HEICO Annual Report 2013

FY2013 Annual Report · HEICO

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HEICO
Corporation

Corporate Offices
3000 Taft Street
Hollywood, FL 33021
Telephone: 954-987-4000
Facsimile: 954-987-8228
www.heico.com

Subsidiaries

Flight Support Group
Action Research Corporation
Aero Design, Inc.
Aircraft Technology, Inc.
Blue Aerospace LLC
CSI Aerospace, Inc.
DEC Technologies, Inc.
Future Aviation, Inc.
HEICO Aerospace Corporation
HEICO Aerospace Holdings Corp.
HEICO Aerospace Parts Corp.
HEICO Component Repair Group - Miami
HEICO Flight Support Corp.
HEICO Parts Group
HEICO Repair Group

Inertial Airline Services, Inc.

Jet Avion Corporation

Jetseal, Inc.
LPI Corporation
McClain International, Inc.
Niacc-Avitech Technologies, Inc.
Prime Air, LLC and Prime Air Europe
Reinhold Industries, Inc.
Seal Dynamics LLC
Sunshine Avionics LLC
Thermal Structures, Inc.
Turbine Kinetics, Inc.

Electronic Technologies Group
3D-Plus, SAS
Analog Modules, Inc.
Connectronics Corp. and Wiremax
dB Control Corp.
Dukane Seacom, Inc.
EMD Technologies Incorporated
Engineering Design Team, Inc.
HVT Group, Inc.

Dielectric Sciences, Inc.
Essex X-Ray & Medical Equipment LTD

Leader Tech, Inc.
Lucix Corporation
Lumina Power, Inc.
Radiant Power Corp.
Ramona Research, Inc.
Santa Barbara Infrared, Inc.
Sierra Microwave Technology, LLC
Switchcraft, Inc. and Conxall
VPT, Inc.

Registrar & Transfer Agent

Computershare Investor Services
P.O. BOX 30170
College Station, TX 77842-3170
Telephone: 800-307-3056
www.computershare.com/investor

New York Stock Exchange Symbols

Class A Common Stock - “HEI.A”
Common Stock - “HEI”

Form 10-K and Board of
Directors Inquiries

The Company’s Annual Report on Form 10-K
for 2013, as filed with the Securities and
Exchange Commission, is available without
charge upon written request to the Corporate
Secretary at the Company’s headquarters.

Any inquiry to any member of the Company’s
Board of Directors, including, but not limited
to “independent” Directors, should be
addressed to such Director(s) care of the
Company’s Headquarters and such inquiries
will be forwarded to the Director(s) of whom
the inquiry is being made.

Annual Meeting

The Annual Meeting of Shareholders
will be held on Friday,
March 21, 2014 at 10:00 a.m.
at the JW Marriott Miami Hotel
1109 Brickell Avenue
Miami, FL 33131
Telephone: 305-329-3500

Shareholder Information

Elizabeth R. Letendre
Corporate Secretary
HEICO Corporation
3000 Taft Street
Hollywood, FL 33021
Telephone: 954-987-4000
Facsimile: 954-987-8228
eletendre@heico.com

CORPORATION

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ANNUAL
REPORT
2013

A CLEAR PERSPECTIVE
FOR THE FUTURE

FINANCIAL HIGHLIGHTS
(in thousands, except per share data)

Year ended October 31, (1)

Operating Data:
Net sales
Operating income
Interest expense
Net income attributable to HEICO

Weighted average number of common shares outstanding: (2)

Basic
Diluted

Per Share Data: (2)
Net income per share attributable to HEICO shareholders:

Basic
Diluted

Cash dividends per share (2)

Balance Sheet Data (as of October 31):
Total assets
Total debt (including current portion)
Redeemable noncontrolling interests
Total shareholders’ equity

2011

2012

2013

$ 764,891

138,431 (3)

142
72,820 (3) (4)

$ 897,347
163,294
2,432
85,147 (5)

$ 1,008,757
183,590
3,717
102,396 (6)

65,050
66,408

65,861
66,624

66,298
66,982

1.12 (3) (4)
1.10 (3) (4)
.069

1.29 (5)
1.28 (5)
.086

1.54 (6)
1.53 (6)

1.816

$ 941,069
40,158
65,430
620,154

$ 1,192,846
131,820
67,166
719,759

$ 1,533,015
377,515
59,218
723,235

(1) Results include the results of acquisitions from each respective effective date.

(2) All share and per share information has been adjusted retrospectively to reflect the 5-for-4 stock splits effected in October 2013 and April 2012 and 2011.

(3) Operating income was reduced by a net aggregate of $3.8 million due to $5.0 million in impairment losses related to the write-down of certain intangible assets
within the Electronic Technologies Group to their estimated fair values, partially offset by a $1.2 million reduction in the value of contingent consideration related
to a prior year acquisition. The impairment losses and the reduction in value of contingent consideration decreased net income attributable to HEICO by $2.4
million, or $.04 per basic and diluted share, in aggregate.

(4) Includes the aggregate tax benefit principally from state income apportionment updates and higher research and development tax credits recognized upon the
filing of HEICO’s fiscal 2010 U.S. federal and state tax returns and amendments of certain prior year state tax returns as well as the benefit from an income tax
credit for qualified research and development activities for the last ten months of fiscal 2010 recognized in fiscal 2011 upon the retroactive extension in December
2010 of Section 41, “Credit for Increasing Research Activities,” of the Internal Revenue Code, which, net of expenses, increased net income attributable to HEICO by
$2.8 million, or $.04 per basic and diluted share, in aggregate.

(5) Includes the aggregate tax benefit principally from higher research and development tax credits recognized upon the filing of HEICO’s fiscal 2011 U.S. federal and state
tax returns during fiscal 2012, which, net of expenses, increased net income attributable to HEICO by approximately $.9 million, or $.01 per basic and diluted share.

(6) Includes the aggregate tax benefit from an income tax credit for qualified research and development activities for the last ten months of fiscal 2012 recognized in

fiscal 2013 upon the retroactive extension in January 2013 of Section 41 of the Internal Revenue Code and higher research and development tax credits recognized
upon the filing of HEICO’s fiscal 2012 U.S. federal and state tax returns, which, net of expenses, increased net income attributable to HEICO by $1.8 million, or $.03
per basic and diluted share.

FORWARD-LOOKING STATEMENTS

Certain statements in this report constitute forward-looking statements, which are subject to risks, uncertainties and contingencies.
HEICO’s actual results may differ materially from those expressed in or implied by those forward-looking statements as a result of
factors including, but not limited to: lower demand for commercial air travel or airline fleet changes or airline purchasing decisions,
which could cause lower demand for our goods and services; product development or 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 product pricing levels, which
could reduce our sales or sales growth; product development difficulties, which could increase our product development costs and
delay sales; our ability to make acquisitions and achieve operating synergies from acquired businesses, customer credit risk, interest
and income tax rates and 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 budget cuts, which could reduce
our defense-related revenue. Parties receiving this material are encouraged to review all of HEICO’s filings with the Securities and
Exchange Commission, including, but not limited to filings on Form 10-K, Form 10-Q and Form 8-K. 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.

BOARD OF DIRECTORS

Adolfo Henriques

Samuel L. Higginbottom

Mark H. Hildebrandt

Wolfgang Mayrhuber

Eric A. Mendelson

Laurans A. Mendelson

Victor H. Mendelson

Dr. Alan Schriesheim

Frank J. Schwitter

ADOLFO HENRIQUES
Chairman and CEO,

ERIC A. MENDELSON
Co-President,

Gibraltar Private Bank and Trust

HEICO Corporation

SAMUEL L. HIGGINBOTTOM
retired Chairman, President and

Chief Executive Officer,

Rolls-Royce, Inc.

MARK H. HILDEBRANDT
Partner, Waldman, Feluren,

Hildebrandt & Trigoboff, P.A.

WOLFGANG MAYRHUBER
Chairman of the Supervisory Board,

Deutsche Lufthansa AG

Chairman of the Supervisory Board,

Infineon Technologies AG

LAURANS A. MENDELSON
Chairman and

Chief Executive Officer,

HEICO Corporation

VICTOR H. MENDELSON
Co-President,

HEICO Corporation

DR. ALAN SCHRIESHEIM
retired Director,

Argonne National Laboratory

FRANK J. SCHWITTER
retired Partner,

Arthur Andersen LLP

NET SALES
(in millions)

OPERATING INCOME
(in millions)

NET INCOME
(in millions)

NET INCOME PER SHARE
(diluted)

$1,008.8

$163.3

$102.4

$183.6

$897.3

$764.9

$138.4

$85.1

$72.8

$1.53

$1.28

$1.10

2011

2012
2011

2013
2012

2013

2011

2012
2011

2013
2012

2013

2011

2012
2011

2013
2012

CORPORATE PROFILE

2013

2011

2012
2011

2013
2012

2013

aerospace and electronics company focused

IHEICO Corporation is a rapidly growing

found in the most demanding applications requiring

for its customers. HEICO ’s products are

on niche markets and cost-saving solutions

Our Electronic Technologies Group, designs and

manufactures mission-critical niche electronic, electro-

optical, microwave and other components found in

aviation, broadcast, defense, homeland security,

medical, space, telecom and other complex equipment

high-reliability parts and components, such as aircraft,

used worldwide.

spacecraft, defense equipment, medical equipment,

HEICO ’s customers include most of the world’s

and telecommunications systems. Through our Flight

airlines, airmotives, satellite manufacturers, defense

Support Group, we are: the world’s largest provider

equipment producers, medical equipment manufacturers,

of commercial, non-OEM, FAA-approved aircraft

government agencies, telecommunications equipment

replacement parts; a significant provider of aircraft

suppliers and others.

accessories component repair & overhaul services for

avionic, electro-mechanical, flight surface, hydraulic

and pneumatic applications; a leader in niche aircraft

parts distribution; and a manufacturer of other

critical aircraft parts.

H E I C O C O R P O R A T I O N

0200400600800100012000501001502000204060801001200.00.51.01.52.00200400600800100012000501001502000204060801001200.00.51.01.52.00200400600800100012000501001502000204060801001200.00.51.01.52.00200400600800100012000501001502000204060801001200.00.51.01.52.0

MANAGEMENT’S MESSAGE

Dear Fellow Shareholder:

HEICO Corporation experienced its fourth consecutive

year of record net income, operating income and sales

results. For the fiscal year ended October 31, 2013, net

income increased 20% to a record $102.4 million, or $1.53 per

Other exciting events at HEICO in fiscal 2013 included the

Flight Support Group’s third quarter acquisition of composite

aerospace component manufacturer Reinhold Industries, Inc.

and the Electronic Technologies Group’s fiscal fourth quarter

acquisition of Lucix Corporation, a leading supplier of niche

satellite electronic components.

Keeping our focus on long-term strength, we, once again,

extended our revolving credit facility’s maturity date by an

additional year to December 2018 and we increased the potential

availability under that facility to $1 billion dollars, with $800

million of that being fully committed by our lenders at the time

of execution. The additional borrowing capacity and duration

of the loan are helpful in our highly successful and continuing

acquisition strategy.

In returning capital to shareholders, HEICO completed a

5-for-4 stock-split in October 2013, which was the Company’s

14th stock-split or stock dividend since 1995 and, in December

2013, the Board of Directors declared combined cash dividends

of $.41 per share payable on both classes of our common stock

on January 17, 2014. This consisted of a special and extraordi-

nary cash dividend of $.35 per share and a regular semi-annual

cash dividend of $.06 per share, which represented a 7% increase

over the prior semi-annual regular dividend per share amount.

This followed special and regular dividends aggregating $1.76

(split-adjusted) per share paid in the first quarter of fiscal 2013.

diluted share, up from $85.1 million or $1.28 per diluted share

Given the strengths of our markets, our people and our

for the fiscal year ended October 31, 2012.

businesses, along with acquisition possibilities, we believe fiscal

Yet again, our remarkably talented Team Members turned

2014 will, again, see HEICO Corporation grow. We talk about

in these results by remaining devoted to our customers,

some of the reasons for that expected growth in the Questions

committed to unparalleled quality and by maintaining sensible

and Answers section which follows.

business practices. These Team Members led to the Flight

Our great thanks goes to our Team Members, customers,

Support Group’s 17% increases in both operating income and

shareholders and our Board of Directors for their unwavering

sales. Most of the Flight Support Group’s increases resulted

confidence and support.

from organic growth, while some came from acquisitions

completed in the latter half of fiscal 2012 and in fiscal 2013.

Sincerely,

In our Electronic Technologies Group, our results witnessed

a 7% operating income increase in fiscal 2013 and a 6% sales

increase, a majority of which came from a fiscal 2013 acquisition

and the balance was contributed by organic growth.

Our successes were not limited to sales and income growth,

importantly, as new products and existing products evolution

contributed to growth along with customer additions - - either

through adding entirely new customers or expanding our

penetration at existing customers.

Laurans A. Mendelson
Chairman & Chief Executive Officer

Victor H. Mendelson
Co-President

Eric A. Mendelson
Co-President

HEICO CORPORATION

QUESTIONS & ANSWERS

management’s views about HEICO’s future. The members of our Office of the CEO, consisting of Laurans A. Mendelson,

Each year we receive questions from investors, business people, Team Members and others about HEICO’s strategy and

Chairman & CEO, Eric A. Mendelson, Co-President, Victor H. Mendelson, Co-President, Thomas S. Irwin, Senior Executive Vice

President, and Carlos L. Macau, Jr., Executive Vice President & Chief Financial Officer, sat down to provide the perspective below.

Q. What conditions do you expect
for commercial aviation in 2014
and beyond?

A. Like many others, we are very excit-
ed about commercial aviation growth
going forward. Record numbers of
aircraft remain in production backlogs,
record numbers of people are flying
and airline load factors remain very
high. This should benefit both our
commercial aftermarket businesses
and our businesses which supply for
new aircraft production. The record
new aircraft backlogs provide rea-
sonable visibility for strength over
the next several years assuming no
significant external “surprises.”

Q. HEICO paid significant cash dividends
and declared another stock split in
fiscal 2013. Will this continue?

A. HEICO paid its 70th consecutive
semi-annual cash dividend in fiscal
2013 and the Board of Directors
intends to continue making these
regular cash dividends. As for the
larger special and extraordinary cash
dividends, these are evaluated based
upon the company’s larger economic
considerations and must be considered
on a case-by-case basis. Of course,
any cash dividends, whether regular
or special, are ultimately subject to
the Board’s discretion based upon all
the information available to it and are
subject to change. As for our stock
splits and stock dividends, the Board
of Directors will continue to consider
these from time-to-time.

Q. What enticed you to make the
Reinhold acquisition?

A. Reinhold makes a diverse group
of composite components used in a
wide array of aerospace applications.
Among its most significant prod-
ucts is a composite seatback which
they developed and is used in a large
number of commercial aircraft seating
systems. Given the new aircraft
production backlogs mentioned earlier,
Reinhold offers us an excellent way to
participate in new aircraft production
while also offering us other unique
aerospace exposure to large long-term
programs, such as missile defense
systems.

Q. Tell us a little about the Lucix
acquisition and why you acquired
the company?

A. HEICO has been very successful in
its space operations over the past 10
years, particularly in the commercial
satellite markets. Our companies
produce highly specialized, niche
sub-components or sub-systems
which are critical to a satellite’s
successful operation. Our companies
are also known for innovation and
high reliability. Lucix fits this mold
precisely and its products, which
include converters, receivers,
transmitters, amplifiers, frequency
sources and related sub-systems,
can be found in more than 40 orbiting
Geosynchronous Orbit satellites.
Lucix’s team includes some of the
world’s most admired designers and
makers of satellite electronics. This is
consistent with our practice of working
with only the most highly respected
and talented people in our industry.

Q. How did defense budget fluctuations
impact HEICO in fiscal 2013 and what
do you see in the future for HEICO’s
defense-related businesses?

A. While only 20% of our revenues
come from defense activities, these
markets are very important to us and
have been very successful for HEICO.
We intend to remain in them and will
continue looking for growth oppor-
tunities. In 2013, we started to feel
some minor effects of the U.S. budget
“sequester” and we expect those
effects to be more profound in fiscal
2014 as well as 2015. Around one-
quarter of our defense revenue comes
through foreign end-users which are
not part of the U.S. defense budget.

Q. Were there any major changes to
HEICO’s strategy in fiscal 2013?

A. Our strategy of achieving
double-digit annual growth through
organic means and acquisitions in the
aerospace and electronics markets
remains unchanged. We have always
been flexible in our ability to adapt to
changes in our markets and to grow
in areas where we see opportunities
while others don’t. We intend to
remain steadfast to these principals.

H E I C O C O R P O R A T I O N

COMMERCIAL
AVIATION

4 H E I C O C O R P O R A T I O N

2013

2012

2011

9.038 Trillion
8.579 Trillion
7.945 Trillion

NUMBER OF REVENUE PASSENGERS KILOMETERS (RPKs)

TRAVELED BY AIRLINE PASSENGERS WORLDWIDE FOR THE TWELVE

MONTH PERIOD ENDED NOVEMBER 30TH OF EACH YEAR SHOWN.

HEICO’s commercial aviation breadth expanded again in

market, accessory component repair business and new

2013. In all of the markets we serve - - the parts after-

aircraft production - - HEICO’s commercial aviation businesses

added capabilities to better serve our customers.

Our FAA-approved commercial aircraft alternative replacement

parts companies continued developing new parts using innovative

methods to deliver our best-in-class cost saving opportunities to

More passengers ran through airports.

the world’s aircraft operators. Airlines saved record amounts using

Commercial air travel reached record levels - -

yet again - - in 2013 with an estimated more

our high-quality parts which have become the industry standard.

than 9 trillion Revenue Passenger Kilometers

Meanwhile, HEICO’s aircraft accessory component repair and

flown worldwide in the twelve months

ended November 30th. Air travel is the only

overhaul operations maintained their market-leading advantages

rapid, efficient and cost effective method of

with numerous new and proprietary repair processes known as

transporting people over long distances.

Designated Engineering Representative, or DER, repairs designed

to bring affordability and process speed to our global airline

customers. These activities are conducted at six FAA-licensed

facilities located throughout the United States where HEICO’s

creative and committed Team Members successfully strive to

serve our customers.

HEICO CORPORATION
2013 also saw our continued expansion to serve new aircraft

production markets. With the acquisition of Reinhold Industries,

Inc. in May 2013, we commenced offering crucial and innovative

interior subcomponents to a rapidly growing market. These

subcomponents help reduce aircraft weight, thereby reducing fuel

consumption and increasing aircraft efficiency.

The HEICO Distribution Group experienced another banner

year with record sales and new customer penetration. The

incredibly capable leadership and Team Members in this group

have led their companies to market prominence and a sterling

reputation for quality, service and dependability.

HEICO’s new Reinhold Industries subsidiary develops and supplies the inside “seat-

back” portion of aircraft seats (pictured on the left) with an innovative product made

with carbon fibers, thereby reducing aircraft operation costs. In addition, Reinhold

also supplies other composite aerospace components and some commercial aircraft

metal seating parts.

6 H E I C O C O R P O R A T I O N

(Above) Trained and licensed technicians at

HEICO’s component repair facility in Miami, FL repair

and overhaul a wing segment and a winglet for a large

commercial aircraft.

(Left) HEICO’s Component Repair Group is a recognized

source of complex aircraft navigation equipment repairs and

overhauls, such as the gyroscopic assembly shown here.

H E I C O C O R P O R A T I O N 7

MANUFACTURING
Manufacturing and production

operations are a critical part of

HEICO’s success. Using both

internal capabilities and external suppliers, our

businesses have over 100,000 different part

numbers which they offer to customers and

which must be produced with great accuracy,

speed and affordability. This requires a healthy

mix of talent, investment and common sense

in order to meet our customers’ needs in a

flexible way that allows HEICO a reasonable

return on our investments.

We accomplish this by intimately understanding our products and not by

merely following the most common practices or by adopting the latest fad.

Of course, the key to our production success lies in our world-class production

Team Members whose achievements make us proud every day.

HEICO’s Flight Support Group maintains

substantial machining and milling capabilities

at its various operations, such as the capability

shown in the above photo from the Company’s

Hollywood, FL facility. Here, a Team Member

conducts an intricate machining operation on

Research and Development are HEICO’s lifeblood activities. Having brilliant,

a large casting.

dedicated and pragmatic engineers is paramount to our efforts and we are

proud to have the best team in our industry. This team creates innovative

solutions for our customers every day through endless collaborative efforts.

While HEICO invests in advanced equipment to assist our research and

development Team Members, we know their

efforts enable our results.

This FAA-approved aircraft engine part was re-engineered by

HEICO’s Parts Group and is sold to commercial airlines worldwide.

H E I C O C O R P O R A T I O N

RESEARCH &
DEVELOPMENT

A HEICO Parts Group technician takes measurements of an

aircraft engine accessory component part during the ongoing

rigorous research and development process through which every

HEICO alternative aircraft part must travel.

H E I C O C O R P O R A T I O N

HEICO’s subsidiaries produce a wide array of components for defense

applications, including for the F-35 Raptor aircraft shown above.

basis for HEICO’s extensive space and defense operations.

Serving customers with mission-critical and high-reliability components is the

Our space capabilities provide critical microwave and other electrical components for

satellites and other spacecraft which are used in navigation, communications, broadcasting,

HEICO’s defense components

include many electronic parts, as

well as mechanical components,

such as the parts shown here.

scientific and defense applications covering the globe from space. Our components must

operate in the harshest of all possible environments where they can’t be “recalled” for repair.

HEICO companies have developed an international reputation for innovation and excellence in

this demanding market segment. We grew, again, in space in 2013 both organically with new

product introductions and through our notable acquisition of Lucix Corporation.

HEICO’s defense operations provide a wide array of electronic, electro-optical, composite

and metal structural components for applications such as aircraft, missiles, missile defense

systems, targeting systems, radar, electronic warfare, space and a variety of shipboard,

vehicular and handheld devices. Our critical subcomponents are usually necessary for the

operation of full systems or platforms and are typically developed or enhanced by a deep

bench of very talented engineers and other HEICO professionals. HEICO remains committed

to the defense markets and will continue its highly specialized approach in them.

HEICO CORPORATION
SPACE AND
DEFENSE

Electronic components used in satellites and other spacecraft designed and made by

the Electronic Technologies Group are critical to operation of the platforms on which

they are installed. HEICO has continued to expand its space operations.

H E I C O C O R P O R A T I O N

Working in cooperation with

medical equipment company Sorin,

the Company’s 3D Plus subsidiary has

worked to develop the core of a unique

and miniaturized heart pacemaker.

Though only in the experimental phase

and unlikely to produce meaningful

revenue for 3D Plus for several

years, this is an example of HEICO’s

forward-thinking mentality.

EXPANDING

IN NICHE MARKETS

HEICO has always been about serving niche markets and we view this as

the best way to continue growing. Frequently, we start with a small idea

to serve a very small market segment, which then expands along with our

product range. This requires constant focus upon very specific customer needs

and requests. HEICO subsidiaries are willing to produce very unique items in very

small quantities to ensure that our customers know they can rely on us in the most

demanding applications.

HEICO CORPORATIONInitially responding to a small retrofit niche market opportunity, the

Company’s Radiant Power Corp. subsidiary developed this emergency

backup power supply and similar versions which became standard

products on numerous in-production commercial aircraft.

H E I C O C O R P O R A T I O N

INTERNATIONAL
CAPABILITIES

Being in the most mobile businesses which can physically traverse huge distances,

HEICO’s Team Members are constantly on the go analyzing and serving the Company’s customers.

14 H E I C O C O R P O R A T I O N

42%

FLIGHT SUPPORT GROUP

ELECTRONIC TECHNOLOGIES GROUP

SALES AND OTHER

48%

HEICO
FACILITIES
WORLDWIDE
Approximate
Figures

10%

HEICO has a global footprint. With subsidiaries and facilities in the United States,

Asia, Canada, Europe and India, we provide products through dedicated sales,

manufacturing and engineering Team Members around the globe. As aircraft

are the most mobile of all items produced anywhere, our global operations are critical to

supporting the worldwide aircraft and aerospace network.

