Company: HEI-A
Filing Date: 2025-12-22
Form Type: 10-K
Source: 0000046619-25-000082
Chunk: 120

Company: HEICO CORP
Filing Date: 2025-12-22
Form: 10-K
Item: Item 8
Chunk 120
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% 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.

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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 October 31, 2025:Acquisition Fair Value UnobservableWeightedDate (in thousands)Input Range Average (1) 1-31-2025$12,647Compound annual revenue growth rate4% - 18%11%Discount rate6.7% - 6.7%6.7%7-18-202222,122Compound annual revenue growth rate5% - 9%7%Discount rate6.9% - 6.9%6.9%3-17-202211,429Compound annual revenue growth rate0% - 10%7%Discount rate7.2% - 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