Laurans A. Mendelson - Chairman, President, and Chief Executive Officer Victor H. Mendelson - President, Electronic Technologies Group, and General Counsel, HEICO Corporation Thomas S. Irwin - Executive Vice President and Chief Financial Officer Eric A. Mendelson - President, Flight Support Group, HEICO Corporation

Arnie Ursaner - CJS Securities Tyler Hojo - Sidoti & Company J.B. Groh - D.A. Davidson Eric Hugel - Stephens, Inc. Chris Quilty - Raymond James James Foung - Gabelli & Company

Good morning and welcome to the HEICO Corporation Fiscal 2009 First Quarter Earnings Conference Call. During this call, there will be breaks for questions-and-answers. (Operator Instructions). At this time, I will turn the call over to Larry Mendelson, Chairman, President, and CEO of HEICO Corporation. Laurans A. Mendelson: Thank you and good morning to everyone on the call, and we welcome you to the HEICO first quarter fiscal 2009 earnings announcement teleconference. I am Larry Mendelson, 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 Before we begin, Victor Mendelson will read a statement. Victor H. Mendelson: Thank you. Good morning. 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 and/or expressed 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, 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 cost 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. Those listening to today's 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. Laurans A. Mendelson: Thank you, Victor. And now, before reviewing our first quarter operating results in detail, I would like to take a few moments to summarize the highlights of what we consider a reasonably good first quarter, especially in light of the current global economic conditions. Consolidated net income increased by 12% to $0.42 per diluted share in the ... for the first quarter of '09, up from $0.37 per diluted share in the first quarter of '08. And this was despite a slight decline in net sales. Although, our airline customers have reduced capacity between 5 and 10% from last year, net sales of Flight Support were down only 3% in the quarter, indicating continued success in penetrating the market with our new products and services. Typically, in market downturns such as the current one, we laid the groundwork for our future market share expansion as customers become more committed to our cost saving products. Within HEICO Electronic Technologies, we are seeing continued strength in our defense related businesses, including space and homeland security products, but continuing weakness in customer demand for some of our electronic products, including demand from medical equipment end markets. For the quarter, overall net sales of Electronic Technologies were down 3%. In January, we paid our 61st consecutive semiannual cash dividend since 1979. The dividend was 20% higher than the prior year or $0.06 per share versus $0.05 per share, reiterating our Board of Directors' continuing confidence in HEICO strategies and financial strength, and our willingness to reward shareholders while retaining sufficient capital to fund our internal growth objectives and acquisition strategy. We are also pleased to report that the IRS completed its product relating to the company's qualified R&D tax credit claimed for fiscal years 2002 to '05. The audit settlement resulted in an increase in net income of $1.1 million or $0.04 per diluted share in the first quarter of '09. Our cash flow and balance sheet remained strong. As of January 31st, the company's debt to capital ratio was only 8.6% with the net debt, the debtless cash of $36.2 million. And we have no significant debt maturities until 2013. As for acquisitions, we have plenty of capital available on our bank lines where we pay very favorable interest rates due to our strong credit rating. Our weighted average interest rate at January 31, '09 was less than 1% and I like to joke with my staff and say we're considered like treasury bills. Further, despite the economic challenges, we remain true to our principles for growth driven, primarily through development of new products and services. While we are aggressively pursuing cost efficiencies and cost reductions, we actually increased new product development spending in the first quarter of '09 by approximately $600,000 or 15% over the first quarter of '08. This will, we believe drive future sales and earnings. That's the way it has always worked for HEICO in the past. Now drilling down into the detail items on the P&L. Net sales, consolidated net sales in the first quarter of '09 were a 130.4 million, reflecting the previously discussed sales of Flight Support and Electronic Technologies segments. Our net sales in the first quarter by market will compose approximately 71% from commercial aviation. This was the same as in '08. 16% from defense and space, it was 14% in '08 and 13% from other markets including medical, telecommunication and electronics and that was about 15% in '08. Our consolidated operating income in the first quarter of '09 was 21.4 million, compared to 23.2 in the first quarter of '08, reflecting lower operating income of Flight Support. Partially offset by an increase in operating income from Electronic Technologies as well as a decrease in corporate expense. Operating income of Flight Support in the first quarter '09 was 15.6 million, compared to 18.9 in the first quarter of '08 and this reflected the lower sales volumes and higher R&D expenses. Operating income of Electronic Technologies in the first quarter '09 increased 19% to 8.5 million, up from 7.2 in the first quarter of '08 as a result of higher operating margins. Corporate expense in the first quarter of '09 decreased to 2.7 million from 2.9 in the first quarter '08. Our consolidated operating margin in the first quarter of '09 was 16.4%, compared to 17.3 in the first quarter of '08 and this was a result of lower margins within Flight Support. Operating margins of Flight Support were 15.7% in the first quarter '09 versus 18.5 first quarter '08, principally reflecting the impact of lower sales volume on gross profit margins, as well as higher R&D expenditure. Due to the higher incremental margins of Flight Support, particularly in our PMA parts sale, the lower sales volume had a disproportional affect on our gross profit margins. Operating margins of Electronic Technologies improved to 27.6% in the first quarter of '09 versus 22.5 in the first quarter of '08. This reflected a favorable product mix and the margins approximated those experienced in the full year fiscal '08. Diluted earnings per share increased 14% to $0.42 in the first quarter of '09, up from $0.37 in the first quarter of '08, reflecting the IRS settlement