HEICO CORPORATION2013

FINANCIAL
STATEMENTS
AND OTHER
INFORMATION

Selected Financial Data

Management’s Discussion and Analysis of
Financial Condition and Results of Operations

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Income

Consolidated Statements of Shareholders’ Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Management’s Annual Report on Internal Control Over
Financial Reporting and Executive Officer Certifications

Reports of Independent Registered Public
Accounting Firm

Market for Company’s Common Equity and
Related Stockholder Matters

16 H E I C O C O R P O R A T I O N

H E I C O C O R P O R A T I O N A N D S U B S I D I A R I E S

SELECTED FINANCIAL DATA
(in thousands, except per share data)

Year ended October 31, (1)

2013

2012

2011

2010

2009

Operating Data:
Net sales
Gross profit
Selling, general and administrative expenses
Operating income
Interest expense
Other income
Net income attributable to HEICO

Weighted average number of common
shares outstanding (2)

Basic
Diluted

Per Share Data: (2)
Net income per share attributable to HEICO
shareholders:

Basic
Diluted

Cash dividends per share (2)

Balance Sheet Data (as of October 31):
Cash and cash equivalents
Total assets
Total debt (including current portion)
Redeemable noncontrolling interests
Total shareholders’ equity

$ 1,008,757
371,181
187,591
183,590
3,717
888
102,396 (3)

$ 897,347
327,436
164,142
163,294
2,432
313
85,147(4)

$ 764,891
274,441
136,010
138,431 (5)
142
64
72,820 (5)(6)

$ 617,020
222,347
113,174
109,173 (7)
508
390
54,938 (7)

$ 538,296
181,011
92,756
88,255
615
205
44,626 (8)

66,298
66,982

65,861
66,624

65,050
66,408

64,126
65,959

63,977
65,977

1.54 (3)
1.53 (3)

1.816

1.29 (4)
1.28 (4)
.086

1.12 (5)(6) $
1.10 (5)(6)
.069

.86 (7)
.83 (7)

.055

15,499
1,533,015
377,515
59,218
723,235

$ 21,451
1,192,846
131,820
67,166
719,759

$ 17,500
941,069
40,158
65,430
620,154

6,543
781,643
14,221
55,048
554,826

.70 (8)
.68 (8)

.049

7,167
732,910
55,431
56,937
490,658

(1) Results include the results of acquisitions from each respective effective date. See Note 2, Acquisitions, of the Notes to Consolidated Financial Statements for more

information.

(2) All share and per share information has been adjusted retrospectively to reflect the 5-for-4 stock splits effected in October 2013 and April 2012, 2011 and 2010.

(3) Includes the aggregate tax benefit from an income tax credit for qualified research and development activities for the last ten months of fiscal 2012 recognized in fiscal
2013 upon the retroactive extension in January 2013 of Section 41 of the Internal Revenue Code, “Credit for Increasing Research Activities,” and higher research and
development tax credits recognized upon the filing of HEICO’s fiscal 2012 U.S. federal and state tax returns, which, net of expenses, increased net income attributable to
HEICO by $1.8 million, or $.03 per basic and diluted share.

(4) Includes the aggregate tax benefit principally from higher research and development tax credits recognized upon the filing of HEICO’s fiscal 2011 U.S. federal and state
tax returns during fiscal 2012, which, net of expenses, increased net income attributable to HEICO by approximately $.9 million, or $.01 per basic and diluted share.

(5) Operating income was reduced by a net aggregate of $3.8 million due to $5.0 million in impairment losses related to the write-down of certain intangible assets within
the Electronic Technologies Group (“ETG”) to their estimated fair values, partially offset by a $1.2 million reduction in the value of contingent consideration related to
a prior year acquisition. Approximately $4.5 million of the impairment losses and the reduction in value of contingent consideration were recorded as a component of
selling, general and administrative expenses, while the remaining impairment losses of $.5 million were recorded as a component of cost of goods sold, which decreased
net income attributable to HEICO by $2.4 million, or $.04 per basic and diluted share, in aggregate.

(6) Includes the aggregate tax benefit principally from state income apportionment updates and higher research and development tax credits recognized upon the filing of

HEICO’s fiscal 2010 U.S. federal and state tax returns and amendments of certain prior year state tax returns as well as the benefit from an income tax credit for qualified
research and development activities for the last ten months of fiscal 2010 recognized in fiscal 2011 upon the retroactive extension in December 2010 of Section 41 of
the Internal Revenue Code, which, net of expenses, increased net income attributable to HEICO by $2.8 million, or $.04 per basic and diluted share, in aggregate.

(7) Operating income was reduced by an aggregate of $1.4 million in impairment losses related to the write-down of certain intangible assets within the ETG to their

estimated fair values. The impairment losses were recorded as a component of selling, general and administrative expenses and decreased net income attributable to
HEICO by $.9 million, or $.01 per basic and diluted share.

(8) Includes a benefit related to a settlement with the Internal Revenue Service concerning the income tax credit claimed by the Company on its U.S. federal filings for

qualified research and development activities incurred during fiscal years 2002 through 2005 as well as an aggregate reduction to the related liability for unrecognized
tax benefits for fiscal years 2006 through 2008, which increased net income attributable to HEICO by approximately $1.2 million, or $.02 per basic and diluted share.

HEICO CORPORATION

Overview

Our business is comprised of two operating segments, the Flight Support Group (“FSG”) and the Electronic Technologies

Group (“ETG”).

The Flight Support Group 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 Flight Support
Group designs, manufactures, repairs, overhauls and distributes jet engine and aircraft component replacement parts. The
parts and services are approved by the Federal Aviation Administration (“FAA”). The Flight Support Group also manufactures
and sells specialty parts as a subcontractor for aerospace and industrial original equipment manufacturers and the United
States government. Additionally, the Flight Support Group is a leading supplier, distributor, and integrator of military aircraft
parts and support services primarily to foreign military organizations allied with the United States and a leading manufacturer
of advanced niche components and complex composite assemblies for commercial aviation, defense and space applications.

The Electronic Technologies Group 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 and High Voltage Advanced Power Electronics. The Electronic Technologies Group designs, manufactures
and sells various types of electronic, microwave and electro-optical equipment and components, including power supplies,
laser rangefinder receivers, infrared simulation, calibration and testing equipment; power conversion products serving the
high-reliability military, space and commercial avionics end-markets; underwater locator beacons used to locate data and voice
recorders utilized on aircraft and marine vessels; electromagnetic interference shielding for commercial and military aircraft
operators, traveling wave tube amplifiers and microwave power modules used in radar, electronic warfare, on-board jamming
and countermeasure systems, electronics companies and telecommunication equipment suppliers; advanced high-technology
interface products that link devices such as telemetry receivers, digital cameras, high resolution scanners, simulation systems
and test systems to computers; high voltage energy generators interconnection devices, cable assemblies and wire for the
medical equipment, defense and other industrial markets; high frequency power delivery systems for the commercial sign
industry; high voltage power supplies found in satellite communications, CT scanners and in medical and industrial x-ray
systems; three-dimensional microelectronic and stacked memory products that are principally integrated into larger subsys-
tems equipping satellites and spacecraft; harsh environment connectivity products and custom molded cable assemblies; RF
and microwave amplifiers, transmitters and receivers used to support military communications on unmanned aerial systems,
other aircraft, helicopters and ground-based data/communications systems, wireless cabin control systems, solid state power
distribution and management systems and fuel level sensing systems for business jets and for general aviation, as well as for
the military/defense market and microwave modules, units and integrated sub-systems for commercial and military satellites.

Our results of operations during each of the past three fiscal years have been affected by a number of transactions. This
discussion of our financial condition and results of operations should be read in conjunction with the Consolidated Financial State-
ments and Notes thereto included herein. All applicable share and per share information has been adjusted retrospectively to reflect
the 5-for-4 stock splits effected in October 2013, April 2012 and April 2011. See Note 1, Summary of Significant Accounting Policies
– Stock Splits, of the Notes to Consolidated Financial Statements for additional information regarding these stock splits. For further
information regarding the acquisitions discussed below, see Note 2, Acquisitions, of the Notes to Consolidated Financial Statements.
Acquisitions are included in our results of operations from the effective dates of acquisition.

In October 2013, we acquired, through HEICO Electronic, all of the outstanding stock of Lucix Corporation (“Lucix”) in a transac-
tion carried out by means of a merger. Lucix is a leading designer and manufacturer of high performance, high reliability microwave
modules, units, and integrated sub-systems for commercial and military satellites.

On May 31, 2013, we acquired, through HEICO Flight Support Corp., Reinhold Industries, Inc. (“Reinhold”) through the acquisition
of all of the outstanding stock of Reinhold’s parent company in a transaction carried out by means of a merger. Reinhold is a leading
manufacturer of advanced niche components and complex composite assemblies for commercial aviation, defense and space
applications.

In October 2012, we acquired, through HEICO Flight Support Corp., 80.1% of the assets and assumed certain liabilities of Action

Research Corporation (“Action Research”). Action Research is an FAA-Approved Repair Station that has developed unique proprietary
repairs that extend the lives of certain engine and airframe components. The remaining 19.9% interest continues to be owned by an
existing member of Action Research’s management team. The purchase price of this acquisition was paid using cash provided by
operating activities.

In August 2012, we acquired, through HEICO Flight Support Corp., 84% of the assets and assumed certain liabilities of CSI

Aerospace, Inc. (“CSI Aerospace”). CSI Aerospace is a leading repair and overhaul provider of specialized components for airlines,
military and other aerospace related organizations. The remaining 16% interest continues to be owned by certain members of CSI
Aerospace’s management team.

HEICO CORPORATIONHEICO CORPORATION AND SUBSIDIARIES MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In April 2012, we acquired, through HEICO Electronic, certain aerospace assets of Moritz Aerospace, Inc. (“Moritz Aerospace”) in
an aerospace product line acquisition. The Moritz Aerospace product line designs and manufactures next generation wireless cabin
control systems, solid state power distribution and management systems and fuel level sensing systems for business jets and for
general aviation, as well as for the military/defense market segments. The purchase price of this acquisition was paid using cash
provided by operating activities.

In March 2012, we acquired, through HEICO Electronic, the business and substantially all of the assets of Ramona Research,
Inc. (“Ramona Research”). Ramona Research designs and manufactures RF and microwave amplifiers, transmitters and receivers
primarily used to support military communications on unmanned aerial systems, other aircraft, helicopters and ground-based data/
communications systems.

On November 22, 2011, we acquired, through HEICO Electronic, Switchcraft, Inc. (“Switchcraft”) through the purchase of all

of the stock of Switchcraft’s parent company, Switchcraft Holdco, Inc. Switchcraft is a leading designer and manufacturer of high
performance, high reliability and harsh environment electronic connectors and other interconnect products.

In September 2011, we acquired, through HEICO Electronic, all of the outstanding capital stock of 3D Plus SA (“3D Plus”). 3D Plus

is a leading designer and manufacturer of three-dimensional microelectronic and stacked memory products used predominately in
satellites and also utilized in medical equipment.

In December 2010, we acquired, through HEICO Aerospace, 80.1% of the assets and assumed certain liabilities of Blue Aerospace
LLC (“Blue Aerospace”). Blue Aerospace is a supplier, distributor, and integrator of military aircraft parts and support services primarily
to foreign military organizations allied with the United States. The remaining 19.9% interest continues to be owned by certain
members of Blue Aerospace’s management team.

Unless otherwise noted, the purchase price of each of the above referenced acquisitions was paid in cash principally using
proceeds from our revolving credit facility. The aggregate cost paid in cash for acquisitions, including additional purchase consider-
ation payments, was $222.6 million, $197.3 million and $94.7 million in fiscal 2013, 2012 and 2011, respectively.

In February 2011, we acquired, through HEICO Aerospace, an additional 8% equity interest in one of our subsidiaries, which

increased our ownership interest to 80%. In February 2012, we acquired an additional 6.7% equity interest in the subsidiary, which
increased our ownership interest to 86.7%. In December 2012, we acquired the remaining 13.3% equity interest in the subsidiary.

Critical Accounting Policies

We believe that the following are our most critical accounting policies, some of which require management to make judgments

about matters that are inherently uncertain.

Revenue Recognition

Revenue from the sale of products and the rendering of services is recognized when title and risk of loss passes to the customer,
which is generally at the time of shipment. Revenue from certain fixed price contracts for which costs can be dependably estimated is
recognized on the percentage-of-completion method, measured by the percentage of costs incurred to date to estimated total costs
for each contract. This method is used because management considers costs incurred to be the best available measure of progress
on these contracts. Variations in actual labor performance, changes to estimated profitability and final contract settlements may
result in revisions to cost estimates. Revisions in cost estimates as contracts progress have the effect of increasing or decreasing
profits in the period of revision. Provisions for estimated losses on uncompleted contracts are made in the period in which such
losses are determined. The percentage of our net sales recognized under the percentage-of-completion method was approximately
1% in fiscal 2013, 2012 and 2011. Changes in estimates pertaining to percentage-of-completion contracts did not have a material or
significant effect on net income or net income per share in fiscal 2013, 2012 or 2011.

For fixed price contracts in which costs cannot be dependably estimated, revenue is recognized on the completed-contract
method. A contract is considered complete when all significant costs have been incurred or the item has been accepted by the
customer. Progress billings and customer advances received on fixed price contracts accounted for under the completed-contract
method are classified as a reduction to contract costs that are included in inventories, if any, and any remaining amount is included in
accrued expenses and other current liabilities.

Valuation of Accounts Receivable

The valuation of accounts receivable requires that we set up an allowance for estimated uncollectible accounts and record a
corresponding charge to bad debt expense. We estimate uncollectible receivables based on such factors as our prior experience, our
appraisal of a customer’s ability to pay, age of receivables outstanding and economic conditions within and outside of the aviation,
defense, space, medical, telecommunications and electronics industries. Actual bad debt expense could differ from estimates made.

Valuation of Inventory

Inventory is stated at the lower of cost or market, 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.

HEICO CORPORATION

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 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 such assets, principally intangible assets, 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 consid-
eration 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 reflecting the credit risk of a
market participant. Subsequent to the acquisition date, the fair value of such contingent consideration is measured each reporting
period and any changes are recorded 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, 2013 and 2012, $29.3 million and $10.9 million of such contingent consideration was accrued within our Consolidated
Balance Sheets, respectively. During fiscal 2013, 2012 and 2011, such fair value measurement adjustments resulted in a net gain of
$1.6 million, a loss of $.1 million and a gain of $1.2 million, respectively.

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, 2013, 2012 and 2011, we determined there was no impairment of our goodwill. The fair value of
each of our reporting units as of October 31, 2013 significantly exceeded its carrying value.

We test each non-amortizing intangible asset (principally trade names) for impairment annually as of October 31, or more fre-

quently 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 such factors as projected revenues and earnings and discount
rates. Based on the intangible impairment tests conducted, we did not recognize any impairment losses in fiscal 2013 and 2012;
however, we recognized pre-tax impairment losses related to the write-down of certain customer relationships, intellectual property
and trade names of $4.3 million, $.5 million and $.2 million, respectively, during fiscal 2011, within the ETG to their estimated fair
values. The impairment losses pertaining to certain customer relationships and trade names were recorded as a component of
selling, general and administrative expenses in the Company’s Consolidated Statements of Operations and the impairment losses
pertaining to intellectual property were recorded as a component of costs of goods sold.

Assumptions utilized to determine fair value in the 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.

HEICO CORPORATIONHEICO CORPORATION AND SUBSIDIARIES MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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,

Net sales
Cost of sales
Selling, general and administrative expenses
Total operating costs and expenses
Operating income

Net sales by segment:

Flight Support Group
Electronic Technologies Group
Intersegment sales

Operating income by segment:
Flight Support Group
Electronic Technologies Group
Other, primarily corporate

Net sales
Gross profit
Selling, general and administrative expenses
Operating income
Interest expense
Other income
Income tax expense
Net income attributable to noncontrolling interests
Net income attributable to HEICO

Comparison of Fiscal 2013 to Fiscal 2012

Net Sales

2013

$ 1,008,757
637,576
187,591
825,167
183,590

665,148
350,033
(6,424)
$ 1,008,757

122,058
83,063
(21,531)
183,590

100.0%
36.8%
18.6%
18.2%
.4%
.1%
5.6%
2.2%
10.2%

2012

$ 897,347
569,911
164,142
734,053
$ 163,294

$ 570,325
331,598
(4,576)
$ 897,347

$ 103,943
77,438
(18,087)
$ 163,294

100.0%
36.5%
18.3%
18.2%
.3%
—%
6.1%
2.4%
9.5%

2011

$ 764,891
490,450
136,010
626,460
$ 138,431

$ 539,563
227,771
(2,443)
$ 764,891

$ 95,001
59,465
(16,035)
$ 138,431

100.0%
35.9%
17.8%
18.1%
—%
—%
5.6%
3.0%
9.5%

Our net sales in fiscal 2013 increased by 12% to a record $1,008.8 million, as compared to net sales of $897.3 million in fiscal
2012. The increase in net sales reflects an increase of $94.8 million (a 17% increase) to a record $665.1 million within the FSG as well
as an increase of $18.4 million (a 6% increase) to a record $350.0 million within the ETG. The net sales increase in the FSG reflects
organic growth of approximately 9% as well as additional net sales of $42.3 million from the fiscal 2013 and 2012 acquisitions. The
organic growth in the FSG principally reflects an increase in net sales from new product offerings and improving market conditions
resulting in a $40.7 million increase in net sales within our aftermarket replacement parts and repair and overhaul services product
lines and an $11.8 million increase in net sales within our specialty products lines. The net sales increase in the ETG reflects organic
growth of approximately 3% as well as additional net sales of $8.0 million from fiscal 2013 and 2012 acquisitions. The organic growth
in the ETG principally reflects increased demand for certain space and aerospace products resulting in a $12.2 million and $3.3 million
increase in net sales from these product lines, respectively, partially offset by a decrease in demand for certain of our defense and
medical products resulting in a $3.1 million and $1.9 million decrease in net sales from these product lines, respectively. Sales price
changes were not a significant contributing factor to the FSG and ETG net sales growth for fiscal 2013.

Our net sales in fiscal 2013 and 2012 by market approximated 54% and 53%, respectively, from the commercial aviation industry,

26% and 26%, respectively, from the defense and space industries, and 20% and 21%, respectively, from other industrial markets
including medical, electronics and telecommunications.

Gross Profit and Operating Expenses

Our consolidated gross profit margin increased to 36.8% in fiscal 2013 as compared to 36.5% in fiscal 2012, principally reflecting a

1.4% and .1% increase in the ETG’s and FSG’s gross profit margin, respectively. The increase in the ETG’s gross profit margin is principally
attributed to increased net sales and a more favorable product mix for certain of our space products partially offset by lower net sales
and a less favorable product mix for certain of our defense products. Total new product research and development expenses included
within our consolidated cost of sales increased to $32.9 million in fiscal 2013 compared to $30.4 million in fiscal 2012.

HEICO CORPORATION

Selling, general and administrative (“SG&A”) expenses were $187.6 million and $164.1 million for fiscal 2013 and fiscal 2012,

respectively. The increase in SG&A expenses reflects an increase of $18.5 million in general and administrative expenses principally
attributed to an $8.9 million increase from the fiscal 2013 and 2012 acquired businesses and the remainder to support the higher net
sales volumes including an increase in accrued performance awards based on the improved consolidated operating results. Addi-
tionally, the increase in SG&A expenses reflects an increase of $5.0 million in selling expenses of which $1.3 million pertains to the
acquired businesses and the remainder is attributed to higher sales-related commissions and other costs from the nets sales growth.
SG&A expenses as a percentage of net sales increased to 18.6% for fiscal 2013 as compared to 18.3% for fiscal 2012 principally
reflecting the impact from the previously mentioned increase in accrued performance awards.

Operating Income

Operating income for fiscal 2013 increased by 12% to a record $183.6 million as compared to operating income of $163.3 million

for fiscal 2012. The increase in operating income reflects an $18.1 million increase (a 17% increase) to a record $122.1 million in
operating income of the FSG for fiscal 2013, up from $103.9 million for fiscal 2012 and a $5.6 million increase (a 7% increase) in
operating income of the ETG to a record $83.1 million for fiscal 2013, up from $77.4 million for fiscal 2012, partially offset by a $3.4
million increase in corporate expenses. The increase in the operating income of the FSG is principally attributed to the previously
mentioned net sales growth. The increase in the operating income of the ETG reflects the previously mentioned improved gross profit
margin and net sales growth.

As a percentage of net sales, our consolidated operating income was 18.2% for both fiscal 2013 and fiscal 2012 despite operating
margin improvements of .3% and .2% within the ETG and FSG, respectively, as the FSG, and its lower operating income as a percentage
of net sales relative to the ETG, accounted for a larger percentage of our consolidated net sales for fiscal 2013 as compared to fiscal
2012. The ETG’s operating income as a percentage of net sales increased from 23.4% in fiscal 2012 to 23.7% in fiscal 2013 reflecting
the previously mentioned improved gross profit margin partially offset by an increase in SG&A expenses as a percentage of net sales.
The FSG’s operating income as a percentage of net sales increased from 18.2% in fiscal 2012 to 18.4% in fiscal 2013 reflecting the
previously mentioned improved gross profit margin.

Interest Expense

Interest expense increased to $3.7 million in fiscal 2013, up from $2.4 million in fiscal 2012. The increase was principally due to a
higher weighted average balance outstanding under our revolving credit facility during fiscal 2013 associated with recent acquisitions
and borrowings made to fund an aggregate $1.76 per share cash dividend paid in December 2012.

Other Income

Other income in fiscal 2013 and 2012 was not material.

Income Tax Expense

Our effective tax rate in fiscal 2013 decreased to 31.1% from 33.8% in fiscal 2012. The decrease is partially due to an income tax
credit for qualified research and development activities for the last ten months of fiscal 2012 that was recognized in the first quarter
of fiscal 2013 pursuant to the retroactive extension of Section 41 of the Internal Revenue Code, “Credit for Increasing Research
Activities,” in January 2013 to cover a two-year period from January 1, 2012 to December 31, 2013. The decrease in the effective tax
rate was also attributed to the benefit from higher tax-exempt unrealized gains in the cash surrender values of life insurance policies
related to the HEICO Corporation Leadership Compensation Plan and an income tax deduction under Section 404(k) of the Internal
Revenue Code for the one-time special and extraordinary cash dividend paid in December 2012 to participants of the HEICO Savings
and Investment Plan holding HEICO common stock.

For a detailed analysis of the provision for income taxes, see Note 6, Income Taxes, of the Notes to Consolidated Financial

Statements.

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 and the noncontrolling interests held by others in certain subsidiaries of the FSG and ETG. Net income attributable
to noncontrolling interests was $22.2 million in fiscal 2013 compared to $21.5 million in fiscal 2012. The increase for fiscal 2013
reflects the aggregate impact of higher earnings of FSG and ETG subsidiaries in which noncontrolling interests are held, partially
offset by our purchases of certain noncontrolling interests during fiscal 2013 and 2012 resulting in lower allocations of net income to
noncontrolling interests.

Net Income Attributable to HEICO

Net income attributable to HEICO increased to a record $102.4 million, or $1.53 per diluted share, in fiscal 2013, up from $85.1
million, or $1.28 per diluted share, in fiscal 2012, principally reflecting the previously mentioned increased operating income and the
favorable tax benefits recognized during fiscal 2013.

HEICO CORPORATIONHEICO CORPORATION AND SUBSIDIARIES MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Outlook

As we look ahead to fiscal 2014, we anticipate continued organic growth within our product lines that serve the commercial

aviation markets. We expect overall organic growth within the Electronic Technologies Group reflecting higher demand for the
majority of our products moderated by lower demand for certain of our defense products attributable to continued uncertainty
regarding the United States of America budget cuts. During fiscal 2014, we will continue our focus on developing new products and
services, further market penetration, additional acquisition opportunities and maintaining our financial strength. Overall, we are
targeting growth in fiscal 2014 full year net sales and net income over fiscal 2013 levels.

Comparison of Fiscal 2012 to Fiscal 2011

Net Sales

Our net sales in fiscal 2012 increased by 17% to a record $897.3 million, as compared to net sales of $764.9 million in fiscal 2011.

The increase in net sales reflects an increase of $103.8 million (a 46% increase) to a record $331.6 million in net sales within the ETG
as well as an increase of $30.8 million (a 6% increase) to a record $570.3 million in net sales within the FSG. The net sales increase in
the ETG reflects additional net sales of approximately $87.4 million from the acquisitions of 3D Plus in September 2011, Switchcraft
in November 2011, Ramona Research in March 2012 and Moritz Aerospace in April 2012, as well as organic growth of approximately
7%. The organic growth in the ETG principally reflects an increase in demand and market penetration for certain defense, space,
electronic, aerospace and medical products, resulting in a $6.2 million, $3.5 million, $2.6 million, $2.1 million and $1.8 million increase
in net sales from these product lines, respectively. The net sales increase in the FSG reflects organic growth of approximately 4%, as
well as additional net sales of approximately $9.1 million from the acquisitions of Blue Aerospace in December 2010, CSI Aerospace
in August 2012 and Action Research in October 2012. The FSG’s organic growth reflects increased market penetration from both
new and existing product offerings for certain of the FSG’s aerospace products and services resulting in an increase of $11.3 million
in net sales of which approximately 70% and 30% were attributed to the aftermarket replacement parts product lines and repair
and overhaul services product lines, respectively. Additionally, the organic growth in the FSG reflects an increase of $10.3 million in
net sales within our specialty product lines primarily attributed to the sales of industrial products used in heavy-duty and off-road
vehicles as a result of increased market penetration. Sales price changes were not a significant contributing factor to the ETG and FSG
net sales growth in fiscal 2012.

Our net sales in fiscal 2012 and 2011 by market approximated 53% and 60%, respectively, from the commercial aviation industry,

26% and 24%, respectively, from the defense and space industries, and 21% and 16%, respectively, from other industrial markets
including medical, electronics and telecommunications.

