HEICO Corp (HEI.A) 2008 Q4 法說會逐字稿

Welcome to the HEICO Corporation fiscal 2008 full year and fourth quarter earnings conference call.

I will now turn you over to your host, Laurans Mendelson.

Thank you, and good morning to everyone on this call. We welcome you to the HEICO fourth quarter as well as the full fiscal 2008 earnings announcement teleconference.

I'm Larry Mendelson, the CEO of HEICO Corporation, and I'm joined here this morning by Eric Mendelson, President of HEICO's Flight Support Group; Victor Mendelson, President of HEICO's Electronic Technologies Group; and Tom Irwin, HEICO's Executive Vice President and CFO. Now before we begin, Victor Mendelson will read a statement. Thank you. Certain statements in today's conference call will constitute forward-looking statements which are subject to risks, uncertainties, and contingencies.

HEICO's actual results may differ materially from those expressed in or implied by those forward-looking statements as a result of factors including, but not limited to, lower demand for commercial air travel or airline fleet changes, which could cause lower demand for our goods and services, product specification costs and requirements, which could cause an increase to our cost 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, HEICO's ability to introduce new products and product pricing levels which could reduce our sales or sales growth, HEICO's ability to make acquisitions and achieve operating synergies from acquired businesses, customer credit risk, interest rates, and economic conditions within and outside of the aviation defense space and electronics industries which could negatively impact our costs and revenues, and HEICO's ability to maintain effective internal controls which could adversely affect our business and the market price of our common stock.

Parties receiving this material are encouraged to review all of HEICO's filings with the Securities and Exchange Commission including but not limited to filings on Forms 10-K, 10-Q, and 8-K. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise. Thank you. Thank you, Victor. And now before reviewing the fourth quarter and the full year operating results in detail, I would like to take a few moments to summarize the highlights of our record setting fourth quarter and full-year results.

Both Flight Support and Electronic Technologies set record sales and record earnings in the fourth quarter of fiscal '08 combining for an overall 12% improvement in consolidated sales, and a 20% increase in consolidated operating income over the fourth quarter of last year. Our consolidated fourth quarter net sales, operating income, and net income represent record quarterly results for HEICO.

Consolidated operating margins improved to 18.3% in the fourth quarter of '08, up from 17% in the fourth quarter of last year. The higher sales and improved margins contributed to a 27% increase in consolidated income over the prior year's fourth quarter.

Full-year net sales, operating income, net income, and cash flow from operating activities represent all-time record results for HEICO for the third year in a row. Also, for the third consecutive year, we are proud that HEICO was named as one of the 200 best small companies by Forbes magazine.

Earlier this week, we announced a 20% increase in our semiannual cash dividend which has been paid consecutively since 1979. By raising the cash dividend for the second consecutive year, our board of directors' goal is to reflect its continuing confidence in HEICO's growth strategies and to continue to reward our shareholders while retaining sufficient capital to fund our internal growth objectives as well as our acquisition strategies.

We believe that each of these events provide further indication of the concentrated efforts for long-term sustainable growth at HEICO. As I have said many times before, we consider HEICO a growth Company, and we believe that this year's performance is definitely proving it again. We remind you that since 1990, when this management took over HEICO, our net sales has grown at a compound annual rate of 19%, and our net income at a compound annual growth rate of 20%.

Focusing on guidance for 2009, based upon the general economic outlook, we have tried to be very conservative in our 2009 guidance. Our goals of 20% net income growth for medium and long-term growth have not changed. But visibility into 2009 is very cloudy at the moment. So we have elected to be conservative. This is in keeping with our past practices.

Over the past few years, we have increased guidance as the year progressed, and hopefully we can do so this year, too. At this moment we are not completely positive. Many companies are reporting large projected decreases in revenue and net income, but HEICO is still expecting a growth year in 2009.

Drilling down into the detail, overall consolidated net sales in the fourth quarter of '08 increased 12% to a record of $156.7 million, up from $140 million in the fourth quarter '07 and increased 15% for the full fiscal '08 to a record $582.3 million, up from $507.9 million in the prior year. The record quarter and full fiscal year sales figures reflect strong sales growth both in Flight Support and Electronic Technologies.

Our consolidated organic growth was a strong 9% despite a slowing economy and accounted for approximately two-thirds of the $74 million full fiscal year increase in consolidated net sales with the remaining $25 million attributable to acquisition. Net sales of Flight Support increased to a record $116.5 million in the fourth quarter of '08, up from $103 million in fourth quarter '07.

The increase in Flight Support's revenue reflects organic growth of approximately 10% and the impact on net sales from three bolt-on acquisitions completed during fiscal '08. Flight Support's net sales for the full fiscal '08 increased to a record $436.8 million, up from $383.9 million in the full fiscal '07, reflecting organic growth of approximately 10% despite airline capacity reductions, as well as the impact on net sales from the aforementioned acquisitions.

The organic increase in Flight Support revenue reflects our continued success in developing and bringing to market new products and new services. Net sales of Electronic Technologies increased to a record $40.3 million in the fourth quarter of '08, up from $36.9 million in the fourth quarter '07. Electronic Technologies' net sales in the full fiscal '08 increased to a record $146 million, up from $124 million in the full fiscal '07 year.

This reflects organic growth of approximately 9% as well as the impact on net sales from two prior year acquisitions. The organic increase in Electronic Technologies' revenue reflects increased demand for certain of our products.

In the fourth quarter of fiscal '08, organic sales growth of Electronic Technologies approximated 5% which is in line with our longer term growth expectations of mid to upper single-digit growth rates. Net sales for the full fiscal '08 by market were composed of approximately 69% from commercial aviation industry, 16% from the defense and space industries, and 15% from other markets, including medical, telecommunications and electronics. This sales mix is comparable to what we experienced in full fiscal '07.

Moving on to operating income, our consolidated operating income in the fourth quarter '08 increased 20% to a record $28.7 million, up from $23.8 million in the fourth quarter '07. Consolidated operating income in the full fiscal '08 increased 23% to a record $105.8 million, up from $86 million in the full fiscal '07, and this reflects strong earnings in both of our business segments.

Operating income of Flight Support in the fourth quarter '08 increased 24% to a record $21.5 million, up from $17.3 million in the fourth quarter '07, and increased 20% in the full fiscal '08 to a record $81.2 million, up from $67.4 million in fiscal '07, reflecting increase in net sales as well as an increase in operating margins resulting principally from favorable product mix.

Operating income of Electronic Technologies in the fourth quarter '08 increased 5% to a record $11 million, up from $10.5 million in the fourth quarter '07, and increased 14% in the full fiscal '08 to a record $38.8 million, up from $33.9 million in full fiscal '07 reflecting an increase in net sales and strong gross margins resulting principally, again, from a favorable product mix.

