HEICO CORPHEI
HEICO CORP Fair Value Disclosure
FAIR VALUE MEASUREMENTS
The Company's assets and liabilities that were measured at fair value on a recurring basis are set forth by level within the fair value hierarchy in the following tables (in thousands):
| As of October 31, 2025 | ||||||||||||||||||||||||||
| Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | |||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||
| Deferred compensation plan: | ||||||||||||||||||||||||||
| Corporate-owned life insurance | $— | $378,930 | $— | $378,930 | ||||||||||||||||||||||
| Money market fund | 11,940 | — | — | 11,940 | ||||||||||||||||||||||
| Total assets | $11,940 | $378,930 | $— | $390,870 | ||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||
| Contingent consideration | $— | $— | $46,198 | $46,198 | ||||||||||||||||||||||
| As of October 31, 2024 | ||||||||||||||||||||||||||
| Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | |||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||
| Deferred compensation plan: | ||||||||||||||||||||||||||
| Corporate-owned life insurance | $— | $313,794 | $— | $313,794 | ||||||||||||||||||||||
| Money market fund | 3,365 | — | — | 3,365 | ||||||||||||||||||||||
| Total assets | $3,365 | $313,794 | $— | $317,159 | ||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||
| Contingent consideration | $— | $— | $30,207 | $30,207 | ||||||||||||||||||||||
The Company maintains the LCP, which is a non-qualified deferred compensation plan. The assets of 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 and valued using a market approach. Certain other assets of the LCP represent an investment in a money market fund that is classified within Level 1. The assets of the LCP are held within an irrevocable trust and classified within other assets in the Company’s Consolidated Balance Sheets.
As part of the agreement to acquire 90% of the membership interests of a subsidiary by the FSG in fiscal 2025, the Company may be obligated to pay contingent consideration of up to $21.1 million in fiscal 2028 based on the earnings of the acquired entity during the three-year period following the acquisition provided the entity meets a certain earnings objective over the same three-year period. As of October 31, 2025, the estimated fair value of the contingent consideration was $12.6 million.
As part of the agreement to acquire 96% of the stock of a subsidiary by the FSG in fiscal 2022, the Company may be obligated to pay contingent consideration of up to $27.4 million in fiscal 2027 based on the earnings of the acquired entity during fiscal years 2025 and 2026. As of October 31, 2025, the estimated fair value of the contingent consideration was $22.1 million.
As part of the agreement to acquire 74% of the membership interests of a subsidiary by the FSG in fiscal 2022, the Company may be obligated to pay contingent consideration of $14.1 million in fiscal 2027 should the acquired entity meet a certain earnings objective during the five-year period following the acquisition. Based on actual results through fiscal 2025 and an improving net sales forecast for the subsidiary's products over the remainder of the earnout period, the estimated fair value of the contingent consideration increased from $0.0 million as of October 31, 2024 to $11.4 million as of October 31, 2025.
As part of the agreement to acquire 89.99% of the equity interests of a subsidiary by the ETG in fiscal 2020, the Company paid contingent consideration of CAD $11.7 million, or $8.1 million, in January 2025 as the acquired entity met certain earnings objectives during fiscal 2023 and 2024.
The estimated fair values of the contingent consideration arrangements described above are classified within Level 3 and were determined using a probability-based scenario analysis approach. Under this method, a set of discrete potential future subsidiary earnings was determined using internal estimates based on various revenue growth rate assumptions for each scenario. A probability of likelihood was assigned to each discrete potential future earnings estimate and the resultant contingent consideration was calculated. The resulting probability-weighted contingent consideration amounts were discounted using a weighted average discount rate reflecting the credit risk of a market participant.
The following unobservable inputs were used to derive the estimated fair value of the Company's Level 3 contingent consideration liabilities as of October 31, 2025:
| Acquisition | Fair Value | Unobservable | Weighted | |||||||||||||||||||||||
| Date | (in thousands) | Input | Range | Average (1) | ||||||||||||||||||||||
| 1-31-2025 | $12,647 | Compound annual revenue growth rate | 4% - 18% | 11% | ||||||||||||||||||||||
| Discount rate | 6.7% - 6.7% | 6.7% | ||||||||||||||||||||||||
| 7-18-2022 | 22,122 | Compound annual revenue growth rate | 5% - 9% | 7% | ||||||||||||||||||||||
| Discount rate | 6.9% - 6.9% | 6.9% | ||||||||||||||||||||||||
| 3-17-2022 | 11,429 | Compound annual revenue growth rate | 0% - 10% | 7% | ||||||||||||||||||||||
| Discount rate | 7.2% - 7.2% | 7.2% | ||||||||||||||||||||||||
(1) Unobservable inputs were weighted by the relative fair value of the contingent consideration liability.
Changes in the Company’s contingent consideration liabilities measured at fair value on a recurring basis using unobservable inputs (Level 3) during fiscal 2025 and 2024 are as follows (in thousands):
| Liabilities | |||||
| Balance as of October 31, 2023 | $71,136 | ||||
| Payment of contingent consideration | (31,000) | ||||
| Decrease in accrued contingent consideration, net | (9,884) | ||||
| Foreign currency transaction adjustments | (45) | ||||
| Balance as of October 31, 2024 | 30,207 | ||||
| Increase in accrued contingent consideration | 12,920 | ||||
| Contingent consideration related to an acquisition | 11,509 | ||||
| Payment of contingent consideration | (8,144) | ||||
| Foreign currency transaction adjustments | (294) | ||||
| Balance as of October 31, 2025 | $46,198 | ||||
As of October 31, 2025, the Company's contingent consideration balance is included within other long-term liabilities in its Consolidated Balance Sheet. The Company records changes in accrued contingent consideration and foreign currency transaction adjustments within in its Consolidated Statements of Operations.
The carrying amounts of the Company’s cash and cash equivalents, accounts receivable, trade accounts payable and accrued expenses and other current liabilities approximate fair value as of October 31, 2025 due to the relatively short maturity of the respective instruments. The
carrying amount of borrowings under the Company's credit facility approximates fair value due to its variable interest rate. See Note 5, Long-Term Debt, for the estimated fair value of the Company's senior unsecured notes.
During fiscal 2024, two non-amortizing trade names within the ETG were measured at fair value on a nonrecurring basis, resulting in the recognition of impairment losses aggregating $7.5 million (see Note 4, Goodwill and Other Intangible Assets, for additional information). The aggregate fair value of these nonfinancial assets, which are classified within Level 3, and the related impairment loss recognized in fiscal 2024 are as follows (in thousands):
| Carrying Amount | Impairment Loss | Fair Value (Level 3) | ||||||||||||||||||
| Asset: | ||||||||||||||||||||
| Trade names | $11,500 | ($7,500) | $4,000 | |||||||||||||||||
The fair value of each trade name was determined using the relief from royalty method, which is an income approach. This method involves applying an asset-specific discount rate to a forecast of cash flows specific to the asset. The following unobservable inputs were used to derive the estimated fair value of the Level 3 trade names as of July 31, 2024 and October 31, 2024:
| Unobservable Input | Range | |||||||
| Discount rate | 15.0% - 20.5% | |||||||
| Royalty rate | 1.0% - 2.5% | |||||||
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 Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.