Company: HEI-A
Filing Date: 2025-08-27
Form Type: 10-Q
Source: 0000046619-25-000062
Chunk: 28

Company: HEICO CORP
Filing Date: 2025-08-27
Form: 10-Q
Item: Item 1
Chunk 28
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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.

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The following unobservable inputs were used to derive the estimated fair value of the Company's Level 3 contingent consideration liabilities as of July 31, 2025 ($ in thousands):Unobservable Weighted Acquisition Date Fair Value Input Range Average (1) 1-31-2025$12,075Compound annual revenue growth rate5% - 22%17%Discount rate7.2% - 7.2%7.2%7-18-202221,534Compound annual revenue growth rate3% - 9%7%Discount rate7.7% - 7.7%7.7%3-17-20228,643Compound annual revenue growth rate(2%) - 6%3%Discount rate7.8% - 7.8%7.8%(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) for the nine months ended July 31, 2025 are as follows (in thousands):LiabilitiesBalance as of October 31, 2024$30,207 Contingent consideration related to an acquisition11,509 Increase in accrued contingent consideration, net8,974 Payment of contingent consideration(8,144)Foreign currency transaction adjustments(294)Balance as of July 31, 2025$42,252 As of July 31, 2025, the Company's contingent consideration balance is included within other long-term liabilities in its Condensed Consolidated Balance Sheet.  The Company records changes in accrued contingent consideration and foreign currency transaction adjustments within SG&A expenses in its Condensed Consolidated Statements of Operations.The carrying amounts of the Company’s cash and cash equivalents,