Corporate expenses in the fourth quarter of '08 decreased to $3.8 million from $4 million in the fourth quarter '07 and decreased to $14.2 million in the full fiscal '08, down from $15.3 million in fiscal '07. As a percentage of net sales, corporate expenses have declined to 2.4% in the fourth quarter '08, and in the full fiscal '08, down from 2.8% and 3% in the comparable periods in fiscal '07. We do continue to focus on controlling general corporate expenses as well as lowering regulatory compliance costs.

Our consolidated operating margins improved to 18.3% for the fourth quarter of '08, up from 17% in the fourth quarter '07. Our consolidated operating margin of 18.2% for the full fiscal '08 exceeded our own expectations, as well as the 16.9% reported for the full fiscal '07, principally reflecting higher operating margins within the Flight Support Group.

Operating margins of Flight Support reflected a favorable product mix as margins improved to 18.4% in the fourth quarter '08, and 18.6% for the full fiscal '08, up very nicely from the 16.8% and the 17.6% margins reported for the comparable periods in '07. Operating margins of Electronic Technologies were very strong, or 27.4% in the fourth quarter of '08, and 26.6% for the full fiscal '08 versus 28.4% and 27.3% for the respective periods of '07.

The slight decreases in margins year-over-year reflect impairment charges of $1.8 million in aggregate, which were recorded in the fourth quarter of '08 related to the valuation of certain intangible assets associated with prior year acquisitions. We believe that this will result in lower amortization charges to income in the future.

Diluted earnings per share increased by a strong 25% to $0.50 a share in the fourth quarter '08, up from $0.40 a share in the fourth quarter '07, and increased $0.33, or 23%, to $1.78 for the full fiscal year of '08, up from $1.45 in the prior year. Depreciation and amortization expenses increased to $3.7 million in the fourth quarter of '08, up from $3.2 million in the fourth quarter '07, and increased to $15.1 million for the full fiscal '08, up from $12.2 million in the prior year.

The increase is primarily due to increased amortization of acquired intangible assets and depreciation of acquired facilities and equipment relating to certain acquisitions. In addition, in the fourth quarter '08, we recorded the noncash pre-tax impairment charges of $1.8 million that I referenced earlier. These noncash charges decreased net income by $1.1 million, or $0.04 per diluted share.

Research and development expenses totaled approximately $4.6 million in the fourth quarter '08 versus $4.7 million in the fourth quarter '07. R&D expense increased 12% to $18.4 million in the full fiscal '08, up from $16.5 million in fiscal '07. We believe that this will definitely benefit future periods.

The addition of new FAA PMA approvals continues to be a critical strategy supporting our medium and long-term growth. We now have over 7,000 parts approved by the FAA, and new parts released by our R&D groups in fiscal '08 totaled approximately 450 and exceeded our expectation of about 400. We are targeting approximately 500 new PMA certifications in fiscal '09.

We also have a number of new products under development in Electronic Technologies, and we are budgeting an increase to approximately $21 million in R&D spending for fiscal '09. SG&A expenses as a percentage of net sales for fiscal '08 and '07 were both 18%. In the fourth quarter of '08, SG&A expense as a percentage of sales, net sales, increased to 18.3% compared to 17.7% in the fourth quarter, and that's due to impairment charges recorded for certain intangible assets which I mentioned earlier.

The increase in SG&A expense to $28.7 million for fourth quarter '08, up from $24.8 million in the fourth quarter '07, and $104.7 million for the full fiscal '08, up from $91.4 million fiscal '07 is due principally to higher operating costs, primarily personnel related associated with the growth in sales, and it also includes the impact of some acquisition. Interest expense in the fourth quarter of '08 decreased to $363,000, down from $855,000 in the fourth quarter '07, principally due to lower interest rates and a lower average balance outstanding under the revolving credit facility.

Interest and other income in the fourth quarters and fiscal year '08 and '07 were not significant, fourth quarter year-over-year were higher although de minimis to our overall results and that was really the result of investment losses in certain designated retirement funds which belong to employees and Tom Irwin later on can explain all the detail, but the bottom line to it is that there was no impact on HEICO's P&L. It's just reflected on two separate lines on the P&L statement.

Income taxes. Our Company's effective tax rate was 33.7% in the fourth quarter '08, 34.5% for the full fiscal '08, compared to 34.1% in the fourth quarter '07, and 33.2% for full fiscal '07. The 1.3% increase in full year effective tax rate is principally due to the benefit of an income tax credit for qualified research and development activities the Company recognized for the full fiscal '06 year in fiscal '07, upon the retroactive extension of these tax credits in fiscal '07.

The aggregate tax credit, net of expenses, increased net income by approximately $535,000, or $0.02 per diluted share for the full fiscal '07. Had nothing to do with '08. Minority interest of consolidated -- and share of consolidated income was $4.9 million in the fourth quarter of '08, $4.3 million in the fourth quarter of '07.

The increase from the fourth quarter of '07 is principally attributable to higher earnings within Flight Support, of which Lufthansa has a 20% ownership interest, as well as higher earnings within certain subsidiaries of Electronic Technologies in which minority interests do exist.

Moving on to the balance sheet and cash flow, our financial position remains extremely strong. Cash flow from operating activities for the full fiscal '08 totaled a record $73.2 million, up from $57.5 million in '07. Our working capital ratio strengthened even further to 3.1 as of October 31, '08, versus 2.5 October 31, '07. DSOs of receivables equaled 52 days October 31 of '08, down from 54 days as of October 31, '07.

We continue to closely monitor receivable collection efforts to manage our credit exposure in light of economic strains facing many of our customers. The inventory turnover rate as of October 31 was 131 days, comparable to the 128 days as of October 31, '07. No one customer accounted for more than 10% of net sales and our top five customers represented approximately 20% of consolidated net sales in full fiscal '08 as well as '07.

Our long-term debt to capitalization ratio increased to 8% as of October 31, '08, down from 13% as of October 31, '07. This reflects net year-to-date payments during fiscal '08 of $16 million under our revolving credit facility, and as you well know, our leverage ratio continues to remain extremely low at 0.5 to 1.

Net debt, which is debt net of cash on our balance sheet, October 31, totaled a mere $25 million, and fiscal '09 cash flow from operations is estimated at $75 million to $80 million. Capital expenditures in full fiscal '08 were approximately $13.5 million.

Looking ahead, as we look at fiscal '09, we will continue our commitments to develop new products and services, increase market penetration with our customers, identify select acquisitions opportunities, and maintain our strong financial position. This is a strategy that we have followed continually for many years and no change is planned.

