UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-K




x
                  ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OFTHE
      SECURITIES EXCHANGE ACT OF 1934For
      the fiscal year ended October 31, 2009 oro
                  TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OFTHE
      SECURITIES EXCHANGE ACT OF 1934For
      the transition period from
      ___________________to__________________




Commission
file number 1-4604





HEICO
CORPORATION


(Exact
name of registrant as specified in its charter)





Florida
                65-0341002(State
      or other jurisdiction of
                  incorporation
      or organization)
                (I.R.S.
      Employer
                  Identification
      No.)3000
      Taft Street, Hollywood, Florida
                33021(Address
      of principal executive offices)
                (Zip
      Code)





Registrant’s
telephone number, including area code: (954) 987-4000





Securities
registered pursuant to Section 12(b) of the Act:





Title of each class
                    
                    Name of each exchange on which
      registeredCommon
      Stock, $.01 par value per share
                    
                    New
      York Stock ExchangeClass
      A Common Stock, $.01 par value per share





Securities
registered pursuant to Section 12(g) of the Act:





Rights
to Purchase Series B Junior Participating Preferred Stock


Rights
to Purchase Series C Junior Participating Preferred Stock


(Title of
class)





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.  Yes x No o





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.  Yes o No x





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes x No o





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months. Yes  o No o





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of the registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. x





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.





Large
accelerated filer x    Accelerated
filer o    Non−accelerated
filer o   
Smaller reporting company o





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).  Yes o No x





The
aggregate market value of the voting and non-voting common equity held by
nonaffiliates of the registrant was $639,454,000 based on the closing price of
HEICO Common Stock and Class A Common Stock as of April 30, 2009 as reported by
the New York Stock Exchange.





The
number of shares outstanding of each of the registrant's classes of common stock
as of December 17, 2009:





Common
      Stock, $.01 par value
                  
                  10,421,225
      sharesClass
      A Common Stock, $.01 par value
                  
                  15,732,299
      shares





DOCUMENTS
INCORPORATED BY REFERENCE





Portions of the registrant’s definitive
proxy statement for the 2010 Annual Meeting of Shareholders are incorporated by
reference into Part III of this Annual Report on Form 10-K.









HEICO CORPORATION


INDEX
TO ANNUAL REPORT ON FORM 10-K





PagePART IItem 1.
                  
                  Business
                  1Item 1A.
                  
                  Risk Factors
                  11Item 1B.
                  
                  Unresolved Staff Comments
                  15Item 2.
                  
                  Properties
                  16Item 3.
                  
                  Legal Proceedings
                  16Item 4.
                  
                  Submission of Matters to a Vote of Security
      Holders
                  16PART IIItem 5.
                  
                  Market for Registrant’s Common Equity, Related Stockholder
      Matters and Issuer Purchases of Equity Securities
                  17Item 6.
                  
                  Selected Financial Data
                  21Item 7.
                  
                  Management’s Discussion and Analysis of Financial Condition
      and Results of Operations
                  22Item 7A.
                  
                  Quantitative and Qualitative Disclosures About Market
      Risk
                  38Item 8.
                  
                  Financial Statements and Supplementary
    Data
                  39Item 9.
                  
                  Changes in and Disagreements With Accountants on Accounting
      and Financial Disclosure
                  77Item 9A.
                  
                  Controls and Procedures
                  77Item 9B.
                  
                  Other Information
                  78PART IIIItem 10.
                  
                  Directors, Executive Officers and Corporate
      Governance
                  79Item 11.
                  
                  Executive Compensation
                  79Item 12.
                  
                  Security Ownership of Certain Beneficial Owners and
      Management and Related Stockholder Matters
                  79Item 13.
                  
                  Certain Relationships and Related Transactions, and
      Director Independence
                  79Item 14.
                  
                  Principal Accounting Fees and Services
                  79PART IVItem 15.
                  
                  Exhibits, Financial Statement Schedules
                  80SIGNATURES
                  85




Table of Contents




PART I





Item 1.
            BUSINESS





The
Company





HEICO Corporation through its
subsidiaries (collectively, “HEICO,” “we,” “us,” “our” or the “Company”)
believes it is the world’s largest manufacturer of Federal Aviation
Administration (“FAA”)-approved jet engine and aircraft component replacement
parts, other than the original equipment manufacturers (“OEMs”) and their
subcontractors.  HEICO also believes it is a leading manufacturer of
various types of electronic equipment for the aviation, defense, space, medical,
telecommunication and electronic industries.





The Company was organized in 1993
creating a new holding corporation known as HEICO Corporation and renaming the
former holding company (formerly known as HEICO Corporation, organized in 1957)
as HEICO Aerospace Corporation.  The reorganization, which was completed in
1993, did not result in any change in the business of the Company, its
consolidated assets or liabilities or the relative interests of its
shareholders.





Our business is comprised of two
operating segments:





The Flight Support
Group.  Our Flight Support Group (“FSG”), consisting of HEICO
Aerospace Holdings Corp. (“HEICO Aerospace”) and its subsidiaries, accounted for
73%, 75% and 76% of our net sales in fiscal 2009, 2008 and 2007,
respectively.  The Flight Support Group uses proprietary technology to
design and manufacture jet engine and aircraft component replacement parts for
sale at lower prices than those manufactured by OEMs.  These parts are
approved by the FAA and are the functional equivalent of parts sold by
OEMs.  In addition, the Flight Support Group repairs and distributes jet
engine and aircraft components, avionics and instruments for domestic and
foreign commercial air carriers and aircraft repair companies as well as
military and business aircraft operators; and manufactures thermal insulation
products and other component parts primarily for aerospace, defense and
commercial applications.





The Flight Support Group competes with
the leading industry OEMs and, to a lesser extent, with a number of smaller,
independent parts distributors.  Historically, the three principal jet
engine OEMs, General Electric (including CFM International), Pratt & Whitney
and Rolls Royce, have been the sole source of substantially all jet engine
replacement parts for their jet engines.  Other OEMs have been the sole
source of replacement parts for their aircraft component parts.  While we
believe that we currently supply less than 2% of the market for jet engine and
aircraft component replacement parts, we have in recent years been adding new
products to our line at a rate of 400 to 500 per year of Parts Manufacturer
Approvals (“PMA” or “PMAs”).  We currently offer to our customers over
5,000 parts for which PMAs have been received from the FAA.





We believe that, based on our
competitive pricing, reputation for high quality, short lead time requirements,
strong relationships with domestic and foreign commercial air carriers and
repair stations (companies that overhaul aircraft engines and/or components),
strategic relationships with Lufthansa and other major airlines and successful
track record of receiving PMAs from the FAA, we are uniquely positioned to
continue to increase our product lines and gain market share.





The Electronic Technologies
Group.  Our Electronic Technologies Group (“ETG”), consisting of
HEICO Electronic Technologies Corp. and its subsidiaries, accounted for 27%, 25%
and 24% of our net




1
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sales in
fiscal 2009, 2008 and 2007, respectively.  Through our Electronic
Technologies Group, which derived approximately 46% of its sales in fiscal 2009
from the sale of products and services to U.S. and foreign military agencies, we
design, manufacture and sell various types of electronic, microwave and
electro-optical products, including infrared simulation and test equipment,
laser rangefinder receivers, electrical power supplies, back-up power supplies,
power conversion products, underwater locator beacons, electromagnetic
interference and radio frequency interference shielding, high power capacitor
charging power supplies, amplifiers, photodetectors, amplifier modules, flash
lamp drivers, laser diode drivers, arc lamp power supplies, custom power supply
designs, cable assemblies, high voltage interconnection devices and wire, high
voltage energy generators, high frequency power delivery systems and high-speed
interface products that link devices such as telemetry receivers, digital
cameras, high resolution scanners, simulation systems and test systems to almost
any computer.





In October 1997, we entered into a
strategic alliance with Lufthansa.  Lufthansa is the world’s largest
independent provider of engineering and maintenance services for commercial
aircraft components and jet engines and supports over 200 airlines, governments
and other customers.  As part of this strategic alliance, Lufthansa has
invested over $60 million in our Company to acquire and maintain a 20% minority
interest in HEICO Aerospace.  This strategic alliance has enabled us to
expand domestically and internationally by enhancing our ability to (i) identify
key jet engine and aircraft component replacement parts with significant profit
potential by utilizing Lufthansa’s extensive operating data on engine and
component parts; (ii) introduce those parts throughout the world in an efficient
manner due to Lufthansa’s testing and diagnostic resources; and (iii) broaden
our customer base by capitalizing on Lufthansa’s established relationships and
alliances within the airline industry.





In March 2001, we entered into a joint
venture with American Airlines, one of the world’s largest airlines, to develop,
design and sell FAA-approved jet engine and aircraft component replacement parts
through HEICO Aerospace.  The joint venture is partly owned by American
Airlines.  American Airlines and HEICO Aerospace have agreed to cooperate
regarding technical services and marketing support on a worldwide basis. 
We have also entered into several strategic relationships with other leading
airlines, such as United Airlines (May 2002), Delta Air Lines (February 2003),
Japan Airlines (March 2004) and British Airways (May 2007).  These
relationships accelerate HEICO’s efforts in developing a broad range of jet
engine and aircraft component replacement parts for FAA approval.  Each of
the aforementioned airlines purchase these newly developed parts, and many of
HEICO Aerospace’s current FAA-approved parts product line, on an exclusive basis
from HEICO Aerospace.





HEICO has continuously operated in the
aerospace industry for more than 50 years.  Since assuming control in 1990,
our current management has achieved significant sales and profit growth through
a broadened line of product offerings, an expanded customer base, increased
research and development expenditures and the completion of a number of
acquisitions.  As a result of internal growth and acquisitions, our net
sales from continuing operations have grown from $26.2 million in fiscal 1990 to
$538.3 million in fiscal 2009, a compound annual growth rate of approximately
17%.  During the same period, we improved our net income from $2.0 million
to $44.6 million, representing a compound annual growth rate of approximately
18%.





Flight
Support Group





The Flight Support Group, headquartered
in Hollywood, Florida, serves a broad spectrum of the aviation industry,
including (i) commercial airlines and air cargo carriers; (ii) repair and
overhaul facilities; (iii) OEMs; and (iv) U.S. and foreign
governments.





Jet engine and aircraft component
replacement parts can be categorized by their ongoing ability to be repaired and
returned to service.  The general categories in which we participate are as
follows: (i)




2
 Table of Contents




rotable;
(ii) repairable; and (iii) expendable.  A rotable is a part which is
removed periodically as dictated by an operator’s maintenance procedures or on
an as needed basis and is typically repaired or overhauled and re-used an
indefinite number of times.  An important subset of rotables is “life
limited” parts.  A life limited rotable has a designated number of
allowable flight hours and/or cycles (one take-off and landing generally
constitutes one cycle) after which it is rendered unusable.  A repairable
is similar to a rotable except that it can only be repaired a limited number of
times before it must be discarded. An expendable is generally a part which is
used and not thereafter repaired for further use.





Jet engine and aircraft component
replacement parts are classified within the industry as (i) factory-new; (ii)
new surplus; (iii) overhauled; (iv) repairable; and (v) as removed.  A
factory-new or new surplus part is one that has never been installed or
used.  Factory-new parts are purchased from FAA-approved manufacturers
(such as HEICO or OEMs) or their authorized distributors.  New surplus
parts are purchased from excess stock of airlines, repair facilities or other
redistributors.  An overhauled part is one that has been completely
repaired and inspected by a licensed repair facility such as ours.  An
aircraft spare part is classified as “repairable” if it can be repaired by a
licensed repair facility under applicable regulations.  A part may also be
classified as “repairable” if it can be removed by the operator from an aircraft
or jet engine while operating under an approved maintenance program and is
airworthy and meets any manufacturer or time and cycle restrictions applicable
to the part.  A “factory-new,” “new surplus” or “overhauled” part
designation indicates that the part can be immediately utilized on an
aircraft.  A part in “as removed” or “repairable” condition requires
inspection and possibly functional testing, repair or overhaul by a licensed
facility prior to being returned to service in an aircraft.





Factory-New Jet Engine and Aircraft
Component Replacement Parts.  The Flight Support Group engages in
the research and development, design, manufacture and sale of FAA-approved
replacement parts that are sold to domestic and foreign commercial air carriers
and aircraft repair and overhaul companies.  Our principal competitors are
Pratt & Whitney, a division of United Technologies Corporation, and General
Electric Company, including its CFM International joint venture. The Flight
Support Group’s factory-new replacement parts include various jet engine and
aircraft component replacement parts.  A key element of our growth strategy
is the continued design and development of an increasing number of PMA
replacement parts in order to further penetrate our existing customer base and
obtain new customers.  We select the jet engine and aircraft component
replacement parts to design and manufacture through a selection process which
analyzes industry information to determine which replacement parts are suitable
candidates.  As part of Lufthansa’s investment in the Flight Support Group,
Lufthansahas the
right to select 50% of the parts for which we will seek PMAs, provided that such
parts are technologically and economically feasible and substantially comparable
with the profitability of our other PMA parts.





Repair and Overhaul
Services.  The Flight Support Group provides repair and overhaul
services on selected jet engine and aircraft component parts, as well as on
avionics, instruments, composites and flight surfaces of commercial aircraft
operated by domestic and foreign commercial airlines.  The Flight Support
Group also provides repair and overhaul services including avionics and
navigation systems as well as subcomponents and other instruments utilized on
military aircraft operated by the United States government and foreign military
agencies and for aircraft repair and overhaul companies.  Our repair and
overhaul operations require a high level of expertise, advanced technology and
sophisticated equipment.  Services include the repair, refurbishment and
overhaul of numerous accessories and parts mounted on gas turbine engines and
airframes.  Components overhauled include fuel pumps, generators, fuel
controls, pneumatic valves, starters and actuators, turbo compressors and
constant speed drives, hydraulic pumps, valves and actuators, composite flight
controls, electro-mechanical equipment and auxiliary power unit
accessories.  The Flight Support Group also provides commercial airlines,
regional operators, asset management companies and Maintenance, Repair and
Overhaul (“MRO”) providers with high quality and cost effective niche accessory
component exchange services as an alternative to OEMs’ spares
services.




3
 Table of Contents




Distribution.The
Flight Support Group distributes FAA-approved parts including hydraulic,
pneumatic, mechanical and electro-mechanical components for the commercial,
regional and general aviation markets.





Manufacture of Specialty
Aircraft/Defense Related Parts and Subcontracting for OEMs.  The
Flight Support Group manufactures thermal insulation blankets primarily for
aerospace, defense and commercial applications.  The Flight Support Group
also manufactures specialty components for sale as a subcontractor for aerospace
and industrial original equipment manufacturers and the United States
government.





FAA Approvals and Product
Design.  Non-OEM manufacturers of jet engine replacement parts must
receive a PMA from the FAA to sell the replacement part.  The PMA approval
process includes the submission of sample parts, drawings and testing data to
one of the FAA’s Aircraft Certification Offices where the submitted data are
analyzed.  We believe that an applicant’s ability to successfully complete
the PMA process is limited by several factors, including (i) the agency’s
confidence level in the applicant; (ii) the complexity of the part; (iii) the
volume of PMAs being filed; and (iv) the resources available to the FAA. 
We also believe that companies such as HEICO that have demonstrated their
manufacturing capabilities and established favorable track records with the FAA
generally receive a faster turnaround time in the processing of PMA
applications.  Finally, we believe that the PMA process creates a
significant barrier to entry in this market niche through both its technical
demands and its limits on the rate at which competitors can bring products to
market.





As part of our growth strategy, we have
continued to increase our research and development activities.  Research
and development expenditures by the Flight Support Group, which were
approximately $300,000 in fiscal 1991, increased to approximately $11.5 million
in fiscal 2009, $11.1 million in fiscal 2008 and $10.7 million in 2007.  We
believe that our Flight Support Group’s research and development capabilities
are a significant component of our historical success and an integral part of
our growth strategy.  In recent years, the FAA granted us PMAs for
approximately 400 to 500 new parts per year (excluding acquired PMAs); however,
no assurancecan be
given that the FAA will continue to grant PMAs or that we will achieve
acceptable levels of net sales and gross profits on such parts in the
future.





We benefit from our proprietary rights
relating to certain design, engineering and manufacturing processes and repair
and overhaul procedures.  Customers often rely on us toprovide initial andadditional components, as
well as to redesign, re-engineer, replace or repair and provide overhaul
services on such aircraft components at every stage of their useful lives. 
In addition, for some products, our unique manufacturing capabilities are
required by the customer’s specifications or designs, thereby necessitating
reliance on us for production of such designed products.





We have no material patents for the
proprietary techniques, including software and manufacturing expertise, we have
developed to manufacture jet engine and aircraft component replacement parts and
instead, we primarily rely on trade secret protection.  Although our
proprietary techniques and software and manufacturing expertise are subject to
misappropriation or obsolescence, we believe that we take appropriate measures
to prevent misappropriation or obsolescence from occurring by developing new
techniques and improving existing methods and processes, which we will continue
on an ongoing basis as dictated by the technological needs of our
business.


Electronic
Technologies Group





Our Electronic Technologies Group’s
strategy is to design and produce mission-critical subcomponents for smaller,
niche markets, but which are utilized in larger systems – systems
like




4
 Table of Contents




targeting,
tracking, identification, simulation, testing, communications, lighting,
surgical, x-ray, telecom and computer systems.  These systems are, in turn,
often located on another platform, such as aircraft, satellites, ships,
vehicles, handheld devices and other platforms.





Electro-Optical Infrared Simulation
and Test Equipment.  The Electronic Technologies Group believes it
is a leading international designer and manufacturer of niche state-of-the-art
simulation, testing and calibration equipment used in the development of missile
seeking technology, airborne targeting and reconnaissance systems, shipboard
targeting andreconnaissance systems,
space-based sensors as well as ground vehicle-based systems.  These
products include infrared scene projector equipment, such as our MIRAGE IR Scene
Simulator, high precision blackbody sources, software and integrated calibration
systems.





Simulation equipment allows the U.S.
government and allied foreign military to save money on missile testing as it
allows infrared-based missiles to be tested on a multi-axis, rotating table
instead of requiring the launch of a complete missile.  In addition,
several large military prime contractors have elected to purchase such equipment
from us instead of maintaining internal staff to do so because we can offer a
more cost-effective solution.  Our customers include major U.S. Department
of Defense weapons laboratories and defense prime contractors, such as Lockheed
Martin, Northrop Grumman and Boeing.





Electro-Optical Laser
Products.  The Electronic Technologies Group believes it is a
leading designer and maker of Laser Rangefinder Receivers and other
photodetectors used in airborne, vehicular and handheld targeting systems
manufactured by major prime military contractors, such as Northrop Grumman and
Lockheed Martin.  Most of our Rangefinder Receiver product offering
consists of complex and patented products which detect reflected light from
laser targeting systems and allow the systems to confirm target accuracy and
calculate target distances prior to discharging a weapon system.  These
products are also used in laser eye surgery systems for tracking ocular
movement.





Electro-Optical, Microwave and Other
Power Equipment.  The Electronic Technologies Group produces power
supplies, amplifiers and flash lamp drivers used in laser systems for military,
medical and other applications that are sometimes utilized with our Rangefinder
Receivers.  We also produce emergency back-up power supplies and batteries
used on commercial aircraft and business jets for services such as emergency
exit lighting, emergency fuel shut-off, power door assists, cockpit voice
recorders and flight computers.  We offer custom or standard designs that
solve challenging OEM requirements and meet stringent agency safety and
emissions requirements.  Our power electronics products include capacitor
charger power supplies, laser diode drivers, arc lamp power supplies and custom
power supply designs.





Our microwave products are used in
satellites and electronic warfare systems.  These products, which include
isolators, bias tees, circulators, latching ferrite switches and waveguide
adapters, are used in satellites to control or direct energy according to
operator needs.  As satellites are frequently used as sensors for stand-off
warfare, we believe this product line further supports our goal of increasing
our activity in the stand-off market.  We believe we are a leading supplier
of the niche products which we design and manufacture for this market, a market
that includes commercial satellites.  Our customers for these products
include satellite manufacturers, such as Space Systems/Loral, Boeing and
Raytheon.





Electromagnetic and Radio
Interference Shielding.  The Electronic Technologies Group designs
and manufactures shielding used to prevent electromagnetic energy and radio
frequencies from interfering with computers, telecommunication devices,
avionics, weapons systems and other electronic equipment.  Our products
include a patented line of shielding applied directly to circuit boards and a
line of gasket-type shielding applied to computers and other electronic
equipment.  Our customers consist essentially of medical, electronic,
telecommunication and defense equipment producers.




5
 Table of Contents


High-Speed Interface
Products.  The Electronic Technologies Group designs and
manufactures advanced high-technology, high-speed interface products utilized in
homeland security, defense, medical research, astronomical and other
applications across numerous industries.





High Voltage Interconnection
Devices.  The Electronic Technologies Group designs and manufactures
high and very high voltage interconnection devices, cable assemblies and wire
for the medical equipment, defense and other industrial markets.  Among
others, our products are utilized in aircraft missile defense, fighter pilot
helmet displays, avionic systems, medical applications, wireless communications,
and industrial applications including high voltage test equipment and underwater
monitoring systems.





High Voltage Advanced Power
Electronics.  The Electronic Technologies Group designs and
manufactures a patented line of high voltage energy generators for medical,
baggage inspection and industrial imaging systems, and also offers a patented
line of high frequency power delivery systems for the commercial sign
industry.





Power Conversion Products.
The Electronic Technologies Group designs and provides innovative power
conversion products principally serving the high-reliability military, space and
commercial avionics end-markets. These high density, low profile and lightweight
DC-to-DC converters and electromagnetic interference filters, which include
thick film hermetically sealed hybrids, military commercial-off-the-shelf and
custom designed and assembled products, have become the primary specified
components of their kind on a generation of complex military, space and avionics
equipment.





Underwater Locator
Beacons.  The Electronic Technologies Group designs and manufactures
Underwater Locator Beacons (“ULBs”) used to locate aircraft Cockpit Voice
Recorders and Flight Data Recorders, marine ship Voyage Recorders and various
other devices which have been submerged under water. ULBs are required equipment
on all U.S. FAA and European Aviation Safety Agency (“EASA”) approved Flight
Data and Cockpit Voice Recorders used in aircraft and on similar systems
utilized on large marine shipping vessels.





As part of our growth strategy, we have
continued to increase our research and development activities.  Research
and development expenditures by the Electronic Technologies Group were $8.2
million in fiscal 2009, $7.3 million in fiscal 2008 and $5.8 million in fiscal
2007.  We believe that our Electronic Technologies Group’s research and
development capabilities are a significant component of our historical success
and an integral part of our growth strategy.





Financial
Information About Operating Segments and Geographic Areas





See Note 14, Operating Segments, of the
Notes to Consolidated Financial Statements for financial information by
operating segment and by geographic areas.





Distribution,
Sales, Marketing and Customers





Each of our operating segments
independently conducts distribution, sales and marketing efforts directed at
their respective customers and industries and, in some cases, collaborates with
other operating divisions and subsidiaries within its group for cross-marketing
efforts.  Sales and marketing efforts are conducted primarily by in-house
personnel and, to a lesser extent, by independent manufacturers’
representatives.  Generally, the in-house sales personnel receive a base
salary plus commission and manufacturers’ representatives receive a commission
on sales.




6
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We believe that direct relationships
are crucial to establishing and maintaining a strong customer base and,
accordingly, our senior management is actively involved in our marketing
activities, particularly with established customers.  We are also a member
of various trade and business organizations related to the commercial aviation
industry, such as the Aerospace Industries Association, which we refer to as
AIA, the leading trade association representing the nation’s manufacturers of
commercial, military and business aircraft, aircraft engines and related
components and equipment.  Due in large part to our established industry
presence, we enjoy strong customer relations, name recognition and repeat
business.





We sell our products to a broad
customer base consisting of domestic and foreign commercial and cargo airlines,
repair and overhaul facilities, other aftermarket suppliers of aircraft engine
and airframe materials, OEMs, domestic and foreign military units, electronic
manufacturing services companies, manufacturers for the defense industry as well
as medical, telecommunication, scientific, and industrial companies.  No
one customer accounted for sales of 10% or more of total consolidated sales from
continuing operations during any of the last three fiscal years.  Net sales
to our five largest customers accounted for approximately 20% of total net sales
during the year ended October 31, 2009.





Competition





The aerospace product and service
industry is characterized by intense competition and some of our competitors
have substantially greater name recognition, inventories, complementary product
and service offerings, financial, marketing and other resources than we
do.  As a result, such competitors may be able to respond more quickly to
customer requirements than we can.  Moreover, smaller competitors may be in
a position to offer more attractive pricing as a result of lower labor costs and
other factors.





Our jet engine and aircraft component
replacement parts business competes primarily with Pratt & Whitney, General
Electric, and other OEMs.  The competition is principally based on price
and service to the extent that our parts are interchangeable.  With respect
to other aerospace products and services sold by the Flight Support Group, we
compete with both the leading jet engine OEMs and a large number of machining,
fabrication and repair companies, some of which have greater financial and other
resources than we do.  Competition is based mainly on price, product
performance, service and technical capability.





Competition for the repair and overhaul
of jet engine and aircraft components comes from three principal sources: OEMs,
major commercial airlines and other independent service companies.  Some of
these competitors have greater financial and other resources than we do. 
Some major commercial airlines own and operate their own service centers and
sell repair and overhaul services to other aircraft operators.  Foreign
airlines that provide repair and overhaul services typically provide these
services for their own aircraft components and for third parties.  OEMs
also maintain service centers that provide repair and overhaul services for the
components they manufacture.  Other independent service organizations also
compete for the repair and overhaul business of other users of aircraft
components.  We believe that the principal competitive factors in the
repair and overhaul market are quality, turnaround time, overall customer
service and price.





Our Electronic Technologies Group
competes with several large and small domestic and foreign competitors, some of
which have greater financial and other resources than we do.  The markets
for our electronic products are niche markets with several competitors with
competition based mainly on design, technology, quality, price, and customer
satisfaction.





Raw
Materials





We purchase a variety of raw materials,
primarily consisting of high temperature alloy sheet metal and castings,
forgings, pre-plated metals and electrical components from various
vendors.  The




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materials
used by our operations are generally available from a number of sources and in
sufficient quantities to meet current requirements subject to normal lead
times.





Backlog





Our total backlog of unshipped orders
was $104.5 million as of October 31, 2009 compared to $107.1 million as of
October 31, 2008.  The Flight Support Group’s backlog of unshipped orders
was $32.9 million as of October 31, 2009 as compared to $49.0 million as of
October 31, 2008.  This backlog excludes forecasted shipments for certain
contracts of the Flight Support Group pursuant to which customers provide only
estimated annual usage and not firm purchase orders.  Our backlogs within
the Flight Support Group are typically short-lead in nature with many product
orders being received within the month of shipment.  The decrease in the
Flight Support Group’s backlog reflects a reduction in demand for our
aftermarket replacement parts and repair and overhaul services resulting from
worldwide airline capacity cuts and efforts to reduce spending and conserve cash
by the airline industry.  The Electronic Technologies Group’s backlog of
unshipped orders was $71.6 million as of October 31, 2009 as compared to $58.1
million as of October 31, 2008.  The increase in the Electronic
Technologies Group’s backlog is primarily related to backlogs of businesses
acquired during fiscal 2009 and some increased orders associated with our
defense related businesses, including homeland security products. 
Substantially the entire backlog of orders as of October 31, 2009 is expected to
be delivered during fiscal 2010.





Government
Regulation





The FAA regulates the manufacture,
repair and operation of all aircraft and aircraft parts operated in the United
States.  Its regulations are designed to ensure that all aircraft and
aviation equipment are continuously maintained in proper condition to ensure
safe operation of the aircraft.  Similar rules apply in other
countries.  All aircraft must be maintained under a continuous condition
monitoring program and must periodically undergo thorough inspectionand maintenance.  The
inspection, maintenance and repair procedures for the various types of aircraft
and equipment are prescribed by regulatoryauthorities andcan be performed only by
certified repair facilities utilizing certified technicians.  Certification
and conformance is required prior to installation of a part on an
aircraft.  Aircraft operators must maintain logs concerning the utilization
and condition of aircraft engines, life-limited engine parts and
airframes.  In addition, the FAA requires that various maintenance routines
be performed on aircraft engines, some engine parts, and airframes at regular
intervals based on cycles or flight time.  Engine maintenance must also be
performed upon the occurrence of certain events, such as foreign object damage
in an aircraft engine or the replacement of life-limited engine parts. 
Such maintenance usually requires that an aircraft engine be taken out of
service.  Our operations may in the future be subject to new and more
stringent regulatory requirements. In that regard, we closely monitor the FAA
and industry trade groups in an attempt to understand how possible future
regulations might impact us.





