SELECTED FINANCIAL STATEMENT INFORMATION

9 Months Ended

Jul. 31, 2020

Selected Financial Statement Information [Abstract]

Selected Financial Statement Information [Text Block]

SELECTED FINANCIAL STATEMENT INFORMATION

Accounts Receivable

(in thousands)	July 31, 2020	October 31, 2019
Accounts receivable	$193,173	$277,992
Less: Allowance for doubtful accounts	(12,039)	(3,666)
Accounts receivable, net	$181,134	$274,326

The $8.4 million increase in the Company’s allowance for doubtful accounts is principally due to potential collection difficulties from certain commercial aviation customers that filed for bankruptcy protection during the third quarter of fiscal 2020 as a result of the financial impact of the Outbreak.

Inventories

(in thousands)	July 31, 2020	October 31, 2019
Finished products	$241,895	$199,880
Work in process	39,777	32,548
Materials, parts, assemblies and supplies	191,432	187,891
Inventories, net of valuation reserves	$473,104	$420,319

Property, Plant and Equipment

(in thousands)	July 31, 2020	October 31, 2019
Land	$6,922	$6,820
Buildings and improvements	122,405	116,997
Machinery, equipment and tooling	264,900	253,127
Construction in progress	9,593	8,382
	403,820	385,326
Less: Accumulated depreciation and amortization	(233,480)	(211,981)
Property, plant and equipment, net	$170,340	$173,345

Accrued Customer Rebates and Credits

The aggregate amount of accrued customer rebates and credits included within accrued expenses and other current liabilities in the accompanying Condensed Consolidated Balance Sheets was $16.6 million as of July 31, 2020 and $18.0 million as of October 31, 2019. The total customer rebates and credits deducted within net sales for the nine months ended July 31, 2020

and 2019 was $4.3 million and $6.5 million, respectively. The total customer rebates and credits deducted within net sales for the three months ended July 31, 2020 and 2019 was $.5 million and $2.9 million, respectively.

Research and Development Expenses

The amount of new product research and development ("R&D") expenses included in cost of sales for the nine and three months ended July 31, 2020 and 2019 is as follows (in thousands):

	Nine months ended July 31,		Three months ended July 31,
	2020	2019	2020	2019
R&D expenses	$48,968	$48,697	$15,113	$16,648

Redeemable Noncontrolling Interests

The holders of equity interests in certain of the Company's subsidiaries have rights ("Put Rights") that may be exercised on varying dates causing the Company to purchase their equity interests through fiscal 2030. The Put Rights, all of which relate either to common shares or membership interests in limited liability companies, provide that the cash consideration to be paid for their equity interests (the "Redemption Amount") be at fair value or a formula that management intended to reasonably approximate fair value based solely on a multiple of future earnings over a measurement period. Management's estimate of the aggregate Redemption Amount of all Put Rights that the Company could be required to pay is as follows (in thousands):

	July 31, 2020	October 31, 2019
Redeemable at fair value	$154,074	$136,611
Redeemable based on a multiple of future earnings	50,065	51,653
Redeemable noncontrolling interests	$204,139	$188,264

As discussed in Note 2, Acquisitions, the Company, through HEICO Flight Support Corp., acquired 70% of the membership interests of Rocky Mountain in June 2020. As part of the operating agreement, the noncontrolling interest holders have the right to cause the Company to purchase their equity interest over a four-year period beginning in fiscal 2027, or sooner under certain conditions, and the Company has the right to purchase the same equity interest over the same period.

As discussed in Note 2, Acquisitions, the Company, through HEICO Electronic, acquired 80.1% of the stock of Quell in December 2019. As part of the shareholders' agreement, the noncontrolling interest holders have the right to cause the Company to purchase their equity interests over a four-year period beginning in fiscal 2025, or sooner under certain conditions, and the Company has the right to purchase the same equity interests over the same period.

During fiscal 2020, the holder of a 20% noncontrolling equity interest in a subsidiary of the FSG that was acquired in fiscal 2015 exercised their option to cause the Company to

purchase one-fourth of their interest. The Company acquired the 5% noncontrolling interest in May 2020 which increased its ownership interest in the subsidiary to approximately 85%.

In May 2020, the Company obtained control of the 22% noncontrolling equity interest in a subsidiary of the ETG that was acquired in fiscal 2012, which increased the Company's ownership interest in the subsidiary to 100%.

During fiscal 2020, the holder of a 17.7% noncontrolling equity interest in a subsidiary of the FSG that was acquired in fiscal 2008 exercised their option to cause the Company to purchase a portion of their noncontrolling interest over a two-year period ending in fiscal 2021. In June 2020, the Company acquired half of such interest, which increased the Company's ownership interest in the subsidiary to 86.2%.

The $7.5 million aggregate Redemption Amount for the redeemable noncontrolling interests acquired in fiscal 2020 was paid using cash provided by operating activities.

Accumulated Other Comprehensive Loss

Changes in the components of accumulated other comprehensive loss for the nine months ended July 31, 2020 are as follows (in thousands):

	Foreign Currency Translation	Defined Benefit Pension Plan	Accumulated Other Comprehensive Loss
Balances as of October 31, 2019	($14,989)	($1,750)	($16,739)
Unrealized gain	12,228	—	12,228
Amortization of unrealized loss	—	60	60
Balances as of July 31, 2020	($2,761)	($1,690)	($4,451)