So good morning to everyone, and we thank you for joining us. We welcome you to HEICO's First Quarter Fiscal 2012 Earnings Announcement Telecon. I'm Larry Mendelson, I'm the CEO of HEICO Corporation, and I'm joined here this morning by Eric Mendelson, HEICO's Co-President and President of HEICO's Flight Support Group; Victor Mendelson, HEICO's Co-President and President of HEICO's Electronic Technologies Group; and Tom Irwin, HEICO's Executive Vice President and CFO. Before we begin, Christie, our operator this morning, will read the statement. Christie?

Welcome to the HEICO Corporation fiscal 2012 first quarter earnings conference call. Certain statements in this 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 cost and requirement, 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 and income tax rates and economic conditions within and outside of the aviation, defense, space, medical, telecommunication and electronic industries, which could negatively impact our costs and revenues. Those listening to this 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 statement whether as a result of new information, future events or otherwise. The moderator for today's call is Laurans A. Mendelson, Chairman and Chief Executive Officer of HEICO Corporation. Please go ahead, sir.

Christie, thank you very much. And before reviewing the first quarter operating results in detail, I'd like to take a few moments to summarize the highlights of what we consider another record-setting quarter. Consolidated net sales and operating income represent all-time record quarterly highs for HEICO, driven principally by all-time record net sales and operating income within our Electronics Technologies Group and record first quarter net sales and operating income within our Flight Support Group. Consolidated net income and operating income for the first quarter of '12 are up 12% and 16%, respectively on a 22% increase in net sales over the first quarter of '11. The Flight Support Group set in first quarter net sales and operating income record improving 15% and 25%, respectively over the first quarter of '11. The increase in net sales reflects organic growth approximating 10% as well as additional net sales contributed by an acquisition in the first quarter of fiscal '11, while the increase in operating income is principally the result of increased sales volumes and improved operating margins. Electronic Technologies set all-time quarterly net sales and operating income records in the first quarter of '12, improving 38% and 4%, respectively over the first quarter of '11. The increase in net sales and operating income principally reflects additional net sales contributed by the acquisitions of 3D Plus in September, 2011 and Switchcraft in November, 2011, as well as organic growth approximating 7%. Net income per diluted share increased 13% to $0.45 for the quarter, first quarter, and that was up from $0.40 in the first quarter of '11. Net income per diluted share in the first quarter of '11 included a $0.02 per diluted share benefit from the retroactive extension of R&D income tax credit. Internally, we adjust the first quarter of '11 to $0.38 on a more normalized basis, so in -- the way we look at it, from a management perspective, net income was really up a little bit over 18% for the first quarter of '12. In November 2011, as you know, we acquired Switchcraft through the purchase of all the stock of Switchcraft's parent company and that was for the price of about $142 million. Switchcraft is a leading designer and manufacturer of high performance, high reliability in harsh environment electronic connectors and other interconnect products. And the acquisition is very consistent with our practice of acquiring outstanding niche designers, manufacturers and marketers of critical components in aerospace in electronics with strong management teams and enables us to broaden our product offerings, technologies and customer base. A little more color on that, Switchcraft is an old-line company with what we consider an outstanding management team, extremely experienced. We have the highest regard for that management team. And as a matter of fact, some people have asked us how it's tracking? How it's doing? And it's doing exactly what we thought it would do. In December 2011, we've completed a new $670 million revolving credit facility giving us excellent flexibility to continue to aggressively pursue quality acquisition opportunities, albeit that perhaps larger than we have looked at in the past. And we're grateful that HEICO's excellent performance and credit characteristics have enabled us to more than double the size of the prior $300 million facility. In January 2012, we paid our 67th consecutive semiannual cash dividend since 1979 and this was at a rate of $0.06 per share. As of January 31, the company's net debt to shareholders' equity was a low 25.9% with net debt, which is total debt less cash and cash equivalents of about $167.7 million and that reflects the acquisition of 3D Plus and Switchcraft. You'll note that we have no significant debt maturities until fiscal 2017 and a net debt-to-EBITDA leverage ratio of less than 1% -- I'm sorry, not 1%, less than 1x. Moving on to net sales, consolidated net sales in the first quarter of '12 increased 22% to a record $212.7 million, up from $174.2 million in the first quarter of '11. Flight Support net sales increased 15% to a first quarter record of $138.9 million that was up from $120.6 million in the first quarter of '11. The increase in net sales for the first quarter of '12 reflects organic growth approximating 10%, as well as additional net sales contributed by a full 3 months of operating results from acquisition in the first quarter of '11. The organic growth principally reflects increased market penetration within certain of our industrial product lines and these were primarily products used in heavy-duty and off-road vehicles and also within certain of our aerospace repair and overhaul services and this compared favorably to 2011 first quarter. Aftermarket parts sales were also up in the first quarter of '12 over the first quarter '11 but at a slower pace. We attribute the slower growth percentage primarily to extraordinary growth in the