There has been no material adverse
effect to our consolidated financial statements as a result of these government
regulations.





Environmental
Regulation





Our operations are subject to
extensive, and frequently changing, federal, state and local environmental laws
and substantial related regulation by government agencies, including the
Environmental Protection Agency.  Among other matters, these regulatory
authorities impose requirements that regulate the operation, handling,
transportation and disposal of hazardous materials; protect the health and
safety of workers; and require us to obtain and maintain licenses and permits in
connection with our operations.  This extensive regulatory framework
imposes significant compliance




8
 Table of Contents




burdens
and risks on us.  Notwithstanding these burdens, we believe that we are in
material compliance with all federal, state and local laws and regulations
governing our operations.





Other Regulation





We are also subject to a variety of
other regulations including work-related and community safety laws.  The
Occupational Safety and Health Act of 1970 mandates general requirements for
safe workplaces for all employees and established the Occupational Safety and
Health Administration (“OSHA”) in the Department of Labor.  In particular,
OSHA provides special procedures and measures for the handling of some hazardous
and toxic substances.  In addition, specific safety standards have been
promulgated for workplaces engaged in the treatment, disposal or storage of
hazardous waste.  Requirements under state law, in some circumstances, may
mandate additional measures for facilities handling materials specified as
extremely dangerous.  We believe that our operations are in material
compliance with OSHA’s health and safety requirements.





Insurance





We are a named insured under policies
which include the following coverage: (i) product liability, including
grounding; (ii) personal property, inventory and business income at our
facilities; (iii) general liability coverage; (iv) employee benefit liability;
(v) international liability and automobile liability; (vi) umbrella liability
coverage; and (vii) various other activities or items subject to certain limits
and deductibles.  We believe that our insurance coverage is adequate to
insure against the various liability risks of our business.





Employees





As of October 31, 2009, we had
approximately 2,100 full-time and part-time employees including approximately
1,400 in the Flight Support Group and approximately 700 in the Electronic
Technologies Group.  None of our employees are represented by a
union.  Our management believes that we have good relations with our
employees.





Available
Information





Our Internet web site address is http://www.heico.com.  We make available
free of charge through our web site our annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K and amendments to those
reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 as soon as reasonably practicable after we electronically
file such material with, or furnish it to, the Securities and Exchange
Commission (“SEC”).  These materials are also available free of charge on
the SEC’s website at http://www.sec.gov.  The information on or
obtainable through our web site is not incorporated into this annual report on
Form 10-K.





We have adopted a code of ethics that
applies to our principal executive officer, principal financial officer,
principal accounting officer or controller and other persons performing similar
functions.  Our Code of Ethics for Senior Financial Officers and Other
Officers is part of our Code of Business Conduct, which is located on our web
site at http://www.heico.com.  Any
amendments to or waivers from a provision of this code of ethics will be posted
on the web site.  Also located on the web site are our Corporate Governance
Guidelines, Finance/Audit Committee Charter, Nominating & Corporate
Governance Committee Charter, and Compensation Committee Charter.





Copies of the above referenced
materials will be made available, free of charge, upon written request to the
Corporate Secretary at the Company’s headquarters.




9
 Table of Contents


Executive
Officers of the Registrant





Our executive officers are elected by
the Board of Directors at the first meeting following the annual meeting of
shareholders and serve at the discretion of the Board.  The following table
sets forth the names, ages of, and positions and offices held by our executive
officers as of December 17, 2009:





Name
                                
                                Age
                                
                                Position(s)
                                
                                Director
                                  SinceLaurans
      A. Mendelson
                                
                                71
                                
                                Chairman
      of the Board and Chief Executive Officer
                                
                                1989Eric
      A. Mendelson
                                
                                44
                                
                                Co-President
      and Director; President and Chief Executive Officer of HEICO Aerospace
      Holdings Corp.
                                
                                1992Victor
      H. Mendelson
                                
                                42
                                
                                Co-President
      and Director; President and Chief Executive Officer of HEICO Electronic
      Technologies Corp.
                                
                                1996Thomas
      S. Irwin
                                
                                63
                                
                                Executive
      Vice President and Chief FinancialOfficer
                                
                                ─William
      S. Harlow
                                
                                61
                                
                                Vice
      President of Corporate Development
                                
                                ─





Laurans A. Mendelson has
served as our Chairman of the Board since December 1990.  He has also
served as our Chief Executive Officer since February 1990 and served as our
President from September 1991 through September 2009.  HEICO Corporation is
a member of the Aerospace Industries Association (“AIA”) in Washington D.C., and
Mr. Mendelson serves on the Board of Governors of AIA.  He is also former
Chairman of the Board of Trustees, former Chairman of the Executive Committee
and a current member of the Society of Mt. Sinai Founders of Mt. Sinai Medical
Center inMiami
Beach, Florida.  Inaddition, Mr. Mendelson
served as a Trustee of Columbia University in The City of New York from 1995 to
2001, as well as Chairman of the Trustees’ Audit Committee.  Mr. Mendelson
currently serves as Trustee Emeritus of Columbia University.  Mr. Mendelson
is a Certified Public Accountant.  Laurans Mendelson is the father of Eric
Mendelson and Victor Mendelson.





Eric A. Mendelson has served
as our Co-President since October 2009 and served as our Executive Vice
President from 2001 through September 2009.  He also serves as President
and Chief Executive Officer of HEICO Aerospace Holdings Corp., a subsidiary of
ours, since its formation in 1997; and President of HEICO Aerospace Corporation
since 1993.  He also served as our Vice President from 1992 to 2001;
President of HEICO’s Jet Avion Corporation, a wholly owned subsidiary of HEICO
Aerospace, from 1993 to 1996; and Jet Avion’s Executive Vice President and Chief
Operating Officer from 1991 to 1993.  From 1990 to 1991, Mr. Mendelson was
our Director of Planning and Operations.  Mr. Mendelson is a co-founder,
and, since 1987, has been Managing Director of Mendelson International
Corporation, a private investment company and a shareholder of HEICO.  In
addition, Mr. Mendelson is a member of the Advisory Board of Trustees of Mt.
Sinai Medical Center in Miami Beach, Florida and a member of the Board of
Trustees of Ransom – Everglades School in Coconut Grove, Florida, as well as a
member of the Executive Committee of the Columbia College Alumni
Association.  Eric Mendelson is the son of Laurans Mendelson and the
brother of Victor Mendelson.





Victor H. Mendelson has
served as our Co-President since October 2009 and served as our Executive Vice
President from 2001 through September 2009.  He also serves as President
and Chief




10
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Executive
Officer of HEICO Electronic Technologies Corp., a subsidiary of ours, since
September 1996.  He served as our General Counsel from 1993 to September
2008 and our Vice President from 1996 to 2001.  In addition, Mr. Mendelson
was the Executive Vice President of our former MediTek Health Corporation
subsidiary from 1994 and MediTek Health’s Chief Operating Officer from 1995
until its sale in July 1996.  He was our Associate General Counsel from
1992 until 1993.  From 1990 until 1992, he worked on a consulting
basis with us, developing and analyzing various strategic
opportunities.  Mr. Mendelson is a co-founder, and, since 1987, has
been President of Mendelson International Corporation, a private investment
company and a shareholder of HEICO.  He is a member of the Board of
Visitors of Columbia College in New York City, a Trustee of St. Thomas
University in Miami Gardens, Florida and President and a Director of the Florida
Grand Opera.  Victor Mendelson is the son of Laurans Mendelson and the
brother of Eric Mendelson.





Thomas S. Irwin has served as
our Executive Vice President and Chief Financial Officer since September 1991;
our Senior Vice President from 1986 to 1991; and our Vice President and
Treasurer from 1982 to 1986.  Mr. Irwin is a Certified Public
Accountant.  He is a Trustee of the Greater Hollywood Chamber of
Commerce and a Director of the Broward Alliance.





William S. Harlowhas served
as our Vice President of Corporate Development since 2001 and served as Director
of Corporate Development from 1995 to 2001.





Item 1A.
            RISK
      FACTORS





Our business, financial condition,
operating results and cash flows can be impacted by a number of factors, many of
which are beyond our control, including those set forth below and elsewhere in
this Annual Report on Form 10-K, any one of which may cause our actual results
to differ materially from anticipated results:





Our
success is highly dependent on the performance of the aviation industry, which
could be impacted by lower demand for commercial air travel or airline fleet
changes causing lower demand for our goods and services.




Economic factors and passenger security
concerns that affect the aviation industry also affect our business.  The
aviation industry has historically been subject to downward cycles from time to
time which reduce the overall demand for jet engine and aircraft component
replacement parts and repair and overhaul services, and such downward cycles
result in lower prices and greater credit risk. These economic factors and
passenger security concerns may have a material adverse effect on our business,
financial condition and results of operations.




We
are subject to governmental regulation and our failure to comply with these
regulations could cause the government to withdraw or revoke our authorizations
and approvals to do business and could subject us to penalties and sanctions
that could harm our business.




Governmental agencies throughout the
world, including the FAA, highly regulate the manufacture, repair and overhaul
of aircraft parts and accessories.  We include, with the replacement parts
that we sell to our customers, documentation certifying that each part complies
with applicable regulatory requirements and meets applicable standards of
airworthiness established by the FAA or the equivalent regulatory agencies in
other countries.  In addition, our repair and overhaul operations are
subject to certification pursuant to regulations established by the FAA.
Specific regulations vary from country to country, although compliance with FAA
requirements generally satisfies regulatory requirements in other
countries.  The revocation or suspension of any of our material
authorizations or approvals would have an




11
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adverse
effect on our business, financial condition and results of operations.  New
and more stringent government regulations, if adopted and enacted, could have an
adverse effect on our business, financial condition and results of operations.
In addition, some sales to foreign countries of the equipment manufactured by
our Electronic Technologies Group require approval or licensing from the U.S.
government.  Denial of export licenses could reduce our sales to those
countries and could have a material adverse effect on our business.




The
retirement of commercial aircraft could reduce our revenues.




Our Flight Support Group designs,
engineers, manufactures and distributes jet engine and aircraft component
replacement parts and also repairs, refurbishes and overhauls jet engine and
aircraft components.  If aircraft or engines for which we have
replacement parts or supply repair and overhaul services are retired and there
are fewer aircraft that require these parts or services, our revenues may
decline.




Reductions
in defense, space or homeland security spending by U.S. and/or foreign customers
could reduce our revenues.




In fiscal 2009, approximately 46% of
the sales of our Electronic Technologies Group were derived from the sale of
defense products and services to U.S. and foreign military agencies and their
suppliers.  A decline in defense, space or homeland security budgets
or additional restrictions imposed by the U.S. government on sales of products
or services to foreign military agencies could lower sales of our products and
services.




Intense
competition from existing and new competitors may harm our
business.




We face significant competition in each
of our businesses.




Flight
Support Group




·
            For
      jet engine replacement parts, we compete with the industry’s leading jet
      engine OEMs, particularly Pratt & Whitney and General
      Electric.




·
            For
      the overhaul and repair of jet engine and airframe components as well as
      avionics and navigation systems, we compete
  with:




-
            major
      commercial airlines, many of which operate their own maintenance and
      overhaul units;




-
            OEMs,
      which manufacture, repair and overhaul their own parts;
  and




-
            other
      independent service companies.




Electronic
Technologies Group




·
            For
      the design and manufacture of various types of electronic and
      electro-optical equipment as well as high voltage interconnection devices
      and high speed interface products, we compete in a fragmented marketplace
      with a number of companies, some of which are well
      capitalized.


The aviation aftermarket supply
industry is highly fragmented, has several highly visible leading companies, and
is characterized by intense competition. Some of our OEM competitors have
greater name recognition than HEICO, as well as complementary lines of business
and financial, marketing and other




12
 Table of Contents




resources
that HEICO does not have. In addition, OEMs, aircraft maintenance providers,
leasing companies and FAA-certificated repair facilities may attempt to bundle
their services and product offerings in the supply industry, thereby
significantly increasing industry competition.  Moreover, our smaller
competitors may be able to offer more attractive pricing of parts as a result of
lower labor costs or other factors.  A variety of potential actions by
any of our competitors, including a reduction of product prices or the
establishment by competitors of long-term relationships with new or existing
customers, could have a material adverse effect on our business, financial
condition and results of operations.  Competition typically
intensifies during cyclical downturns in the aviation industry, when supply may
exceed demand.  We may not be able to continue to compete effectively
against present or future competitors, and competitive pressures may have a
material and adverse effect on our business, financial condition and results of
operations.




Our
success is dependent on the development and manufacture of new products,
equipment and services. Our inability to develop, manufacture and introduce new
products and services at profitable pricing levels could reduce our sales or
sales growth.




The aviation, defense, space, medical,
telecommunication and electronic industries are constantly undergoing
development and change and, accordingly, new products, equipment and methods of
repair and overhaul service are likely to be introduced in the
future.  In addition to manufacturing electronic and electro-optical
equipment and selected aerospace and defense components for OEMs and the U.S.
government and repairing jet engine and aircraft components, we re-design
sophisticated aircraft replacement parts originally developed by OEMs so that we
can offer the replacement parts for sale at substantially lower prices than
those manufactured by the OEMs.  Consequently, we devote substantial
resources to research and product development.  Technological
development poses a number of challenges and risks, including the
following:




·
            We
      may not be able to successfully protect the proprietary interests we have
      in various aircraft parts, electronic and electro-optical equipment and
      our repair processes;




·
            As
      OEMs continue to develop and improve jet engines and aircraft components,
      we may not be able to re-design and manufacture replacement parts that
      perform as well as those offered by OEMs or we may not be able to
      profitably sell our replacement parts at lower prices than the
      OEMs;




·
            We
      may need to expend significant capital
to:


-      purchase
new equipment and machines,


-      train
employees in new methods of production and service, and


-      fund the
research and development of new products; and




·
            Development
      by our competitors of patents or methodologies that preclude us from the
      design and manufacture of aircraft replacement parts or electrical and
      electro-optical equipment could adversely affect our business, financial
      condition and results of
operations.




In addition, we may not be able to
successfully develop new products, equipment or methods of repair and overhaul
service, and the failure to do so could have a material adverse effect on our
business, financial condition and results of operations.




13
 Table of Contents


Product
specification costs and requirements could cause an increase to our costs to
complete contracts.




The costs to meet customer
specifications and requirements could result in us having to spend more to
design or manufacture products and this could reduce our profit margins on
current contracts or those we obtain in the future.




We
may incur product liability claims that are not fully insured.




Our jet engine and aircraft component
replacement parts and repair and overhaul services expose our business to
potential liabilities for personal injury or death as a result of the failure of
an aircraft component that we have designed, manufactured or
serviced.  The commercial aviation industry occasionally has
catastrophic losses that may exceed policy limits.  An uninsured or
partially insured claim, or a claim for which third-party indemnification is not
available, could have a material adverse effect on our business, financial
condition and results of operations.  Additionally, insurance coverage
costs may become even more expensive in the future.  Our customers
typically require us to maintain substantial insurance coverage and our
inability to obtain insurance coverage at commercially reasonable rates could
have a material adverse effect on our business.




We
may not have the administrative, operational or financial resources to continue
to grow the company.




We have experienced rapid growth in
recent periods and intend to continue to pursue an aggressive growth strategy,
both through acquisitions and internal expansion of products and
services.  Our growth to date has placed, and could continue to place,
significant demands on our administrative, operational and financial
resources.  We may not be able to grow effectively or manage our
growth successfully, and the failure to do so could have a material adverse
effect on our business, financial condition and results of
operations.




We
may not be able to execute our acquisition strategy, which could slow our
growth.




A key element of our strategy is growth
through the acquisition of additional companies.  Our acquisition
strategy is affected by and poses a number of challenges and risks, including
the following:




·
            Availability
      of suitable acquisition candidates;




·
            Availability
      of capital;




·
            Diversion
      of management’s attention;




·
            Integration
      of the operations and personnel of acquired
  companies;




·
            Potential
      write downs of acquired intangible
assets;




·
            Potential
      loss of key employees of acquired
companies;




·
            Use
      of a significant portion of our available
cash;




·
            Significant
      dilution to our shareholders for acquisitions made utilizing our
      securities; and




·
            Consummation
      of acquisitions on satisfactory
terms.




14
 Table of Contents




We may not be able to successfully
execute our acquisition strategy, and the failure to do so could have a material
adverse effect on our business, financial condition and results of
operations.




We
may incur environmental liabilities and these liabilities may not be covered by
insurance.




Our operations and facilities are
subject to a number of federal, state and local environmental laws and
regulations, which govern, among other things, the discharge of hazardous
materials into the air and water as well as the handling, storage and disposal
of hazardous materials.  Pursuant to various environmental laws, a
current or previous owner or operator of real property may be liable for the
costs of removal or remediation of hazardous materials.  Environmental
laws typically impose liability whether or not the owner or operator knew of, or
was responsible for, the presence of hazardous materials.  Although
management believes that our operations and facilities are in material
compliance with environmental laws and regulations, future changes in them or
interpretations thereof or the nature of our operations may require us to make
significant additional capital expenditures to ensure compliance in the
future.




We do not maintain specific
environmental liability insurance and the expenses related to these
environmental liabilities, if we are required to pay them, could have a material
adverse effect on our business, financial condition and results of
operations.




We
are dependent on key personnel and the loss of these key personnel could have a
material adverse effect on our success.




Our success substantially depends on
the performance, contributions and expertise of our senior management team led
by Laurans A. Mendelson, our Chairman and Chief Executive Officer, Eric A.
Mendelson, our Co-President, and Victor H. Mendelson, our
Co-President.  Technical employees are also critical to our research
and product development, as well as our ability to continue to re-design
sophisticated products of OEMs in order to sell competing replacement parts at
substantially lower prices than those manufactured by the OEMs.  The
loss of the services of any of our executive officers or other key employees or
our inability to continue to attract or retain the necessary personnel could
have a material adverse effect on our business, financial condition and results
of operations.




Our
executive officers and directors have significant influence over our management
and direction.




As of December 17, 2009, collectively
our executive officers and entities controlled by them, our 401(k) Plan and
members of the Board of Directors beneficially owned approximately 26% of our
outstanding Common Stock and approximately 7% of our outstanding Class A Common
Stock.  Accordingly, they will be able to substantially influence the
election of the Board of Directors and control our business, policies and
affairs, including our position with respect to proposed business combinations
and attempted takeovers.





Item 1B.
            UNRESOLVED STAFF
      COMMENTS





None.




15
 Table of Contents




Item 2.
            PROPERTIES





We own or lease a number of facilities,
which are utilized by our Flight Support Group (“FSG”), Electronic Technologies
Group (“ETG”) and Corporate office.  All of the facilities listed
below are in good operating condition, well maintained and in regular
use.  We believe that our existing facilities are sufficient to meet
our operational needs for the foreseeable future.  Summary information
on the facilities utilized within the FSG and the ETG to support their principal
operating activities is as follows:





Flight Support
Group


Square FootageLocation
                              
                              Leased
                              
                              
                              Owned
                              
                              DescriptionUnited
      States facilities (8 states)
                              
                              
                              294,000
                              
                              
                              
                              173,000
                              
                              Manufacturing,
      engineering and distributionfacilities,
      and corporate headquartersUnited
      States facilities (6 states)
                              
                              
                              134,000
                              
                              
                              
                              127,000
                              
                              Repair
      and overhaul facilitiesInternational
      facilities (3 countries)
                                -
      India, Singapore and United Kingdom
                              
                              
                              10,000
                              
                              
                              
                              —
                              
                              Manufacturing,
      engineering and distribution
facilities





Electronic Technologies
Group


Square FootageLocation
                        
                        Leased
                        
                        
                        Owned
                        
                        DescriptionUnited
      States facilities (9 states)
                        
                        
                        185,000
                        
                        
                        
                        76,000
                        
                        Manufacturing
      and engineering facilitiesInternational
      facilities (2 countries)
                        
                        
                        52,000
                        
                        
                        
                        12,000
                        
                        Manufacturing
      and engineering facilities-
      Canada and United Kingdom





Corporate


Square FootageLocation
                      
                      Leased
                      
                      
                      Owned(1)
                      
                      DescriptionUnited
      States facilities (1 state)
                      
                      
                      —
                      
                      
                      
                      4,000
                      
                      Administrative
      offices





(1)
            Represents
      the square footage of corporate offices in Miami, Florida. The square
      footage of our corporate headquarters in Hollywood, FL is included within
      the square footage under the caption “United States facilities (8 states)”
      under Flight Support Group.





Item 3.
            LEGAL
      PROCEEDINGS





We are involved in various legal
actions arising in the normal course of business.  Based upon the
company’s and our 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 our results of operations, financial position or cash
flows.





Item 4.
            SUBMISSION OF MATTERS TO A
      VOTE OF SECURITY HOLDERS





There were no matters submitted to a
vote of security holders during the fourth quarter of fiscal 2009.




16
 Table of Contents


PART II





Item 5.
            MARKET FOR REGISTRANT’S COMMON
      EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
      SECURITIES





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.





Class A Common
Stock





High
                    
                    
                    Low
                    
                    
                    Cash Dividends
                      Per ShareFiscal
      2008:First
      Quarter
                    
                    $
                    44.63
                    
                    
                    $
                    32.05
                    
                    
                    $
                    .05Second
      Quarter
                    
                    
                    42.24
                    
                    
                    
                    32.80
                    
                    
                    
                    ―Third
      Quarter
                    
                    
                    41.68
                    
                    
                    
                    24.87
                    
                    
                    
                    .05Fourth
      Quarter
                    
                    
                    36.19
                    
                    
                    
                    19.82
                    
                    
                    
                    ―Fiscal
      2009:First
      Quarter
                    
                    $
                    31.36
                    
                    
                    $
                    18.27
                    
                    
                    $
                    .06Second
      Quarter
                    
                    
                    30.63
                    
                    
                    
                    17.34
                    
                    
                    
                    ―Third
      Quarter
                    
                    
                    32.76
                    
                    
                    
                    23.26
                    
                    
                    
                    .06Fourth
      Quarter
                    
                    
                    35.00
                    
                    
                    
                    26.01
                    
                    
                    
                    ―





As of December 17, 2009, there were 569
holders of record of our Class A Common Stock.





Common
Stock





High
                    
                    
                    Low
                    
                    
                    Cash Dividends
                      Per ShareFiscal
      2008:First
      Quarter
                    
                    $
                    56.92
                    
                    
                    $
                    42.00
                    
                    
                    $
                    .05Second
      Quarter
                    
                    
                    52.78
                    
                    
                    
                    41.80
                    
                    
                    
                    ―Third
      Quarter
                    
                    
                    54.35
                    
                    
                    
                    30.16
                    
                    
                    
                    .05Fourth
      Quarter
                    
                    
                    48.27
                    
                    
                    
                    26.49
                    
                    
                    
                    ―Fiscal
      2009:First
      Quarter
                    
                    $
                    42.78
                    
                    
                    $
                    24.30
                    
                    
                    $
                    .06Second
      Quarter
                    
                    
                    41.64
                    
                    
                    
                    21.40
                    
                    
                    
                    ―Third
      Quarter
                    
                    
                    40.50
                    
                    
                    
                    26.32
                    
                    
                    
                    .06Fourth
      Quarter
                    
                    
                    44.02
                    
                    
                    
                    35.00
                    
                    
                    
                    ―





As of December 17, 2009, there were 584
holders of record of our Common Stock.




17
 Table of Contents


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 New York Stock Exchange
(NYSE) Composite Index and the Dow Jones U.S. Aerospace Index for the five-year
period from October 31, 2004 through October 31, 2009.  The NYSE
Composite Index measures all common stock 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 used for defense purposes.  The total returns
include the reinvestment of cash dividends.











CumulativeTotalReturnasofOctober31,2004
                  
                  
                  2005
                  
                  
                  2006
                  
                  
                  2007
                  
                  
                  2008
                  
                  
                  2009HEICO
      Common Stock
                  
                  $
                  100.00
                  
                  
                  $
                  122.76
                  
                  
                  $
                  201.48
                  
                  
                  $
                  302.93
                  
                  
                  $
                  214.60
                  
                  
                  $
                  212.80HEICO
      Class A Common Stock
                  
                  
                  100.00
                  
                  
                  
                  122.23
                  
                  
                  
                  217.16
                  
                  
                  
                  314.51
                  
                  
                  
                  204.39
                  
                  
                  
                  225.62NYSE
      Composite Index
                  
                  
                  100.00
                  
                  
                  
                  111.06
                  
                  
                  
                  131.11
                  
                  
                  
                  154.07
                  
                  
                  
                  90.56
                  
                  
                  
                  100.70Dow
      Jones U.S. Aerospace Index
                  
                  
                  100.00
                  
                  
                  
                  121.17
                  
                  
                  
                  158.41
                  
                  
                  
                  209.17
                  
                  
                  
                  125.95
                  
                  
                  
                  141.69




18
 Table of Contents




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 on the previous
page.  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.











CumulativeTotalReturnasofOctober31,1990
                                      
                                      
                                      1991
                                      
                                      
                                      1992
                                      
                                      
                                      1993
                                      
                                      
                                      1994
                                      
                                      
                                      1995
                                      
                                      
                                      1996HEICO
      Common Stock (1)
                                      
                                      $
                                      100.00
                                      
                                      
                                      $
                                      141.49
                                      
                                      
                                      $
                                      158.35
                                      
                                      
                                      $
                                      173.88
                                      
                                      
                                      $
                                      123.41
                                      
                                      
                                      $
                                      263.25
                                      
                                      
                                      $
                                      430.02NYSE
      Composite Index
                                      
                                      
                                      100.00
                                      
                                      
                                      
                                      130.31
                                      
                                      
                                      
                                      138.76
                                      
                                      
                                      
                                      156.09
                                      
                                      
                                      
                                      155.68
                                      
                                      
                                      
                                      186.32
                                      
                                      
                                      
                                      225.37Dow
      Jones U.S. Aerospace Index
                                      
                                      
                                      100.00
                                      
                                      
                                      
                                      130.67
                                      
                                      
                                      
                                      122.00
                                      
                                      
                                      
                                      158.36
                                      
                                      
                                      
                                      176.11
                                      
                                      
                                      
                                      252.00
                                      
                                      
                                      
                                      341.651997
                                      
                                      
                                      1998
                                      
                                      
                                      1999
                                      
                                      
                                      2000
                                      
                                      
                                      2001
                                      
                                      
                                      2002
                                      
                                      
                                      2003HEICO
      Common Stock (1)
                                      
                                      $
                                      1,008.31
                                      
                                      
                                      $
                                      1,448.99
                                      
                                      
                                      $
                                      1,051.61
                                      
                                      
                                      $
                                      809.50
                                      
                                      
                                      $
                                      1,045.86
                                      
                                      
                                      $
                                      670.39
                                      
                                      
                                      $
                                      1,067.42NYSE
      Composite Index
                                      
                                      
                                      289.55
                                      
                                      
                                      
                                      326.98
                                      
                                      
                                      
                                      376.40
                                      
                                      
                                      
                                      400.81
                                      
                                      
                                      
                                      328.78
                                      
                                      
                                      
                                      284.59
                                      
                                      
                                      
                                      339.15Dow
      Jones U.S. Aerospace Index
                                      
                                      
                                      376.36
                                      
                                      
                                      
                                      378.66
                                      
                                      
                                      
                                      295.99
                                      
                                      
                                      
                                      418.32
                                      
                                      
                                      
                                      333.32
                                      
                                      
                                      
                                      343.88
                                      
                                      
                                      
                                      393.19





2004
                                      
                                      
                                      2005
                                      
                                      
                                      2006
                                      
                                      
                                      2007
                                      
                                      
                                      2008
                                      
                                      
                                      2009HEICO
      Common Stock (1)
                                      
                                      $
                                      1,366.57
                                      
                                      
                                      $
                                      1,674.40
                                      
                                      
                                      $
                                      2,846.48
                                      
                                      
                                      $
                                      4,208.54
                                      
                                      
                                      $
                                      2,872.01
                                      
                                      
                                      $
                                      2,984.13NYSE
      Composite Index
                                      
                                      
                                      380.91
                                      
                                      
                                      
                                      423.05
                                      
                                      
                                      
                                      499.42
                                      
                                      
                                      
                                      586.87
                                      
                                      
                                      
                                      344.96
                                      
                                      
                                      
                                      383.57Dow
      Jones U.S. Aerospace Index
                                      
                                      
                                      478.49
                                      
                                      
                                      
                                      579.77
                                      
                                      
                                      
                                      757.97
                                      
                                      
                                      
                                      1,000.84
                                      
                                      
                                      
                                      602.66
                                      
                                      
                                      
                                      678.00









(1)
            Information
      has been adjusted retroactively to give effect to all stock dividends paid
      during the nineteen-year period.




