Larry Mendelson - Chairman and Chief Executive Officer Eric Mendelson - Co-President and President of HEICO's Flight Support Group Victor Mendelson - Co-President and President of HEICO's Electronic Technologies Group Carlos Macau - Executive Vice President and Chief Financial Officer.

Ken Herbert - Canaccord Genuity Larry Solow - CJS Securities Sheila Kahyaoglu - Jefferies Michael Ciarmoli - SunTrust.

lower demand for commercial air travel or airline fleet changes, or airline purchasing decisions, which could cause lower demand for our goods and services; product development or product specification costs and requirements, which could cause an increase to our costs to complete contracts; governmental and regulatory demands, export policies and restrictions, reductions in defense, space or homeland security spending by U.S.

and/or foreign customers or competition from existing and new competitors, which could reduce our sales; our ability to introduce new products and product pricing levels, which could reduce our sales or sales growth; product development difficulties, which could increase our product development costs and delay sales; our ability to make acquisitions and achieve operating synergies from acquired businesses; customer credit risk; interest and income tax rate; and economic conditions within and outside of the aviation, defense, space, medical, telecommunications and electronics industries, which could negatively impact our cost and revenues, and defense budget cuts, which could reduce our defense-related revenue.

Those listening to this call are encouraged to review all HEICO's filings with the Securities and Exchange Commission, including, but not limited to filings on Form 10-K, Form 10-Q and Form 8-K.

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by applicable law. I would now like to turn the call over to Laurans Mendelson. Thank you. You may begin..

Thank you very much, and good morning to everyone on the call. We thank you for joining us, and we welcome you to HEICO's first quarter fiscal '17 earnings announcement teleconference.

I'm Larry Mendelson, Chairman and CEO of HEICO Corporation, and I'm joined here this morning by Eric Mendelson, HEICO's Co-President and President of HEICO's Flight Support Group; Victor Mendelson, HEICO's Co-President and President of HEICO's Electronic Technologies Group; and Carlos Macau, our Executive Vice President and CFO.

Before I start I want to thank the approximately 5,000 HEICO team members who really make HEICO what it is today.

Senior Management can lead by example, but the people that are in the field, getting the daily performance done the way we want it to be done in the most admirable manner; they are the ones who deserve the credit for the great success of this company. So I can't mention 5,000 names on the telephone, or I'd be here until next week.

But I do thank each and every one of our HEICO team members for their outstanding performance. I'd like to take a few minutes to summarize the highlights of our outstanding first quarter results. Consolidated net income increased 31%, to $40.9 million or $0.59 per diluted share in the first quarter of fiscal '17.

And that was up from $31.3 million or $0.46 per diluted share in the first quarter of fiscal '16. Consolidated operating income increased 23%, to $64.6 million in the first quarter of fiscal '17, and that was up from $52.6 million in the first quarter of fiscal '16.

In addition, HEICO's operating margin increased to 18.8% in the first quarter of fiscal '17, and again that was up from 17.2% in the first quarter of fiscal '16. Cash flow, which as you all know is what HEICO management keys on, the most important quantitative factor in our business.

So cash flow provided by operating activities was extremely strong, increased 24% to $56 million in the first quarter of fiscal '17, and that represented 137% of reported net income as compared to $45.2 million in the first quarter of fiscal '16. As of January 31, '17, the Company's total debt to shareholders' equity was 38.3%.

In addition, our net debt to shareholders' equity was 34.1% as of January 31, '17. With net debt, and we define that as total debt less cash and cash equivalents, so net debt of $371.4 million, and that had been principally incurred to fund acquisitions in fiscal '16 and '15.

In January, '17, we paid an increased regular semi-annual dividend in cash of $0.09 per share. This represented our 77th consecutive semi-annual cash dividend, and that represented a 13% increase over the prior semi-annual cash -- per share cash amount of $0.08.

In addition, given the strength of HEICO's share prices and the company's history of stock splits and dividend, the Board of Directors intends to consider a stock split or a stock dividend at its regular meeting on March 17, of 2017. To remind you, historically, we have declared 14 stock splits or stock dividends since 1995.

In January, '17, we were happy to announce HEICO's 60th anniversary in business. The company was founded in 1957. And our current management group took over in 1990.

