Overview

Our business is comprised of two operating segments, the Flight Support Group ("FSG") and the Electronic Technologies Group ("ETG").



  The FSG consists of HEICO Aerospace Holdings Corp. ("HEICO Aerospace"), which
is 80% owned, and HEICO Flight Support Corp., which is wholly owned, and their
collective subsidiaries, which primarily:

•Designs, Manufactures, Repairs, Overhauls and Distributes Jet Engine and
Aircraft Component Replacement Parts. The FSG designs and manufactures jet
engine and aircraft component replacement parts, which are approved by the
Federal Aviation Administration ("FAA"). In addition, the FSG repairs, overhauls
and distributes jet engine and aircraft components, avionics and instruments for
domestic and foreign commercial air carriers and aircraft repair companies as
well as military and business aircraft operators. The FSG also manufactures and
sells specialty parts as a subcontractor for aerospace and industrial original
equipment manufacturers and the United States ("U.S.") government. Additionally,
the FSG is a leading supplier, distributor, and integrator of military aircraft
parts and support services primarily to foreign military organizations allied
with the U.S. and a leading manufacturer of advanced niche components and
complex composite assemblies for commercial aviation, defense and space
applications. Further, the FSG engineers, designs and manufactures thermal
insulation blankets and parts as well as removable/reusable insulation systems
for aerospace, defense, commercial and industrial applications; manufactures
expanded foil mesh for lightning strike protection in fixed and rotary wing
aircraft; distributes aviation electrical interconnect products and
electromechanical parts; and overhauls industrial pumps, motors, and other
hydraulic units with a focus on the support of legacy systems for the U.S. Navy.

The ETG consists of HEICO Electronic Technologies Corp. ("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, Microelectronic Memory Products,
Self-Sealing Auxiliary Fuel Systems, Active Antenna Systems and TSCM
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
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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, three-dimensional microelectronic and stacked
memory products, harsh environment electronic connectors and other interconnect
products, radio frequency ("RF") and microwave amplifiers, transmitters and
receivers; 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 for commercial 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; and rugged small-form factor embedded
computing solutions.

Our results of operations in fiscal 2020 were significantly affected by the
COVID-19 global pandemic (the "Pandemic"). The effects of the Pandemic and
related actions by governments around the world to mitigate its spread have
impacted our employees, customers, suppliers and manufacturers. In response to
the economic impact from the Pandemic, we implemented certain cost reduction
efforts, including layoffs, temporary reduced work hours and temporary pay
reductions within various departments of our business, including within our
executive management team and our Board of Directors. Additionally, our response
to the Pandemic included the implementation of varying health and safety
measures at our facilities, including: supplying and requiring the use of
personal protective equipment; staggering work shifts; body temperature taking;
increasing work-from-home capabilities; consistent and ongoing cleaning of work
spaces and high-touch areas; and establishing processes aligned with the Centers
for Disease and Control guidelines to work with any individual exposed to
COVID-19 on their necessary quarantine period and the process for the individual
to return to work.

With respect to our results of operations, approximately 59% of our net sales in
fiscal 2020 were derived from defense, space and other industrial markets
including electronics, medical and telecommunications. Although demand for these
products was slightly moderated in fiscal 2020, our overall results from this
portion of our business were not materially impacted by the Pandemic. However,
we experienced, and expect to continue experiencing, periodic operational
disruptions resulting from supply chain disturbances, staffing challenges -
including at some of our customers, temporary facility closures, transportation
interruptions and other conditions which slow production and orders, or increase
costs.

The remaining portion of our fiscal 2020 net sales was derived from commercial
aviation products and services. The Pandemic has caused significant volatility
and a substantial decline in value across global markets. Most notably, the
commercial aerospace industry experienced an ongoing substantial decline in
demand resulting from a significant number of aircraft in the
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global fleet being grounded during fiscal 2020. Our businesses that operate
within the commercial aerospace industry were materially impacted by the
significant decline in global commercial air travel that began in March 2020.
Consolidated net sales for our businesses that operate within the commercial
aerospace industry decreased by approximately 32% during fiscal 2020.

