Overview



This discussion of our financial condition and results of operations should be
read in conjunction with our condensed consolidated financial statements and
notes thereto included herein. The preparation of consolidated financial
statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as of the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ materially from those estimates if
different assumptions were used or different events ultimately transpire.

Our critical accounting policies, which require management to make judgments
about matters that are inherently uncertain, are described in Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," under the heading "Critical Accounting Policies" in our Annual
Report on Form 10-K for the year ended October 31, 2021. There have been no
material changes to our critical accounting policies during the three months
ended January 31, 2022.

Our business is comprised of two operating segments: the Flight Support Group
("FSG"), consisting of HEICO Aerospace Holdings Corp. and HEICO Flight Support
Corp. and their respective subsidiaries; and the Electronic Technologies Group
("ETG"), consisting of HEICO Electronic Technologies Corp. and its subsidiaries.

Our results of operations in fiscal 2022 continue to reflect the adverse impact
from the COVID-19 global pandemic (the "Pandemic"). Most notably, demand for our
commercial aviation products and services continues to be moderated by the
ongoing depressed commercial aerospace market as compared to pre-Pandemic
levels. We experienced a significant improvement in operating results in the
first quarter of fiscal 2022 as compared to the first quarter of fiscal 2021
principally reflecting greatly improved demand for our commercial aerospace
products. The Flight Support Group has reported six consecutive quarters of
improvement in net sales and operating income resulting from signs of commercial
air travel recovery in certain domestic travel markets, moderated by a slower
recovery in international travel markets.

Additionally, our results of operations for the three months ended January 31,
2022 have been affected by the fiscal 2021 acquisitions as further detailed in
Note 2, Acquisitions, of the Notes to Consolidated Financial Statements of our
Annual Report on Form 10-K for the year ended October 31, 2021.



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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 Condensed Consolidated Statements of Operations (in thousands):

Three months ended January 31,


                                                                            2022                           2021
Net sales                                                                     $490,343                       $417,902
Cost of sales                                                                  300,133                        259,468
Selling, general and administrative expenses                                    91,388                         78,149
Total operating costs and expenses                                             391,521                        337,617
Operating income                                                               $98,822                        $80,285

Net sales by segment:
Flight Support Group                                                          $272,681                       $199,334
Electronic Technologies Group                                                  222,336                        223,550
Intersegment sales                                                              (4,674)                        (4,982)
                                                                              $490,343                       $417,902

Operating income by segment:
Flight Support Group                                                           $52,376                        $25,822
Electronic Technologies Group                                                   55,588                         60,128
Other, primarily corporate                                                      (9,142)                        (5,665)
                                                                               $98,822                        $80,285

Net sales                                                                        100.0  %                       100.0  %
Gross profit                                                                      38.8  %                        37.9  %
Selling, general and administrative expenses                                      18.6  %                        18.7  %
Operating income                                                                  20.2  %                        19.2  %
Interest expense                                                                   (.2  %)                        (.6  %)
Other income                                                                         -  %                          .2  %
Income tax expense                                                                  .8  %                          .6  %
Net income attributable to noncontrolling interests                                1.5  %                         1.4  %
Net income attributable to HEICO                                                  17.7  %                        16.9  %




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Comparison of First Quarter of Fiscal 2022 to First Quarter of Fiscal 2021

Net Sales



Our consolidated net sales in the first quarter of fiscal 2022 increased by 17%
to $490.3 million, up from net sales of $417.9 million in the first quarter of
fiscal 2021. The increase in consolidated net sales principally reflects an
increase of $73.3 million (a 37% increase) to $272.7 million in net sales within
the FSG, partially offset by a decrease of $1.2 million (a 1% decrease) to
$222.3 million in net sales within the ETG. The net sales increase in the FSG
reflects strong organic growth of 30% as well as net sales of $13.5 million
contributed by our fiscal 2021 acquisitions. The FSG's organic growth reflects
increased demand for the majority of our commercial aerospace products and
services resulting from continued recovery in global commercial air travel as
compared to the prior year. As such, organic net sales increased by $32.5
million, $18.3 million and $9.0 million within our aftermarket replacement
parts, repair and overhaul parts and services and specialty products product
lines, respectively. The net sales decrease in the ETG principally reflects a 3%
decrease in organic net sales, partially offset by $5.2 million contributed by
our fiscal 2021 acquisitions. The ETG's organic net sales decline is mainly
attributable to decreased demand for our defense and space products resulting in
net sales decreases of $14.6 million and $2.3 million, respectively, partially
offset by increased demand for our medical and other electronics products
resulting in net sales increases of $5.0 million and $2.8 million, respectively.
Sales price changes were not a significant contributing factor to the change in
net sales of the FSG and ETG in the first quarter of fiscal 2022.