in the first quarter of '09, as well as the increased operating income within Electronic Technologies. Depreciation and amortization expenses were approximately 3.5 million in the first quarters of '08 and '09. As mentioned earlier, R&D expense increased 15% to 4.8 million in the first quarter '09, up from 4.2 in the first quarter '08. And we are confident that these increased expenditures will be well rewarded in the future. The addition of new FAA PMA approvals continues to be a critical strategy to support our medium and long-term growth. We are targeting approximately 500 new PMA certifications in fiscal '09, up from about 400 in fiscal '08. We also have a number of new products under development in Electronic Technologies. As I have mentioned many times before, we believe, our focus on continuing new product development is fundamental into our growth strategy. We remain committed to this long-term strategy even as we address the near-term challenges of global recession. SG&A spending as a percentage of net sales decreased to 17.2% in the first quarter '09, down from 17.6 in the first quarter of '08. The decrease to 22.5 million in the first quarter of '09 from 23.6 in the first quarter of '08 is principally due to lower operating costs, principally personnel related, associated with the decline in net sales. As previously mentioned, we are pursuing cost efficiencies and cost reductions in all of our businesses. We have always tried to operate on a lean basis, and some of the efficiencies have been the elimination of some workforce positions and squeezing down and only essential travel is being conducted. Interest expense in the first quarter of '09 decreased to $195,000, down from 862 in the first quarter of '08, principally due to lower interest rates and the lower average balance outstanding under revolving credit facility in the first quarter of '09. Our net debt was only 36.2 million as of January 31, '09. The company's effective tax rate decreased to 27.6 million for the first quarter of '09, compared to 34.1 in the first quarter of '08, and thus reflects the IRS settlement previously mentioned. The minority interest share of consolidated income was 4 million in the first quarter of '09, and 4.6 in the first quarter of '08. And the decrease in the minority interest share of income in the first quarter of '09 compared to '08 was attributable to the acquisition of additional equity interest in certain Flight Support subsidiaries, in which minority interest exists, as well as revolver earning of Flight Support Group. Moving from the P&L to the balance sheet and cash flow; our financial position remained extremely strong. Cash flow from operating activities in the first quarter totaled 5.2 million compared to 9.8 in the first quarter of '08. Our working capital ratio, which as you know is current assets divided by current liability, strengthened even further to 4.0 as of January 31, '09 over 3.1 as of October 31, '08. DSOs of accounts receivables equaled 53 days January 31, '09, compared to 52 days October 31, '08.We continue to closely monitor receivable collection efforts to manage our credit exposure in light of economic strings facing many of our customers. The inventory turnover rate as of January 31, '09 equaled 149 days, versus the 123 days as of October 31, '08 reflecting higher inventories in Flight Support, we have lower sales volume in the first quarter '09 resulted in higher inventory levels. We are just in production schedules to better match customer demands, while at the same time managing production efficiencies. No one customer accounted for more than 10% in net sales and our top five customers represented approximately 22% of consolidated net sales in the first quarter, versus about 21% in 2008. Year-to-date net borrowings during fiscal '09 totaled only 3 million under our revolving credit facility. Cash invested in acquisitions totaled 12.8 million in the first quarter '09, all of which related to acquisitions completed in previous years i.e.; additional purchase of equity interest and payment of additional contingent purchase consideration. CapEx first quarter '09, approximately 2.6 million, in line with the current estimate of 10 to 15 million for the full fiscal '09. Moving on to the outlook. As we look to the balance of fiscal '09 and beyond, we are cognizant of the difficult global economic landscape in which we're currently operating. We have accelerated our commitment to develop new products and services in order to increase market penetration with our existing and new customers and to identify select acquisition opportunities. At the same time, we are maintaining our strong financial position. And further, we believe that the long-term prospects of the commercial airline industry still remain quite strong. Current market forecast of airline capacity in 2009 project global capacity reductions ranging from zero to minus 5% and forecast MRO spending reductions in the range of 5 to 10%, down from 2008. Based on these current market expectations, we are updating our targeted full fiscal '09 diluted net income per share to be approximately flat with fiscal '08 and net sales to a range of flat to down 5%, when compared to '08. Potential acquisition opportunities could add to these growth targets. We continue to target '09 cash flow from operating activities in the area of 75 to $80 million and as mentioned earlier, CapEx are expected to range between 10 and 15 million. Even in the face of airline capacity reductions, we are confident that the value proposition at HEICO products represent and the accelerated rate of our new product development will give us excellent opportunities for continued success. In closing, we face near-term economic challenges. We remain committed to our long-term strategy of developing and marketing new products and services, maintaining the high quality of these products and services, while offering our customers cost savings opportunities and focusing on strategic acquisition. This is the same disciplined business model we have followed since 1990, a period over which HEICO has achieved a 20% compound annual growth rate in net income. One last closing comment. We faced a similar situation after 9/11. We accelerated -- significantly accelerated our R&D developments and after 9/11 starting perhaps a year, year and a half later and for the next six or seven years, we were running at a compound annual growth rate top-line and bottom-line, somewhere between 27 and 29%. We are optimistic that we will achieve very strong growth rates, if we follow our same disciplined approach. Those are my prepared comments. And I do want to open the floor for any questions that the callers may have.