As we look ahead to fiscal 2021, the extent to which the Pandemic may have a
material adverse effect on our future business, financial condition and results
of operations will depend on many factors that are not within HEICO's control,
including but not limited to the duration, spread and severity of the Pandemic,
government responses and other actions to mitigate the spread of and to treat
the Pandemic, and when and to what extent normal business, economic and social
activity and conditions resume. However, we are cautiously optimistic that the
recent vaccine progress may generate increased commercial air travel and result
in a gradual recovery in demand for our commercial aerospace parts and services
commencing in fiscal 2021.

Additionally, our results of operations in fiscal 2020 have been affected by
recent acquisitions as further detailed in Note 2, Acquisitions, of the Notes to
Consolidated Financial Statements.

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 2020 to fiscal
2019. A similar discussion and analysis that compares fiscal 2019 to fiscal 2018
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, 2019.

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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,
                                                                       2020                             2019
Net sales                                                                $1,787,009                       $2,055,647
Cost of sales                                                             1,104,882                        1,241,807
Selling, general and administrative expenses                                305,479                          356,743
Total operating costs and expenses                                        1,410,361                        1,598,550
Operating income                                                           $376,648                         $457,097

Net sales by segment:
Flight Support Group                                                       $924,812                       $1,240,183
Electronic Technologies Group                                               874,987                          834,522
Intersegment sales                                                          (12,790)                         (19,058)
                                                                         $1,787,009                       $2,055,647

Operating income by segment:
Flight Support Group                                                       $143,051                         $242,029
Electronic Technologies Group                                               258,814                          245,743
Other, primarily corporate                                                  (25,217)                         (30,675)
                                                                           $376,648                         $457,097

Net sales                                                                     100.0  %                         100.0  %
Gross profit                                                                   38.2  %                          39.6  %
Selling, general and administrative expenses                                   17.1  %                          17.4  %
Operating income                                                               21.1  %                          22.2  %
Interest expense                                                                 .7  %                           1.1  %
Other income                                                                     .1  %                            .1  %
Income tax expense                                                              1.6  %                           3.8  %
Net income attributable to noncontrolling interests                             1.2  %                           1.5  %
Net income attributable to HEICO                                               17.6  %                          16.0  %


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Comparison of Fiscal 2020 to Fiscal 2019

Net Sales



  Our consolidated net sales in fiscal 2020 decreased by 13% to $1,787.0
million, as compared to net sales of $2,055.6 million in fiscal 2019. The
decrease in consolidated net sales principally reflects a decrease of $315.4
million (a 25% decrease) to $924.8 million in net sales within the FSG partially
offset by an increase of $40.5 million (a 5% increase) to a record $875.0
million in net sales within the ETG. The net sales decrease in the FSG is
principally organic and reflects lower demand for the majority of our products
and services resulting from the significant decline in global commercial air
travel beginning in March 2020 due to the Pandemic. As a result, organic net
sales of our aftermarket replacement parts, repair and overhaul parts and
services, and specialty products product lines decreased by $154.0 million,
$106.2 million, and $58.8 million, respectively. The net sales increase in the
ETG principally reflects $52.8 million contributed by our fiscal 2020 and 2019
acquisitions and higher demand for our defense products resulting in an organic
net sales increase of $13.6 million partially offset by lower demand for our
commercial aerospace and medical products resulting in organic net sales
decreases of $12.9 million and $5.6 million, respectively, largely attributable
to the Pandemic. Sales price changes were not a significant contributing factor
to the change in net sales of the FSG and ETG in the fiscal 2020.

  Our net sales in fiscal 2020 and 2019 by market consisted of approximately 41%
and 52% from the commercial aviation industry, respectively, 44% and 35% from
the defense and space industries, respectively, and 15% and 13% from other
industrial markets including electronics, medical and telecommunications,
respectively.

Gross Profit and Operating Expenses



  Our consolidated gross profit margin was 38.2% in fiscal 2020 as compared to
39.6% in 2019, principally reflecting a decrease of 3.6% and 1.3% in the FSG's
and ETG's gross profit margin, respectively. The decrease in the FSG's gross
profit margin principally reflects a 2.1% impact, or an incremental increase of
$18.1 million, from an increase in inventory obsolescence expense mainly
resulting from the announced retirement of certain aircraft types and engine
platforms by our commercial aerospace customers due to the Pandemic's financial
impact. Additionally, the FSG's lower gross profit margin reflects the impact
from lower net sales within our repair and overhaul parts and services and
aftermarket replacement parts product lines. The decrease in the ETG's gross
profit margin principally reflects a decrease in net sales and a less favorable
product mix of certain commercial aerospace and medical products, partially
offset by increased net sales of certain defense products. Total new product
research and development ("R&D") expenses included within our consolidated cost
of sales were $65.6 million and $66.6 million in fiscal 2020 and 2019,
respectively.