19
 Table of Contents




Dividend
Policy





We have historically paid semi-annual
cash dividends on both our Class A Common Stock and Common Stock.  In
July 2009, we paid our 62nd
consecutive semi-annual cash dividend since 1979.  Our Board of
Directors presently intends to continue the payment of regular semi-annual cash
dividends on both classes of our common stock.  In December 2009, the
board of directors declared a regular semi-annual cash dividend of $.06 per
share payable in January 2010.  The current annual cash dividend of
$.12 per share represents a 20% increase over the prior annual per share
amount.  Our ability to pay dividends could be affected by future
business performance, liquidity, capital needs, alternative investment
opportunities and loan covenants under our revolving credit
facility.





Equity
Compensation Plan Information





The following table summarizes
information about our equity compensation plans as of October 31,
2009.


Number of SecuritiesRemaining Available forNumber of Securities
                      
                      
                      
                      
                      
                      Future Issuance Underto be Issued Upon
                      
                      
                      Weighted-Average
                      
                      
                      Equity CompensationExercise of
                      
                      
                      Exercise Price of
                      
                      
                      Plans (ExcludingOutstanding Options,
                      
                      
                      Outstanding Options,
                      
                      
                      Securities Reflected inWarrants and Rights
                      
                      
                      Warrants and Rights
                      
                      
                      Column (a))Plan Category
                      
                      (a)
                      
                      
                      (b)
                      
                      
                      (c)Equity compensation plans approved
      by security holders (1)
                      
                      
                      1,703,062
                      
                      
                      $
                      15.19
                      
                      
                      
                      1,326,064Equity compensation
      plans not approved by security holders (2)
                      
                      
                      160,000
                      
                      
                      $
                      7.36
                      
                      
                      
                      ―Total
                      
                      
                      1,863,062
                      
                      
                      $
                      14.52
                      
                      
                      
                      1,326,064








(1)
            Represents
      aggregated information pertaining to our three equity compensation plans:
      the 1993 Stock Option Plan, the Non-Qualified Stock Option Plan and the
      2002 Stock Option Plan.  See Note 9, Stock Options, of the Notes
      to Consolidated Financial Statements for further information regarding
      these plans.





(2)
            Represents
      stock options granted in fiscal 2002 to a former shareholder of a business
      acquired in fiscal 1999.  Such stock options were fully vested
      and transferable as of the grant date and expire ten years from the date
      of grant.  The exercise price of such options was the fair
      market value as of the date of
grant.





Issuer
Purchases of Equity Securities





During March 2009, we repurchased
193,736 shares of our Class A Common Stock at an average price of $20.08 per
share and 184,500 shares of our Common Stock at an average price of $22.81 per
share under a pre-existing share repurchase authorization that was announced by
our Board of Directors in October 2002.  We did not repurchase any
shares of our Class A Common Stock and/or Common Stock during fiscal 2008 or
2007.





In March 2009, our Board of Directors
approved an increase in our share repurchase program by an aggregate 1,000,000
shares of either or both Class A Common Stock and Common Stock, bringing the
total authorized for future purchase to 1,024,742 shares.  The
remaining shares authorized for repurchase can be executed, at management’s
discretion, in the open market or via private transactions and are




20
 Table of Contents




subject
to certain restrictions included in our revolving credit
agreement.  The repurchase program does not have a fixed termination
date.





Recent
Sales of Unregistered Securities





There were no unregistered sales of our
equity securities during fiscal 2009.





Item 6.
            SELECTED FINANCIAL
      DATA


For the year ended October 31,(1)2005
                  
                  
                  2006
                  
                  
                  2007
                  
                  
                  2008
                  
                  
                  2009(in thousands, except per share data)Operating
      Data:Net
      sales
                  
                  $
                  269,647
                  
                  
                  $
                  392,190
                  
                  
                  $
                  507,924
                  
                  
                  $
                  582,347
                  
                  
                  $
                  538,296Gross
      profit
                  
                  
                  100,996
                  
                  
                  
                  142,513
                  
                  
                  
                  177,458
                  
                  
                  
                  210,495
                  
                  
                  
                  181,011Selling,
      general and administrative expenses
                  
                  
                  56,347
                  
                  
                  
                  75,646
                  
                  
                  
                  91,444
                  
                  
                  
                  104,707
                  
                  
                  
                  92,756Operating
      income
                  
                  
                  44,649
                  
                  
                  
                  66,867
                  
                  
                  
                  86,014
                  
                  
                  
                  105,788
                  (4)
                  
                  
                  88,255Interest
      expense
                  
                  
                  1,136
                  
                  
                  
                  3,523
                  
                  
                  
                  3,293
                  
                  
                  
                  2,314
                  
                  
                  
                  615Other
      income (expense)
                  
                  
                  528
                  
                  
                  
                  639
                  
                  
                  
                  95
                  
                  
                  
                  (637
                  )
                  
                  
                  205Net
      income
                  
                  
                  22,812
                  
                  
                  
                  31,888
                  (2)
                  
                  
                  39,005
                  (3)
                  
                  
                  48,511
                  (4)
                  
                  
                  44,626
                  (5)Weighted
      average number of common shares outstanding:Basic
                  
                  
                  24,460
                  
                  
                  
                  25,085
                  
                  
                  
                  25,716
                  
                  
                  
                  26,309
                  
                  
                  
                  26,205Diluted
                  
                  
                  26,323
                  
                  
                  
                  26,598
                  
                  
                  
                  26,931
                  
                  
                  
                  27,243
                  
                  
                  
                  27,024Per
      Share Data:Net
      income:Basic
                  
                  $
                  0.93
                  
                  
                  $
                  1.27
                  (2)
                  
                  $
                  1.52
                  (3)
                  
                  $
                  1.84
                  (4)
                  
                  $
                  1.70
                  (5)Diluted
                  
                  
                  0.87
                  
                  
                  
                  1.20
                  (2)
                  
                  
                  1.45
                  (3)
                  
                  
                  1.78
                  (4)
                  
                  
                  1.65
                  (5)Cash
      dividends
                  
                  
                  .05
                  
                  
                  
                  .08
                  
                  
                  
                  .08
                  
                  
                  
                  .10
                  
                  
                  
                  .12Balance
      Sheet Data (as of October 31):Cash
      and cash equivalents
                  
                  $
                  5,330
                  
                  
                  $
                  4,999
                  
                  
                  $
                  4,947
                  
                  
                  $
                  12,562
                  
                  
                  $
                  7,167Total
      assets
                  
                  
                  435,624
                  
                  
                  
                  534,815
                  
                  
                  
                  631,302
                  
                  
                  
                  676,542
                  
                  
                  
                  732,910Total
      debt (including current portion)
                  
                  
                  34,124
                  
                  
                  
                  55,061
                  
                  
                  
                  55,952
                  
                  
                  
                  37,601
                  
                  
                  
                  55,431Minority
      interests in consolidated subsidiaries
                  
                  
                  49,035
                  
                  
                  
                  63,301
                  
                  
                  
                  72,938
                  
                  
                  
                  83,978
                  
                  
                  
                  89,742Shareholders’
      equity
                  
                  
                  273,503
                  
                  
                  
                  317,258
                  
                  
                  
                  371,601
                  
                  
                  
                  417,760
                  
                  
                  
                  457,853










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





(2)
            Includes
      the benefit of a tax credit (net of related expenses) for qualified
      research and development activities claimed for certain prior years, which
      increased net income by $1,002, or $.04 per basic and diluted
      share.





(3)
            Includes
      the benefit of a tax credit (net of related expenses) for qualified
      research and development activities recognized for the full fiscal 2006
      year pursuant to the retroactive extension in December 2006 of Section 41,
      “Credit for Increasing Research Activities,” of the Internal Revenue Code,
      which increased net income by $535, or $.02 per basic and diluted
      share.





(4)
            Operating
      income was reduced by an aggregate of $1,835 in impairment losses related
      to the write-down of certain intangible assets within the Electronic
      Technologies Group to their estimated fair values.  The
      impairment losses were recorded as a component of selling, general and
      administrative expenses and decreased net income by $1,140, or $.04 per
      basic and diluted share.





(5)
            Includes
      a benefit related to a settlement with the Internal Revenue Service
      concerning the income tax audit 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 reserve for fiscal years 2006 through 2008, which increased net
      income by $1,225, or $.05 per basic and diluted
  share.




21
 Table of Contents




Item 7.
            MANAGEMENT’S DISCUSSION AND
      ANALYSIS OF FINANCIAL CONDITION ANDRESULTS
      OF OPERATIONS





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”) and its subsidiaries, which
primarily:





·
            Designs, Manufactures, Repairs
      and Distributes Jet Engine and Aircraft Component Replacement
      Parts.  The Flight Support Group designs, manufactures,
      repairs 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.





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, 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; and high
      frequency power delivery systems for the commercial sign
      industry.





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
Statements and Notes thereto included herein.  For further information
regarding the acquisitions discussed below, see Note 2, Acquisitions, of the
Notes to Consolidated Financial Statements.  The acquisitions have
been accounted for using the purchase method of accounting and are included in
our results of operations from the effective dates of acquisition.





In April and September 2007, we
acquired, through HEICO Electronic, all of the stock of a U.S. company engaged
in the design and manufacture of Radio Frequency Interference and
Electromagnetic Frequency Interference Suppressors for a variety of markets and
a Canadian company that designs and manufactures high voltage energy generators
for medical, baggage inspection and industrial imaging manufacturers and high
frequency power delivery systems for the commercial sign industry,
respectively.  In August 2007, we acquired, through HEICO Aerospace,
substantially all of the assets of a U.S. company that designs and manufactures
FAA-approved aircraft and engine parts.




22
 Table of Contents





In November 2007, we acquired, through
an 80%-owned subsidiary of HEICO Aerospace, all of the stock of a European
company that supplies aircraft parts for sale and exchange and provides repair
management services.  In January and February 2008, we acquired,
through HEICO Aerospace, certain assets and assumed certain liabilities of a
U.S. company that designs and manufactures FAA-approved aircraft and engine
parts and acquired an 80% interest in certain assets and certain liabilities of
a U.S. company that is an FAA-approved repair station which specializes in
avionics.  The remaining 20% of the repair station’s equity interests
are principally owned by certain members of the acquired company’s
management.





In April 2008, we acquired, through
HEICO Aerospace, an additional 7% equity interest in one of our subsidiaries,
which increased our ownership interest to 58%.  In December 2008, we
acquired, through HEICO Aerospace, and additional 14% equity interest in the
subsidiary, which increased our ownership interest to
72%.





In May 2009, we acquired, through HEICO
Electronic, 82.5% of the stock of VPT, Inc. (“VPT”).  VPT is a
designer and provider of power conversion products principally serving the
defense, space and aviation industries.  The remaining 17.5% continues
to be owned by an existing VPT shareholder which is also a supplier to the
acquired company.





In October 2009, we acquired, through
HEICO Electronic, the business, assets and certain liabilities of the Seacom
division of privately-held Dukane Corp. and formed a new subsidiary, Dukane
Seacom, Inc. (“Seacom”).  Seacom is a designer and manufacturer of
underwater locator beacons used to locate aircraft cockpit voice recorders,
flight data recorders, marine ship voyage recorders and various other devices
which have been submerged under water.





The purchase price of each of the above
referenced acquisitions was paid in cash using proceeds from the Company’s
revolving credit facility and was not material or significant to our
consolidated financial statements.  The aggregate cost of all of our
acquisitions, including payments made in cash and contingent payments, was $71.1
million, $29.0 million and $48.4 million in fiscal 2009, 2008 and 2007,
respectively.





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 is recognized on an accrual
basis, primarily upon the shipment of products and the rendering of
services.  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.  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.  The percentage of our net sales recognized
under the percentage-of-completion method was approximately 1%, 3% and 3% in
fiscal 2009, 2008 and 2007, respectively.  The aggregate effects
of




23
 Table of Contents




changes
in estimates relating to long-term contracts did not have a significant effect
on net income or diluted net income per share in fiscal 2009, 2008 or
2007.





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 and economic conditions within and
outside of the aviation, defense, space, medical, telecommunication and
electronic 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.





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
theamount necessary
to write-down its 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.





Purchase
Accounting





We apply the purchase method of
accounting to our acquisitions.  Under this method, the purchase
price, including any capitalized acquisition costs, is allocated to the
underlying tangible and identifiable intangible assets acquired and liabilities
assumed based on their estimated fair market 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.





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.  The test requires us to 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 a reporting unit’s goodwill exceeds its implied fair value, if
any.  The determination of fair value requires us to make a number of
estimates, assumptions and judgments of such factors as earnings multiples,
projected revenues and operating expenses and our weighted average cost of
capital.  If there is a material change in such assumptions used by us
in determining fair value or if there is a material change in the conditions or
circumstances influencing fair value, we could be required to recognize a
material impairment charge.  See Item 1.A., Risk Factors, for a list
of factors of which any may cause our actual results to differ materially from
anticipated results.  Based on the annual goodwill test for impairment
as of October 31, 2009, 2008 and 2007, we determined there is no impairment of
our goodwill.




24
 Table of Contents





We test 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.  We also test each amortizing intangible asset for
impairment if events or circumstances indicate that the asset might be
impaired.  These tests consist 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 impairment tests
conducted during fiscal 2009 and 2008, we recognized pre-tax impairment losses
of $.2 million and $.1 million, respectively, and $1.3 million and $.5 million,
respectively, related to the write-down of certain customer relationships and
trade names, respectively, within the ETG to their estimated fair
values.  The impairment losses were recorded as a component of
selling, general and administrative expenses in the Company’s Consolidated
Statements of Operations.  Based on the impairment tests conducted
during fiscal 2007, we determined there was no impairment of our intangible
assets.





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:





For the year ended October 31,2009
                
                
                2008
                
                
                2007Net
      sales
                
                $
                538,296,000
                
                
                $
                582,347,000
                
                
                $
                507,924,000Cost
      of sales
                
                
                357,285,000
                
                
                
                371,852,000
                
                
                
                330,466,000Selling,
      general and administrative expenses
                
                
                92,756,000
                
                
                
                104,707,000
                
                
                
                91,444,000Total
      operating costs and expenses
                
                
                450,041,000
                
                
                
                476,559,000
                
                
                
                421,910,000Operating
      income
                
                $
                88,255,000
                
                
                $
                105,788,000
                
                
                $
                86,014,000Net
      sales by segment:Flight
      Support Group
                
                $
                395,423,000
                
                
                $
                436,810,000
                
                
                $
                383,911,000Electronic
      Technologies Group
                
                
                143,372,000
                
                
                
                146,044,000
                
                
                
                124,035,000Intersegment
      sales
                
                
                (499,000
                )
                
                
                (507,000
                )
                
                
                (22,000
                )$
                538,296,000
                
                
                $
                582,347,000
                
                
                $
                507,924,000Operating
      income by segment:Flight
      Support Group
                
                $
                60,003,000
                
                
                $
                81,184,000
                
                
                $
                67,408,000Electronic
      Technologies Group
                
                
                39,981,000
                
                
                
                38,775,000
                
                
                
                33,870,000Other,
      primarily corporate
                
                
                (11,729,000
                )
                
                
                (14,171,000
                )
                
                
                (15,264,000
                )$
                88,255,000
                
                
                $
                105,788,000
                
                
                $
                86,014,000Net
      sales
                
                
                100.0
                %
                
                
                100.0
                %
                
                
                100.0
                %Gross
      profit
                
                
                33.6
                %
                
                
                36.1
                %
                
                
                34.9
                %Selling,
      general and administrative expenses
                
                
                17.2
                %
                
                
                18.0
                %
                
                
                18.0
                %Operating
      income
                
                
                16.4
                %
                
                
                18.2
                %
                
                
                16.9
                %Interest
      expense
                
                
                .1
                %
                
                
                .4
                %
                
                
                .6
                %Other
      income (expense)
                
                
                ―
                
                
                
                (.1
                )%
                
                
                ―Income
      tax expense
                
                
                5.2
                %
                
                
                6.1
                %
                
                
                5.4
                %Minority
      interests' share of income
                
                
                2.8
                %
                
                
                3.2
                %
                
                
                3.2
                %Net
      income
                
                
                8.3
                %
                
                
                8.3
                %
                
                
                7.7
                %




25
 Table of Contents




Comparison
of Fiscal 2009 to Fiscal 2008





Net
Sales





Net sales in fiscal 2009 decreased by
7.6% to $538.3 million compared to net sales of $582.3 million in fiscal
2008.  The decrease in net sales reflects a decrease of $41.4 million
(a 9.5% decrease) to $395.4 million in net sales within the FSG and a decrease
of $2.7 million (a 1.8% decrease) to $143.4 million in net sales within the
ETG.  The net sales decline in both the FSG and the ETG reflects the
impact of the continued global recession on our businesses, which has resulted
in a reduction in customer demand.  The net sales decrease within the
FSG reflects lower demand for our aftermarket replacement parts and repair and
overhaul services resulting from worldwide airline capacity cuts and efforts to
reduce spending and conserve cash by the airline industry.  Within the
ETG, we are generally seeing some strength in our defense related businesses,
including space and homeland security products, but continued weakness in
customer demand for certain of our medical, telecommunication and electronic
products.  The net sales decline in the ETG was partially offset by
the favorable impact on net sales from acquisitions of approximately $17
million.





Our net sales in fiscal 2009 and 2008
by market approximated 68% and 69%, respectively, from the commercial aviation
industry, 20% and 16%, respectively, from the defense and space industries, and
12% and 15%, respectively, from other industrial markets including medical,
electronics and telecommunications.





Gross
Profit and Operating Expenses





Our consolidated gross profit margin
decreased to 33.6% in fiscal 2009 as compared to 36.1% in fiscal 2008, mainly
reflecting lower margins within the FSG due principally to a less favorable
product mix as well as the impact of lower sales volumes on fixed manufacturing
costs and a higher investment by HEICO in the research and development of new
products and services.  Consolidated cost of sales in fiscal 2009 and
2008 includes approximately $19.7 million and $18.4 million, respectively, of
new product research and development expenses.





SG&A expenses were $92.8 million
and $104.7 million in fiscal 2009 and 2008, respectively.  The
decrease in SG&A expenses was mainly due to lower operating costs,
principally personnel related, associated with cost reduction initiatives and
the decline in net sales discussed above, partially offset by the additional
operating costs associated with the acquired businesses.  These cost
reductions resulted in a decrease of SG&A expenses as a percentage of net
sales from 18.0% in fiscal 2008 to 17.2% in fiscal 2009.





Operating
Income





Operating income in fiscal 2009
decreased by 16.6% to $88.3 million, compared to operating income of $105.8
million in fiscal 2008.  The decrease in operating income reflects a
decrease of $21.2 million (a 26.1% decrease) to $60.0 million in operating
income of the FSG in fiscal 2009, partially offset by an increase of $1.2
million (a 3.1% increase) to $40.0 million in operating income of the ETG in
fiscal 2009 and a $2.4 million decrease in corporate expenses.





As a percentage of net sales, operating
income decreased to 16.4% in fiscal 2009 compared to 18.2% in fiscal
2008.  The decrease in operating income as a percentage of net sales
reflects a decrease in the FSG’s operating income as a percentage of net sales
to 15.2% in fiscal 2009 compared to 18.6% in fiscal 2008, partially offset by an
increase in the ETG’s operating income as a percentage of net sales from 26.6%
in fiscal 2008 to 27.9% in fiscal 2009.  The decrease in operating
income as a percentage of




26
 Table of Contents




net sales
for the FSG principally reflects the aforementioned impact of the lower sales
volume and a less favorable product mix on gross profit and operating income
margins.  The increase in operating income as a percentage of net
sales for the ETG principally reflects a favorable product mix.





Interest
Expense





Interest expense decreased to $.6
million in fiscal 2009 from $2.3 million in fiscal 2008.  The decrease
was principally due to lower variable interest rates under our revolving credit
facility in 2009.





Other
Income (Expense)





Other income (expense) in fiscal 2009
and 2008 were not material.





Income Tax
Expense





Our effective tax rate for fiscal 2009
decreased to 31.9% from 34.5% in fiscal 2008.  The decrease was
principally related to a settlement reached with the Internal Revenue Service
(“IRS”) during fiscal 2009.  The IRS settlement pertained to the
income tax credits claimed on HEICO’s U.S. federal filings for qualified
research and development activities incurred for fiscal years 2002 through 2005
and a resulting reduction to the related reserve for fiscal years 2002 through
2008 based on new information obtained during the examination, which increased
net income by approximately $1,225,000, or $.05 per diluted share, for fiscal
2009.





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





Minority
Interests’ Share of Income





Minority interests’ share of income of
consolidated subsidiaries relates to the 20% minority interest held in the FSG
and the minority interests held in certain subsidiaries of the FSG and the
ETG.  Minority interests’ share of income decreased to $15.2 million
in fiscal 2009 from $18.9 million in fiscal 2008.  The decrease in the
minority interests’ share of income for fiscal 2009 compared to fiscal 2008 is
principally attributable to the acquired additional equity interests of certain
FSG subsidiaries in which minority interests exist as well as the lower earnings
of the FSG, partially offset by the higher earnings of certain ETG subsidiaries
in which minority interests exist and the mid-year acquisition of an 82.5%
interest in VPT.





Net
Income





Our net income was $44.6 million, or
$1.65 per diluted share, in fiscal 2009 compared to $48.5 million, or $1.78 per
diluted share, in fiscal 2008 reflecting the decreased operating income
referenced above, partially offset by the aforementioned favorable IRS
settlement, the decreased minority interests’ share of income of certain
consolidated subsidiaries and lower interest expense.





Outlook





As we look forward to fiscal 2010,
HEICO will continue its focus on developing new products and services, further
market penetration, additional acquisition opportunities and maintaining its
financial strength.  We are targeting growth in net sales, earnings
and net cash provided by operating activities in fiscal 2010 over fiscal 2009
results despite the uncertainty as to the duration of the global economic
recession.




27
 Table of Contents





Comparison
of Fiscal 2008 to Fiscal 2007





Net
Sales





Net sales in fiscal 2008 increased by
14.7% to $582.3 million, as compared to net sales of $507.9 million in fiscal
2007.  The increase in net sales reflects an increase of $52.9 million
(a 13.8% increase) to $436.8 million in net sales within the FSG and an increase
of $22.0 million (a 17.7% increase) to $146.0 million in net sales within the
ETG.  The FSG’s net sales increase reflects organic growth of
approximately 10% as well as the impact on net sales from the fiscal 2008
acquisitions.  The organic growth principally represents higher sales
of new products and services and increased demand for the FSG’s aftermarket
replacement parts and repair and overhaul services.  The ETG’s net
sales increase reflects the impact on net sales from prior year acquisitions as
well as organic growth of approximately 9% principally due to increased demand
for certain products.





Our net sales in both fiscal 2008 and
2007 by market approximated 69% from the commercial aviation industry, 16% from
the defense and space industries and 15% from other industrial markets including
medical, electronics and telecommunications.





Gross
Profit and Operating Expenses





Our gross profit margin increased to
36.1% in fiscal 2008 as compared to 34.9% in fiscal 2007, principally reflecting
higher margins within the FSG and the ETG primarily due to a more favorable
product mix.  Consolidated cost of sales in fiscal 2008 and 2007
includes approximately $18.4 million and $16.5 million, respectively, of new
product research and development expenses.





SG&A expenses were $104.7 million
and $91.4 million in fiscal 2008 and 2007, respectively.  The increase
in SG&A expenses was mainly due to higher operating costs, principally
personnel related, associated with the growth in net sales discussed above and
the additional operating costs associated with the acquired
businesses.  As a percentage of net sales, SG&A expenses were
18.0% in fiscal 2008 and 2007.





Operating
Income





Operating income in fiscal 2008
increased by 23.0% to $105.8 million, compared to operating income of $86.0
million in fiscal 2007.  The increase in operating income reflects an
increase of $13.8 million (a 20.4% increase) to $81.2 million in operating
income of the FSG in fiscal 2008, an increase of $4.9 million (a 14.5% increase)
to $38.8 million in operating income of the ETG in fiscal 2008 and a $1.1
million decrease in corporate expenses.





As a percentage of net sales, operating
income increased to 18.2% in fiscal 2008 compared to 16.9% in fiscal
2007.  The increase in operating income as a percentage of net sales
reflects an increase in the FSG’s operating income as a percentage of net sales
to 18.6% in fiscal 2008 compared to 17.6% in fiscal 2007, partially offset by a
decrease in the ETG’s operating income as a percentage of net sales from 27.3%
in fiscal 2007 to 26.6% in fiscal 2008.  The increase in the FSG’s
operating income as a percentage of net sales principally reflects the
aforementioned increased gross profit margins.  The decrease in the
ETG’s operating income as a percentage of net sales principally reflects an
aggregate of $1.8 million in impairment losses related to the write-down of
certain intangible assets to their estimated fair values recognized in fiscal
2008.




28
 Table of Contents




Interest
Expense





Interest expense decreased to $2.3
million in fiscal 2008 from $3.3 million in fiscal 2007. The decrease was
principally due to lower interest rates.





Other
Income (Expense)





Other income (expense) in fiscal 2008
and 2007 were not material.





Income Tax
Expense





Our effective tax rate for fiscal 2008
increased to 34.5% from 33.2% in fiscal 2007.  The increase was
principally related to the December 2006 retroactive extension for the two year
period covering January 1, 2006 to December 31, 2007 of Section 41, “Credit for
Increasing Research Activities,” of the Internal Revenue Code.  As a
result of this retroactive extension, we recognized an income tax credit for
qualified research and development activities for the full fiscal 2006 year in
fiscal 2007, which increased net income, net of expenses, by approximately $.5
million.





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





Minority
Interests’ Share of Income





Minority interests’ share of income of
consolidated subsidiaries relates to the 20% minority interests held in the FSG
and the minority interests held in certain subsidiaries of the FSG and the
ETG.  Minority interests’ share of income increased to $18.9 million
in fiscal 2008 from $16.3 million in fiscal 2007.  The increase in the
minority interests’ share of income in fiscal 2008 compared to fiscal 2007 was
attributable to the higher earnings of the FSG and certain ETG subsidiaries in
which the minority interests exist.





Net
Income





Our net income was $48.5 million, or
$1.78 per diluted share, in fiscal 2008 compared to $39.0 million, or $1.45 per
diluted share, in fiscal 2007 reflecting the increased operating income
referenced above, partially offset by the increased minority interests’ share of
certain consolidated subsidiaries.





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 our net income has been
generally minimized by efforts to lower costs through manufacturing efficiencies
and cost reductions.




29
 Table of Contents




Liquidity
and Capital Resources





Our capitalization was as
follows:





As of October 31,2009
                  
                  
                  2008Cash
      and cash equivalents
                  
                  $
                  7,167,000
                  
                  
                  $
                  12,562,000Total
      debt (including current portion)
                  
                  
                  55,431,000
                  
                  
                  
                  37,601,000Shareholders’
      equity
                  
                  
                  457,853,000
                  
                  
                  
                  417,760,000Total
      capitalization (debt plus equity)
                  
                  
                  513,284,000
                  
                  
                  
                  455,361,000Total
      debt to total capitalization
                  
                  
                  11
                  %
                  
                  
                  8
                  %





In addition to cash and cash
equivalents of $7.2 million, we had approximately $243 million of unused
availability under the terms of our revolving credit facility as of October 31,
2009.  Our principal uses of cash include acquisitions, payments of
principal and interest on debt, capital expenditures, cash dividends and
increases in working capital.  We finance our activities primarily
from our operating activities and financing activities, including borrowings
under short-term and long-term credit agreements.