Gross Profit and Operating Expenses

Our consolidated gross profit margin improved to 36.5% in fiscal 2012 as compared to 35.9% in fiscal 2011, principally reflecting
a .7% increase in the FSG’s gross profit margin, partially offset by a 2.5% decrease in the ETG’s gross profit margin. The increase in the
FSG’s gross profit margin is primarily attributed to the previously mentioned increased sales of higher gross profit margin products
within our aftermarket replacement parts and repair and overhaul services product lines. The decrease in the ETG’s gross profit
margin principally reflects a 1.9% impact from lower gross profit margins realized by Switchcraft and 3D Plus in fiscal 2012. The lower
gross profit margins realized by these acquired businesses are principally attributed to amortization expense of certain acquired
intangible assets and inventory purchase accounting adjustments aggregating approximately $4.0 million. Additionally, the decrease
in the ETG’s gross profit margin reflects a lower margin product mix of certain of our defense, space and medical products in fiscal
2012. Total new product research and development expenses included within our consolidated cost of sales increased from approx-
imately $25.4 million in fiscal 2011 to approximately $30.4 million in fiscal 2012, principally to further enhance growth opportunities
and market penetration.

SG&A expenses were $164.1 million and $136.0 million in fiscal 2012 and 2011, respectively. The increase in SG&A expenses

reflects an increase of $17.7 million in general and administrative expenses and $10.4 million in selling expenses, of which $16.3
million in general and administrative expenses and $7.6 million in selling expenses were attributed to the acquired businesses. SG&A
expenses as a percentage of net sales increased from 17.8% in fiscal 2011 to 18.3% in fiscal 2012 principally reflecting an increase in
amortization expense of intangible assets from the acquired businesses.

Operating Income

Operating income for fiscal 2012 increased by 18% to a record $163.3 million as compared to operating income of $138.4
million for fiscal 2011. The increase in operating income reflects an $18.0 million increase (a 30% increase) to a record $77.4 million
in operating income of the ETG for fiscal 2012, up from $59.5 million in fiscal 2011 and an $8.9 million increase (a 9% increase) in
operating income of the FSG to a record $103.9 million for fiscal 2012, up from $95.0 million for fiscal 2011, partially offset by a $2.0
million increase in corporate expenses. The increase in the operating income of the ETG is principally due to the acquired businesses
and the previously mentioned increased sales volumes. The increase in the operating income of the FSG principally reflects the
previously mentioned increased sales volumes and improved gross profit margin.

HEICO CORPORATION

As a percentage of net sales, our consolidated operating income increased to 18.2% for fiscal 2012, up from 18.1% for fiscal 2011.

The increase in consolidated operating income as a percentage of net sales reflects an increase in the FSG’s operating income as a
percentage of net sales from 17.6% for fiscal 2011 to 18.2% for fiscal 2012, partially offset by a decrease in the ETG’s operating in-
come as a percentage of net sales from 26.1% in fiscal 2011 to 23.4% in fiscal 2012. The increase in operating income as a percentage
of net sales for the FSG principally reflects the previously mentioned higher gross profit margin. The decrease in operating income as
a percentage of net sales for the ETG principally reflects a 3.9% impact from lower operating margins realized by Switchcraft and 3D
Plus. The lower operating margins realized by Switchcraft and 3D Plus are principally attributed to amortization expense associated
with intangible assets and inventory purchase accounting adjustments aggregating approximately $10.6 million during fiscal 2012.

Interest Expense

Interest expense increased to $2.4 million for fiscal 2012 from $.1 million for fiscal 2011. The increase was principally due to a
higher weighted average balance outstanding under our revolving credit facility in fiscal 2012 associated with the recent acquisitions.

Other Income

Other income in fiscal 2012 and 2011 was not material.

Income Tax Expense

The Company’s effective tax rate increased to 33.8% for fiscal 2012 from 31.0% for fiscal 2011. The change in the effective tax
rate is primarily attributed to the retroactive extension of Section 41 of the Internal Revenue Code, “Credit for Increasing Research
Activities,” to cover the period from January 1, 2010 to December 31, 2011, which resulted in the recognition of an income tax credit
for qualified research and development activities for the last ten months of fiscal 2010 in the first quarter of fiscal 2011 and reduced
the recognition of such income tax credit to just the first two months of qualifying research and development activities in fiscal 2012.
In addition, the Company purchased certain noncontrolling interests during fiscal 2011 and 2012 that contributed to the comparative
increase in the effective tax rate for fiscal 2012. Further, the increase also reflects a higher effective state income tax rate principally
because the prior year includes a benefit from state income apportionment updates recognized upon the filing of the Company’s fiscal
2010 state tax returns and the amendment of certain prior year state tax returns in the third quarter of fiscal 2011 and the current
year includes the effect of a fiscal 2012 acquisition and changes in certain state tax laws which impacted state apportionment factors.

For a detailed analysis of the provision for income taxes, see Note 6, Income Taxes, of the Notes to Consolidated Financial

Statements.

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 and the noncontrolling interests held by others in certain subsidiaries of the FSG and ETG. Net income attributable
to noncontrolling interests was $21.5 million in fiscal 2012 compared to $22.6 million in fiscal 2011. The decrease in fiscal 2012
principally reflects our purchases of certain noncontrolling interests during fiscal 2011 and 2012 resulting in lower allocations of net
income to noncontrolling interests. Additionally, the decrease is attributed to lower earnings of certain ETG and FSG subsidiaries,
partially offset by higher earnings of the FSG in which the 20% noncontrolling interest is held.

Net Income Attributable to HEICO

Net income attributable to HEICO was a record $85.1 million, or $1.28 per diluted share, in fiscal 2012 compared to $72.8 million,

or $1.10 per diluted share, in fiscal 2011 principally reflecting the increased operating income referenced above.

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

Our capitalization was as follows (in thousands):

As of October 31,

Cash and cash equivalents
Total debt (including current portion)
Shareholders’ equity
Total capitalization (debt plus equity)
Total debt to total capitalization

2013

15,499
377,515
723,235
1,100,750
34%

2012

21,451
131,820
719,759
851,579
15%

Our principal uses of cash include acquisitions, cash dividends, capital expenditures, distributions to noncontrolling interests
and working capital needs. Capital expenditures in fiscal 2014 are anticipated to approximate $25 million. We finance our activities
primarily from our operating activities and financing activities, including borrowings under long-term credit agreements.

HEICO CORPORATIONHEICO CORPORATION AND SUBSIDIARIES MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Recent Developments

On November 22, 2013, we entered into an amendment to extend the maturity date of our revolving credit facility by one year

to December 2018 and to increase the aggregate principal amount to $800 million. Furthermore, the amendment includes a feature
that will allow us to increase the aggregate principal amount by an additional $200 million, at our option, to become a $1.0 billion
facility through increased commitments from existing lenders or the addition of new lenders.

As of December 17, 2013, we had approximately $431 million of unused availability under the terms of our revolving credit
facility. 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 cash requirements for at least the next twelve months.

Operating Activities

Net cash provided by operating activities was $131.8 million in fiscal 2013 and consisted primarily of net income from

consolidated operations of $124.6 million and depreciation and amortization of $36.8 million (a non-cash item), partially offset by an
increase in working capital (current assets minus current liabilities) of $30.9 million. The increase in working capital was principally
attributed to increases in accounts receivable and inventory as a result of net sales growth during the period. Net cash provided by
operating activities decreased by $6.7 million in fiscal 2013 from $138.6 million in fiscal 2012. The decrease in cash provided by
operating activities is principally attributed to a $27.8 million increase in working capital reflecting increases in accounts receivable of
$10.8 million and inventories of $7.4 million as a result of net sales growth, a $9.0 million decrease in income taxes payable due to
the timing of estimated payments and a $3.0 million increase in our deferred tax benefit, partially offset by a $17.9 million and $6.1
million increase in net income from consolidated operations and depreciation and amortization, respectively.

Net cash provided by operating activities was $138.6 million for fiscal 2012, principally reflecting net income from consolidated
operations of $106.7 million, depreciation and amortization of $30.7 million and stock option compensation expense of $3.9 million,
partially offset by an increase in working capital (current assets minus current liabilities) of $3.1 million. The increase in working
capital of $3.1 million primarily reflects a build in inventory levels to meet customer demand and increased accounts receivable
related to higher net sales in fiscal 2012, partially offset by the timing of certain payments pertaining to fiscal 2012 accruals and
payables. Net cash provided by operating activities increased by $13.1 million from $125.5 million in fiscal 2011. The increase in net
cash provided by operating activities is principally due to a $12.1 million increase in depreciation and amortization expense principally
related to the fiscal 2012 and 2011 acquisitions and an $11.2 million increase in net income from consolidated operations, partially
offset by a $7.3 million increase in net operating assets and a $5.0 million decrease in impairment losses of certain intangible assets.

Net cash provided by operating activities was $125.5 million in fiscal 2011, principally reflecting net income from consolidated
operations of $95.5 million, depreciation and amortization of $18.5 million, impairment losses of certain intangible assets aggregating
$5.0 million, a decrease in working capital (current assets minus current liabilities) of $4.1 million, and stock option compensation
expense of $2.6 million.

Investing Activities

Net cash used in investing activities during the three-year fiscal period ended October 31, 2013 primarily relates to several

acquisitions aggregating $514.6 million, including $222.6 million in fiscal 2013, $197.3 million in fiscal 2012, and $94.7 million in
fiscal 2011. Further details on acquisitions may be under the caption “Overview” and Note 2, Acquisitions, of the Notes to Consol-
idated Financial Statements. Capital expenditures aggregated $43.0 million over the last three fiscal years, primarily reflecting the
expansion, replacement and betterment of existing production facilities and capabilities, which were generally funded using cash
provided by operating activities.

Financing Activities

Net cash provided by financing activities was $103.2 million in fiscal 2013 and $78.4 million in fiscal 2012 and net cash used
in financing activities was $10.7 million in fiscal 2011. During the three-year fiscal period ended October 31, 2013, we borrowed
an aggregate $635.0 million under our revolving credit facility principally to fund acquisitions and a special and extraordinary cash
dividend paid in fiscal 2013, including $372.0 million in fiscal 2013, $191.0 million in fiscal 2012, and $72.0 million in fiscal 2011.
Further details on acquisitions may be found under the caption “Overview” and Note 2, Acquisitions, of the Notes to Consolidated
Financial Statements. Payments on the revolving credit facility aggregated $276.0 million over the last three fiscal years, including
$126.0 million in fiscal 2013, $100.0 million in fiscal 2012, and $50.0 million in fiscal 2011. In December 2012, we paid a special and
extraordinary cash dividend on both classes of HEICO common stock aggregating $113.5 million. For the three-year fiscal period
ended October 31, 2013, we made distributions to noncontrolling interest owners aggregating $31.6 million, acquired certain noncon-
trolling interests aggregating $31.5 million, redeemed common stock related to stock option exercises aggregating $17.0 million, paid
regular semi-annual cash dividends aggregating $17.0 million, and paid revolving credit facility issuance costs of $3.6 million. For
the three-year fiscal period ended October 31, 2013, we received proceeds from stock option exercises aggregating $3.5 million. Net
cash provided by financing activities also includes the presentation of an excess tax benefit from stock option exercises aggregating
$23.6 million for the three-year fiscal period ended October 31, 2013.

HEICO CORPORATION

In December 2011, we entered into a $670 million Revolving Credit Agreement (“Credit Facility”) with a bank syndicate. The
Credit Facility may be used for our working capital and general corporate needs, including capital expenditures and to finance acqui-
sitions. In November 2013, we extended the maturity date of the Credit Facility by one year to December 2018 and increased the
aggregated principal amount to $800 million. The Credit Facility also includes a feature that will allow us to increase the aggregate
principal amount by an additional $200 million to become a $1.0 billion facility through increased commitments from existing lenders
or the addition of new lenders.

Advances under the Credit Facility accrue interest at our choice of the “Base Rate” or the London Interbank Offered Rate (“LI-
BOR”) plus applicable margins (based on the Company’s ratio of total funded debt to earnings before interest, taxes, depreciation and
amortization, noncontrolling interests and non-cash charges, or “leverage ratio”). The Base Rate is the highest of (i) the Prime Rate;
(ii) the Federal Funds rate plus .50% per annum; and (iii) the Adjusted LIBO Rate determined on a daily basis for an Interest Period of
one month plus 1.00% per annum, as such capitalized terms are defined in the Credit Facility. The applicable margins for LIBOR-based
borrowings range from .75% to 2.25%. The applicable margins for Base Rate borrowings range from 0% to 1.25%. A fee is charged on
the amount of the unused commitment ranging from .125% to .35% (depending on our leverage ratio). The Credit Facility also includes
a $50 million sublimit for borrowings made in foreign currencies, letters of credit and swingline borrowings. 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 restrict the amount of certain
payments, including dividends, and require, among other things, the maintenance of a total leverage ratio, a senior leverage ratio
and a fixed charge coverage ratio. In the event our leverage ratio exceeds a specified level, the Credit Facility would become secured
by the capital stock owned in substantially all of our subsidiaries. As of October 31, 2013, we were in compliance with all financial
and nonfinancial covenants. See Note 5, Long-Term Debt, of the Notes to Consolidated Financial Statements for further information
regarding the Credit Facility.

Contractual Obligations

The following table summarizes our contractual obligations as of October 31, 2013 (in thousands):

Long-term debt obligations (1)
Capital lease obligations (2)
Operating lease obligations (3)
Purchase obligations (4) (5) (6)
Other long-term liabilities
Total contractual obligations

Total

373,655
4,576
41,096
33,593
591
453,511

Payments due by fiscal period

2014

2015 - 2016

2017 - 2018

127
732
9,581
10,868
265
21,573

357
1,126
17,334
22,712
195
41,724

171
891
8,941
13
107
10,123

Thereafter

$ 373,000
1,827
5,240
—
24
$ 380,091

(1) Excludes interest charges on borrowings and the fee on the amount of any unused commitment that we may be obligated to pay under our revolving credit facility

as such amounts vary. Also excludes interest charges associated with notes payable as such amounts are not material. 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. 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 December 2018, which is
reflected in the table.

(2) Inclusive of $.7 million in interest charges. See Note 5, Long-Term Debt, of the Notes to Consolidated Financial Statements for additional information regarding our

capital lease obligations.

(3) See Note 16, Commitments and Contingencies – Lease Commitments, of the Notes to Consolidated Financial Statements for additional information regarding our

operating lease obligations.

(4) Includes contingent consideration aggregating $29.3 million related to a fiscal 2013 acquisition and a fiscal 2012 acquisition as well as $2.1 million of accrued additional
purchase consideration related to expected purchase price adjustments of certain fiscal 2013 acquisitions. See Note 2, Acquisitions, and Note 7, Fair Value Measure-
ments, of the Notes to Consolidated Financial Statements for additional information.

(5) 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 2022. The Put Rights provide that cash consideration be paid for their equity interests (the “Redemption Amount”). As of October 31, 2013,
management’s estimate of the aggregate Redemption Amount of all Put Rights that we would be required to pay is approximately $59 million, which is reflected within
redeemable noncontrolling interests in our Consolidated Balance Sheet. Of this amount, $1.2 million is included in the table as payable in fiscal 2014, which represents
an adjustment to the Redemption Amount of a fiscal 2013 acquisition of redeemable noncontrolling interests. All other Redemption Amounts have been excluded
from the table as the timing of such payments is contingent upon the exercise of the Put Rights. See Note 12, Redeemable Noncontrolling Interests, of the Notes to
Consolidated Financial Statements for additional information.

(6) Also includes an aggregate $1.0 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.

HEICO CORPORATIONHEICO CORPORATION AND SUBSIDIARIES MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Off-Balance Sheet Arrangements

Guarantees

We have arranged for a standby letter of credit in the amount of $1.5 million to meet the security requirement of our insurance

company for potential workers’ compensation claims, which is supported by our revolving credit facility.

New Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-05, “Presentation

of Comprehensive Income,” which requires the presentation of total comprehensive income, the components of net income and the
components of other comprehensive income in either a single continuous statement of comprehensive income or in two separate, but
consecutive statements. ASU 2011-05 eliminates the option to present other comprehensive income and its components in the statement
of shareholders’ equity. We adopted ASU 2011-05 in the first quarter of fiscal 2013 and elected to make the presentation in two separate,
but consecutive statements, which had no impact on our consolidated results of operations, financial position or cash flows.

In September 2011, the FASB issued ASU 2011-08, “Testing Goodwill for Impairment,” which is intended to reduce the complexity

and cost of performing a quantitative test for impairment of goodwill by permitting an entity the option to perform a qualitative
evaluation about the likelihood of goodwill impairment in order to determine whether it should calculate the fair value of a reporting
unit. The update also improves previous guidance by expanding upon the examples of events and circumstances that an entity should
consider between annual impairment tests in determining whether it is more likely than not that the fair value of a reporting unit is
less than its carrying amount. We adopted ASU 2011-08 in the fourth quarter of fiscal 2013 but elected to perform a quantitative
analysis when performing our fiscal 2013 impairment test. The adoption of this guidance had no impact on our consolidated results
of operations, financial position or cash flows.

In February 2013, the FASB issued ASU 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive

Income,” which requires disclosure about changes in and amounts reclassified out of accumulated other comprehensive income by
component. In addition, an entity is required to present, either on the face of the statement of operations or in the notes, significant
amounts reclassified out of accumulated other comprehensive income by the respective line items of net income, but only if the
amount reclassified is required to be reclassified to net income in its entirety in the same reporting period. For amounts that are not
required to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide
additional detail about those amounts. ASU 2013-02 is effective prospectively for fiscal years and interim periods within those fiscal
years beginning after December 15, 2012, or in fiscal 2014 for HEICO. Early adoption is permitted. The adoption of this guidance is
not expected to have a material impact on our consolidated results of operations, financial position or cash flows.

In March 2013, the FASB issued ASU 2013-05, “Parent’s Accounting for the Cumulative Translation Adjustment upon Derecog-
nition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity,” which clarifies the
applicable guidance for the release of any cumulative translation adjustments into net earnings. ASU 2013-05 specifies that the
entire amount of cumulative translation adjustments should be released into earnings when an entity ceases to have a controlling
financial interest in a subsidiary or group of assets within a consolidated foreign entity and the sale or transfer results in the complete
or substantially complete liquidation of the investment in the foreign entity. ASU 2013-05 is effective prospectively for fiscal years
and interim reporting periods within those years beginning after December 15, 2013, or in fiscal 2015 for HEICO. Early adoption
is permitted. We are currently evaluating the effect, if any, the adoption of this guidance will have on our consolidated results of
operations, financial position or cash flows.

HEICO CORPORATION

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
“expect,” “anticipate,” “believe,” “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 or implied in those statements. Factors
that could cause such differences include:

• Lower demand for commercial air travel or airline fleet changes or airline purchasing decisions, which could cause lower

demand for our goods and services;

• Product development or 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 product pricing levels, which could reduce our sales or sales growth;

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

• Our ability to make acquisitions and achieve operating synergies from acquired businesses, customer credit risk, interest and

income tax rates and 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 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.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The primary market risk to which we have exposure is interest rate risk, mainly related to our revolving credit facility, which has
variable interest rates. Interest rate risk associated with our variable rate debt is the potential increase in interest expense from an
increase in interest rates. Based on our aggregate outstanding variable rate debt balance of $373 million as of October 31, 2013, a
hypothetical 10% increase in interest rates would not have a material effect on our results of operations, financial position or cash flows.

We maintain a portion of our cash and cash equivalents in financial instruments with original maturities of three months or

less. These financial instruments are subject to interest rate risk and will decline in value if interest rates increase. Due to the
short duration of these financial instruments, a hypothetical 10% increase in interest rates as of October 31, 2013 would not have a
material effect on our results of operations, financial position or cash flows.

We are also exposed to foreign currency exchange rate fluctuations on the United States dollar value of our foreign currency
denominated transactions, which are principally in Euros, Canadian dollars and British pounds sterling. A hypothetical 10% weakening
in the exchange rate of the Euro, Canadian dollar or British pound sterling to the United States dollar as of October 31, 2013 would
not have a material effect on our results of operations, financial position or cash flows.

HEICO CORPORATIONHEICO CORPORATION AND SUBSIDIARIES MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

H E I C O C O R P O R A T I O N A N D S U B S I D I A R I E S

CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)

As of October 31,

ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable, net

Inventories, net

Prepaid expenses and other current assets
Deferred income taxes
Total current assets

Property, plant and equipment, net
Goodwill
Intangible assets, net
Deferred income taxes
Other assets

Total assets

LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt
Trade accounts payable
Accrued expenses and other current liabilities

Income taxes payable
Total current liabilities

Long-term debt, net of current maturities
Deferred income taxes
Other long-term liabilities

Total liabilities

Commitments and contingencies (Notes 2 and 16)

2013

2012

15,499
157,022
218,893
17,022
33,036
441,472

97,737
688,489
241,558
1,791
61,968
$ 1,533,015

697
54,855
105,734
—
161,286

376,818
128,482
83,976
750,562

21,451
122,214
189,704
6,997
27,545
367,911

80,518
542,114
154,324
2,492
45,487
$ 1,192,846

626
50,083
76,241
4,564
131,514

131,194
90,436
52,777
405,921

Redeemable noncontrolling interests (Note 12)

59,218

67,166

Shareholders’ equity:
Preferred Stock, $.01 par value per share; 10,000 shares authorized; 300 shares
designated as Series B Junior Participating Preferred Stock and 300 shares
designated as Series C Junior Participating Preferred Stock; none issued

Common Stock, $.01 par value per share; 75,000 shares authorized; 26,790 and

26,682 shares issued and outstanding

Class A Common Stock, $.01 par value per share; 75,000 shares authorized; 39,586 and

39,397 shares issued and outstanding

Capital in excess of par value
Deferred compensation obligation
HEICO stock held by irrevocable trust
Accumulated other comprehensive income (loss)
Retained earnings

Total HEICO shareholders’ equity

Noncontrolling interests

Total shareholders’ equity
Total liabilities and equity

The accompanying notes are an integral part of these consolidated financial statements.

—

268

396
255,889
1,138
(1,138)
144
349,649
606,346
116,889
723,235
$ 1,533,015

—

213

315
244,632
823
(823)
(3,572)
375,085
616,673
103,086
719,759
$ 1,192,846

HEICO CORPORATION

H E I C O C O R P O R A T I O N A N D S U B S I D I A R I E S

CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)

Year ended October 31,

2013

2012

2011

Net sales

$ 1,008,757

$ 897,347

$ 764,891

Operating costs and expenses:

Cost of sales
Selling, general and administrative expenses

637,576
187,591

569,911
164,142

490,450
136,010

Total operating costs and expenses

825,167

734,053

626,460

Operating income

Interest expense
Other income

183,590

163,294

138,431

(3,717)
888

(2,432)
313

(142)
64

Income before income taxes and noncontrolling interests

180,761

161,175

138,353

Income tax expense

56,200

54,500

42,900

Net income from consolidated operations

124,561

106,675

95,453

Less: Net income attributable to noncontrolling interests

22,165

21,528

22,633

Net income attributable to HEICO

102,396

85,147

$ 72,820

Net income per share attributable to HEICO shareholders (Note 13):

Basic
Diluted

$
$

1.54
1.53

$
$

1.29
1.28

$
$

1.12
1.10

Weighted average number of common shares outstanding:

Basic
Diluted

The accompanying notes are an integral part of these consolidated financial statements.

66,298
66,982

65,861
66,624

65,050
66,408

HEICO CORPORATION

H E I C O C O R P O R A T I O N A N D S U B S I D I A R I E S

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)

Year ended October 31,

2013

2012

2011

Net income from consolidated operations
Other comprehensive income (loss):

124,561

$ 106,675

$ 95,453

Foreign currency translation adjustments
Unrealized gain on pension benefit obligation, net of tax

Total other comprehensive income (loss)
Comprehensive income from consolidated operations
Less: Comprehensive income attributable to noncontrolling interests
Comprehensive income attributable to HEICO

3,128
590
3,718
128,279
22,165
106,114

(6,457)
—
(6,457)
100,218
21,528
78,690

3,012
—
3,012
98,465
22,633
$ 75,832

The accompanying notes are an integral part of these consolidated financial statements.

HEICO CORPORATION

H E I C O C O R P O R A T I O N A N D S U B S I D I A R I E S

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands, except per share data)

Balances as of October 31, 2012
Comprehensive income
Cash dividends ($1.816 per share)
Five-for-four common stock split
Issuance of common stock to HEICO Savings and Investment Plan
Tax benefit from stock option exercises
Stock option compensation expense
Proceeds from stock option exercises
Redemptions of common stock related to stock option exercises
Acquisitions of noncontrolling interests
Distributions to noncontrolling interests
Adjustments to redemption amount of redeemable noncontrolling interests
Deferred compensation obligation
Other
Balances as of October 31, 2013

Balances as of October 31, 2011
Comprehensive income
Cash dividends ($.086 per share)
Five-for-four common stock split
Issuance of common stock to HEICO Savings and Investment Plan
Tax benefit from stock option exercises
Stock option compensation expense
Proceeds from stock option exercises
Redemptions of common stock related to stock option exercises
Acquisitions of noncontrolling interests
Distributions to noncontrolling interests
Noncontrolling interests assumed related to acquisitions
Adjustments to redemption amount of redeemable noncontrolling interests
Deferred compensation obligation
Other
Balances as of October 31, 2012

The accompanying notes are an integral part of these consolidated financial statements.