Since 1990, HEICO has grown from approximately $26 million in revenues and market cap of about the same amount, to a current market cap of approximately $5 billion, and sales of nearly $1.4 billion in fiscal '16.

Again, we thank our nearly 5,000 team members world-wide as well as our customers and our suppliers for getting HEICO to this unique milestone.

In January, 2017, Institutional Investor Magazine named HEICO to its All-American Executive Team, and named me, Laurans Mendelson the best CEO in the aerospace and defense electronics sector, and named HEICO's Investor Relations program as the second best such program in the aerospace and defense electronics sector.

These honors could only have been achieved through, again, the dedication of our nearly 5,000 team members and their outstanding and diligent commitment through excellence.

At this time I would like to introduce Eric Mendelson, Co-President of HEICO and President of HEICO's Flight Support Group, and he will discuss the results of the Flight Support Group..

Thank you. The Flight Support Group net sales increased 8% to $220.9 million in the first quarter of fiscal '17, up from $204.6 million in the first quarter of fiscal '16.

The increase was all organic growth, of 8%, principally attributed to increased demand in new product offerings within our Aftermarket Replacement Parts and Repair and Overhaul Parts and Services product line.

The Flight Support Group's operating income increased 17% on that 8% organic growth to $41.4 million in the first quarter of fiscal '17, up from $35.5 million in the first quarter of fiscal '16. The increase is principally attributed to the previously mentioned net sales growth with operating income increases in each of our three product lines.

The Flight Support Group's operating margin improved to 18.7% in the first quarter of fiscal '17, up from 17.3% in the first quarter of fiscal '16. The increase is principally attributed to the previously mentioned higher net sales volumes and the positive impact of higher net sales on the fixed portion of SG&A expenses.

With respect to the remainder of fiscal '17, we continue to estimate mid single-digit growth in the Flight Support Group's net sales over fiscal '16 levels. In the full year, Flight Support Group's operating margin to approximate 19% to 19.5%. These estimates exclude additional acquired businesses, if any.

Now, I would like to introduce Victor Mendelson, Co-President of HEICO and President of HEICO's Electronic Technologies Group to discuss the results of the Electronic Technologies Group..

Thank you, Eric. The Electronic Technologies Group's net sales increased 21% to $126.2 million in the first quarter of fiscal '17, up from $104.2 million in the first quarter of fiscal '16.

The increase reflects organic growth of 8% namely attributed to higher net sales of certain other electronics, aerospace, and medical-related products, as well as net sales of approximately $13 million contributed by our fiscal '16 acquisitions.

The Electronic Technologies Group's operating income increased 31% to $29.1 million in the first quarter of fiscal '17, up from $22.3 million in the first quarter of fiscal '16.

The increase is principally attributed to the previously mentioned net sales growth, and $3.1 million in acquisition costs associated with the prior year acquisition that were recognized in the first quarter of fiscal 2016, partially offset by a less favorable product mix for certain space products and an increase in research and development expenses.

The Electronic Technologies Group's operating margin improved to 23.1% in the first quarter of fiscal 2017 up from 21.4% in the first quarter fiscal 2016.

And I also note to comment that that is after of course around 300 to 400 basis points of intangibles amortization expense which means that if I look at and we look at how we evaluate our businesses which is before intangibles amortization expense which is an expense that only exists because we made an acquisition and doesn't really reflect those individual businesses are doing on a trading basis those are very strong margins and we're very pleased with them.

The increase principally reflects the previously mentioned net sales growth and decrease in acquisition costs partially offset by the less favorable product mix and increase in research and development expenses.

With respect to the remainder of fiscal 2017 we are continuing to estimate mid to high single-digit growth in the Electronic Technologies Group's net sales over fiscal 2016 level and the full year of Electronic Technologies Group's operating margin to approximate 24% and I make the same note about amortization as I did a few moments ago.

These estimates exclude additional acquired businesses if any. I'll turn the call back over to Larry Mendelson..

Thank you, Victor, and thank you, Eric. Moving on to diluted earnings per share, consolidated net income per diluted share increased 28% to $0.59 in the first quarter of fiscal 2017 that was up from $0.46 in the first quarter of fiscal 2016.