(Operator Instructions). Our first question comes from the line of Arnie with CJS Securities. Please continue with your question. Arnie Ursaner - CJS Securities: Sure. It's Arnie Ursaner with CJS Securities. Good morning.

Good morning, Arnie. Arnie Ursaner - CJS Securities: Couple of bookkeeping questions, first, what sort of tax rate guidance would you suggest we have for the year?

Hi, this is Tom Erwin. If you look at the first quarter and adjusted for the R&D tax savings that is add back, the one-time benefit in the first quarter. You get to about a 34% effective rate which is in line with last year. Arnie Ursaner - CJS Securities: Okay. And another bookkeeping item. I assume currency was not a material impact either in your results or in your guidance, is that a fair statement?

That's correct. Arnie Ursaner - CJS Securities: Okay. Larry, in your prepared remarks, or in your comments on your last conference call, you indicated at that point and this was in late December. You indicated that if you only achieved your guidance at that point, you would be extremely disappointed. And at that time the IATA data was talking about a decline of 1 to 4% in global airline travel. So I guess the real question in the back of my mind is what has changed in the month that has made you significantly more cautious than you were a month ago?

Arnie, that's a good question. And I look at it really is really almost two months that we were looking at. But the main changes, November and December are normally slow months for us in the Flight Support Group. For some reason in October, normally it's a relatively strong month. November December are weak months and we see a big pop-back in January. And we were expecting that based upon conversations with airlines and talking to customers and big customers. And they were indicating that January would be a strong month. Unfortunately, that pop didn't happen. I can tell you-- I hate to say February appears to be better than January. Maybe we're getting the January effect in February. I'm not sure, but I don't want to give anybody too optimistic an expectation, but the main issue was that January didn't do what it normally does and pop-up. I had expected it to be and I was disappointed. I was very disappointed and Eric was very disappointed. And it's going down the line. And there is a lot of yelling and yipping about moving products out the door. Unfortunately, if airlines are putting planes away and taking amount of service, it's very difficult to convince them to buy parts that they don't need to fix up in aircraft. So that was really the main drivers. So at this point, it's very, very difficult to see the outlook going forward in this current year. I mean the visibility when I speak to people, when I speak to people about visibility, almost in every industry I get the same response and it's very, very difficult to picture. The one thing I do want to emphasize is that none of this in our opinion is any loss of market share. And typically, what has happened in the past when people differ purchases of parts, there comes a day of reckoning. They ultimately, they put the plane in service and then there is a huge demand and there is a scramble to get parts yesterday. So at some point in the cycle that we believe that they're going to use the parts. And if I knew when this economic downturn was going to end or turnaround, I wouldn't have a much better idea of when they're going to need those parts, because -- and I think, most people can just watch as they put planes into service they run. There's another thing, the greater proportion of planes taken out of service were U.S. domestic. Those started before the foreign. So, I think, part of it was seeing the impact of some of the domestic early on, and we had expected it to pop-back. I don't know if that's helpful, but that was -- that's what I saw in December, and that's what I see now. Arnie Ursaner - CJS Securities: Looking at ... one, again, bookkeeping question; I think you said you expect 500 new parts a share. Is that correct?

I guess. Arnie Ursaner - CJS Securities: Okay. And, remind us again if the seasonality of the repair work in MRO, doesn't a lot more of it happened kind of a February, March period, when planes are less in demand than in the more critical seasons?