Statement continued on page 34

Redeemable
Noncontrolling
Interests
$ 67,166
8,386
—
—
—
—
—
—
—
(16,610)
(7,579)
7,454
—
401
$ 59,218

Redeemable
Noncontrolling
Interests
$ 65,430
9,526
—
—
—
—
—
—
—
(7,616)
(9,090)
3,918
3,775
—
1,223
$ 67,166

Common
Stock
$ 213
—
—
54
—
—
—
1
—
—
—
—
—
—
$ 268

Common
Stock
$ 171
—
—
42
—
—
—
—
—
—
—
—
—
—
—
$ 213

Class A
Common
Stock
$ 315
—
—
79
—
—
—
2
—
—
—
—
—
—
$ 396

Class A
Common
Stock
$ 250
—
—
63
—
—
—
2
—
—
—
—
—
—
—
$ 315

HEICO Shareholders’ Equity

Capital in

Excess of

Par Value

$ 244,632

Deferred

Compensation

Obligation

HEICO Stock

Held by

Irrevocable

Trust

($ 823)

Accumulated

Other

Comprehensive

Income (Loss)

($ 3,572)

3,718

Noncontrolling

Shareholders’

Interests

$ 103,086

13,779

—

(133)

2,985

5,191

5,117

460

(2,364)

—

(105)

982

13,164

3,948

831

(307)

—

(1)

$ 244,632

$ 823

—

315

—

$ 1,138

$ 522

—

301

—

$ 823

—

Retained

Earnings

$ 375,085

102,396

(120,361)

(17)

—

(7,454)

Retained

Earnings

$ 299,497

85,147

(5,689)

(16)

—

(3,775)

—

(79)

—

Total

Equity

$ 719,759

119,893

(120,361)

(17)

2,985

5,191

5,117

463

(2,364)

(7,454)

—

Total

Equity

$ 620,154

90,692

(5,689)

(16)

982

13,164

3,948

833

(307)

—

(3,775)

—

(227)

—

(301)

—

($ 823)

(148)

($ 3,572)

$ 375,085

$ 103,086

$ 719,759

$ 255,889

$ 349,649

$ 116,889

$ 723,235

(315)

—

($1,138)

(2)

$ 144

HEICO Shareholders’ Equity

Capital in

Excess of

Par Value

$ 226,120

Deferred

Compensation

Obligation

HEICO Stock

Held by

Irrevocable

Trust

($ 522)

Accumulated

Other

Comprehensive

Income (Loss)

$ 3,033

(6,457)

Noncontrolling

Shareholders’

Interests

$ 91,083

12,002

HEICO CORPORATION

Issuance of common stock to HEICO Savings and Investment Plan

Balances as of October 31, 2012

Comprehensive income

Cash dividends ($1.816 per share)

Five-for-four common stock split

Tax benefit from stock option exercises

Stock option compensation expense

Proceeds from stock option exercises

Acquisitions of noncontrolling interests

Distributions to noncontrolling interests

Deferred compensation obligation

Other

Balances as of October 31, 2013

Redemptions of common stock related to stock option exercises

Adjustments to redemption amount of redeemable noncontrolling interests

Issuance of common stock to HEICO Savings and Investment Plan

Balances as of October 31, 2011

Comprehensive income

Cash dividends ($.086 per share)

Five-for-four common stock split

Tax benefit from stock option exercises

Stock option compensation expense

Proceeds from stock option exercises

Acquisitions of noncontrolling interests

Distributions to noncontrolling interests

Deferred compensation obligation

Other

Balances as of October 31, 2012

Redemptions of common stock related to stock option exercises

Noncontrolling interests assumed related to acquisitions

Adjustments to redemption amount of redeemable noncontrolling interests

The accompanying notes are an integral part of these consolidated financial statements.

Statement continued on page 34

Redeemable

Noncontrolling

Interests

$ 67,166

8,386

(16,610)

(7,579)

7,454

—

401

$ 59,218

Redeemable

Noncontrolling

Interests

$ 65,430

9,526

—

(7,616)

(9,090)

3,918

3,775

—

1,223

$ 67,166

Common

Stock

$ 213

—

$ 268

Common

Stock

$ 171

—

$ 213

Class A

Common

Stock

$ 315

—

$ 396

Class A

Common

Stock

$ 250

—

$ 315

Capital in
Excess of
Par Value
$ 244,632
—
—
(133)
2,985
5,191
5,117
460
(2,364)
—
—
—
—
1
$ 255,889

Capital in
Excess of
Par Value
$ 226,120
—
—
(105)
982
13,164
3,948
831
(307)
—
—
—
—
—
(1)
$ 244,632

HEICO Shareholders’ Equity
HEICO Stock
Held by
Irrevocable
Trust
($ 823)
—
—
—
—
—
—
—
—
—
—
—
(315)
—
($1,138)

Deferred
Compensation
Obligation
$ 823
—
—
—
—
—
—
—
—
—
—
—
315
—
$ 1,138

HEICO Shareholders’ Equity
HEICO Stock
Held by
Irrevocable
Trust
($ 522)
—
—
—
—
—
—
—
—
—
—
—
—
(301)
—
($ 823)

Deferred
Compensation
Obligation
$ 522
—
—
—
—
—
—
—
—
—
—
—
—
301
—
$ 823

Accumulated
Other
Comprehensive
Income (Loss)
($ 3,572)
3,718
—
—
—
—
—
—
—
—
—
—
—
(2)
$ 144

Accumulated
Other
Comprehensive
Income (Loss)
$ 3,033
(6,457)
—
—
—
—
—
—
—
—
—
—
—
—
(148)
($ 3,572)

Retained
Earnings
$ 375,085
102,396
(120,361)
(17)
—
—
—
—
—
—
—
(7,454)
—
—
$ 349,649

Retained
Earnings
$ 299,497
85,147
(5,689)
(16)
—
—
—
—
—
—
—
—
(3,775)
—
(79)
$ 375,085

Noncontrolling
Interests
$ 103,086
13,779
—
—
—
—
—
—
—
—
—
—
—
24
$ 116,889

Noncontrolling
Interests
$ 91,083
12,002
—
—
—
—
—
—
—
—
—
—
—
—
1
$ 103,086

Total
Shareholders’
Equity
$ 719,759
119,893
(120,361)
(17)
2,985
5,191
5,117
463
(2,364)
—
—
(7,454)
—
23
$ 723,235

Total
Shareholders’
Equity
$ 620,154
90,692
(5,689)
(16)
982
13,164
3,948
833
(307)
—
—
—
(3,775)
—
(227)
$ 719,759

HEICO CORPORATION

H E I C O C O R P O R A T I O N A N D S U B S I D I A R I E S

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands, except per share data)

Balances as of October 31, 2010
Comprehensive income
Cash dividends ($.069 per share)
Five-for-four common stock split
Tax benefit from stock option exercises
Stock option compensation expense
Proceeds from stock option exercises
Redemptions of common stock related to stock option exercises
Acquisitions of noncontrolling interests
Distributions to noncontrolling interests
Noncontrolling interests assumed related to acquisitions
Adjustments to redemption amount of redeemable noncontrolling interests
Deferred compensation obligation
Other
Balances as of October 31, 2011

The accompanying notes are an integral part of these consolidated financial statements.

Redeemable
Noncontrolling
Interests
$ 55,048
11,264
—
—
—
—
—
—
(7,241)
(8,893)
5,612
9,640
—
—
$ 65,430

Common
Stock
$ 131
—
—
33
—
—
9
(3)
—
—
—
—
—
1
$ 171

Class A
Common
Stock
$ 199
—
—
50
—
—
2
—
—
—
—
—
—
(1)
$ 250

HEICO Shareholders’ Equity

Deferred

Compensation

Obligation

HEICO Stock

Held by

Irrevocable

Capital in

Excess of

Par Value

$ 227,993

—

(83)

7,703

2,647

2,156

(14,295)

—

(1)

$ 226,120

$ —

—

522

—

$ 522

Accumulated

Other

Comprehensive

Income (Loss)

($ 124)

3,012

—

145

$ 3,033

Trust

$ —

—

(522)

—

($522)

Noncontrolling

Shareholders’

Retained

Earnings

$ 240,913

72,820

(4,494)

(102)

—

(9,640)

Interests

$ 85,714

11,369

—

(6,000)

Total

Equity

$ 554,826

87,201

(4,494)

(102)

7,703

2,647

2,167

(14,298)

(6,000)

—

(9,640)

—

144

$ 299,497

$ 91,083

$ 620,154

HEICO CORPORATION

Balances as of October 31, 2010

Comprehensive income

Cash dividends ($.069 per share)

Five-for-four common stock split

Tax benefit from stock option exercises

Stock option compensation expense

Proceeds from stock option exercises

Acquisitions of noncontrolling interests

Distributions to noncontrolling interests

Deferred compensation obligation

Other

Balances as of October 31, 2011

Redemptions of common stock related to stock option exercises

Noncontrolling interests assumed related to acquisitions

Adjustments to redemption amount of redeemable noncontrolling interests

The accompanying notes are an integral part of these consolidated financial statements.

Redeemable

Noncontrolling

Interests

$ 55,048

11,264

—

(7,241)

(8,893)

5,612

9,640

—

$ 65,430

Common

Stock

$ 131

—

(3)

—

$ 171

Class A

Common

Stock

$ 199

—

(1)

$ 250

Capital in
Excess of
Par Value
$ 227,993
—
—
(83)
7,703
2,647
2,156
(14,295)
—
—
—
—
—
(1)
$ 226,120

HEICO Shareholders’ Equity
HEICO Stock
Held by
Irrevocable
Trust
$ —
—
—
—
—
—
—
—
—
—
—
—
(522)
—
($522)

Deferred
Compensation
Obligation
$ —
—
—
—
—
—
—
—
—
—
—
—
522
—
$ 522

Accumulated
Other
Comprehensive
Income (Loss)
($ 124)
3,012
—
—
—
—
—
—
—
—
—
—
—
145
$ 3,033

Retained
Earnings
$ 240,913
72,820
(4,494)
(102)
—
—
—
—
—
—
—
(9,640)
—
—
$ 299,497

Noncontrolling
Interests
$ 85,714
11,369
—
—
—
—
—
—
—
(6,000)
—
—
—
—
$ 91,083

Total
Shareholders’
Equity
$ 554,826
87,201
(4,494)
(102)
7,703
2,647
2,167
(14,298)
—
(6,000)
—
(9,640)
—
144
$ 620,154

HEICO CORPORATION

H E I C O C O R P O R A T I O N A N D S U B S I D I A R I E S

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

Year ended October 31,

2013

2012

2011

Operating Activities:
Net income from consolidated operations
Adjustments to reconcile net income from consolidated operations

to net cash provided by operating activities:
Depreciation and amortization
Tax benefit from stock option exercises
Excess tax benefit from stock option exercises
Stock option compensation expense
Impairment of intangible assets
Issuance of common stock to HEICO Savings and Investment Plan
(Decrease) increase in value of contingent consideration

Deferred income tax (benefit) provision
Changes in operating assets and liabilities, net of acquisitions:

Increase in accounts receivable
Increase in inventories
Increase in prepaid expenses and other current assets
(Decrease) increase in trade accounts payable
Increase in accrued expenses and other current liabilities
(Decrease) increase in income taxes payable

Other

Net cash provided by operating activities

Investing Activities:
Acquisitions, net of cash acquired
Capital expenditures
Other
Net cash used in investing activities

Financing Activities:
Borrowings on revolving credit facility
Payments on revolving credit facility
Cash dividends paid
Acquisitions of noncontrolling interests
Excess tax benefit from stock option exercises
Distributions to noncontrolling interests
Redemptions of common stock related to stock option exercises
Payment of contingent consideration
Revolving credit facility issuance costs
Proceeds from stock option exercises
Other
Net cash provided by (used in) financing activities

124,561

$ 106,675

$ 95,453

36,790
5,191
(5,126)
5,117
—
2,985
(1,640)
(5,785)

(16,585)
(14,877)
(4,918)
(23)
12,766
(7,273)
653
131,836

(222,638)
(18,328)
(342)
(241,308)

372,000
(126,000)
(120,361)
(16,610)
5,126
(7,579)
(2,364)
(601)
(570)
463
(296)
103,208

30,656
13,164
(12,110)
3,948
—
982
119
(2,834)

(5,782)
(7,484)
(1,072)
4,269
5,182
1,759
1,113
138,585

(197,285)
(15,262)
(161)
(212,708)

191,000
(100,000)
(5,689)
(7,616)
12,110
(9,090)
(307)
—
(3,028)
833
214
78,427

18,543
7,703
(6,346)
2,647
4,987
—
(1,150)
29

(5,327)
(9,405)
(343)
7,257
10,425
1,516
(471)
125,518

(94,655)
(9,446)
201
(103,900)

72,000
(50,000)
(4,494)
(7,241)
6,346
(14,893)
(14,298)
—
—
2,167
(256)
(10,669)

Effect of exchange rate changes on cash

312

(353)

Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

(5,952)
21,451
15,499

3,951
17,500
21,451

10,957
6,543
$ 17,500

The accompanying notes are an integral part of these consolidated financial statements.

HEICO CORPORATION

H E I C O C O R P O R A T I O N A N D S U B S I D I A R I E S

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

HEICO Corporation, through its principal subsidiaries HEICO Aerospace Holdings Corp. (“HEICO Aerospace”), HEICO Flight Support

Corp. and HEICO Electronic Technologies Corp. (“HEICO Electronic”) and their subsidiaries (collectively, the “Company”), is principally
engaged in the design, manufacture and sale of aerospace, defense and electronic related products and services throughout the
United States and internationally. The Company’s customer base is primarily the aviation, defense, space, medical, telecommunica-
tions and electronics industries.

Basis of Presentation

The consolidated financial statements include the accounts of HEICO Corporation and its subsidiaries, all of which are wholly
owned except for HEICO Aerospace, which is 20% owned by Lufthansa Technik AG, the technical services subsidiary of Lufthansa
German Airlines. In addition, HEICO Aerospace consolidates three subsidiaries which are 80.1%, 80.1% and 82.3% owned, respectively,
and a joint venture, which is 84% owned. Also, HEICO Flight Support Corp. consolidates two subsidiaries which are 80.1% and 84%
owned, respectively. Furthermore, HEICO Electronic consolidates three subsidiaries, which are 80.1%, 82.5%, and 95.9% owned,
respectively, and a wholly owned subsidiary of HEICO Electronic consolidates a subsidiary which is 78% owned. See Note 12,
Redeemable Noncontrolling Interests. All significant intercompany balances and transactions are eliminated.

Stock Splits

In September 2013, March 2012 and March 2011, the Company’s Board of Directors declared a 5-for-4 stock split on both
classes of the Company’s common stock. The stock splits were effected as of October 23, 2013, April 25, 2012 and April 26, 2011,
respectively, in the form of a 25% stock dividend distributed to shareholders of record as of October 11, 2013, April 13, 2012 and April
15, 2011, respectively. All applicable share and per share information has been adjusted retrospectively to give effect to the 5-for-4
stock splits.

Use of Estimates and Assumptions

The preparation of 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 financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

For purposes of the consolidated financial statements, the Company considers all highly liquid investments such as U.S. Treasury

bills and money market funds with an original maturity of three months or less at the time of purchase to be cash equivalents.

Accounts Receivable

Accounts receivable consist of amounts billed and currently due from customers and unbilled costs and estimated earnings related

to revenue from certain fixed price contracts recognized on the percentage-of-completion method that have been recognized for
accounting purposes, but not yet billed to customers. The valuation of accounts receivable requires that the Company set up an allow-
ance for estimated uncollectible accounts and record a corresponding charge to bad debt expense. The Company estimates uncollectible
receivables based on such factors as its prior experience, its appraisal of a customer’s ability to pay, age of receivables outstanding and
economic conditions within and outside of the aviation, defense, space, medical, telecommunications and electronics industries.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of temporary cash

investments and trade accounts receivable. The Company places its temporary cash investments with high credit quality financial
institutions and limits the amount of credit exposure to any one financial institution. Concentrations of credit risk with respect to
trade receivables are limited due to the large number of customers comprising the Company’s customer base and their dispersion
across many different geographical regions. The Company performs ongoing credit evaluations of its customers, but does not
generally require collateral to support customer receivables.

Inventory

Inventory is stated at the lower of cost or market, 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.

HEICO CORPORATION

H E I C O C O R P O R A T I O N A N D S U B S I D I A R I E S

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company periodically evaluates 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.

Property, Plant and Equipment

Property, plant and equipment is recorded at cost. Depreciation and amortization is generally provided on the straight-line
method over the estimated useful lives of the various assets. The Company’s property, plant and equipment is depreciated over the
following estimated useful lives:

Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 to 40 years
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 to 20 years
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 to 10 years
Tooling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 to 5 years

The costs of major additions and improvements are capitalized. Leasehold improvements are amortized over the shorter of the

leasehold improvement’s useful life or the lease term. Repairs and maintenance costs are expensed as incurred. Upon disposition, the
asset’s cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected within earnings.

Capital Leases

Assets acquired under capital leases are recorded at the lower of the fair value of the asset or the present value of the future
minimum lease payments, excluding that portion of the payments representing executory costs. The discount rate used in deter-
mining the present value of the minimum lease payments is the lower of the rate implicit in the lease or the Company’s incremental
borrowing rate. Assets under capital leases are included in property, plant and equipment and are depreciated over the shorter of
the lease term or the useful life of the leased asset. Lease payments under capital leases are recognized as a reduction of the capital
lease obligation and as interest expense.

Business Combinations

The Company allocates 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. The operating results of acquired businesses are included in the Company’s results of operations beginning as of their
effective acquisition dates. Acquisition costs are generally expensed as incurred and were not material in fiscal 2013, 2012 or 2011.

For contingent consideration arrangements associated with acquisitions consummated during or after fiscal 2010, a liability

is recognized at fair value as of the acquisition date with subsequent fair value adjustments recorded in operations. For contingent
consideration arrangements associated with acquisitions consummated prior to fiscal 2010, a liability and additional goodwill was
recognized only when the earnings objectives were met. Information regarding additional contingent purchase consideration related
to acquisitions both prior and subsequent to fiscal 2010 may be found in Note 2, Acquisitions.

Goodwill and Other Intangible Assets

The Company tests 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, the Company
compares the fair value of each of its 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 the Company’s reporting units are determined by using a weighted average of a market approach and an income approach.
Under the market approach, fair values are estimated using published market multiples for comparable companies. The Company
calculates fair values under the income approach by taking estimated future cash flows that are based on internal projections and
other assumptions deemed reasonable by management and discounting them using an estimated weighted average cost of capital.

The Company’s intangible assets not subject to amortization consist principally of its trade names. The Company’s intangible

assets subject to amortization are amortized on the straight-line method (except for certain customer relationships amortized on an
accelerated method) over the following estimated useful lives:

Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 to 10 years
Intellectual property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 to 15 years
Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 to 17 years
Non-compete agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 to 7 years
Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 to 19 years
Trade names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 to 10 years

HEICO CORPORATION

Amortization expense of intellectual property, licenses and patents is recorded as a component of cost of sales, and amortization

expense of customer relationships, non-compete agreements and trade names is recorded as a component of selling, general and
administrative expenses in the Company’s Consolidated Statement of Operations. The Company tests each non-amortizing intangible
asset 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 its trade names, the Company utilizes an income approach, which relies upon man-
agement’s assumptions of royalty rates, projected revenues and discount rates. The Company also tests 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, the Company recognizes 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 such factors as projected revenues and earnings and discount rates.

Investments

Investments are stated at fair value based on quoted market prices. Investments that are intended to be held for less than one year
are included within prepaid expenses and other current assets in the Company’s Consolidated Balance Sheets, while those intended to be
held for longer than one year are classified within other assets. Unrealized gains or losses associated with available-for-sale securities
are reported net of tax within other comprehensive income in shareholders’ equity. Unrealized gains or losses associated with trading
securities are recorded as a component of other income in the Company’s Consolidated Statement of Operations.

Derivative Instruments

From time to time, the Company utilizes certain derivative instruments (e.g. foreign currency forward contracts and interest rate
swap agreements) to hedge the variability of foreign currency exchange rates and the expected future cash flows of certain transac-
tions. Changes in the fair value of derivative instruments are recognized immediately in earnings, unless the derivative is designated
as a hedge and qualifies for hedge accounting. There are three hedging relationships where a derivative (hedging instrument) may
qualify for hedge accounting: (1) a hedge of the change in fair value of a recognized asset or liability or firm commitment (fair value
hedge), (2) a hedge of the variability in cash flows from forecasted transactions (cash flow hedge), and (3) a hedge of the variability
caused by changes in foreign currency exchange rates (foreign currency hedge).

Under hedge accounting, recognition of derivative gains and losses can be matched in the same period with that of the hedged ex-

posure and thereby minimize earnings volatility. In order for a derivative to qualify for hedge accounting, the derivative must be formally
designated as a fair value, cash flow, or a foreign currency hedge by documenting the relationship between the derivative and the hedged
item. Additionally, the hedge relationship must be expected to be highly effective at offsetting changes in either the fair value or cash
flows of the hedged item at both inception and on an ongoing basis. For a derivative instrument that qualifies for hedge accounting, the
effective portion of changes in fair value of the derivative is deferred and recorded as a component of other comprehensive income until
the hedged transaction occurs and is recognized in earnings. All other portions of changes in fair value of the derivative are recognized in
earnings immediately. If the derivative does not qualify for hedge accounting, the Company considers the transaction to be an “economic
hedge” and changes in the fair value of the derivative asset or liability are recognized immediately in earnings.

During fiscal 2012 and 2011, the Company entered into foreign currency forward contracts to mitigate foreign exchange risk of

certain transactions. The impact of these forward contracts did not have a material effect on the Company’s results of operations,
financial position or cash flows in fiscal 2012 or 2011. The Company did not utilize any derivative investments in fiscal 2013.

Customer Rebates and Credits

The Company records accrued customer rebates and credits as a component of accrued expenses and other current liabilities
in the Company’s Consolidated Balance Sheets. These amounts generally relate to discounts negotiated with customers as part of
certain sales contracts that are usually tied to sales volume thresholds. The Company accrues customer rebates and credits as a
reduction within net sales as the revenue is recognized based on the estimated level of discount rate expected to be earned by each
customer over the life of the contract period (generally one year). Accrued customer rebates and credits are monitored by manage-
ment and discount levels are updated at least quarterly.

Product Warranties

Product warranty liabilities are estimated at the time of shipment and recorded as a component of accrued expenses and other

current liabilities in the Company’s Consolidated Balance Sheets. The amount recognized is based on historical claims experience.

HEICO CORPORATION

H E I C O C O R P O R A T I O N A N D S U B S I D I A R I E S

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Defined Benefit Pension Plan

In connection with the acquisition of Reinhold Industries, Inc. (“Reinhold”) (see Note 2, Acquisitions), the Company assumed
Reinhold’s frozen qualified defined benefit pension plan (the “Plan”). The Plan’s benefits are based on employee compensation and
years of service. However, since the Plan was closed to new participants effective December 31, 2004, the accrued benefit for Plan
participants was fixed as of the date of acquisition. The Company uses an actuarial valuation to determine the projected benefit
obligation of the Plan and records the difference between the fair value of the Plan’s assets and the projected benefit obligation as
of October 31 in its Consolidated Balance Sheet. Additionally, any actuarial gain or loss that arises during a fiscal year that is not
recognized as a component of net periodic pension income or expense is recorded as a component of other comprehensive income or
(loss), net of tax. See Note 10, Retirement Plans, for additional information and disclosures about the Plan.

Revenue Recognition

Revenue from the sale of products and the rendering of services is recognized when title and risk of loss passes to the customer,

which is generally at the time of shipment. Revenue from the rendering of services represented less than 10% of consolidated net
sales for all periods presented. Revenue from certain fixed price contracts for which costs can be dependably estimated is recognized
on the percentage-of-completion method, measured by the percentage of costs incurred to date to estimated total costs for each
contract. The percentage of the Company’s net sales recognized under the percentage-of-completion method was approximately 1%
in fiscal 2013, 2012 and 2011. 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 costs. Selling, general and administrative costs are
charged to expense as incurred.

Revisions in cost estimates as contracts progress have the effect of increasing or decreasing profits in the period of revision.
Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Variations in
actual labor performance, changes to estimated profitability, and final contract settlements may result in revisions to cost estimates
and are recognized in income in the period in which the revisions are determined. Changes in estimates pertaining to percent-
age-of-completion contracts did not have a material effect on net income from consolidated operations in fiscal 2013, 2012 or 2011.

The asset, “costs and estimated earnings in excess of billings” on uncompleted percentage-of-completion contracts, included in

accounts receivable, represents revenue recognized in excess of amounts billed. The liability, “billings in excess of costs and estimated
earnings,” included in accrued expenses and other current liabilities, represents billings in excess of revenue recognized on contracts
accounted for under the percentage-of-completion method. Billings are made based on the completion of certain milestones as
provided for in the contracts.

