HEICO Corp (HEI) 2006 Q1 法說會逐字稿

Good morning and welcome to the HEICO Corporate 2006 First Quarter Earnings Call. [OPERATOR INSTRUCTIONS] At this time, I would like to turn the call over to Mr. Laurans Mendelson, Chairman, President, and CEO of HEICO. Go ahead, sir.

Thank you. Good morning to everybody on this call. We welcome to HEICO's first quarter fiscal 2006 earnings announcement teleconference. I'm Larry Mendelson, CEO of HEICO Corporation and this morning I'm joined here by Victor Mendelson, President of HEICO's Electronic Technologies Group and HEICO's General Counsel, and Tom Irwin, HEICO's Executive Vice President and CFO. Eric Mendelson, President of HEICO's Flight Support Group is traveling in Asia and he's there on business attend - - he was attending the Singapore Air Show and he should be joining us on a remote telecon link. Before we begin, I'd like Victor Mendelson to read a statement. Thank you. Certain statements in this conference call will constitute forward-looking statements, which are subject to risks and uncertainties and contingencies. HEICO's actual results may differ materially from those expressed or - - 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 costs to complete contracts, governmental and regulatory demands, export policies and restrictions, reductions in defense or space 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, HEICO's ability to make acquisitions and achieve operating synergies from acquired business, 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 in the market price of our stock.

Parties receiving - - or listening to this conference call 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 statements, whether as a result of new information, future events or otherwise. Thank you. Thank you, Victor. And now before reviewing our first quarter operating results in some detail, I'd like to take a few minutes to kind of summarize the highlights.

Both our Flight Support Group and our Electronic Technologies Group reported higher sales in the first quarter of fiscal '06 - - fiscal '06, combining for an overall 55% improvement in consolidated revenue. Consolidated operating margins increased by 2.2% to 17.4% in the first quarter of fiscal '06, up from 15.2% in the first quarter of last year. Our consolidated net sales and operating income represent new records for the fourth consecutive quarter. Higher sales and operating margins in the first quarter of fiscal '06 contributed to a 76% increase in operating income and a 52% increase in net income over the first quarter of fiscal '05.

During the first quarter of fiscal '06, the company paid its 55th consecutive cash dividend and we increase the per share dividend by 60%. We also completed our 27th and 28th acquisition since 1990, with the addition of Engineering Design Team, we call it EDT, which specializes in the design, manufacture and sales of advanced high technology, high-speed interface products primarily used in defense applications and other markets and our 28th acquisition was of Seal Dynamics, which is a 51% owned HEICO Aerospace subsidiary with a minority interest shareholder agreement.

Seal Dynamics is a distributor and designer of FAA approved hydraulic, pneumatic, mechanical, and electromechanical parts for commercial airline industry and also other markets. And Seal also holds a number of FAA approved PMA replacement parts which we expect to market aggressively.

Our Flight Support Group recently announced that its HEICO parts group has entered into a joint cooperation agreement for the promotion of HEICO Aerospace FAA approved aircraft and engine replacement parts and products in China. And that agreement was with the China Import/Export Group Corporation of the People's Republic of China. We believe that these results are further indication of the progress that HEICO has made towards long-term sustainable growth.

Now drilling down a little further, consolidated revenues in the first quarter increased by $31million, or 55%, up from the first quarter of fiscal '05. And this reflects revenue growth of 46% within the Flight Support Group and 79% within Electronic Technologies.

Revenues of Flight Support increased to 61.7 million in the first quarter of fiscal '06, up from 42.3 million in the first quarter of fiscal '05. This reflects the acquisition of Seal Dynamics in November '05, as well as very strong organic growth of approximately 19%. The organic increase in Flight Support's revenue reflects the continued recovery in the aftermarket demand within the commercial airline industry, as well as our success in developing and bringing to market new products and services.

Revenues of Electronic Technologies increased to 26.5 million in the first quarter of fiscal '06, up from 14.8 million in the first quarter of fiscal '05. And this reflects the acquisitions of Connectronics in December '04, Lumina in February '05, HVT Group in September '05, as well as EDT in November 2005, as well as strong organic growth of approximately 13%. Consolidated operating income in the first quarter of fiscal '06 increased an amazing 76% to 15.3 million, up from 8.7 million in the first quarter of fiscal '05. With strong operating income growth in both of our business segments.

