Laurans A. Mendelson - Chairman, Chief Executive Officer and Chairman of Executive Committee Eric A. Mendelson - Co-President, Director, Member of Environmental, Safety & Health Committee, Chief Executive Officer of Heico Aerospace Holdings Corp and President of Heico Aerospace Holdings Corp Victor H. Mendelson - Co-President, Director, Member of Environmental, Safety & Health Committee, Chief Executive Officer of Heico Electronic Technologies Corp and President of Heico Electronic Technologies Corp Thomas S. Irwin - Senior Executive Vice President and Member of The Office of The Chief Executive Officer Carlos L. Macau - Chief Financial Officer, Executive Vice President and Treasurer

Tyler Hojo - Sidoti & Company, LLC Alex Heinen - D.A. Davidson & Co., Research Division Michael Callahan - Topeka Capital Markets Inc., Research Division Stephen E. Levenson - Stifel, Nicolaus & Co., Inc., Research Division Kevin Ciabattoni - KeyBanc Capital Markets Inc., Research Division Arnold Ursaner - CJS Securities, Inc. Eric Hugel - S&P Equity Research Russell Rosenband Andrew Doupe

Good morning. My name is Suzette, and I will be your conference operator today. At this time, I would like to welcome everyone to the fiscal 2013 second quarter conference call. [Operator Instructions] 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 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 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. Thank you. I will now turn the call over to Laurans Mendelson. Laurans A. Mendelson: Thank you very much, and good morning to everyone on the call. We thank you for joining us, and we welcome you to this HEICO Second Quarter Fiscal '13 Earnings Announcement Teleconference. I'm Larry Mendelson. I'm the Chairman and CEO of HEICO. 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; Tom Irwin, HEICO's Senior Executive Vice President; and Carlos Macau, our Executive Vice President and CFO. Now before reviewing our second quarter operating results in more detail, I would like to take a few minutes to summarize the highlights. Consolidated second quarter '13 results exceeded our expectations and were accentuated by strong organic growth both -- within both of our operating segments and all-time quarterly record net sales and operating income within our Flight Support Group. Consolidated year-to-date net sales, operating income and net income represent all-time record results for HEICO, and this was driven principally by record net sales and operating income in both segments. Consolidated second quarter fiscal '13 net income and operating income are up 24% and 19%, respectively, on a 10% increase in net sales over the second quarter of fiscal '12. Consolidated net income and operating income in the first 6 months of fiscal '13 are up 14% and 6%, respectively, on a 6% increase in net sales over the first 6 months of fiscal '12. Flight Support set an all-time quarterly net sales and operating income record in the second quarter of fiscal '13, improving 10% and 14%, respectively, over the second quarter of fiscal '12. The increases principally reflect organic growth of approximately 7% and additional net sales contributed by 2 acquisitions since the third quarter of fiscal '12. Consolidated net income per diluted share increased 22% to $0.44 in the second quarter of fiscal '13, up from $0.36 in the second quarter of fiscal '12. This was as a result of continued strong performances from both of our segments. Cash flow provided by operating activities was $44.5 million in the first 6 months of fiscal '13. And as of April 30, '13, the company's net debt to shareholders' equity ratio was 32.1% with net debt, which is total debt less cash, of $211.7 million. As previously announced, we recently entered into an agreement to acquire Reinhold Industries. Closing, which is subject to government approval and standard closing conditions, is expected to occur within the next 10 to 30 days. Reinhold is believed to be the world's leading manufacturer of advanced niche components and complex composite assemblies for commercial aviation, defense and space applications. Reinhold is an excellent acquisition for HEICO because it offers a growing product line in growing markets. Reinhold's outstanding quality record, reputation and exceptional management were also critical to our decision to buy the business. Additionally, Reinhold will be part of our Flight Support Group, and we expect the acquisition to be accretive to our earnings per share within the first 12 months following closing. We plan to fund our acquisition of Reinhold through our existing credit facility. Immediately following the acquisition, even after paying our special dividend in December 2012, and that was a little bit in excess of $100 million, we expect our trailing 12-month leverage ratio, which is EBITDA to debt, to be less than 1.75x, and then subsequently decreasing to less than 1x by the end of fiscal '14. This, of course, excludes the impact of any additional acquisitions which we might make during that period. As we look ahead to the remainder of fiscal '13, our financial flexibility will continue to allow us to aggressively pursue high-quality acquisition opportunities. One other comment I've been asked often was our December dividend of -- in excess of $100 million, was that an indication that we've run out of acquisition opportunities? And I responded many times that the answer is absolutely not. We have more than enough buyer power to finance any acquisition that we would conceivably make. So we are not capital constrained in any way. I would like to now introduce Eric Mendelson, Co-President of HEICO and President of HEICO's Flight Support Group, and he will discuss the results of the Flight Support Group. Eric A. Mendelson: Thank you. The Flight Support Group's net sales increased 10% to a record $155.2 million in the second quarter of fiscal 2013 as compared to $141 million in the second quarter of fiscal '12. The increase reflects organic growth of approximately 7%, as well as additional net sales of $3.9 million from the successful integration of our fiscal 2012 acquisitions. The organic growth principally reflects an increase in demand from improving market conditions within our aftermarket replacement parts and repair and overhaul services product lines, as well as within our specialty product lines. Flight Support Group's net sales in the first 6 months of fiscal 2013 increased 5% to a record $294.2 million, up from $279.9 million in the first 6 months of fiscal 2012. The increase reflects additional net sales of $7.4 million from fiscal 2012 acquisitions, as well as organic growth of approximately 2%. The organic growth principally reflects an increase in demand from improving market conditions within our aftermarket replacement parts and repair and overhaul services product lines and within our specialty products lines. Approximately 80% of the Flight Support Group's organic growth came from increased aftermarket sales. The Flight Support Group's operating income in the second quarter of fiscal 2013 increased 14% to a record $30.3 million as compared to $26.6 million in the second quarter of fiscal 2012 and increased 5% to a record $54.5 million in the first 6 months of fiscal 2013, up from $52.1 million in the first 6 months of fiscal 2012. The increase in the second quarter and first 6 months of fiscal 2013 principally reflects the previously mentioned higher net sales. The Flight Support Group's operating margin improved to 19.5% in the second quarter of fiscal 2013, up from 18.9% in the second quarter of fiscal 2012. The increase principally reflects higher net sales in a more favorable product mix within our aftermarket replacement parts and repair and overhaul services product lines and higher net sales within our specialty products lines. The Flight Support Group's operating margin in the first 6 months of fiscal 2013 was 18.5%, comparable to the 18.6% reported in the first 6 months of fiscal 2012. Now I would like to introduce Victor Mendelson, Co-President of HEICO and President of HEICO's Electronic Technologies Group, to discuss the results of the Electronic Technologies Group. Victor H. Mendelson: Thank you, Eric. The Electronic Technologies Group's net sales increased 10% to $83.9 million in the second quarter of fiscal 2013, up from $76.3 million in the second quarter of fiscal '12. The increase reflects organic growth of approximately 9%, as well as additional net sales of $700,000 from acquisitions made in fiscal 2012. The organic growth principally reflects an increase in demand for certain space products and was partially offset by a small decrease in demand for certain of our defense products. In the first 6 months of fiscal 2013, ETG net sales increased 8% to a record $162.8 million, up from $150.7 million in the first 6 months of fiscal 2012. The increase mainly resulted from organic growth of approximately 5%, as well as additional net sales of $4.9 million from fiscal 2012 acquisitions. Again, this organic growth principally reflects an increase in demand for certain of our space products, which was partially offset by a small decrease in demand for certain of our defense products. The Electronic Technologies Group's operating income in the second quarter of fiscal 2013 increased by 32% to $20.2 million, up from $15.3 million in the second quarter of fiscal 2012, and increased by 14% to a record $35.8 million in the first 6 months of fiscal 2013, up from $31.5 million in the first 6 months of fiscal '12. The increases in the second quarter and first 6 months of fiscal '13 principally reflect the previously mentioned increase in net sales. The Electronic Technologies Group's operating margin improved to 24.1% in the second quarter of fiscal '13, up from 20.1% in the second quarter of fiscal '12, and improved to 22% in the first 6 months of