Our consolidated selling, general and administrative ("SG&A") expenses decreased by 14% to $305.5 million in fiscal 2020, as compared to $356.7 million in fiscal 2019. The decrease in consolidated SG&A expenses reflects a $36.5 million decrease in performance-based


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compensation expense, a $20.7 million reduction in other general and
administrative expenses and a $16.5 million reduction in other selling expenses
including outside sales commissions, marketing and travel. These decreases were
partially offset by $13.4 million attributable to the fiscal 2019 and 2020
acquisitions and a $9.1 million increase in bad debt expense principally due to
potential collection difficulties from certain commercial aviation customers
that filed for bankruptcy protection during fiscal 2020 as a result of the
Pandemic's financial impact.

  Our consolidated SG&A expenses as a percentage of net sales decreased to 17.1%
in fiscal 2020, down from 17.4% in fiscal 2019. The decrease in consolidated
SG&A expenses as a percentage of net sales is due to a 1.6% impact from lower
performance-based compensation expense and a .2% decrease in other selling
expenses, partially offset by a 1.0% impact from higher other general and
administrative expenses as a percentage of net sales and a .5% increase in bad
debt expense principally due to potential collection difficulties from certain
commercial aviation customers that filed for bankruptcy protection during fiscal
2020 as a result of the Pandemic's financial impact.

Operating Income



  Our consolidated operating income decreased by 18% to $376.6 million in fiscal
2020, as compared to $457.1 million in fiscal 2019. The decrease in consolidated
operating income principally reflects a $99.0 million decrease (a 41% decrease)
to $143.1 million in operating income of the FSG partially offset by a $13.1
million increase (a 5% increase) to a record $258.8 million in operating income
of the ETG. The decrease in operating income of the FSG principally reflects the
previously mentioned decrease in net sales, lower gross profit margin and a $9.3
million increase in bad debt expense principally due to potential collection
difficulties from certain commercial aviation customers that filed for
bankruptcy protection during fiscal 2020 as a result of the Pandemic's financial
impact, partially offset by a $26.1 million decrease in performance-based
compensation expense. The increase in operating income of the ETG principally
reflects the previously mentioned net sales growth, a $5.4 million decrease in
performance-based compensation expense and a $2.5 million decrease in
acquisition-related expenses, partially offset by the previously mentioned
decrease in gross profit margin. Further, the decrease in consolidated operating
income was partially offset by $5.4 million of lower corporate expenses mainly
attributable to a decrease in performance-based compensation expense.

  Our consolidated operating income as a percentage of net sales was 21.1% in
fiscal 2020, as compared to 22.2% in fiscal 2019. The decrease principally
reflects a decrease in the FSG's operating income as a percentage of net sales
to 15.5% in fiscal 2020, as compared to 19.5% in fiscal 2019. The decrease in
the FSG's operating income as a percentage of net sales reflects the previously
mentioned lower gross profit margin and a .5% increase in SG&A expenses as a
percentage of net sales mainly from the previously mentioned higher bad debt
expense and fixed cost efficiencies lost resulting from the Pandemic's impact,
partially offset by the previously mentioned lower performance-based
compensation expense. The ETG's operating income as a percentage of net sales
increased to 29.6% in fiscal 2020, up from 29.4% in fiscal 2019.

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Interest Expense



  Interest expense decreased to $13.2 million in fiscal 2020, down from $21.7
million in fiscal 2019. The decrease was principally due to a lower weighted
average interest rate on borrowings outstanding under our revolving credit
facility.

Other Income

Other income in fiscal 2020 and 2019 was not material.

Income Tax Expense



  Our effective tax rate in fiscal 2020 was 7.9%, as compared to 17.8% in fiscal
2019. The decrease in our effective tax rate in fiscal 2020 is mainly
attributable to a $31.8 million larger tax benefit recognized in fiscal 2020
from stock option exercises compared to fiscal 2019 as a result of more stock
options exercised and the strong appreciation in HEICO's stock price during the
optionees' holding periods.