With respect to the discussion of global recession facing us in fiscal '09, we do recognize that we will face certain headwinds. Specifically, we would expect global airline capacity to shrink in '09 and those estimates are somewhere between 1% and 4%. As mentioned previously, our electronic Electronic Technologies Group has seen some weakness in orders within our medical and electronics markets.

However, we do have certain tailwinds as well. Specifically, as we offer our customers substantial cost savings, therefore, our value proposition to -- continues to be well received by airline customers. As a matter of fact, some of our customers save between $30 and $40 million a year over comparable OEM pricing by purchasing from us. Those are actual savings realized.

Lower oil prices offer our airline customers more capacity flexibility. Lack of availability of credit to finance new airplane deliveries could force airlines to slow retirements of older aircraft if sufficient passenger demand exists.

And keep in mind that the value proposition of purchasing new aircraft, when fuel prices have dropped considerably from $147 a barrel of oil to around $40, the economics of purchasing new aircraft versus running the old aircraft which burn more fuel, that value proposition went out the window, and it's much more economical for an airline to continue flying older aircraft. That, in turn, is a tailwind for us and very positive.

We have accelerated our new product development. We are a financially very strong Company, and the recession has absolutely no impact on our ability to finance new product. We continue full tilt as fast as we can.

We expect relative strength in demand within our defense, homeland security, and satellite markets. Acquisition opportunities seem strong and generally at lower purchase multiples and with less competition due to the credit markets. I want to point out that we have a $300 million credit facility, we have $25 million outstanding which can be paid off in three or six months, whatever it is, in a very short period of time.

We have a group of banks that is calling upon us almost daily to take down the loan, why don't we go out and buy another company, so we have absolutely no pressure, and we're really in the cat bird seat when it comes to the ability to make cash acquisitions, and we are studying many different opportunities. Finally, HEICO does not depend on overall market growth as a key driver of our growth.

As you know, we manufacture -- we develop new products, and we increase our product offerings, our SKUs, by about 400 to 500 new products every year. Overall, we are targeting growth in sales, earnings, and cash flow in fiscal '09 despite the global economic strains facing the markets and the customers, including the impact of expected capacity reductions in commercial airlines.

Based upon current market expectations, we are targeting fiscal '09 earnings at approximately 6% to 10% over fiscal '08 on net sales in the range of $610 million to $620 million. Substantially all of this revenue increase is represented by organic growth. We expect the revenue growth of Flight Support to continue to exceed the revenue growth of Electronic Technologies, and I'd point out that potential acquisition opportunities could and would add to these growth targets.

We have a policy of making accretive acquisitions in the first year -- the acquisition has to be accretive in the first year. Fiscal '09 cash flow from operating activities is anticipated to increase to approximately $75 million to $80 million, and our CapEx in fiscal '09 are expected in the range of $15 million to $18 million.

Historically, our expectations have not been met, and we normally spend less in CapEx than we start out with our budget at the beginning of the year. Excluding the impact of future acquisitions, we expect to fully pay off our outstanding debt, probably during the first half of fiscal '09.

In closing, I want you to know that we continue to adhere to the -- to our long-term strategy of developing and marketing new product and services. We believe that the strategy has resulted in the 20% compound annual growth rate in net income that we have achieved since 1990.

Further, we remain committed to these long-term growth objectives following our disciplined business model as we face near-term economic challenges. That is the extent of my prepared remarks, and I would like our operator to open the floor for questions and discussion.

(Operator Instructions) We do have a few questions. Our first question is from Arnie Ursaner from CJS Securities.

Hi, good morning.

Good morning, Arnie.

Can you focus a little bit on the ETG segment of your business? Give us a sense of the backlog you have? You mentioned the slowdown. Remind us the percent of revenues tied to medical, perhaps, and are you seeing actual cancellations or deferrals?

Arnie, I'm going to ask Victor, who is President of ETG, to respond. Thank you. Arnie, how are you?

Very well.

Good. The answer is that within the ETG, a little less than 20% of our business is tied to medical markets, and we are seeing no cancellations that I know of at this point.

We have seen some deferrals, and we've seen orders that we had hoped or expected to get not received, which could either be deferrals or cancellations. In terms of -- what were the other questions?

The other question there is backlog and how it might compare with previous periods?

Arnie, this is Tom Irwin. Within the ETG group the backlog is roughly flattish with prior years.

Okay, Tom, as long as I have you, two very quick questions. Your tax rate guidance for '09?

Our tax rate guidance for the '09, we would expect it to go up a bit, and by explanation, we are scheduled to buy some minority interests, so you would expect the minority interest percentage in some tax -- not to get overly complicated -- in some LLCs that are taxed as partnerships. While the tax rate may go up the combined minority interest and tax rate of roughly 52%, 53% would be relatively constant.

Tom, as long as again I have you, your run rate corporate expense number, please?

I would say it should remain as a rough percentage of sales as our targets going forward. That would be 2.5% to certainly below 3% of sales.

If I can ask a final question of Larry, you are already basically 90%, 95% of the way through the current quarter, because last quarter is your fiscal year end. Can you give us a feel for trends in the current quarter, perhaps comparing it to Q2, your Q4 or calendar Q3? What are you actually seeing in your business currently?

Well, Arnie, I really don't want to go there, because we would be telegraphing, I think, too much at this point. I think we're going to have a reasonably good quarter, and I think the quarter -- we don't give quarterly guidance, and I'm concerned that people begin to lock on to quarters. We really don't know, and there are things like taxes and other oddball events that happen in any particular quarter.

ETG's shipments and things like that. So I really -- I mean, I don't expect anything unique one way or the other, but at this point, I really don't want to telegraph more because we don't focus quarterly, and we try to avoid quarterly guidance.

At least I could try. Thank you very much.

Thank you, Arnie.

Our next question is from Chris Donaghey from SunTrust. Please proceed with your question.

Hi. Good morning, guys.

Good morning.

This may be a question for Eric, but Delta and Northwest, now that the merger has closed, they have kind of been talking about some of the things they are going to do with their fleet structure that, I guess, I'm not totally familiar with how these large mergers are executed, but they're talking about the way they are going to mix the fleets and to try to drive a more efficient fleet.

Can you walk me through what, if any, impact that has? I know that Delta has historically been a very significant HEICO customer. Northwest, not so much. What do you see as the opportunity now that the merger has closed?

I think there's a lot of opportunity for us. As you point out, though, Delta has historically been a very strong HEICO customer and is a partner of ours under contract to buy a large group of our products. I think that there are natural cost savings opportunities available to Northwest and Delta will share, I think, some of those best practices and some of those opportunities with northwest and that should be to our benefit.