first quarter of last year when organic growth approximated 24% and that was despite November and December being typically Flight Support Group's weakest months and that was then followed by a typically strong January. Last year most likely was impacted by some level of pent-up maintenance demand following cutbacks by the airlines in 2009 and '10. In addition, the slower sales growth in the first quarter of '12 reflects our reduced sales emphasis on certain lower-margin PMA parts. Electronic Technologies net sales increased 38% to an all-time record of $74.5 million, up from $53.9 million in the first quarter of '11 and that increase in net sales in the first quarter of '12 reflects additional net sales of approximately $17 million contributed by the previously mentioned acquisitions with Switchcraft and 3D, as well as organic growth of about 7%. Let me just mention that we always talk about ETG growing at an organic of about mid- to upper-single digits, so it was right on target. The organic growth in Electronic Technologies principally reflects continued strength in demand for certain of our medical and defense products. Net sales for the first quarter of '12 by market were composed approximately 55% commercial aviation versus 60% in the full fiscal '11, 24% from defense and space both in the first quarter of '12 and the full fiscal '11. And about 21% from other markets, which includes medical communication electronics and this was the 16% in the full fiscal 2011. Operating income consolidated for the first quarter of '12 increased 16% to a record $37.6 million, up from $32.5 million in the first quarter of '11. Flight Support's operating income increased 25%, a very healthy 25% to a first quarter record of $25.5 million and that was up from $20.4 million in the first quarter of '11. And this principally reflects increased sales volumes as well as improved operating margins. ETG operating income increased 4% to a record $16.2 million, up from $15.5 million in the first quarter of '11 and this represents operating income contributed by the recently acquired businesses. The operating margins consolidated for the first quarter of '12 was $17.7 million compared to $18.6 million in the first quarter of '11. Flight Support operating margins were 18.4% in the first quarter of ‘12 that was up significantly from $16.9 million in the first quarter of '11. And that reflects a favorable product mix and favorable impact on operating margins that higher sales has on the fixed portion of our operating expenses. ETG operating margins were 21.8% in the first quarter of '12 compared to 28.8% in the first quarter of '11. That decrease in operating margin for the first quarter of '12 principally reflects the impact from lower operating margin realized by our French-subsidiary, newly-acquired 3D Plus and a more favorable product mix in the first quarter of 2011. The lower operating margin from 3D Plus is principally attributed to softer orders in certain of its products in the first quarter of '12 resulting primarily from the economic uncertainty throughout Europe and approximately $1.2 million associated with noncash charges for amortization of intangible assets and inventory purchase accounting adjustment. And just to add a little bit of color, I guess most of you understand this but that is where certain inventories that are, acquired principally finished goods, under the accounting rules must be written up from their historical cost with fair value as of the acquisition date and the increase in that value or cost is charged to cost of sales as the items are shipped. So that has the result of reducing the operating margin because that higher cost inventory is costed out in cost of sales. Although margins were lower than were expected at 3D, there were no asset write-downs. Just a little bit of color on that, we purchased 3D because we felt it was an unusual opportunity to gain access to European and foreign markets. Often it's difficult for U.S. companies to access, particularly European markets, because they're very pro-European producers and European companies. And this gave us a foothold in a very, of what we believe, is an expanding and very strong market, world market, Europe and Far East and so forth for the products that 3D makes. And if you want to know what they are, later on Victor can respond to that and give you more detail. As we've discussed before, variations in product mix and the timing of customer delivery requirements may cause operating income and operating margins of Electronic Technologies Group to vary from quarter-to-quarter, and this is due for 3D Plus as well. And I think there is a very good example. We do believe, at this point, based upon 3D management, to see stronger performance particularly in the second half of the year as orders pick -- have been picking up and are expected to pick up. So we think 3D was the right decision and the actual operations will prove -- should prove that out. Excluding 3D, Electronic Technologies' operating margin in the first quarter of '11 would've been 25%, approximately 25%, which is comparable to Electronic Technologies full year operating margins, and they normally approximate 25% to 26%. Diluted earnings per share increased 13% to $0.45 in the first quarter of '12, up from $0.40 in the first quarter of '11. As I mentioned earlier, the first quarter of '11 includes $0.02 benefit from retroactive extension of the R&D tax credit. I told you internally, for operating purposes, we look at '11 as really $0.38 so the growth in our mind is about 18.4% on a diluted earnings per share basis. Fiscal '11 diluted earnings per share has, of course, been respectively adjusted to reflect the 5-for-4 stock split that was affected in April 2011. Depreciation and amortization expense increased by $2.7 million to $7 million total in the first quarter of '12, up from $4.3 million first quarter of '11. This reflects higher amortization and depreciation expense related to the acquisitions, which I mentioned earlier. Research and development expense increased 15% to $6.5 million in the first quarter of '12, up from $5.6 million in the first quarter of '11 and this is principally due to further enhanced growth opportunities and market penetration. And