Net Income Attributable to Noncontrolling Interests


  Net income attributable to noncontrolling interests relates to the 20%
noncontrolling interest held by Lufthansa Technik AG ("LHT") in HEICO Aerospace
Holdings Corp. and the noncontrolling interests held by others in certain
subsidiaries of the FSG and ETG. Net income attributable to noncontrolling
interests was $21.9 million in fiscal 2020, as compared to $31.8 million in
fiscal 2019. The decrease in net income attributable to noncontrolling interests
in fiscal 2020 principally reflects a decrease in operating results of certain
subsidiaries of the FSG in which noncontrolling interests are held as well as
the impact of a dividend paid by HEICO Aerospace in June 2019 that effectively
resulted in the transfer of the 20% noncontrolling interest held by LHT in eight
of our existing subsidiaries within HEICO Aerospace that are principally part of
the FSG's repair and overhaul parts and services product line to HEICO Flight
Support Corp., a wholly owned subsidiary of HEICO.

Net Income Attributable to HEICO



Net income attributable to HEICO was $314.0 million, or $2.29 per diluted share,
in fiscal 2020 as compared to $327.9 million, or $2.39 per diluted share, in
fiscal 2019, principally reflecting the previously mentioned lower operating
income of the FSG, partially offset by lower income tax expense, less net income
attributable to noncontrolling interests and lower interest expense.






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Outlook



As we look ahead to fiscal 2021, the Pandemic will likely continue to negatively
impact the commercial aerospace industry and HEICO. Given this uncertainty,
HEICO cannot provide fiscal 2021 net sales and earnings guidance at this time.
However, we believe our ongoing fiscal conservative policies, healthy balance
sheet, and increased liquidity will permit us to invest in new research and
development and gain market share as the industry recovers. In addition, our
time-tested strategy of maintaining low debt and acquiring and operating high
cash generating businesses across a diverse base of industries beyond commercial
aerospace, such as defense, space and other high-end markets including
electronics and medical, puts us in a good financial position to weather this
uncertain economic period. Further, we are cautiously optimistic that the recent
vaccine progress may generate increased commercial air travel and result in a
gradual recovery in demand for our commercial aerospace parts and services
commencing in fiscal 2021.

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.

Liquidity and Capital Resources

The following table summarizes our capitalization (in thousands):


                                                    As of October 31,
                                               2020                    2019
Cash and cash equivalents                   $406,852

$57,001


Total debt (including current portion)       739,831                 

561,955


Shareholders' equity                       2,010,607               

1,694,660


Total capitalization (debt plus equity)    2,750,438               

2,256,615


Total debt to total capitalization                   27%                    

25%





  Our principal uses of cash include acquisitions, capital expenditures, cash
dividends, distributions to noncontrolling interests and working capital needs.
Capital expenditures in fiscal 2021 are anticipated to approximate $40 million.
We finance our activities primarily from our operating and financing activities,
including borrowings under our revolving credit facility.

  As of December 22, 2020, we had approximately $755 million of unused committed
availability under the terms of our revolving credit facility. 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.

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Operating Activities



Net cash provided by operating activities was $409.1 million in fiscal 2020 and
consisted primarily of net income from consolidated operations of $335.9
million, depreciation and amortization expense of $88.6 million (a non-cash
item), net changes in other long-term liabilities and assets related to the
HEICO Leadership Compensation Plan ("LCP") of $14.8 million (principally
participant deferrals and employer contributions), $10.1 million in share-based
compensation expense (a non-cash item), and $9.6 million in employer
contributions to the HEICO Savings and Investment Plan (a non-cash item),
partially offset by a $48.5 million increase in working capital. The increase in
working capital is inclusive of a $68.2 million decrease in accrued expenses and
other current liabilities and trade accounts payable mainly reflecting lower
accrued performance-based compensation as well as the timing of payments; a
$28.3 million increase in inventories as a result of certain inventory purchase
commitments based on pre-Pandemic net sales expectations and to support the
backlog of certain of our businesses; and a $16.4 million increase in contract
assets, partially offset by a $71.5 million decrease in accounts receivable
resulting from lower net sales and strong cash collections. Net cash provided by
operating activities decreased by $28.3 million in fiscal 2020 from $437.4
million in fiscal 2019. The decrease is principally attributable to a $23.9
million decrease in net income from consolidated operations and a $16.3 million
increase in net working capital partially offset by a $5.1 million increase in
depreciation and amortization expense (a non-cash item).