As far as the specific fleets, I don't know exactly what the fleet combination is going to look like there at Delta. Delta came out and said they were going to be keeping their MD-88s for awhile, and that should be good for us. But I would anticipate continued growth at the combined Delta and Northwest for HEICO.

Okay, great, thanks. Then just as we look at the margin guidance for 2009, operating margins are basically roughly flat at about the midpoint of your guidance, but you are actually getting some revenue growth, and with the majority of that growth, it sounds like, or a higher percentage balance towards the Fleet Support Group. Are you not seeing much leverage in that, or is this still just about making sure that you have a conservative target set as you head into the new year?

I think it's more the latter. We would rather err on the conservative side because of the visibility. It's very confusing out there. I think we just -- if anything, we'd rather err on the conservative side of predictions.

Okay, great. One last question, Larry. Just as you look at the M&A pipeline, you talked a little bit about the multiples. Can you talk about, maybe qualify the mix of opportunities you are looking at? Are they shifted towards Flight Support Group? Are they more Electronic Technologies Group type companies? What is the mix of potential acquisitions look like out there? Thanks a lot, guys.

The answer is the acquisition lineup is both. We have potential in both Flight Support and Electronic Technologies. We're looking at a number of companies. We're being extremely cautious.

The key is the outlook and how the companies are going to do in 2009, '10, '11, and '12, what kind of businesses they turn out to be. And so I think the opportunities are in both places, and I cannot predict at this time which opportunities we'll take and which we're going to pass on. But we're doing very thorough due diligence.

We think that because of our strong balance sheet, we're not going to -- we don't plan on spending all that money, and we're going to be conservative, and we're going to husband our resources, as we always have. And we're going to try to make the best transaction that we can for the -- buying the best companies that we can, but at this point, it's both. Both Electronic Technology and Flight Support.

Great. Thanks a lot, Larry.

Thank you.

Our next question is from Chris Quilty from Raymond James. Please proceed with your question.

Thanks, gentlemen. Congratulations on the good results, and I would call the encouraging guidance. With regard to the guidance, just a quick question.

I guess the various news reports, it looks as though we can probably expect about a 10% capacity reduction in aircraft fleets in 2009. Is it fair to assume that you have those sort of numbers embedded in your expectations to get to the sort of 5% to 7% top line growth, or are you using a different number?

Well, the answer is, I think the 10% is probably a domestic number. Internationally it's less. So as I said earlier, maybe somewhere -- if you take the whole ball of wax, it may be 1% to 4% overall. But we have tried to bake in all of the information, domestic, international, into our estimates as the best we can, and it is based upon our discussions with airline customers, what they expect what they plan, and we put that all together in the budgets. When our operating people prepare the budgets for the year, they go out and we do it from a bottoms up basis.

We analyze customer by customer, part by part, and our people put together a budget that we think is realistic. So I think we're considering everything that we know. Now, saying that, that's why I say the visibility is cloudy. It could be either more or less.

And a lot also depends upon the type of aircraft that they take out of service. So it's not just a simple thing, well, it's 10% or 5%, and if it's an aircraft that we have a lot of content, it could impact us more. If it's an aircraft that we don't have much content on, it's going to impact us less.

So it's a very tough analysis. But to answer your question, I think we've been as realistic as possible getting the input from all of our customers in putting together this guidance.

Fair enough. Appreciate that. So, bottom line, the guidance reflects a little bit stronger earnings growth than revenue guidance, and it looks like you are expecting a steady tax rate. Did I read that right, Tom?

Well, I think net-net, the tax rate may go up, but the minority interest rate would go down a little bit. I think the other variable is, as Larry mentioned, with basically contemplating paying off the debt, our interest would go effectively to zero. So there would be a pickup in earnings per share based on the fact that our net interest would decrease as well.

Okay.

That assumes no acquisitions.

Right. And that small amount of leverage is coming through primarily gross margins or operating expense? Just simplistically.

I would say typically it comes from a combination of both. We really try to watch manufacturing costs as well as in the SG&A area.

Okay, and I know, Larry you don't like to get into quarterly earnings expectations, but just to clarify, a lot of companies out there, certainly consumer or even industrial have experienced over the course of September, October, into November, sort of dramatic shutdown in business and demand.

It's probably fair to assume, due to the nature of your products and your customers and how the products are used that you haven't had any of that disruption in your business?

I think that's an accurate statement. We have not had dramatic shutdowns in demand like that. I can tell you, as a it matter of course, every November, because we have October 31st year end, our guys very often try to push things in October, so we see November as light in most years anyway. So that's standard.

But it's nothing really out of the ordinary yet, and, we're waiting to see if the other shoe falls, but, again, I don't want to get into quarterly stuff, but I don't see any major drop.

Okay. And how about, Tom, exposure on the receivable side? Do you have any customers out there to be worried about? No Big Three exposure, right?

The answer is we, in our industry, with airlines, in particular, we watch customers very closely. We think our reserves are consistent with our understanding and so forth. You never know, but I think we've done the best we can in terms of analyzing it. We're not aware of any risk that's out there that we haven't considered at this point.

Also, Chris, keep in mind, as you know, with the fuel prices dropping, the predictions are that airlines are going to be a lot better off in '09, even with the fall in traffic. So I think financially the message is that airlines are probably a lot better off, but I don't believe we have any significant exposure to accounts receivable.

Okay, and final question, if I can. Any update on the BA relationship and Rolls-Royce parts and any headway you've made?

I'm going to ask Eric to respond. Chris, we're always very sensitive about speaking about particular details about what's going on at particular customers for competitive reasons, but I can tell you our relationship with BA is progressing very nicely. And just sort of like to leave it at that at this point.

I think there's a lot of opportunities for them to reduce their costs. We have a very good relationship, and they've had very good experience with our products, and I expect that business relationship just to continue to grow. Chris, this is Larry, as an additional color on that -- as you know, and I'm saying it not so much for your benefit, but for some of the other listeners on the call, I've always said that HEICO is a kind of glacially growing Company.

Nothing -- if we announce we had a new customer for a new airline that we never sold before, the impact would not be significant at the beginning, but historically, these relationships grow, and they add product to their purchase line, and they add product, and it's very slow, and in any one quarter or any one year, there wouldn't be anything significant that would really impact in a major way the bottom line.

But if you start to look -- you take all of these few hundred customers that we have, and each one buys a little bit over a period of time, it's like a snowball. And that's really how we grow.

That's why in any one quarter we wouldn't expect to see a big jump in anything or a big drop, even if we lost a customer or we gained a customer. So it's, I think, very consistent, and that's the way we run the Company.