Operating income of Flight Support in the first quarter '06 increased 62% to 12.3 million, up from 7.6 million in the first quarter of fiscal '05. And this reflects both the higher sales and higher operating margins within the group.

Operating income of Electronic Technologies in the first quarter '06 increased 132% to 5.7 million, up from 2.5 million in the first quarter of fiscal '05. And this, too, reflects the increase in net sales, as well as higher operating margins.

Corporate expense in the first quarter of fiscal '06 were 2.7 million, versus 1.4 million in the first quarter of fiscal '05. This is primarily due to increased costs of compliance with Sarbanes-Oxley and higher accrued performance awards. The majority of these costs incurred during fiscal '05 were not incurred until the second half of the year.

Consolidated operating margins improved to 17.4% in the first quarter of '06, up from 15.2 in the first quarter of fiscal '05 and they are pretty much in line with the operating margins that we have targeted for the full fiscal 2006.

Operating margins of Flight Support were 20% in the first quarter of '06, up from18% in the first quarter of '05. Again primarily due to operating efficiencies realized on higher sales volumes.

Operating margins of Electronic Technologies were 21.6% in the first quarter of '06, up from 16.7% in the first quarter of '05, and primarily due to a more favorable product mix, including a higher margin product mix contributed by some of our recent acquisitions.

Earnings per share. The diluted earnings per share improved to $0.26 in the first quarter of fiscal '06, up from $0.17 in the first quarter of fiscal '05. And this reflects a 52% increase in net income. And the increase in net income was less than the 76% increase in operating income, principally due to increased minority interest share in the income of certain consolidated subsidiaries.

Depreciation and amortization expenses increased to 2.1 million in the first quarter of '06, up from 1.7 mil in the first quarter of '05. Again primarily due to increased amortization relating to new acquisitions.

In research and development our total expense in the first quarter of '06 was 3.8 million versus 2.4 million in the first quarter of '05, as we increased research and development efforts in both businesses. The addition of new FAA/PMA approvals continues to be very critical to our long-term growth. We now have over 4,000 parts approved by the FAA. New FAA parts released by our research and development groups in the first quarter of fiscal '06 continued at a strong level and pretty much as we budgeted for the period. We are now budgeting approximately 350 new PMA's in fiscal '06, including new certifications by Seal Dynamics. We also have a number of new products under development in our Electronic Technologies Group. As I've mentioned many times before, we believe that a focus on new product development is fundamental to our growth strategy. And this strategy has proven very effective over the years.

Moving onto SG&A, the spending on SG&A increased to 16.8 million in the first quarter of fiscal '06, up from 11.6 million in the first quarter of '05, and that's due principally to higher operating costs, principally personnel related associated with the previously mentioned acquisitions, also due to increased sales, and due also to corporate expense. We believe that this is a very positive trend because SG&A expense, as a percentage of sales, actually decreased to 19% for the first quarter of '06, down from 20.4% in the first quarter of fiscal '05 and just as a guideline, it was 21% for the full year of fiscal '05. So that's a very good improvement.

Interest expense in the first quarter of '06 versus '05 was up principally due to higher average balances outstanding under our revolving credit facility, attributable to the acquisitions as well as higher interest rates. As you can all see, our interest expense is still, of course, still very, very low. We incurred net borrowings of 27 million under our revolving credit facility during the first quarter of fiscal '06. Interest and other income in the first quarter of '06 and '05 were not significant.

The company's effective tax rate of 34.1% in the first quarter of fiscal '06 was down slightly from 34.5% in the first quarter of '05, and this is due principally to higher minority interest. The minority interest of 2.8 million in the first quarter of fiscal '06 and 1.1 million in the first quarter of '05 represent principally the minority interests that are held by Lufthansa and Seal Dynamics in our Flight Support Group. And Sierra Microwave and HVT in our Electronics Technologies Group. The increase from the first quarter of '05 is attributable to the acquisitions of Seal Dynamics and HVT, as well as higher earnings at our Flight Support Group and higher earnings at Sierra Microwave.