During the first quarter of fiscal 2017 we adopted accounting standards update 2016-09 which simplifies several aspects related to accounting for share-based payment transactions.

The adoption of this standard resulted in HEICO recognizing a $3.1 million discrete income tax benefit which net of non-controlling interest increased net income attributable to HEICO by 2.6 million or approximately $0.03 per diluted share.

In addition the adoption of this standard required us to increase the number of weighted average diluted shares outstanding by 543,000 shares. The increase in shares within our diluted EPS calculation is recurring while the previously mentioned discrete benefit is a onetime event.

For all of you on the call I'm sure that paragraph is rather confusing and the Carlos Macau, our CFO is available at any time at your discretion to explain the details and how the new accounting requirements are calculated.

Depreciation and amortization expense totaled $15.2 million and $13.9 million in the first quarter of fiscal 2017 and 2016 respectively. That increase principally reflects the incremental impact of higher amortization expense of intangible assets attributable to our fiscal 2016 acquisitions.

R&D expense increased 25% to 11.2 million in the first quarter of fiscal 2017 and that was up from 9 million in the first quarter fiscal 2016. The increase in R&D expenditures during the first quarter of fiscal 2017 occurred in both operating segments, as well as the incremental impact of R&D expenditures associated with our fiscal 2016 acquisitions.

Significant new ongoing new product development efforts are continuing at both flight support and ETG and we continue to invest approximately 3% to 4% of each sales dollar into new product development. SG&A expenses were $60.9 million in the first quarter of fiscal 2017 up from $59.6 million in the first quarter 2016.

The increase principally reflects higher performance-based compensation expense, as well as the impact from our fiscal 2016 acquisitions and they were partially offset by the previously mentioned $3.1 million decrease in acquisition costs.

SG&A expense as a percentage of net sales were 17.7% and $19.5 in the first quarter of fiscal 2017 and 2016 respectively. The decrease principally reflects a 1% impact from the aforementioned decrease in acquisition costs, as well as the benefit of higher net sales volume on the portion -- fixed portion of SG&A expenses.

Interest expense increased to $2 million in the first quarter of fiscal 2017 up from $1.6 million in the first quarter of 2016. Increase was due to a higher weighted average balance outstanding under our revolving credit facility associated with our fiscal 2016 and 2015 acquisitions, as well as slightly higher interest rates.

Other income and expense in the first quarter of 2017 was not significant.

Our effective tax rate in the first quarter of fiscal 2017 decreased to 26.6% from 29% in the first quarter of fiscal 2016 and that decrease principally reflects a discrete income tax benefit related to stock option exercises resulting from the adoption of the new accounting standard which I previously discussed, as well as higher tax exempt unrealized gains in life insurance policies related to the HEICO corporate leadership plan.

These decreases were partially offset by the benefits recognized in the first quarter of fiscal 2016 from the retroactive and permanent extension of U.S. federal R&D tax credit that resulted in the recognition of additional income tax credit for qualified R&D activities related to the last 10 months of fiscal 2015.

Net income attributable to non-controlling interest was $5.3 million in the first quarter fiscal 2017 and that's comparable to $4.7 million reported in the first quarter of fiscal 2016.

For the full fiscal 2017 year, we continue to estimate a combined effective tax rate and non-controlling interest rate between 39% and 40% of pretax income assuming that U.S. corporate tax reform does not become effective during this fiscal year.

Now, moving on to the balance sheet and cash flow, our financial position and cash flow remained very strong as I previously discussed cash flow provided by operating activities was very strong increasing 24% to $56 million in the first quarter of fiscal 2017 and that represented 137% of reported net income, and that was compared to $45.2 million of cash flow in the first quarter fiscal 2016.

Working capital ratio that's current assets divided by current liabilities improved to 2.9 as of January 32, 2017 and that compared to 2.7 on October 31, 2016. DSOs of accounts receivable were 47 days as of January 31, 2017 that compared favorably to 52 days as of January 31, 2016.

As you know we closely monitor all receivable collection efforts in order to limit credit exposure our credit experience is generally excellent. No one customer accounted for more than 10% of net sales and our top five customers represented approximately 21% and 18% of consolidated net sales in the first quarter of fiscal '17 and '16 respectively.