fiscal 2013, up from 20.9% in the first 6 months of fiscal 2012. These increases principally resulted from higher net sales and a more favorable product mix for certain of our space products, again, partially offset by lower net sales and a less favorable product mix for certain of our defense products. At this point, I turn the call back over to Larry Mendelson. Laurans A. Mendelson: Thank you, Victor and Eric. One thing I'd like to mention at this point before I get into the detail, nowhere in our call in the financial data do we have anything that shows the outstanding performance of our business group leaders. All these performances that we see are really due to their extraordinary efforts, and I know some of them are on the call. On behalf of the Board of Directors, HEICO's shareholders, executive management, I want to thank them. I'm not going to name them all, there are too many. But if the shareholders out there listening to this call could meet some of these people, they would be duly impressed. It's truly an extraordinarily talented, dedicated, hardworking bunch that makes all of this happen. They're the ones that really deserve all the credit for our great results. Moving on to diluted earnings per share. The consolidated net income per diluted share increased 22% to $0.44 in the second quarter of fiscal '13. That's up from $0.36 in the second quarter of fiscal '12, principally driven by, again, continued strong performances in both segments. Consolidated net income per diluted share increased 14% to $0.82 in the first 6 months of fiscal '13. That was up from $0.72 in the first 6 months of fiscal '12, again, principally driven by continued strong performances in both segments. Depreciation and amortization expense of $8.3 million in the second quarter and $16.4 million in the first half increased by about $800,000 and $2 million in the second quarter and first 6 months of fiscal '13, and that was up $7.5 million and $14.4 million in the second quarter and first 6 months of fiscal '12. The increase in both periods reflects higher amortization expense of intangibles that were primarily the result of our fiscal '12 acquisitions. R&D expense increased to $7.7 million in the second quarter of fiscal '13. That was up from the $7.3 million spent in the first quarter and approximated the expense in the second quarter of fiscal '12. For the first 6 months of fiscal '13, R&D was $15 million, up about 1% from $14.9 million in the first 6 months of '12. Significant ongoing new product development efforts are continuing at both Flight Support and Electronic Technologies, and we continue to invest over 3% of each sales dollar in the R&D programs. We believe that, that commitment to invest in new product development has proven very effective over the years, and it continues to be a significant part of our long-term growth strategy in both operating segments. SG&A expenses increased 19% to $44.8 million in the second quarter of fiscal '13, that was up from $37.6 million in the second quarter of fiscal '12; and increased 12% to $87.4 million in the first 6 months of fiscal '12, and that was up from $78.2 million in the first 6 months of fiscal '12. The increases in the second quarter and the first 6 months of fiscal '13 principally reflect the incremental impact from the fiscal '12 acquired businesses and increase in accrued performance awards, which were based on improved consolidated operating results and an increase in certain selling costs associated with higher net sales volumes. SG&A expense as a percentage of net sales increased from $17.4 million in the second quarter of fiscal '12 to $18.8 million in the second quarter of fiscal '13. And they increased from $8.2 million in the first 6 months of fiscal '12 to $19.2 million in the first 6 months of fiscal '13. Those increases in the second quarter and first 6 months of fiscal '13 principally reflect the impact from previously mentioned increase in accrued performance awards and sales-related commissions and costs. Interest expense in the second quarter and the first 6 months of fiscal '13 were $800,000 and $1.4 million, respectively, up slightly from the $700,000 and $1.3 million in the second quarter and first 6 months of fiscal '13, respectively. The increases principally reflect a higher weighted average balance outstanding under our revolving credit facility. And that was associated with borrowings to fund recent acquisition, as well as the special and extraordinary cash dividend paid to shareholders in December 2012. I mentioned earlier, that was slightly in excess of $100 million. Other income in the second quarter and first 6 months of fiscal '13 was not significant. Income taxes. The effective tax rate in the second quarter of '13 decreased to 34.1%, down from 34.7% in the second quarter of fiscal '12. The decrease is principally due to an income tax deduction for the special and extraordinary cash dividend paid in December 