Great. Keep up the consistency.

Thank you, Chris.

Your next question is from Tyler Hojo from Sidoti & Company.

Good morning, everyone.

Good morning.

First question, you talked to the 500 parts targeted for fiscal '09. I guess I'm wondering a couple different things on that front. First, I mean, what is the biggest headwind in terms of getting that many parts out? Then kind of a follow-up to that, where do you cap out? I mean, is it 600 parts a year? 700? It seems like maybe there could be some up side there.

Tyler, the answer to that is the biggest headwind is really getting the part approved by the airlines. If we have a couple hundred customers, if you take the top 20 customers, each customer has to approve the part in engineering, and they have to approve it in purchasing and so forth. And if you just take -- take 400 parts and 20 airlines, that means you have got roughly 8,000 SKUs that we have to logistically get approved in 20 different airlines. And we have more than 20 customers.

So it's the logistics of getting the part approved, getting the people in the airline to approve it, and you would think this is a very easy thing, but it's not. And it's why a lot of people say, well, how come other people just didn't go into this business? Because you can't. It's so difficult to get parts approved by airlines, and that takes more of the time.

The development of the part with the FAA, we're very good at that, and I probably -- we could probably double the number of parts we get through the FAA approved, because we do that very, very well, and we have a great staff to do it. But we could get 1,000 approved by the FAA, and if we can only sell, say, 400 or 500, we would start to get a backup and an inventory that wasn't moving, and it wouldn't make any economic sense.

I mean, I would love to do 1,000 parts a year, but at this point, it's pushing them to get them approved. And that's really the barrier, the gatekeeper, the most significant gatekeeper. Not to say 1,000 parts at the FAA would be easy. It would not. But that's probably more doable than getting them approved at the airline.

So we're pushing as hard as we can, and we have programs in place with airlines to accelerate the approval process, and those programs are working, as you can see every year. Ten years ago we did -- in 1998 we did 25 parts. In 1999 we did 50. This year we're shooting at 500. So you can see we're constantly -- we're getting better at it, we're moving the target up, but that's the barrier.

So just kind of to sum that up, you think you're kind of reaching the ceiling, just from the airline perspective? The FAA side is not the barrier, is that right?

No, no. Again, we were moving -- we were at 50 -- 10 years ago we were at 50 parts, pushing the airline. Now we're it at 500. I clearly think we go to 1,000 in a couple years from now, but it's pushing, pushing, pushing. I push Eric, Eric pushes his people, everybody is pushing to get more parts approved, because that's the lifeline of our business.

Okay, great. And just one more, if I may. I think in some of the past calls that we've been on here, you have kind of given us some level of interest, just from new customers. So just some general commentary there would be very helpful.

Okay, Eric will answer that. Yes, Tyler, we've had a tremendous amount of interest in our products from new customers. We've got what we consider a new opportunity. It could be a new part from an existing customer or types of parts they haven't bought in the past, or it can be an entirely new -- a totally new customer to us.

Now, we sell most of the airlines around the world at least something, so most of the opportunity is just selling our existing customers more product than we're currently selling. So there is, I can tell you throughout the airlines, around the world, massive interest in products that they are not currently focused on.

And I have now been with HEICO for 19 years, and I have never seen this level of enthusiasm or interest in what HEICO can offer them. I think it's because we have matured into a fairly significant Company. In many cases we are in the top, clearly the top 10 of suppliers, technical parts suppliers to these customers, and when you think of it, that our -- the other companies in the field are the major suppliers, such as OEMs such as Boeing and Airbus, United Technologies, and General Electric.

To be in the company of those folks is really pretty special. And they see the breadth of product that we're offering, and frankly there is no reason why they shouldn't be buying all of the other product from us. And the interest now is so overwhelming, that we're really being very carefully to pick and choose and make sure we sell -- that we select the right product for development, and we're able to get it sold to the airlines, get it manufactured, rather than just obtain PMAs, and sell it, for example, to one customer.

But there is just huge enthusiasm, I think due to the market conditions you see today. Most of the airlines around the world are seeing forward bookings fall, so they know that there's a crunch coming, even though fuel prices have dropped and continue to fall, and they know that this is just something they have to do.

Thanks for that.

You are welcome. Thank you.

Our next question is from J.B. Groh from D.A. Davidson. Please proceed with your question.

Good morning, guys.

Good morning.

Couple questions. One for Victor. When you add back in that impairment charge, your margins in Electronic Technologies were like close to 32%. Obviously, I think you'll probably say that's not a sustainable level. Is there anything that went on in the quarter that made it so great or what should we look forward to in fiscal 2009?

Yes, definitely that was a high quarter. I would not look for that in 2009. I would look for things closer to their historical levels, in the 27% range, 26%, 27%, somewhere in that range, I would think.

And the mix was what drove the higher number in the quarter. I think earlier in the year we had some lower margin periods, and it's kind of the typical thing is we've seen in prior years, mix driven as things kind of -- the higher margin stuff seems to move out in the fourth quarter.

So when we think of that mix, is it like the space type stuff, space and defense stuff that gets you the best margin and the medical is on the lower end of the spectrum?

I wouldn't say that's really the case. Our medical is also healthy in the fourth quarter and was strong in the fourth quarter, as well. It's -- when you look at our mix, it really drills down to the product level and not always just the end market.

Got it. Okay. Then kind of a crazy one for Eric. Eric, have you ever seen a customer, when times improve for the airlines, going -- reversing trends and going from using an alternative part back to the OEM? Has that ever happened?

I don't want to say that it's never happened, but I can't, off the top of my head, recall a time that it has happened.

Typically once our product is entered into the airline system as interchangeable, there really would be no reason to go back to the OEM.

The only reason would be maybe availability or something, right? I can't imagine --

Right. If we, for example, if the market turns up rapidly and we didn't have enough inventory for a short period of time that could happen, but I would say that is very, very infrequent.

I mean, once -- we've said many times that these industry downturns really give us the opportunity to grow market share, and we put down the roots, and we explain the cause and get more products accepted at the airline, and then when demand recovers, we really reap the benefits of that. So right now, we're planting seeds.

Obviously, we're dealing with whenever airlines pull aircraft out of service and their softness in [ASMs] that hits us in terms of volume, but it's mitigated by picking up the new products as well as planting the seeds that we ultimately harvest down the road, as they provide additional ASMs.

Great. Thanks for your time, guys. Congratulations on the quarter and the year.

Thank you. Thank you.

Our next question is from Eric Hugel from Stephens, Inc.

Hey, good morning, guys. Good quarter.

Thank you. Good morning.