For fixed price contracts in which costs cannot be dependably estimated, revenue is recognized on the completed-contract
method. A contract is considered complete when all significant costs have been incurred or the has been accepted by the customer.
Progress billings and customer advances (“billings to date”) received on fixed price contracts accounted for under the completed-con-
tract method are classified as a reduction to contracts in process (a component of inventories), if any, and any remaining amount is
included in accrued expenses and other current liabilities.

Stock-Based Compensation

The Company records compensation expense associated with stock options in its Consolidated Statements of Operations
based on the grant date fair value of those awards. The fair value of each stock option on the date of grant is estimated using the
Black-Scholes pricing model based on certain valuation assumptions. Expected volatilities are based on the Company’s historical
stock prices over the contractual terms of the options and other factors. The risk-free interest rates used are based on the published
U.S. Treasury yield curve in effect at the time of the grant for instruments with a similar life. The dividend yield reflects the Company’s
expected dividend yield at the date of grant. The expected life represents the period that the stock options are expected to be
outstanding, taking into consideration the contractual terms of the options and employee historical exercise behavior. The Company
generally recognizes stock option compensation expense ratably over the award’s vesting period.

The Company calculates the amount of excess tax benefit that is available to offset future write-offs of deferred tax assets,

or additional paid-in-capital pool (“APIC Pool”) by tracking each stock option award granted after November 1, 1996 on an employ-
ee-by-employee basis and on a grant-by-grant basis to determine whether there is a tax benefit situation or tax deficiency situation
for each such award. The Company then compares the fair value expense to the tax deduction received for each stock option grant
and aggregates the benefits and deficiencies, which have the effect of increasing or decreasing, respectively, the APIC Pool. Should
the amount of future tax deficiencies be greater than the available APIC Pool, the Company will record the excess as income tax
expense in its Consolidated Statements of Operations. The excess tax benefit resulting from tax deductions in excess of the cumula-
tive compensation expense recognized for stock options exercised is presented as a financing activity in the Company’s Consolidated
Statements of Cash Flows. All other tax benefits related to stock options have been presented as a component of operating activities.

HEICO CORPORATION

Income Taxes

Income tax expense includes United States and foreign income taxes, plus the provision for United States taxes on undistributed
earnings of foreign subsidiaries not deemed to be permanently invested. Deferred income taxes are provided on elements of income
that are recognized for financial accounting purposes in periods different from periods recognized for income tax purposes.

The Company accounts for uncertainty in income taxes and evaluates tax positions utilizing a two-step process. The first step is
to determine whether it is more-likely-than-not that a tax position will be sustained upon examination based on the technical merits
of the position. The second step is to measure the benefit to be recorded from tax positions that meet the more-likely-than-not
recognition threshold by determining the largest amount of tax benefit that is greater than 50 percent likely of being realized upon
ultimate settlement and recognizing that amount in the financial statements. The Company’s policy is to recognize interest and
penalties related to income tax matters as a component of income tax expense. Further information regarding income taxes can be
found in Note 6, Income Taxes.

Redeemable Noncontrolling Interests

As further detailed in Note 12, Redeemable Noncontrolling Interests, the holders of equity interests in certain of the Company’s

subsidiaries have rights (“Put Rights”) that require the Company to provide cash consideration for their equity interests (the
“Redemption Amount”) at fair value or at a formula that management intended to reasonably approximate fair value based solely on
a multiple of future earnings over a measurement period. The Put Rights are embedded in the shares owned by the noncontrolling
interest holders and are not freestanding. The Company tracks the carrying cost of such redeemable noncontrolling interests at
historical cost plus an allocation of subsidiary earnings based on ownership interest, less dividends paid to the noncontrolling
interest holders. Redeemable noncontrolling interests are recorded outside of permanent equity at the higher of their carrying cost
or management’s estimate of the Redemption Amount. The initial adjustment to record redeemable noncontrolling interests at the
Redemption Amount results in a corresponding decrease to retained earnings. Subsequent adjustments to the Redemption Amount
of redeemable noncontrolling interests may result in corresponding decreases or increases to retained earnings, provided any increas-
es to retained earnings may only be recorded to the extent of decreases previously recorded. Adjustments to Redemption Amounts
based on fair value will have no affect on net income per share attributable to HEICO shareholders whereas the portion of periodic
adjustments to the carrying amount of redeemable noncontrolling interests based solely on a multiple of future earnings that reflect
a redemption amount in excess of fair value will affect net income per share attributable to HEICO shareholders. Acquisitions of
redeemable noncontrolling interests are treated as equity transactions.

Net Income per Share Attributable to HEICO Shareholders

Basic net income per share attributable to HEICO shareholders is computed by dividing net income attributable to HEICO by

the weighted average number of common shares outstanding during the period. Diluted net income per share attributable to
HEICO shareholders is computed by dividing net income attributable to HEICO by the weighted average number of common shares
outstanding during the period plus potentially dilutive common shares arising from the assumed exercise of stock options, if dilutive.
The dilutive impact of potentially dilutive common shares is determined by applying the treasury stock method.

As further detailed in “Redeemable Noncontrolling Interests” above, the portion of periodic adjustments to the carrying amount

of redeemable noncontrolling interests based solely on a multiple of future earnings that reflect a redemption amount in excess of fair
value affect net income attributable to HEICO for purposes of determining net income per share attributable to HEICO shareholders
(see Note 13, Net Income per Share Attributable to HEICO Shareholders).

Foreign Currency Translation

All assets and liabilities of foreign subsidiaries that do not utilize the United States dollar as its functional currency are translated

at period-end exchange rates, while revenue and expenses are translated using average exchange rates for the period. Unrealized
translation gains or losses are reported as foreign currency translation adjustments through other comprehensive income in share-
holders’ equity.

Contingencies

Losses for contingencies such as product warranties, litigation and environmental matters are recognized in income when they

are probable and can be reasonably estimated. Gain contingencies are not recognized in income until they have been realized.

New Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-05, “Presen-
tation of Comprehensive Income,” which requires the presentation of total comprehensive income, the components of net income and
the components of other comprehensive income in either a single continuous statement of comprehensive income or in two separate,
but consecutive statements. ASU 2011-05 eliminates the option to present other comprehensive income and its components in the
statement of shareholders’ equity. The Company adopted ASU 2011-05 in the first quarter of fiscal 2013 and elected to make the
presentation in two separate, but consecutive statements, which had no impact on the Company’s consolidated results of operations,
financial position or cash flows.

HEICO CORPORATION

H E I C O C O R P O R A T I O N A N D S U B S I D I A R I E S

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In September 2011, the FASB issued ASU 2011-08, “Testing Goodwill for Impairment,” which is intended to reduce the complex-

ity and cost of performing a quantitative test for impairment of goodwill by permitting an entity the option to perform a qualitative
evaluation about the likelihood of goodwill impairment in order to determine whether it should calculate the fair value of a reporting
unit. The update also improves previous guidance by expanding upon the examples of events and circumstances that an entity should
consider between annual impairment tests in determining whether it is more likely than not that the fair value of a reporting unit
is less than its carrying amount. The Company adopted ASU 2011-08 in the fourth quarter of fiscal 2013 but elected to perform a
quantitative test when performing its fiscal 2013 impairment test. The adoption of this guidance had no impact on the Company’s
consolidated results of operations, financial position or cash flows.

In February 2013, the FASB issued ASU 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive

Income,” which requires disclosure about changes in and amounts reclassified out of accumulated other comprehensive income by
component. In addition, an entity is required to present, either on the face of the statement of operations or in the notes, significant
amounts reclassified out of accumulated other comprehensive income by the respective line items of net income, but only if the
amount reclassified is required to be reclassified to net income in its entirety in the same reporting period. For amounts that are not
required to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide
additional detail about those amounts. ASU 2013-02 is effective prospectively for fiscal years and interim periods within those fiscal
years beginning after December 15, 2012, or in fiscal 2014 for HEICO. Early adoption is permitted. The adoption of this guidance is
not expected to have a material impact on the Company’s consolidated results of operations, financial position or cash flows.

In March 2013, the FASB issued ASU 2013-05, “Parent’s Accounting for the Cumulative Translation Adjustment upon Derecog-
nition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity,” which clarifies the
applicable guidance for the release of any cumulative translation adjustments into net earnings. ASU 2013-05 specifies that the
entire amount of cumulative translation adjustments should be released into earnings when an entity ceases to have a controlling
financial interest in a subsidiary or group of assets within a consolidated foreign entity and the sale or transfer results in the complete
or substantially complete liquidation of the investment in the foreign entity. ASU 2013-05 is effective prospectively for fiscal years
and interim reporting periods within those years beginning after December 15, 2013, or in fiscal 2015 for HEICO. Early adoption is
permitted. The Company is currently evaluating the effect, if any, the adoption of this guidance will have on its consolidated results of
operations, financial position or cash flows.

NOTE 2 ACQUISITIONS

Reinhold Acquisition

On May 31, 2013, the Company, through its HEICO Flight Support Corp. subsidiary, acquired Reinhold Industries, Inc. (“Reinhold”)

through the acquisition of all of the outstanding stock of Reinhold’s parent company for approximately $133.0 million, net of $8.0
million of cash acquired, in a transaction carried out by means of a merger. The purchase price of this acquisition was paid in cash,
principally using proceeds from the Company’s revolving credit facility. Reinhold is a leading manufacturer of advanced niche compo-
nents and complex composite assemblies for commercial aviation, defense and space applications. This acquisition is consistent with
HEICO’s practice of acquiring outstanding, niche designers and manufacturers of critical components in the aerospace and defense
industries and will further enable the Company to broaden its product offerings, technologies and customer base.

The following table summarizes the allocation of the purchase price of Reinhold to the estimated fair values of the tangible and

identifiable intangible assets acquired and liabilities assumed (in thousands):

Assets acquired:
Goodwill
Identifiable intangible assets
Inventories
Accounts receivable
Property, plant and equipment
Other assets
Total assets acquired, excluding cash

Liabilities assumed:

Deferred income taxes
Accrued expenses
Accounts payable
Defined benefit pension plan obligation, net
Accrued additional purchase consideration
Other liabilities
Total liabilities assumed
Net assets acquired, excluding cash

$ 76,424
66,500
10,753
8,830
7,994
2,832
$ 173,333

$ 25,631
6,994
2,923
2,865
1,557
390
$ 40,360
$ 132,973

HEICO CORPORATION

The allocation of the purchase price to the tangible and identifiable assets acquired and liabilities assumed is preliminary until

the Company obtains final information regarding their fair values. However, the Company does not expect any adjustments to
such allocation to be material to the Company’s consolidated financial statements. The primary items that generated the goodwill
recognized were the premiums paid by the Company for the future earnings potential of Reinhold and the value of its assembled
workforce that do not qualify for separate recognition. The operating results of Reinhold were included in the Company’s results of
operations from the effective acquisition date. The Company’s consolidated net sales and net income attributable to HEICO for the
year ended October 31, 2013, includes approximately $30.8 million and $2.8 million, respectively, from the acquisition of Reinhold.

The following table presents unaudited pro forma financial information for fiscal 2012 as if the acquisition of Reinhold had

occurred as of November 1, 2011 (in thousands):

Year ended October 31,

Net sales
Net income from consolidated operations
Net income attributable to HEICO
Net income per share attributable to HEICO shareholders:

Basic
Diluted

2012

$ 952,184
$ 109,923
$ 88,382

$
$

1.34
1.33

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, 2011. The unaudited
pro forma financial information includes adjustments to historical amounts such as additional amortization expense related to
intangible assets acquired, increased interest expense associated with borrowings to finance the acquisition and inventory purchase
accounting adjustments charged to cost of sales as the inventory is sold. Had the acquisition been consummated as of November
1, 2011, net sales, net income from consolidated operations, net income attributable to HEICO, and basic and diluted net income per
share attributable to HEICO shareholders on a pro forma basis for the year ended October 31, 2013 would not have been materially
different than the reported amounts.

Switchcraft Acquisition

On November 22, 2011, the Company, through HEICO Electronic, acquired Switchcraft, Inc. (“Switchcraft”) through the purchase

of all of the stock of Switchcraft’s parent company, Switchcraft Holdco, Inc., for approximately $142.7 million, net of $3.7 million of
cash acquired. The purchase price of this acquisition was paid in cash, principally using proceeds from the Company’s revolving credit
facility. Switchcraft is a leading designer and manufacturer of high performance, high reliability and harsh environment electronic
connectors and other interconnect products. This acquisition is consistent with HEICO’s practice of acquiring outstanding, niche
designers and manufacturers of critical components in the aerospace and electronic industries and will further enable the Company to
broaden its product offerings, technologies and customer base.

The following table summarizes the allocation of the purchase price of Switchcraft to the estimated fair values of the tangible

and identifiable intangible assets acquired and liabilities assumed (in thousands):

Assets acquired:
Goodwill
Identifiable intangible assets
Inventories
Property, plant and equipment
Accounts receivable
Other assets
Total assets acquired, excluding cash

Liabilities assumed:

Deferred income taxes
Accrued expenses
Accounts payable
Other liabilities
Total liabilities assumed
Net assets acquired, excluding cash

$ 73,405
72,500
13,086
10,884
6,123
1,358
$ 177,356

$ 30,244
2,252
1,889
258
$ 34,643
$ 142,713

HEICO CORPORATION

H E I C O C O R P O R A T I O N A N D S U B S I D I A R I E S

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The primary items that generated the goodwill recognized were the premiums paid by the Company for the future earnings
potential of Switchcraft and the value of its assembled workforce that do not qualify for separate recognition. The operating results
of Switchcraft were included in the Company’s results of operations from the effective acquisition date. The Company’s consolidated
net sales and net income attributable to HEICO for fiscal 2012 includes approximately $54.6 million and $3.6 million, respectively,
from the acquisition of Switchcraft.

The following table presents unaudited pro forma financial information for fiscal 2011 as if the acquisition of Switchcraft had

occurred as of November 1, 2010 (in thousands):

Year ended October 31,

Net sales
Net income from consolidated operations
Net income attributable to HEICO
Net income per share attributable to HEICO shareholders:

Basic
Diluted

2012

$ 824,767
$ 100,842
$ 78,209

$
$

1.20
1.18

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, 2010. The unaudited pro forma
financial information includes adjustments to historical amounts such as additional amortization expense related to intangible assets
acquired, increased interest expense associated with borrowings to finance the acquisition and inventory purchase accounting adjust-
ments charged to cost of sales as the inventory is sold. Had the acquisition been consummated as of November 1, 2010, net sales, net
income from consolidated operations, net income attributable to HEICO, and basic and diluted net income per share attributable to HEICO
shareholders on a pro forma basis for fiscal 2012 would not have been materially different than the reported amounts.

Other Acquisitions

In October 2013, the Company acquired, through HEICO Electronic, all of the outstanding stock of Lucix Corporation (“Lucix”) in

a transaction carried out by means of a merger. Lucix is a leading designer and manufacturer of high performance, high reliability
microwave modules, units, and integrated sub-systems for commercial and military satellites. The total consideration includes an
accrual of approximately $20.7 million as of the acquisition date representing the fair value of contingent consideration in aggregate
that the Company may be obligated to pay should Lucix meet certain earnings objectives during the last three months of the calendar
year of acquisition and during the subsequent two calendar years (2014 and 2015). The maximum amount of contingent consider-
ation that the Company could be required to pay is $50.0 million in aggregate. See Note 7, Fair Value Measurements, for additional
information regarding the Company’s contingent consideration obligation.

During fiscal 2013, the Company, through subsidiaries of HEICO Electronic, acquired certain product lines that will supplement

their existing operations. The purchase price of these acquisitions was paid using cash provided by operating activities.

In October 2012, the Company, through HEICO Flight Support Corp., acquired 80.1% of the assets and assumed certain liabilities

of Action Research Corporation (“Action Research”). Action Research is an FAA-Approved Repair Station that has developed unique
proprietary repairs that extend the lives of certain engine and airframe components. The remaining 19.9% interest continues to be
owned by an existing member of Action Research’s management team. The purchase price of this acquisition was paid using cash
provided by operating activities.

In August 2012, the Company, through HEICO Flight Support Corp., acquired 84% of the assets and assumed certain liabilities of
CSI Aerospace, Inc. (“CSI Aerospace”). CSI Aerospace is a leading repair and overhaul provider of specialized components for airlines,
military and other aerospace related organizations. The remaining 16% interest continues to be owned by certain members of CSI
Aerospace’s management team.

In April 2012, the Company, through a subsidiary of HEICO Electronic, acquired certain aerospace assets of Moritz Aerospace,
Inc. (“Moritz Aerospace”) in an aerospace product line acquisition. The Moritz Aerospace product line designs and manufactures next
generation wireless cabin control systems, solid state power distribution and management systems and fuel level sensing systems
for business jets and for general aviation, as well as for the military/defense market segments. The purchase price of this acquisition
was paid using cash provided by operating activities.

In March 2012, the Company, through HEICO Electronic, acquired the business and substantially all of the assets of Ramona

Research, Inc. (“Ramona Research”). Ramona Research designs and manufactures RF and microwave amplifiers, transmitters and
receivers primarily used to support military communications on unmanned aerial systems, other aircraft, helicopters and ground-
based data/communications systems. The total consideration includes an accrual of approximately $10.8 million as of the acquisition
date representing the fair value of contingent consideration in aggregate that the Company may be obligated to pay if Ramona
Research meets certain earnings objectives during each of the first five years following the acquisition. As of the acquisition date,
the maximum amount of contingent consideration that the Company could be required to pay is $14.6 million. See Note 7, Fair Value
Measurements, for additional information regarding the Company’s contingent consideration obligation.

HEICO CORPORATION

In September 2011, the Company, through HEICO Electronic, acquired all of the outstanding capital stock of 3D Plus SA (“3D
Plus”). 3D Plus is a leading designer and manufacturer of three-dimensional microelectronic and stacked memory products used
predominately in satellites and also utilized in medical equipment.

In December 2010, the Company, through HEICO Aerospace, acquired 80.1% of the assets and assumed certain liabilities of
Blue Aerospace LLC (“Blue Aerospace”). Blue Aerospace is a supplier, distributor, and integrator of military aircraft parts and support
services primarily to foreign military organizations allied with the United States. The remaining 19.9% interest continues to be owned
by certain members of Blue Aerospace’s management team.

Unless otherwise noted, the purchase price of each of the above referenced other acquisitions was paid in cash principally using
proceeds from the Company’s revolving credit facility and is not material or significant to the Company’s consolidated financial statements.

The following table summarizes the allocation of the aggregate purchase price of the other acquisitions to the estimated fair

values of the tangible and identifiable intangible assets acquired and liabilities and noncontrolling interests assumed (in thousands):

Year ended October 31,

Assets acquired:
Goodwill

Identifiable intangible assets

Accounts receivable
Property, plant and equipment

Inventories
Other assets
Total assets acquired, excluding cash

Liabilities assumed:

Accrued additional purchase consideration
Deferred income taxes
Accrued expenses
Accounts payable
Other liabilities
Total liabilities assumed

Noncontrolling interests in consolidated subsidiaries

Acquisitions, net of cash acquired

2013

2012

2011

68,068
39,843
9,233
6,286
3,112
2,603
129,145

21,223
13,868
3,846
1,746
—
40,683

—

18,499
21,831
4,390
1,361
4,688
171
50,940

11,982
—
645
445
—
13,072

$ 49,575
40,187
9,072
10,206
16,847
1,639
$ 127,526

5,738
7,423
7,634
7,555
5,184
$ 33,534

3,918

5,921

88,462

33,950

$ 88,071

The purchase price allocation of the Company’s other fiscal 2013 acquisitions to the tangible and identifiable intangible assets
acquired and liabilities assumed is preliminary until the Company obtains final information regarding their fair values. During fiscal
2013, the Company recorded certain immaterial measurement period adjustments to the purchase price allocation of its other fiscal
2012 acquisitions, which are reflected in the table above. The primary items that generated the goodwill recognized were the premi-
ums paid by the Company for the future earnings potential of the businesses acquired and the value of their assembled workforces
that do not qualify for separate recognition, which, in the case of Blue Aerospace, CSI Aerospace and Action Research, benefit both
the Company and the noncontrolling interest holders. Based on the factors comprising the goodwill recognized and consideration of
an insignificant control premium, the fair value of the noncontrolling interest in Blue Aerospace and Action Research was determined
based on the consideration of the purchase price paid by the Company for its controlling ownership interest. The fair value of the
noncontrolling interest in CSI Aerospace was determined based on the consideration of the purchase price 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 operating results of the Company’s fiscal 2013 acquisitions were included in the Company’s results of operations from the
effective acquisition dates. The amount of net sales and earnings of the fiscal 2013 acquisitions excluding Reinhold included in the
Consolidated Statements of Operations is not material. Had the fiscal 2013 acquisitions excluding Reinhold been consummated as
of the beginning of fiscal 2012, net sales, net income from consolidated operations, net income attributable to HEICO, and basic and
diluted net income per share attributable to HEICO shareholders on a pro forma basis for fiscal 2013 and 2012 would not have been
materially different than the reported amounts.

HEICO CORPORATION

H E I C O C O R P O R A T I O N A N D S U B S I D I A R I E S

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Additional Purchase Consideration

As part of the purchase agreements associated with certain acquisitions consummated prior to fiscal 2010, the Company was
obligated to pay additional purchase consideration based on the acquired subsidiary meeting certain earnings objectives following
the acquisition. For such acquisitions, the Company accrued an estimate of additional purchase consideration when the earnings
objectives were met. During fiscal 2012 and 2011, the Company, through HEICO Electronic, paid $15.1 million and $6.6 million of
such additional purchase consideration, respectively, of which $4.8 million and $4.1 million was accrued as of October 31, 2011 and
October 31, 2010, respectively. The amounts paid in fiscal 2012 and 2011 were based on a multiple of each applicable subsidiary’s
earnings relative to target and were not contingent upon the former shareholders of the respective acquired entity remaining
employed by the Company or providing future services to the Company. Accordingly, the amounts paid were recorded as additional
goodwill as they represented an additional cost of the respective entity. As of October 31, 2013 and 2012, the Company had no
remaining obligation to pay additional purchase consideration for acquisitions consummated prior to fiscal 2010.

Pursuant to the terms of the purchase agreements related to certain fiscal 2012 and 2011 acquisitions, the Company was
obligated to pay additional purchase consideration representing the difference between the actual net assets of the acquired entity as
of the acquisition date and the amount estimated in the purchase agreement. During fiscal 2013 and fiscal 2012 , the Company paid
$1.2 million and $5.5 million of such additional purchase consideration, respectively.

NOTE 3 SELECTED FINANCIAL STATEMENT INFORMATION

Accounts Receivable

As of October 31,

(in thousands)
Accounts receivable
Less: Allowance for doubtful accounts
Accounts receivable, net

Costs and Estimated Earnings on Uncompleted Percentage-of-Completion Contracts

As of October 31,

(in thousands)
Costs incurred on uncompleted contracts
Estimated earnings

Less: Billings to date

Included in the accompanying Consolidated Balance Sheets under the following captions:
Accounts receivable, net (costs and estimated earnings in excess of billings)
Accrued expenses and other current liabilities (billings in excess of costs and estimated earnings)

2013

2012

$ 160,118
(3,096)
$ 157,022

$ 124,548
(2,334)
$ 122,214

2013

2012

22,548
25,391
47,939
(40,676)
7,263

9,540
(2,277)
7,263

6,673
6,235
12,908
(7,426)
5,482

5,482
—
5,482

As discussed in Note 2, Acquisitions, the Company acquired Lucix Corporation in October 2013, which recognizes the majority

of its revenue using the percentage-of-completion method. The acquired balances of costs incurred on uncompleted contracts,
estimated earnings, billings to date, costs and estimated earnings in excess of billings, and billings in excess of costs and estimated
earnings were $13.4 million, $15.3 million, $26.5 million, $4.7 million and $2.5 million, respectively.

Changes in estimates pertaining to percentage-of-completion contracts did not have a material effect on net income from

consolidated operations in fiscal 2013, 2012 or 2011.

Inventories

As of October 31,

(in thousands)
Finished products
Work in process
Materials, parts, assemblies and supplies
Contracts in process
Less: Billings to date

Inventories, net of valuation reserves

2013

2012

$ 103,234
26,810
79,863
9,941
(955)
$ 218,893

93,873
18,887
69,042
8,299
(397)
$ 189,704

HEICO CORPORATION

Contracts in process represents accumulated capitalized costs associated with fixed price contracts for which revenue is

recognized on the completed-contract method. Related progress billings and customer advances (“billings to date”) are classified as a
reduction to contracts in process, if any, and any excess is included in accrued expenses and other liabilities.

Property, Plant and Equipment

As of October 31,

(in thousands)
Land
Buildings and improvements
Machinery, equipment and tooling
Construction in progress

Less: Accumulated depreciation and amortization
Property, plant and equipment, net

2013

2012

4,515
60,105
131,855
4,932
201,407
(103,670)
97,737

4,505
54,322
109,041
5,599
173,467
(92,949)
80,518

The amounts set forth above include tooling costs having a net book value of $5.7 million and $6.0 million as of October 31, 2013

and 2012, respectively. Amortization expense on capitalized tooling was $2.2 million, $2.1 million and $2.1 million in fiscal 2013,
2012 and 2011, respectively.