2012 to participants of the HEICO 401(k) plan, who were holding HEICO common stock. Additionally, the decrease reflects a benefit resulting from the retroactive extension in January 2013 of the R&D tax credit to cover a 2-year period from January 1, 2012, to December 31, '13. The company's effective tax rate in the first 6 months of fiscal '13 decreased to 31.3%, down from 34.5% in the first 6 months of fiscal '12. And that is due principally to previously mentioned income tax credit for qualified R&D activities, as well as the income tax deduction for the special and extraordinary cash dividend paid in December '12. For the full fiscal '13, we continued to estimate an effective tax rate of approximately 33%. Net income attributable to noncontrolling interest was $5.3 million and $10.4 million in the second quarter and first 6 months of fiscal '13 compared to $5.2 million and $10.5 million in the second quarter and first 6 months of fiscal '12. The changes in net income attributable to noncontrolling interest in fiscal '13 compared to '12 principally reflect higher earnings of certain Flight Support Group companies and Electronic Technologies Group subsidiaries, which was partially offset by purchases of certain noncontrolling interest by HEICO, of course, resulting in lower allocations of net income to those noncontrolling interest. Now onto the balance sheet and cash flow. As I mentioned earlier, our financial position and forecasted cash flow remained extremely strong. Cash flow provided by operating activities was $44.5 million in the first 6 months of fiscal '13. And we continue to expect strong cash flow for the rest of the year, and we project about $140 million in fiscal '13. Our working capital ratio is strong, $3.2 million as of April 30, and that was up from $2.8 million as of October 31. DSOs of receivables were 47 days compared to 46 in October 31, 2012. And of course, we continue to closely monitor all receivable collection efforts in order to limit credit exposure. We rarely have losses in accounts receivable. I want to remind, we tend to collect what we sell. No one customer accounted for more than 10% of net sales, and top 5 customers represented about 17% of consolidated net sales in the second quarter, up from 16% in the second quarter of fiscal '12. Inventory turnover rate was 120 days as of April 30 compared to 114 as of October 2012. And the increase in the inventory rate reflects an increase in inventory levels towards the end of the second quarter '13 due to anticipated sales growth, which we see in this -- coming in the second half of fiscal '13. Our net debt to shareholders' equity was, I mentioned before, 32.1% on April 30, with net debt of 100 -- $211.7 million principally incurred to fund certain fiscal 2012 acquisitions, as well as the payment of that onetime special cash dividend, which actually totaled $116.6 million in December 2012. We have no significant debt maturities until fiscal 2018. The outlook. Consistent with our previous guidance, we remain confident in the outlook for the commercial airline industry and expect increases in airline capacity and maintenance spending to yield moderate organic growth within the Flight Support Group for the remainder of '13. Uncertainties surrounding the impact of governmental budget reductions has continued to soften the market for certain defense products and remained a contributing factor to the decline in sales for certain defense products within the Electronic Technologies Group during the first 6 months of fiscal 2013. Despite these market conditions, we continue to anticipate the healthy demand for nondefense products will drive moderate organic growth within ETG for the remainder of fiscal '13. Based upon our current economic visibility, we are increasing our estimates for fiscal '13 year-over-year growth in net sales to 8% to 10% and growth in net income to 11% to 13%, and that was up from our prior growth estimates of 6% to 8% in net sales and 9% to 11% in net income. Approximately, 60% of the mentioned sales growth is expected to be organic. For fiscal '13, we anticipate capital expenditures to approximate $20 million and depreciation and amortization, about -- to approximate $38 million. Additionally, we continue to estimate consolidated operating margins to approximate 18% for fiscal '13. And these estimates do include the impact of Reinhold Industries acquisition, but they exclude any other potential acquisitions, which we might make during the remainder of fiscal '13. In closing, we will continue to focus on intermediate and long-term growth strategies, with an emphasis on acquiring profitable businesses at fair prices. Currently, we are actively pursuing opportunities within both of our segments that complement our existing operations. And that is the extent of my prepared comments -- our prepared comments. I would like to open the floor for any questions, which you all may have. Thank you.

