount rate	5.9% - 5.9%	5.9%


						Liabilities
Balance as of October 31, 2022						$82,803
Payment of contingent consideration						(10,009)
Increase in accrued contingent consideration, net						1,336
Foreign currency transaction adjustments						255
						$74,385

Included in the accompanying Condensed Consolidated Balance Sheet under the following captions:
Accrued expenses and other current liabilities						$19,233
Other long-term liabilities						55,152
						$74,385


			Other, Primarily Corporate and Intersegment (1)	Consolidated Totals
	Segment
	FSG	ETG
Three months ended January 31, 2023:
Net sales	$371,278	$255,059	($5,422)	$620,915
Depreciation	4,178	3,938	270	8,386
Amortization	6,731	11,669	274	18,674
Operating income	83,609	56,537	(10,712)	129,434
Capital expenditures	6,653	4,089	104	10,846

Three months ended January 31, 2022:
Net sales	$272,681	$222,336	($4,674)	$490,343
Depreciation	3,718	3,366	246	7,330
Amortization	5,513	10,092	287	15,892
Operating income	52,376	55,588	(9,142)	98,822
Capital expenditures	3,582	5,070	39	8,691


			Other, Primarily Corporate	Consolidated Totals
	Segment
	FSG	ETG
Total assets as of January 31, 2023	$1,678,148	$2,859,097	$267,375	$4,804,620
Total assets as of October 31, 2022	1,635,229	2,230,744	229,523	4,095,496


Exhibit						Description
31.1						Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer. *

31.2						Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer. *

32.1						Section 1350 Certification of Chief Executive Officer. **

32.2						Section 1350 Certification of Chief Financial Officer. **

101.INS						Inline XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL Document. *

101.SCH						Inline XBRL Taxonomy Extension Schema Document. *

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document. *

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document. *

101.LAB						Inline XBRL Taxonomy Extension Labels Linkbase Document. *

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document. *

104						Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). *


		HEICO CORPORATION

Date:	March 1, 2023	By:	/s/ CARLOS L. MACAU, JR.
			Carlos L. Macau, Jr. Executive Vice President - Chief Financial Officer and Treasurer (Principal Financial Officer)

		By:	/s/ STEVEN M. WALKER
			Steven M. Walker Chief Accounting Officer and Assistant Treasurer (Principal Accounting Officer)


Date:	March 1, 2023	/s/ LAURANS A. MENDELSON
		Laurans A. Mendelson
		Chief Executive Officer
		(Principal Executive Officer)