Net cash provided by operating activities was $437.4 million in fiscal 2019 and
consisted primarily of net income from consolidated operations of $359.7
million, depreciation and amortization expense of $83.5 million (a non-cash
item), net changes in other long-term liabilities and assets related to the
HEICO LCP of $12.9 million (principally participant deferrals and employer
contributions) and $10.3 million in share-based compensation expense (a non-cash
item), partially offset by a $32.3 million increase in working capital.

Investing Activities



Net cash used in investing activities totaled $199.0 million in fiscal 2020 and
related primarily to acquisitions of $163.9 million (net of cash acquired),
capital expenditures of $22.9 million and investments related to the HEICO LCP
of $15.9 million. Further details on acquisitions may be found in Note 2,
Acquisitions, of the Notes to Consolidated Financial Statements.

Net cash used in investing activities totaled $280.6 million in fiscal 2019 and
related primarily to acquisitions of $240.8 million (net of cash acquired),
capital expenditures of $28.9 million and investments related to the HEICO LCP
of $13.7 million. Further details on acquisitions may be found in Note 2,
Acquisitions, of the Notes to Consolidated Financial Statements.




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Financing Activities



Net cash provided by financing activities in fiscal 2020 totaled $137.7 million.
During fiscal 2020, we borrowed $200.0 million under our revolving credit
facility to provide a cushion of liquidity during this period of economic
uncertainty resulting from the Pandemic and $45.0 million to fund our fiscal
2020 acquisitions. We also received $14.3 million in capital contributions from
the noncontrolling interest holders of a subsidiary of HEICO Electronic
representing their share of the purchase price for a 25% interest in two
acquisitions made by a subsidiary of HEICO Electronic in August 2020. (See Note
2, Acquisitions, of the Notes to Consolidated Financial Statements for further
details). Additionally, we made $68.0 million in payments on our revolving
credit facility, paid $21.6 million in cash dividends on our common stock, made
$17.9 million of distributions to noncontrolling interests, redeemed common
stock related to stock option exercises aggregating $12.1 million, paid $7.5
million to acquire certain noncontrolling interests and received $7.0 million in
proceeds from stock option exercises.

Net cash used in financing activities in fiscal 2019 totaled $159.7 million.
During fiscal 2019, we made $283.0 million in payments on our revolving credit
facility, paid $110.9 million in distributions to noncontrolling interests,
redeemed common stock related to stock option exercises aggregating $64.0
million and paid $18.7 million in cash dividends on our common stock.
Additionally, we borrowed $313.0 million under our revolving credit facility to
fund certain of our fiscal 2019 acquisitions and a certain distribution to a
noncontrolling interest holder.

  In November 2017, we entered into a $1.3 billion Revolving Credit Facility
Agreement ("Credit Facility") with a bank syndicate, which matures in November
2022. Under certain circumstances, the maturity of the Credit Facility may be
extended for two one-year periods. The Credit Facility also includes a feature
that will allow us to increase the capacity by $350 million to become a $1.65
billion facility through increased commitments from existing lenders or the
addition of new lenders. Borrowings under the Credit Facility may be used to
finance acquisitions and for working capital and other general corporate
purposes, including capital expenditures.

On December 11, 2020, we entered into an amendment to extend the maturity date
of the Credit Facility by one year to November 2023 and to increase the capacity
by $200 million to $1.5 billion. The Credit Facility continues to include a
feature that will allow us to increase the capacity by $350 million to become a
$1.85 billion facility through increased commitments from existing lenders or
the addition of new lenders and can be extended for an additional one-year
period.

  Borrowings under the Credit Facility accrue interest at our election of the
Base Rate or the Eurocurrency Rate, plus in each case, the Applicable Rate
(based on our Total Leverage Ratio). The Base Rate for any day is a fluctuating
rate per annum equal to the highest of (i) the Prime Rate; (ii) the Federal
Funds Rate plus .50%; and (iii) the Eurocurrency Rate for an Interest Period of
one month plus 100 basis points. The Eurocurrency Rate is the rate per annum
obtained by dividing LIBOR for the applicable Interest Period by a percentage
equal to 1.00
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minus the daily average Eurocurrency Reserve Rate for such Interest Period, as
such capitalized terms are defined in the Credit Facility. The Applicable Rate
for Eurocurrency Rate Loans ranges from 1.00% to 2.00%. The Applicable Rate for
Base Rate Loans ranges from 0% to 1.00%. A fee is charged on the amount of the
unused commitment ranging from .125% to .30% (depending on our Total Leverage
Ratio). The Credit Facility also includes $100 million sublimits for borrowings
made in foreign currencies and for swingline borrowings, and a $50 million
sublimit for letters of credit. Outstanding principal, accrued and unpaid
interest and other amounts payable under the Credit Facility may be accelerated
upon an event of default, as such events are described in the Credit Facility.
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, 2020.