Good morning. Can you talk about -- I think on the second quarter call you talked about having some delays in the ETG business developing some product, and then sort of that caused to you lower your revenue expectations, that you thought it was going to ship out next year. Can you give us an update as to where you stand on that stuff?

Yes, I think some of that stuff came out in the back end of the year there, in the fourth quarter, and we got through most of it in the fourth quarter.

Great. Can you talk about, with regards to your M&A opportunities, I know I've talked to many companies. Sort of what I'm hearing is, yes, there's a lot of companies out there, but pricing hasn't really adjusted for what sort of the market is showing on the public market. Can you sort of talk about your opportunities in terms of, is the pricing something that you would be comfortable with?

The answer is that the pricing hasn't come -- we haven't seen wholesale drops in prices the way you've seen it in the public market. However, I must tell you that as this recession deepens, opportunities that we had lost out on are now coming back to us. So, for example, 90, 120 days ago there was an auction. We put in a bid, a letter of intent.

It was a very interesting company. We liked it very much. They got back to us and said that we were not the high bidder, and they thanked us for our time, and that was the end of it. We're used to that because we don't do well in these auctions.

Earlier this week on Monday, they called us back, and they said the company they were dealing with had some problems, a public company, whatever it was, would we be interested in coming back and buying the company at the same price that we had offered previously. And our answer was, yes, as long as the outlook for the company that we were looking at hadn't changed significantly.

So one of the things, we don't pay high prices, we don't buy 10 times EBITDA and stuff like that. So our pricing has normally been five to seven times EBIT, maybe five to six times EBIT, so we didn't go way up, and we're not expecting to go way down. We don't want to buy something very cheap because it's no good or damaged merchandise.

We'll pay a fair price, but we won't pay an excessive price, but we are seeing deals failing. People are not getting the financing that they thought they could. Of course, all the financial buyers are out of the market. There is no such thing. So if people want to sell and they want to liquidate their investment, we're available.

We have plenty of money, and -- but we are seeing opportunity starting to pop up, but no discounted prices yet.

Any material change in sort of size of deals, getting larger, getting smaller, or about the same?

I would say for us, it's about the same. I mean, we have a strategy that -- we have a growth strategy, and -- in that we can continue about same size transactions.

Lastly, can you just address maybe the competitive environment within the PMA industry? I know, for example, last year Delta signed a 10-year billion dollar deal with Chromalloy for CFM56-5 and CFM56-7 PMA parts, and I'm sure airlines are around -- you talked about heavy demand. Do you find airlines saying, yes, great, HEICO, but maybe you guys have been a little too successful and we don't want to rely on one supplier for these parts?

I don't think that's the case it at all, but I am going to ask really Eric to respond. Incidentally, Chromalloy wasn't competitive with what we were -- it's a totally different part, just like when Pratt & Whitney announced they were going to make alternative parts, they -- their parts were not our parts. So it's -- it wasn't a competition between Chromalloy and us or Pratt & Whitney and us either, but let Eric give you more color. Yes, Eric, just to give a little background, HEICO is the undisputed leader in the PMA business. We have a majority market share of alternative or what we call competitive PMA parts, which is substantial. United Technologies, about two years ago Pratt & Whitney came out and said they wanted to obtain PMAs primarily on life-limited parts for CFM56-3 engines, and since then they have successfully executed on that program and have have obtained the PMAs.

We do not offer any of the parts that -- I think there may be one part where there's a small amount of overlap, but on United Technologies PMA offering, HEICO does not offer those parts. They have just done the life-limited very complex heavy fast rotating parts that HEICO does not offer. Likewise, when Chromalloy came out with their program with Delta, it was very similar with Pratt & Whitney, and there is minimal overlap with HEICO's product line.

We have 7,000 PMAs across all parts of the engines as well as components, air frames, interiors, and our strategy is to be very, very wide in the products that we offer. I can tell that you I have not experienced any airlines being concerned about the size of our market share because, frankly, they want to create as much savings as quickly as possible.

And since we have a very broad library, and we have a lot of different products that we have obtained approval on, HEICO is clearly the best way for them to generate those cost savings. So I would consider the Pratt & Whitney as well as the Chromalloy offerings to be complementary and not competitive to HEICO.

Great. Thanks a lot, guys.

Thank you.

Our next question is from Jim Foung with Gabelli.

Hi, good morning, everyone.

Good morning, Jim.

I just have a couple of questions, Larry. I guess the first would be the industry downturn. That's affecting all the OEMs, and I'm just wondering, what's the likelihood of them matching your prices during the downturn? Because they clearly have a lot of excess capacity in the next couple years, and just to keep it full. Have they done that in the past where, they cut prices to be competitive with you?

The answer is no, but I'm going to ask Eric to give you more color. Jim, that's good question. Our strategy contemplated this for a long time, and when we develop a part our strategy is to take about 30% market share on each part. And we intentionally leave the OEM with 70%.

So if the OEMs were to go out there and cut price they would actually be hurting themselves much more than they would be hurting us, and it would be highly unlikely that the airlines who have switched to us would switch back for the OEM -- I'm very confident the airlines would not switch back at the same price. They would have to be substantially lower than we would, and that would assume that we wouldn't then match and do what we had to do to retain the business.

I think the OEMs understand that by cutting price they would just be hurting themselves and they would not be able to recover the business. Furthermore, if they did such a thing we would make sure that we offer our product to 100% of their customers, and we would be very aggressive and would view this as an opportunity for us to increase our market share well beyond 30%. So I really don't anticipate this happening.

If the's any help, when we look back at 2001, 2002, 2003, the OEMs did not cut price and did not go after us to increase market share. I think for the reasons that I just mentioned. Jim, just a little bit more color on that, and I agree with Eric completely, but keep one thing in mind. That most airlines that buy from us, particularly our partner airlines, after very long-term strategy in mind. They are not short-term players. You take the Lufthansas of the world, the Deltas, your major airlines, they are thinking very long term. And they understand that long term means a commitment to HEICO to buy its parts because we, out of the box, in good times and bad, are 25% to 40% less expensive. They can save $30 million to $40 million a year by buying our parts.

Now, they also understand that if the OEM comes in and says, okay, well, times are bad, we're going to give you -- we're going match HEICO's price. In theory they could put HEICO out of business because they're much bigger, and they could charge less. So if that airline purchased from the OEM at the reduced price and didn't purchase from HEICO, HEICO goes out of business.

And all of the pricing leverage that the airline has built up goes out the window. They understand that long term. They would say to the OEM, listen, guys, you want us to buy? You reduce your price across the 98% of the products that we don't buy from you, and give us long-term protection just the way HEICO is then we will buy from you.