Inventory turnover rate improved to 127 days as of January 31, '17 and that compared favorably to the 130 days as of one year ago January 31, '16. Previously mentioned total debt to shareholders equity was a low 38.3% as of January 31, '17.

Our net debt to shareholders equity was 34.1% as of January 31, '17 and net debt as I described before total debt less cash and cash equivalents was $371.4 million principally incurred to fund the acquisitions in '16 and '15.

We have no significant debt maturities until fiscal '19 and we plan to utilize our financial flexibility to aggressively pursue high quality acquisition opportunities to accelerate growth and maximize shareholder returns.

Again I congratulate our team members and especially the leaders of our business units for delivering an exceptional quarter of high cash flow generation, as well as earnings per share. It is a testament to their commitment of two excellent entrepreneurships, daily focus on delivering high quality products that exceed our customer's expectation.

Again it is their hard work and dedication that allows HEICO to consistently deliver exceptional results for its shareholders.

Now the outlook, as we look ahead to the remainder of fiscal '17 we do anticipate continued net sales growth both within Flight Support and ETG and that we will result from increased demand across the majority of our product lines.

During the remainder of fiscal '17 we'll continue our commitments to developing new products and services, further market penetration, as well as an aggressive acquisition strategy while maintaining our financial strength and flexibility.

With regard to our acquisition pipeline, it remains robust as HEICO shareholders have come to expect we are aggressive acquirers of successful businesses but our patient allocators of capital and we do not have an acquisition clock. At this time our due-diligence teams are highly engaged of potential targets across the globe.

Well I cannot predict the outcome of our due-diligence efforts, nor the ultimate closing of these potentially accretive transactions, we do remain optimistic on the opportunities we are pursuing.

As you know, we will not force an acquisition and if we find something that -- mitigates against acquiring a business, we will walk from the closing table rather than make a major mistake. Hopefully the transactions that we're looking at will close but again we cannot guarantee it because we are not finished with due diligence.

Based upon current economic visibility, we are increasing our estimated consolidated fiscal '17 year-over-year growth in net sales to 6% to 8% and net income increasing the estimate 9% to 11% up from prior growth estimate in net sales of 5% to 7% and net income of 7% to 10%.

In addition, we anticipate our operating margin to approximate between 19% and 20%, depreciation and amortization expense of approximately $63 million, CapEx to approximate $38 million and cash flow from operations to approximate $260 million. These estimates of course exclude any additional acquired businesses.

I would like to mention that were cautiously optimistic that President Trump's new business friendly policies will impact HEICO on a favorable manner. Decreases in corporate tax rates would increase HEICO'S earnings and cash generation.

In addition, increased military spending would help HEICO given that we continue to generate approximately a third of our business revenue from defense and space. Furthermore his pro-business stimulus plan should positively benefit the commercial and industrial markets that we serve.

However, given political posturing in Washington, and lack of clarity of specifics, we cannot be sure of what or when these impacts, if any, will ultimately translate to increased shareholder value to HEICO.

In closing, I promise you that we'll continue to focus on intermediate and long-term growth strategies with a laser focus on growing our core businesses, and an emphasis on acquiring additional profitable businesses at fair prices. That is the extent of my prepared comments, and I the like to now open the floor for questions..

[Operator Instructions] And your first question is from the line of Ken Herbert, Canaccord..

Hi, good morning..

Good morning, Ken..

Hi. I first wanted to ask Eric within FSG, very nice organic growth in the quarter. Can you provide any more detail on -- I know, obviously you're up against probably your easiest comp from fiscal '16, just up 1% a year ago. You didn't raise the full-year guidance for sales growth.

Was there anything unique in the quarter that was maybe one-time, or can you just talk a little bit more about where you saw [indiscernible] on a geographic or a product line basis?.

Hi, good morning, Ken. This is Eric. I would be happy to answer that. We were very, very happy with the positive results with the organic growth that they present. And I think the thing that we were even happier about is that we had organic growth in operating income because all of that growth was organic -- organic growth and operating income was 17%.

And the people who run our businesses are measured primarily on operating income and cash flow. That's what we focus on. And obviously revenue is sort of a byproduct; you've got to have revenue in order to have earnings. But we try to keep them really focused on as few objectives as possible. And so the 17% I think is very important.

