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ACQUISITIONS | 6 Months Ended
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Apr. 30, 2023
Business Combination and Asset Acquisition [Abstract] |
Acquisitions [Text Block] | ACQUISITIONS In March 2023, the Company, through a subsidiary of HEICO Electronic, entered into an exclusive license and acquired certain assets for the Aircraft Emergency Locator Transmitter (“ELT”) product line from Honeywell International. ELTs provide critical emergency transmission signals in the event of aircraft impact on land or water to enable first responders to locate the aircraft. The transaction provides the HEICO Electronic subsidiary with all rights to produce, sell and repair both fixed and portable Honeywell ELTs, as well as various support equipment. The purchase price of this acquisition was paid in cash using cash provided by operating activities and is not material or significant to the Company's condensed consolidated financial statements. On January 5, 2023, the Company, through HEICO Electronic, acquired 93.69% of the outstanding common stock and all of the preferred stock of Exxelia International SAS (“Exxelia”). Exxelia designs, manufactures and sells 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 Company believes that this acquisition will further HEICO's strategy of expanding its already wide range of mission-critical and Hi-Rel components for the most demanding applications, as well as provide HEICO with added broad geographic and product diversity, including in the important European market. The remaining 6.31% interest is owned by certain members of Exxelia's management team (see Note 3, Selected Financial Statement Information - Redeemable Noncontrolling Interests, for additional information). Additionally, as a result of this acquisition, the Company also obtained a 90% ownership interest in Alcon Electronics Pvt. Ltd. (“Alcon”), which is an existing subsidiary of Exxelia. The remaining 10% interest continues to be owned by a certain member of Alcon’s management team (See Note 3, Selected Financial Statement Information – Redeemable Noncontrolling Interests, for additional information). The purchase price of this acquisition was paid in cash, using proceeds from the Company's revolving credit facility. The following table summarizes the total consideration for the acquisition of Exxelia (in thousands):
Cash paid |  | $515,785 |
Less: cash acquired |  | (14,234) |
Total consideration paid, net |  | $501,551 |
As noted above, the Company acquired all of the preferred stock of Exxelia. Pursuant to the terms of the acquisition, Exxelia’s preferred stock accrues dividends at 5.18% per annum. Additionally, in connection with the acquisition, HEICO issued Exxelia a ten-year, €150 million note, which accrues interest at 4.7% per annum on the principal outstanding. The Company records foreign currency transaction adjustments on the note receivable within selling, general and administrative ("SG&A") expenses in its Condensed Consolidated Statements of Operations. The following table summarizes the allocation of the total consideration for the acquisition of Exxelia to the estimated fair values of the tangible and identifiable intangible assets acquired and liabilities and noncontrolling interests assumed (in thousands):
Assets acquired: |  |
Goodwill |  | $332,033 |
Customer relationships |  | 64,935 |
Intellectual property |  | 44,044 |
Trade name |  | 21,703 |
Inventories |  | 55,922 |
Property, plant and equipment |  | 42,165 |
Accounts receivable |  | 41,113 |
Other assets |  | 11,254 |
Total assets acquired, excluding cash |  | 613,169 |
Liabilities assumed: |  |
Deferred income taxes |  | 31,975 |
Accounts payable |  | 22,369 |
Accrued expenses |  | 18,383 |
Other liabilities |  | 24,231 |
Total liabilities assumed |  | 96,958 |
Noncontrolling interests in consolidated subsidiaries |  | 14,660 |
Net assets acquired, excluding cash |  | $501,551 |
The allocation of the total consideration to the tangible and identifiable intangible assets acquired and liabilities and noncontrolling interests assumed is preliminary until the Company obtains final information regarding their fair values. The primary items that generated the goodwill recognized were the premiums paid by the Company for the future earnings potential of Exxelia and the value of its assembled workforce that do not qualify for separate recognition, however, benefit both the Company and the noncontrolling interest holders. The fair value of the noncontrolling interests were determined based on the consideration paid by the Company for its controlling ownership interest adjusted for a lack of control that a market participant would consider when estimating the fair value of the noncontrolling interest. The weighted-average amortization periods of the customer relationships, intellectual property and trade names acquired are 15 years, 15 years and indefinite, respectively. Acquisition costs associated with the purchase of Exxelia totaled $5.2 million for the six months ended April 30, 2023 and were recorded as a component of SG&A expenses in the Company's Condensed Consolidated Statement of Operations. The operating results of Exxelia were included in the Company’s results of operations from the effective acquisition date. The Company's consolidated net sales for the six and three months ended April 30, 2023, includes approximately $69.6 million and $54.6 million, respectively, from the acquisition of Exxelia. Net income attributable to HEICO for the six and three months ended April 30, 2023, was not materially impacted by the acquisition of Exxelia. The following table presents unaudited pro forma financial information for the six and three months ended April 30, 2023 and April 30, 2022 as if the acquisition of Exxelia had occurred as of November 1, 2021 (in thousands, except per share data):
| Six months ended April 30, |  | Three months ended April 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
Net sales | $1,348,159 |  |  | $1,125,052 |  |  | $687,841 |  |  | $586,039 |
Net income from consolidated operations | $234,185 |  |  | $173,002 |  |  | $115,568 |  |  | $85,883 |
Net income attributable to HEICO | $213,969 |  |  | $157,855 |  |  | $105,544 |  |  | $77,901 |
Net income per share attributable to HEICO shareholders: |  |  |  |  |  |  |
Basic | $1.56 |  |  | $1.16 |  |  | $.77 |  |  | $.57 |
Diluted | $1.54 |  |  | $1.14 |  |  | $.76 |  |  | $.57 |
The pro forma financial information is presented for comparative purposes only and is not necessarily indicative of the results of operations that actually would have been achieved if the acquisition had taken place as of November 1, 2021. The unaudited pro forma financial information includes adjustments to historical amounts such as increased interest expense associated with borrowings to finance the acquisition, foreign currency transaction adjustments on the note receivable from Exxelia, the reclassification of acquisition costs associated with the purchase of Exxelia from fiscal 2023 to fiscal 2022, additional amortization expense related to the intangible assets acquired, and inventory purchase accounting adjustments charged to cost of sales as the inventory is sold. Additionally, the pro forma information presented above reflects HEICO's initial ownership interest of 93.69% of Exxelia's common stock as of the date of acquisition. During the second quarter of fiscal 2023, the Company sold an additional 2.72% of the common stock of Exxelia to its existing noncontrolling interest holders and certain members of Exxelia's management team, which decreased the Company's ownership interest in the subsidiary to 90.97% (see Note 3, Selected Financial Statement Information - Redeemable Noncontrolling Interests, for additional information).

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 805 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479907/805-20-50-5 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 805 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//805/tableOfContent + Details
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