The amounts set forth above also include $5.5 million and $5.2 million of assets under capital leases as of October 31, 2013 and

October 31, 2012, respectively. Accumulated depreciation associated with the assets under capital leases was $1.1 million and $.6
million as of October 31, 2013 and October 31, 2012, respectively. See Note 5, Long-Term Debt, for additional information pertaining
to these capital lease obligations.

Depreciation and amortization expense, exclusive of tooling, on property, plant and equipment was $13.4 million, $11.6 million

and $8.6 million in fiscal 2013, 2012 and 2011, respectively.

Accrued Expenses and Other Current Liabilities

As of October 31,

(in thousands)
Accrued employee compensation and related payroll taxes
Accrued customer rebates and credits
Deferred revenue
Accrued additional purchase consideration
Other
Accrued expenses and other current liabilities

2013

2012

52,435
14,787
11,529
9,142
17,841
$ 105,734

41,307
10,833
6,442
2,917
14,742
76,241

The increase in accrued employee compensation and related payroll taxes principally reflects a higher level of accrued per-
formance awards based on the improved consolidated operating results. The total customer rebates and credits deducted within
net sales in fiscal 2013, 2012 and 2011 was $8.3 million, $2.8 million and $8.7 million, respectively. The principal reason why the
amount of customer rebates and credits deducted within net sales in fiscal 2012 is less than it was in fiscal 2013 and 2011 is fiscal
2012 reflected a reduction in the net sales volume of certain customers eligible for rebates as well as a reduction in the associated
rebate percentages. The increase in accrued additional purchase consideration principally reflects the estimated amount of contin-
gent consideration related to a fiscal 2013 acquisition. See Note 7, Fair Value Measurements, for additional information regarding the
Company’s contingent consideration obligations.

HEICO CORPORATION

H E I C O C O R P O R A T I O N A N D S U B S I D I A R I E S

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other Long-Term Assets and Liabilities

The Company provides eligible employees, officers and directors of the Company the opportunity to voluntarily defer base salary,

bonus payments, commissions, long-term incentive awards and directors fees, as applicable, on a pre-tax basis through the HEICO
Corporation Leadership Compensation Plan (“LCP”), a nonqualified deferred compensation plan that conforms to Section 409A of
the Internal Revenue Code. The Company matches 50% of the first 6% of base salary deferred by each participant. Director fees that
would otherwise be payable in Company common stock may be deferred into the LCP, and, when distributable, are distributed in
actual shares of Company common stock. The LCP does not provide for diversification of a director’s assets allocated to Company
common stock. The deferred compensation obligation associated with Company common stock is recorded as a component of
shareholders’ equity at cost and subsequent changes in fair value are not reflected in operations or shareholders’ equity of the
Company. Further, while the Company has no obligation to do so, the LCP also provides the Company the opportunity to make
discretionary contributions. The Company’s matching contributions and any discretionary contributions are subject to vesting and
forfeiture provisions set forth in the LCP. Company contributions to the LCP charged to income in fiscal 2013, 2012 and 2011 totaled
$4.3 million, $3.8 million and $3.6 million, respectively. The aggregate liabilities of the LCP were $51.9 million and $36.5 million as of
October 31, 2013 and 2012, respectively, and are classified within other long-term liabilities in the Company’s Consolidated Balance
Sheets. The assets of the LCP, totaling $52.7 million and $37.1 million as of October 31, 2013 and 2012, respectively, are classified
within other assets and principally represent cash surrender values of life insurance policies that are held within an irrevocable trust
that may be used to satisfy the obligations under the LCP.

Other long-term liabilities also includes deferred compensation of $5.0 million and $4.2 million as of October 31, 2013 and
2012, respectively, principally related to elective deferrals of salary and bonuses under a Company sponsored non-qualified deferred
compensation plan available to selected employees. The Company makes no contributions to this plan. The assets of this plan, which
equaled the deferred compensation liability as of October 31, 2013 and 2012, respectively, are held within an irrevocable trust and
classified within other assets in the Company’s Consolidated Balance Sheets. Additional information regarding the assets of this
deferred compensation plan and the LCP may be found in Note 7, Fair Value Measurements.

NOTE 4 GOODWILL AND OTHER INTANGIBLE ASSETS

Changes in the carrying amount of goodwill during fiscal 2013 and 2012 by operating segment are as follows (in thousands):

Balances as of October 31, 2011
Goodwill acquired
Adjustments to goodwill
Foreign currency translation adjustments
Balances as of October 31, 2012
Goodwill acquired
Adjustments to goodwill
Foreign currency translation adjustments
Balances as of October 31, 2013

Segment

FSG

$ 192,357
10,873
309
—
203,539
76,424
(108)
—
$ 279,855

ETG

$ 251,045
81,139
10,513
(4,122)
338,575
68,068
—
1,991
$ 408,634

Consolidated
Totals

$ 443,402
92,012
10,822
(4,122)
542,114
144,492
(108)
1,991
$ 688,489

The goodwill acquired during fiscal 2013 and 2012 relates to the acquisitions consummated in those respective years as

described in Note 2, Acquisitions. Goodwill acquired represents the residual value after the allocation of the total consideration
to the tangible and identifiable intangible assets acquired and liabilities assumed. The adjustments to goodwill during fiscal 2013
represent immaterial measurement period adjustments to the purchase price allocations of certain fiscal 2012 acquisitions. The
adjustments to goodwill during fiscal 2012 principally represent additional purchase consideration paid relating to a pre-fiscal
2010 acquisition for which the earnings objectives were met in fiscal 2012 as well as immaterial measurement period adjustments
to the purchase price allocations of the fiscal 2011 acquisitions. See Note 2, Acquisitions, for additional information regarding ad-
ditional purchase consideration. The foreign currency translation adjustments reflect unrealized translation gains on the goodwill
recognized in connection with foreign subsidiaries. Foreign currency translation adjustments are included in other comprehensive
income in the Company’s Consolidated Statements of Comprehensive Income. The Company estimates that approximately $5
million and $21 million of the goodwill recognized in fiscal 2013 and 2012, respectively, will be deductible for income tax purposes.
Based on the annual test for goodwill impairment as of October 31, 2013, the Company determined there is no impairment of its
goodwill and the fair value of each of the Company’s reporting units significantly exceeded their carrying value.

HEICO CORPORATION

Identifiable intangible assets consist of (in thousands):

Amortizing Assets:
Customer relationships
Intellectual property

Licenses
Non-compete agreements
Patents
Trade names

Non-Amortizing Assets:
Trade names

As of October 31, 2013

As of October 31, 2012

Gross
Carrying
Amount

$ 156,801
75,095
2,900
1,132
642
566
237,136

Accumulated
Amortization

Net
Carrying
Amount

Gross
Carrying
Amount

Accumulated
Amortization

($ 38,461)
(10,795)
(1,381)
(1,132)
(351)
(448)
(52,568)

$ 118,340
64,300
1,519
—
291
118
184,568

$ 102,172
43,093
2,900
1,339
589
566
150,659

($ 24,038)
(5,738)
(1,117)
(1,320)
(309)
(336)
(32,858)

Net
Carrying
Amount

$ 78,134
37,355
1,783
19
280
230
117,801

56,990
$ 294,126

—
($ 52,568)

56,990
$ 241,558

36,523
$ 187,182

—
($ 32,858)

36,523
$ 154,324

The increase in the gross carrying amount of customer relationships, intellectual property, and non-amortizing trade names as

of October 31, 2013 compared to October 31, 2012 principally relates to such intangible assets recognized in connection with the
acquisitions made during fiscal 2013 (see Note 2, Acquisitions). The weighted average amortization period of the customer relation-
ships and intellectual property acquired during fiscal 2013 is 9 years and 11 years, respectively.

Amortization expense related to intangible assets was $20.6 million, $16.2 million and $7.6 million for the fiscal years ended
October 31, 2013, 2012 and 2011, respectively. Amortization expense for each of the next five fiscal years and thereafter is esti-
mated to be $28.0 million in fiscal 2014, $26.1 million in fiscal 2015, $24.2 million in fiscal 2016, $23.1 million in fiscal 2017, $20.9
million in fiscal 2018 and $62.3 million thereafter.

During fiscal 2011, the Company recognized impairment losses of approximately $4.3 million, $.5 million and $.2 million from

the write-down of certain customer relationships, intellectual property and trade names, respectively. The impairment losses
recognized in fiscal 2011 were within the ETG and due to reductions in the future cash flows associated with such intangible assets.
The impairment losses pertaining to customer relationships and trade names were recorded as a component of selling, general and
administrative expenses in the Company’s Consolidated Statements of Operations and the impairment losses pertaining to intellectu-
al property were recorded as a component of cost of goods sold.

NOTE 5 LONG-TERM DEBT

Long-term debt consists of the following (in thousands):

As of October 31,

Borrowings under revolving credit facility
Capital leases and notes payable

Less: Current maturities of long-term debt

2013

$ 373,000
4,515
377,515
(697)
$ 376,818

2012

$ 127,000
4,820
131,820
(626)
$ 131,194

As of October 31, 2013, the aggregate amount of long-term debt, excluding capital leases, that will mature within the next five

years is $.1 million in fiscal 2014, $.1 million in fiscal 2015, $.2 million in fiscal 2016, $.2 million in fiscal 2017 and $0.0 million in fiscal
2018. The aforementioned information has been adjusted to reflect an extension of the maturity date of the Company’s revolving
credit facility as further discussed below.

Capital Lease Obligations

In connection with an acquisition, the Company assumed a capital lease for a manufacturing facility and related property in
France. The lease contains a bargain purchase option and has a twelve-year term, which began in February 2011. Additionally, the
acquisition resulted in the Company assuming various capital leases for manufacturing equipment. The manufacturing equipment
leases have terms ranging from approximately three to five years. The estimated future minimum lease payments of all capital leases
for the next five fiscal years and thereafter are as follows (in thousands):

HEICO CORPORATION

H E I C O C O R P O R A T I O N A N D S U B S I D I A R I E S

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Year ending October 31,

2014
2015
2016
2017
2018
Thereafter
Total minimum lease payments
Less: amount representing interest
Present value of minimum lease payments

Revolving Credit Facility

$ 732
588
538
449
442
1,827
4,576
(716)
$ 3,860

In December 2011, the Company entered into a $670 million Revolving Credit Agreement (“Credit Facility”) with a bank syndicate.
The Credit Facility may be used for working capital and general corporate needs of the Company, including capital expenditures and to
finance acquisitions. In December 2012, the Company entered into an amendment to extend the maturity date of the Credit Facility
by one year to December 2017. The Company also amended certain covenants contained within the Credit Facility agreement to
accommodate payment of a special and extraordinary cash dividend paid in December 2012. See Note 8, Shareholders’ Equity, for
additional information.

On November 22, 2013, the Company entered into an amendment to extend the maturity date of the Credit Facility by one year
to December 2018 and to increase the aggregate principal amount to $800 million. Furthermore, the amendment includes a feature
that will allow the Company to increase the aggregate principal amount by an additional $200 million to become a $1.0 billion facility
through increased commitments from existing lenders or the addition of new lenders.

Advances under the Credit Facility accrue interest at the Company’s choice of the “Base Rate” or the London Interbank Offered
Rate (“LIBOR”) plus applicable margins (based on the Company’s ratio of total funded debt to earnings before interest, taxes, depre-
ciation and amortization, noncontrolling interests and non-cash charges, or “leverage ratio”). The Base Rate is the highest of (i) the
Prime Rate; (ii) the Federal Funds rate plus .50% per annum; and (iii) the Adjusted LIBO Rate determined on a daily basis for an Interest
Period of one month plus 1.00% per annum, as such capitalized terms are defined in the Credit Facility. The applicable margins for
LIBOR-based borrowings range from .75% to 2.25%. The applicable margins for Base Rate borrowings range from 0% to 1.25%. A fee
is charged on the amount of the unused commitment ranging from .125% to .35% (depending on the Company’s leverage ratio). The
Credit Facility also includes a $50 million sublimit for borrowings made in foreign currencies, letters of credit and swingline borrow-
ings. 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
restrict the amount of certain payments, including dividends, and require, among other things, the maintenance of a total leverage
ratio, a senior leverage ratio and a fixed charge coverage ratio. In the event the Company’s leverage ratio exceeds a specified level, the
Credit Facility would become secured by the capital stock owned in substantially all of the Company’s subsidiaries.

As of October 31, 2013 and 2012, the weighted average interest rate on borrowings under the Credit Facility was 1.3% and 1.2%,

respectively. The Credit Facility contains both financial and non-financial covenants. As of October 31, 2013, the Company was in
compliance with all such covenants.

NOTE 6 INCOME TAXES

The components of the provision for income taxes on income before income taxes and noncontrolling interests are as follows

(in thousands):

Year ended October 31,

Current:
Federal
State
Foreign

Deferred

Total income tax expense

2013

2012

2011

$ 49,275
9,060
3,650
61,985
(5,785)
$ 56,200

$ 48,461
7,516
1,357
57,334
(2,834)
$ 54,500

$ 38,002
4,008
861
42,871
29
$ 42,900

HEICO CORPORATION

A reconciliation of the federal statutory income tax rate to the Company’s effective tax rate is as follows:

Year ended October 31,

Federal statutory income tax rate
State taxes, less applicable federal income tax reduction
Net tax benefit on qualified research and development activities
Net tax benefit on corporate owned life insurance policies
Net tax benefit on noncontrolling interests’ share of income
Net tax benefit on qualified domestic production activities
Other, net

Effective tax rate

2013

35.0%
3.1
(2.6)
(1.4)
(1.3)
(1.2)
(.5)
31.1%

2012

35.0%
3.1
(1.7)
(0.5)
(1.7)
(1.3)
.9
33.8%

2011

35.0%
1.8
(2.7)
(0.1)
(2.5)
(1.0)
.5
31.0%

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for

financial reporting purposes and the amounts used for income tax purposes. The Company believes that it is more likely than not that it
will generate sufficient future taxable income to utilize all of its deferred tax assets and has therefore not recorded a valuation allowance
on any such asset. Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands):

2013

2012

As of October 31,

Deferred tax assets:
Deferred compensation liability

Inventories

Stock option compensation
R&D carryforward and credit
Bonus accrual
Customer rebates accrual
Vacation accrual
Capital lease obligations
Other

Total deferred tax assets

Deferred tax liabilities:
Goodwill and other intangible assets
Property, plant and equipment
Other

Total deferred tax liabilities
Net deferred tax liability

$ 22,242
21,673
5,002
4,045
3,394
2,706
1,676
1,313
6,645
68,696

(148,711)
(12,486)
(1,154)
(162,351)
($ 93,655)

$ 15,805
18,536
3,151
3,432
2,671
2,029
1,288
1,412
3,768
52,092

(102,829)
(8,950)
(712)
(112,491)
($ 60,399)

2012

$ 27,545
2,492
(90,436)
($ 60,399)

The net deferred tax liability is classified in the Company’s Consolidated Balance Sheets as follows (in thousands):

As of October 31,

Current asset
Long-term asset
Long-term liability
Net deferred tax liability

2013

$ 33,036
1,791
(128,482)
($ 93,655)

The increase in the Company’s net deferred tax liability from $60.4 million as of October 31, 2012 to $93.7 million as of October

31, 2013 is principally related to the net deferred tax liabilities recognized in connection with the acquisitions of Reinhold and Lucix
(see Note 2, Acquisitions), partially offset by an increase in the deferred tax asset related to a higher deferred compensation liability
for the HEICO Corporation Leadership Compensation Plan (“LCP”). The deferred income tax benefit recognized in fiscal 2013 principal-
ly reflects the increase in the deferred tax asset related to the higher LCP liability resulting from both increased investment earnings
and plan contributions.

HEICO CORPORATION

H E I C O C O R P O R A T I O N A N D S U B S I D I A R I E S

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of October 31, 2013 and 2012, the Company’s liability for gross unrecognized tax benefits related to uncertain tax positions

was $1.1 million and $2.5 million, respectively, of which $.8 million and $1.7 million, respectively, would decrease the Company’s
income tax expense and effective income tax rate if the tax benefits were recognized. A reconciliation of the activity related to the
liability for gross unrecognized tax benefits during the fiscal years ended October 31, 2013 and 2012 is as follows (in thousands):

Year ended October 31,

Balances as of beginning of year
Increases related to prior year tax positions
Decreases related to prior year tax positions
Increases related to current year tax positions
Settlements
Lapse of statutes of limitations
Balances as of end of year

2013

$ 2,527
58
(967)
108
(570)
(84)
$ 1,072

2012

$ 1,834
1,281
(240)
299
(52)
(595)
$ 2,527

The decreases related to settlements and prior year tax positions recognized in fiscal 2013 pertain to state income tax positions
regarding nexus and state apportionment, respectively, which were originally recognized in fiscal 2012 and resolved through the filing
of state income tax returns in fiscal 2013 and the finalization of a state tax audit, respectively.

The Company’s net liability for unrecognized tax benefits was $1.0 million as of October 31, 2013, including $.3 million of interest

and penalties and net of $.4 million in deferred tax assets. The Company’s net liability for unrecognized tax benefits was $2.3 million
as of October 31, 2012, including $.7 million of interest and penalties and net of $1.0 million in deferred tax assets. The Company
recognized interest and penalties of ($.2) million, $.4 million and less than $.1 million in fiscal 2013, 2012 and 2011, respectively,
related to unrecognized tax benefits.

The Company’s effective tax rate in fiscal 2013 decreased to 31.1% from 33.8% in fiscal 2012. The decrease is partially due to an

income tax credit for qualified research and development activities for the last ten months of fiscal 2012 that was recognized in the
first quarter of fiscal 2013 pursuant to the retroactive extension of Section 41 of the Internal Revenue Code, “Credit for Increasing
Research Activities,” in January 2013 to cover a two-year period from January 1, 2012 to December 31, 2013. The decrease in the
effective tax rate was also attributed to the benefit from higher tax-exempt unrealized gains in the cash surrender values of life
insurance policies related to the LCP and an income tax deduction under Section 404(k) of the Internal Revenue Code for the one-time
special and extraordinary cash dividend paid in December 2012 to participants of the HEICO Savings and Investment Plan holding
HEICO common stock.

The Company’s effective tax rate increased to 33.8% in fiscal 2012 from 31.0% in fiscal 2011. The change in the effective tax
rate is partially attributed to the retroactive extension of Section 41 of the Internal Revenue Code, “Credit for Increasing Research
Activities,” to cover the period from January 1, 2010 to December 31, 2011, which resulted in the recognition of an income tax credit
for qualified research and development activities for the last ten months of fiscal 2010 in the first quarter of fiscal 2011 and reduced
the recognition of such income tax credit to just the first two months of qualifying research and development activities in fiscal 2012.
In addition, the Company purchased certain noncontrolling interests during fiscal 2011 and 2012 that contributed to the comparative
increase in the effective tax rate for fiscal 2012. Further, the increase also reflects a higher effective state income tax rate principally
because fiscal 2011 includes the aforementioned benefit from state income apportionment updates recognized upon the filing of the
Company’s fiscal 2010 state tax returns and the amendment of certain prior year state tax returns in the third quarter of fiscal 2011
and fiscal 2012 includes the effect of a fiscal 2012 acquisition and changes in certain state tax laws which impacted state apportion-
ment factors.

The Company files income tax returns in the United States (“U.S.”) federal jurisdiction and in multiple state jurisdictions. The
Company is also subject to income taxes in certain jurisdictions outside the U.S., none of which are individually material to the accom-
panying consolidated financial statements. Generally, the Company is no longer subject to U.S. federal, state or foreign examinations
by tax authorities for years prior to fiscal 2009.

The total amount of unrecognized tax benefits can change due to audit settlements, tax examination activities, lapse of applica-
ble statutes of limitations and the recognition and measurement criteria under the guidance related to accounting for uncertainty in
income taxes. The Company is unable to estimate what this change could be within the next twelve months, but does not believe it
would be material to its consolidated financial statements.

HEICO CORPORATION

NOTE 7 FAIR VALUE MEASUREMENTS

The following tables set forth by level within the fair value hierarchy, the Company’s assets and liabilities that were measured at

fair value on a recurring basis (in thousands):

Quoted Prices

Significant

As of October 31, 2013

Assets:
Deferred compensation plans:

Corporate owned life insurance
Equity securities
Mutual funds
Money market funds and cash
Other

Total assets

Liabilities:
Contingent consideration

Assets:
Deferred compensation plans:

Corporate owned life insurance
Equity securities
Mutual funds
Money market funds and cash
Other

Total assets

Liabilities:
Contingent consideration

in Active Markets Other Observable Unobservable
for Identical Assets
(Level 1)

Inputs
(Level 3)

Inputs
(Level 2)

$ —
1,940
1,529
1,470
—
$ 4,939

$ 52,655
—
—
—
46
$ 52,701

$ —
—
—
—
—
$ —

Total

$ 52,655
1,940
1,529
1,470
46
$ 57,640

$ —

$ 29,310

Quoted Prices

Significant

As of October 31, 2012

in Active Markets Other Observable Unobservable
for Identical Assets
(Level 1)

Inputs
(Level 3)

Inputs
(Level 2)

$ —
991
1,154
1,122
—
$ 3,267

$ 37,086
—
—
—
442
$ 37,528

$ —
—
—
—
538
538

Total

$ 37,086
991
1,154
1,122
980
$ 41,333

$ —

$ 10,897

The Company maintains two non-qualified deferred compensation plans. The assets of the HEICO Corporation Leadership Com-
pensation Plan (the “LCP”) represent cash surrender values of life insurance policies, which derive their fair values from investments
in mutual funds that are managed by an insurance company and are classified within Level 2 and valued using a market approach.
The assets of the Company’s other deferred compensation plan are principally invested in equity securities, mutual funds and money
market funds that are classified within Level 1. The assets of both plans are held within irrevocable trusts and classified within other
assets in the Company’s Consolidated Balance Sheets.

As part of the agreement to acquire a subsidiary by the ETG in fiscal 2012, the Company may be obligated to pay contingent
consideration of up to $12.9 million in aggregate should the acquired entity meet certain earnings objectives during each of the next
four years following the first anniversary date of the acquisition. The $8.6 million estimated fair value of the contingent consideration
as of October 31, 2013 is classified within Level 3 and was determined using a probability-based scenario analysis approach. Under
this method, a set of discrete potential future subsidiary earnings was determined using internal estimates based on various revenue
growth rate assumptions for each scenario that ranged from a compound annual growth rate of negative 5% to positive 19%. A proba-
bility of likelihood was assigned to each discrete potential future earnings estimate and the resultant contingent consideration was
calculated. The resulting probability-weighted contingent consideration amounts were discounted using a weighted average discount
rate of 3.0% reflecting the credit risk of a market participant. 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 and such changes will be recorded
in the Company’s consolidated statements of operations. The $1.7 million decrease in the fair value of the contingent consideration
since October 31, 2012 is principally attributed to lower year one actual earnings and year two forecasted earnings of the subsidiary
due to reductions in United States defense spending and was recorded to selling, general and administrative expenses in the Com-
pany’s Consolidated Statement of Operations. As of October 31, 2013, the estimated amount of such contingent consideration to be
paid is included in other long-term liabilities in the Company’s Consolidated Balance Sheet.

HEICO CORPORATION

H E I C O C O R P O R A T I O N A N D S U B S I D I A R I E S

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As part of the agreement to acquire a subsidiary by the ETG in fiscal 2013, the Company may be obligated to pay contingent
consideration of up to $50.0 million in aggregate should the acquired entity meet certain earnings objectives during the last three
months of the calendar year of acquisition and during the subsequent two calendar years (2014 and 2015). The $20.7 million
estimated fair value of the contingent consideration as of October 31, 2013 is classified within Level 3 and was determined using a
probability-based scenario analysis approach. Under this method, a set of discrete potential future subsidiary earnings was deter-
mined using internal estimates based on various revenue growth rate assumptions for each scenario that ranged from a compound
annual growth rate of negative 4% to positive 31%. A probability of likelihood was assigned to each discrete potential future earnings
estimate and the resultant contingent consideration was calculated. The resulting probability-weighted contingent consideration
amounts were discounted using a weighted average discount rate of 2.5% reflecting the credit risk of a market participant. 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 and such changes will be recorded in the Company’s consolidated statements of operations. As of October 31,
2013, the estimated amount of such contingent consideration to be paid within the next twelve months of $7.0 million is included in
accrued expenses and other current liabilities and the remaining $13.7 million is included in other long-term liabilities in the Compa-
ny’s Consolidated Balance Sheet.

Changes in the Company’s assets and liabilities measured at fair value on a recurring basis using unobservable inputs (Level 3) for

the fiscal years ended October 31, 2013 and 2012 are as follows (in thousands):

Balances as of October 31, 2011
Contingent consideration related to acquisition
Increase in value of contingent consideration
Total unrealized losses
Balances as of October 31, 2012
Contingent consideration related to acquisition
Payment of contingent consideration
Decrease in value of contingent consideration, net
Total realized gains
Sales
Balances as of October 31, 2013

Assets

573
—
—
(35)
538
—
—
—
48
(586)
—

Liabilities

$
—
10,778
119
—
10,897
20,654
(601)
(1,640)
—
—
$ 29,310

The Company did not have any transfers between Level 1 and Level 2 fair value measurements during fiscal 2013 and 2012.