Gross Profit and Operating Expenses



Our consolidated gross profit margin increased to 38.8% in the first quarter of
fiscal 2022, up from 37.9% in the first quarter of fiscal 2021, principally
reflecting a 4.3% improvement in the FSG's gross profit margin, partially offset
by a .8% decrease in the ETG's gross profit margin. The increase in the FSG's
gross profit margin principally reflects the previously mentioned higher net
sales across all product lines. The decrease in the ETG's gross profit margin
principally reflects a .6% increase in new product research and development
expenses as a percentage of net sales to support ongoing new product research
and development activities. Total new product research and development expenses
included within our consolidated cost of sales were $18.4 million in the first
quarter of fiscal 2022, up from $16.2 million in the first quarter of fiscal
2021.

Our consolidated selling, general and administrative ("SG&A") expenses were
$91.4 million in the first quarter of fiscal 2022, as compared to $78.1 million
in the first quarter of fiscal 2021. The increase in consolidated SG&A expenses
principally reflects costs incurred to support the previously mentioned net
sales growth resulting in increases of $7.4 million and $3.0 million in general
and administrative expenses and selling expenses, respectively. Additionally,
the increase in consolidated SG&A expenses reflects $2.9 million attributable to
our fiscal 2021 acquisitions.

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Our consolidated SG&A expenses as a percentage of net sales decreased to 18.6%
in the first quarter of fiscal 2022, down from 18.7% in the first quarter of
fiscal 2021.

Operating Income

Our consolidated operating income increased by 23% to $98.8 million in the first
quarter of fiscal 2022, up from $80.3 million in the first quarter of fiscal
2021. The increase in consolidated operating income principally reflects a $26.6
million increase (a 103% increase) to $52.4 million in operating income of the
FSG, partially offset by a $4.5 million decrease (an 8% decrease) to $55.6
million in operating income of the ETG. The increase in operating income of the
FSG principally reflects the previously mentioned improved gross profit margin,
net sales growth, and efficiencies realized from the higher net sales volume.
The decrease in operating income of the ETG principally reflects a lower level
of efficiencies resulting from the net sales decrease, as well as the previously
mentioned lower gross profit margin. Further, the increase in consolidated
operating income was partially offset by $3.8 million of higher corporate
expenses mainly attributable to an increase in performance-based compensation
expense and the suspension of corporate salary reductions as of the end of the
first quarter of fiscal 2021.

Our consolidated operating income as a percentage of net sales increased to
20.2% in the first quarter of fiscal 2022, up from 19.2% in the first quarter of
fiscal 2021. The increase principally reflects an increase in the FSG's
operating income as a percentage of net sales to 19.2% in the first quarter of
fiscal 2022, up from 13.0% in the first quarter of fiscal 2021, partially offset
by a decrease in the ETG's operating income as a percentage of net sales to
25.0% in the first quarter of fiscal 2022, as compared to 26.9% in the first
quarter of fiscal 2021. The increase in the FSG's operating income as a
percentage of net sales principally reflects the previously mentioned improved
gross profit margin, as well as a 1.9% impact from a decrease in SG&A expenses
as a percentage of net sales mainly reflecting the previously mentioned
efficiencies. The decrease in the ETG's operating income as a percentage of net
sales principally reflects a 1.1% impact from an increase in SG&A expenses as a
percentage of net sales mainly from the previously mentioned lower level of
efficiencies, as well as the previously mentioned lower gross profit margin.

Interest Expense



Interest expense decreased to $.8 million in the first quarter of fiscal 2022,
down from $2.4 million in the first quarter of fiscal 2021. The decrease was
principally due to a lower weighted average balance of borrowings outstanding
under our revolving credit facility.

Other Income

Other income in the first quarter of fiscal 2022 and 2021 was not material.


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Income Tax Expense



Our effective tax rate was 4.1% in the first quarter of fiscal 2022, as compared
to 2.9% in the first quarter of fiscal 2021. The increase in our effective tax
rate reflects an unfavorable impact from tax-exempt unrealized losses in the
cash surrender values of life insurance policies related to the HEICO Leadership
Compensation Plan ("LCP") in the first quarter of fiscal 2022 as compared to
tax-exempt unrealized gains recognized on such policies in the first quarter of
fiscal 2021, partially offset by a larger tax benefit from stock option
exercises recognized in the first quarter of fiscal 2022. We recognized a
discrete tax benefit from stock option exercises in both the first quarter of
fiscal 2022 and 2021 of $17.8 million and $13.5 million, respectively. The tax
benefit from stock option exercises in both periods was the result of 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 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 $7.3
million in the first quarter of fiscal 2022 as compared to $5.7 million in the
first quarter of fiscal 2021. The increase in net income attributable to
noncontrolling interests in the first quarter of fiscal 2022 principally
reflects an aggregate increase in the operating results of subsidiaries in which
noncontrolling interests are held.
Net Income Attributable to HEICO

Net income attributable to HEICO increased by 23% to $86.9 million, or $.63 per
diluted share, in the first quarter of fiscal 2022, up from $70.6 million, or
$.51 per diluted share, in the first quarter of fiscal 2021 principally
reflecting the previously mentioned higher consolidated operating income.