we always believe that our commitment to invest in new product development has proven very effective over the years. It continues to be a significant part of our long-term growth strategy in both of our operating segments. SG&A expenses were $40.6 million in the first quarter of '12 versus $31.6 million in the first quarter of '11. The $9 million increase in SG&A principally reflects an increase of $7 million attributable to the newly acquired businesses. SG&A spending as a percentage of net sales increased 19.1% in the first quarter of '12 from 18.1% in the first quarter of '11 and this principally reflects the impact of higher SG&A expenses as a percentage of net sales at the acquired businesses. Interest expense still is pretty low. It increased to $0.6 million in the first quarter of '12 from $0.1 million in the first quarter of '11, and the increase was principally due to higher weighted average balance outstanding under the revolving credit facility, and that was associated with the previously mentioned acquisitions, of course. Other income in both years was not significant. Our effective tax rate increased to 34.2% in the first quarter of '12, up from 30.4% in the first quarter of '11, and the increase in the rate is principally due to the income tax credit for qualified R&D for the last 10 months of fiscal 2010. And that was recognized in the first quarter of fiscal 2011 because of the retroactive extension of the tax credits to cover the period from January 2010 to December 31, 2011. The increase in the first quarter of fiscal '12 was attributed to the expiration of the R&D tax credits as of December 31, 2011, and also our purchase of certain noncontrolling interest at the end of the first quarter of fiscal 2011. The net income attributable to noncontrolling interest was $5.3 million in the first quarter of '12 compared to $5.4 million in the first quarter of '11. And the decrease in the first quarter of '12 principally reflects the previously mentioned purchase of certain noncontrolling interest by HEICO. That is that we acquired a percentage of some of the noncontrolling interest during fiscal '11, and that was partially offset by higher earnings in Flight Support in which a 20% noncontrolling interest is held by Lufthansa. Moving over to the balance sheet and cash flow, our financial position and forecasted cash flow remain extremely strong. Working capital ratio is strong at 3.5%. That's current assets divided by current liabilities as of January 31, 2012, and that's up from 2.6% at October 31, 2011. DSOs of accounts receivable were 47 days in both January 31, '12 and October 31, '11, and we continue to closely monitor all receivable collection efforts to limit credit exposure. No one customer accounted for more than 10% of net sales. Top 5 customers represented approximately 15% of consolidated net sales in the first quarter of '12 compared to 18% in the first quarter of '11. We like that because we're diversifying and we think that's good for the overall financial health of our business. The inventory turnover rate as of January 31, 2012, was about 126 days. That was up from 113 as of October 31, '11, and that reflects the impact of the -- these previously discussed acquisitions on that computation. And so, what -- if you exclude the recent acquisitions, the turnover rate would be 121 versus the actual 126. Cash flow used in operating activities in the first quarter of '12 was $2.3 million primarily driven by the timing of certain payments pertaining to fiscal 2011 year-end and fiscal 2012 payables. And we continue to expect fiscal 2012 cash flow provided by operating activities to remain strong and to be in the range of $120 million to $130 million. The fact that the first quarter was negative is -- really bears no impact. We expected that and that's nothing to be concerned about. Capital expenditure in the first quarter of '12 were $3.8 million and we budget CapEx for the full 2012 to be in the range of $20 million to $23 million. Now looking ahead, the outlook improved economic conditions and increased capacity in the airline industry resulted in higher demand for Flight Support's products and services and strong sales growth for each of the -- for each of our reporting periods during 2011. Based on overall economic uncertainty, the commercial airline industry expects continued year-over-year capacity growth but perhaps at a slower rate than experienced during 2011. In our Electronics Technologies markets, we generally anticipate stable demand for products, for our products, but recognize the government deficits and spending reduction plans may moderate demand for certain of our defense products. Based on current market conditions, we continue to estimate fiscal 2012 growth in the area of 15% to 18% in net sales and 10% to 12% in net income over fiscal 2011 levels with consolidated operating income approximating $155 million and depreciation amortization about $30 million. These estimates include the recent acquisitions of 3D and Switchcraft but exclude additional acquisitions, if any. And consistent with our long-term growth goals, management continues to target net income growth of 20% for the full fiscal 2012 year. But it remains too early in the year for us to make that prediction. We do continue to pursue a number of attractive acquisition opportunities. Some of the opportunities we put on hold because of pricing. We don't know if those opportunities will come back if the sellers will lower the pricing. But there's a possibility and -- but maybe they won't, but certainly the pipeline is pretty good for the acquisitions over the year. I would-- historically, we've made 2 to 3 acquisitions during the year. I think that's reasonable to the outlook at this time. In closing, we will continue to focus on intermediate and long-term growth strategies with an emphasis on the development of new products, new services to meet the needs of our customers and strategic acquisition opportunities that complement our existing operations. That's the extent of my prepared comments and I would like Christie, our operator, to open the floor to questions. And of course, Tom, Eric, Victor are all here to be responsive to your questions. So, Christie, let's open the floor.