The carrying amounts of the Company’s cash and cash equivalents, accounts receivable, trade accounts payable and accrued

expenses and other current liabilities approximate fair value as of October 31, 2013 due to the relatively short maturity of the
respective instruments. The carrying value of long-term debt approximates fair value due to its variable interest rates.

During fiscal 2011, certain intangible assets within the ETG were measured at fair value on a nonrecurring basis resulting in the
recognition of impairment losses aggregating $5.0 million (See Note 4, Goodwill and Other Intangible Assets). The fair value of each
asset was determined using a discounted cash flow model and internal estimates of each asset’s future cash flows.

NOTE 8 SHAREHOLDERS’ EQUITY

Preferred Stock Purchase Rights Plan

The Company’s Board of Directors adopted, as of November 2, 2003, a Shareholder Rights Agreement (the “2003 Plan”). Pur-

suant to the 2003 Plan, the Board declared a dividend of one preferred share purchase right for each outstanding share of Common
Stock and Class A Common Stock (with the preferred share purchase rights collectively as the “Rights”). The Rights trade with the
common stock and are not exercisable or transferable apart from the Common Stock and Class A Common Stock until after a person
or group either acquires 15% or more of the outstanding common stock or commences or announces an intention to commence a
tender offer for 15% or more of the outstanding common stock.

The Rights expired on November 2, 2013. The Rights had certain anti-takeover effects and, therefore, would have caused
substantial dilution to a person or group who attempted to acquire the Company on terms not approved by the Company’s Board of
Directors or who acquired 15% or more of the outstanding common stock without approval of the Company’s Board of Directors. The
Rights would not have interfered with any merger or other business combination that was approved by the Board since they may
have been redeemed by the Company at $.01 per Right at any time until the close of business on the tenth day after a person or group
had obtained beneficial ownership of 15% or more of the outstanding common stock or until a person commenced or announced an
intention to commence a tender offer for 15% or more of the outstanding common stock. The 2003 Plan also contained a provision to
help ensure a potential acquirer pays all shareholders a fair price for the Company.

HEICO CORPORATION

Common Stock and Class A Common Stock

Each share of Common Stock is entitled to one vote per share. Each share of Class A Common Stock is entitled to a 1/10 vote
per share. Holders of the Company’s Common Stock and Class A Common Stock are entitled to receive when, as and if declared by
the Board of Directors, dividends and other distributions payable in cash, property, stock or otherwise. In the event of liquidation,
after payment of debts and other liabilities of the Company, and after making provision for the holders of preferred stock, if any, the
remaining assets of the Company will be distributable ratably among the holders of all classes of common stock.

Stock Splits

Share Repurchases

In 1990, the Company’s Board of Directors authorized a share repurchase program, which allows the Company to repurchase
Company shares in the open market or in privately negotiated transactions at the Company’s discretion, subject to certain restrictions
included in the Company’s revolving credit agreement. As of October 31, 2013, the maximum number of shares that may yet be
purchased under this program was 2,501,813 of either or both of the Company’s Class A Common Stock and the Company’s Common
Stock. The repurchase program does not have a fixed termination date. During fiscal 2013, 2012 and 2011, the Company did not
repurchase any shares of Company common stock under this program.

During fiscal 2013, the Company repurchased an aggregate 36,354 shares of Common Stock at a total cost of $1.3 million and
an aggregate 39,965 shares of Class A Common Stock at a total cost of $1.1 million. During fiscal 2012, the Company repurchased
an aggregate 3,808 shares of Common Stock at a total cost of approximately $.1 million and an aggregate 7,510 shares of Class A
Common Stock at a total cost of $.2 million. During fiscal 2011, the Company repurchased an aggregate 420,066 shares of Common
Stock at a total cost of approximately $13.6 million and an aggregate 34,843 shares of Class A Common Stock at a total cost of
approximately $.7 million. The transactions in fiscal 2013, 2012 and 2011 occurred as settlement for employee taxes due pertaining
to exercises of non-qualified stock options, did not impact the number of shares authorized for future purchase under the Company’s
share repurchase program, and are reflected as redemptions of common stock related to stock option exercises in the Company’s
Consolidated Statements of Shareholders’ Equity and the Company’s Consolidated Statements of Cash Flows.

In December 2012, the Company paid a special and extraordinary $1.712 per share cash dividend on both classes of HEICO

common stock as well as a regular semi-annual $.048 per share cash dividend that was accelerated from January 2013. The divi-
dends, which aggregated $116.6 million, were funded from borrowings under the Company’s revolving credit facility.

NOTE 9 STOCK OPTIONS

The Company currently has one stock option plan, the HEICO Corporation 2012 Incentive Compensation Plan (“2012 Plan”), un-
der which stock options may be granted. The 2012 Plan became effective in March 2012, the same time the Company’s 2002 Stock
Option Plan (“2002 Plan”) and its remaining 2.0 million unissued shares expired. Also, in March 2012, the Company made a decision
to no longer issue options under its Non-Qualified Stock Option Plan (“NQSOP”) under which less than .1 million remaining unissued
shares were cancelled. Options outstanding under the 2002 Plan and NQSOP may be exercised pursuant to their terms. The total
number of shares approved by the shareholders of the Company for the 2012 Plan is 2.7 million plus any options outstanding under
the 2002 Plan and NQSOP as of the 2012 Plan’s effective date and that are subsequently forfeited or expire. A total of 5.0 million
shares of the Company’s common stock are reserved for issuance to employees, directors, officers and consultants as of October 31,
2013, including 3.1 million shares currently under option and 1.8 million shares available for future grants.

Stock options granted pursuant to the 2012 Plan may be designated as Common Stock and/or Class A Common Stock in such

proportions as shall be determined by the Board of Directors or the Stock Option Plan Committee at its sole discretion. The exercise
price per share of a stock option granted under the 2012 Plan may not be less than the fair market value of the designated class of
Company common stock as of the date of grant and stock option grants vest ratably over a period specified as of the date of grant
(generally five years) and expire ten years after the date of grant. Options issued under the 2012 Plan may be designated as incentive
stock options or non-qualified stock options, but only employees are eligible to receive incentive stock options. The 2012 Plan will
terminate no later than the tenth anniversary of its effective date.

HEICO CORPORATION

H E I C O C O R P O R A T I O N A N D S U B S I D I A R I E S

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Information concerning stock option activity for each of the last three fiscal years ended October 31 is as follows (in thousands,

except per share data):

Outstanding as of October 31, 2010
Granted
Cancelled
Exercised
Outstanding as of October 31, 2011
Shares approved by the Shareholders for the 2012 Incentive Compensation Plan
Granted
Cancelled unissued shares under the NQSOP
Expired unissued shares under the 2002 Plan
Exercised
Outstanding as of October 31, 2012
Granted
Exercised
Outstanding as of October 31, 2013

Shares Available
For Grant
2,822
(739)
—
—
2,083
2,656
(323)
(23)
(2,004)
—
2,389
(549)
—
1,840

Shares Under Option

Shares
4,175
739
(4)
(2,017)
2,893
—
323
—
—
(317)
2,899
549
(306)
3,142

Weighted Average
Exercise Price
$ 7.74
$ 25.80
$ 3.96
$ 4.68
$ 14.50
$ —
$ 24.97
$ —
$ —
$ 3.22
$ 16.90
$ 35.74
$ 3.78
$ 21.48

Information concerning stock options outstanding (all of which are vested or expected to vest) and stock options exercisable by

class of common stock as of October 31, 2013 is as follows (in thousands, except per share and contractual life data):

Common Stock
Class A Common Stock

Number
Outstanding
1,484
1,658
3,142

Number
Exercisable
918
614
1,532

Options Outstanding

Weighted
Average
Exercise Price
$ 21.14
$ 21.78
$ 21.48

Weighted Average
Remaining Contractual
Life (Years)
6.3
7.3
6.8

Options Exercisable

Weighted
Average
Exercise Price
$ 16.77
$ 13.43
$ 15.43

Weighted Average
Remaining Contractual
Life (Years)
5.5
5.2
5.4

Aggregate
Intrinsic
Value
$ 48,139
28,752
$ 76,891

Aggregate
Intrinsic
Value
$ 33,784
15,698
$ 49,482

Information concerning stock options exercised is as follows (in thousands):

Year ended October 31,

Cash proceeds from stock option exercises
Tax benefit realized from stock option exercises
Intrinsic value of stock option exercises

2013

463
5,191
8,033

2012

833
$
13,164
7,008

2011

$ 2,167
7,703
48,952

Net income attributable to HEICO for the fiscal years ended October 31, 2013, 2012 and 2011 includes compensation expense

of $5.1 million, $3.9 million and $2.6 million, respectively, and an income tax benefit of $2.0 million, $1.5 million and $1.0 million,
respectively, related to the Company’s stock options. Substantially all of the stock option compensation expense was recorded
as a component of selling, general and administrative expenses in the Company’s Consolidated Statements of Operations. As of
October 31, 2013, there was $18.8 million of pre-tax unrecognized compensation expense related to nonvested stock options, which
is expected to be recognized over a weighted average period of approximately 3.7 years. The total fair value of stock options that
vested in fiscal 2013, 2012 and 2011 was $4.5 million, $3.6 million and $2.1 million, respectively. If there were a change in control of
the Company, all of the unvested options outstanding as of October 31, 2013 would become immediately exercisable.

For the fiscal years ended October 31, 2013, 2012 and 2011, the excess tax benefit resulting from tax deductions in excess of
the cumulative compensation cost recognized for stock options exercised was $5.1 million, $12.1 million and $6.3 million, respectively,
and is presented as a financing activity in the Company’s Consolidated Statements of Cash Flows.

HEICO CORPORATION

The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option-pricing model based

on the following weighted average assumptions for the fiscal years ended October 31, 2013, 2012 and 2011:

2013

Class A
Common
Stock

38.40%
1.85%
.33%
.00%
7
14.29

Common
Stock
39.94%
2.02%
.24%
.00%
9
20.24

2012
Class A
Common
Stock
40.11%
1.19%
.32%
.00%
7
10.20

2011

Class A
Common
Stock

38.92%
2.74%
.33%
.00%
7
9.25

Common
Stock
41.17%
1.64%
.26%
.00%
9
$ 14.67

Expected stock price volatility
Risk-free interest rate
Dividend yield
Forfeiture rate
Expected option life (years)
Weighted average fair value

NOTE 10 RETIREMENT PLANS

The Company has a qualified defined contribution retirement plan (the “401(k) Plan”) under which eligible employees of the
Company and its participating subsidiaries may make Elective Deferral Contributions up to the limitations set forth in Section 402(g)
of the Internal Revenue Code. The Company generally makes a 25% or 50% Employer Matching Contribution, as determined by
the Board of Directors, based on a participant’s Elective Deferral Contribution up to 6% of the participant’s Compensation for the
Elective Deferral Contribution period. The Employer Matching Contribution may be contributed to the 401(k) Plan in the form of the
Company’s common stock or cash, as determined by the Company. The Company’s match of a portion of a participant’s contribution
is invested in Company common stock and is based on the fair value of the shares as of the date of contribution. The 401(k) Plan also
provides that the Company may contribute to the 401(k) Plan additional amounts in its common stock or cash at the discretion of the
Board of Directors. Employee contributions cannot be invested in Company common stock.

Participants receive 100% vesting of employee contributions and cash dividends received on Company common stock. Vesting
in Company contributions is based on a participant’s number of years of vesting service. Contributions to the 401(k) Plan charged to
income in fiscal 2013 and fiscal 2012 totaled $3.2 million and $3.0 million, respectively, and were made through the issuance of new
shares of Company common stock and the use of forfeited shares within the 401(k) Plan. Contributions to the 401(k) Plan charged to
income in fiscal 2011 was less than $.1 million and was made with the use of forfeited shares within the 401(k) Plan.

In connection with the acquisition of Reinhold (see Note 2, Acquisitions), the Company assumed Reinhold’s frozen qualified
defined benefit pension plan (the “Plan”). The Plan’s benefits are based on employee compensation and years of service. However,
since the Plan was closed to new participants effective December 31, 2004, the accrued benefit for Plan participants was fixed as
of the date of acquisition and therefore the Plan’s accumulated benefit obligation is equal to the projected benefit obligation. The
acquired projected benefit obligation and plan assets were recorded at fair value as of the acquisition date.

Changes in the Plan’s projected benefit obligation and plan assets since the acquisition are as follows (in thousands):

Change in projected benefit obligation:
Acquired projected benefit obligation
Actuarial gain
Interest cost
Benefits paid
Projected benefit obligation as of October 31, 2013

Change in plan assets:
Acquired plan assets
Actual return on plan assets
Benefits paid
Fair value of plan assets as of October 31, 2013

Funded status as of October 31, 2013

$ 14,539
(1,165)
236
(397)
$ 13,213

$ 11,674
120
(397)
$ 11,397

($ 1,816)

The $1.8 million difference between the projected benefit obligation and fair value of plan assets as of October 31, 2013 was
included in other long-term liabilities within the Company’s Consolidated Balance Sheet. Additionally, the Plan experienced a $1.0
million net actuarial gain during fiscal 2013 that was recognized in other comprehensive income (where it is reported net of $.4 million
of tax) and represents the total balance in accumulated other comprehensive income that has yet to be recognized as a component of
net periodic pension income as of October 31, 2013. The Company does not expect to recognize any of the amount within accumulat-
ed other comprehensive income as of October 31, 2013 as a component of net periodic pension income during fiscal 2014.

HEICO CORPORATION

H E I C O C O R P O R A T I O N A N D S U B S I D I A R I E S

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Weighted average assumptions used to determine the projected benefit obligation as of October 31, 2013 and net benefit

income for the year ended October 31, 2013 are as follows:

Discount rate
Expected return on plan assets

Projected Benefit Obligation Net Benefit Income

4.79%
N/A

3.99%
6.75%

The discount rate was determined using the results of a bond yield curve model based on a portfolio of high-quality bonds

matching expected Plan benefit payments. The expected return on plan assets was based upon the current and expected target asset
allocation and investment return estimates for the Plan’s equity and fixed income securities. In establishing this assumption, the
Company considers many factors including both the historical rate of return and projected inflation-adjusted real rate of return on the
Plan’s various asset classes and the expected working lifetime for Plan participants.

Components of net pension income since the acquisition within the Company’s fiscal 2013 Statement of Operations are as

follows (in thousands):

Expected return on plan assets
Interest cost
Net pension income

$ 320
236
84

The Company has not made any contributions to the Plan since the acquisition and anticipates making contributions of $.1
million during fiscal 2014. Estimated future benefit payments to be made during each of the next five fiscal years and in aggregate
during the succeeding five fiscal years are as follows (in thousands):

Year ending October 31,

2014
2015
2016
2017
2018
2019-2023

$ 964
937
919
905
873
4,313

The following table sets forth by level within the fair value hierarchy, the fair value of the Plan’s assets as of October 31, 2013

(in thousands):

Quoted Prices

Significant

As of October 31, 2013

in Active Markets Other Observable Unobservable
for Identical Assets
(Level 1)

Inputs
(Level 3)

Inputs
(Level 2)

Fixed income securities
Equity securities
Money market funds and cash

$ 9,060
2,212
125
$ 11,397

$ —
—
—
$ —

Total

$ 9,060
2,212
125
$ 11,397

Fixed income securities consist of investments in mutual funds. Equity securities consist of investments in common stocks and

mutual funds.

The Plan’s actual and targeted asset allocations by asset category as of October 31, 2013 were as follows:

Fixed income securities
Equity securities
Money market funds and cash
Total

As of October 31, 2013

Actual Allocation

Target Allocation

80%
19%
1%
100%

80%
20%
—%
100%

The Company is currently evaluating the Plan’s asset allocation policy which was established prior to the acquisition. The
Company’s objective is to maximize long-term investment return while maintaining an acceptable level of risk that is accomplished
through broad diversification of the Plan’s assets.

HEICO CORPORATION

NOTE 11 RESEARCH AND DEVELOPMENT EXPENSES

Cost of sales amounts in fiscal 2013, 2012 and 2011 include approximately $32.9 million, $30.4 million and $25.4 million,

respectively, of new product research and development expenses.

NOTE 12 REDEEMABLE NONCONTROLLING INTERESTS

The holders of equity interests in certain of the Company’s subsidiaries have rights (“Put Rights”) that may be exercised on
varying dates causing the Company to purchase their equity interests through fiscal 2022. The Put Rights, all of which relate either to
common shares or membership interests in limited liability companies, provide that the cash consideration to be paid for their equity
interests (the “Redemption Amount”) be at fair value or at a formula that management intended to reasonably approximate fair value
based solely on a multiple of future earnings over a measurement period. As of October 31, 2013, management’s estimate of the
aggregate Redemption Amount of all Put Rights that the Company would be required to pay is approximately $59 million. The actual
Redemption Amount will likely be different. The aggregate Redemption Amount of all Put Rights was determined using probability
adjusted internal estimates of future earnings of the Company’s subsidiaries with Put Rights while considering the actual or earliest
exercise date, the measurement period and any applicable fair value adjustments. The portion of the estimated Redemption Amount
as of October 31, 2013 redeemable at fair value is approximately $48 million and the portion redeemable based solely on a multiple
of future earnings is approximately $11 million.

A summary of the put and call rights associated with the redeemable noncontrolling interests in certain of the Company’s subsidiaries

and a description of any transactions involving redeemable noncontrolling interests during fiscal 2013, 2012 and 2011 is as follows:

The Company acquired an 80.1% interest in a subsidiary by the ETG in fiscal 2004. As part of the purchase agreement, the

noncontrolling interest holders currently have the right to cause the Company to purchase their interests over a five-year period
ending in fiscal 2018 and the Company has the right to purchase the noncontrolling interests over a five-year period beginning in
fiscal 2015, or sooner under certain conditions.

Pursuant to the purchase agreement related to the acquisition of an 85% interest in a subsidiary by the ETG in fiscal 2005, the
noncontrolling interest holders have the right to cause the Company to purchase their interests over a four-year period beginning in
fiscal 2007 or thereafter. Certain noncontrolling interest holders exercised their option during fiscal 2007 and in fiscal 2009 to cause the
Company to purchase their aggregate 3% and 10.5% interest, respectively. Accordingly, the Company increased its ownership interest
in the subsidiary by an aggregate 10.9% to 95.9% effective April 2011. During fiscal 2012, the Company and the noncontrolling interest
holder of the aforementioned 10.5% interest agreed to defer the purchase of the remaining 2.6% interest to a future period.

Pursuant to the purchase agreement related to the acquisition of a 51% interest in a subsidiary by the FSG in fiscal 2006, certain

noncontrolling interest holders exercised their option to cause the Company to purchase an aggregate 29% interest, which was completed
in fiscal 2011. During fiscal 2012, the remaining noncontrolling interest holder exercised their option to cause the Company to purchase the
remaining 20% interest, of which 6.7% was acquired effective February 2012 and 13.3% was acquired effective December 2012.

The Company acquired an 80.1% interest in a subsidiary by the FSG in fiscal 2006. As part of the purchase agreement, the Com-

pany has the right to purchase the noncontrolling interests over a four-year period beginning in fiscal 2014 and the noncontrolling
interest holders have the right to cause the Company to purchase the same equity interests over the same period.

The Company acquired an 80.1% interest in a subsidiary through the FSG in fiscal 2008 and acquired an additional 2.2% interest in
fiscal 2010, which increased the Company’s ownership interest to 82.3%. Pursuant to the original purchase agreement as amended in
fiscal 2012, the Company has the right to purchase the remaining noncontrolling interests over a five-year period beginning in fiscal
2016, or sooner under certain conditions, and the noncontrolling interest holders have the right to cause the Company to purchase
the same equity interests over the same period.

The Company acquired an 82.5% interest in a subsidiary by the ETG in fiscal 2009. As part of the purchase agreement, the

Company has the right to purchase the noncontrolling interests beginning in fiscal 2014 and the noncontrolling interest holder has the
right to cause the Company to purchase the same equity interests over the same period.

The Company acquired an 80.1% interest in a subsidiary by the FSG in fiscal 2011. As part of the purchase agreement, the

Company has the right to purchase the noncontrolling interests over a two-year period beginning in fiscal 2015, or sooner under
certain conditions, and the noncontrolling interest holders have the right to cause the Company to purchase the same equity interests
over the same period.

During fiscal 2012, one of the subsidiaries of the ETG formed a new subsidiary which acquired certain assets and liabilities of two

businesses in exchange for shares aggregating 22% of its equity interest, valued at $.4 million. The noncontrolling interest holders
have the right to cause the Company to purchase their equity interests over a two-year period beginning in fiscal 2017.

The Company acquired an 84% interest in a subsidiary by the FSG in fiscal 2012. As part of the purchase agreement, the Com-
pany has the right to purchase the noncontrolling interests over a four-year period beginning in fiscal 2018, or sooner under certain
conditions, and the noncontrolling interest holders have the right to cause the Company to purchase the same equity interests over
the same period.

HEICO CORPORATION

H E I C O C O R P O R A T I O N A N D S U B S I D I A R I E S

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company acquired an 80.1% interest in a subsidiary by the FSG in fiscal 2012. As part of the purchase agreement, the

Company has the right to purchase the noncontrolling interests over a four-year period beginning in fiscal 2019, or sooner under
certain conditions, and the noncontrolling interest holder has the right to cause the Company to purchase the same equity interests
over the same period.

The purchase price of the redeemable noncontrolling interests acquired in fiscal 2013 was paid using proceeds from the Compa-

ny’s revolving credit facility. The purchase prices of the redeemable noncontrolling interests acquired in fiscal 2012 and 2011 were
paid using cash provided by operating activities. The aggregate cost of the redeemable noncontrolling interests acquired was $16.6
million, $7.6 million and $7.2 million in fiscal 2013, 2012 and 2011, respectively.

NOTE 13 NET INCOME PER SHARE ATTRIBUTABLE TO HEICO SHAREHOLDERS

The computation of basic and diluted net income per share attributable to HEICO shareholders is as follows (in thousands, except

per share data):

Year ended October 31,

Numerator:
Net income attributable to HEICO
Adjustments to redemption amount of redeemable

noncontrolling interests (see Note 1)

Net income attributable to HEICO, as adjusted

Denominator:
Weighted average common shares outstanding - basic
Effect of dilutive stock options
Weighted average common shares outstanding - diluted

Net income per share attributable to HEICO shareholders:
Basic
Diluted

Anti-dilutive stock options excluded

NOTE 14 QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

(in thousands, except per share data)
Net sales:
2013
2012
Gross profit:
2013
2012

Net income from consolidated operations:

2013
2012

Net income attributable to HEICO:

2013
2012

Net income per share attributable to HEICO:
Basic:

2013
2012
Diluted:
2013
2012

First
Quarter

$ 216,490
$212,655

$ 77,589
$ 78,248

$ 24,984
$ 24,466

$ 19,958
$ 19,185

$
$

.30
.29

2013

2012

2011

$ 102,396

$ 85,147

$ 72,820

—
$ 102,396

13
$ 85,160

19
$ 72,839

66,298
684
66,982

$
$

1.54
1.53

754

Second
Quarter

$ 237,708
$216,314

$ 89,448
$ 75,198

$ 29,046
$ 24,224

$ 23,700
$ 19,043

$
$

.36
.29

.35
.29

65,861
763
66,624

$
$

1.29
1.28

888

Third
Quarter

$ 267,133
$225,969

$ 97,540
$ 84,252

$ 34,768
$ 28,672

$ 28,947
$ 23,128

$
$

.44
.35

.43
.35

65,050
1,358
66,408

$
$

1.12
1.10

601

Fourth
Quarter

$287,426
$242,409

$106,604
$ 89,738

$ 35,763
$ 29,313

$ 29,791
$ 23,791

$
$

.45
.36

.44
.36

During the third quarter of fiscal 2013, the Company filed its fiscal 2012 U.S. federal and state tax returns. As a result, the
Company recognized a benefit, which increased net income attributable to HEICO by approximately $.8 million, or $.01 per basic and
diluted share, net of expenses, from higher research and development tax credits.

HEICO CORPORATION

During the first quarter of fiscal 2013, the Company recognized an income tax credit for qualified research and development
activities for the last ten months of fiscal 2012 upon the retroactive extension in January 2013 of Section 41 of the Internal Revenue
Code, “Credit for Increasing Research Activities,” to cover the period from January 1, 2012 to December 31, 2013. The tax credit, net
of expenses, increased net income attributable to HEICO by $1.0 million, or $.01 per basic and diluted share.

During the third quarter of fiscal 2012, the Company filed its fiscal 2011 U.S. federal and state tax returns. As a result, the
Company recognized an aggregate benefit, which increased net income attributable to HEICO by approximately $.9 million, or $.01 per
basic and diluted share, net of expenses, principally from higher research and development tax credits.