Contractual Obligations

  The following table summarizes our contractual obligations as of October 31,
2020
(in thousands):
                                                                                            Payments due by fiscal period
                                      Total                    2021                     2022 - 2023                  2024 - 2025               Thereafter
Long-term debt obligations (1)       $730,264                       $11                       $98                     $730,110                      $45
Estimated interest payments (1)        28,395                     9,422                    18,844                          129                        -
Finance lease obligations (2)          12,144                     1,436                     2,527                        1,964                    6,217
Operating lease obligations (3)        70,778                    16,549                    24,392                        9,832                   20,005
Purchase obligations (4) (5)
(6)                                    46,164                     3,631                    22,366                       20,167                        -
Other long-term liabilities (7)        14,209                     2,582                     8,869                        1,719                    1,039
Total contractual obligations        $901,954                   $33,631                   $77,096                     $763,921                  $27,306


__________________

(1)Estimated interest payments assumes the $730.0 million outstanding balance
under our revolving credit facility and related interest rate of 1.3% as of
October 31, 2020, will remain constant through the credit facility's maturity
date in fiscal 2024. Actual interest payments may vary significantly based on
future borrowings, repayments and interest rate fluctuations. As discussed in
"Liquidity and Capital Resources," we entered into an amendment to extend the
maturity date of our revolving credit facility by one year to November 2023,
which is reflected in the table. See Note 5, Long-Term Debt, of the Notes to
Consolidated Financial Statements and "Liquidity and Capital Resources," above
for additional information regarding our long-term debt obligations.

(2)Inclusive of $2.6 million of imputed interest. See Note 9, Leases, of the
Notes to Consolidated Financial Statements for additional information regarding
our finance lease obligations.

(3)See Note 9, Leases, of the Notes to Consolidated Financial Statements for additional information regarding our operating lease obligations.

(4)Includes contingent consideration aggregating $42.0 million related to a fiscal 2017 acquisition and certain fiscal 2020 acquisitions. See Note 8, Fair Value Measurements, of the Notes to Consolidated Financial Statements for additional information.


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(5)Also includes an aggregate $1.4 million of commitments principally for
capital expenditures and inventory. All purchase obligations of inventory and
supplies in the ordinary course of business (i.e., with deliveries scheduled
within the next year) are excluded from the table.

(6)The holders of equity interests in certain of our subsidiaries have rights
("Put Rights") that may be exercised on varying dates causing us to purchase
their equity interests through fiscal 2030. The Put Rights provide that cash
consideration be paid for their equity interests (the "Redemption Amount"). As
of October 31, 2020, management's estimate of the aggregate Redemption Amount of
all Put Rights that we could be required to pay is approximately $221.2 million,
which is reflected within redeemable noncontrolling interests in our
Consolidated Balance Sheet. Of this amount, $2.3 million is included in the
table as payable in fiscal 2021 pursuant to the past exercise of such Put Rights
by the noncontrolling interest holder of one of our subsidiaries. See Note 13,
Redeemable Noncontrolling Interests, of the Notes to Consolidated Financial
Statements for further information.

(7)Includes $7.2 million of deferred payroll taxes related to the provisions of
the Coronavirus Aid, Relief and Economic Security Act, which allows the Company
to defer its portion of certain calendar year 2020 payroll taxes until fiscal
2022 and 2023. Also includes $3.5 million related to a one-time transition tax
on the unremitted earnings of the Company's foreign subsidiaries which will be
paid over a remaining six-year period as permitted by the Tax Cuts and Jobs Act.
The amounts in the table do not include liabilities related to the HEICO LCP as
they are fully supported by assets held within irrevocable trusts. See Note 3,
Selected Financial Statement Information - Other Long-Term Assets and
Liabilities, of the Notes to Consolidated Financial Statements for further
information about this deferred compensation plan.