[Operator Instructions] And your first question comes from Tyler Hojo of Sidoti & Company.

So first question, I just wanted to go back to the growth rate in the Flight Support Group. So I guess, you mentioned just in your prepared remarks that you were deemphasizing certain lower-margin products. Just kind of wondering what, if you can maybe quantify that a little bit or just to -- that trend?

Eric is going to be -- respond to that.

As you know, the team members that HEICO and the leadership are incentivized on operating income. And that's really the performance that our leadership looks at and we think the metric that our shareholders want us to focus on. So as a result, they really don't, in the sales, is just not something that is really important to them because it's somewhat irrelevant to the total earnings. So as a result, there are -- there were certain lower-margin products, which consume a certain amount of time to develop, support and all just generally consume leadership management time. So we, in certain businesses, made certain decisions to deemphasize certain lower-margin areas and focus on higher-margin areas. And I think that's why you've seen the margin -- one of the reasons why you've seen the margin pick up in the Flight Support Group. We can't get into the details for competitive purposes and perhaps some of these lower-margin areas will end up coming back in terms of demand, perhaps at price levels that are more attractive to our business unit. But we -- they made the decision at this point just to deemphasize the certain products. But that's all part of the natural running of the business and I would not say it's really material to the trend or where the company is going.

Were the lower margins more attributable to volume or price?

It could be both. It could be both volume as well as price. And sometimes, frankly, with customers, you gotta push back a little bit. And when margins in certain areas need to be picked up, we have to take a certain position. So we continue to be very customer-friendly and we want to obviously sell as much as we possibly can. But we've got a-- just a certain amount of bandwidth and we really want our sales and product support people to focus in areas that are most accretive to HEICO shareholders.

No, it totally make sense. And just kind of a follow-up to that, just kind of wondering how you're looking at maybe enacting further price increases when you look at your PMA catalog as it sits today? I mean, what have you enacted and kind of just how you're thinking about that?

We don't publish a -- we don't announce really an average price increase. They're all certainly calculated that can be weighted by volume, unit volume, which of course nobody knows but us. And it can be calculated just as a straight average of all the parts into the thousands of parts that we provide. We continue to be extremely customer-friendly to those customers who want to provide long-term commitments to us and that is a vast majority of our business. OEMs have taken the -- our competitors have taken the opportunity to jack up prices significantly. And as a matter of fact, it tends to be a tremendous amount of concern out there in the industry-- I was just over in Singapore last week and many people were commenting that on the newer platform, they sense that the OEM prices are going to be even more egregious than they've been in the past. So I think that there's opportunity for us. We get pricing, a little bit of pricing, in our existing parts. But of course, we basically get pricing as the successive generation parts are more expensive, significantly more expensive than the ones that they replace. We're sure to get a secular pricing increase with each -- a new generation of product. So we continue to look at that and where we can get pricing, we certainly do.

Your next question comes from Arnie Ursaner of CJS Securities.

To follow up on Tyler's question, what's exactly involved when you deemphasize a product? Do you discourage your sales force? Or do you -- how do you deemphasize a product?

Yes, Arnie, this is Eric. We have a limited number of sales people. I'm guessing we've got roughly 100 sales people in the organization and they only have a certain amount of time with customers to be able to focus on a certain number of products. And there are some products that are just frankly less profitable than others. Some of those products may be less important to our customers as well and we just don't spend the time on them that we spend in other areas. So don't get me wrong, I mean, we're not going out there and saying to customers, please don't order these parts. But we may not be following up. We may be raising the price somewhat. We may not care if the volume falls off. We may have our people focus in other areas. So when you sit down with the customer, you can go over x number of items per time. Maybe those items are not on the list. So that's what we mean in terms of deemphasizing the product. But just to be clear, we are not de-continuing -- discontinuing the sales of those products. And we still continue to offer those products. Sometimes, we just need a higher pricing to make them more attractive or higher volumes. But I -- it's just in the natural flow of business.

