FAIR VALUE MEASUREMENTS

9 Months Ended

Jul. 31, 2019

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

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 July 31, 2019
	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		$—		$148,586		$—		$148,586
Money market funds	15		—		—		15
Total assets		$15		$148,586		$—		$148,601
Liabilities:
Contingent consideration		$—		$—		$19,430		$19,430

	As of October 31, 2018
	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		$—		$123,255		$—		$123,255
Money market funds	3,560		—		—		3,560
Equity securities	3,179		—		—		3,179
Mutual funds	1,437		—		—		1,437
Other	1,306		—		—		1,306
Total assets		$9,482		$123,255		$—		$132,737
Liabilities:
Contingent consideration		$—		$—		$20,875		$20,875

The Company maintains the HEICO Corporation Leadership Compensation Plan (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 investments in money market funds that are classified within Level 1. The assets of the LCP are held within an irrevocable trust and classified within other assets in the Company’s Condensed Consolidated Balance Sheets and have a value of $148.6 million as of July 31, 2019 and $126.8 million as of October 31, 2018. The related liabilities of the LCP plan are included within other long-term liabilities in the Company’s Condensed Consolidated Balance Sheets and have a value of $148.0 million as of July 31, 2019 and $125.8 million as of October 31, 2018.

The Company previously maintained another non-qualified deferred compensation plan. The assets and liabilities of this plan were each $5.9 million as of October 31, 2018 and classified within other assets and other long-term liabilities, respectively, in the Company's Condensed Consolidated Balance Sheet. During fiscal 2019, the plan's assets were liquidated and distribution payments were made to the remaining plan participants in accordance with their elections.

As part of the agreement to acquire a subsidiary by the FSG in fiscal 2019, the Company may be obligated to pay contingent consideration of $6.4 million in fiscal 2022 should the acquired entity meet a certain earnings objective during the second and third years following the acquisition. As of July 31, 2019, the estimated fair value of the contingent consideration was $2.2 million.

As part of the agreement to acquire a subsidiary by the ETG in fiscal 2017, the Company may be obligated to pay contingent consideration of $20.0 million in fiscal 2023 should the acquired entity meet a certain earnings objective during the first six years following the acquisition. As of July 31, 2019, the estimated fair value of the contingent consideration was $16.3 million. The increase in the fair value of the contingent consideration as of July 31, 2019 as compared to the $13.9 million accrued as of October 31, 2018 is principally attributable to a reduction in the discount rate used to present value the potential future obligation and higher than originally estimated earnings of the acquired entity during the earnout period.

As part of the agreement to acquire certain assets of a company by the ETG in fiscal 2016, the Company may be obligated to pay contingent consideration of up to $1.4 million in aggregate during the first three years following the second anniversary of the acquisition should the acquired entity meet certain earnings objectives during this same time period. During fiscal 2019, the Company paid $.3 million of contingent consideration based on the actual financial performance of the acquired entity during the third year following the acquisition. As of July 31, 2019, the estimated fair value of the remaining contingent consideration was $.9 million.    

As part of the agreement to acquire a subsidiary by the FSG in fiscal 2015, the Company paid contingent consideration of €6.1 million, or $6.8 million, during the third quarter of fiscal 2019 based on the actual operating results of the acquired entity during the fourth year following the acquisition. The increase in the amount paid as compared to the €5.1 million, or $5.8 million, accrued as of October 31, 2018 was principally due to the higher actual than anticipated earnings of the acquired entity.

The estimated fair value 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 HEICO. 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 July 31, 2019 were as follows:

	Fiscal 2019 Acquisition				Fiscal 2017 Acquisition				Fiscal 2016 Acquisition
Compound annual revenue growth rate range	(8	%)	-	9%	(5	%)	-	12%	4	%	-	13%
Weighted average discount rate	5.9%				4.9%				4.2%

Changes in the Company’s contingent consideration liability measured at fair value on a recurring basis using unobservable inputs (Level 3) for the nine months ended July 31, 2019 are as follows (in thousands):

Balance as of October 31, 2018		$20,875
Increase in accrued contingent consideration	3,734
Contingent consideration related to acquisition	2,107
Payments of contingent consideration	(7,178		)
Foreign currency transaction adjustments	(108		)
Balance as of July 31, 2019		$19,430
Included in the accompanying Condensed Consolidated Balance Sheet under the following captions:
Accrued expenses and other current liabilities		$491
Other long-term liabilities	18,939
		$19,430

The Company recorded the increase in accrued contingent consideration and foreign currency transaction adjustments set forth in the table above within selling, general and administrative expenses in the Company's Condensed Consolidated Statement of Operations.

The Company did not have any transfers between Level 1 and Level 2 fair value measurements during the nine months ended July 31, 2019.

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 July 31, 2019 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.