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 the foreseeable future.





Operating
Activities





Net cash provided by operating
activities was $75.8 million for fiscal 2009, principally reflecting net income
of $44.6 million, minority interests’ share of income of $15.2 million,
depreciation and amortization of $15.0 million, a tax benefit related to stock
option exercises of $1.9 million, and a decrease in net operating assets of $2.5
million, partially offset by the presentation of $1.6 million of excess tax
benefit from stock option exercises as a financing activity and a deferred
income tax benefit of $2.7 million.  The decrease in net operating
assets (current assets used in operating activities net of current liabilities)
primarily reflects a decrease in accounts receivable due to the timing of cash
collections and lower net sales, partially offset by a decrease in accrued
expenses, including employee compensation, customer rebates and credits and
additional accrued purchase consideration since October 31, 2008.





Net cash provided by operating
activities was $73.2 million for fiscal 2008, principally reflecting net income
of $48.5 million, minority interests’ share of income of $18.9 million,
depreciation and amortization of $15.1 million, a tax benefit related to stock
option exercises of $6.2 million, deferred income tax provision of $3.6 million
and impairment losses of intangible assets aggregating $1.8 million, partially
offset by an increase in net operating assets of $17.1 million and the
presentation of $4.3 million of excess tax benefit from stock option exercises
as a financing activity.  The increase in net operating assets
(current assets used in operating activities net of current liabilities)
primarily reflects a higher investment in inventories by the FSG required to
meet sales demand associated with new product offerings, sales growth, and
increased lead times on certain raw materials; and an increase in accounts
receivable due to sales growth; partially offset by higher current liabilities
associated with increased sales and purchases and higher accrued employee
compensation and related payroll taxes.


Net cash provided by operating
activities was $57.5 million for fiscal 2007, principally reflecting net income
of $39.0 million, minority interests’ share of income of $16.3 million,
depreciation and amortization of $12.2 million, a tax benefit related to stock
option exercises of $6.9 million, and a deferred income tax provision of $2.8
million, partially offset by an increase in net operating assets of




30
 Table of Contents




$16.0
million and the presentation of $5.3 million of excess tax benefit from stock
option exercises as a financing activity.  The increase in net
operating assets primarily reflects a higher investment in inventories by the
FSG required to meet increased sales demand associated with new product
offerings, sales growth, improved product delivery times, and higher prices of
certain raw materials; and an increase in accounts receivable due to sales
growth; partially offset by higher current liabilities associated with increased
sales and purchases and higher accrued employee compensation and related payroll
taxes.





Investing
Activities





Net cash used in investing activities
during the three-year fiscal period ended October 31, 2009 primarily relates to
several acquisitions, including payments of additional contingent purchase
consideration and the acquisitions of certain minority interests, totaling
$148.5 million, including $71.1 million in fiscal 2009, $29.0 million in fiscal
2008 and $48.4 million in fiscal 2007.  Further details on
acquisitions may be found at the beginning of this Item 7 under the caption
“Overview” and Note 2, Acquisitions, of the Notes to Consolidated Financial
Statements.  Capital expenditures aggregated $36.6 million over the
last three fiscal years, primarily reflecting the expansion of existing
production facilities and capabilities, which were generally funded using cash
provided by operating activities.





Financing
Activities





During the three-year fiscal period
ended October 31, 2009, the Company borrowed an aggregate $187.0 million under
its revolving credit facility principally to fund acquisitions and for working
capital needs, including $91.0 million in fiscal 2009, $50.0 million in fiscal
2008 and $46.0 million in fiscal 2007. Further details on acquisitions may be
found at the beginning of this Item under the caption “Overview” and Note 2,
Acquisitions, of the Notes to Consolidated Financial
Statements.  Repayments on the revolving credit facility aggregated
$185.0 million over the last three fiscal years, including $73.0 million in
fiscal 2009, $66.0 million in fiscal 2008 and $46.0 million in fiscal
2007.  For the three-year fiscal period ended October 31, 2009, we
made distributions to minority interest owners aggregating $23.5 million, made
repurchases of our common stock aggregating $8.1 million, paid cash dividends
aggregating $7.8 million, and paid the matured industrial development revenue
bonds aggregating $2.0 million.  For the three-year fiscal period
ended October 31, 2009, we received proceeds from stock option exercises
aggregating $10.5 million.  Net cash provided by financing activities
also includes the presentation of $1.6 million, $4.3 million and $5.3 million of
excess tax benefit from stock option exercises in fiscal 2009, 2008 and 2007,
respectively.





In May 2008, we amended our revolving
credit facility by entering into a $300 million Second Amended and Restated
Revolving Credit Agreement (“Credit Facility”) with a bank syndicate, which
matures in May 2013.  Under certain circumstances, the maturity may be
extended for two one-year periods.  The Credit Facility also includes
a feature that will allow us to increase the Credit Facility, at its option, up
to $500 million through increased commitments from existing lenders or the
addition of new lenders.  The Credit Facility may be used for working
capital and general corporate needs of the company, including letters of credit,
capital expenditures and to finance acquisitions.  Advances under the
Credit Facility accrue interest at our choice of the “Base Rate” or the London
Interbank Offered Rate (“LIBOR”) plus applicable margins (based on our ratio of
total funded debt to earnings before interest, taxes, depreciation and
amortization, minority interest and non-cash charges, or “leverage
ratio”).  The Base Rate is the higher of (i) the Prime Rate or (ii)
the Federal Funds rate plus .50%.  The applicable margins for
LIBOR-based borrowings range from .625% to 2.25%.  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 euros, a $30 million sublimit for letters of
credit and a $20 million swingline sublimit.  The Credit Facility is
unsecured and contains covenants that require, among other things, the
maintenance of the leverage ratio, a senior leverage ratio and a
fixed




31
 Table of Contents




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, 2009, our
leverage ratio was significantly below such specified level.  See Note
5, Short-Term and Long-Term Debt, of the Notes to Consolidated Financial
Statements for further information regarding the revolving credit
facility.





Contractual
Obligations





The following table summarizes our
contractual obligations as of October 31, 2009:





Payments due by fiscal periodTotal
                        
                        
                        2010
                        
                        
                        
                        2011 - 2012
                        
                        
                        
                        2013 - 2014
                        
                        
                        ThereafterShort-term and
      long-term debt obligations (1)
                        
                        $
                        55,374,000
                        
                        
                        $
                        193,000
                        
                        
                        $
                        161,000
                        
                        
                        $
                        55,020,000
                        
                        
                        $
                        ―Capital lease
      obligations and equipment loans (1)
                        
                        
                        57,000
                        
                        
                        
                        44,000
                        
                        
                        
                        13,000
                        
                        
                        
                        ―
                        
                        
                        
                        ―Operating lease
      obligations (2)
                        
                        
                        28,188,000
                        
                        
                        
                        6,012,000
                        
                        
                        
                        9,604,000
                        
                        
                        
                        5,487,000
                        
                        
                        
                        7,085,000Purchase obligations
      (3)
      (4)
      (5)
                        
                        
                        8,746,000
                        
                        
                        
                        2,775,000
                        
                        
                        
                        5,971,000
                        
                        
                        
                        ―
                        
                        
                        
                        ―Other long-term
      liabilities (6)
      (7)
                        
                        
                        203,000
                        
                        
                        
                        56,000
                        
                        
                        
                        80,000
                        
                        
                        
                        67,000
                        
                        
                        
                        ―Total
      contractual obligations
                        
                        $
                        92,568,000
                        
                        
                        $
                        9,080,000
                        
                        
                        $
                        15,829,000
                        
                        
                        $
                        60,574,000
                        
                        
                        $
                        7,085,000





(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, capital lease obligations and equipment
      loans as such amounts are not material.  See Note 5, Short-Term
      and Long-Term Debt, of the Notes to Consolidated Financial Statements and
      “Financing
      Activities” above for additional information regarding our
      long-term debt and capital lease obligations and equipment
      loans.





(2)
            See
      Note 15, Commitments and Contingencies – Lease Commitments, of the Notes
      to Consolidated Financial Statements for additional information regarding
      our operating lease obligations.





(3)
            Includes
      an aggregate of $273,000 of commitments for capital expenditures as well
      as purchase obligations of inventory and supplies that extend beyond one
      year.  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.





(4)
            Also
      includes accrued additional contingent purchase consideration of
      $1,775,000 payable in fiscal 2010 relating to a previous year acquisition
      (see Note 2, Acquisitions, of the Notes to Consolidated Financial
      Statements).  The amounts in the table do not include the
      additional contingent purchase consideration we may have to pay based on
      future earnings of certain acquired businesses, which is further discussed
      in “Off-Balance Sheet Arrangements – Acquisitions – Additional Contingent
      Purchase Consideration” below. The aggregate maximum amount of such
      contingent purchase consideration that we could be required to pay is
      approximately $94 million payable over the future periods beginning in
      fiscal 2010 through fiscal 2013.  Assuming the subsidiaries
      perform over their respective future measurement periods at the same
      earnings levels they performed in the comparable historical measurement
      periods, the aggregate amount of such contingent purchase consideration
      that we would be required to pay is approximately $12
      million.  The actual contingent purchase consideration will
      likely be different.


(5)
            As
      further explained below in “Off-Balance Sheet Arrangements – Acquisitions
      – Put/Call Rights,” the minority interest holders of certain subsidiaries
      have rights (“Put Rights”) that may be exercised on varying dates causing
      us to purchase their equity interests beginning in fiscal 2010 through
      fiscal 2018.  The Put Rights provide that cash consideration be paid
      for minority interests (“Redemption Amount”).  The amounts in
      the




32
 Table of Contents




table
      include $6,698,000 as management’s estimate of the aggregate Redemption
      Amount payable in fiscal years 2010 through 2012 pursuant to past
      exercises of such Put Rights by the minority interest holders of certain
      of our subsidiaries.  As the actual Redemption Amount payable in
      fiscal 2011 and 2012 are based on a multiple of future earnings, such
      amounts will likely be different.  Management’s estimate of the
      aggregate Redemption Amount related to all other Put Rights of
      approximately $50 million has been excluded from the table as the timing
      of such payments is contingent upon the exercise of the Put
      Rights.




(6)
            Represents
      projected payments aggregating $203,000 under our Directors Retirement
      Plan, which is explained further in Note 10, Retirement Plans, of the
      Notes to Consolidated Financial Statements (the plan is unfunded and we
      pay benefits directly).  The amounts in the table do not include
      amounts related to the Leadership Compensation Plan or our other deferred
      compensation arrangement as there is a related asset or an offsetting
      asset, respectively, included in our Consolidated Balance
      Sheets.  See Note 3, Selected Financial Statement Information –
      Other Long-Term Liabilities, of the Notes to Consolidated Financial
      Statements for further information about these two deferred compensation
      plans.





(7)
            The
      amounts in the table do not include approximately $3,121,000 of our
      liability for unrecognized tax benefits due to the uncertainty with
      respect to the timing of future cash flows associated with these
      unrecognized tax benefits as we are unable to make reasonably reliable
      estimates of the timing of any cash settlements.  See Note 6,
      Income Taxes, of the Notes to Consolidated Financial Statements for
      further information about our liability for unrecognized tax
      benefits.





Off-Balance
Sheet Arrangements





Guarantees





We have arranged for a standby letter
of credit for $1.5 million, which is supported by our revolving credit facility,
to meet the security requirement of our insurance company for potential workers’
compensation claims.  As of October 31, 2009, one of our subsidiaries
has guaranteed its performance related to a customer contract through a letter
of credit for $.4 million, expiring May 2010, which is supported by our
revolving credit facility.  The subsidiary is also a beneficiary of a
letter of credit related to the same contract.





Acquisitions
– Put/Call Rights





As part of the agreement to acquire an
80% interest in a subsidiary by the ETG in fiscal 2004, the minority interest
holders currently have the right to cause us to purchase their interests over a
five-year period and we have the right to purchase the minority 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, certain minority interest holders exercised their option during
fiscal 2007 to cause us to purchase their aggregate 3% interest over a four-year
period ending in fiscal 2010.  Pursuant to this same purchase
agreement, certain other minority interest holders exercised their option during
fiscal 2009 to cause us to purchase their aggregate 10.5% interest over a
four-year period ending in fiscal 2012.  Accordingly, we increased our
ownership interest in the subsidiary by an aggregate 4.9% (or one-fourth of such
applicable minority interest holders’ aggregate interest in fiscal years 2007
through 2009) to 89.9% effective April 2009.  Further, the remaining
minority interest holders currently have the right to cause us to purchase their
aggregate 1.5% interest over a four-year period.


Pursuant to the purchase agreement
related to the acquisition of a 51% interest in a subsidiary by the FSG in
fiscal 2006, the minority interest holders exercised their option during fiscal
2008 to cause us to purchase an aggregate 28% interest over a four-year period
ending in fiscal 2011.  Accordingly, we




33
 Table of Contents




increased
our ownership interest in the subsidiary by 7% (or one-fourth of such minority
interest holders’ aggregate interest) to 58% effective April 2008.  We
and the minority interest holders agreed to accelerate the purchase of 14% of
these equity interests (7% from April 2009 and 7% from April 2010), which
increased our ownership interest to 72% effective December 2008.  The
remaining 7% interest is scheduled to be purchased in April
2011.  Further, we have the right to purchase the remaining 21% of the
equity interests of the subsidiary over a three-year period beginning in fiscal
2012, or sooner under certain conditions, and the minority interest holders have
the right to cause us to purchase the same equity interests over the same
period.





As part of the agreement to acquire an
80% interest in a subsidiary by the FSG in fiscal 2006, we have the right to
purchase the minority interests over a four-year period beginning in fiscal
2014, or sooner under certain conditions, and the minority interest holders have
the right to cause us to purchase the same equity interest over the same
period.





As part of an agreement to acquire an
80% interest in a subsidiary by the FSG in fiscal 2008, we have the right to
purchase the minority interests over a five-year period beginning in fiscal
2014, or sooner under certain conditions, and the minority interest holders have
the right to cause us to purchase the same equity interest over the same
period.





As part of an agreement to acquire an
82.5% interest in a subsidiary by the ETG in fiscal 2009, we have the right to
purchase the minority interests beginning in fiscal 2014, or sooner under
certain conditions, and the minority interest holder has the right to cause us
to purchase the same equity interests over the same period.





The above referenced rights of the
minority interest holders (“Put Rights”) may be exercised on varying dates
causing us to purchase their equity interests beginning in fiscal 2010 through
fiscal 2018.  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 the minority interests (“Redemption Amount”)
be at a formula that management intended to reasonably approximate fair value,
as defined in the applicable agreements based on a multiple of future earnings
over a measurement period.  As described in Note 1, Summary of
Significant Accounting Policies, of the Notes to Consolidated Financial
Statements, we are required to adopt new guidance regarding the accounting for
our Put Rights (known as “redeemable noncontrolling interests”) effective as of
the beginning of fiscal 2010.  Effective November 1, 2009, we will
adjust our redeemable noncontrolling interests to the higher of their carrying
cost or management’s estimate of the Redemption Amount with a corresponding
charge to retained earnings and classify such interests outside of permanent
equity in our Consolidated Balance Sheets.  Under this guidance,
subsequent adjustments to the carrying amount of redeemable noncontrolling
interests (the Redemption Amount) based on fair value will be recorded to
retained earnings and have no effect on net income per diluted
share.  Subsequent adjustments to the carrying amount of redeemable
noncontrolling interests based solely on a multiple of future earnings that
reflect a redemption in excess of fair value will be recorded to retained
earnings and will be reflected in net income per diluted share under the
two-class method.  As of October 31, 2009, management’s estimate of
the aggregate Redemption Amount of all Put Rights that we would be required to
pay is approximately $57 million.  The actual Redemption Amount will
likely be different.  The portion of the estimated Redemption Amount
as of October 31, 2009 redeemable at fair value is $25 million and the portion
redeemable based solely on a multiple of future earnings is $32 million.





Acquisitions
– Additional Contingent Purchase Consideration





As part of the agreement to purchase a
subsidiary by the ETG in fiscal 2005, we may be obligated to pay additional
purchase consideration currently estimated to be $.9 million should the
subsidiary meet certain product line-related earnings objectives during calendar
year 2009.




34
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As part of the agreement to acquire a
subsidiary by the ETG in fiscal 2007, we may be obligated to pay additional
purchase consideration up to 73 million Canadian dollars in aggregate, which
translates to approximately $68 million U.S. dollars based on the October 31,
2009 exchange rate, should the subsidiary meet certain earnings objectives
through fiscal 2012.





As part of the agreement to acquire a
subsidiary by the FSG in fiscal 2008, we may be obligated to pay additional
purchase consideration of up to approximately $.4 million should the subsidiary
meet certain earnings objectives during fiscal 2010, 2011 and 2012.





As part of the agreement to acquire a
subsidiary by the ETG in fiscal 2009, we may be obligated to pay additional
purchase consideration of up to approximately $1.3 million in fiscal 2010, $1.3
million in fiscal 2011 and $10.1 million in fiscal 2012 should the subsidiary
meet certain earnings objectives during each of the first three years following
the acquisition.





As part of the agreement to acquire a
subsidiary by the ETG in fiscal 2009, we may be obligated to pay additional
purchase consideration of up to approximately $11.7 million should the
subsidiary meet certain earnings objectives during the first two years following
the acquisition.





The above referenced additional
contingent purchase consideration will be accrued when the earnings objectives
are met. Such additional contingent consideration is based on a multiple of
earnings above a threshold (subject to a cap in certain cases) and is not
contingent upon the former shareholders of the acquired entities remaining
employed by us or providing future services to us.  Accordingly, such
consideration will be recorded as an additional cost of the respective acquired
entity when paid.





For additional information on the
aforementioned acquisitions see Note 2, Acquisitions, of the Notes to
Consolidated Financial Statements.





New
Accounting Pronouncements





In September 2006, the Financial
Accounting Standards Board (“FASB”) issued new guidance which defines fair
value, establishes a framework for measuring fair value, and requires expanded
disclosures about fair value measurements.  In February 2008, the FASB
issued additional guidance which delays the effective date by one year for
nonfinancial assets and liabilities, except those recognized or disclosed at
fair value in the financial statements on a recurring basis. We adopted all
required portions of the new guidance effective November 1, 2008.  The
adoption did not have a material effect on our results of operations, financial
position or cash flows. See Note 7, Fair Value Measurements, of the Notes to
Consolidated Financial Statements, which provides information about the extent
to which fair value is used to measure assets and liabilities and the methods
and assumptions used to measure fair value.  We will adopt the
portions of the new guidance that were delayed at the beginning of fiscal 2010,
and we are currently in the process of evaluating the effect such adoption will
have on our results of operations, financial position and cash
flows.





In February 2007, the FASB issued new
guidance that permits entities to choose to measure certain financial assets and
liabilities at fair value that are not currently required to be measured at fair
value, and report unrealized gains and losses on items for which the fair value
option has been elected in earnings.  We adopted this guidance
effective November 1, 2008 and have not elected to measure any financial assets
and financial liabilities at fair value that were not previously required to be
measured at fair value.  Accordingly, the adoption of the new guidance
did not impact our results of operations, financial position or cash
flows.




35
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In December 2007, the FASB issued new
guidance on business combinations that retains the fundamental requirements of
previous guidance that the acquisition method of accounting (formerly the
“purchase accounting” method) be used for all business combinations and for an
acquirer to be identified for each business combination.  However, the
new guidance changes the approach of applying the acquisition method in a number
of significant areas, including that acquisition costs will generally be
expensed as incurred; noncontrolling interests will be valued at fair value at
the acquisition date; in-process research and development will be recorded at
fair value as an indefinite-lived intangible asset at the acquisition date;
restructuring costs associated with a business combination will generally be
expensed subsequent to the acquisition date; and changes in deferred tax asset
valuation allowances and income tax uncertainties after the acquisition date
generally will affect income tax expense.  The new guidance is
effective on a prospective basis for all business combinations for which the
acquisition date is on or after the beginning of the first fiscal year beginning
on or after December 15, 2008, or in fiscal 2010 for us.  We will
apply this new guidance for all business combinations consummated on or after
November 1, 2009.





In December 2007, the FASB issued new
guidance that requires the recognition of certain noncontrolling interests
(previously referred to as minority interests) as a separate component within
equity in the consolidated balance sheet. It also requires the amount of
consolidated net income attributable to the parent and the noncontrolling
interest be clearly identified and presented within the consolidated statement
of operations.  The new guidance is effective for fiscal years
beginning on or after December 15, 2008, or in fiscal 2010 for
us.  The adoption of this new guidance will affect the presentation of
noncontrolling interests in our results of operations, financial position and
cash flows.





In March 2008, the FASB Emerging Issues
Task Force (“EITF”) made certain revisions to the guidance on the financial
statement classification and measurement of redeemable noncontrolling interests
which are required to be applied no later than the effective date of the above
referenced guidance for noncontrolling interests, or in fiscal 2010 for
us.  As further detailed in Note 15, Commitments and Contingencies, of
the Notes to Consolidated Financial Statements, the holders of interests in
certain of our subsidiaries have rights (“Put Rights”) that require us 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, as defined in the applicable agreements 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.  Historically, we have recorded such redeemable
noncontrolling interests at historical cost plus an allocation of subsidiary
earnings based on ownership interests, less dividends paid to the noncontrolling
interest holders.  Effective November 1, 2009, we will adjust our
redeemable noncontrolling interests to the higher of their carrying cost or
management’s estimate of the Redemption Amount with a corresponding charge to
retained earnings and classify such interests outside of permanent
equity.  Under this guidance, subsequent adjustments to the carrying
amount of redeemable noncontrolling interests (the Redemption Amount) based on
fair value will be recorded to retained earnings and have no effect on net
income per diluted share.  Subsequent adjustments to the carrying
amount of redeemable noncontrolling interests based solely on a multiple of
future earnings that reflect a redemption in excess of fair value will be
recorded to retained earnings and will be reflected in net income per diluted
share under the two-class method.  If both the guidance on
noncontrolling interests and redeemable noncontrolling interests was effective
as of October 31, 2009, we would have reclassified approximately $78 million
from minority interests in consolidated subsidiaries to permanent equity for
non-redeemable noncontrolling interests and recorded an approximately $45
million increase to minority interests in consolidated subsidiaries (to be
renamed as “redeemable noncontrolling interests”) with a corresponding decrease
to retained earnings in our Consolidated Balance Sheets.  The
resulting $57 million of redeemable noncontrolling interests represents
management’s estimate of the aggregate Redemption Amount of all Put Rights that
the Company would be required to pay of which approximately $25
million




36
 Table of Contents




is
redeemable at fair value and approximately $32 million is redeemable based
solely on a multiple of future earnings.  The actual Redemption Amount
will likely be different.





In March 2008, the FASB issued new
guidance that expands the disclosure requirements about an entity’s derivative
instruments and hedging activities.  It requires enhanced disclosures
about (i) how and why an entity uses derivative instruments; (ii) how derivative
instruments and related hedged items are accounted for; and (iii) how derivative
instruments and related hedged items affect an entity’s financial position,
financial performance and cash flows. We adopted the new guidance effective
February 1, 2009.  The new guidance affects financial statement
disclosures only, and we will make the required additional disclosures in
reporting periods for which we use derivative instruments.





In May 2008, the FASB issued new
guidance that identifies the sources of accounting principles and the framework
for selecting the principles used in the preparation of financial statements
that are presented in conformity with generally accepted accounting
principles.  The new guidance became effective November 15,
2008.  The adoption of the new guidance did not have a material effect
on our results of operations, financial position or cash flows.





In May 2009, the FASB issued new
guidance on subsequent events that establishes general standards of accounting
for and disclosure of events that occur after the balance sheet date but before
financial statements are issued.  The new guidance requires the
disclosure of the date through which an entity has evaluated subsequent events,
which is through the date the financial statements are issued for a public
entity such as ours.  We adopted the new guidance in the third quarter
of fiscal 2009.  The adoption of the new guidance did not impact our
results of operations, financial position or cash flows.





In June 2009, the FASB issued new
guidance that establishes the FASB Accounting Standards CodificationTM as the
source of authoritative accounting principles recognized by the FASB to be
applied by nongovernmental entities in the preparation of financial statements
in conformity with generally accepted accounting principles
(“GAAP”).  We adopted the new guidance in the fourth quarter of fiscal
2009.  The new guidance is not intended to change GAAP, therefore the
adoption of the new guidance did not impact our results of operations, financial
position or cash flows.





Forward
Looking Statements





Certain statements in this report
constitute “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995.  All statements contained
herein that are not clearly historical in nature may be forward-looking and the
words “anticipate,” “believe,” “expect,” “estimate” and similar expressions are
generally intended to identify forward-looking statements.  Any
forward-looking statements 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 known and unknown 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, but are not limited to:





·
            Lower
      demand for commercial air travel or airline fleet changes, which could
      cause lower demand for our goods and
services;




37
 Table of Contents





·
            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;
and





·
            Our
      ability to make acquisitions and achieve operating synergies from acquired
      businesses, customer credit risk, interest rates and economic conditions
      within and outside of the aviation, defense, space, medical,
      telecommunication and electronic industries, which could negatively impact
      our costs and revenues.





For further information on these and
other factors that potentially could materially affect our financial results,
see Item 1A, Risk Factors.  We undertake no obligation to publicly
update or revise any forward-looking statement, whether as a result of new
information, future events or otherwise.





Item 7A.   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.  Periodically, we enter
into interest rate swap agreements to manage our interest expense.  We
did not have any interest rate swap agreements in effect as of October 31,
2009.  Based on our aggregate outstanding variable rate debt balance
of $55 million as of October 31, 2009, 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, 2009 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 Canadian dollar and
British pound sterling.  During fiscal 2008, we entered into a one
year foreign currency forward contract to mitigate a portion of foreign exchange
risk at one of our foreign subsidiaries for transactions denominated in a
currency other than its functional currency.  The impact of this
forward contract did not have a material effect on our results of operations,
financial position or cash flows.  A hypothetical 10% weakening in the
exchange rate of the Canadian dollar or British pound sterling to the United
States dollar as of October 31, 2009 would not have a material effect on our
results of operations, financial position or cash flows.





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 Table of Contents





Item 8.
            FINANCIAL STATEMENTS AND
      SUPPLEMENTARY DATA





HEICO
CORPORATION AND SUBSIDIARIES


INDEX
TO FINANCIAL STATEMENTS





PageReport
      of Independent Registered Public Accounting Firm
                          
                          
                          40Consolidated
      Balance Sheets as of October 31, 2009 and 2008
                          
                          
                          42Consolidated
      Statements of Operations for the years ended October 31,
    2009,2008
      and 2007
                          
                          
                          43Consolidated
      Statements of Shareholders’ Equity and Comprehensive
Incomefor
      the years ended October 31, 2009, 2008 and 2007
                          
                          
                          44Consolidated
      Statements of Cash Flows for the years ended October 31,
    2009,2008
      and 2007
                          
                          
                          45Notes
      to Consolidated Financial Statements
                          
                          
                          46Financial
      Statement Schedule II, Valuation and Qualifying Accounts for
      theyears
      ended October 31, 2009, 2008 and 2007
                          
                          
                          84





39
 Table of Contents





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, 2009 and 2008, and the related
consolidated statements of operations, shareholders’ equity and comprehensive
income, and cash flows for each of the three years in the period ended October
31, 2009.  Our audits also included the financial statement schedule listed
in the Index at Item 15.  We also have audited the Company’s internal
control over financial reporting as of October 31, 2009, based on criteria
established in Internal
Control—Integrated Frameworkissued by the Committee of Sponsoring
Organizations of the Treadway Commission.  The Company’s management is
responsible for these financial statements and the financial statement schedule,
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 Report on Internal Control over
Financial Reporting.  Our responsibility is to express an opinion on
these financial statements and the financial statement schedule and an opinion
on the Company’s internal control over financial reporting 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 and whether effective
internal control over financial reporting was maintained in all material
respects.  Our audits of the financial statements included examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation.  Our audit of internal control over financial reporting
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.  Our audits also included performing such other
procedures as we considered necessary in the circumstances.  We believe
that our audits provide a reasonable basis for our opinions.