Our financial position remains extremely strong. Cash flow from operating activities for the first quarter of fiscal '06 totalled 6.3 million, up from 4 million in the first quarter of fiscal '05. Fiscal 2006 cash flow from operating activities excludes $1.1 million of tax benefits to the company from stock option exercises, which are now classified as a financing activity in compliance with the new accounting rules. After giving effect to this classification change, we are now targeting fiscal '06 cash flow from operating activities in the range of 41 to 44 million.

Our working capital ratio further strengthened to 2.9 as of January 31, '06, versus 2.5 as of October 31, '05. DSO's of accounts receivables as of January 31, '06 equalled 53 days, down from 56 days as of October 31, '05. We continue to closely monitor receivable collection efforts to manage our credit exposure in light of continued financial challenges facing some of our customers. Our top five customers represented approximately 22% of consolidated sales in the first quarter of '06 versus about 24% for the full year of '05 and we see this as a nice improvement.

Inventories increased slightly since October 31, 2005 in order to meet the needs of strong sales growth and due to the acquisition of Seal Dynamics and EDT. Overall, the inventory turnover rate is down slightly. It's 128 days as of January 31, '06, versus 132 days as of October 31, '05. We don't consider that significant at all.

Long-term debt to capitalization increased to 18.5% as of January 31, '06, versus 11.1% as of October 31, '05 and this reflects the net borrowing of 27 million during the first quarter of fiscal '06. And our leverage, of course, remains extremely low.

CapEx in the first quarter of '06 was 1.2 million and our net capital expenditure budget for the full year remains 12 to 14 million.

Now for the outlook. As we look to the balance of fiscal '06, we expect to continue to focus on new products, market penetration, and additional strategic acquisitions while maintaining our strong operating margins, and financial strength. Based on current market conditions, we are raising our fiscal 2006 targeted sales to a range of 355 to 365 million. Operating income to a range of 61 to 63 million, and diluted net income per share to a range of $1.07 to $1.11. And, of course, these targets exclude the impact of additional acquisitions, if any.

In closing I'd like to say that we continue to adhere to our long-term strategy of developing and marketing new products and services, which provide our existing customers with substantial cost savings and allows us to expand our markets and to expend additional funds on R&D. We believe that this strategy has resulted in our strong financial position,successful growth, and it also positions us with the opportunity for substantial forward growth. That concludes my formal remarks - - prepared remarks and I would like to open the floor to any questions.

One other comment that I'd like to make and that is a general thank you to our team members, who in my opinion have performed extraordinarily well in executing a business plan. I think the first quarter was a sensational quarter. I think the credit goes to our team members, who have taken a concept and have been able to translate that into action. And I'm really very proud of our group of people. We do have outstanding talent at HEICO. And with that, I'd like to open the floor to questions.

Thank you, Mr. Mendelson. At this time, we'll begin the question-and-answer session. [OPERATOR INSTRUCTIONS] Our first question comes from Arnie Ursaner of CJS Securities

Hi, good morning.

Good morning, Arnie

Couple of quick questions. One, the biggest thing that's probably driven your - - the movement in your stock in the last week or two has been Pratt & Whitney's announcement that they appear to be entering the PMA parts business. They speak about 55, 60 critical parts. They also speak about getting to 500 million of revenue in the segment in five years, or double your size today. Can you comment a little bit on how you think they can accomplish this? And how many parts you believe they will overlap with you on? And perhaps, a general view of how this could impact the entire PMA industry, since you're the dominant player today.

Okay. Arnie, I'm going to ask Eric to respond to that, because he's closest to the ground on all those activities. And he was out at Singapore and had a lot of scuttlebutt and talk and he's knows more detail, but as an overall comment, I think that we can say as a company, we welcome Pratt, we think that it clearly has vindicated our business model or added substance to a business model that we had developed. And we welcome and we think it's great that they're now involved in it. But, I'm going to let Eric - - Eric, would you like to pick up and get into this. Sure. Arnie?

Yes, hi good morning.