Now, of course, the OEM is not going to give them long-term protection or a number of years, because that's where their growth comes from. Their growth comes from pricing, plus the fact that our market share, maximum, is 30% of any particular market. We're not interested in dealing with all the airlines and selling 80% of the market or 50%.

We're very happy in our strategy with 30%. Once we get 30%, sometimes we don't even care to sell another airline. So it's a very clearly thought out strategy between ourselves and the airlines, our partner airlines, where we give them enormous savings, and we have, for most of these guys, great loyalty.

And the loyalty comes because it's in their best interest to buy from us over a long period of time and not to go back to the OEM and put us out of business. So there's a very good reason why this has never happened.

So strategically, it makes a lot of sense for them to continue with you and not just jump ship on a tactical basis.

Absolutely. Now, saying that, there are a couple of airlines that will use us as a stalking horse, paying $100 for a part from the OEM, and then they'll come to us, we're $75, they go back to the OEM, the OEM says, okay, we'll give it to the you for $75.

And, sure, they'll buy it from the the OEM and we won't get the order, and they might do it another time, but guess what happens the third time they do that? Are we going to ramp up production and put another machine in our factory to supply them when they want us, then shut the machine down when they don't want us?

So we say, guys, we're sorry, we're sold out, we're not going to tool up to make parts for you on Monday, then get canceled on Wednesday and that kind of stuff. We are going to stick with our long-term, strong customers partners, and it works fine. And God bless the OEM.

What do you think happens to that airline? That airline ultimately winds up paying $120 for the part they thought they were -- they were paying $100, and they could have bought it from us for $75, they're now paying $120. So they're the ones sitting out in the cold.

They learn the hard way.

They learn the hard way.

Very good. I guess, can you talk a little bit about pricing, with commodity prices coming down substantially? How does your pricing look? Are your customers asking for price reductions with material costs coming down? Are you seeing deflation?

Eric, the answer is no because, remember, our commodity content is de minimis. Even on the up side we didn't see big pressure when commodity prices were going up, we weren't forced to increase prices, and the same thing on the down side. But Eric can give you more color on that. Yes, Jim, material as a percentage of our revenue is relatively small. So while we did see, obviously, some costs go up a couple years ago, it was never that significant. The unique part about our business and the aftermarket business is the OEMs continually raise prices.

So even though their costs may be going down, they are not passing this on to their customers, and HEICO has had a very friendly policy with regard to price adjustments with our customers. In particular, our partner customers, the folks that buy a lot of parts from us, so we're not seeing any significant movement one way or the other.

What percent of your cost of goods sold is material? Would you say about a third, or --

We don't break it out because of -- for competitive reasons, but if you take a look at what our gross margins are, and then you assume labor and overhead is the majority, then you can sort of take a guess and back into those numbers. But, Jim, it's not a significant amount.

Okay, and then just lastly, you talked about medical market, you are seeing softness there in the order intake. Are there any other markets that you are concerned about going in, as you look into 2000 2009? I guess some of the shorter cycle businesses that you might participate in. Is there anything you are worried about as you look out the next 12 months?

Jim, this is Victor. The answer is not at this point. We're watching all the markets, and we're being cautious on cost controls, et cetera, within the businesses. But at this point, as an overall market, the medical one is the one where we see softness, which I would anticipate would continue for some period of time, until I would expect there will come a point at which you will see that reverse.

I just don't know when. But I also suspect that some of the stimulus that's being talked about in Washington and the expansion of healthcare programs will ultimately be a major benefit to us, the timing of which I'm uncertain about.

Very good. Thank you very much, gentlemen, and good quarter.

Thank you, Jim.

We have another question from Arnie Ursaner from CJS Securities. Please proceed with your question.

Hi. Sort of a more general comment. I think in some ways, Larry, you are almost giving mixed signals. Your dividend increase was well above your normal and a very strong positive signal. You have expanded your credit line, which is a strong indicator that you have multiple opportunities for acquisitions, and yet you are giving pretty conservative guidance.

Maybe could you help reconcile those and also more specifically, remind us if you do or don't have a share repurchase authorization? And given where your stock is, and your incredibly strong balance sheet, have you thought about perhaps taking on a little bit of leverage which, I think, clearly you have indicated shouldn't influence your ability to grow both organically and through acquisitions?

Arnie, that's a very good question with a lot of perspective. And I think I can give you color on that. We, as you know, have, in the past, been conservative out of the box. When we give guidance for the prior year, we give our year-end numbers, and then we give guidance for the following year.

We generally, over the year, increase the guidance. And that's not because we're playing games or anything. It is just, A) because we're conservative, and we can't see out nine months. As I told you earlier, I can't predict on a quarter-by-quarter basis.

Historically, we have been lower -- as a matter of fact, one of the analysts on the call wrote in a piece that did he this morning that -- talking about last year, '08, for the full year earnings improved 23% to $1.78, or 3% above the midpoint guidance that management provided at the start of the year. That midpoint guidance was $1.73 to $1.76. So the low end was $1.73, and we reported $1.78.

The reason we do that is, one, we don't want to over promise. Two, particularly in this year, it's very hard to determine, with the economic climate where it is. So we want to be conservative, and we don't want negative surprises.

Number two, we are a very strong company financially, which you point out, and we did, I think, wisely redo our bank lines last April or May, and we have very advantageous interest rates. I haven't asked Tom what we're paying. What's our interest rate now with the LIBOR what it is?

It's basically five-eighths over LIBOR, which, short-term LIBOR is under about 1.5% right now.

So we're paying five-eighths over LIBOR, so our interest rate is now 2% or something like that, I don't know. But we are very, very active in the acquisition world. We are trying very, very hard, and we have a number of acquisitions on the table that our guys are -- in both fields, which I indicated earlier, in Electronic Technologies and Flight Support. We're looking at deals.

We're not -- as you know, we don't pay crazy prices. I think we have more picks now because we have the ammunition. We have all the money we need. We have a great bank. So, I mean, truthfully, if we come in at these numbers, and I'm not changing my guidance, our guidance. I'd be disappointed.

Now, I don't want people to run out and say, well, he would be disappointed, so therefore he's sandbagging the numbers, and they're really going to do a lot better and all that stuff, because I don't know. But the one thing you know, that the Mendelsons and Tom Irwin are pushing like hell to come in at 20%. Now, can we come in at 20% in this economic? I don't know. But we are doing everything humanly possible to make that happen.

I don't want to promise that we can do it it, because I don't know that we can do it. But all I can say is we are going to try very, very hard -- so all the things we're doing are pushing to make this the best year we've ever had, and even our guidance indicates it will be the best year. So as we go on in the second quarter and the end of the first quarter and the second quarter as the year rolls out, we will see how we do.