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 authorizations 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




40
 Table of Contents




become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.





In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of HEICO Corporation and
subsidiaries as of October 31, 2009 and 2008, and the results of their
operations and their cash flows for each of the three years in the period ended
October 31, 2009, in conformity with accounting principles generally accepted in
the United States of America.  Also, in our opinion, such financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.  Also, in our opinion,
the Company maintained, in all material respects, effective internal control
over financial reporting as of October 31, 2009, based on the criteria
established in Internal
Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.





DELOITTE
& TOUCHE LLP


Certified
Public Accountants





Miami,
Florida


December
23, 2009





41
 Table of Contents





HEICO
CORPORATION AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS





As of October 31,2009
                      
                      
                      2008ASSETSCurrent
      assets:Cash
      and cash equivalents
                      
                      $
                      7,167,000
                      
                      
                      $
                      12,562,000Accounts
      receivable, net
                      
                      
                      77,864,000
                      
                      
                      
                      88,403,000Inventories,
      net
                      
                      
                      137,585,000
                      
                      
                      
                      132,910,000Prepaid
      expenses and other current assets
                      
                      
                      4,290,000
                      
                      
                      
                      3,678,000Deferred
      income taxes
                      
                      
                      16,671,000
                      
                      
                      
                      13,957,000Total
      current assets
                      
                      
                      243,577,000
                      
                      
                      
                      251,510,000Property,
      plant and equipment, net
                      
                      
                      60,528,000
                      
                      
                      
                      59,966,000Goodwill
                      
                      
                      365,243,000
                      
                      
                      
                      323,393,000Intangible
      assets, net
                      
                      
                      41,588,000
                      
                      
                      
                      24,983,000Other
      assets
                      
                      
                      21,974,000
                      
                      
                      
                      16,690,000Total
      assets
                      
                      $
                      732,910,000
                      
                      
                      $
                      676,542,000LIABILITIES
      AND SHAREHOLDERS’ EQUITYCurrent
      liabilities:Current
      maturities of long-term debt
                      
                      $
                      237,000
                      
                      
                      $
                      220,000Trade
      accounts payable
                      
                      
                      26,978,000
                      
                      
                      
                      29,657,000Accrued
      expenses and other current liabilities
                      
                      
                      36,978,000
                      
                      
                      
                      49,586,000Income
      taxes payable
                      
                      
                      1,320,000
                      
                      
                      
                      1,765,000Total
      current liabilities
                      
                      
                      65,513,000
                      
                      
                      
                      81,228,000Long-term
      debt, net of current maturities
                      
                      
                      55,194,000
                      
                      
                      
                      37,381,000Deferred
      income taxes
                      
                      
                      41,340,000
                      
                      
                      
                      39,192,000Other
      long-term liabilities
                      
                      
                      23,268,000
                      
                      
                      
                      17,003,000Total
      liabilities
                      
                      
                      185,315,000
                      
                      
                      
                      174,804,000Minority
      interests in consolidated subsidiaries (Note 15)
                      
                      
                      89,742,000
                      
                      
                      
                      83,978,000Commitments
      and contingencies (Notes 2 and 15)Shareholders’
      equity:Preferred
      Stock, $.01 par value per share; 10,000,000 shares authorized; 300,000
      shares designated as Series B Junior Participating Preferred Stock and
      300,000 shares designated as Series C Junior Participating Preferred
      Stock; none issued
                      
                      
                      ―
                      
                      
                      
                      ―Common
      Stock, $.01 par value par share; 30,000,000 shares authorized; 10,409,141
      and 10,572,641 shares issued and outstanding, respectively
                      
                      
                      104,000
                      
                      
                      
                      106,000Class
      A Common Stock, $.01 par value per share; 30,000,000 shares authorized;
      15,713,234 and 15,829,790 shares issued and outstanding,
      respectively
                      
                      
                      157,000
                      
                      
                      
                      158,000Capital
      in excess of par value
                      
                      
                      224,625,000
                      
                      
                      
                      229,443,000Accumulated
      other comprehensive loss
                      
                      
                      (1,381,000
                      )
                      
                      
                      (4,819,000
                      )Retained
      earnings
                      
                      
                      234,348,000
                      
                      
                      
                      192,872,000Total
      shareholders’ equity
                      
                      
                      457,853,000
                      
                      
                      
                      417,760,000Total
      liabilities and shareholders’ equity
                      
                      $
                      732,910,000
                      
                      
                      $
                      676,542,000




The
accompanying notes are an integral part of these consolidated financial
statements.
  42
 Table of Contents





HEICO
CORPORATION AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF OPERATIONS





For the year ended October
    31,2009
                
                
                2008
                
                
                2007Net
      sales
                
                $
                538,296,000
                
                
                $
                582,347,000
                
                
                $
                507,924,000Operating
      costs and expenses:Cost
      of sales
                
                
                357,285,000
                
                
                
                371,852,000
                
                
                
                330,466,000Selling,
      general and administrative expenses
                
                
                92,756,000
                
                
                
                104,707,000
                
                
                
                91,444,000Total
      operating costs and expenses
                
                
                450,041,000
                
                
                
                476,559,000
                
                
                
                421,910,000Operating
      income
                
                
                88,255,000
                
                
                
                105,788,000
                
                
                
                86,014,000Interest
      expense
                
                
                (615,000
                )
                
                
                (2,314,000
                )
                
                
                (3,293,000
                )Other
      income (expense)
                
                
                205,000
                
                
                
                (637,000
                )
                
                
                95,000Income
      before income taxes and minority interests
                
                
                87,845,000
                
                
                
                102,837,000
                
                
                
                82,816,000Income
      tax expense
                
                
                28,000,000
                
                
                
                35,450,000
                
                
                
                27,530,000Income
      before minority interests
                
                
                59,845,000
                
                
                
                67,387,000
                
                
                
                55,286,000Minority
      interests’ share of income
                
                
                15,219,000
                
                
                
                18,876,000
                
                
                
                16,281,000Net
      income
                
                $
                44,626,000
                
                
                $
                48,511,000
                
                
                $
                39,005,000Net
      income per share:Basic
                
                $
                1.70
                
                
                $
                1.84
                
                
                $
                1.52Diluted
                
                $
                1.65
                
                
                $
                1.78
                
                
                $
                1.45Weighted
      average number of common shares outstanding:Basic
                
                
                26,204,799
                
                
                
                26,309,139
                
                
                
                25,715,899Diluted
                
                
                27,024,031
                
                
                
                27,243,356
                
                
                
                26,931,048





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





43
 Table of Contents





HEICO
CORPORATION AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME





AccumulatedClass
      A
                  
                  
                  Capital
      in
                  
                  
                  OtherCommon
                  
                  
                  Common
                  
                  
                  Excess
      of
                  
                  
                  Comprehensive
                  
                  
                  Retained
                  
                  
                  ComprehensiveStock
                  
                  
                  Stock
                  
                  
                  Par
      Value
                  
                  
                  Income
      (Loss)
                  
                  
                  Earnings
                  
                  
                  IncomeBalances
      as of October 31, 2006
                  
                  $
                  103,000
                  
                  
                  $
                  151,000
                  
                  
                  $
                  206,260,000
                  
                  
                  $
                  62,000
                  
                  
                  $
                  110,682,000Net
      income
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  39,005,000
                  
                  
                  $
                  39,005,000Foreign
      currency translation adjustments
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  2,966,000
                  
                  
                  
                  ―
                  
                  
                  
                  2,966,000Comprehensive
      income
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  $
                  41,971,000Cash
      dividends ($.08 per share)
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  (2,056,000
                  )Tax
      benefit from stock option exercises
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  6,873,000
                  
                  
                  
                  ―
                  
                  
                  
                  ―Proceeds
      from stock option exercises
                  
                  
                  2,000
                  
                  
                  
                  5,000
                  
                  
                  
                  6,868,000
                  
                  
                  
                  ―
                  
                  
                  
                  ―Stock
      option compensation expense
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  658,000
                  
                  
                  
                  ―
                  
                  
                  
                  ―Other
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  (1,000
                  )
                  
                  
                  22,000
                  
                  
                  
                  1,000Balances
      as of October 31, 2007
                  
                  
                  105,000
                  
                  
                  
                  156,000
                  
                  
                  
                  220,658,000
                  
                  
                  
                  3,050,000
                  
                  
                  
                  147,632,000Net
      income
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  48,511,000
                  
                  
                  $
                  48,511,000Foreign
      currency translation adjustments
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  (7,706,000
                  )
                  
                  
                  ―
                  
                  
                  
                  (7,706,000
                  )Comprehensive
      income
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  $
                  40,805,000Cash
      dividends ($.10 per share)
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  (2,631,000
                  )Cumulative
      effect of adopting FIN 48 (Note 6)
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  (639,000
                  )Tax
      benefit from stock option exercises
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  6,248,000
                  
                  
                  
                  ―
                  
                  
                  
                  ―Proceeds
      from stock option exercises
                  
                  
                  1,000
                  
                  
                  
                  2,000
                  
                  
                  
                  2,395,000
                  
                  
                  
                  ―
                  
                  
                  
                  ―Stock
      option compensation expense
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  142,000
                  
                  
                  
                  ―
                  
                  
                  
                  ―Other
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  (163,000
                  )
                  
                  
                  (1,000
                  )Balances
      as of October 31, 2008
                  
                  
                  106,000
                  
                  
                  
                  158,000
                  
                  
                  
                  229,443,000
                  
                  
                  
                  (4,819,000
                  )
                  
                  
                  192,872,000Net
      income
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  44,626,000
                  
                  
                  $
                  44,626,000Foreign
      currency translation adjustments
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  3,276,000
                  
                  
                  
                  ―
                  
                  
                  
                  3,276,000Comprehensive
      income
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  $
                  47,902,000Repurchases
      of common stock
                  
                  
                  (2,000
                  )
                  
                  
                  (2,000
                  )
                  
                  
                  (8,094,000
                  )
                  
                  
                  ―
                  
                  
                  
                  ―Cash
      dividends ($.12 per share)
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  (3,150,000
                  )Tax
      benefit from stock option exercises
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  1,890,000
                  
                  
                  
                  ―
                  
                  
                  
                  ―Proceeds
      from stock option exercises
                  
                  
                  ―
                  
                  
                  
                  1,000
                  
                  
                  
                  1,206,000
                  
                  
                  
                  ―
                  
                  
                  
                  ―Stock
      option compensation expense
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  181,000
                  
                  
                  
                  ―
                  
                  
                  
                  ―Other
                  
                  
                  ―
                  
                  
                  
                  ―
                  
                  
                  
                  (1,000
                  )
                  
                  
                  162,000
                  
                  
                  
                  ―Balances
      as of October 31, 2009
                  
                  $
                  104,000
                  
                  
                  $
                  157,000
                  
                  
                  $
                  224,625,000
                  
                  
                  $
                  (1,381,000
                  )
                  
                  $
                  234,348,000




The
accompanying notes are an integral part of these consolidated financial
statements.
  44
 Table of Contents





HEICO
CORPORATION AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS





For
      the year ended October 31,2009
                          
                          
                          2008
                          
                          
                          2007Operating
      Activities:Net
      income
                          
                          $
                          44,626,000
                          
                          
                          $
                          48,511,000
                          
                          
                          $
                          39,005,000Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
      and amortization
                          
                          
                          14,967,000
                          
                          
                          
                          15,052,000
                          
                          
                          
                          12,167,000Impairment
      of intangible assets
                          
                          
                          300,000
                          
                          
                          
                          1,835,000
                          
                          
                          
                          ―Deferred
      income tax (benefit) provision
                          
                          
                          (2,651,000
                          )
                          
                          
                          3,617,000
                          
                          
                          
                          2,819,000Minority
      interests’ share of income
                          
                          
                          15,219,000
                          
                          
                          
                          18,876,000
                          
                          
                          
                          16,281,000Tax
      benefit from stock option exercises
                          
                          
                          1,890,000
                          
                          
                          
                          6,248,000
                          
                          
                          
                          6,873,000Excess
      tax benefit from stock option exercises
                          
                          
                          (1,573,000
                          )
                          
                          
                          (4,324,000
                          )
                          
                          
                          (5,262,000
                          )Stock
      option compensation expense
                          
                          
                          181,000
                          
                          
                          
                          142,000
                          
                          
                          
                          658,000Changes
      in operating assets and liabilities, net of acquisitions:Decrease
      (increase) in accounts receivable
                          
                          
                          15,214,000
                          
                          
                          
                          (4,749,000
                          )
                          
                          
                          (13,790,000
                          )Increase
      in inventories
                          
                          
                          (87,000
                          )
                          
                          
                          (16,597,000
                          )
                          
                          
                          (14,701,000
                          )Decrease
      (increase) in prepaid expenses and other current assets
                          
                          
                          5,216,000
                          
                          
                          
                          650,000
                          
                          
                          
                          (266,000
                          )(Decrease)
      increase in trade accounts payable
                          
                          
                          (5,619,000
                          )
                          
                          
                          808,000
                          
                          
                          
                          4,265,000(Decrease)
      increase in accrued expenses and other current liabilities
                          
                          
                          (11,296,000
                          )
                          
                          
                          3,803,000
                          
                          
                          
                          7,013,000(Decrease)
      increase in income taxes payable
                          
                          
                          (936,000
                          )
                          
                          
                          (1,040,000
                          )
                          
                          
                          1,523,000Other
                          
                          
                          366,000
                          
                          
                          
                          330,000
                          
                          
                          
                          865,000Net
      cash provided by operating activities
                          
                          
                          75,817,000
                          
                          
                          
                          73,162,000
                          
                          
                          
                          57,450,000Investing
      Activities:Acquisitions
      and related costs, net of cash acquired
                          
                          
                          (71,066,000
                          )
                          
                          
                          (29,038,000
                          )
                          
                          
                          (48,367,000
                          )Capital
      expenditures
                          
                          
                          (10,253,000
                          )
                          
                          
                          (13,455,000
                          )
                          
                          
                          (12,886,000
                          )Other
                          
                          
                          20,000
                          
                          
                          
                          166,000
                          
                          
                          
                          59,000Net
      cash used in investing activities
                          
                          
                          (81,299,000
                          )
                          
                          
                          (42,327,000
                          )
                          
                          
                          (61,194,000
                          )Financing
      Activities:Borrowings
      on revolving credit facility
                          
                          
                          91,000,000
                          
                          
                          
                          50,000,000
                          
                          
                          
                          46,000,000Payments
      on revolving credit facility
                          
                          
                          (73,000,000
                          )
                          
                          
                          (66,000,000
                          )
                          
                          
                          (46,000,000
                          )Borrowings
      on short-term line of credit
                          
                          
                          ―
                          
                          
                          
                          500,000
                          
                          
                          
                          1,000,000Payments
      on short-term line of credit
                          
                          
                          ―
                          
                          
                          
                          (500,000
                          )
                          
                          
                          (1,000,000
                          )Payment
      of industrial development revenue bonds
                          
                          
                          ―
                          
                          
                          
                          (1,980,000
                          )
                          
                          
                          ―Distributions
      to minority interest owners
                          
                          
                          (9,591,000
                          )
                          
                          
                          (7,456,000
                          )
                          
                          
                          (6,448,000
                          )Repurchases
      of common stock
                          
                          
                          (8,098,000
                          )
                          
                          
                          ―
                          
                          
                          
                          ―Cash
      dividends paid
                          
                          
                          (3,150,000
                          )
                          
                          
                          (2,631,000
                          )
                          
                          
                          (2,056,000
                          )Excess
      tax benefit from stock option exercises
                          
                          
                          1,573,000
                          
                          
                          
                          4,324,000
                          
                          
                          
                          5,262,000Proceeds
      from stock option exercises
                          
                          
                          1,207,000
                          
                          
                          
                          2,398,000
                          
                          
                          
                          6,875,000Other
                          
                          
                          (219,000
                          )
                          
                          
                          (1,158,000
                          )
                          
                          
                          (57,000
                          )Net
      cash (used in) provided by financing activities
                          
                          
                          (278,000
                          )
                          
                          
                          (22,503,000
                          )
                          
                          
                          3,576,000Effect
      of exchange rate changes on cash
                          
                          
                          365,000
                          
                          
                          
                          (717,000
                          )
                          
                          
                          116,000Net
      (decrease) increase in cash and cash equivalents
                          
                          
                          (5,395,000
                          )
                          
                          
                          7,615,000
                          
                          
                          
                          (52,000
                          )Cash
      and cash equivalents at beginning of year
                          
                          
                          12,562,000
                          
                          
                          
                          4,947,000
                          
                          
                          
                          4,999,000Cash
      and cash equivalents at end of year
                          
                          $
                          7,167,000
                          
                          
                          $
                          12,562,000
                          
                          
                          $
                          4,947,000





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





45
 Table of Contents





HEICO
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





1.      SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES





Nature
of Business





HEICO Corporation, through its
principal subsidiaries HEICO Aerospace Holdings Corp. (“HEICO Aerospace”) 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 electronics related products and services
throughout the United States and internationally.  The Company’s
customer base is primarily the commercial aviation, defense, space, medical,
telecommunication and electronic 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 a 72%-owned
subsidiary, two 80%-owned subsidiaries, and a joint venture formed in March
2001, which is 16%-owned by American Airlines’ parent company, AMR
Corporation.  Also, HEICO Electronic consolidates three subsidiaries,
which are 80%, 89.9% and 82.5% owned, respectively.  (See Note 2,
Acquisitions.)  All significant intercompany balances and transactions
are eliminated.  The consolidated financial statements reflect
management’s evaluation of subsequent events through December 23, 2009, the date
of issuance of this Annual Report on Form 10-K.





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 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 allowance 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 and electronics industries.





46
 Table of Contents





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.





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 theamount
necessary to write-down its 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.





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
                15
      to 40 yearsLeasehold
      improvements
                2
      to 20 yearsMachinery
      and equipment
                3
      to 10 yearsTooling
                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 are expensed as
incurred.  Upon disposition, the cost and related accumulated
depreciation are removed from the accounts and any resulting gain or loss is
reflected in earnings.





Business
Combinations





The Company applies the purchase method
of accounting to its acquisitions.  Under this method, acquired
businesses are included in the consolidated financial statements from the date
of acquisition.  The purchase price, including any capitalized
acquisition costs, is allocated to the underlying tangible and identifiable
intangible assets and liabilities acquired based on their estimated fair market
values, with any excess recorded as goodwill.





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.  The test requires the Company to compare 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 a reporting unit’s goodwill exceeds its implied fair value, if
any.





47
 Table of Contents





The Company’s intangible assets not
subject to amortization consist of most of its trade names.  The
Company’s intangible assets subject to amortization are amortized on the
straight-line method over the following estimated useful lives:





Customer
      relationships
              3
      to 8 yearsIntellectual
      property
              4
      to 15 yearsLicenses
              12
      to  17 yearsNon-compete
      agreements
              2
      to 7 yearsPatents
              5
      to 20 yearsTrade
      names
              5
      to 10 years





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.  The Company also tests each amortizing intangible asset for
impairment if events or circumstances indicate that the asset might be
impaired.  These tests consist 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.





Financial
Instruments





The carrying amounts of cash and cash
equivalents, accounts receivable, trade accounts payable and accrued expenses
and other current liabilities approximate fair value due to the relatively short
maturity of the respective instruments.  The carrying value of
long-term debt approximates fair market value due to its variable interest
rates.





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.





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. interest rate swap agreements and foreign
currency forward contracts) to hedge the variability of expected future cash
flows of certain transactions.  On an ongoing basis, the Company
assesses whether derivative instruments used in hedging transactions are highly
effective in offsetting changes in cash flows of the hedged items and therefore
qualify as cash flow hedges.  For a derivative instrument that
qualifies as a cash flow hedge, the effective portion of changes in fair value
of the derivative is deferred and recorded as a component of




48
 Table of Contents




other
comprehensive income until the hedged transaction occurs and is recognized in
earnings.  All other portions of changes in the fair value of a cash
flow hedge are recognized in earnings immediately.





The
Company has previously utilized interest rate swap agreements to manage interest
expense related to its revolving credit facility.  Interest rate risk
associated with the Company’s variable rate revolving credit facility is the
potential increase in interest expense from an increase in interest
rates.  The Company did not enter into any interest rate swap
agreements in fiscal 2009, 2008 or 2007.





During fiscal 2008, the Company entered
into a one year foreign currency forward contract to mitigate foreign exchange
risk at one of its foreign subsidiaries for transactions denominated in a
currency other than its functional currency.  The impact of this
forward contract did not have a material effect on the Company’s results of
operations, financial position or cash flows in fiscal 2009 or
2008.  The Company did not enter into any foreign currency forward
contracts in fiscal 2009 or 2007.





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 management 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.





Revenue
Recognition





Revenue is recognized on an accrual
basis, primarily upon the shipment of products and the rendering of
services.  Revenue earned from rendering 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%, 3%, and 3% in fiscal
2009, 2008 and 2007, respectively.  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.





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




49
 Table of Contents


expenses
and other current liabilities, represents billings in excess of revenue
recognized on contracts accounted for under either the percentage-of-completion
method or the completed-contract 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 item has been accepted by the
customer.  The aggregate effects of changes in estimates relating to
long-term contracts did not have a significant effect on net income or diluted
net income per share in fiscal 2009, 2008 or 2007.





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 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 employee-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 cumulative 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.





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.





Effective November 1, 2007, the Company
adopted new guidance related to accounting for uncertainty in income taxes and
began evaluating 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.  As a result of adopting the provisions of
the new guidance, the Company recognized a cumulative effect adjustment that
decreased retained earnings as of




50
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the
beginning of fiscal 2008 by $639,000.  Further, effective with the
adoption of the new guidance, the Company’s policy is to recognize interest and
penalties related to income tax matters as a component of income tax
expense.  Interest and penalties, which were not significant in fiscal
2007, were previously recorded in interest expense and in selling, general and
administrative expenses, respectively, in the Company’s Consolidated Statements
of Operations.  Further information regarding income taxes can be
found in Note 6, Income Taxes.




Net
Income Per Share





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





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
shareholders’ 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 September 2006, the Financial
Accounting Standards Board (“FASB”) issued new guidance which defines fair
value, establishes a framework for measuring fair value, and requires expanded
disclosures about fair value measurements. In February 2008, the FASB issued
additional guidance which delays the effective date by one year for nonfinancial
assets and liabilities, except those recognized or disclosed at fair value in
the financial statements on a recurring basis.  The Company adopted
all required portions of the new guidance effective November 1, 2008. The
adoption did not have a material effect on the Company’s results of operations,
financial position or cash flows.  See Note 7, Fair Value
Measurements, which provides information about the extent to which fair value is
used to measure assets and liabilities and the methods and assumptions used to
measure fair value.  The portions of the new guidance that were
delayed will be adopted by the Company at the beginning of fiscal 2010, and the
Company is currently in the process of evaluating the effect such adoption will
have on its results of operations, financial position and cash
flows.





In February 2007, the FASB issued new
guidance that permits entities to choose to measure certain financial assets and
liabilities at fair value that are not currently required to be measured at fair
value, and report unrealized gains and losses on items for which the fair value
option has been elected in earnings.  The Company adopted this
guidance effective November 1, 2008 and has not elected to measure any financial
assets and financial liabilities at fair value that were not previously required
to be measured at fair value.  Accordingly, the adoption of the new
guidance did not impact the Company’s results of operations, financial position
or cash flows.




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In December 2007, the FASB issued new
guidance for business combinations that retains the fundamental requirements of
previous guidance that the acquisition method of accounting (formerly the
“purchase accounting” method) be used for all business combinations and for an
acquirer to be identified for each business combination.  However, the
new guidance changes the approach of applying the acquisition method in a number
of significant areas, including that acquisition costs will generally be
expensed as incurred; noncontrolling interests will be valued at fair value at
the acquisition date; in-process research and development will be recorded at
fair value as an indefinite-lived intangible asset at the acquisition date;
restructuring costs associated with a business combination will generally be
expensed subsequent to the acquisition date; and changes in deferred tax asset
valuation allowances and income tax uncertainties after the acquisition date
generally will affect income tax expense.  The new guidance is
effective on a prospective basis for all business combinations for which the
acquisition date is on or after the beginning of the first fiscal year beginning
on or after December 15, 2008, or in fiscal 2010 for HEICO.  The
Company will apply this new guidance in the accounting for all business
combinations consummated on or after November 1, 2009.





In December 2007, the FASB issued new
guidance that requires the recognition of certain noncontrolling interests
(previously referred to as minority interests) as a separate component within
equity in the consolidated balance sheet.  It also requires the amount
of consolidated net income attributable to the parent and the noncontrolling
interest be clearly identified and presented within the consolidated statement
of operations.  The new guidance is effective for fiscal years
beginning on or after December 15, 2008, or in fiscal 2010 for
HEICO.  The adoption of this new guidance will affect the presentation
of noncontrolling interests in the Company’s results of operations, financial
position and cash flows.





In March 2008, the FASB Emerging Issues
Task Force (“EITF”) made certain revisions to the guidance on the financial
statement classification and measurement of redeemable noncontrolling interests
which are required to be applied no later than the effective date of the above
referenced guidance for noncontrolling interests, or in fiscal 2010 for
HEICO.  As further detailed in Note 15, Commitments and Contingencies,
the holders of 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, as defined in the
applicable agreements 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.  Historically, the Company has recorded such redeemable
noncontrolling interests at historical cost plus an allocation of subsidiary
earnings based on ownership interests, less dividends paid to the noncontrolling
interest holders.  Effective November 1, 2009, the Company will adjust
its redeemable noncontrolling interests to the higher of their carrying cost or
management’s estimate of the Redemption Amount with a corresponding charge to
retained earnings and classify such interests outside of permanent
equity.  Under this guidance, subsequent adjustments to the carrying
amount of redeemable noncontrolling interests (the Redemption Amount) based on
fair value will be recorded to retained earnings and have no effect on net
income per diluted share.  Subsequent adjustments to the carrying
amount of redeemable noncontrolling interests based solely on a multiple of
future earnings that reflect a redemption in excess of fair value will be
recorded to retained earnings and will be reflected in net income per diluted
share under the two-class method.  If both the guidance on
noncontrolling interests and redeemable noncontrolling interests was effective
as of October 31, 2009, the Company would have reclassified approximately $78
million from minority interests in consolidated subsidiaries to permanent equity
for non-redeemable noncontrolling interests and recorded an approximately $45
million increase to minority interests in consolidated subsidiaries (to be
renamed as “redeemable noncontrolling interests”) with a corresponding decrease
to retained earnings in the Company’s Consolidated Balance
Sheets.  The resulting $57 million of redeemable noncontrolling
interests represents management’s estimate of the aggregate Redemption Amount of
all Put Rights that the Company would be required to pay of which




52
 Table of Contents




approximately
$25 million is redeemable at fair value and approximately $32 million is
redeemable based solely on a multiple of future earnings. The actual Redemption
Amount will likely be different.


In March 2008, the FASB issued new
guidance that expands the disclosure requirements about an entity’s derivative
instruments and hedging activities.  It requires enhanced disclosures
about (i) how and why an entity uses derivative instruments; (ii) how derivative
instruments and related hedged items are accounted for; and (iii) how derivative
instruments and related hedged items affect an entity’s financial position,
financial performance and cash flows.  The Company adopted the new
guidance effective February 1, 2009.  The new guidance affects
financial statement disclosures only, and the Company will make the required
additional disclosures in reporting periods for which it uses derivative
instruments.





In May 2008, the FASB issued new
guidance that identifies the sources of accounting principles and the framework
for selecting the principles used in the preparation of financial statements
that are presented in conformity with generally accepted accounting
principles.  The new guidance became effective November 15,
2008.  The adoption of the new guidance did not have a material effect
on the Company’s results of operations, financial position or cash
flows.