Hi, good morning. As you know Pratt - - or as you mentioned Pratt came out and said that they expected $500 million of revenue from this initiative in the next number of years. We believe that a majority of that revenue would come from the life-limited parts. And those are basically the heavy, high rotating parts, which are not designed in general to be contained in the event of a failure. Those are the kinds of parts that HEICO has not obtained approval in - - approval from the FAA on in the past. And so, therefore, Pratt & Whitney's parts do not compete.

Their life-limited parts do not compete in any way with HEICO's product line. And actually are quite complementary, because as airlines look for alternatives, typically, if they're going to buy, they're going the independent route and purchase HEICO parts and other independent repairs, then Pratt & Whitney's disks would fit in very nicely to that strategy. The - - they - - Pratt & Whitney announced that they were coming out with 55 parts. We believe a majority of them and a vast majority of the dollar value is the life-limited parts.

Got it. Can you comment a little bit on your view of industry growth currently and over the next few years? Obviously, your numbers have just been spectacular. And you are the industry for all practical purposes. But what do you see as the growth in the industry over the next few years? And, in a sense, give us a feel who either who you're gaining share from or what is causing this exceptional growth?

Well, we're relatively small as compared to the total industry. If you look at the total sales of engine parts and of controls and accessories, air frame, and engine related component parts, it's a very large market and HEICO is relatively small. And we think that we have a lot of growth opportunities in front of us.

We're working with our partners to develop additional parts. We have many parts in development and we think that the future holds great opportunity for us because there's a lot of additional product out there for us to do.

There was a lot of excitement and talk at the Singapore Air Show about Pratt & Whitney's move. It's very exciting for the industry. It caught a lot of people in the industry by surprise. And many, many comments to me were that it validated our business model and it really shows the industry that it's a model which - - whose time has come. And It's one that's very much needed. And if United Technologies is going to be getting into this area, that it just further validates really our entire model.

Okay. Two more quick questions, if I can. I want to clarify something. You indicated you are to add 350 new PMA parts this year. But I believe you indicated that includes some that you acquired with the acquisition.

No, no. No, Arnie, those are new parts. We in a - - we did acquire some with the acquisition of Seal Dynamics, but the 350 is new parts.

And you traditionally ran free. So are we now basically finding an additional 10% a year that we can [inaudible] - -

Yes, an additional almost 20, 20 would be 360. So, yes, we're trying to push the envelope and go up in the number of parts that we're beginning to offer. Yes.

Okay. My final question, since you obviously just proved I can't do numbers so well, I'm looking at your 17.4 operating margin view, which you discussed for the balance of the year. And I'm trying - - I know you don't break this down by components, but it also doesn't seem logical versus some of the past performance you've had. In Electronic Technologies, the segment, you've run, in recently as '04, a 24/4 gross margin. You had some issues that impacted you in '05 with timing and some other contracts, but you've added a lot of higher margin business in Electronic Technologies Group. And if I keep your margin flat, if not even slightly declining in Flight Support Group, unless your corporate expenses are about to balloon materially, it would - - the mathematical conclusion would be well above a 17.4 EBIT margin. What am I missing here?

Well, I think one of the th - - we don't give guidance quarterly. And, as you know, Electronic Technologies can be a little bit lumpy. And with some time - - as last year, you saw that in the first quarter margins were low, and then in the fourth quarter they bounced back and so forth. So, I think, as we go through the year, we don't really give guidance as to what the margins will be in any quarter. But we do feel comfortable in saying that if we look at seven as in all-in margin, 17.4, that area is a realistic margin. And we believe that's true and the problem is the lumpiness.

I don't think corporate expenses, to our knowledge - - we don't expect them to balloon. But, I think it's the mix. And that's a little bit complex. And truthfully we don't know quarter-to-quarter. Because if a shipment delays three days, it flops into the next quarter and it can impact the margins and Electronic Technologies as well. So we do feel comfortable giving the guidance for year of 17 - - we said 17.4 is in the range. But how we get there through the year can be a little problematic depending when product ships.