So you have very good margin this quarter in flight safety, and some part of it relates to the strategy. Should we, on a go-forward basis, assume you can maintain 50, 100 basis points higher margin in flight safety if this trend continues?

Arnie, this is Tom Irwin. As we went into the year, our comment was in terms of margins that we saw some opportunity for a modest margin improvement. We continue to think that's the case for Flight Support Group. And parts depend on mix going forward. I think we do expect some strengthening whether they'll be at that high a level throughout. It's kind of hard to tell going, predetermining by quarter in particular. But I think we continue to expect modest improvement for the full year.

As long as I have you, the long-term debt jump to $190 million, should we assume that Switchcraft was roughly $150 million and your availability currently is about $500 million?

Yes. This is actually the purchase price, as Larry mentioned earlier for Switchcraft, was $142 million prior to the close of last fiscal year. Of course, we borrowed the -- for 3D Plus, so there's some amounts standings there as well. So and obviously with the cash flow from operations forecasted $120 Million, $130 million, we'll pay that down throughout -- not totally pay it down throughout the year, but there will be a pro rata reduction the remainder of the year.

My final question is on 3D where you mentioned the -- you specifically highlighted softer orders for certain of its products. Do you believe it's timing or is it a fundamental change in those specific products? And also remind us if 3D has an earn-out?

Arnie, this is Victor. And the answer is, we don't think it's a fundamental shift in the products. We think it's timing. In fact, we've seen the orders improve substantially of late. And I think as that continues and those things get shipped, and it may have to do with lead times and so forth, I think we would look for improvement in the sales line in the third quarter of our fiscal year. And there is no earn-out for that transaction.

Arnie, this is Larry. There's just one comment I'm picking up on your question about the debt. I think that we have plenty of debt capacity for any acquisition plan that we might have. And so the $190 million that we show on the balance sheet and there's $27 million in cash, so the net of $160 million, $170 million, whatever the number is. And with cash flow of, give or take, $120 million, $130 million, that's going to be way, way down. So we have more than enough debt capacity for anything we're even thinking about.

Well, plus you have an accordion feature on the debt you have.

Exactly, exactly.

And again, I'm not going to remind you of the math we've talked about. If you are successful in these acquisitions, I assume it sounds like you're remaining quite price disciplined.

Yes, I think that's been the part of our success that maybe in some cases, we should have paid more but we can't argue with success. The process has worked well. And we look -- you can -- as you well know, you can overpay and then you can see markets drop. I have said publicly that one of the acquisitions we were looking up was in the defense area. And it was a very good -- it still is a potentially very good acquisition. But what is the future of defense? So you can pay one price today and then wind up seeing the defense budget cut and seeing the sales and earnings of that acquisition fall. And that's going to impact the growth going forward. So all these things we try to balance purchase price growth, everything else. And we would rather -- the money is not burning a hole on our pocket. We can grow very, very nicely and we can look elsewhere. So -- and that there's plenty of fish in the sea. So that's what -- that's how we operate the business. And as you well know, we're very conservative in the way we spend the bank lines and shareholders money. So I think I'm confident that the acquisition program will work out fine.

It sound like you own a few shares and maybe not driven by size and ego.

For sure.

Your next question comes from Julie Yates of Credit Suisse.

Victor, this one's for you. Just in EPG, can you help us understand the weakness in the margins a little bit more in terms of how they should trend the rest of the year if sales aren't, on 3D Plus, aren't going to come back until maybe the third quarter? Could you see this weakness persist into to next quarter?

Well, I think it vacillates. It moves up and down. It sort of oscillates as it has historically. So it's not unusual for us to see lower margins in the business. I think it will be in the second quarter. It's just too early to tell where we're going to be in the second quarter alone. But I think for the full year, we're still thinking that we should get to that sort of mid-20s margin that we talked about historically. And as I said earlier, in response to Arnie Ursaner's question, we're seeing order improvement, the significant order improvement in the one place where it particularly dragged us down.

Okay. And then did Switchcraft have any impact on margins in the quarter?

No. I can give us pretty much -- yes, was that -- Switchcraft, number one, did perform as expected. Number two, even with the purchase accounting adjustment to amortization and inventory just into the type of things that we expected. It didn't have a significant change on the reported margins, plus or minus, so it's in line. And again, that was the -- a higher-margin business that more our norm, if you will. And if you think 3D on the long-term basis will hit our norm as well, but the near-term impact has been a shortfall.