In May 2009, the FASB issued new
guidance on subsequent events that establishes general standards of accounting
for and disclosure of events that occur after the balance sheet date but before
financial statements are issued.  The new guidance requires the
disclosure of the date through which an entity has evaluated subsequent events,
which is through the date the financial statements are issued for a public
entity such as HEICO.  The Company adopted the new guidance in the
third quarter of fiscal 2009.  The adoption of the new guidance did
not have a material effect on the Company’s results of operations, financial
position or cash flows.





In June 2009, the FASB issued new
guidance that establishes the FASB Accounting Standards CodificationTM as the
source of authoritative accounting principles recognized by the FASB to be
applied by nongovernmental entities in the preparation of financial statements
in conformity with generally accepted accounting principles
(“GAAP”).  The Company adopted the new guidance in the fourth quarter
of fiscal 2009.  The new guidance is not intended to change GAAP,
therefore the adoption of the new guidance did not impact the Company’s results
of operations, financial position or cash flows.





2.      ACQUISITIONS





During the first quarter of fiscal
2007, the Company, through HEICO Aerospace, acquired an additional 10% of the
equity interests in one of its subsidiaries, which increased the Company’s
ownership interest to 90%.  During the first quarter of fiscal 2009,
the Company, through HEICO Aerospace, acquired the remaining 10% equity
interest, which increased the Company’s ownership interest to 100% effective
October 31, 2008.  The purchase price of both acquired equity interests was
paid using cash provided by operating activities.





In April 2007, the Company, through
HEICO Electronic, acquired all the stock of a U.S. company engaged in the design
and manufacture of Radio Frequency Interference and Electromagnetic Frequency
Interference Suppressors for a variety of markets.  The Company has
since integrated the operations of the acquired entity into the operations of
one of its existing subsidiaries.





During both April 2007 and 2008, the
Company, through HEICO Electronic, acquired an additional .75% of the equity
interests in one of its subsidiaries, which increased the Company’s ownership
interest from 85% to 86.5%.  In April 2009, the Company, through HEICO
Electronic,




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acquired
an additional 3.4% equity interest, which increased the Company’s ownership
interest to 89.9%.  The purchase prices of the acquired equity
interests were paid using cash provided by operating
activities.


In May 2007, the Company, through HEICO
Aerospace, acquired certain assets of a supplier.  The acquired assets
were integrated into one of its existing subsidiaries and will be utilized to
bring certain manufacturing operations in-house.  The purchase price
was paid using cash provided by operating activities.





In August 2007, the Company, through
HEICO Aerospace, acquired substantially all of the assets and assumed certain
liabilities of a U.S. company that designs and manufactures FAA-approved
aircraft and engine parts primarily for the commercial aviation
market.





In September 2007, the Company, through
HEICO Electronic, acquired all of the stock of a Canadian company that designs
and manufactures high voltage energy generators for medical, baggage inspection
and industrial imaging manufacturers and high frequency power delivery systems
for the commercial sign industry.  Subject to meeting certain earnings
objectives during the first five years following the acquisition, the Company
may be obligated to pay additional purchase consideration of up to 73 million
Canadian dollars in aggregate, which translates to approximately $68 million
U.S. dollars based on the October 31, 2009 exchange rate.





In November 2007, the Company, through
an 80%-owned subsidiary of HEICO Aerospace, acquired all of the stock of a
European company.  Subject to meeting certain earnings objectives
during the third, fourth and fifth years following the acquisition, the Company
may be obligated to pay additional purchase consideration of up to approximately
$.4 million in aggregate.  The acquired company supplies aircraft
parts for sale and exchange as well as repair management services to commercial
and regional airlines, asset management companies and FAA overhaul and repair
facilities.





In January 2008, the Company, through
HEICO Aerospace, acquired certain assets and assumed certain liabilities of a
U.S. company that designs and manufactures FAA-approved aircraft and engine
parts primarily for the commercial aviation market.  The Company has
since combined the operations of the acquired entity within other subsidiaries
of HEICO Aerospace.





In February 2008, the Company, through
HEICO Aerospace, acquired an 80% interest in certain assets and certain
liabilities of a U.S. company that is an FAA-approved repair station which
specializes in avionics primarily for the commercial aviation
market.  The remaining 20% is principally owned by certain members of
the acquired company’s management.  The Company has the right to
purchase the minority interests beginning at approximately the sixth anniversary
of the acquisition, or sooner under certain conditions, and the minority
interest holders have the right to cause the Company to purchase the same equity
interest over the same period.





In April 2008, the Company, through
HEICO Aerospace, acquired an additional 7% equity interest in one of its
subsidiaries, which increased the Company’s ownership interest to
58%.  In December 2008, the Company, through HEICO Aerospace, acquired
an additional 14% equity interest in the subsidiary, which increased the
Company’s ownership interest to 72%.





In May 2009, the Company, through HEICO
Electronic, acquired 82.5% of the stock of VPT, Inc., a U.S. company that
designs and provides power conversion products principally serving the defense,
space and aviation industries.  The remaining 17.5% continues to be
owned by an existing VPT shareholder which is also a supplier to the acquired
company.  The Company has the right to purchase the minority interests
beginning at the fifth anniversary of the acquisition, or sooner under certain
conditions, and the minority interest holder has the right to cause the Company
to purchase the same equity interests




54
 Table of Contents




over the
same period.  In addition, subject to meeting certain earnings
objectives during each of the first three years following the acquisition, the
Company may be obligated to pay additional purchase consideration of up to
approximately $1.3 million in fiscal 2010, $1.3 million in fiscal 2011 and $10.1
million in fiscal 2012.


In October 2009, the Company, through
HEICO Electronic, acquired the business, assets and certain liabilities of the
Seacom division of privately-held Dukane Corp. and formed a new subsidiary,
Dukane Seacom, Inc. (“Seacom”).  Seacom is a designer and manufacturer
of underwater locator beacons used to locate aircraft cockpit voice recorders,
flight data recorders, marine ship voyage recorders and various other devices
which have been submerged under water.  Subject to meeting certain
earnings objectives during the first two years following the acquisition, the
Company may be obligated to pay additional purchase consideration of up to
approximately $11.7 million.





As part of the purchase agreement
associated with certain acquisitions, the Company may be obligated to pay
additional purchase consideration based on the acquired subsidiary meeting
certain earnings objectives following the acquisition.  The Company
accrues an estimate of additional purchase consideration when the earnings
objectives are met.  During fiscal 2009, the Company, through HEICO
Electronic, paid $2.2 million of such additional purchase consideration related
to an acquisition made previously, which was accrued as of October 31,
2008.  In addition, the Company, through HEICO Electronic, paid $1.6
million of additional purchase consideration in the fourth quarter of fiscal
2009 related to a previous acquisition for which the earnings objective was met
during fiscal 2009.  During fiscal 2008, the Company, through HEICO
Aerospace and HEICO Electronic, paid $7.0 million and $4.7 million,
respectively, of such additional purchase consideration related to acquisitions
made in previous years, all of which was accrued as of October 31,
2007.  During fiscal 2007, the Company, through HEICO Electronic, paid
$7.3 million of such additional purchase consideration related to acquisitons
made in previous years, of which $7.2 million was accrued as of October 31,
2006.  As of October 31, 2009, the Company, through HEICO Electronic,
accrued $1.8 million of additional purchase consideration related to a prior
year acquisition, which it expects to pay in fiscal 2010.  The amounts
paid in fiscal 2009, 2008 and 2007 were based on a multiple of each applicable
subsidiary’s earnings relative to target.  Since these amounts were
not contingent upon the former shareholders of each acquired entity remaining
employed by the Company or providing future services to the Company, the
payments were recorded as an additional cost of the respective acquired
entity.  Information regarding additional purchase consideration
related to acquisitions may be found in Note 15, Commitments and
Contingencies.





All of the acquisitions described above
were accounted for using the purchase method of accounting.  The
purchase price of each acquisition was paid in cash using proceeds from the
Company’s revolving credit facility unless otherwise noted and was not material
or significant to the Company’s consolidated financial
statements.  The operating results of each acquired company were
included in the Company’s results of operations from their effective acquisition
date.  The following table presents the Company’s unaudited pro forma
consolidated operating results assuming the fiscal 2009 and 2008 acquisitions
had been consummated as of the beginning of fiscal 2008.  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 acquisitions had taken place as of the beginning fiscal
2008.  The unaudited pro forma financial information includes
adjustments to historical amounts such as additional amortization expense
related to acquired intangible assets, increased interest expense associated
with borrowings to finance the acquisitions, and applicable adjustments to
minority interest in net income as well as the exclusion of any
acquisition-related expenses.




55
 Table of Contents





For the year ended October 31,2009
                  
                  
                  2008Net
      sales
                  
                  $
                  559,923
                  
                  
                  $
                  619,665Net
      income
                  
                  $
                  47,220
                  
                  
                  $
                  51,975Net
      income per share:Basic
                  
                  $
                  1.80
                  
                  
                  $
                  1.98Diluted
                  
                  $
                  1.75
                  
                  
                  $
                  1.91





The allocation of the purchase price of
each acquisition to the tangible and identifiable intangible assets acquired and
liabilities assumed is based on their estimated fair values as of the date of
acquisition.  The Company determines the fair values of such assets
and liabilities, generally in consultation with third-party valuation
advisors.  The allocation of the purchase price of the fiscal 2009
acquisitions to the tangible and identifiable intangible assets acquired and
liabilities assumed in these consolidated financial statements is preliminary
until the Company obtains final information regarding their fair
values.  The excess of the purchase price over the net of the amounts
assigned to assets acquired and liabilities assumed has been recorded as
goodwill (see Note 16, Supplemental Disclosures of Cash Flow
Information).  The aggregate cost of acquisitions, including payments
made in cash and contingent payments, was $71.1 million, $29.0 million and $48.4
million in fiscal 2009, 2008 and 2007, respectively.





3. SELECTED
FINANCIAL STATEMENT INFORMATION





Accounts
Receivable


As of October 31,2009
                        
                        
                        2008Accounts
      receivable
                        
                        $
                        80,399,000
                        
                        
                        $
                        90,990,000Less:  Allowance
      for doubtful accounts
                        
                        
                        (2,535,000
                        )
                        
                        
                        (2,587,000
                        )Accounts receivable,
      net
                        
                        $
                        77,864,000
                        
                        
                        $
                        88,403,000





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





As of October 31,2009
                  
                  
                  2008Costs
      incurred on uncompleted contracts
                  
                  $
                  10,280,000
                  
                  
                  $
                  21,505,000Estimated
      earnings
                  
                  
                  8,070,000
                  
                  
                  
                  12,545,00018,350,000
                  
                  
                  
                  34,050,000Less:  Billings
      to date
                  
                  
                  (12,543,000
                  )
                  
                  
                  (28,337,000
                  )$
                  5,807,000
                  
                  
                  $
                  5,713,000Included
      in accompanying Consolidated Balance Sheets under the following
      captions:Accounts
      receivable, net (costs and estimated earnings in excess of
      billings)
                  
                  $
                  5,832,000
                  
                  
                  $
                  6,115,000Accrued
      expenses and other current liabilities (billings in excess of costs and
      estimated earnings)
                  
                  
                  (25,000
                  )
                  
                  
                  (402,000
                  )$
                  5,807,000
                  
                  
                  $
                  5,713,000





Changes in estimates pertaining to
percentage of completion contracts did not have a material effect on net income
or diluted net income per share in fiscal 2009, 2008 or 2007.




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 Table of Contents


Inventories


As of October 31,2009
                  
                  
                  2008Finished
      products
                  
                  $
                  79,665,000
                  
                  
                  $
                  74,281,000Work
      in process
                  
                  
                  14,279,000
                  
                  
                  
                  17,897,000Materials,
      parts, assemblies and supplies
                  
                  
                  43,641,000
                  
                  
                  
                  40,732,000Inventories,
      net
                  
                  $
                  137,585,000
                  
                  
                  $
                  132,910,000





Inventories related to long-term
contracts were not significant as of October 31, 2009 and 2008.





Property,
Plant and Equipment


As of October 31,2009
                  
                  
                  2008Land
                  
                  $
                  3,656,000
                  
                  
                  $
                  3,656,000Buildings
      and improvements
                  
                  
                  38,091,000
                  
                  
                  
                  36,229,000Machinery,
      equipment and tooling
                  
                  
                  80,697,000
                  
                  
                  
                  73,038,000Construction
      in progress
                  
                  
                  5,331,000
                  
                  
                  
                  5,446,000127,775,000
                  
                  
                  
                  118,369,000Less:  Accumulated
      depreciation and amortization
                  
                  
                  (67,247,000
                  )
                  
                  
                  (58,403,000
                  )Property,
      plant and equipment, net
                  
                  $
                  60,528,000
                  
                  
                  $
                  59,966,000





The amounts set forth above include
tooling costs having a net book value of $4,369,000 and $4,037,000 as of October
31, 2009 and 2008, respectively.  Amortization expense on capitalized
tooling was $1,825,000, $1,575,000 and $1,448,000 for the fiscal years ended
October 31, 2009, 2008 and 2007, respectively.  Expenditures for
capitalized tooling costs were $2,193,000, $1,412,000 and $1,634,000 in fiscal
2009, 2008 and 2007, respectively.





Depreciation and amortization expense,
exclusive of tooling, on property, plant and equipment was $8,365,000,
$7,990,000 and $6,678,000 for the fiscal years ended October 31, 2009, 2008 and
2007, respectively.





Included in the Company’s property,
plant and equipment is rotable equipment located at various customer locations
in connection with certain repair and maintenance agreements.  The
rotables are stated at a net book value of $631,000 and $908,000 as of October
31, 2009 and 2008, respectively.  Under the terms of the agreements,
the customers may purchase the equipment at specified prices, which are no less
than net book value, upon termination of the agreements.  The
equipment is currently being depreciated over its estimated life.





Accrued
Expenses and Other Current Liabilities


As of October 31,2009
                  
                  
                  2008Accrued
      employee compensation and related payroll taxes
                  
                  $
                  14,745,000
                  
                  
                  $
                  25,157,000Accrued
      customer rebates and credits
                  
                  
                  9,689,000
                  
                  
                  
                  11,758,000Accrued
      additional purchase consideration
                  
                  
                  1,775,000
                  
                  
                  
                  3,427,000Other
                  
                  
                  10,769,000
                  
                  
                  
                  9,244,000Accrued
      expenses and other current liabilities
                  
                  $
                  36,978,000
                  
                  
                  $
                  49,586,000





The total customer rebates and credits
deducted within net sales for the fiscal years ended October 31, 2009, 2008 and
2007 were $8,315,000, $10,249,000 and $9,574,000, respectively.




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Other
Long-Term Liabilities





During fiscal 2006, the Company
established the HEICO Corporation Leadership Compensation Plan (“LCP”), a
nonqualified deferred compensation plan that conforms to Section 409A of the
Internal Revenue Code.  The LCP was effective October 1, 2006 and
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.  The Company matches 50% of the first 6% of base salary
deferred by each participant.  In September 2008, the LCP was amended
principally to allow director fees that would otherwise be payable in Company
common stock to be deferred into the Plan, and, when distributed, amounts would
be distributable in actual shares of Company common stock.  During
fiscal 2009, the LCP was amended to comply with the final Section 409A
regulations issued by the Internal Revenue Service, which become effective
January 1, 2009.  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 Plan charged to income
in fiscal 2009, 2008 and 2007 totaled $2,195,000, $2,075,000 and $2,119,000,
respectively.  In the accompanying Consolidated Balance Sheets,
$241,000 was included in accrued expenses and other current liabilities and
$15,552,000 in other long-term liabilities as of October 31, 2009, and $623,000
was included in accrued expenses and other current liabilities and $7,136,000 in
other long-term liabilities as of October 31, 2008.  The assets of the
LCP, totaling $15,811,000 and $7,148,000 as of October 31, 2009, and 2008,
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 $3,953,000 and $3,860,000 as of October 31,
2009 and 2008, 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 related to this deferred
compensation liability are held within an irrevocable trust and classified
within other assets in the accompanying 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.




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 Table of Contents


4.      GOODWILL
AND OTHER INTANGIBLE ASSETS





The Company has two operating
segments:  the Flight Support Group (“FSG”) and the Electronic
Technologies Group (“ETG”).  Changes in the carrying amount of
goodwill during fiscal 2009 and 2008 by operating segment are as
follows:





Segment
                
                
                ConsolidatedFSG
                
                
                ETG
                
                
                TotalsBalances
      as of October 31, 2007
                
                $
                169,689,000
                
                
                $
                140,813,000
                
                
                $
                310,502,000Goodwill
      acquired
                
                
                9,094,000
                
                
                
                74,000
                
                
                
                9,168,000Adjustments
      to goodwill
                
                
                1,491,000
                
                
                
                2,673,000
                
                
                
                4,164,000Accrued
      additional purchase consideration
                
                
                1,215,000
                
                
                
                2,212,000
                
                
                
                3,427,000Foreign
      currency translation adjustments
                
                
                (363,000
                )
                
                
                (3,505,000
                )
                
                
                (3,868,000
                )Balances
      as of October 31, 2008
                
                
                181,126,000
                
                
                
                142,267,000
                
                
                
                323,393,000Goodwill
      acquired
                
                
                6,444,000
                
                
                
                29,269,000
                
                
                
                35,713,000Adjustments
      to goodwill
                
                
                866,000
                
                
                
                1,612,000
                
                
                
                2,478,000Accrued
      additional purchase consideration
                
                
                3⁄4
                
                
                
                1,775,000
                
                
                
                1,775,000Foreign
      currency translation adjustments
                
                
                23,000
                
                
                
                1,861,000
                
                
                
                1,884,000Balances
      as of October 31, 2009
                
                $
                188,459,000
                
                
                $
                176,784,000
                
                
                $
                365,243,000





The goodwill acquired during fiscal
2009 and 2008 is a result of certain of the Company’s acquisitions described in
Note 2, Acquisitions.  Adjustments to goodwill during fiscal 2009 by
the FSG and fiscal 2008 by the FSG and ETG consist primarily of final purchase
price adjustments related to the preliminary allocation of the purchase price
during the allocation period for certain prior year acquisitions to the assets
acquired and liabilities assumed.  The adjustment to goodwill during
fiscal 2009 by the ETG represents additional purchase consideration paid in the
fourth quarter of fiscal 2009 related to a previous acquisition for which the
earnings objective was met during fiscal 2009 (see Note 15, Commitments and
Contingencies).  The $1.8 million and $2.2 million accrued additional
purchase consideration recognized during fiscal 2009 and 2008, respectively, by
the ETG is the result of a subsidiary meeting certain earnings objectives in
fiscal 2009 and 2008, respectively (see Note 2, Acquisitions).  The
$1.2 million accrued additional purchase consideration recognized during fiscal
2008 by the FSG is the result of the Company’s purchase of the remaining 10% of
the equity interests of a 90%-owned subsidiary effective October 31,
2008.  The foreign currency translation adjustments reflect unrealized
translation (losses) 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
Shareholders’ Equity and Comprehensive Income.  The Company estimates
that approximately $25 million and $13 million of the goodwill recognized in
fiscal 2009 and 2008, respectively, will be deductible for income tax
purposes.  Based on the annual goodwill test for impairment as of
October 31, 2009, the Company determined there is no impairment of its
goodwill.




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Identifiable
intangible assets consist of:


As of October 31, 2009
                                
                                
                                As of October 31, 2008Gross
                                
                                
                                
                                
                                
                                Net
                                
                                
                                Gross
                                
                                
                                
                                
                                
                                NetCarrying
                                
                                
                                Accumulated
                                
                                
                                Carrying
                                
                                
                                Carrying
                                
                                
                                Accumulated
                                
                                
                                CarryingAmount
                                
                                
                                Amortization
                                
                                
                                Amount
                                
                                
                                Amount
                                
                                
                                Amortization
                                
                                
                                AmountAmortizing Assets:Customer
      relationships
                                
                                $
                                33,237,000
                                
                                
                                $
                                (9,944,000
                                )
                                
                                $
                                23,293,000
                                
                                
                                $
                                16,845,000
                                
                                
                                $
                                (6,451,000
                                )
                                
                                $
                                10,394,000Intellectual
      property
                                
                                
                                3,369,000
                                
                                
                                
                                (628,000
                                )
                                
                                
                                2,741,000
                                
                                
                                
                                3,427,000
                                
                                
                                
                                (1,833,000
                                )
                                
                                
                                1,594,000Licenses
                                
                                
                                1,000,000
                                
                                
                                
                                (547,000
                                )
                                
                                
                                453,000
                                
                                
                                
                                1,000,000
                                
                                
                                
                                (474,000
                                )
                                
                                
                                526,000Non-compete
      agreements
                                
                                
                                1,221,000
                                
                                
                                
                                (969,000
                                )
                                
                                
                                252,000
                                
                                
                                
                                1,086,000
                                
                                
                                
                                (660,000
                                )
                                
                                
                                426,000Patents
                                
                                
                                575,000
                                
                                
                                
                                (246,000
                                )
                                
                                
                                329,000
                                
                                
                                
                                575,000
                                
                                
                                
                                (189,000
                                )
                                
                                
                                386,000Trade
      names
                                
                                
                                569,000
                                
                                
                                
                                3⁄4
                                
                                
                                
                                569,000
                                
                                
                                
                                3⁄4
                                
                                
                                
                                3⁄4
                                
                                
                                
                                3⁄439,971,000
                                
                                
                                
                                (12,334,000
                                )
                                
                                
                                27,637,000
                                
                                
                                
                                22,933,000
                                
                                
                                
                                (9,607,000
                                )
                                
                                
                                13,326,000Non-Amortizing Assets:Trade
      names
                                
                                
                                13,951,000
                                
                                
                                
                                3⁄4
                                
                                
                                
                                13,951,000
                                
                                
                                
                                11,657,000
                                
                                
                                
                                3⁄4
                                
                                
                                
                                11,657,000$
                                53,922,000
                                
                                
                                $
                                (12,334,000
                                )
                                
                                $
                                41,588,000
                                
                                
                                $
                                34,590,000
                                
                                
                                $
                                (9,607,000
                                )
                                
                                $
                                24,983,000





The increase in the gross carrying
amount of customer relationships, trade names and non-compete agreements as of
October 31, 2009 compared to October 31, 2008 principally relates to the
intangible assets recognized in connection with the fiscal 2009 acquisitions
(see Note 2, Acquisitions, and Note 16, Supplemental Disclosures of Cash Flow
Information).  The increase in the gross carrying amount of
intellectual property recognized in connection with the fiscal 2009 acquisitions
(see Notes 2 and 16) was more than offset by the write-off of certain such fully
amortized intangible assets.  During the fourth quarter of fiscal 2009
and 2008, the Company recognized impairment losses of $200,000 and $1,313,000,
respectively, and $100,000 and $522,000, respectively, from the write-down of
certain customer relationships and trade names, respectively, within the ETG to
their estimated fair values, due to reductions in future cash flows associated
with such assets.  The impairment losses were recorded as a component
of selling, general and administrative expenses in the Company’s Consolidated
Statements of Operations.





The weighted average amortization
period of the customer relationships, intellectual property, finite-lived trade
names and non-compete agreements acquired during fiscal 2009 is six years, six
years, five years and two years, respectively.  The weighted average
amortization period of the customer relationships and non-compete agreements
acquired during fiscal 2008 is approximately six and four years,
respectively.  Amortization expense of other intangible assets was
$4,499,000, $5,156,000 and $3,647,000 for the fiscal years ended October 31,
2009, 2008 and 2007, respectively.  Amortization expense for each of the
next five fiscal years is expected to be $6,162,000 in fiscal 2010, $5,345,000
in fiscal 2011, $4,638,000 in fiscal 2012, $4,178,000 in fiscal 2013 and
$3,881,000 in fiscal 2014.




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5.      SHORT-TERM
AND LONG-TERM DEBT





The $2.5 million short-term line of
credit that one of the Company’s subsidiaries had with a bank expired in June
2009.





Long-term debt consists
of:





As of October 31,2009
                    
                    
                    2008Borrowings
      under revolving credit facility
                    
                    $
                    55,000,000
                    
                    
                    $
                    37,000,000Notes
      payable, capital leases and equipment loans
                    
                    
                    431,000
                    
                    
                    
                    601,00055,431,000
                    
                    
                    
                    37,601,000Less:  Current
      maturities of long-term debt
                    
                    
                    (237,000
                    )
                    
                    
                    (220,000
                    )$
                    55,194,000
                    
                    
                    $
                    37,381,000





The aggregate amount of long-term debt
maturing in each of the next five fiscal years is $237,000in fiscal 2010,$134,000 in fiscal 2011,
$40,000 in fiscal 2012 and $55,020,000 in fiscal 2013.





Revolving
Credit Facility





In May 2008, the Company amended its
revolving credit facility by entering into a $300 million Second Amended and
Restated Revolving Credit Agreement (“Credit Facility”) with a bank syndicate,
which matures in May 2013.  Under certain circumstances, the maturity
may be extended for two one-year periods.  The Credit Facility also
includes a feature that will allow the Company to increase the Credit Facility,
at its option, up to $500 million through increased commitments from existing
lenders or the addition of new lenders.  The Credit Facility may be
used for working capital and general corporate needs of the Company, including
letters of credit, capital expenditures and to finance
acquisitions.  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, depreciation and amortization, minority
interest and non-cash charges, or “leverage ratio”).  The Base Rate is
the higher of (i) the Prime Rate or (ii) the Federal Funds rate plus
..50%.  The applicable margins for LIBOR-based borrowings range from
..625% to 2.25%.  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 euros, a $30 million sublimit for letters of credit and a $20
million swingline sublimit.  The Credit Facility is unsecured and
contains covenants that require, among other things, the maintenance of the
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, 2009 and 2008, the
Company had a total of $55 million and $37 million, respectively, borrowed under
its revolving credit facility at weighted average interest rates of .9% and
3.6%, respectively.  The amounts were primarily borrowed to fund
acquisitions (see Note 2, Acquisitions) as well as for working capital and
general corporate purposes.  The revolving credit facility contains
both financial and non-financial covenants.  As of October 31, 2009,
the Company was in compliance with all such covenants.





Industrial
Development Revenue Bonds





In April 2008, the Company paid the
matured Series 1988 industrial development revenue bonds aggregating
$1,980,000.