We were able, I think, to reduce some sales of some lower margin activities; we were able to get into some higher margin activities. We've seen strength around the world. You're right in terms of as the year goes on our comps get tougher. But I would have to say our business leaders are probably conservative by nature.

And it's tough in a business where you get 70% - 80% of your orders in the month of shipment it's very difficult to be able to forecast going forward. So I'm sure that they're going to do everything that they possibly can to drive the organic earnings growth, and hence the organic sales growth up. But I wouldn't say that it was due to any one area.

I've done detailed sales reviews with our sales leaders and the heads of our businesses, and we've got a lot of very good projects in work.

I think, as we've said for many years, as time goes on I think that HEICO's market credibility improves, and customers are interested in us developing additional products in related areas, adjacent spaces that we haven't been in, in the past. And I anticipate that to continue..

Okay, that's helpful..

Ken, this is Carlos; I want to add one thing to that because you did mention geography, and I do want to clarify one thing. Because, as you know, last year we spoke quite a bit about Latin America and South America, and I suspect that's where your geography question came from.

What we have noticed so far this year is quite a bit more optimism out of our business unit leaders in the repair and overhaul business for that marketplace. And that was not a drag, as Eric mentioned in the organic growth that we posted this quarter, there was not a drag. So we've got -- I'd say we're cautiously optimistic that that's behind us.

And as you year plays out more we'll have more color on that particular topic..

Okay, that's very helpful. And then Eric, I know you specifically highlighted the new products introductions as a source of growth or upside in the quarter.

Is it possible to give any more detail around maybe some numbers on that relative to legacy products or maybe just sort of mix of the growth from newer programs or products versus more mature or established products within the segment?.

No, we -- I think that's a very good question, but for competitive reasons we don't like to get into specific platforms. But I can tell you I think we're doing very well on the legacy side. We're also getting into the new products as well. As I mentioned before, the new products tend to be extremely expensive.

Of course there is the competitive dynamic in the news area is increasing because there are fewer suppliers, and those suppliers tend to have a greater amount of content on the aircraft. But that also provides greater opportunity for companies like HEICO.

So I would say we're doing very well in both areas, and we're meeting our objectives without going into the specific numbers which would cause competitive issues for us..

Okay, thank you. And just finally if I could, Larry, obviously you continue to see what sounds like a fairly robust M&A pipeline.

Can you just comment on maybe some of the issues with -- is it issues with valuation, is it issues with maybe just not seeing the right business that's contributing to, I don't want to say a delay, but obviously you're going to be disciplined in how you think about the M&A process.

And second, as a part of that, do you have a particular preference for companies now with more commercial versus defense exposure?.

I'll answer your last question first. We are neutral. We like defense, and we like commercial. And it all depends on what the company looks like. We're not afraid of defense. I think the defense budget -- we all believe the defense budget is going to be increased. They're talking about some $50 billion increase.

I think that in itself will be helpful to us. We have some wonderful defense businesses, so we like them. And we also are looking at very good commercial businesses. So it really depends on the opportunity. So, as you know, we are opportunistic buyers. The rest of it, the M&A business is, as you know, very difficult.

So one is a question of pricing, as interest rates were lowered multiples expanded, you get a lot of competition in there. And so first thing, we have to consider pricing and what people are asking.

And then, once we get to that point, and you know we only look at companies that have operating margins of 20% or more, with the exception of some tuck-away deals where we can cut overhead and so forth. But most of them say 80% will be stand-alone operation, so we want strong companies, strong history, strong cash flow, low CapEx.

And to find these companies is difficult. And then once you find them the due diligence process that we use is extremely thorough. And we do it in-house, so it takes us a little bit longer. We send our people out to the field, and they scrutinize these companies. Sometimes private companies take longer to generate the data that we need.

And that's again; we really take a deep dive into companies, products, customers, and everything else. And we're not going to force an acquisition. Again, I do believe that we're going to make a number of these transactions, but in order to sound good to the market we're going to do the right thing for the long term of HEICO.

And again, we focus on growth of 15% to 20% bottom line. And we had a strong quarter in organic of about 8%. So between organic and acquired growth I think that target of 15% to 20% over the next number of years is doable. And we're going to continue to shoot at it. And so there's nothing that's troubling us about the acquisition pace.