[Operator Instructions] And your first question comes from Tyler Hojo. Tyler Hojo - Sidoti & Company, LLC: Just the first question relates to the organic aftermarket growth rate. I mean, certainly, it's nice to see kind of the improvement there. But I was hoping that you can maybe provide a little bit more granularity as to what drove that. And I'm also hoping that you can maybe comment on -- certainly, it seems like there's been more focus on concerns surrounding kind of competing used parts coming on to the market and impeding growth rates, and is that impacting you? Laurans A. Mendelson: Tyler, let me answer the last part of the question first, and then I'm going to shift it over to Tom and Carlos to get into the detail. As far as cannibalization in aircraft and so forth, we don't believe that, that's really having much of an impact on us because the parts that we sell for the most -- most of those parts are sort of expendable parts that people are not going to pick up out of used aircraft and so forth. So if we're having washers, bushings, so forth and so on, that is probably not going to impact us in a significant way. I think some writers who -- and I know a number of analysts have mentioned this theory, and I think they're right in -- as it regards, perhaps, the OEMs because maybe they'll see a little of their spares drop. But the kind of things that we're selling I don't think are too sensitive to that type of cannibalization. So -- and keep in mind, we also have within our MRO group a company that actually does that kind of thing, buys engines and aircraft and so forth, and sells and tears down and so forth, so we're a little bit active in that business but -- so we see it from the other side. We understand if there's a plethora of parts coming on the market, I mean, we're very aware of it. And so the answer to it is we're not concerned about that. As to the first part of the question, I'm going to ask Tom to... Thomas S. Irwin: Yes, Tyler, this is Tom Irwin. As Eric mentioned, our -- in the second quarter, our organic growth for the FSG group was around 7%, and that he also mentioned about 80% was attributable to the aftermarket sales, which we saw growth organically in the parts and service business. And then the other, obviously, 20% of the organic growth was contributed by our specialty products, which is broadly OEM-type products. I think the answer is we typically target outgrowing the market, and probably, we did that in the second quarter. I think looking forward, we -- inherent in our estimates for the full year are comparable organic growth for the rest of this year, which, again, as I think you're pointing out, is probably a bit higher than overall MRO spend outlook and so on and so forth. But I think, as we've seen over a longer period of time, the MRO cycle is a bit longer, and we think there is some pent-up demand that we're beginning to see -- we begin -- we began to see in the second quarter, dating back to our first quarter conference call. And at this point, that we're expecting in the second half of this year. For particular color, I don't know, Eric, if you have anything else... Eric A. Mendelson: Yes, I'd just say, Tyler, it's been broad-based that support enthusiasm for our products and what we're doing. I think we continue to outgrow the market, which means we're taking market share in various areas. For obvious reasons, we don't like getting into specific products or customers because our competitors listen to these calls, and they'd go and try to protect what they can. So we mentioned in the first quarter that I had gone customer by customer and done a review with our folks, and that was the basis for our confidence in the remaining 3 quarters of fiscal 2013. And certainly, we've seen that a growth in that increase already now manifest itself in the second quarter. And I would anticipate we're probably at a reasonable run rate now, where we've seen that pickup in demand, and we're just continuing to focus on all of our areas. Tyler Hojo - Sidoti & Company, LLC: Okay. Great. That's certainly encouraging. Just one other question, if I may. Related to guidance and how Reinhold kind of folds in, I mean, I get the sales increase looks like it's mostly driven by the acquisition. But on the earnings side, you said in the press release, you expect the deal to be accretive in 12 months. My guess is it's not accretive to earnings in fiscal '13, but maybe you can just expand upon that. Laurans A. Mendelson: I think that, that assumption is not correct. We think it's going to be accretive from the get go. Tom can give you more color on it, but I think it's going to be -- we can't be exactly sure, but I think it's -- we'll let Tom give you more color. Thomas S. Irwin: Again, this is Tom Irwin. I have -- the answer is, we're not exactly sure of the exact timing, but we do have in our estimates, obviously, some revenue projections for Reinhold, presuming closing roughly 10 -- within 10 to 30 days. The earnings impact has been moderated in our estimates, the reason being, as you may recall, typically, in acquisitions post-closing, you have acquisition costs, that it gets spent. You also have, for us, typically, inventory write-offs and for purchase accounting, which typically hit pretty quickly. So the answer is -- of our -- basically, we upped our earnings guidance, obviously. Most of the earnings guidance increase was attributable to our core businesses. There is a little bit in for Reinhold impact but very minimal. And again, today, we haven't given any financial details on the Reinhold transaction. As we go forward, we'll be able to add a bit more color. But suffice to say, there's more sales added to the guidance than there are earnings at this point. Tyler Hojo - Sidoti & Company, LLC: Yes, okay. That's what I thought. Great.

