HEICO CORPHEI
HEICO CORP Income Taxes Disclosure
INCOME TAXES
The components of income before income taxes and noncontrolling interests are as follows (in thousands):
| Year ended October 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Domestic | $814,178 | $596,060 | $479,990 | ||||||||||||||
| Foreign | 79,376 | 81,526 | 75,293 | ||||||||||||||
Income before taxes and noncontrolling interests | $893,554 | $677,586 | $555,283 | ||||||||||||||
The components of the provision for income taxes on income before income taxes and noncontrolling interests are as follows (in thousands):
| Year ended October 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal | $148,908 | $97,164 | $96,492 | ||||||||||||||
| State | 23,114 | 19,195 | 18,225 | ||||||||||||||
| Foreign | 24,543 | 24,143 | 22,714 | ||||||||||||||
| 196,565 | 140,502 | 137,431 | |||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | (38,000) | (17,038) | (19,049) | ||||||||||||||
| State | (7,615) | (2,911) | (4,311) | ||||||||||||||
| Foreign | (2,950) | (2,053) | (3,171) | ||||||||||||||
| (48,565) | (22,002) | (26,531) | |||||||||||||||
| Total income tax expense | $148,000 | $118,500 | $110,900 | ||||||||||||||
A reconciliation of the federal statutory income tax rate to the Company’s effective tax rate is as follows:
| Year ended October 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Federal statutory income tax rate | 21.0 | % | 21.0 | % | 21.0 | % | |||||||||||
State taxes, net of federal income tax benefit | 2.0 | % | 2.5 | % | 2.5 | % | |||||||||||
Tax benefit related to stock option exercises | (3.0 | %) | (2.0 | %) | (1.1 | %) | |||||||||||
| Foreign-derived intangible income deduction | (2.5 | %) | (2.4 | %) | (1.9 | %) | |||||||||||
Research and development tax credits | (1.8 | %) | (2.1 | %) | (1.9 | %) | |||||||||||
| Tax-exempt gains on corporate-owned life insurance policies | (1.2 | %) | (2.3 | %) | (.6 | %) | |||||||||||
Nondeductible compensation | 1.3 | % | 2.2 | % | 1.4 | % | |||||||||||
Other, net | .8 | % | .6 | % | .6 | % | |||||||||||
| Effective tax rate | 16.6 | % | 17.5 | % | 20.0 | % | |||||||||||
The Company's effective tax rate decreased to 16.6% in fiscal 2025, down from 17.5% in fiscal 2024. The decrease in the Company's effective tax rate principally reflects a larger tax benefit from stock option exercises recognized in the first quarter of fiscal 2025. The Company recognized a discrete tax benefit from stock option exercises in the first quarter of fiscal 2025 and 2024 of $27.2 million and $13.6 million, respectively.
The Company's effective tax rate decreased to 17.5% in fiscal 2024, down from 20.0% in fiscal 2023. The decrease in the Company's effective tax rate reflects a larger tax benefit from stock option exercises recognized in the first quarter of fiscal 2024. The Company recognized a discrete tax benefit from stock option exercises in the first quarter of fiscal 2024 and 2023 of $13.6 million and $6.2 million, respectively. Additionally, the decrease in the Company's effective tax rate reflects a larger favorable impact from tax-exempt unrealized gains in the cash surrender values of life insurance policies related to the LCP in fiscal 2024, net of the nondeductible portion of the related gains in the LCP accounts of certain executive officers, as well as increased foreign-derived intangible income, which is subject to a lower tax rate.
On July 4, 2025, the U.S. enacted H.R. 1, commonly referred to as the One Big Beautiful Bill Act (the “Act”), which introduced significant changes to U.S. tax law. Key provisions include the reinstatement of 100% bonus depreciation for qualified property placed in service after January 19, 2025, immediate expensing of domestic R&D expenditures (effective in fiscal 2026 for HEICO), and changes to the methodology for Foreign-Derived Intangible Income (“FDII”) and Global Intangible Low-Tax Income ("GILTI") (effective in fiscal 2027 for HEICO). The Act did not have a significant impact on the Company’s fiscal 2025 consolidated financial statements and the Company will continue to evaluate its potential impact on its future consolidated financial statements.
As a result of the Tax Cuts and Jobs Act, the Company began capitalizing R&D costs beginning in fiscal 2023 and amortizing them over five years for income tax purposes. In accordance with one of the provisions of the Act, the Company expects to immediately expense domestic R&D costs for income tax purposes beginning in fiscal 2026 and will elect to deduct the remaining unamortized domestic R&D costs that were capitalized over a two-year period ending in fiscal 2027.
The Company files income tax returns in the 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, state or foreign examinations by tax authorities for years prior to fiscal 2021. One of the Company's foreign subsidiaries files income tax returns in The Netherlands and Thailand where the statute of limitations is open for its fiscal 2015 returns.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company believes that it is more likely than not that it will
generate sufficient future taxable income to utilize all of its deferred tax assets and has therefore not recorded a valuation allowance on any such asset.
Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands):
| As of October 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
Inventories | $107,395 | $92,498 | |||||||||
| Deferred compensation plan liability | 67,433 | 57,016 | |||||||||
| Capitalized research and development costs | 65,424 | 48,820 | |||||||||
| Operating lease liabilities | 28,384 | 28,270 | |||||||||
| Contract liabilities (deferred revenue) | 15,724 | 6,146 | |||||||||
Share-based compensation | 14,797 | 11,387 | |||||||||
| Performance-based compensation accrual | 10,060 | 8,183 | |||||||||
Other | 18,030 | 21,657 | |||||||||
Total deferred tax assets | 327,247 | 273,977 | |||||||||
Deferred tax liabilities: | |||||||||||
Goodwill and other intangible assets | (358,691) | (330,624) | |||||||||
Property, plant and equipment | (45,834) | (27,701) | |||||||||
| Operating lease right-of-use assets | (27,022) | (26,766) | |||||||||
Other | (2,886) | (3,042) | |||||||||
Total deferred tax liabilities | (434,433) | (388,133) | |||||||||
| Net deferred tax liability | ($107,186) | ($114,156) | |||||||||
As of October 31, 2025 and 2024, the Company’s liability for gross unrecognized tax benefits related to uncertain tax positions was $8.9 million and $6.5 million, respectively, of which $7.0 million and $5.1 million, respectively, would decrease the Company’s income tax expense and effective income tax rate if the tax benefits were recognized. A reconciliation of the activity related to the liability for gross unrecognized tax benefits during fiscal 2025 and 2024 is as follows (in thousands):
| Year ended October 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Balance as of beginning of year | $6,451 | $4,363 | |||||||||
| Increases related to current year tax positions | 3,182 | 2,521 | |||||||||
| Increases related to prior year tax positions | — | 88 | |||||||||
| Decreases related to prior year tax positions | (120) | — | |||||||||
| Lapses of statutes of limitations | (628) | (521) | |||||||||
| Balance as of end of year | $8,885 | $6,451 | |||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Dec 22, 2025 | Showing above |
| 2024 | Dec 19, 2024 | |
| 2023 | Dec 20, 2023 | |
| 2022 | Dec 21, 2022 | |
| 2021 | Dec 21, 2021 | |
| 2020 | Dec 23, 2020 | |
| 2019 | Dec 19, 2019 | |
| 2018 | Dec 20, 2018 | |
| 2017 | Dec 21, 2017 | |
| 2016 | Dec 15, 2016 | |
| 2015 | Dec 17, 2015 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.