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6.      INCOME
TAXES


The
components of the provision for income taxes on income before income taxes and
minority interests is as follows:




For the year ended October
    31,2009
                  
                  
                  2008
                  
                  
                  2007Current:Federal
                  
                  $
                  25,920,000
                  
                  
                  $
                  27,118,000
                  
                  
                  $
                  20,688,000State
                  
                  
                  3,890,000
                  
                  
                  
                  4,225,000
                  
                  
                  
                  3,746,000Foreign
                  
                  
                  841,000
                  
                  
                  
                  490,000
                  
                  
                  
                  277,00030,651,000
                  
                  
                  
                  31,833,000
                  
                  
                  
                  24,711,000Deferred
                  
                  
                  (2,651,000
                  )
                  
                  
                  3,617,000
                  
                  
                  
                  2,819,000Total
      income tax expense
                  
                  $
                  28,000,000
                  
                  
                  $
                  35,450,000
                  
                  
                  $
                  27,530,000




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


For the year ended October
    31,2009
                  
                  
                  2008
                  
                  
                  2007Federal
      statutory income tax rate
                  
                  
                  35.0
                  %
                  
                  
                  35.0
                  %
                  
                  
                  35.0
                  %State
      taxes, less applicable federal income tax reduction
                  
                  
                  2.5
                  
                  
                  
                  2.9
                  
                  
                  
                  3.3Net
      tax benefit on minority interests’ share of income
                  
                  
                  (2.7
                  )
                  
                  
                  (3.0
                  )
                  
                  
                  (3.4
                  )Net
      tax benefit on qualified research and development
    activities
                  
                  
                  (2.9
                  )
                  
                  
                  (.3
                  )
                  
                  
                  (1.8
                  )Net
      tax benefit on qualified domestic production activities
                  
                  
                  (.6
                  )
                  
                  
                  (.7
                  )
                  
                  
                  (.4
                  )Other,
      net
                  
                  
                  .6
                  
                  
                  
                  .6
                  
                  
                  
                  .5Effective
      tax rate
                  
                  
                  31.9
                  %
                  
                  
                  34.5
                  %
                  
                  
                  33.2
                  %




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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 andliabilities are as
follows:





As
      of October 31,2009
                      
                      
                      2008Deferred
      tax assets:Inventories
                      
                      $
                      13,123,000
                      
                      
                      $
                      7,483,000Deferred
      compensation liability
                      
                      
                      7,407,000
                      
                      
                      
                      4,240,000Net
      operating loss carryforward of acquired business
                      
                      
                      4,184,000
                      
                      
                      –Foreign
      R&D carryforward and credit
                      
                      
                      1,714,000
                      
                      
                      
                      269,000Bonus
      accrual
                      
                      
                      1,214,000
                      
                      
                      
                      2,684,000Allowance
      for doubtful accounts receivable
                      
                      
                      880,000
                      
                      
                      
                      821,000Vacation
      accrual
                      
                      
                      795,000
                      
                      
                      
                      884,000Customer
      rebates accrual
                      
                      
                      671,000
                      
                      
                      
                      1,097,000Other
                      
                      
                      2,382,000
                      
                      
                      
                      3,051,000Total
      deferred tax assets
                      
                      
                      32,370,000
                      
                      
                      
                      20,529,000Deferred
      tax liabilities:Intangible
      asset amortization
                      
                      
                      50,113,000
                      
                      
                      
                      40,695,000Accelerated
      depreciation
                      
                      
                      3,700,000
                      
                      
                      
                      3,778,000Software
      development costs
                      
                      
                      1,622,000
                      
                      
                      
                      1,019,000Other
                      
                      
                      1,604,000
                      
                      
                      
                      272,000Total
      deferred tax liabilities
                      
                      
                      57,039,000
                      
                      
                      
                      45,764,000Net
      deferred tax liability
                      
                      $
                      (24,669,000
                      )
                      
                      $
                      (25,235,000
                      )





The net deferred tax liability is
classified in the accompanying Consolidated Balance Sheets as
follows:


As of October 31,2009
                  
                  
                  2008Current
      asset
                  
                  $
                  16,671,000
                  
                  
                  $
                  13,957,000Long-term
      liability
                  
                  
                  41,340,000
                  
                  
                  
                  39,192,000Net
      deferred tax liability
                  
                  $
                  (24,669,000
                  )
                  
                  $
                  (25,235,000
                  )





The decrease in the net deferred tax
liability from $25.2 million as of October 31, 2008 to $24.7 million as of
October 31, 2009 is principally due to the $2.7 million deferred income tax
benefit for 2009 offset by a $1.8 million reduction in a deferred tax asset that
was released during the second quarter of fiscal 2009 upon the filing of an
application with the Internal Revenue Service (“IRS”) for an accounting
methodology change as referenced below.





As discussed in Note 1, Summary of
Significant Accounting Policies – Income Taxes, the Company adopted the
provisions of certain new guidance related to income taxes effective November 1,
2007.  As a result, the Company increased its liabilities related to
uncertain tax positions by $4,622,000 and accounted for this change as a
$3,889,000 increase to deferred tax assets, a $639,000 decrease to retained
earnings (the cumulative effect of adopting the new guidance), and a $94,000
decrease to deferred tax liabilities.  Upon adoption, the Company also
reclassified $2,680,000 in unrecognized tax benefits and $2,621,000 of income
tax refunds (related to research and development activities as further described
below) from income taxes payable to long-term income tax liabilities and
long-term income tax assets, respectively, since the Company does not anticipate
payment or receipt of cash within one year.




63
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Long-term
income tax liabilities are classified within other long-term liabilities and
long-term income tax assets are classified within other assets in the Company’s
Consolidated Balance Sheets.




As of
October 31, 2009 and 2008, the Company’s liability for gross unrecognized tax
benefits related to uncertain tax positions was $3,328,000 and $5,742,000,
respectively, of which $2,859,000 and $3,438,000, 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 fiscal 2009
and 2008 is as follows:





Year ended October 31,2009
                  
                  
                  2008Balance
      as of beginning of fiscal year
                  
                  $
                  5,742,000
                  
                  
                  $
                  7,396,000Increases
      related to prior year tax positions
                  
                  
                  91,000
                  
                  
                  
                  2,000Decreases
      related to prior year tax positions
                  
                  
                  (3,562,000
                  )
                  
                  
                  (4,380,000
                  )Increases
      related to current year tax positions
                  
                  
                  1,234,000
                  
                  
                  
                  2,793,000Settlements
                  
                  
                  (211,000
                  )
                  
                  
                  —Lapse
      of statutes of limitations
                  
                  
                  34,000
                  
                  
                  
                  (69,000
                  )Balance
      as of October 31,
                  
                  $
                  3,328,000
                  
                  
                  $
                  5,742,000





The Company’s net liability for
unrecognized tax benefits was $3,121,000 as of October 31, 2009, including
$176,000 of interest and $148,000 of penalties and net of $530,000 in related
deferred tax assets.  It is the Company’s policy to recognize interest
and penalties related to income tax matters as a component of income tax
expense.  During the fiscal year ended October 31, 2009, the Company
accrued penalties of $52,000 related to the unrecognized tax benefits noted
above.  The liability for interest decreased by $56,000 during fiscal
2009 due to the lapse of statutes of limitations.





The $2,414,000 decrease in the
liability during fiscal 2009 was principally related to the release of
liabilities for tax positions for which the uncertainty was only related to the
timing of such tax benefits and the effect of a favorable settlement reached
with the IRS during fiscal 2009, partially offset by increases related to
current year tax positions.  During the IRS’ examination of the income
tax credits claimed by the Company in its U.S. federal filings for qualified
research and development activities incurred for fiscal years 2002 through 2005,
new information was obtained that supported an aggregate reduction of the
liability for uncertain tax positions concerning research and development
activities for fiscal years 2002 through 2008.  As a result of the IRS
settlement and associated liability adjustment, the Company recognized a tax
benefit, which increased net income by approximately $1,225,000 for fiscal
2009.  Further, the Company believes that it is reasonably possible
that within the next twelve months the California Franchise Tax Board
examination of the income tax credit claimed for qualified research and
development activities on the Company’s state of California filings for fiscal
years 2001 through 2005 will be settled.  Accordingly, the Company
reclassified the related liability for unrecognized tax benefits from other
long-term liabilities to accrued expenses and other current liabilities in the
Company’s Condensed Consolidated Balance Sheets.  In addition, the
Company reclassified the $554,000 of income tax refund receivables for the state
of California filings from other assets to prepaid expenses and other current
assets in the Company’s Condensed Consolidated Balance Sheets.





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
accompanying consolidated financial statements.  Generally, the
Company is no longer subject to U.S. federal or state examinations by tax
authorities for




64
 Table of Contents




fiscal
years prior to 2005.  The Company’s state of California filings for
fiscal years 2001 through 2005 are currently under examination by the California
Franchise Tax Board, respectively, who are reviewing the income tax credit
claimed by the Company for qualified research and development activities
incurred during those years.





The total amount of unrecognized tax
benefits can change due to audit settlements, tax examination activities, lapse
of applicable 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.





During the second quarter of fiscal
2009, the Company filed an application with the IRS for an accounting
methodology change that does not require the IRS’ advanced
approval.  As this change removes the uncertainty surrounding certain
tax positions that was related only to the timing of such tax benefits, the
Company released the related liability, including interest, and deferred tax
asset upon filing the application, which did not have a material effect on net
income for the fiscal year 2009.





In December 2006, Section 41 of the
Internal Revenue Code, “Credit for Increasing Research Activities,” was
retroactively extended for two years to cover the period from January 1, 2006 to
December 31, 2007.  As a result, the Company recognized an income tax
credit for qualified research and development activities in fiscal 2007 for the
full fiscal 2006 year.  The tax credit, net of expenses, increased
fiscal 2007 net income by approximately $.5 million.





7.    FAIR
VALUE MEASUREMENTS





The Company adopted new guidance issued
by the FASB regarding fair value measurements effective November 1, 2008 for all
financial assets and liabilities and nonfinancial assets and liabilities that
are recognized or disclosed at fair value on a recurring basis.  The
guidance defines fair value as the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market
participants at the measurement date.  The guidance also establishes a
three-level fair value hierarchy that prioritizes the inputs to valuation
techniques used to measure fair value.  An asset or liability’s level
is based on the lowest level of input that is significant to the fair value
measurement.  The guidance requires that assets and liabilities
carried at fair value be classified and disclosed in one of the following three
categories:





Level
      1 —
            Quoted
      prices in active markets for identical assets or
    liabilities;


Level
      2 —
              Inputs,
      other than quoted prices included within Level 1, that are observable for
      the asset
      or liability either directly or indirectly;
  or


Level
      3 —
              Unobservable
      inputs for the asset or liability where there is little or no market
      data,requiring
      management to develop its own
assumptions.




65
 Table of Contents




The following table sets forth by level
within the fair value hierarchy, the Company’s financial assets and liabilities
and nonfinancial assets and liabilities that were measured at fair value on a
recurring basis as of October 31, 2009:





Level 1
                
                
                Level 2
                
                
                Level 3
                
                
                TotalAssets:Deferred
      compensation plans:Corporate
      owned life insurance
                
                $
                —
                
                
                $
                15,687,000
                
                
                $
                —
                
                
                $
                15,687,000Mutual
      funds
                
                
                2,776,000
                
                
                
                —
                
                
                
                —
                
                
                
                2,776,000Equity
      securities
                
                
                1,057,000
                
                
                
                —
                
                
                
                —
                
                
                
                1,057,000Other
                
                
                1,000
                
                
                
                243,000
                
                
                
                —
                
                
                
                244,000Total
                
                $
                3,834,000
                
                
                $
                15,930,000
                
                
                $
                —
                
                
                $
                19,764,000Liabilities
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —





The Company maintains two non-qualified
deferred compensation plans.  The assets of the HEICO Corporation
Leadership Compensation Plan (the “LCP”) principally 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.  Certain other assets of the LCP represent
investments in publicly-traded mutual funds and equity securities and are
classified within Level 1.  The assets of the Company’s other deferred
compensation plan are principally invested in publicly-traded mutual funds and
equity securities and a life insurance policy, and the fair values of this
plan’s assets are classified within Level 1 and Level 2,
respectively.  The assets of both plans are held within irrevocable
trusts and classified within other assets in the Company’s Consolidated Balance
Sheets.  The related liabilities of the two deferred compensation
plans are included within other long-term liabilities in the Company’s
Consolidated Balance Sheets and have an aggregate value of $19,505,000 as of
October 31, 2009.





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”).  Pursuant 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.  Absent either of the
aforementioned events transpiring, the Rights will expire as of the close of
business on November 2, 2013.





The Rights have certain anti-takeover
effects and, therefore, will cause substantial dilution to a person or group who
attempts to acquire the Company on terms not approved by the Company’s Board of
Directors or who acquires 15% or more of the outstanding common stock without
approval of the Company’s Board of Directors.  The Rights should not
interfere with any merger or other business combination approved by the Board
since they may be 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 has obtained
beneficial ownership of 15% or more of the outstanding common stock or until a
person commences or announces an intention




66
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to
commence a tender offer for 15% or more of the outstanding common
stock.  The 2003 Plan also contains a provision to help ensure a
potential acquirer pays all shareholders a fair price for the
Company.





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.





Share
Repurchases





In accordance with the Company’s share
repurchase program, 193,736 shares of Class A Common Stock were repurchased at a
total cost of $3.9 million and 184,500 shares of Common Stock were repurchased
at a total cost of $4.2 million during the second quarter of fiscal
2009.





In March 2009, the Company’s Board of
Directors approved an increase in the Company’s share repurchase program by an
aggregate 1,000,000 shares of either or both Class A Common Stock and Common
Stock, bringing the total authorized for future purchase to 1,024,742
shares.





The
Company did not repurchase any shares of its common stock in fiscal 2008 or
2007.





9.    STOCK
OPTIONS





The Company currently has two stock
option plans, the 2002 Stock Option Plan (“2002 Plan”) and the Non-Qualified
Stock Option Plan, under which stock options may be granted.  The
Company’s 1993 Stock Option Plan (“1993 Plan”) terminated in March 2003 on the
tenth anniversary of its effective date.  No options may be granted
under the 1993 Plan after such termination date; however, options outstanding as
of the termination date may be exercised pursuant to their terms.  In
addition, the Company granted stock options in fiscal 2002 to a former
shareholder of an acquired business pursuant to an employment agreement entered
into in connection with the acquisition in fiscal 1999.  A total of
3,189,126 shares of the Company’s stock are reserved for issuance to employees,
directors, officers and consultants as of October 31, 2009, including 1,863,062
shares currently under option and 1,326,064 shares available for future
grants.  Options issued under the 2002 Plan may be designated as
incentive stock options or non-qualified stock options.  Incentive
stock options are granted with an exercise price of not less than 100% of the
fair market value of the Company’s common stock as of date of grant (110%
thereof in certain cases) and are exercisable in percentages specified as of the
date of grant over a period up to ten years.  Only employees are
eligible to receive incentive stock options.  Non-qualified stock
options under the 2002 Plan may be immediately exercisable.  In March
2008, the Company’s shareholders approved two amendments to the 2002 Plan, which
principally increased the number of shares available for issuance under the plan
and now requires options be granted with an exercise price of no less than fair
market value of the Company’s common stock as of the date of the
grant.  The options granted pursuant to the 2002 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.  Options granted under the Non-Qualified Stock
Option Plan may be granted with an exercise price of no less than the fair
market value of the Company’s common stock as of the date of grant and are
generally exercisable in four equal annual installments commencing one year from
the date




67
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of
grant.  The stock options granted to a former shareholder of an
acquired business were fully vested and transferable as of the grant date and
expire ten years from the date of grant.  The exercise price of such
options was the fair market value as of the date of grant.  Options
under all stock option plans expire no later than ten years after the date of
grant, unless extended by the Stock Option Plan Committee or the Board of
Directors.





Information concerning stock option
activity for each of the three fiscal years ended October 31 is as
follows:





Shares
                      
                      
                      Shares Under OptionAvailable
                      
                      
                      
                      
                      
                      Weighted AverageForGrant
                      
                      
                      Shares
                      
                      
                      Exercise PriceOutstanding
      as of October 31, 2006
                      
                      
                      162,683
                      
                      
                      
                      2,734,018
                      
                      
                      $
                      10.16Cancelled
                      
                      
                      221
                      
                      
                      
                      (16,787
                      )
                      
                      $
                      13.11Exercised
                      
                      
                      —
                      
                      
                      
                      (841,901
                      )
                      
                      $
                      10.94Outstanding
      as of October 31, 2007
                      
                      
                      162,904
                      
                      
                      
                      1,875,330
                      
                      
                      $
                      9.79Shares
      approved by the Shareholders for the 2002 Stock Option
Plan
                      
                      
                      1,500,000
                      
                      
                      
                      —
                      
                      
                      $
                      —Cancelled
                      
                      
                      660
                      
                      
                      
                      (710
                      )
                      
                      $
                      6.66Exercised
                      
                      
                      —
                      
                      
                      
                      (250,878
                      )
                      
                      $
                      9.56Outstanding
      as of October 31, 2008
                      
                      
                      1,663,564
                      
                      
                      
                      1,623,742
                      
                      
                      $
                      9.83Granted
                      
                      
                      (337,500
                      )
                      
                      
                      337,500
                      
                      
                      $
                      36.45Exercised
                      
                      
                      —
                      
                      
                      
                      (98,180
                      )
                      
                      $
                      12.29Outstanding
      as of October 31, 2009
                      
                      
                      1,326,064
                      
                      
                      
                      1,863,062
                      
                      
                      $
                      14.52





Information concerning stock options
outstanding and stock options exercisable by class of common stock as of October
31, 2009 is as follows:





Options OutstandingWeighted
                                      
                                      Weighted Average
                                      
                                      AggregateNumber
                                      
                                      
                                      Average
                                      
                                      Remaining Contractual
                                      
                                      IntrinsicOutstanding
                                      
                                      
                                      Exercise Price
                                      
                                      Life (Years)
                                      
                                      ValueCommon
      Stock
                                      
                                      
                                      1,131,182
                                      
                                      
                                      $
                                      15.76
                                      
                                      3.5
                                      
                                      $
                                      25,488,000Class
      A Common Stock
                                      
                                      
                                      731,880
                                      
                                      
                                      $
                                      12.62
                                      
                                      3.6
                                      
                                      
                                      13,549,0001,863,062
                                      
                                      
                                      $
                                      14.52
                                      
                                      3.6
                                      
                                      $
                                      39,037,000




Options ExercisableWeighted
                                    
                                    Weighted Average
                                    
                                    AggregateNumber
                                    
                                    
                                    Average
                                    
                                    Remaining Contractual
                                    
                                    IntrinsicExercisable
                                    
                                    
                                    Exercise Price
                                    
                                    Life (Years)
                                    
                                    ValueCommon
      Stock
                                    
                                    
                                    931,182
                                    
                                    
                                    $
                                    10.66
                                    
                                    2.2
                                    
                                    $
                                    25,488,000Class
      A Common Stock
                                    
                                    
                                    594,180
                                    
                                    
                                    $
                                    8.12
                                    
                                    2.2
                                    
                                    
                                    13,511,0001,525,362
                                    
                                    
                                    $
                                    9.67
                                    
                                    2.2
                                    
                                    $
                                    38,999,000




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Information concerning stock options
exercised is as follows:




For
      the year ended October 31,2009
                          
                          
                          2008
                          
                          
                          2007Cash
      proceeds from stock option exercises
                          
                          $
                          1,207,000
                          
                          
                          $
                          2,398,000
                          
                          
                          $
                          6,875,000Tax
      benefit realized from stock option exercises
                          
                          
                          1,890,000
                          
                          
                          
                          6,248,000
                          
                          
                          
                          6,873,000Intrinsic
      value of stock option exercises
                          
                          
                          1,586,000
                          
                          
                          
                          7,854,000
                          
                          
                          
                          20,900,000


The Company’s net income for the fiscal
years ended October 31, 2009, 2008 and 2007 includes compensation expense of
$181,000, $142,000 and $658,000, respectively, and an income tax benefit of
$64,000, $43,000 and $165,000, 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, 2009, there was $5,882,000 of pre-tax unrecognized compensation expense
related to nonvested stock options, which is expected to be recognized over a
weighted average period of approximately 4.9 years.  The total fair
value of stock options that vested in 2009, 2008 and 2007 was $14,000, $408,000
and $795,000, respectively.





For the fiscal years ended October 31,
2009, 2008 and 2007, the excess tax benefit resulting from tax deductions in
excess of the cumulative compensation cost recognized for stock options
exercised was $1,573,000, $4,324,000 and $5,262,000, respectively, and is
presented as a financing activity in the Consolidated Statements of Cash
Flows.





The weighted-average fair value of
stock options granted during fiscal 2009 was $20.99 per share for Common Stock
and $13.45 per share for Class A Common Stock.  The Company did not
grant any stock options in fiscal 2008 or 2007.  If there were a
change in control of the Company, 337,500 of the unvested options outstanding
would become immediately exercisable.





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 year ended
October 31, 2009:





Class
      ACommon
                  
                  
                  CommonStock
                  
                  
                  StockExpected
      stock price volatility
                  
                  
                  44.13
                  %
                  
                  
                  39.94
                  %Risk-free
      interest rate
                  
                  
                  3.22
                  %
                  
                  
                  2.80
                  %Dividend
      yield
                  
                  
                  .28
                  %
                  
                  
                  .33
                  %Expected
      option life (years)
                  
                  
                  9
                  
                  
                  
                  6





10.   RETIREMENT
PLANS





The Company has a qualified defined
contribution retirement plan (the “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 Plan in the form of the
Company’s common stock or cash, as determined by the




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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 market value of the shares as of
the date of contribution.  The Plan also provides that the Company may
contribute to the Plan additional amounts in its common stock or cash at the
discretion of the Board of Directors.  Employee contributions can not
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 Plan charged
to income in fiscal 2009, 2008 and 2007 totaled $40,000, $230,000 and $164,000,
respectively.  Company contributions are made with the use of
forfeited shares within the Plan.  As of October 31, 2009, the Plan
held approximately 64,000 forfeited shares of Common Stock and 95,000 forfeited
shares of Class A Common Stock, which are available to make future Company
contributions.





In 1991, the Company established a
Directors Retirement Plan covering its then current directors.  The
net assets of this plan as of October 31, 2009, 2008 and 2007 were not material
to the financial position of the Company.  During fiscal 2009, 2008
and 2007, $27,000, $23,000 and $20,000, respectively, were expensed for this
plan.





11.   RESEARCH
AND DEVELOPMENT EXPENSES





Cost of sales amounts in fiscal 2009,
2008 and 2007 include approximately $19.7 million, $18.4 million and $16.5
million, respectively, of new product research and development
expenses.





12.   NET
INCOME PER SHARE





The computation of basic and diluted
net income per share is as follows:





For the year ended October 31,2009
                  
                  
                  2008
                  
                  
                  2007Numerator:Net
      income
                  
                  $
                  44,626,000
                  
                  
                  $
                  48,511,000
                  
                  
                  $
                  39,005,000Denominator:Weighted
      average common shares outstanding - basic
                  
                  
                  26,204,799
                  
                  
                  
                  26,309,139
                  
                  
                  
                  25,715,899Effect
      of dilutive stock options
                  
                  
                  819,232
                  
                  
                  
                  934,217
                  
                  
                  
                  1,215,149Weighted
      average common shares outstanding - diluted
                  
                  
                  27,024,031
                  
                  
                  
                  27,243,356
                  
                  
                  
                  26,931,048Net
      income per share - basic
                  
                  $
                  1.70
                  
                  
                  $
                  1.84
                  
                  
                  $
                  1.52Net
      income per share - diluted
                  
                  $
                  1.65
                  
                  
                  $
                  1.78
                  
                  
                  $
                  1.45Anti-dilutive
      stock options excluded
                  
                  
                  86,291
                  
                  
                  
                  ―
                  
                  
                  
                  ―





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13. QUARTERLY
FINANCIAL INFORMATION (UNAUDITED)





First
                  
                  
                  Second
                  
                  
                  Third
                  
                  
                  FourthQuarter
                  
                  
                  Quarter
                  
                  
                  Quarter
                  
                  
                  QuarterNet sales:2009
                  
                  $
                  130,437,000
                  
                  
                  $
                  130,166,000
                  
                  
                  $
                  134,086,000
                  
                  
                  $
                  143,607,0002008
                  
                  
                  134,287,000
                  
                  
                  
                  144,039,000
                  
                  
                  
                  147,305,000
                  
                  
                  
                  156,716,000Gross profit:2009
                  
                  $
                  43,904,000
                  
                  
                  $
                  42,518,000
                  
                  
                  $
                  45,811,000
                  
                  
                  $
                  48,778,0002008
                  
                  
                  46,829,000
                  
                  
                  
                  52,356,000
                  
                  
                  
                  53,851,000
                  
                  
                  
                  57,459,000Net income:2009
                  
                  $
                  11,317,000
                  
                  
                  $
                  10,541,000
                  
                  
                  $
                  11,132,000
                  
                  
                  $
                  11,636,0002008
                  
                  
                  10,086,000
                  
                  
                  
                  11,948,000
                  
                  
                  
                  12,827,000
                  
                  
                  
                  13,650,000Net income pershare:Basic:2009
                  
                  $
                  .43
                  
                  
                  $
                  .40
                  
                  
                  $
                  .43
                  
                  
                  $
                  .452008
                  
                  
                  .39
                  
                  
                  
                  .45
                  
                  
                  
                  .49
                  
                  
                  
                  .52Diluted:2009
                  
                  $
                  .42
                  
                  
                  $
                  .39
                  
                  
                  $
                  .41
                  
                  
                  $
                  .432008
                  
                  
                  .37
                  
                  
                  
                  .44
                  
                  
                  
                  .47
                  
                  
                  
                  .50





During the first and second quarters of
fiscal 2009, the Company reached 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 by approximately $1,225,000, or $.05 per diluted
share.





During the fourth quarter of fiscal
2008, the Company recorded impairment losses related to the write-down of
certain intangible assets to their estimated fair values, which decreased net
income by $1,140,000, or $.04 per diluted share, in aggregate.





Due to changes in the average number of
common shares outstanding, net income per share for the full fiscal year may not
equal the sum of the four individual quarters.





14.   OPERATING
SEGMENTS





The Company has two operating
segments:  the Flight Support Group (“FSG”) consisting of HEICO
Aerospace and its subsidiaries and the Electronic Technologies Group (“ETG”),
consistingof HEICO
Electronic and its subsidiaries.  The Flight Support Group designs,
manufactures, repairs 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.  The Electronic Technologies Group
designs and manufactures electronic, microwave, and electro-optical equipment
and components, high-speed interface products, high voltage interconnection
devices, high voltage advanced power electronics products, power conversion
products and underwater locator beacons primarily for the aviation, defense,
space, medical, telecommunication and electronic 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.




71
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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, of the Notes to Consolidated Financial
Statements.  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 fiscal years ended
October 31 is as follows:





Other,PrimarilyCorporateand
                      
                      
                      ConsolidatedFSG
                      
                      
                      ETG
                      
                      
                      Intersegment
                      
                      
                      TotalsFor the year ended October 31,
      2009:Net
      sales
                      
                      $
                      395,423,000
                      
                      
                      $
                      143,372,000
                      
                      
                      $
                      (499,000
                      )
                      
                      $
                      538,296,000Depreciation
      and amortization
                      
                      
                      9,801,000
                      
                      
                      
                      4,728,000
                      
                      
                      
                      438,000
                      
                      
                      
                      14,967,000Operating
      income
                      
                      
                      60,003,000
                      
                      
                      
                      39,981,000
                      
                      
                      
                      (11,729,000
                      )
                      
                      
                      88,255,000Capital
      expenditures
                      
                      
                      8,518,000
                      
                      
                      
                      1,670,000
                      
                      
                      
                      65,000
                      
                      
                      
                      10,253,000Total
      assets
                      
                      
                      414,030,000
                      
                      
                      
                      285,602,000
                      
                      
                      
                      33,278,000
                      
                      
                      
                      732,910,000For the year ended October 31,
      2008:Net
      sales
                      
                      $
                      436,810,000
                      
                      
                      $
                      146,044,000
                      
                      
                      $
                      (507,000
                      )
                      
                      $
                      582,347,000Depreciation
      and amortization
                      
                      
                      9,339,000
                      
                      
                      
                      5,238,000
                      
                      
                      
                      475,000
                      
                      
                      
                      15,052,000Operating
      income
                      
                      
                      81,184,000
                      
                      
                      
                      38,775,000
                      
                      
                      
                      (14,171,000
                      )
                      
                      
                      105,788,000Capital
      expenditures
                      
                      
                      10,735,000
                      
                      
                      
                      2,093,000
                      
                      
                      
                      627,000
                      
                      
                      
                      13,455,000Total
      assets
                      
                      
                      418,079,000
                      
                      
                      
                      220,888,000
                      
                      
                      
                      37,575,000
                      
                      
                      
                      676,542,000For the year ended October 31,
      2007:Net
      sales
                      
                      $
                      383,911,000
                      
                      
                      $
                      124,035,000
                      
                      
                      $
                      (22,000
                      )
                      
                      $
                      507,924,000Depreciation
      and amortization
                      
                      
                      8,047,000
                      
                      
                      
                      3,786,000
                      
                      
                      
                      334,000
                      
                      
                      
                      12,167,000Operating
      income
                      
                      
                      67,408,000
                      
                      
                      
                      33,870,000
                      
                      
                      
                      (15,264,000
                      )
                      
                      
                      86,014,000Capital
      expenditures
                      
                      
                      10,146,000
                      
                      
                      
                      2,300,000
                      
                      
                      
                      440,000
                      
                      
                      
                      12,886,000Total
      assets
                      
                      
                      379,433,000
                      
                      
                      
                      230,448,000
                      
                      
                      
                      21,421,000
                      
                      
                      
                      631,302,000





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.