No, Arnie, this is Eric. Typically we would experience greater demand in our third and fourth quarter. Basically what drives the engine starts weighing when the temperature rise after the spring, and the exhaust gas temperature margins goes down day after overhaul, the engine in that causes a popping demand typically. Arnie Ursaner - CJS Securities: Okay. Thank you very much.

You're welcome.

Thank you, Arnie.

Our next question comes from the line of Tyler Hojo with Sidoti & Company. Please proceed with your questions. Tyler Hojo - Sidoti & Company: Hey, good morning, everybody.

Good morning, Tyler. Tyler Hojo - Sidoti & Company: Hi. Just a follow-on to Arnie's question there. Just in regards to the guidance, does it potentially reflect capacity reductions that have not yet been announced by your customer base? Is that maybe one way to look at it?

We tried to factor that to give you the best -- our best thinking on it. But truthfully Tyler, it's almost impossible to know. They tell us one thing, and then that may not happen, because things are happening in their own service. They see that their number of passengers were also up, so then they change their mind and they try to give us some indication of what's going to happen, and then it changes. They can ... it also, when it comes back, changes the, as I indicated before, changes the opposite way. They don't tell us, and obviously then we get a call; hurry up, we need the part yesterday. So, it is very, very opaque and very, very difficult. We try to do the best guesstimate that we can in running our business, and then conveying that information to you and the investing public is to say, its imperfect would be an accurate statement, because we try our best, but it could be higher or lower. Tyler Hojo - Sidoti & Company: Right. I understand that. And, I guess, maybe since you highlighted kind of the last downturn, kind of '01 to '03. I mean, my understanding was that you were more exposed to some KTA engines that, today you have a little bit more diversity. So, I mean, is it a safe assumption to think that you fair better in the current downturn than you did back at the early 2000?

Tyler, I think that that's what you said is an accurate statement. In the 2001, 9/11 issue, they took planes out of service, never to put them back in it. There were lot of 727s, they had JT-80 (ph) engines; those were taken out and never returned. In this case, many of the engines that they're taking out are temporary, and we expect them to return to service. Only we'd see the resumption of the part flow sales to repair those engines. So, we don't think it's a permanent change, we think this is a more temporary change. Tyler Hojo - Sidoti & Company: Yeah, I understand that. But, the point I was trying to make was, weren't you more overly exposed to the engine that was coming out of service back than you are today?

Yes, definitively. Tyler Hojo - Sidoti & Company: Okay. All right, good. And, just a couple of housekeeping things here. Last conference call, I think you indicated that you where looking to payoff outstanding debt some time in the first half of the year. Does that still stand or have things adjusted a bit here?

Tyler, this is Tom Irwin. No, actually as it relates to our outlook for cash flow from operating activity, we really didn't change our guidance there, which is somewhere 75 to 80 million. So based upon that we would expect to be out of that sometime around mid year. Tyler Hojo - Sidoti & Company: Okay, great. And just in regards to the 500 new parts that came out this year or that you're expecting to come out this year. Are you able to give us an idea of maybe how many introduced in the quarter?

Tyler, this is Eric. Typically our parts come out in the -- majority of the parts come out in second half of the year. Tyler Hojo - Sidoti & Company: Okay.

We're performing that consistently, consistent with the prior year. So most definitely come out at the end of the year, just like last year and year before and year before that, most come out at the end of the year. So I would say we have year-to-year pretty consistent growth. Tyler Hojo - Sidoti & Company: Okay. All right, great. Thanks for that.

Thank you, Tyler.

Our next question comes from the line of J.B. Groh with D.A. Davidson. Please proceed with your question. J.B. Groh - D.A. Davidson: Good morning, guys.

Good morning. J.B. Groh - D.A. Davidson: Just a real quick sort of housekeeping question on the acquisition among the cash flow statements, you mention that's all just additional purchase price. So those numbers we see on the sales are all organic, right, there is no -- you didn't have to pickup any more revenue due to that consideration paid on those acquisitions?

That is correct. In fact, there were new -- no new entities in this year and substantially all the sales are changed as related to organic-- J.B. Groh - D.A. Davidson: Okay.

Acquisitions and there were simply additional equity interest we bought 10% of one entity and 14% of another minority shareholders basically. J.B. Groh - D.A. Davidson: But, it didn't change the way you had to recognize the revenue, so that's just pure organic that we see?

Exactly. Because the entities are already 100% sales were already in our composite. J.B. Groh - D.A. Davidson: Got you. Okay and then for Victor, could you kind of remind us what the end market exposure is there? How much is medical now and how much is still the defense side?

Consolidated HEICO Corporation, for corporate level probably about 5% would be on the medical side and answer the second part. J.B. Groh - D.A. Davidson: I was just trying to get a breakdown within Electronic Technologies or what the end market exposure is. I know most of its sort of space defense type stuff.