And we just have to do our homework, and that's really what delays it.

Does that answer your question?.

No, that's very helpful. Thank you very much, and very nice quarter. Thank you..

Thank you..

Thank you. And your next question comes from the line of Larry Solow with CJS Securities..

Good morning, guys..

Good morning..

That was great. Good color on the acquisition environment, thank you. Just a question, Eric, for you, just on I guess obviously a nice quarter, 8% organic growth.

It's more operating income, but just on it that you guys look at, but just on the sales side, I guess there was some improvement in the Repair and Overhaul market particularly, I know that was sort of what hurt last year's -- made that comp a little bit easier.

Was there some improvement there?.

Yes, there was. There was improvement in the Overhaul business. And so that of course helped the comp. But I would say that there was strength all the way around really in all of our businesses. It was really quite strong..

Okay. And is there growth in the aftermarket, in particular that's been sort of mid single digits.

Was that higher this quarter, and any change that you just see just industry wide?.

Well, I think -- actually when I look at our numbers and the fact that we're up 8% on sales, and 17% on operating income on an organic basis. From the numbers I've seen from other companies I think that that's a bit outperformance.

I would not -- of course, we sort of report early, so I don't know how the other companies are going to report for their first quarter. But my guess is that HEICO is outperforming.

We've always felt that due to HEICO's business model the businesses that we're in with the margins, with the cash generation, and as well as with our operating structure where we divide these businesses into smaller business units so people can have the authority and the responsibility to execute and generate these results.

I think we have a structural advantage. So my sense is yes, the tide is rising, but I think that HEICO might get -- and of course we'll see when other people report, but based on the numbers that came out for other peoples' fourth quarters which included our November and December, from our first quarter I think HEICO is way outperforming..

Got it, okay, and then just a question quickly for Carolos, obviously you guys have done a great job on DSOs or overall working capital management cash flows. Those DSO were basically have been steady sort of in the high 49 range.

Was there something that sort of made it bounce up a little bit -- I'll have to go back and look, that made it bounce a little bit higher last year or that drove the improvement this quarter?.

No I think at the end of last year we had some receivables outstanding on some larger contracts that got paid off. I think that our guys did a fabulous job in the first quarter managing cash flow and receivables. Nothing out of the ordinary as Larry mentioned earlier in our prepared remarks.

Generally speaking from a receivables standpoint we're pretty quick cash collectors. And I wouldn't say that there was anything unusual. Our run rate has typically been in the high 40s to very low 50s.

There has been a tendency by larger corporations to stretch out terms, in some companies we've been successful in not having that impact our DSOs, so nothing new to report there..

Okay, and just the last question for Larry. Just clearly the new presidential, it sounds like things should help you guys or could certainly help you.

Just on the defense side, hypothetically, if things were to increase could you just remind us how long it would sort of take to potentially flow through into your business?.

I think it'll take a little while. Victor can give you a little bit more color. He's closer to ground on this, so he had definite thoughts on it. So let me ask him..

Hi, Larry, this is Victor..

Hi, Victor..

The answer is, of course, we all have the same visibility, I'll start with that. We all read the same newspapers, I don't have any particular insight or inside information out of D.C. than anyone else has. But our general view is it is not a -- the increase in the defense budget that would come is not going to really impact this materially in 2017.

And it's probably not necessarily even early '18. It's somewhere we would think in 2018, but I don't want to put an exact date on it because what has to happen, of course, is first the budget has to get through. And then once the budget gets through the PO, if you will, get cut.

And that takes some time, and those things get on order, and then there's a lead time to produce, and so on. So I don't anticipate that the current discussions on a larger defense budget are going to impact the industry materially in our fiscal 2017. But I do think we'll start to see it sometime in 2017.

What we are noticing, and I think people in the industry are noticing is something a little bit different, a little more positive particularly in the current administration, and that is the lack of reticence to spend money.

What we were starting to notice was that money that had been approved in the defense that had been planned for spending in the defense budget wasn't actually getting spent. And things were moving around to fund other priorities, and spending was just getting delayed, and excuses were appearing, and things of that sort.

We've noticed more recently that that is abating, specifically in the current calendar year we've been noticing that abating. So there is what we believe to be a greater willingness to fund what has already been approved. And we'll see how that works through for us during the year and for the industry during the year.