But to be clear, you're not even implying at all that Flight Support Group margins would be materially different or lower than where they've been. There's nothing mechanically that would cause that to come down. I know the SM - - the acquisition is more distributor, which would affect margin. But is there any other factor on FSG, would lead - -

As a general comment, we think Flight Support was very strong this quarter in the margins. Will it continue that strong? I don't know. I hope so. But we would rather err on the side of conservatism and say maybe it's not going to run out at 20% for the whole year and, therefore, maybe it will. But we would rather not tell people to expect that and - - things can happen. So we're a little bit more conservative as we look out at Flight Support and we think Flight Support was sensational this first quarter. And maybe a little too sensational. So we think as we go through the year, maybe some of that will come down a little bit. But it'll - - we'll wait to see what happens.

Terrific job. Thank you.

Thank you, Arnie.

Our next question comes from Tyler Hojo of Sidoti & Co.

Hi, good morning.

Good morning, Tyler.

I was wondering if you could talk a little bit about the recent contract you announced, the CASGC contract. And if you could kind of quantify what you think that will mean and if that played into the part of your slightly raising your bottom line guidance here.

I'm going to let Eric respond to it more fully. But as a general overview, we think that it is a great positive for this Company. You all know what the projections are for the airlines and flights in China and potentially India. To be part of the Chinese market is crucial. We want to be part of that. By signing this agreement, they have agreed to permit our parts to be distributed and sold. And that's very crucial to our long-term strategy. It had no impact on the first first quarter at all.

Mm-hmm.

Because it was actually signed - - basically the end - - or after the first quarter ended. But I'm going to ask Eric to add any color that he would like on that contract. But it's a - - to us it's a sensational achievement and looking forward - - we do things for the medium and long-term.

Mm-hmm.

And clearly that's a major step for us. Eric, do you want to add to that? I would - - yes, sure. You know we're very excited about this agreement because the CASGC is the organization which purchases all of the aircraft and engines for the Chinese government airlines. So this is the company that places the multibillion dollar orders with Boeing and Airbus and the engine manufacturers as well. So in having the CASGC support our product, it's very important for the country of China to be confident that this is a product which the airlines should be using.

So we expect, as China grows tremendously and as they grow their aviation fleet over the next 10 and 20 years, that this will be very significant for us. It's impossible at this point to predict what it means for - - specifically for the remainder of fiscal '06. But I think it should just give people a greater confidence that our parts are well accepted around the world. And now with the Chinese government supporting it as well as, of course, Pratt & Whitney entering the PMA business, just gives further credibility to our arguments.

Okay. How would that work though, as far as - - would China only buy FAA certified parts for international flights? Or would they buy them for their regional flights as well? Do you have any sense of what kind of would be the ordering patterns there?

We believe that any parts which are used in China would be FAA approved parts to my knowledge. Certainly everything which is used to date is FAA approved. If those aircraft operate either within the United States or in other countries that would require the use of FAA approved parts, they would want to make sure that they're up to the proper certification levels. So we would expect that to continue and don't really see the Chinese government giving approval to the airlines to use non-FAA approved parts.

Okay. Great. I guess moving to something else. If we could talk a little bit about Seal Dynamics, and obviously the results within the Flight Support Group were very strong. And when looking at bringing in kind of a distribution network in house, was that one of the catalysts for some of the organic growth that you experienced this quarter?

Well, actually Seal performed extremely well. And it did much better in the first quarter than it had done historically, although, it was very successful historically. I would say that we are starting to cross-market the products and that is yielding some benefits. But I think there's a lot more to come down the road.

Okay. Great. Well, I'll let somebody else ask a question. Thanks.

Thank you. Thank you.

Our next question comes from J. B. Groh of D. A. Davidson.

Hi, guys.

Morning.

Congratulations on the quarter.

Thank you.

Just to clarify on this 350 PMA certificates kind of going forward number. Is that additional 50 just the one that Seal is getting?

That's what the budget is at this point, yes.

Okay. And is there a - - are you being - - are you fairly consistent on the dollar value of the new PMA's being awarded versus say last year, year before in terms of value of that engine content?

Generally speaking it is about the same. It could be a little higher. But I would say that it's comparable.

Great. And a question for Tom. You talked a little bit about the tax rate. Is that how we should kind of look at it over the balance of the year, kind of the 34% range? What's sort of embedded in your earnings per share guidance in terms of a tax rate?