Yeah. Well that's correct I mean I'd -- within the ETG, I would say roughly half is defense, sort of space defense roughly 15% or so would be probably medical and roughly 15% or so would be space and then the rest was in industrial market. It somewhere around there, 15 to 20 medical 15 to 20 space. The space (ph) is a little complicated, some of that drifts into the in the area of space. We don't always know what the end market is. J.B. Groh - D.A. Davidson: Sure. I guess what I am hearing Larry from you is that you -- what you're seeing is kind of customer destocking really and maybe that's the impact of the retirements is one thing. But really it's just maybe a cash preservation strategy from customers. There is no -- this isn't any sort of trend that you're seeing. I hope I'm reading that correctly?

I think you're reading it exactly right. And as I mentioned, we're very concerned with market share and we don't believe that we have lost any market share. Perhaps, we maybe picking up market share. But it's being offset by the demand. They're just they're saving cash and they're not repairing these planes when they put them down. But as I say there is going to be a panic to get cost. I mean, that comment, my last comment is based upon our prior experience every time this happens, they scramble to get the parts and they can't them fast enough. So we would assume that over a normal business cycle, we'll see a lot of this business return, but when it will start we don't know. J.B. Groh - D.A. Davidson: And the one last thing, maybe Eric, you could comment, two things, I'd seen obviously the decline in fuel price, there's really extended the economic life of these planes and I would guess that that has some positive implications for you. And then the other thing, I think we've seen some carriers have unfortunately hedged fuel at much, much higher prices which leads me to believe they'll be struggling to find ways to save money which would also have positive implications for you, could you may be comment on this two statements?

J.B., First of all, with regards to the fuel hedges, you're absolutely right and the savings of the reduced price in fuel in '08 were those carriers -- were a number of carriers and that gives them a lot of confidence going forward. You're right, with regard to the order equipment. Of course the credit crunch which is going on is reducing the airlines ability to buy new equipments as you pointed out. The fuel price is making it more reasonable to keep the order equipment service and that's restock for us. So as the airlines are in this situation, they're becoming even more focused than ever on the selection of alternative materials. And they're recognizing of the FAA has approved these, of all these materials, most of major airlines out there in the world are applying them, nearly all of them. And the opportunity is prevented. So when times get tough, they start to devote additional resources to the approval of alternative materials and that's what we're seeing today. I really believe strongly that we are laying the groundwork for our future recovery by getting these parts approved that the FAA as well as at the airlines. We're able to do things with the airlines that's really very, very, unique and there is a huge focus on the reduction in operating costs. So that's plays very well for us. J.B. Groh - D.A. Davidson: Great, could you make any general comment maybe the level of enquiry, from I mean I guess there is not that many new customers, but increased penetration of current customers?

Yes, the level of enquiry I can tell you ha never been higher. J.B. Groh - D.A. Davidson: Okay. Thank you guys.

You're welcome.

Our next question comes from the line of Eric Hugel with Stephens. Please proceed with your question. Eric Hugel - Stephens, Inc.: It's Eric Hugel of Stephens. Good morning, guys.

Good morning Eric. Eric Hugel - Stephens, Inc.: Hey. Can you talk about I guess, ETG margins looked really nice in the quarter. You talked about mix. Can you talk about the sustainability of those levels going forward or usually your first quarter is the lowest, can we expect higher, does it go forward into the rest of the year?

Yeah Eric, this is Victor Mendelson speaking. The answer is I wouldn't expect to see higher margins going forward. Hopefully, somewhere flattish. I think that, we have very good mix in the quarter and that's what particularly drove us and we have to see as things progress, because visibility is general for us right now is less than it was. Eric Hugel - Stephens, Inc.: Is the good mix reflective of what you have talked about weakness in medical, was it reflective of the medical business didn't hit, so you didn't have the lower margin part of the business?

That maybe little bit of it, but I wouldn't say so, because we slow our medical, we had lower margins, because it's slow, I think it was just a, it was very good mix on the products. Really the defense and space and industrial actually -- I call industrial for some of teleconference type industry product that we're shipping. Eric Hugel - Stephens, Inc.: Okay. I was -- switching back to the FSG [Flight Support Group] segment, it was my understanding that you did some acquisitions small relative in the first and second quarter of last year. I just wanted to be clear that there was no sort of acquisition growth in your year-over-year 3% comp, because I was looking at maybe more like a 7% organic growth decline?

Eric, this Tom Irwin. The acquisition, you're right. There were a couple small acquisitions in fiscal '08, but they were basically early in the first quarter and so there are in the first quarter of last year and the first quarter of this year as well. And there were no other acquisition there. One other tiny, tiny one later on was actually pretty much of -- Eric Hugel - Stephens, Inc.: Okay.