72
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The Company markets its products and
services in approximately 100 countries.  Other than in the United
States, the Company does not conduct business in any other country in which its
sales in that country exceed 10% of consolidated sales.  Sales are
attributed to countries based on the location of customers.  The
composition of the Company’s sales to customers between those in the United
States and those in other locations for each of the three fiscal years ended
October 31 as follows:





For the year ended October
    31,2009
                        
                        
                        2008
                        
                        
                        2007United
      States
                        
                        $
                        367,736,000
                        
                        
                        $
                        400,447,000
                        
                        
                        $
                        365,588,000Other
                        
                        
                        170,560,000
                        
                        
                        
                        181,900,000
                        
                        
                        
                        142,336,000Total
                        
                        $
                        538,296,000
                        
                        
                        $
                        582,347,000
                        
                        
                        $
                        507,924,000





15.   COMMITMENTS
AND CONTINGENCIES





Lease
Commitments





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 for operating
leases having initial or remaining non-cancelable terms in excess of one year
are as follows:





For
      the year ending October 31,2010
                      
                      $
                      6,012,0002011
                      
                      
                      5,120,0002012
                      
                      
                      4,484,0002013
                      
                      
                      3,466,0002014
                      
                      
                      2,021,000Thereafter
                      
                      
                      7,085,000Total
      minimum lease commitments
                      
                      $
                      28,188,000





Total rent expense charged to
operations for operating leases in fiscal 2009, 2008 and 2007 amounted to
$6,274,000, $6,074,000 and $4,221,000, respectively.





Guarantees





The Company has arranged for a standby
letter of credit for $1.5 million, which is supported by the Company’s revolving
credit facility, to meet the security requirement of its insurance company for
potential workers’ compensation claims.  As of October 31, 2009, one
of the Company’s subsidiaries has guaranteed its performance related to a
customer contract through a letter of credit for $.4 million, expiring May 2010,
which is supported by the Company’s revolving credit facility.  The
subsidiary is also a beneficiary of a letter of credit related to the same
contract.




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 Table of Contents


Product
Warranty





Changes in the Company’s product
warranty liability for fiscal 2009 and 2008 are as follows:





Balance
      as of October 31, 2007
                    
                    $
                    1,181,000Accruals
      for warranties
                    
                    
                    1,201,000Warranty
      claims settled
                    
                    
                    (1,711,000
                    )Balance
      as of October 31, 2008
                    
                    
                    671,000Acquired
      warranty liabilities
                    
                    
                    13,000Accruals
      for warranties
                    
                    
                    1,566,000Warranty
      claims settled
                    
                    
                    (1,228,000
                    )Balance
      as of October 31, 2009
                    
                    $
                    1,022,000





Acquisitions





Put/Call
Rights





As part of the agreement to acquire an
80% interest in a subsidiary by the ETG in fiscal 2004, the minority interest
holders currently have the right to cause the Company to purchase their
interests over a five-year period and the Company has the right to purchase the
minority 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, certain minority interest holders exercised their option during
fiscal 2007 to cause the Company to purchase their aggregate 3% interest over a
four-year period ending in fiscal 2010.  Pursuant to this same
purchase agreement, certain other minority interest holders exercised their
option during fiscal 2009 to cause the Company to purchase their aggregate 10.5%
interest over a four-year period ending in fiscal 2012.  Accordingly,
the Company increased its ownership interest in the subsidiary by an aggregate
4.9% (or one-fourth of such applicable minority interest holders’ aggregate
interest in fiscal years 2007 through 2009) to 89.9% effective April
2009.  Further, the remaining minority interest holders currently have
the right to cause the Company to purchase their aggregate 1.5% interest over a
four-year period.





Pursuant to the purchase agreement
related to the acquisition of a 51% interest in a subsidiary by the FSG in
fiscal 2006, the minority interest holders exercised their option during fiscal
2008 to cause the Company to purchase an aggregate 28% interest over a four-year
period ending in fiscal 2011.  Accordingly, the Company increased its
ownership interest in the subsidiary by 7% (or one-fourth of such minority
interest holders’ aggregate interest) to 58% effective April
2008.  The Company and the minority interest holders agreed to
accelerate the purchase of 14% of these equity interests (7% from April 2009 and
7% from April 2010), which increased the Company’s ownership interest to 72%
effective December 2008.  The remaining 7% interest is scheduled to be
purchased in April 2011.  Further, the Company has the right to
purchase the remaining 21% of the equity interests of the subsidiary over a
three-year period beginning in fiscal 2012, or sooner under certain conditions,
and the minority interest holders have the right to cause the Company to
purchase the same equity interests over the same period.





As part of the agreement to acquire an
80% interest in a subsidiary by the FSG in fiscal 2006, the Company has the
right to purchase the minority interests over a four-year period beginning in
fiscal 2014, or sooner under certain conditions, and the minority interest
holders have the right to cause the Company to purchase the same equity
interests over the same period.




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As part of an agreement to acquire an
80% interest in a subsidiary by the FSG in fiscal 2008, the Company has the
right to purchase the minority interests over a five-year period beginning in
fiscal 2014, or sooner under certain conditions, and the minority interest
holders have the right to cause the Company to purchase the same equity
interests over the same period.





As part of an agreement to acquire an
82.5% interest in a subsidiary by the ETG in fiscal 2009, the Company has the
right to purchase the minority interests beginning in fiscal 2014, or sooner
under certain conditions, and the minority interest holder has the right to
cause the Company to purchase the same equity interests over the same
period.





The above referenced rights of the
minority interest holders (“Put Rights”) may be exercised on varying dates
causing the Company to purchase their equity interests beginning in fiscal 2010
through fiscal 2018.  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 the minority interests (“Redemption
Amount”) be at fair value or at a formula that management intended to reasonably
approximate fair value, as defined in the applicable agreements based solely on
a multiple of future earnings over a measurement period.  As described
in Note 1, Summary of Significant Accounting Policies, the Company is required
to adopt new guidance regarding the accounting for its Put Rights (known as
“redeemable noncontrolling interests”) effective as of the beginning of fiscal
2010.  Effective November 1, 2009, the Company will adjust its
redeemable noncontrolling interests to the higher of their carrying cost or
management’s estimate of the Redemption Amount with a corresponding charge to
retained earnings and classify such interests outside of permanent equity in its
Consolidated Balance Sheets.  Under this guidance, subsequent
adjustments to the carrying amount of redeemable noncontrolling interests (the
Redemption Amount) based on fair value will be recorded to retained earnings and
have no effect on net income per diluted share.  Subsequent
adjustments to the carrying amount of redeemable noncontrolling interests based
solely on a multiple of future earnings that reflect a redemption in excess of
fair value will be recorded to retained earnings and will be reflected in net
income per diluted share under the two-class method.  As of October
31, 2009, management’s estimate of the aggregate Redemption Amount of all Put
Rights that the Company would be required to pay is approximately $57
million.  The actual Redemption Amount will likely be
different.  The portion of the estimated Redemption Amount as of
October 31, 2009 redeemable at fair value is $25 million and the portion
redeemable based solely on a multiple of future earnings is $32
million.





Additional
Contingent Purchase Consideration





As part of the agreement to purchase a
subsidiary by the ETG in fiscal 2005, the Company may be obligated to pay
additional purchase consideration currently estimated to be $.9 million should
the subsidiary meet certain product line-related earnings objectives during
calendar year 2009.




As part of the agreement to acquire a
subsidiary by the ETG in fiscal 2007, the Company may be obligated to pay
additional purchase consideration up to 73 million Canadian dollars in
aggregate, which translates to approximately $68 million U.S. dollars based on
the October 31, 2009 exchange rate, should the subsidiary meet certain earnings
objectives through fiscal 2012.





As part of the agreement to acquire a
subsidiary by the FSG in fiscal 2008, the Company may be obligated to pay
additional purchase consideration of up to approximately $.4 million should the
subsidiary meet certain earnings objectives during fiscal 2010, 2011 and
2012.





As part of the agreement to acquire a
subsidiary by the ETG in fiscal 2009, the Company may be obligated to pay
additional purchase consideration of up to approximately $1.3 million in fiscal
2010,




75
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$1.3
million in fiscal 2011 and $10.1 million in fiscal 2012 should the subsidiary
meet certain earnings objectives during each of the first three years following
the acquisition.





As part of the agreement to acquire a
subsidiary by the ETG in fiscal 2009, the Company may be obligated to pay
additional purchase consideration of up to approximately $11.7 million should
the subsidiary meet certain earnings objectives during the first two years
following the acquisition.





The above referenced additional
contingent purchase consideration will be accrued when the earnings objectives
are met.  Such additional contingent consideration is based on a
multiple of earnings above a threshold (subject to a cap in certain cases) and
is not contingent upon the former shareholders of the acquired entities
remaining employed by the Company or providing future services to the
Company.  Accordingly, such consideration will be recorded as an
additional cost of the respective acquired entity when paid.  The
aggregate maximum amount of such contingent purchase consideration that the
Company could be required to pay is approximately $94 million payable over
future periods beginning in fiscal 2010 through fiscal 2013.  Assuming
the subsidiaries perform over their respective future measurement periods at the
same earnings levels they have performed in the comparable historical
measurement periods, the aggregate amount of such contingent purchase
consideration that the Company would be required to pay is approximately $12
million.  The actual contingent purchase consideration will likely be
different.





Litigation





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.





16.  
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION





Cash paid for interest was $617,000,
$2,443,000 and $3,287,000 in fiscal 2009, 2008 and 2007,
respectively.  Cash paid for income taxes was $30,209,000, $26,669,000
and $16,572,000 in fiscal 2009, 2008 and 2007, respectively.  Cash
received from income tax refunds in fiscal 2009, 2008 and 2007 was $5,398,000,
$29,000 and $243,000 respectively.




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Cash investing activities related to
acquisitions, including contingent purchase price payments to previous owners of
acquired businesses is as follows:





For the year ended October 31,2009
                  
                  
                  2008
                  
                  
                  2007Fair
      value of assets acquired:Liabilities
      assumed
                  
                  $
                  3,881,000
                  
                  
                  $
                  1,581,000
                  
                  
                  $
                  7,460,000Minority
      interests in consolidated subsidiaries
                  
                  
                  135,000
                  
                  
                  
                  (412,000
                  )
                  
                  
                  (412,000
                  )Less:Goodwill
                  
                  
                  37,367,000
                  
                  
                  
                  9,685,000
                  
                  
                  
                  22,296,000Identifiable
      intangible assets
                  
                  
                  21,562,000
                  
                  
                  
                  3,991,000
                  
                  
                  
                  15,902,000Accounts
      receivable, net
                  
                  
                  4,720,000
                  
                  
                  
                  2,045,000
                  
                  
                  
                  2,569,000Inventories,
      net
                  
                  
                  4,096,000
                  
                  
                  
                  1,252,000
                  
                  
                  
                  3,539,000Accrued
      additional purchase consideration
                  
                  
                  3,427,000
                  
                  
                  
                  11,736,000
                  
                  
                  
                  7,180,000Property,
      plant and equipment
                  
                  
                  553,000
                  
                  
                  
                  1,394,000
                  
                  
                  
                  2,142,000Other
      assets
                  
                  
                  3,357,000
                  
                  
                  
                  104,000
                  
                  
                  
                  1,787,000Acquisitions
      and related costs, net of cash acquired
                  
                  $
                  (71,066,000
                  )
                  
                  $
                  (29,038,000
                  )
                  
                  $
                  (48,367,000
                  )





In connection with certain
acquisitions, the Company accrued additional purchase consideration aggregating
$1.8 million, $3.4 million and $11.7 million in fiscal 2009, 2008 and 2007,
respectively, which was allocated to goodwill (see Note 2, Acquisitions, and
Note 4, Goodwill and Other Intangible Assets).





There were no significant capital lease
or other equipment financing activities during fiscal 2009, 2008 and
2007.





Item 9.
            CHANGES IN AND DISAGREEMENTS
      WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
    DISCLOSURE





Not applicable.





Item 9A.
            CONTROLS AND
      PROCEDURES





Evaluation
of Disclosure Controls and Procedures





The Company’s management, with the
participation of the Company’s Chief Executive Officer and its Chief Financial
Officer, evaluated the effectiveness of the Company’s disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the
end of the period covered by this annual report.  Based upon that
evaluation, the Company’s Chief Executive Officer and its Chief Financial
Officer concluded that the Company’s disclosure controls and procedures are
effective as of the end of the period covered by this annual
report.





Management’s
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




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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.Based on its assessment, management believes that
the Company’s internal control over financial reporting is effective as of
October 31, 2009.





Deloitte & Touche LLP, the
independent registered public accounting firm that audited the Company’s
consolidated financial statements included in this Annual Report on Form 10-K,
has issued an attestation report on the Company’s internal control over
financial reporting as of October 31, 2009.  A copy of the report is
included in Item 8, Financial
Statements and Supplementary Data, of this Annual Report on Form
10-K.





Changes
in Internal Control Over Financial Reporting





The Company is continuously seeking to
improve the efficiency and effectiveness of its operations and of its internal
controls.  This results in refinements to processes throughout the
Company.  However, there have been no changes in the Company’s
internal control over financial reporting that occurred during the Company’s
most recent fiscal quarter that have materially affected, or are reasonably
likely to materially affect, the Company’s internal control over financial
reporting.





Item 9B.
            OTHER
      INFORMATION





Not applicable.




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PART III





Item 10.
            DIRECTORS, EXECUTIVE OFFICERS
      AND CORPORATE GOVERNANCE





Information concerning the Directors of
the Company, including the Finance/Audit Committee of the Board of Directors and
its Finance/Audit Committee Financial Expert, as well as information concerning
compliance with Section 16(a) of the Securities Exchange Act of 1934 is hereby
incorporated by reference to the Company’s definitive proxy statement, which
will be filed with the Securities and Exchange Commission (“Commission”) within
120 days after the close of fiscal 2009.





Information concerning the Executive
Officers of the Company is set forth in Item 1 of Part I hereof under the
caption “Executive Officers of the Registrant.”





The Company has adopted a code of
ethics that applies to its principal executive officer, principal financial
officer, principal accounting officer or controller and persons performing
similar functions.  The code of ethics is located on the Company’s
Internet web site at http://www.heico.com.  Any amendments to or
waivers from a provision of this code of ethics will be posted on the Company’s
web site.





Item 11.
            EXECUTIVE
      COMPENSATION





Information concerning executive
compensation is hereby incorporated by reference to the Company’s definitive
proxy statement, which will be filed with the Commission within 120 days after
the close of fiscal 2009.





Item 12.
              SECURITY OWNERSHIP OF CERTAIN
      BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
      MATTERS





Information concerning security
ownership of certain beneficial owners and management is hereby incorporated by
reference to the Company’s definitive proxy statement, which will be filed with
the Commission within 120 days after the close of fiscal 2009.





Equity compensation plan information is
set forth in Item 5 of Part II hereof under the caption “Equity Compensation
Plan Information.”





Item 13.
              CERTAIN RELATIONSHIPS AND
      RELATED TRANSACTIONS, AND DIRECTOR
  INDEPENDENCE





Information concerning certain
relationships and related transactions and director independence is hereby
incorporated by reference to the Company’s definitive proxy statement, which
will be filed with the Commission within 120 days after the close of fiscal
2009.





Item 14.
            PRINCIPAL ACCOUNTING FEES AND
      SERVICES





Information concerning principal
accounting fees and services is hereby incorporated by reference to the
Company’s definitive proxy statement, which will be filed with the Commission
within 120 days after the close of fiscal 2009.




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PART IV





Item 15.
            EXHIBITS AND FINANCIAL
      STATEMENT SCHEDULES





(a)(1)    
Financial Statements





The following consolidated financial
statements of the Company and subsidiaries are included in Part II, Item
8:


PageReport
      of Independent Registered Public Accounting Firm
                  
                  40Consolidated
      Balance Sheets as of October 31, 2009 and 2008
                  
                  42Consolidated
      Statements of Operations for the years ended October 31, 2009, 2008 and
      2007
                  
                  43Consolidated
      Statements of Shareholders’ Equity and Comprehensive Income for the years
      ended October 31, 2009, 2008 and 2007
                  
                  44Consolidated
      Statements of Cash Flows for the years ended October 31, 2009, 2008 and
      2007
                  
                  45Notes
      to Consolidated Financial Statements
                  
                  46





(a)(2)    
Financial Statement Schedules





The following financial statement
schedule of the Company and subsidiaries is included herein:





· Schedule
II – Valuation and Qualifying Accounts





All other schedules have been omitted
because the required information is not applicable or the information is
included in the consolidated financial statements or notes thereto presented in
Part II, Item 8.





(a)(3)    
Exhibits





Exhibit
                                    
                                    Description2.1
                                    —
                                    Amended
      and Restated Agreement of Merger and Plan of Reorganization, dated as of
      March 22, 1993, by and among HEICO Corporation, HEICO Industries, Corp.
      and New HEICO, Inc. is incorporated by reference to Exhibit 2.1 to the
      Registrant’s Registration Statement on Form S-4 (Registration No.
      33-57624) Amendment No. 1 filed on March 19, 1993.*3.1
                                    —
                                    Articles
      of Incorporation of the Registrant are incorporated by reference to
      Exhibit 3.1 to the Company's Registration Statement on Form S-4
      (Registration No. 33-57624) Amendment No. 1 filed on March 19,
      1993.*3.2
                                    —
                                    Articles
      of Amendment of the Articles of Incorporation of the Registrant, dated
      April 27, 1993, are incorporated by reference to Exhibit 3.2 to the
      Company's Registration Statement on Form 8-B dated April 29,
      1993.*3.3
                                    —
                                    Articles
      of Amendment of the Articles of Incorporation of the Registrant, dated
      November 3, 1993, are incorporated by reference to Exhibit 3.3 to the Form
      10-K for the year ended October 31,
1993.*




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Exhibit
                                            
                                            Description3.4
                                            —
                                            Articles
      of Amendment of the Articles of Incorporation of the Registrant, dated
      March 19, 1998, are incorporated by reference to Exhibit 3.4 to the
      Company’s Registration Statement on Form S-3 (Registration No. 333-48439)
      filed on March 23, 1998.*3.5
                                            —
                                            Articles
      of Amendment of the Articles of Incorporation of the Registrant, dated as
      of November 2, 2003, are incorporated by reference to Exhibit 3.5 to the
      Form 10-K for the year ended October 31, 2003.*3.6
                                            —
                                            Bylaws
      of the Registrant are incorporated by reference to Exhibit 3.1 to the Form
      8-K filed on December 19, 2007.*4.0
                                            —
                                            The
      description and terms of the Preferred Stock Purchase Rights are set forth
      in a Rights Agreement between the Company and SunTrust Bank, N.A., as
      Rights Agent, dated as of November 2, 2003, incorporated by reference to
      Exhibit 4.0 to the Form 8-K dated November 2, 2003.*10.1#
                                            —
                                            HEICO
      Savings and Investment Plan, as amended and restated effective as of
      January 1, 2007 is incorporated by reference to Exhibit 10.1 to the Form
      10-Q for the quarterly period ended January 31, 2008.*10.2#
                                            —
                                            First
      Amendment, effective as of January 1, 2007, to the HEICO Savings and
      Investment Plan, is incorporated by reference to Exhibit 10.2 to the Form
      10-K for the year ended October 31, 2008.*10.3#
                                            —
                                            Second
      Amendment, effective as of January 1, 2009, to the HEICO Savings and
      Investment Plan, is incorporated by reference to Exhibit 10.3 to the Form
      10-K for the year ended October 31, 2008.*10.4#
                                            —
                                            Third
      Amendment, effective as of January 1, 2007, to the HEICO Savings and
      Investment Plan.**10.5#
                                            —
                                            Non-Qualified
      Stock Option Agreement for Directors, Officers and Employees is
      incorporated by reference to Exhibit 10.8 to the Form 10-K for the year
      ended October 31, 1985.*10.6#
                                            —
                                            HEICO
      Corporation 1993 Stock Option Plan, as amended, is incorporated by
      reference to Exhibit 4.7 to the Company’s Registration Statement on Form
      S-8 (Registration No. 333-81789) filed on June 29,
  1999.*10.7#
                                            —
                                            HEICO
      Corporation 2002 Stock Option Plan, effective March 19, 2002, is
      incorporated by reference to Exhibit 10.10 to the Form 10-K for the year
      ended October 31, 2002.*10.8#
                                            —
                                            HEICO
      Corporation Amended and Restated 2002 Stock Option Plan, effective March
      28, 2008, is incorporated by reference to Appendix A to the Form DEF-14A
      filed on February 28, 2008.*10.9#
                                            —
                                            HEICO
      Corporation Directors’ Retirement Plan, as amended, dated as of May 31,
      1991, is incorporated by reference to Exhibit 10.19 to the Form 10-K for
      the year ended October 31,
1992.*




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Exhibit
                        
                        Description10.10#
                        —
                        Key
      Employee Termination Agreement, dated as of April 5, 1988, between HEICO
      Corporation and Thomas S. Irwin is incorporated by reference to Exhibit
      10.20 to the Form 10-K for the year ended October 31,
    1992.*10.11#
                        —
                        HEICO
      Corporation Leadership Compensation Plan, effective October 1, 2006, is
      incorporated by reference to Exhibit 10.1 to the Form 8-K filed on October
      31, 2006.*10.12#
                        —
                        HEICO
      Corporation Leadership Compensation Plan, effective October 1, 2006, as
      Amended and Restated effective January 1, 2009, is incorporated by
      reference to Exhibit 10.1 to the Form 8-K filed on December 16,
      2008.*10.13#
                        —
                        HEICO
      Corporation Leadership Compensation Plan, effective October 1, 2006, as
      Re-Amended and Restated effective January 1, 2009, is incorporated by
      reference to Exhibit 10.1 to the Form 8-K filed on September 17,
      2009.*10.14#
                        —
                        HEICO
      Corporation 2007 Incentive Compensation Plan, effective as of November 1,
      2006, is incorporated by reference to Exhibit 10.1 to the Form 8-K filed
      on March 19, 2007.*10.15
                        —
                        Shareholders
      Agreement, dated October 30, 1997, by and between HEICO Aerospace Holdings
      Corp., HEICO Aerospace Corporation and all of the shareholders of HEICO
      Aerospace Holdings Corp. and Lufthansa Technik AG is incorporated by
      reference toExhibit
      10.32 to Form 10-K/A for the year ended October 31,
  1997.*10.16
                        —
                        Amended
      and Restated Revolving Credit Agreement, dated as of August 4, 2005, among
      HEICO Corporation, as Borrower, the lenders from time to time party
      hereto, and SunTrust Bank, as Administrative Agent; Wachovia Bank,
      National Association as Syndication Agent; and HSBC Bank USA, as
      Documentation Agent, is incorporated by reference to Exhibit 10.1 to the
      Form 8-K filed on August 8, 2005.*10.17
                        —
                        First
      Amendment, effective as of July 14, 2006, to the Amended and Restated
      Revolving Credit Agreement among HEICO Corporation, as a Borrower, the
      lenders from time to time party hereto, and SunTrust Bank, as
      Administrative Agent; Wachovia Bank, National Association as Syndication
      Agent; and HSBC Bank USA, as Documentation Agent, is incorporated by
      reference to Exhibit 10.1 to the Form 10-Q for the quarterly period ended
      July 31, 2006.*10.18
                        —
                        Second
      Amended and Restated Revolving Credit Agreement, dated as of May 27, 2008,
      among HEICO Corporation, as Borrower, the lenders from time to time party
      hereto, Regions Bank and Wells Fargo Bank, National Association, as
      Co-Documentation Agents, JPMorgan Chase Bank, N.A., as Syndication Agent,
      and SunTrust Bank, as Administrative Agent, is incorporated by reference
      to Exhibit 10.1 to the Form 8-K filed on May 30, 2008.*21
                        —
                        Subsidiaries
      of HEICO Corporation.**23
                        —
                        Consent
      of Independent Registered Public Accounting Firm.**31.1
                        —
                        Rule
      13a-14(a)/15d-14(a) Certification of Chief Executive
      Officer.**




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Exhibit
                  
                  Description31.2
                  —
                  Rule
      13a-14(a)/15d-14(a) Certification of Chief Financial
      Officer.**32.1
                  —
                  Section
      1350 Certification of Chief Executive Officer.***32.2
                  —
                  Section
      1350 Certification of Chief Financial
  Officer.***





#
            Management
      contract or compensatory plan or arrangement required to be filed as an
      exhibit.


*
            Previously
      filed.


**
            Filed
      herewith.


***
            Furnished
      herewith.




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HEICO
CORPORATION AND SUBSIDIARIES


SCHEDULE
II – VALUATION AND QUALIFYING ACCOUNTS





For the year ended October 31,2009
                
                
                2008
                
                
                2007Allowance
      for doubtful accounts:Allowance
      as of beginning of year
                
                $
                2,587,000
                
                
                $
                1,712,000
                
                
                $
                2,893,000Additions
      (deductions) charged (credited) to costs and expenses
                
                
                52,000
                
                
                
                872,000
                
                
                
                (75,000
                )Additions
      charged to other accounts (a)
                
                
                26,000
                
                
                
                29,000
                
                
                
                4,000Deductions
      (b)
                
                
                (130,000
                )
                
                
                (26,000
                )
                
                
                (1,110,000
                )Allowance
      as of end of year
                
                $
                2,535,000
                
                
                $
                2,587,000
                
                
                $
                1,712,000





(a)
            Principally
      additions from acquisitions.


(b)
            Principally
      write-offs of uncollectible accounts receivables, net of
      recoveries.





For the year ended October 31,2009
                
                
                2008
                
                
                2007Inventory
      valuation reserves:Reserves
      as of beginning of year
                
                $
                27,186,000
                
                
                $
                27,141,000
                
                
                $
                24,554,000Additions
      charged to costs and expenses
                
                
                7,649,000
                
                
                
                1,808,000
                
                
                
                2,035,000Additions
      charged to other accounts (a)
                
                
                391,000
                
                
                
                731,000
                
                
                
                1,516,000Deductions
      (b)
                
                
                (896,000
                )
                
                
                (2,494,000
                )
                
                
                (964,000
                )Reserves
      as of end of year
                
                $
                34,330,000
                
                
                $
                27,186,000
                
                
                $
                27,141,000





(a)
            Principally
      additions from acquisitions.


(b)
            Principally
      write-offs of slow moving, obsolete or damaged
  inventory.




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SIGNATURES





Pursuant to the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.





HEICO
      CORPORATIONDate:
      December 23, 2009
              By:
              /s/  THOMAS S.
    IRWINThomas
      S. IrwinExecutive
      Vice PresidentAnd
      Chief Financial Officer(Principal
      Financial andAccounting
      Officer)





Pursuant to the requirements of the
Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.





/s/ LAURANS A. MENDELSON
                                          
                                          ChairmanLaurans
      A. Mendelson
                                          
                                          Director
      (Principal Executive Officer)/s/ SAMUEL L. HIGGINBOTTOM
                                          
                                          DirectorSamuel
      L. Higginbottom/s/ MARK H. HILDEBRANDT
                                          
                                          DirectorMark
      H. Hildebrandt/s/ WOLFGANG MAYRHUBER
                                          
                                          DirectorWolfgang
      Mayrhuber/s/ ERIC A. MENDELSON
                                          
                                          DirectorEric
      A. Mendelson/s/ VICTOR H. MENDELSON
                                          
                                          DirectorVictor
      H. MendelsonDirectorAlbert
      Morrison, Jr./s/ MITCHELL I. QUAIN
                                          
                                          DirectorMitchell
      I. Quain/s/ ALAN SCHRIESHEIM
                                          
                                          DirectorAlan
      Schriesheim/s/ FRANK J. SCHWITTER
                                          
                                          DirectorFrank
      J. Schwitter




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EXHIBIT
INDEX





Exhibit
                    
                    Description10.4
                    —
                    Third
      Amendment, effective as of January 1, 2007, to the HEICO Savings and
      Investment Plan.21
                    —
                    Subsidiaries
      of HEICO Corporation.23
                    —
                    Consent
      of Independent Registered Public Accounting Firm.31.1
                    —
                    Rule
      13a-14(a)/15d-14(a) Certification of Chief Executive
    Officer.31.2
                    —
                    Rule
      13a-14(a)/15d-14(a) Certification of Chief Financial
    Officer.32.1
                    —
                    Section
      1350 Certification of Chief Executive Officer.32.2
                    —
                    Section
      1350 Certification of Chief Financial Officer.