FAIR VALUE MEASUREMENTS

3 Months Ended

Jan. 31, 2015

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 January 31, 2015
	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 plans:
Corporate owned life insurance		$—		$67,185		$—		$67,185
Money market funds	5,378		—		—		5,378
Equity securities	2,219		—		—		2,219
Mutual funds	1,685		—		—		1,685
Other	1,589		50		—		1,639
Total assets		$10,871		$67,235		$—		$78,106

Liabilities:
Contingent consideration		$—		$—		$21,724		$21,724



	As of October 31, 2014
	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 plans:
Corporate owned life insurance		$—		$61,958		$—		$61,958
Money market funds	3,974		—		—		3,974
Equity securities	2,225		—		—		2,225
Mutual funds	1,903		—		—		1,903
Other	1,339		50		—		1,389
Total assets		$9,441		$62,008		$—		$71,449

Liabilities:
Contingent consideration		$—		$—		$1,184		$1,184

The Company maintains two non-qualified deferred compensation plans. The assets of the HEICO Corporation Leadership Compensation Plan (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 investments in money market deposit accounts that are classified within Level 1. The assets of the Company’s other deferred compensation plan are principally invested in equity securities and mutual funds that are classified within Level 1. The assets of both plans are held within irrevocable trusts and classified within other assets in the Company’s Condensed Consolidated Balance Sheets and have an aggregate value of $78.1 million as of January 31, 2015 and $71.4 million as of October 31, 2014, of which the LCP related assets were $72.5 million and $65.9 million as of January 31, 2015 and October 31, 2014, respectively. The related liabilities of the two deferred compensation plans are included within other long-term liabilities in the Company’s Condensed Consolidated Balance Sheets and have an aggregate value of $77.3 million as of January 31, 2015 and $70.5 million as of October 31, 2014, of which the LCP related liability was $71.7 million and $65.0 million as of January 31, 2015 and October 31, 2014, respectively.

As part of the agreement to acquire a subsidiary by the FSG in the first quarter of fiscal 2015, the Company may be obligated to pay contingent consideration of up to €24.4 million in aggregate, which translates to approximately $27.7 million based on the January 31, 2015 exchange rate, should the acquired entity meet certain earnings objectives during each of the first four years following the acquisition. As of January 31, 2015, the estimated fair value of the contingent consideration was $20.5 million.

As part of the agreement to acquire a subsidiary by the ETG in fiscal 2013, the Company may be obligated to pay contingent consideration of up to $30.0 million should the acquired entity meet certain earnings objectives during calendar years 2014 and 2015. The estimated fair value of the contingent consideration was $1.2 million as of January 31, 2015 and October 31, 2014.

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. Changes in either the revenue growth rates, related earnings or the discount rate could result in a material change to the amount of contingent consideration accrued and such changes will be recorded in the Company's condensed consolidated statements of operations.

The Level 3 inputs used to derive the estimated fair value of the Company's contingent consideration liability as of January 31, 2015 were as follows:



	Fiscal 2015 Subsidiary				Fiscal 2013 Subsidiary
Compound annual revenue growth rate range	(7	%)	-	12%	(7	%)	-	20%
Weighted average discount rate	2.2%				2.6%

Changes in the Company’s contingent consideration liability measured at fair value on a recurring basis using unobservable inputs (Level 3) for the three months ended January 31, 2015 are as follows (in thousands):




Balance as of October 31, 2014		$1,184
Contingent consideration related to acquisition	21,355
Increase in accrued contingent consideration	20
Foreign currency translation adjustments	(835		)
Balance as of January 31, 2015		$21,724

Included in the accompanying Condensed Consolidated Balance Sheet under the following captions:
Accrued expenses and other current liabilities		$—
Other long-term liabilities	21,724
		$21,724

The Company did not have any transfers between Level 1 and Level 2 fair value measurements during the three months ended January 31, 2015.

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 January 31, 2015 due to the relatively short maturity of the respective instruments. The carrying amount of long-term debt approximates fair value due to its variable interest rates.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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