Due to changes in the average number of common shares outstanding, net income per share attributable to HEICO for the full

fiscal year may not equal the sum of the four individual quarters.

NOTE 15 OPERATING SEGMENTS

The Company has two operating segments: the Flight Support Group (“FSG”), consisting of HEICO Aerospace and HEICO Flight
Support Corp. and their collective subsidiaries; and the Electronic Technologies Group (“ETG”), consisting of HEICO Electronic and its
subsidiaries. The Flight Support Group designs, manufactures, repairs, overhauls and distributes jet engine and aircraft component
replacement parts. The parts and services are approved by the FAA. The FSG also manufactures and sells specialty parts as a
subcontractor for aerospace and industrial original equipment manufacturers and the United States government and is a leading
manufacturer of advanced niche components and complex composite assemblies for commercial aviation, defense and space
applications. The Electronic Technologies Group designs and manufactures electronic, microwave, and electro-optical equipment and
components, three-dimensional microelectronic and stacked memory products, high-speed interface products, high voltage intercon-
nection devices, high voltage advanced power electronics products, power conversion products, underwater locator beacons, traveling
wave tube amplifiers, harsh environment electronic connectors and other interconnect products, and RF and microwave amplifiers,
transmitters, receivers and satellite microwave modules, units and integrated subsystems primarily for the aviation, defense, space,
medical, telecommunications and electronics industries.

The Company’s reportable operating segments offer distinctive products and services that are marketed through different

channels. They are managed separately because of their unique technology and service requirements.

Segment Profit or Loss

The accounting policies of the Company’s operating segments are the same as those described in Note 1, Summary of Significant

Accounting Policies. Management evaluates segment performance based on segment operating income.

Information on the Company’s two operating segments, the FSG and the ETG, for each of the last three fiscal years ended

October 31 is as follows (in thousands):

Year ended October 31, 2013:
Net sales
Depreciation and amortization
Operating income
Capital expenditures
Total assets

Year ended October 31, 2012:
Net sales
Depreciation and amortization
Operating income
Capital expenditures
Total assets

Year ended October 31, 2011:
Net sales
Depreciation and amortization
Operating income
Capital expenditures
Total assets

Segment

FSG

ETG

Other,
Primarily
Corporate and
Intersegment

$ 665,148
14,614
122,058
10,190
679,839

$ 570,325
10,451
103,943
7,045
487,188

$ 539,563
10,661
95,001
6,866
458,624

$ 350,033
21,392
83,063
7,748
759,807

$ 331,598
19,365
77,438
7,248
636,660

$ 227,771
7,502
59,465
2,543
429,869

($ 6,424)
784
(21,531)
390
93,369

($ 4,576)
840
(18,087)
969
68,998

($ 2,443)
380
(16,035)
37
52,576

Consolidated
Totals

$ 1,008,757
36,790
183,590
18,328
1,533,015

$ 897,347
30,656
163,294
15,262
1,192,846

$ 764,891
18,543
138,431
9,446
941,069

Major Customer and Geographic Information

No one customer accounted for 10% or more of the Company’s consolidated net sales during the last three fiscal years. The Company’s

net sales originating and long-lived assets held outside of the United States during each of the last three fiscal years were not material.

HEICO CORPORATION

H E I C O C O R P O R A T I O N A N D S U B S I D I A R I E S

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company markets its products and services in approximately 100 countries. The Company’s net sales to any country other

than the United States of America did not exceed 10% of consolidated net sales. Sales are attributed to countries based on the
location of customers. The composition of the Company’s net sales to customers located in the United States of America and to
those in other countries for each of the last three fiscal years ended October 31 is as follows (in thousands):

Year ended October 31,

United States of America
Other countries
Total

NOTE 16 COMMITMENTS AND CONTINGENCIES

Lease Commitments

2013

$ 654,096
354,661
$ 1,008,757

2012

$ 596,922
300,425
$ 897,347

2011

$ 507,237
257,654
$ 764,891

The Company leases certain property and equipment, including manufacturing facilities and office equipment under operating

leases. Some of these leases provide the Company with the option after the initial lease term either to purchase the property at the
then fair market value or renew the lease at the then fair rental value. Generally, management expects that leases will be renewed or
replaced by other leases in the normal course of business.

Future minimum payments under non-cancelable operating leases for the next five fiscal years and thereafter are estimated to

be as follows (in thousands):

Year ending October 31,

2014
2015
2016
2017
2018
Thereafter
Total minimum lease commitments

$ 9,581
9,182
8,152
6,102
2,839
5,240
$ 41,096

Total rent expense charged to operations for operating leases in fiscal 2013, 2012 and 2011 amounted to $9.8 million, $7.9

million and $7.6 million, respectively.

Guarantees

The Company has arranged for a standby letter of credit in the amount of $1.5 million to meet the security requirement of its

insurance company for potential workers’ compensation claims, which is supported by the Company’s revolving credit facility.

Product Warranty

Changes in the Company’s product warranty liability in fiscal 2013 and 2012 are as follows (in thousands):

Year ended October 31,

Balances as of beginning of year
Accruals for warranties
Acquired warranty liabilities
Warranty claims settled
Balances as of end of year

Litigation

2013

$ 2,571
1,308
556
(1,202)
$ 3,233

2012

$ 2,231
1,621
18
(1,299)
$ 2,571

The Company is involved in various legal actions arising in the normal course of business. Based upon the Company’s and its

legal counsel’s evaluations of any claims or assessments, management is of the opinion that the outcome of these matters will not
have a material adverse effect on the Company’s results of operations, financial position or cash flows.

NOTE 17 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Cash paid for interest was $3.5 million, $2.4 million and $.1 million in fiscal 2013, 2012 and 2011, respectively. Cash paid for

income taxes was $62.6 million, $43.5 million and $33.9 million in fiscal 2013, 2012 and 2011, respectively. Cash received from
income tax refunds in fiscal 2013, 2012 and 2011 was less than $.1 million, $1.6 million and $0.8 million, respectively.

NOTE 18 SUBSEQUENT EVENT

On December 17, 2013, the Company’s Board of Directors declared a regular semi-annual cash dividend of $.06 per share and a

special and extraordinary cash dividend of $.35 per share on both classes of the Company’s common stock. The cash dividends will be
paid in one payment totaling $.41 per share on January 17, 2014 to shareholders of record as of January 3, 2014.

HEICO CORPORATION

H E I C O C O R P O R A T I O N A N D S U B S I D I A R I E S

MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL
OVER FINANCIAL REPORTING

Management of HEICO Corporation is responsible for establishing and maintaining adequate internal control over financial

reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to
the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the
Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements
in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only
in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material
effect on the financial statements.

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of
any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management, under the supervision of and with the participation of the Company’s Chief Executive Officer and the Chief Financial

Officer, assessed the effectiveness of the Company’s internal control over financial reporting based on the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (1992). Based on its
assessment, management concluded that the Company’s internal control over financial reporting is effective as of October 31, 2013.

During fiscal 2013, the Company acquired all of the outstanding stock of Reinhold Industries, Inc. (“Reinhold”) and Lucix Corpo-
ration (“Lucix”). See Note 2, Acquisitions, of the Notes to Consolidated Financial Statements, for additional information. As permitted
by the Securities and Exchange Commission, companies are allowed to exclude acquisitions from their assessment of internal
control over financial reporting during the first year of an acquisition and management elected to exclude Reinhold and Lucix from its
assessment of internal control over financial reporting as of October 31, 2013. Reinhold and Lucix in aggregate constitute 19.5% of
the Company’s consolidated total assets as of October 31, 2013 and 3.4% of the Company’s consolidated net sales for the fiscal year
ended October 31, 2013.

Deloitte & Touche LLP, an independent registered public accounting firm, audited the Company’s consolidated financial statements

included in this Annual Report for the year ended October 31, 2013. A copy of their report is included in this Annual Report. Deloitte &
Touche LLP has issued their attestation report on management’s internal control over financial reporting, which is set forth below.

EXECUTIVE OFFICER CERTIFICATIONS

HEICO Corporation has filed with the U.S. Securities and Exchange Commission as exhibits 31.1. and 31.2 to its Form 10-K for the

year ended October 31, 2013, the required certifications of its Chief Executive Officer (CEO) and Chief Financial Officer under Section
302 of the Sarbanes-Oxley Act regarding the quality of its public disclosures. HEICO Corporation’s CEO also has submitted to the
New York Stock Exchange (NYSE) following the March 2013 annual meeting of shareholders, the annual CEO certification stating that
he is not aware of any violation by HEICO Corporation of the NYSE’s corporate governance listing standards. All Board of Directors
Committee Charters, Corporate Governance Guidelines as well as HEICO’s Code of Ethics and Business Conduct are located on
HEICO’s website at www.heico.com.

HEICO CORPORATION

H E I C O C O R P O R A T I O N A N D S U B S I D I A R I E S

REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM

To the Board of Directors and Shareholders of
HEICO Corporation
Hollywood, Florida

We have audited the accompanying consolidated balance sheets of HEICO Corporation and subsidiaries (the “Company”) as of
October 31, 2013 and 2012, and the related consolidated statements of operations, comprehensive income, shareholders’ equity, and
cash flows for each of the three years in the period ended October 31, 2013. These financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by manage-
ment, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of HEICO
Corporation and subsidiaries as of October 31, 2013 and 2012, and the results of their operations and their cash flows for each of the
three years in the period ended October 31, 2013, in conformity with accounting principles generally accepted in the United States
of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the Company’s internal control over financial reporting as of October 31, 2013, based on the criteria established in Internal Control -
Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated
December 19, 2013 expressed an unqualified opinion on the Company’s internal control over financial reporting.

DELOITTE & TOUCHE LLP
Certified Public Accountants

Miami, Florida
December 19, 2013

HEICO CORPORATION

H E I C O C O R P O R A T I O N A N D S U B S I D I A R I E S

REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM

To the Board of Directors and Shareholders of
HEICO Corporation
Hollywood, Florida

We have audited the internal control over financial reporting of HEICO Corporation and subsidiaries (the “Company”) as

of October 31, 2013, based on criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of
Sponsoring Organizations of the Treadway Commission. As described in Management’s Annual Report on Internal Control Over Financial
Reporting, management excluded from its assessment the internal control over financial reporting at Reinhold Industries, Inc. and
Lucix Corporation (collectively the “Excluded Acquisitions”), which were acquired during 2013 and whose financial statements
constitute 19.5% of total assets and 3.4% of net sales of the consolidated financial statement amounts as of and for the year ended
October 31, 2013. Accordingly, our audit did not include the internal control over financial reporting of the Excluded Acquisitions. The
Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control
Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on
our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control
over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness
of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstanc-
es. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s
principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of
directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s
internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authoriza-
tions of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper

management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis.
Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to
the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies
or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of October

31, 2013, based on the criteria established in Internal Control-Integrated Framework (1992) issued by the Committee of Sponsoring
Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the

consolidated financial statements as of and for the year ended October 31, 2013 of the Company and our report dated December 19,
2013 expressed an unqualified opinion on those financial statements.

DELOITTE & TOUCHE LLP
Certified Public Accountants

Miami, Florida
December 19, 2013

HEICO CORPORATION

H E I C O C O R P O R A T I O N A N D S U B S I D I A R I E S

MARKET FOR COMPANY’S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS

Market Information

Our Class A Common Stock and Common Stock are listed and traded on the New York Stock Exchange (“NYSE”) under the
symbols “HEI.A” and “HEI,” respectively. The following tables set forth, for the periods indicated, the high and low share prices for
our Class A Common Stock and our Common Stock as reported on the NYSE, as well as the amount of cash dividends paid per share
during such periods.

In September 2013 and March 2012, the Company’s Board of Directors declared a 5-for-4 stock split on both classes of the

Company’s common stock. The stock splits were effected as of October 23, 2013 and April 25, 2012, respectively, in the form of a
25% stock dividend distributed to shareholders of record as of October 11, 2013 and April 13, 2012, respectively. All applicable share
and per share information has been adjusted retrospectively to give effect to the 5-for-4 stock splits.

Fiscal 2012:

First Quarter
Second Quarter
Third Quarter
Fourth Quarter

Fiscal 2013:

First Quarter
Second Quarter
Third Quarter
Fourth Quarter

Class A Common Stock
High

Low

Common Stock

High

Low

Cash Dividends
Per Share

$ 26.88
26.96
26.80
25.78

$ 28.46
29.17
32.34
42.04

$ 22.72
24.74
22.98
22.89

$ 23.84
25.77
26.84
31.48

$ 39.66
38.38
34.62
31.79

$ 38.12
37.84
45.96
56.09

$ 33.49
31.45
28.19
27.21

$ 29.88
32.61
33.82
45.54

$
.038
—
.048
—

$ 1.760
—
.056
—

As of December 17, 2013, there were 427 holders of record of our Class A Common Stock and 441 holders of our Common Stock.

In addition, as of December 17, 2013, there were approximately 5,600 holders of the Company’s Class A Common Stock and

Common Stock who held their shares in brokerage or nominee accounts. The combined total of all record holders and brokerage or
nominee holders is approximately 6,500 holders of both classes of common stock.

Performance Graphs

The following graph and table compare the total return on $100 invested in HEICO Common Stock and HEICO Class A Common
Stock with the total return of $100 invested in the NYSE Composite Index and the Dow Jones U.S. Aerospace Index for the five-year
period from October 31, 2008 through October 31, 2013. The NYSE Composite Index measures the performance of all common
stocks listed on the NYSE. The Dow Jones U.S. Aerospace Index is comprised of large companies which make aircraft, major weapons,
radar and other defense equipment and systems as well as providers of satellites and spacecrafts used for defense purposes. The
total returns include the reinvestment of cash dividends.

Comparison of Five-Year Cumulative Total Return

HEICO Common Stock

HEICO Class A
Common Stock

NYSE Composite Index

Dow Jones
U.S. Aerospace Index

$400

$360

$320

$280

$240

$200

$160

$120

$80

$40

2008

2009

2010

2011

2012

2013

HEICO Common Stock
HEICO Class A Common Stock
NYSE Composite Index
Dow Jones U.S. Aerospace Index

2008

$ 100.00
100.00
100.00
100.00

2009

$ 99.16
110.39
111.19
112.50

2010

$ 162.74
166.72
123.96
153.78

2011

$ 233.53
221.24
124.79
165.12

2012

$ 198.29
215.20
135.64
177.57

2013

$ 361.14
368.15
165.15
272.99

Cumulative Total Return as of October 31,

HEICO CORPORATION

The following graph and table compare the total return on $100 invested in HEICO Common Stock since October 31, 1990 using

the same indices shown on the five-year performance graph above. October 31, 1990 was the end of the first fiscal year following
the date the current executive management team assumed leadership of the Company. No Class A Common Stock was outstanding
as of October 31, 1990. As with the five-year performance graph, the total returns include the reinvestment of cash dividends.

Comparison of Twenty Three-Year Cumulative Total Return

HEICO Common Stock

NYSE Composite Index

Dow Jones U.S. Aerospace Index

$11,000

$10,000

$9,000

$8,000

$7,000

$6,000

$5,000

$4,000

$3,000

$2,000

$1,000

1990

1991

1992

1993

1994

Cumulative Total Return as of October 31,

HEICO Common Stock
NYSE Composite Index
Dow Jones U.S. Aerospace Index

$ 100.00
100.00
100.00

$ 141.49
130.31
130.67

$ 158.35
138.76
122.00

$ 173.88
156.09
158.36

$ 123.41
155.68
176.11

1995

263.25
186.32
252.00

HEICO Common Stock
NYSE Composite Index
Dow Jones U.S. Aerospace Index

$ 430.02
225.37
341.65

$ 1,008.31
289.55
376.36

$ 1,448.99
326.98
378.66

$ 1,051.61
376.40
295.99

$ 809.50
400.81
418.32

$ 1,045.86
328.78
333.32

1996

1997

1998

1999

2000

2001

HEICO Common Stock
NYSE Composite Index
Dow Jones U.S. Aerospace Index

$ 670.39
284.59
343.88

$ 1,067.42
339.15
393.19

$ 1,366.57
380.91
478.49

$ 1,674.40
423.05
579.77

$ 2,846.48
499.42
757.97

$ 4,208.54
586.87
1,000.84

2002

2003

2004

2005

2006

2007

HEICO Common Stock
NYSE Composite Index
Dow Jones U.S. Aerospace Index

$ 2,872.01
344.96
602.66

$ 2,984.13
383.57
678.00

$ 4,722.20
427.61
926.75

$ 6,557.88
430.46
995.11

$ 5,900.20
467.91
1,070.15

$ 10,457.14
569.69
1,645.24

2008

2009

2010

2011

2012

2013

HEICO CORPORATION

H E I C O C O R P O R A T I O N A N D S U B S I D I A R I E S

OFFICERS AND SENIOR LEADERSHIP

Laurans A. Mendelson
Chairman of the Board of Directors and
Chief Executive Officer,
HEICO Corporation

Jeff Andrews
Vice President and General Manager,
Niacc-Avitech Technologies, Inc.

Nadim Bakhache
President,
EMD Technologies Incorporated

Keith Bandolik
President,
Switchcraft, Inc. and Conxall

Vaughn Barnes
President,
HEICO Specialty Products Group and
Thermal Structures, Inc.

Jeffrey S. Biederwolf
Senior Vice President,
HEICO Repair Group

Gregory S. Braselton
Vice President and General Manager,
Action Research Corporation

Russ Carlson
Vice President and General Manager -
Hardware & Accessories,
HEICO Parts Group

Vladimir Cervera
Vice President and General Manager -
Structures,
HEICO Component Repair Group – Miami

William Cockerell
President and Founder,
Ramona Research, Inc.

Barry Cohen
President and Founder,
Prime Air, LLC

Ian D. Crawford
President and Founder,
Analog Modules, Inc.

Alexander de Gunten
Business Development Officer,
HEICO Aerospace Corporation

Andrew J. Feeley
Vice President and General Manager,
CSI Aerospace, Inc.

Jerry Goldlust
President and Founder,
HVT Group, Inc. and
Dielectric Sciences, Inc.

Leon Gonzalez
Vice President and General Manager,
Sunshine Avionics LLC

William S. Harlow
Vice President - Acquisitions,
HEICO Corporation

Clarence Hightower
President,
Reinhold Industries, Inc.

Walter Howard
Vice President and General Manager,
Aero Design, Inc.

John F. Hunter
Senior Vice President,
HEICO Parts Group

Tung Hyunh
President and Co-Founder,
Lumina Power, Inc.

Thomas S. Irwin
Senior Executive Vice President,
HEICO Corporation

Elizabeth R. Letendre
Corporate Secretary,
HEICO Corporation

Jack Lewis
Vice President and General Manager,
Jet Avion Corporation

Omar Lloret
Vice President and General Manager -
Accessories,
HEICO Component Repair Group – Miami

David A. Lowry
President and Co-Founder,
Engineering Design Team, Inc.

Carlos L. Macau, Jr.
Executive Vice President,
Chief Financial Officer and Treasurer,
HEICO Corporation

Patrick Markham
Vice President - Technical Services,
HEICO Parts Group

Pierre Maurice
President and Co-Founder,
3D Plus, SAS

Steve McHugh
Chief Operating Officer,
Electronic Technologies Group and
President and Co-Founder,
Santa Barbara Infrared, Inc. and
IRCameras, LLC

Robert J. McKenna
President,
Leader Tech, Inc.

Eric A. Mendelson
Co-President,
HEICO Corporation

Victor H. Mendelson
Co-President,
HEICO Corporation

Luis J. Morell
President,
HEICO Parts Group and
HEICO Repair Group

Michael Navon
President and Founder,
Blue Aerospace LLC

Fred J. Ortiz
President,
dB Control Corp.

Joseph W. Pallot
General Counsel,
HEICO Corporation

Anish V. Patel
President,
Radiant Power Corp. and
Dukane Seacom, Inc.

Jeffrey Perkins
Vice President and General Manager,
Seal Dynamics – Tampa

James L. Reum
Executive Vice President,
HEICO Aerospace Holdings Corp.

Rex Reum
Vice President and General Manager,
Jetseal, Inc.

Thomas L. Ricketts
CEO and Co-Founder,
Connectronics Corp. and Wiremax

Troy J. Rodriguez
President and Co-Founder,
Sierra Microwave Technology, LLC

James E. Roubian
Senior Vice President - Manufacturing,
HEICO Parts Group

Dr. Daniel M. Sable
Chief Executive Officer and Co-Founder,
VPT, Inc.

Mark Shahriary
Chief Executive Officer,
Lucix Corporation

Val R. Shelley
Vice President - Strategy,
HEICO Corporation

David J. Susser
President,
HEICO Distribution Group and
Seal Dynamics LLC

Gregg Tuttle
Vice President and General Manager,
Future Aviation, Inc.

Steven M. Walker
Chief Accounting Officer and
Assistant Treasurer,
HEICO Corporation

Nicholas “Tony” Wright
Vice President and General Manager -
Avionics,
HEICO Repair Group

HEICO CORPORATIONFINANCIAL HIGHLIGHTS
(in thousands, except per share data)

Year ended October 31, (1)

Operating Data:
Net sales
Operating income
Interest expense
Net income attributable to HEICO

Weighted average number of common shares outstanding: (2)

Basic
Diluted

Per Share Data: (2)
Net income per share attributable to HEICO shareholders:

Basic
Diluted

Cash dividends per share (2)

Balance Sheet Data (as of October 31):
Total assets
Total debt (including current portion)
Redeemable noncontrolling interests
Total shareholders’ equity

2011

2012

2013

$ 764,891

138,431 (3)

142
72,820 (3) (4)

$ 897,347
163,294
2,432
85,147 (5)

$ 1,008,757
183,590
3,717
102,396 (6)

65,050
66,408

65,861
66,624

66,298
66,982

1.12 (3) (4)
1.10 (3) (4)
.069

1.29 (5)
1.28 (5)
.086

1.54 (6)
1.53 (6)

1.816

$ 941,069
40,158
65,430
620,154

$ 1,192,846
131,820
67,166
719,759

$ 1,533,015
377,515
59,218
723,235

(1) Results include the results of acquisitions from each respective effective date.

(2) All share and per share information has been adjusted retrospectively to reflect the 5-for-4 stock splits effected in October 2013 and April 2012 and 2011.

(6) Includes the aggregate tax benefit from an income tax credit for qualified research and development activities for the last ten months of fiscal 2012 recognized in

FORWARD-LOOKING STATEMENTS

BOARD OF DIRECTORS

Adolfo Henriques

Samuel L. Higginbottom

Mark H. Hildebrandt

Wolfgang Mayrhuber

Eric A. Mendelson

Laurans A. Mendelson

Victor H. Mendelson

Dr. Alan Schriesheim

Frank J. Schwitter

ADOLFO HENRIQUES
Chairman and CEO,

ERIC A. MENDELSON
Co-President,

Gibraltar Private Bank and Trust

HEICO Corporation

SAMUEL L. HIGGINBOTTOM
retired Chairman, President and

Chief Executive Officer,

Rolls-Royce, Inc.

MARK H. HILDEBRANDT
Partner, Waldman, Feluren,

Hildebrandt & Trigoboff, P.A.

WOLFGANG MAYRHUBER
Chairman of the Supervisory Board,

Deutsche Lufthansa AG

Chairman of the Supervisory Board,

Infineon Technologies AG

LAURANS A. MENDELSON
Chairman and

Chief Executive Officer,

HEICO Corporation

VICTOR H. MENDELSON
Co-President,

HEICO Corporation

DR. ALAN SCHRIESHEIM
retired Director,

Argonne National Laboratory

FRANK J. SCHWITTER
retired Partner,

Arthur Andersen LLP

HEICO
Corporation

Corporate Offices
3000 Taft Street
Hollywood, FL 33021
Telephone: 954-987-4000
Facsimile: 954-987-8228
www.heico.com

Subsidiaries

Inertial Airline Services, Inc.

Jet Avion Corporation

Dielectric Sciences, Inc.
Essex X-Ray & Medical Equipment LTD

Leader Tech, Inc.
Lucix Corporation
Lumina Power, Inc.
Radiant Power Corp.
Ramona Research, Inc.
Santa Barbara Infrared, Inc.
Sierra Microwave Technology, LLC
Switchcraft, Inc. and Conxall
VPT, Inc.

Registrar & Transfer Agent

Computershare Investor Services
P.O. BOX 30170
College Station, TX 77842-3170
Telephone: 800-307-3056
www.computershare.com/investor

New York Stock Exchange Symbols

Class A Common Stock - “HEI.A”
Common Stock - “HEI”

Form 10-K and Board of
Directors Inquiries

Annual Meeting

The Annual Meeting of Shareholders
will be held on Friday,
March 21, 2014 at 10:00 a.m.
at the JW Marriott Miami Hotel
1109 Brickell Avenue
Miami, FL 33131
Telephone: 305-329-3500

Shareholder Information

Elizabeth R. Letendre
Corporate Secretary
HEICO Corporation
3000 Taft Street
Hollywood, FL 33021
Telephone: 954-987-4000
Facsimile: 954-987-8228
eletendre@heico.com

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ANNUAL
REPORT
2013

A CLEAR PERSPECTIVE
FOR THE FUTURE