Yes, basically. Tax rate ran about 34% this year. And higher last year. I think we've been saying it would be somewhere between 34 and 35. So at this point in that range, yes.

Okay. And then also, Tom, on the SG&A. I know in fourth quarter of last year you had some incentive comp and so sequentially it came down. How should we be thinking of kind of the run rate on SG&A? I know you don't want to give quarterly guidance. But just kind of what we're seeing - - the appropriate level, or does any of that kind of peel off?

I would say, as previously discussed, we target corporate expense at around 3% of sales. That's what it ran in the first quarter. And I think that's still our indications and, as we noted in the press release, one of the things that drove the corporate expense up significantly in the first quarter versus last year was really a timing of expenses incurred for both Sarbanes-Oxley and the meeting of certain performance awards. So overall I think we're still in that 3% range for the full year and, as Larry earlier mentioned, do not expect the corporate expenses to balloon.

Hey, great. Thanks for your time.

Thank you.

We'll take a question from Jim Foung of Gabelli & Co.

Hi. Good morning, Larry.

Good morning, Jim.

Let me ask you just following up on the Pratt & Whitney decision to go in the PMA market. Could you just give us an idea - - just maybe percentage-wise how much of your PMA parts goes to the different engine manufacturers, which are GE, Pratt, and Rolls Royce?

The answer is we don't give that information out. It's proprietary and for competitive purposes, we really don't. What we have said in the past is that our dependence - - which was a dependence few years ago on JT8D, has essentially been eliminated. So our JT8D revenue is, I don't know, give - - Tom, about 20%? JT8D?

Approximately.

Maybe 20%. So it's - - the JT8D is low. But we don't like to go into the different percentages from these different companies, Pratt, General Electric, or Rolls Royce.

Okay. And then the JT8D was primarily Pratt & Whitney's engine then?

It was entirely a Pratt engine. And keep in mind that JT8D still has a large, 5 or 6,000 engines flying. So it's - - it's a good revenue thing. But there are a lot more engines, and CFM56 and the QF6, and all of the other engines that are around. So it's just - - the important thing is that there's not a concentration of JT8D. We're kind of spread across the board. Which are we think is very healthy.

And then maybe just a broad brush answer. Are you kind of concentrated in like one or two engine manufacturers with your PMA parts or just say one? There's only three. Versus pretty much broad-based among the three guys?

At this point we don't have much product offering at Rolls Royce because truthfully, the majority of engines are Pratt and GE. So the opportunity - - the market opportunity is clearly whatever it is, 80% Pratt and GE. So that's where the greatest market opportunity is. We - - we're relatively small or medium-sized company. We can't do everything. So we focus on the most productive aspects of where we think the market is.

Right. Okay. And then your new PMA parts, which you're getting approved for, is that the same pattern pretty much or you more getting into the rolls Royce to kind of diversify your - - ?

At this point, it's pretty much the same strategy that we've always had.

Okay. And just shifting over to the intentions of your quarter. I'm a little puzzled by your revenue guidance. Just seems a little low considering the first quarter strength. And just back of the envelope, you kind of backed out the acquisition contribution. I mean, the organic growth. It seems to be fairly strong, about 15 to 20%. Yet for your full year, you're kind of looking at a much lower organic growth. Was there something the first quarter that kind of make you feel - - was there some one-time sales gain or something to make you feel more conservative for the rest of the year?

No. You know Jim, we're still in the first quarter of the year. I think we try to be realistic and yet on the conservative side. I think as the year rolls out, we'll see what happens. There was nothing unusually strong in the first quarter.

But we've given guidance which we believe is the best guidance we can give at the moment. If this changes, we'll raise it or lower it as it - - as the target moves. But, in the first quarter we gave guidance and that was based upon - - we had to give guidance after the first two months of the year. So one-sixth of the year was - - and we did the best we could and our guidance was $1.05 to $1.09. As we saw the first quarter complete, and then we're into the first month of the second quarter, we see how things are rolling out. And see the order patterns. And if it warrants it, we would change it as we move forward. But we have given the best guidance that we think is realistic at this time.