I think that the concept of rising tide lifts all ships applies to the industry as a whole, but of course keep in mind we will ultimately have to see which budget priorities affect which ones of our companies. And it will be important of course for funding to apply and for spending to apply to the programs we're on. And that's what we remain to see.

So we just as a general rule have a sort of positive outlook based on what we're reading in the press. And we will update as things go on.

Was that helpful?.

Yes, absolutely, very helpful. Thanks a lot, I appreciate it guys..

You're welcome..

Thank you..

Thank you. And your next question is from the line of Sheila Kahyaoglu, Jefferies..

Hi, it's Sheila. Good morning and thank you for taking my questions..

Good morning, Sheila..

Good morning..

Did you listen to my advice?.

No, clearly I didn't, again. But from on maybe I should just listen. Howard would like to hear that. But Eric, can I ask you a question within the Repair and Overhaul business; I know you said it improved.

I guess is there any way you give a bit more color on what you're seeing on the activity side if fuel prices rise maybe on a year-over-year basis, or is that changing repair activity at all or not so much?.

Sheila, that is a good question. We have not seen the increase in fuel prices impact repair activity thus far. Of course the cost of new equipment is very high, and you and other have written about the perhaps oversupply or a potential future oversupply in the wide-body and the narrow-body market.

So I think the airlines are looking to maintain the equipment that they've got, and we're in pretty good shape with regard to fuel. Of course, if fuel were despite which people don't believe is likely at this point, if fuel were to spike that would not be good for it.

But we have not seen any real significant impact as a result of fuel in our component overhaul businesses..

Understood, thank you.

I guess, Victor, can I ask you about the organic growth within your end market, just I guess specifically on medical and electronic, what drove that, and could you expect that to continue through the year?.

Yes, I'll -- and Sheila, this is Victor, I'll sort of answer the last part of the question first. As a rule of thumb, if you look back over time these things tend to shift.

And so we may have a stronger quarter in growth in one group, let's say defense, and then the next quarter it shifts around to other electronics or products that go into medical equipment, and then it can shift to space and so forth.

I would say that if I look for growth over the course of the year, I would expect that as the year wears on, we'll see it more evenly distributed across the businesses. We are seeing particularly good signs, if you will, in some of the electronics, medical, and other markets these days.

They've been strong when I look at the backlog, I look at the orders, I look at book-to-bill things, like that, in those other product lines and companies, they have been fairly strong, but I would -- it pass this prelude, which usually is, I would expect those to moderate somewhat in some of the other lines to increase somewhat and see a fairly even distribution over the course of the full year..

Okay. Thank you..

You are welcome..

And I guess just one more on Robertson.

You mind providing an update at maybe what's integrated or just how the businesses is progressing thus far, you know, you're going to per year?.

Sheila, so far so good. We are very happy with how it's done. I'd say more or less right on the mark with our expectations, happy with the people, happy with the management team there. Let's not to say that everything is always easy, never is in any business, and we are always cautious with how we proceed, but it's really been on the mark..

Great, thank you very much, and great quarter..

You're welcome..

Sheila, thank you very much..

Thanks..

Thank you. [Operator Instructions] And on our next question comes from the line of Michael Ciarmoli with SunTrust..

Hey, good morning guys. Thanks for taking my questions, and a nice quarter..

Thank you, Michael, thank you..

Hi Eric, I just wanted to go back, the 8% organic growth I know we've talked a lot here about the MRO and maybe those headwinds elevating, but can you talk maybe about the part sales business? Some of the other suppliers out there talked about strength with the CFM 36, with the V2500, it seems like the expectation is there that the shop visits would pick up, can you just give some color in terms of what you're seeing on the actual part side, or maybe even layer in some of the data points about used aircraft, I think United has kind of been making some statements that there is a desire to operate used, and you know, kind of what the expectation for part demand would like as the year progresses?.

Hi, Mike, this is Eric, I'd be happy to address your question. We are seeing strength.

I can't unfortunately get into specific product lines or product types as you know due to a competitive reason, but you're right, we have seen the airlines continued time, some of the order equipment where it makes a lot of sense to operate especially in this fuel environment, the lower price equipment.