So the answer is yes, it's based in the growth numbers, basically it's all organic. Eric Hugel - Stephens, Inc.: Okay, fair enough. And with regards to the R&D for the rest of the year 4.8% -- 4.8 million this quarter, can you talk about how we should think about that, I mean is that a good sort of steady state dollar level, I mean how should we think about or does it ramp up as you guys sort of look to increase further?

Can you repeat the question? Eric Hugel - Stephens, Inc.: Sure.

I think that we would hope to increase that. We are looking for additional personnel engineers to increase our R&D spending. So we would like to increase the R&D spending, particularly in times like this. When earnings are off. We don't run the company to show the highest possible earnings. I mean, in the sense that if we wanted to show earnings and manipulate earnings we would layoff engineers, reduce R&D, at the earnings per share go up and we could play financial gains. We don't do that. We recognize it is what it is, and in these times, we are trying to expand our R&D efforts because we got a huge payoff with this turns. And that's exactly what happened after 9/11, that's what we expect to happen now. So, I am hoping that the R&D expenditures will go up over the year, which will permit us to develop more part. Eric Hugel - Stephens, Inc.: Sure. I guess my final question, I'm just maybe scratching my head a little bit, sort of thinking about the macro environment continuing to weaken. I guess there has been some recent announcements out of your Asian airlines like JAA, A&A (ph) in Singapore. But they're looking at doing significant capacity cuts beginning in April. And I look at your guidance, I mean, you did about $0.38 extra tax benefit. And I'm assuming you do not have any more sort of one-time items baked into your sort of let say flat EPS guidance. And, if you sort of back that up, the implication is on average for the last three quarters of the year, you can do around $0.45. Can you sort of walk us through sort of where -- how you're going to get cash from $0.38 in the first quarter, again X the R&D benefit, up to around 45 in the phase of weakening macro environment, at least in the first half of your year?

Eric, this is Eric. I can answer that. We have a number of projects, which we expect to ship; a number of new products, services, repairs, parts that we expect to ship in the balance of the next three quarters. So that's why we do anticipate an increase there. There was this -- one of the other analyst had mentioned was there destocking inventory over the last couple of months, in particular; in December. But we do anticipate these new parts to get sold. The customers want them very badly. I mean, they're behind the part, they're under great pressure to get savings. And these products are as they improved and offer huge savings. So, it's just a matter of burning off their inventory and buying the parts that frankly are already signed the committed to HIECO on a long-term basis. I mean, the sales are done. We will ship the parts as soon the demand is there. It seems they just burn off their existing demand. Eric Hugel - Stephens, Inc.: So it's really a timing issue. I mean, you're going to sell the part, but it might not be till next year, (inaudible) how bad the macro environment get.

Yeah. Well, we don't anticipate to be next year. I mean, when we missed our numbers in the first quarter, the sales gross went out to the CO (ph) and the first thing we always wanted to make sure is that we haven't lost any market share. And we validated that, we didn't loose market share. It was just burning down of inventory. So, the words that came back was that in the balance of the year, we were in fact selling these parts back, or frankly, already designed, certified and sitting on our shelves. So, when you hope that they will shift in the balance of '09, in addition to '010, '010 will sell the same parts we sold in '09 but new parts that we developed in '09. Eric Hugel - Stephens, Inc.: Right that make sense. And just to close if you guys don't have any sort of like more one-time like this tax benefits sort of planned in your expectations, do you?

At this time, no. At this point, it's -- if you -- when you look at our guidance, inherently there is a baked in about a 12% per quarter average. As you did with the earnings, we do ourselves, that was 12% earnings growth and that's what drives the growth as opposed to any future one-time items. Eric Hugel - Stephens, Inc.: Great. Appreciate it guys. Thanks a lot.

Thank you.

Our next question comes from the line of Chris Quilty with Raymond James and Associates. Chris Quilty - Raymond James: Good morning, gentlemen. I just want to follow back. Larry, you had mention you didn't see the normal domestic pop you would expect in January, but did you see any kind of a decline in your international, or is there -- or any expected downturn that you have built into your numbers?

I'm going to ask Eric to respond to that.

Yeah. Chris, this is Eric. The decline was broad based. It was both; domestic and international. And again, it was not a loss of market share, it was legally drawing down of inventories, the airlines supply chains are getting very tight right now. There is some airlines that 12/31 year-end and they normally cutback as we said in November and December which are also short months and if we normally cutback in the quarter in January of course the year-end numbers were very poor but they did in order. There are major customers who have March year-end and they're watching their inventory right now and their cash position as well. Chris Quilty - Raymond James: Okay, so perhaps by the early spring at least we should see relief from any of these inventory adjustments or channel inventory issues and get back to more normalized growth?