Okay. Let me ask. What's the organic growth rate that you assume in your current revenue guidance for '06, which is mid-point about $360 million? Yes.

Tom, do you want to?

Yes. I think as we previously reported the organic growth by segment, Flight Support Group, we said at least 10 to 15%, it ran above that probably for the first quarter. On the Electronic Technologies Group, again long-term, we have been saying that's more in the single-digit organic growth, and again,we ran ahead of that in the first quarter. If you do the math, the growth is roughly one-third organic and two-thirds from acquired businesses in the first quarter. And that's kind of consistent with what our overall targeting is at this point.

For the full year, the same kind of relationship, one-third organic and two-thirds acquisition for the year?

Well, I think that's what we - - obviously we're always trying to beat those organic growth targets. And as we commented on, we continue to look at acquisition opportunities. But I think at this point, that's what we're comfortable - - in that range, yes.

Okay. All right. Thank you, guys.

Okay, Jim. Thank you.

And our next question comes from Jim Larkins of Wasatch.

Good morning and congratulations, guys. Great to see the success back on track.

Thank you, Jim.

Really, really nice to see.

Thank you.

I just - - on your growth, I wanted to make sure I kind of understood a little bit the acquisition dynamics. It's pretty obvious you can kind of see Flight Support Group what was added because there's just the one acquisition on the Flight Support Group, right?

Yes.

It's substantially all the or - - acquisition growth was Seal Dynamics. But not all of it, but substantially all of it.

And ,so the way the acquisitions folded into Electronic Technologies then, the runrate that we saw this quarter from acquisitions, does that start to drop off quite a bit in the coming quarters or - -

Yes in that we had one acquisition in December, one acquisition in February of last year, so those would quote rolloff in terms of the impact dynamics. And then the next one wasn't until the fourth quarter. So that wouldn't roll off until the fourth quarter.

Okay. All right. Great. The rest of my questions have been answered. Thanks a lot, guys.

Thank you, Jim.

And we'll take another question from Arnie Ursaner of CJS Securities.

Just a quick follow-up. In the previous quarter's you've talked about Delta and their bankrupty, I believe, and the impact it had on your - - some reserving and some other issues. Could you freshen up what impact, if any, Delta had in the quarter and, both they and United have reduced flights, how that might impact you in any way going forward?

In the quarter, their bankruptcy didn't impact us at all. We took the full brunt of it last year. And in moving forward I guess Eric is probably in the best position to - - do you want to comment on that, Eric? Sure. Both Delta and United are partners of ours. And they're good customers. And what specifically can I help you with here?

Well, they've indicated they're cutting back or reducing some flights. Is that going - - is that part of - - you see that impacting - -

Arnie, I think part of it is it's a mix between reducing flights and buying more parts. So what we constantly do by introducing more parts and pushing our marketing and so forth, I would think that we would assume, and Eric can correct me if I'm wrong, but we would assume the net would be maybe a little increase in spite of them reducing flights. We don't think the reduction in flights will impact us because we offer more product and that ups any drop that a few flights may have. So I don't think that's going to impact us. Right. We model our internal forecasts based on their currently announced fleet plans. So anything that we're aware of would be modeled into the remainder of the year in the guidance that we've given.

And just remind me, I should know this, but just remind me again. You indicate you have about 4,000 parts. How many parts in total do you think are possible to be PMA parts?

Eric? I don't have that information with me. I don't know. I'd have to analyze that. But the bottom line -- But many thousands of additional parts. I mean, we could be producing parts for a long time - - new parts for a long time. It's -- we have plenty of opportunity there, Arnie. We don't see any end in sight.

Thanks very much.

Thank you, Arnie.

And Mr. Mendelson, there are no other questions in queue at this time.

Okay. Well I want to thank everybody for their interest in HEICO. We want to remind you that we will have a second quarter conference call after we release earnings in the second quarter, which will be around three months from now. And that in the meantime if you have any questions about HEICO, if we can be helpful, please call us. You can call me, you can call Tom Irwin, Victor, Eric Mendelson and we'll try to help you to the extent that we can. Again, thanks for your interest in HEICO and have a great day.

This does conclude today's teleconference. We do appreciate your participation. Have a wonderful day.

Thank you.