Off-Balance Sheet Arrangements

Guarantees



  As of October 31, 2020, we have arranged for standby letters of credit
aggregating $14.6 million, which are supported by our revolving credit facility
and principally pertain to performance guarantees related to customer contracts
entered into by certain of our subsidiaries as well as payment guarantees
related to potential workers' compensation claims and a facility lease.

Critical Accounting Policies

We believe that the following are our most critical accounting policies, which require management to make judgments about matters that are inherently uncertain.



  Assumptions utilized to determine fair value in connection with business
combinations, contingent consideration arrangements and in goodwill and
intangible assets impairment tests are highly judgmental. If there is a material
change in such assumptions or if there is a material change in the conditions or
circumstances influencing fair value, we could be required to recognize a
material impairment charge. See Item 1A., Risk Factors, for a list of factors
which may cause our actual results to differ materially from anticipated
results.

Revenue Recognition



During fiscal 2019, we adopted Accounting Standard Codification ("ASC") Topic
606, "Revenue from Contracts with Customers" ("ASC 606"). Pursuant to ASC 606,
HEICO
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recognizes revenue when it transfers control of a promised good or service to a
customer in an amount that reflects the consideration it expects to receive in
exchange for the good or service. Our performance obligations are satisfied and
control is transferred either at a point-in-time or over-time. The majority of
our revenue is recognized at a point-in-time when control is transferred, which
is generally evidenced by the shipment or delivery of the product to the
customer, a transfer of title, a transfer of the significant risks and rewards
of ownership, and customer acceptance. For certain contracts under which we
produce products with no alternative use and for which we have an enforceable
right to recover costs incurred plus a reasonable profit margin for work
completed to date and for certain other contracts under which we create or
enhance a customer-owned asset while performing repair and overhaul services,
control is transferred to the customer over-time. HEICO recognizes revenue using
an over-time recognition model for these types of contracts.

  We utilize the cost-to-cost method as a measure of progress for performance
obligations that are satisfied over-time as we believe this input method best
represents the transfer of control to the customer. Under this method, revenue
for the current period is recorded at an amount equal to the ratio of costs
incurred to date divided by total estimated contract costs multiplied by (i) the
transaction price, less (ii) cumulative revenue recognized in prior periods.
Contract costs include all direct material and labor costs and those indirect
costs related to contract performance, such as indirect labor, supplies, tools,
repairs and depreciation.

  Under the cost-to-cost method, the extent of progress toward completion is
measured based on the proportion of costs incurred to date to the total
estimated costs at completion of the performance obligation. These projections
require management to make numerous assumptions and estimates relating to items
such as the complexity of design and related development costs, performance of
subcontractors, availability and cost of materials, labor productivity and cost,
overhead, capital costs, and manufacturing efficiency. We review our cost
estimates on a periodic basis, or when circumstances change and warrant a
modification to a previous estimate. Cost estimates are largely based on
negotiated or estimated purchase contract terms, historical performance trends
and other economic projections.

  For certain contracts with similar characteristics and for which revenue is
recognized using an over-time model, we use a portfolio approach to estimate the
amount of revenue to recognize. For each portfolio of contracts, the respective
work in process and/or finished goods inventory balances are identified and the
portfolio-specific margin is applied to estimate the pro rata portion of the
transaction price to recognize in relation to the costs incurred. This approach
is utilized only when the resulting revenue recognition is not expected to be
materially different than if the accounting was applied to the individual
contracts.

  Certain of our contracts give rise to variable consideration when they contain
items such as customer rebates, credits, volume purchase discounts, penalties
and other provisions that may impact the total consideration we will receive. We
include variable consideration in the transaction price generally by applying
the most likely amount method of the consideration that we expect to be entitled
to receive based on an assessment of all available information (i.e., historical
experience, current and forecasted performance) and only to the extent it is
probable
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that a significant reversal of revenue recognized will not occur when the
uncertainty is resolved. We estimate variable consideration by applying the most
likely amount method when there are a limited number of outcomes related to the
resolution of the variable consideration.

Changes in estimates that result in adjustments to net sales and cost of sales are recognized as necessary in the period they become known on a cumulative catch-up basis. Changes in estimates did not have a material effect on net income from consolidated operations in fiscal 2020, 2019 and 2018.