Okay, great. And then, Tom, just on SG&A at 19% of sales, how do we think about that in the rest of the year? And I think you mentioned $7 million of the increase was from acquisitions. Does that continue in the year? Or is that more one-time in the quarter?

That would -- I think the answer is those businesses have a slightly higher mix of SG&A versus margin. Again, we focus on the operating income margin line and their hit -- they're at our expectations or they will hit our targeted operating margins. But they do, being the types of businesses have a little bit more of a sales effort. And as an example, on smaller businesses, often the 2 or 3 key executives are SG&A-classified but they're also -- their #1 salesmen and #1 technical guys. And so that tends, on the smaller electronic businesses, to weight the SG&A above a sort of industry averages of the bigger companies. And similarly, the direct manufacturing costs or gross margins tend to be higher than overall larger industry comps .

Okay. So on a full year basis for FY '12 as a percentage of total sales, we expect it to increase over the 17.8% in FY '11?

Yes, I would say so. I would say it will be more norm. As I think a run rate is a bit more typical than what it maybe last year before we bought these businesses. Both of this was, in effect, we're saying have higher SG&A percentages than the 17.8% so they would drive them up.

Okay. But is it as high as the 19% or somewhere in between there?

It would be in the higher range.

Your next question comes from Ken Herbert of Wedbush.

Just wanted to first, one final question on, from my end, on 3D Plus. When you think about this business, I mean, it sounds like there's some timing on the top line which should benefit later in the year. How much of the recovery in the margin of this business through the rest of this year is from potential of changes to the cost structure? And is that something that you've got in the plans or much flexibility on?

Ken, this is Victor. The answer is, there is some improvement in the cost structure that's going on there now. But the improvement in the bottom line will come mostly from the top line growth from resumptions to kind of getting back to where they should be.

And if Switchcraft performed as planned, I mean is it safe to say that the top line shortfall from 3D Plus in the quarter was well, it seems like it was much more significant than you were expecting maybe 1 or 2 quarters ago when you announced the acquisition. Is that a fair statement?

Yes, that's correct. And yes -- No, I think that summarized that well.

Okay. And then just to jump over, you, within Flight Support, you mentioned or you highlighted specifically better growth on the repaired overhaul side of the business. Eric, can you provide any more details on that in terms of specific parts or specific areas that you're seeing? I mean, we tend to -- I tend to think of that is, and I think over the last few quarters, you've seen better growth on the parts side than on the repair side. And it seems like this quarter was the inverse. Can you provide any more details specifically on the repair side and what you're seeing there? And maybe through the rest of 2012, do we see growth on that repair side maybe outstripping the parts growth?

Ken, this is Eric. As you know, we have a hard time getting into details, the specific types of products and the customers because our competitors are on the call. But as you know, we do all sorts of component overhaul. We're one of the largest non-OEM, non-airline affiliated component overhaul businesses in the United States. So we do fuel, hydraulic, medic, electro-mechanical, avionics, wheels and brakes, structures, all sorts of components basically throughout the aircraft. And we're seeing a lot of interest in those products. As you know, our business is-- nothing normally goes up in the straight line. Things bounce around a little bit. And we'll capture a bunch of market share in a particular area and then we'll consolidate it. And it goes flat for a little bit of time and then it jumps back up as we lay the groundwork for more business and as we add more capabilities. So I think what you're seeing is just really the natural cycling of the business. I wouldn't draw any conclusions that we're focusing on one part of the business over the other. It's just sometimes there's particular strength in one area and sometimes we don't exactly know why until many quarters after the fact when we finally figure it out. Maybe a customer floods us with a particular new type of product in the beginning at that they've got stocked up waiting for us to go into a certain area and a level of that in a different rate. All sorts of things invariably happen. But we are seeing a significant opportunity in the component overhaul side using our parts as well as using OEM parts. I wouldn't say that it's in any one particular area, it's just the -- really strength throughout the entire area. And over on the parts side, we continue to develop all of the same type of parts that we've developed now for the last 5 or 10 years. And we're just continuing to do that as well.

Okay, that's helpful, Eric. Just one final question, when you look at the overhaul and the repair business then with, I mean, it looked like it was a really -- a very strong quarter for that side of the business. Is there any reason for you to think that, that strength won't continue through the rest of this fiscal year?

No. I mean, I wouldn't say that I wouldn't expect the strength to continue. The businesses, as I said, move around and we see strength in different areas at different times. I wouldn't want to call it a trend or anything like that. Again, we typically don't understand it until well after the fact. But I expect to see continued growth frankly in all of our -- in all of the products and services that we offer within FSG. I wouldn't say that the growth is going to come from one particular area or another. I think it's going to be pretty broad-based.