But I can tell you I'm pushing our guys very hard to finish the due diligence on certain transactions that would be very accretive, and if we can do it, and if we satisfy with the due diligence, we'll have good things to report. I'm an optimist by nature, and we're very aggressive in the Company to -- remember, we're the larger shareholder, so we have every incentive to make HEICO bigger and better, and that's what we've done. I don't know if this answers your question, but it's just some of my own rambling thoughts on where we are.

Okay, a couple of follow-ups to that. To the extent you normally think about your growth as 10% revenue, 20% earnings, we would, if anything, seem to have a larger pipeline of acquisition opportunities than normal this go-round.

Again, when you think about the guidance you normally provide or historically have provided, how much of that is typically acquisitions, and given the pipelines you have right now, if a few things go right, what sort of acquisition revenue might you be able to create for '09?

Well, again, two things. We don't look at the revenue side. We really focus on the bottom line, and net income and how accretive it is to the bottom line and cash flow and all that. But to give you a number, I really can't give you a number because some of these acquisitions, some are larger, some are smaller, and I don't know where we will -- we make acquisitions because they are good for the Company, and they add income, cash flow, benefits to HEICO.

I really don't know which one of these transactions is going to work and which ones won't. I mean, we've had some that have fallen through because we did the due diligence and we didn't like what we saw. So I can't tell you -- I don't know the answer to that question, and it's impossible to guess. But I think they could -- if some of them work, they could be very worthwhile transactions for us. And if they don't work, we're not going to add anything.

That's why we said we're trying to err on the side of conservatism and not promise too much, but, I mean, everybody who is a shareholder of HEICO understands that the dynamics of the business and how concerned we are, the management, to make this Company grow and grow bigger. I mean, nobody benefits more than we do, and -- because we're the largest single group of shareholders. So we are doing everything day in and day out to make this Company bigger, better, more profitable, successful.

So we look at it as all the other shareholders are our partners, and if we do well, everybody does well, and all I can do is assure you, and I think you know me at this point, a number of years, that's what we're doing.

Okay, do you have a share authorization in place?

We do. We do after buyback in place, and it's, what, 400? Roughly 400,000 shares. It's been in place for awhile. It was announced a long time ago. We haven't used it recently.

Final question, if I can, is on your business. Obviously, you have some of your parts sitting as inventory with airlines at any given point in time. To the extent there's a major slowdown in air travel, which we're all talking about at least a slowdown. The question is the magnitude. I'm assuming the customers take parts out of existing inventory and don't reorder as much. The sense I had is you had already been hit by that to some degree in your Q3. Can you update us? I'm assuming you talk to your customers all the time. Where are we in the inventory process at your customers?

Well, I think that we have a level of inventory that we keep at the customer. I don't think that's a significant issue. We don't expect to see inventory just sitting at a customer. The customers we have use this inventory, and they're likely to keep using the inventory. So we don't have like inventory sitting there doing nothing and just collecting dust. I don't think that's a serious problem.

Our bigger problem, and it's not a problem, it's part of the business, is that we make 500 new parts. We've said our target is 500, so if we put 500 new parts on the shelf and, let's say, we put an equal number, 40 every month. Well, in the first month, whatever base stock inventory we put on that 40 parts that gets approved we probably won't sell one part. And so the inventory is increasing because it takes three to four years to get to a base -- to get to a stabilized rate of flow of any particular part.

So we -- in order to offer a part we have to put a base stock inventory on the shelf that's economical to produce. We can't just produce five pieces because it would it cost too much. So we may do a run of, I don't know, 150, 300, whatever the number is. So all of those 300 parts are sitting on the shelf and we don't sell one.

So the inventory -- as we increase the number of SKUs in our line, our inventory in units and dollars goes up. That's far more significant than the inventory sitting on -- at customers' places of business. We don't consider that a problem.

Okay, thank you very much. Happy holidays. Speak to you soon.

Arnie, thank you very much.

We do have one last question from Eric Hugel from Stephens, Inc.

Yes, hey, guys, just a quick follow-up. Can you maybe some more background story as to sort of what happened at that ETG business to precipitate the intangible write-down?

Eric, this is Tom Irwin. Well, as part of our regular annual closing, that is under Generally Accepted Accounting Principles, you have to do an annual review of all intangibles. So we do that. It is a hot topic, I think, to accountants and the SEC and so on and so forth. So we took a hard look at all of our intangibles.

We identified some very specific components of our overall intangibles related to some specific customer lists and some specific trademarks related to specific products. We revalued them based on future cash flow and so on and so forth. So, again, it was a very unique situation. It's not as broad.

It wasn't, again, a lot of companies, of course, are facing large goodwill impairment charges. That was not the case. We looked at our goodwill as we do every year, and then, so I would say, it's not a broad situation but specific to some particular customer list and some particular products.

But was it more related to, let's say, you said, okay, maybe we made this decision a couple years ago to make this assumption. Maybe we have some more data now versus maybe deterioration of the sort outlook for that business? Is that safe to assume?

Well, I wouldn't say outlook for the whole -- they did relate to acquisitions of prior years. Not one acquisition, but several different acquisitions. They did relate to specific products, or, again, specific groups of customers.

So while the overall outlook for that same acquired business is still good, the outlook for those particular, again, trademarks, or those particular customer lists have, in fact, changed and were of a reduced value. Again, as Larry mentioned, those are items that we would expect to amortize anyway over the future and so, again, under the Generally Accepted Accounting rules we took the impairment charge in fiscal '08.

Eric, I mean, from my perspective it's a noncash charge. We would normally take it next year or two years, whatever we take it this year, and it's fine, because truthfully, it benefits next year, or the year after, whenever, we would have written it off anyway, so we wrote it off this year instead of next year or the year after.

I understand. I'm just trying to get a sense as to sort of potential, sort of maybe what we're seeing a slowing in the business, and you guys are sort of saying, hey, we're seeing it, we're reducing some of the value of some of these companies that we acquired. But it sounds like, the read that I'm getting, yes, some things are falling off, but other things are doing well, and all in all, things are doing okay.

I think the latter comment is accurate. Things are doing okay.

Great. Thanks a lot, guys.

Eric, thank you.

We have no further questions in queue.

Okay. In signing off, I just would like to wish everybody a very happy and healthy holiday season. We thank you very much for your interest in HEICO Corporation.

If you do have any questions, specific questions that you haven't asked, please give us a call. Any of us is available. Be happy to try to respond to your question, and we will look forward to speaking to you at the first quarter conference call early next year, probably sometime in February.

So have a good holiday, and we will speak to you soon. Thank you.