What I can tell you that is in the surplus markets, going back to the roughly 2013, '14, '15 times, even a bit of 2016, we saw a lot of money pouring into this space, frankly, where financial investors without experience really in this space thought that it would be a good business to get into.

And I would say that it's in our opinion, you know, nothing is easy, everything looks easy for me outside, but when you get on the inside, it's extremely difficult.

In order to do it on a consistent and successful basis, you've got to have the right methodology and the right people, and I think that some of these -- my sense is some of the financial investors who went in and bought equipment at prices I that that were fairly aggressive, let's just say, roughly to 2013 to '15 area have realized that it's not such a easy business, and you really have to know what you're doing, and I think the return have not been what they expected.

So, I think at some of the pricing from what we've seen has come down to more reasonable levels, I think where people can start to make wise investments there, but we see continued -- obviously continued growth in all of these markets and tremendous need for our products..

Got it. That's helpful.

And then just one more and I'll get out of the way here, should any more data or color in terms of what's happening within the EU with the investigation ongoing I guess and also maybe the practices of some of the engine providers and trying to lock up airline customers over the longer term, I mean, how do you guys see that shaping out, I mean, would there be an opportunity if you see some ruling inside of the airlines, but any additional color there?.

Well, just to give everybody a little bit of background, what you're referring to is IATA the International Air Transport Association started looking into it, and has been expressing for many years their disappointment with the very high prices on spare parts from original equipment manufacturers, in particular, in the engine area.

And so, IATA has been talking about this, the membership has been very upset about it.

They had their annual general meeting and they all spoke about it, and I don't know how it ultimately got started, but I think they went to the European Commission and they complained and said that the cost of the spares was in appropriate and there were certain unfair things happening there.

HEICO was not part of hat complaint, but we are aware of it really just to the extent that everybody else is. So, I don't know what the timing is on this. I think these kinds of things can take a long time. I don't know what possible remedies could occur.

We have not baked any of that into our projections or guidance, because honestly, we have no idea of what is happening. I mean, we have confidence and conviction in our opinion as to what's happening there, and believe that IATA has a tremendous amount of credibility and tremendous information on this.

So, if they have complained, I believe that it's a very serious issue, but I don't know where it is going to end up or the timing of it..

Got it. Thanks a lot guys..

And I think Carlos also wanted to stand on something..

Oh, yes..

Okay. I wanted to just make a point because I don't want you or the other investors on the call to lose sight of the fact that geography measures mentioned earlier that's there for repair and overhaul. We are very proud of the guys this quarter. They had growth.

And last year we had growth in our repair and overhaul business but it was the drag down, if you would, was highly concentrated, and it was geographically concentrated.

And as we talked about it at the end of December, we had a feeling and our team members in that particular business area had a feeling that you know, that was not a sustainable drag, if you would, or deferral about repair type work down in that part of the marketplace.

So, we did see some improvements in that area, and we did have growth in our repair and overhaul, and parts business, and we were proud of the guys there. I hope that adds a little color to your initial question..

Yes, definitely, thanks a lot guys. Nice quarter..

Thank you..

Thank you..

Okay. That was our final question. I will now turn the conference back over to you..

Well, I want to thank all of the folks that have been on this call, and one second -- for your interest in HEICO. Apparently, a lot of people have begun to focus on the company, and we are very happy. We work very, very hard. As you know, we consider all shareholders partners.

We are probably the largest shareholder in Mendelson family, and our executive management team and the company's for our 1K plan. So, we have to lead by example. And as long as we do the right thing selflessly for ourselves, every one of our shareholders who we consider partners will continue to do well.

In that game, somebody just gave me a paper that shows that the market approved what we did. This morning, we had a new high and the HEI stock of 88 and on the HEI A we were 7590.

So, I think that the stock market has recognized what all of you investors have recognized and so many of you on this call have been long-term investors in HEICO, and we thank you so much for your continued confidence.

We try to earn it every day, and we look forward to speaking to you at the next quarter two conference call, which will be I guess some time during the month of May. So, thank you all, and if you have any questions, as you know, we are available, Eric, Victor, Carlos, me, will try to answer your questions.

Thank you all, and thank you for your confidence..

So this concludes today's conference call. You may now disconnect..