Your next question comes from Steve Levenson of Stifel, Nicolaus.

I know you don't like to talk specifically about parts, but I'm sorry, I've got to ask this one. It looks like there's going to be some pretty good growth in engine maintenance events particularly this year and continued strength into next year and it looks like it's skewed more to narrowbodies and even within narrowbodies more towards A320 family and the B2500 engine. Are you all satisfied with your content on B2500? Would like to have more in both parts and services? And do you think that will be helpful this year?

Yes. We continue to develop product in all platforms. And I would say that there is the resurgence in narrowbody engine demand that will definitely benefit us. So we continue to develop new products. We've already got a large portfolio in narrowbody engine parts. And so I would expect to see a continued growth in that area if that comes to fruition.

Your next question comes from J. B. Groh of D.A. Davidson. J. B. Groh: Larry, gave us some details on ETG sort of business mix? But, Victor, I was wondering if you could sort of give us a kind of a pro forma look with Switchcraft and 3D Plus with that business mix is like when you include those 2 trailing basis or something?

You mean like end markets? J. B. Groh: Yes, yes, yes.

Like the end markets? Okay. So I think what the business looks like with 3D Plus and with Switchcraft is that we probably are somewhere in the neighborhood, in terms of defense, it's probably somewhere in the neighborhood of about 30% or so straight defense kind of I think a go-forward basis, somewhere in that range. And space is probably something more like going forward probably somewhere in the neighborhood of 15%. And then in the other markets, it's probably somewhere in the neighborhood of 40%, 45%, somewhere in that range of the business. And then of course, commercial aviation is probably somewhere in the upper-single digits, somewhere around there. And within the other markets, medical would be a significant portion maybe, I don't know, somewhere to 1/3 to 1/2, something like that of the remainder. J. B. Groh: Okay. So you -- less than the dependence on space and defense with the deal?

On -- in the case of Switchcraft, yes. Now in the case of 3D Plus, that's almost all space. J. B. Groh: Right, okay, okay. Okay, that makes sense, okay, good. And then, one for Eric, what's your sense of sort of customer inventory levels? I mean, it seems like some other guys that are sort of aftermarket levered had these sort of blow out quarters in terms of the numbers and capacity didn't change that much. So I was just kind of curious as to what your feel is for inventory levels? What are your sales guys saying on that front?

Actually, there was, I think, a focus by a number of customers in November and December to bring down their inventory levels. I think that they continue to bring it down as they report their year-end numbers. But we see things running at a pretty stabilized rate right now. We have not seen, if you will the traditional restocking, where customers want to keep more months on the shelf. I think customer inventories remain very, very lean. And if there is a pickup in demand in any of these areas, I would expect that we would be selling parts very quickly for it because the airlines really just don't have -- they don't have much inventory on the shelves right now. J. B. Groh: And I think you in the past, you've said the -- you get these surcharges in fuel prices, the phone starts to ring a little bit more because they're looking for ways to save. How do you kind of balance that with the probability that capacity gets reined in a little bit? I mean, what are your thoughts there relative to kind of last cycle is where we had the big moves in fuel?

Yes. There's no question that whenever fuel prices go up and the airlines get more serious about cutting their costs and they become much less complacent and much more aggressive. So I think that, that is a good medium- and long-term driver for our business. As far as the short-term, if they remove any capacity, then obviously that would hurt. However, if you look at it -- I mean, the airlines have been to pass through a significant amounts of the fuel cost increases over the last 6 months or so. So we see a continued strength by the customers. I think we're fortunate in that some of the fleets that are being impacted don't impact us as much. But we anticipate continued strength growing in the markets that we serve. And that as airlines come under pressure, I think it provides a great opportunity for us. J. B. Groh: Great. And the just a quickie for Tom. Tom, what's the -- you mentioned this, but what's the tax rate embedded in your guidance?

For the full year, it's basically based on the first quarter running around 34%. That does assume that there's no extension of the now expired R&D tax credit in some discussions. But at this point, we have not factored that in there. And again, that would be an upside if it is extended or it's certainly -- it's extended before the end of the year. But again, at this point, it looks -- it's looking alike the current first quarter rate continued throughout the year with no additional R&D tax credits.

[Operator Instructions] And your next question comes from Eric Hugel of Stephens.

Can you maybe give a little more clarity on the PMA products that you've talked you were deemphasizing. Is there may be some common theme as to why you can't get the pricing that you want? Is there competition alternatives or the OEMs sort of lowering price? Can you sort of talk about, are they certain types of products, maybe older engines or non-engine parts?