That's sounds reasonable, yes. That's what we expect. Chris Quilty - Raymond James: Okay. And, I know you don't like to give specific market share issues, but if I remember correct the number is back in the last downturn, post 9/11 I mean your exposure to the JT-80 was probably north of 50%, when you look across either customers engine types or airplanes, is there any of those categories where you would project you have greater than 10% exposure that would be reason for concern?

What we say Chris is that we don't have a majority of our sales coming from any one platform. Back in 2001, we had majority coming out of the JT-80, that is not the case today. Certainly, we have platforms that account for greater than 10% of our sales. It's just on that platforms to go around. So by definition, we would have that. So we don't have a component or a concentration in any one platform. As the matter of fact some of the largest sales disappointment were in ongoing programs that are going to continue in service and there is no plans to remove any of these aircrafts. I mean again it's more of an inventory destocking situation, where we just pushing out engine overhauls and component maintenance and doing whatever they can to conserve cost and drawing down the supply chain. So, no, there in no concentration in any one area. It's not even remotely similar to what happened in 2001. Other than the airlines are in trouble, they need the savings. We have a credible product which is FAA approved and they frankly, need to expedite the resources to get the cost of goods and start buying. Chris Quilty - Raymond James: Got it. And I know you haven't had any announcements per say, but have you in the last six months picked up any significant new customer wins? Or is there something likely to happen?

Well, I would say we continue to grow our customer base. We continue to add new customers. Of course we already has 18 or 19 of the world's 20 largest airline volume HEICO products. So there aren't as many airlines potentials out there, new airline potentials as there are selling a part to existing customers. And that's where we have a tremendous opportunity, but yes we are adding new customers and we are selling products to those -- to existing customers who haven't purchase those particular part numbers in the past. Chris Quilty - Raymond James: Great. Thank you gentlemen, and keep up the good work.

Thank you.

Our next question comes from the line of Jim Foung with Gabelli & Company. Please proceed with your questions. James Foung - Gabelli & Company: Good morning, Larry and everyone.

Good morning, Jim. James Foung - Gabelli & Company: Just a couple of questions here. I was wondering do you have a numbers R&D this year, you indicated earlier that this would be higher, I was just wondering you haven't figured?

I don't think we disclose the hard number, typically it run at average around 4 to 5% of sales. That's as specific as we've gotten. And as Larry mentioned, we are looking at ramping up in terms of hiring some engineering positions and so the actual number would probably depend on our success of the timing of those additional position. James Foung - Gabelli & Company: Okay. And so I could assume that's going to be higher than last year, the R&D expenditure.

Yes. I think overall we are budgeting an increase in dollars spend, yes. James Foung - Gabelli & Company: Okay. And then Larry, I just think, what's your sensitivity to reduction in airline capacity. Early, you mentioned that you saw the industry capacity is down zero to 5%, and then you're looking to see us that kind of being -- kind of ballpark decline. Do you have a one-to-one correlation to the reduction airline capacity with regards to your revenues?

No, and we don't because as I've said before Jim. We have a headwind and a tailwind. The headwind is the airline reduction in capacity, the tailwind is new products that we're pushing to sell. And so, we can't correlate it exactly. It's a matter of fact that the one sort of new products that we sell, I'm sure that the airline capacity reductions would have resulted in bigger revenue drops. So, if this balance of the two vectors, and we really don't know where that comes out, but we do know from experience that the more parts we have than the more parts we offer, that does get into the revenue stream eventually. And, depending upon when the airlines approve it, and when the airlines run out of their existing base stock. And that's what keeps the tailwind, and it keeps the headwind from pushing us back further. James Foung - Gabelli & Company: All right, good. Very good. And then lastly; I recall on the last downturn when the airlines stopped planes, they cannibalized the parts. And so that kinds of rate the recovery in the MRO market. Do you see that repeating again in this cycle?

There'll be some of that, but I -- we don't think that's going to be the same amount, because last time that you had a relatively fuel inefficient engine and also in the 727, you had three in the cockpit. So, those inefficient -- economically inefficient planes, a lot of them were taken out of service. And they could cannibalize the aircraft and engines. But, in this situation they're taking amount of service, we think a lot of these planes are good aircrafts and will come back into service. So we don't see as much of that kind of thing. James Foung - Gabelli & Company: Okay. Very good. Thanks so much.

Thank you.

Our next question comes from the line of Arnie with CJS Securities. Please proceed with your question. Arnie Ursaner - CJS Securities: Hi, Larry. No ones ask you about acquisitions; and obviously it's been a very important part of your long-term growth, you obviously raised a fair amount of capital with very attractive rates, we've done that that indicate if you use half of your available lines and pay multiples higher than where we're probably are right now that it would be $0.40 accretive. Obviously, you run and have (ph) run the company carefully because you own lot of shares and don't do silly things, but where are you on the acquisition front and why wouldn't you try to take advantage of some of the fact that there are virtue buyers out there, and you're a logical strategic player?