Outlook



As we look ahead to the remainder of fiscal 2022, we expect global commercial
air travel to continue on a path to recovery despite the potential for
additional Pandemic variants, such as the recent emergence of Omicron. We remain
cautiously optimistic that the ongoing worldwide rollout of Pandemic vaccines,
including boosters, will continue to positively influence global commercial air
travel and benefit the markets we serve. But, it still remains very difficult to
predict the Pandemic's path and effect, including factors like new variants and
vaccination rates, potential supply chain disruptions and inflation, which can
impact our key markets. Therefore, we feel it would not be responsible to
provide fiscal 2022 net sales and earnings guidance at this time. However, we
believe our ongoing conservative policies, strong balance sheet, and high degree
of liquidity enable us to continuously invest in new research and development,
take advantage of periodic strategic inventory purchasing opportunities, and
execute on our successful acquisition program, which collectively position HEICO
for market share gains.
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Liquidity and Capital Resources



Our principal uses of cash include acquisitions, capital expenditures, cash
dividends, distributions to noncontrolling interests and working capital needs.
We continue to anticipate fiscal 2022 capital expenditures to be approximately
$45 million. We finance our activities primarily from our operating and
financing activities, including borrowings under our revolving credit facility.
The revolving credit facility contains both financial and non-financial
covenants. As of January 31, 2022, we were in compliance with all such covenants
and our total debt to shareholders' equity ratio was 10.1%.

Based on our current outlook, we believe that our 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.

Operating Activities



Net cash provided by operating activities was $78.0 million in the first quarter
of fiscal 2022 and consisted primarily of net income from consolidated
operations of $94.3 million, depreciation and amortization expense of $23.2
million (a non-cash item), net changes in other long-term liabilities and assets
related to the HEICO LCP of $11.6 million (principally participant deferrals and
employer contributions), $3.6 million in share-based compensation expense (a
non-cash item), and $3.2 million in employer contributions to the HEICO Savings
and Investment Plan (a non-cash item), partially offset by a $57.9 million
increase in net working capital. The increase in net working capital is
inclusive of a $38.7 million decrease in accrued expenses and other current
liabilities mainly reflecting the payment of fiscal 2021 accrued
performance-based compensation, a $27.0 million increase in inventories
reflecting strategic buys within our distribution businesses and to support an
increase in consolidated backlog, and a $9.0 million increase in prepaid
expenses and other current assets, partially offset by a $16.2 million decrease
in accounts receivable resulting from the timing of collections.

Net cash provided by operating activities decreased by $29.2 million in the
first quarter of fiscal 2022 from $107.2 million in the first quarter of fiscal
2021. The decrease is principally attributable to a $54.8 million increase in
net working capital, partially offset by an $18.0 million increase in net income
from consolidated operations and an $8.0 million decrease in deferred income tax
benefits. The increase in net working capital primarily resulted from the
previously mentioned increase in inventories and the payment of a larger amount
of accrued performance-based compensation in the first quarter of fiscal 2022
resulting from the much improved fiscal 2021 operating results.







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Investing Activities



Net cash used in investing activities totaled $20.0 million in the first quarter
of fiscal 2022 and related primarily to investments related to the HEICO LCP of
$10.1 million and capital expenditures of $8.7 million.

Financing Activities



Net cash used in financing activities in the first quarter of fiscal 2022
totaled $39.9 million. During the first quarter of fiscal 2022, we made $25.0
million in payments on our revolving credit facility, redeemed common stock
related to stock option exercises aggregating $23.6 million, paid $12.2 million
in cash dividends on our common stock and made $6.0 million of distributions to
noncontrolling interests, which were partially offset by $26.0 million of
borrowings under our revolving credit facility and $.8 million in proceeds from
stock option exercises.

Other Obligations and Commitments

There have not been any material changes to our other obligations and commitments that were included in our Annual Report on Form 10-K for the year ended October 31, 2021.



New Accounting Pronouncement

See Note 1, Summary of Significant Accounting Policies - New Accounting Pronouncements, of the Notes to Condensed Consolidated Financial Statements for additional information.



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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; 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,
including the effects of inflation, within and outside of the aviation, defense,
space, medical, telecommunications and electronics industries, which could
negatively impact our costs and revenues; and defense spending or budget cuts,
which could reduce our defense-related revenue. 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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