Yes, we -- I think you're really -- due to all of the above. But I would not say though that it is due to increased amounts of competition in those areas. I think that's not the case. It would really just be -- we had a natural distribution of profitability by part. And sometimes it depends on the amount of volume that we've got on a particular part. So sometimes we've got to increase our market share on some things for it to be more competitive or maybe it's an older product that where the price was set a long time ago. And as a result, the OEM price is not as high as it is on a similar part on a newer platform. So it really covers -- it covers a whole bunch of different products. But I would not say it's due to increased competition for those parts. It really is -- I mean, we offer a tremendous value on what we provide and sometimes, the value is frankly just too good. And we decide that if the value is too good in some areas that we got to focus on more profitable areas. So we just stop talking about it as much as we stop going after it and we're not so aggressive. Sometimes you have to stop providing a part for a certain period of time until the customers are sort of willing to accept that the current price level has increased. And then they come back at a significantly higher price. So I would just say it's just part of the general flow of the business. This is no change. I mean, we've been doing this for 22 years and I'd say that this has happened for the whole time that this leadership team has seen something.

Would you -- are there any sort of differences here that you're seeing in terms of engine versus non-engine parts? Are there any differences in terms of your ability to get the pricing that you want? Or is that just not an issue?

No. I would say that's not an issue. That's really not an issue for us.

Okay. In terms of 3D Plus, can you talk about -- is it basically, is it across your whole product base that you saw, the sort of the dropoff in demand? Or were there really certain products that were more impacted and why?

Well, it was probably more on their main product line. They have a few product lines there. And I think it was more in particular markets, in market segments, particular customers, who are expected to place orders at the time and we were told that they were pushed out.

Okay. And I guess lastly, with regards to the FSG business, again you talked about a sort of most of the growth was related to the industrial products, I guess that 10% organic growth in the FSG business. Can you give us sort of a ballpark figure as to sort of what kind of growth you saw on the year-over-year basis organically for the aerospace aftermarket business? Well, it sorts of like a mid-single digit, 5% cut-in number be a reasonable ballpark?

You're speaking about all commercial aviation?

For the -- in the FSG segment because you said that there, as you said, a lot of the growth in that was driven by the industrial business?

I mean, yes. I mean, it's pretty -- overall, the aviation -- virtually aftermarket would be pretty close to that full 10% organic growth partly because remember the industrial product which is, again, was growth above 10%, is a small product line.

Right. Okay. So it was around a little -- maybe a point or two below the 10% but not too far different?

Exactly, yes.

Your next question comes from Michael Ciarmoli of KeyBanc Capital Markets.

Just a couple of a housekeeping questions, I may have missed this, did you guys give, within the Flight Support Group, did you give the mix between product and services for the quarter? Would you be willing to?

I would say, I'm not sure we did but it's probably running, and I'll have to check exactly -- but it was probably running pretty close to where it's normally running in terms of say 65, 35, something like that. I don't think it'd be too far off that.

Okay. And then just a point of clarity, on the ETG margin, can you talk about kind of excluding 3D Plus, you'd be at a 25% margin. Was that also excluding the amortization or excluding that additional, I guess, charge for amortization of $1.2 million puts you back up at a higher level over the 25%?

The answer is the 25% computation basically takes reported historic and just excludes all of the 3D. So it would be the sales, the cost of sales, the SG&A which would include the amortization then the purchase accounting is added. And so, it's totally excluding 3D. It's sort of a normalized or a 3D where it hit the rest and then it would be in the 25% range.

Okay, perfect. And then just within ETG, are you guys seeing any pricing pressure from some of your defense customers given kind of what's been happening with the budget, with the cuts? Is that starting -- are you starting to get push back on pricing for just better terms from some of your customers?

I don't think it's any different than it's been over the past several years. Five years is more. So we're not seeing anything more pronounced at this point.

Okay. And then last one for me, just on the Switchcraft, can you give sort of -- you talked about, obviously, the order flow with 3D Plus. Any kind of order patterns or trends that you're seeing in Europe from some of the Switchcraft product lines?

Nothing that's notable on the Switchcraft lines that we're seeing out of Europe. I think that's not a huge part of their business. They're more North American and some in Asia. But they do business in Europe, but nothing that jumps out.

At this time, there are no further questions. Are there any closing remarks?

The only closing remarks, we thank everybody on the call for their interest in HEICO. We are available if you have additional questions. Tom, Eric, Victor and I are available. Give us a call and we will -- otherwise, if we don't hear from you, we'll maybe see you at an aero-conference over the next couple of months or will be on the second quarter call sometime near the end of May. So we thank you, and that's the end of the first quarter call. Thank you.

Thank you. This does concludes today's conference call. You may now disconnect.