That's a very good question. I'm glad you asked that, Arnie. The answer is, we are looking at a number of acquisitions. The problem is that some of the acquisitions that we've looked at, the sellers' expectation of sale price to us becomes unrealistic when their earnings drop. In this economic contraction, people start off with telling us that the earnings last year were X, and they're going to be up 20% this -- and then when you go in and do the due diligence, you find that it's very hard to support that theory. And, so then we say we'll still proceed and we have ... certainly have the capital to make the acquisition and we'll pay the same multiple, we don't want to get a lower multiple. But, we say to the seller; you have to be more realistic and you have to recognize that if you are not going to earn what you said you're going to earn, we can't pay you what we said we were going to pay you. So -- and then what we do is we say we'll give you an earn out, and if you really earn like you say, you're going to earn, you're going to get the same thing. Well, some people don't have this much confidence to put their money where the amount is and stand behind that statement that they're really going to earn and so we say we can pay you, and because as you point out, we're disciplined and we're not going to overpay silly amounts for companies that we're not earning it. The deals either full down or in some cases we decide that we'll wait and they'll wait, and we'll just see what happens. So I think we're looking -- at the present time we're looking at some very, very, interesting acquisitions, they're in the due diligence process. But ones that we are still looking at do not have the attributes that I just described, because otherwise we wouldn't still be looking at them. We think there are very good opportunities out there and if we pay fair prices and the one thing as you point out, we have the capital to make acquisitions. We have no problem writing a check. So we're looking at a number of acquisitions, the pipeline is full and set the appropriate time we're going to make -- we try to make accretive acquisitions of good companies, with good managements and I can tell you that the companies that we are looking at are in active due diligence, all meet those criteria. Arnie Ursaner - CJS Securities: So as to follow-up on that, if I may. We've done work that indicates if you use a 150 of your 350 million bank lines, amortization is roughly 5% of your purchase price, interest expense is LIBOR plus 5, I assumed that's locked in and you pay a five multiple of EBITDA, if you do that math which we've done, those were 40% plus accretive and on a full year basis using entire line, it's more than double that. So I don't know if you have any reaction to the math we have, but I've seen those multiples and other factors have not changed if you can find these.

You are a 100% correct. You have done the math and the arithmetic accurately, I believe and that's why we are looking at these companies. And I think we would like to make those acquisitions, but we're not going to make the acquisition, of a foolish -- again the problem is the arithmetic, the math works out making the acquisitions difficult. It's very interesting that recently I was reading a piece that was put out by one of the accounting firms Graham IV (ph) okay and it talks about acquisition, M&A activity. And they talk about the issues that -- the difficult issues that aerospace companies and other companies are having in finding and making acquisitions. And the problems that they point to is exactly the problems that we are running into. And it's interesting that we are not the only ones. I can assure you that if we could spend a $150 million today to make the acquisitions that you describe, we would do it in a heartbeat and maybe we'll be fortunate and the things that we have on the table that we're looking at, maybe they will click and we would like them to click. But the key to our long-term success Arnie is being fiscally very responsible and conservative. We -- I would say that at this point HEICO even though some people are disappointed in the market value and they're dumping the stock and panicking and running around with a tizzy, because HEICO didn't earn what -- I'm not happy about that. But we have to run the business and we're going to do it in a same disciplined way and in my opinion the earnings are going to shoot back up again. And so the people who want to dump the stock and go to something else, they're going to do that. But I believe we'll make our share of the acquisitions. We will maintain a very strong balance sheet in a disciplined way. Lot of companies are in hot water, lot of companies are in real trouble. We -- as you point out, we're paying less than 1% for our money right now and that's because we're financially strong and no shareholder has to worry about HEICO cutting its dividend or blowing up or something financial problem with HEICO and that's the way we run the company, but if we could spend the 150 million today, we would do it. We're trying to do it. Arnie Ursaner - CJS Securities: The various things in your pipeline ate again you probably have multiple candidates. Would they be large enough to meet that kind of use of capital?

I would say that, the companies that we -- if you take all the companies that we're looking at, yeah, we could spend the $150 million, easily with all the companies, the potential companies. Yes. Arnie Ursaner - CJS Securities: Thank you very much.

Okay.

We have no further questions at this time.

I want to thank all of you that are on this call. And remind you that if you do have any other questions about HEICO, you can give me a call or Tom or Eric or Victor and we'll try to clarify them for you. We look forward to talking to you for the second quarter fiscal 2009 earnings. And we hope that the overall economic conditions around the world, not only in the U.S. will be improving at that time. So have a good day, and thank you all for your interest in HEICO.