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.

  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. These estimates could vary significantly from
actual amounts based upon future economic conditions, customer inventory levels,
or competitive factors that were not foreseen or did not exist when the
estimated write-downs were made.

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.

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. 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. We determine the fair
values of intangible assets acquired generally in consultation with third-party
valuation advisors.

  As part of the agreement to acquire certain subsidiaries, we may be obligated
to pay contingent consideration should the acquired entity meet certain earnings
objectives subsequent to the date of acquisition. 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. A
probability of likelihood is then assigned to each discrete potential future
earnings estimate and the resultant contingent consideration is calculated and
discounted using a weighted average discount rate
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reflecting the credit risk of HEICO. 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. As of October 31, 2020, 2019 and 2018, $42.0 million,
$18.3 million and $20.9 million of contingent consideration was accrued within
our Consolidated Balance Sheets, respectively. During fiscal 2020, 2019 and
2018, such fair value measurement adjustments resulted in net increases
(decreases) to SG&A expenses of $.5 million, $2.6 million and ($1.4) million,
respectively. For further information regarding our contingent consideration
arrangements, see Note 8, Fair Value Measurements, of the Notes to Consolidated
Financial Statements.

Valuation of Goodwill and Other Intangible Assets



  We test goodwill for impairment annually as of October 31, or more frequently
if events or changes in circumstances indicate that the carrying amount of
goodwill may not be fully recoverable. In evaluating the recoverability of
goodwill, we compare the fair value of each of our reporting units to its
carrying value to determine potential impairment. If the carrying value of a
reporting unit exceeds its fair value, the implied fair value of that reporting
unit's goodwill is to be calculated and an impairment loss is recognized in the
amount by which the carrying value of the reporting unit's goodwill exceeds its
implied fair value, if any. The fair values of our reporting units were
determined using a weighted average of a market approach and an income
approach. Under the market approach, fair values are estimated using published
market multiples for comparable companies. 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. Based on
the annual goodwill impairment test as of October 31, 2020, 2019 and 2018, we
determined there was no impairment of our goodwill. The fair value of each of
our reporting units as of October 31, 2020 significantly exceeded its carrying
value.

  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. 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. 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 determination of fair value requires us to make a number of
estimates, assumptions and judgments of underlying factors such as projected
revenues and related earnings as well as discount rates. Based on the intangible
asset impairment tests conducted, we did not recognize any impairment losses in
fiscal 2020, 2019 and 2018.

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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. 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. Any forward-looking statement contained herein, in press releases,
written statements or other documents filed with the Securities and Exchange
Commission or in communications and discussions with investors and analysts in
the normal course of business through meetings, phone calls and conference
calls, concerning our operations, economic performance and financial condition
are subject to risks, uncertainties and contingencies. We have based these
forward-looking statements on our current expectations and projections about
future events. All forward-looking statements involve risks and uncertainties,
many of which are beyond our control, which may cause actual results,
performance or achievements to differ materially from anticipated results,
performance or achievements. Also, forward-looking statements are based upon
management's estimates of fair values and of future costs, using currently
available information. Therefore, actual results may differ materially from
those expressed in or implied by those forward-looking statements. Factors that
could cause such differences include:

•The severity, magnitude and duration of the Pandemic;

•Our liquidity and the amount and timing of cash generation;



•Lower commercial air travel caused by the Pandemic and its aftermath, airline
fleet changes or airline purchasing decisions, which could cause lower demand
for our goods and services;

•Product specification costs and requirements, which could cause an increase to our costs to complete contracts;

•Governmental and regulatory demands, export policies and restrictions, reductions in defense, space or homeland security spending by U.S. and/or foreign customers or competition from existing and new competitors, which could reduce our sales;

•Our ability to introduce new products and services at profitable pricing levels, which could reduce our sales or sales growth;

•Product development or manufacturing difficulties, which could increase our product development and manufacturing costs and delay sales;


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•Our ability to make acquisitions and achieve operating synergies from acquired
businesses; customer credit risk; interest, foreign currency exchange and income
tax rates; economic conditions within and outside of the aviation, defense,
space, medical, telecommunications and electronics industries, which could
negatively impact our costs and revenues; and

•Defense spending or budget cuts, which could reduce our defense-related revenue.



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.

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