Your next question comes from J. B. Groh. Alex Heinen - D.A. Davidson & Co., Research Division: Alex in for J.B. today. So I had a question about the ETG segment. You talked about how defense products saw a little bit of softness this quarter, and I'm wondering how you guys are looking at that going forward with sequestration setting in and everything. And we've kind of heard other people around the group state that they don't see much impact for the remaining 2013 from sequestration, and I'm just wondering if you guys are kind of thinking about it the same way, somewhere around flat, maybe down a little bit, maybe up a little bit, and then how you're looking at it in 2014. Victor H. Mendelson: Yes, this is Victor. The answer to that is I would expect that we would see some continued deterioration in defense domestically in our overall defense numbers. I think where we've seen thus far has been on our short-lead, short-cycle businesses. Unfortunately, some of that is higher margin. And I think that as the year wears on, it will become more pronounced, and we'll see more of it in sort of a 6- to 9-month timeframe. I don't think it's going to overwhelm us, as I've talked about at many conferences and on these calls before, but I think we've got an early taste of it. Alex Heinen - D.A. Davidson & Co., Research Division: Okay. Great. So along the same line then, we saw some space product pickup in the quarter. Can we expect that going forward as well? Are you going to use that to kind of offset impacts of sequestration? Victor H. Mendelson: Well, for the moment, our space business is strong, and the outlook for it is pretty good. I think that overall in the year, it will be an offset to sequestration. We'll see how it goes as we get later in the year and into next year. It is -- by nature, the space business is an excellent business, but by nature, there's variability to it on top line and, of course, bottom line. Over time, it's a great place to be in, and we've done phenomenally with it.

Your next question comes from Michael Callahan. Michael Callahan - Topeka Capital Markets Inc., Research Division: I guess first off here, I just wanted to maybe do a follow-up on your organic growth rate throughout the quarter. You guys kind of report a month off from, I guess, a lot of peers that we're comparing you to here. Did you see any type of large, I guess, monthly sequential step-up towards the end of the quarter? Or was it pretty consistent throughout the quarter? Thomas S. Irwin: We -- April was the relatively strong month in FSG, speaking of FSG principally compared to a couple prior months. That in fact -- as you look at our cash flow, our receivables jumped up a bit, and again, it was primarily because the sales were a little bit heavier by -- on a monthly basis in April. But I think we tend to look at longer periods even beyond quarters in terms of try to estimating forecast in sales growth because different airlines order on different cycles. And you may recall, particularly in FSG, where 60% or 70% of our shipments each month come in under the PO in the same month, it's a little bit -- we need to look at a large, longer-period window to come up with our forecast. Michael Callahan - Topeka Capital Markets Inc., Research Division: Okay. Fair enough. Maybe I'll just follow up a little bit along the same line then, a little bit different way to go about, I guess. So based on your first quarter report versus the second report -- the second quarter report, there's a pretty dramatic reversal there. Was there any kind of -- was it very progressive or was there a time period in which things kind of dramatically started to turn? Eric A. Mendelson: Yes, this is Eric. I would say it really occurred pretty much throughout the quarter. And I would be careful about reading -- transferring HEICO's results and inferring that other companies are going to show this kind of growth. When I speak to our peers in the industry, I don't think they are seeing the kind of growth that we are seeing, so -- and that's really continuing to now. But it really occurred, I would say, through the quarter. We knew that the first quarter was lower than we had expected. There was a pickup in the second quarter, and we anticipate sort of this level of activity going forward through the remainder of the year. Michael Callahan - Topeka Capital Markets Inc., Research Division: Okay. Great. That was helpful. And I guess the one other thing I want to ask was really on the Electronic side of the business, just around margins. So we had a pretty big step-up in operating margin for the second quarter. It sounds like that was related to the space products. It sounds like that also may continue. I guess, just how should we be thinking about the run rate there, I guess, for the balance of the year? Thomas S. Irwin: Yes, again, this is Tom Irwin. Again, in our guidance numbers, in our overall operating margin estimate of about 18%, it continues. As we previously stated, that for the full year, we expect operating margins in ETG, that it'd be comparable to last year, so that would put it at 22%, 23%, again, for the full year. So you may recall, first quarter was lower. As you're pointing out, second quarter was a bit higher, so I think roughly averaging the second half of the year somewhere in the 22% to 23% would bring us to a full year average in that range.

Your next question comes from Steve Levenson. Stephen E. Levenson - Stifel, Nicolaus & Co., Inc., Research Division: Just curious, in terms of the organic growth in aftermarket, can you point to it as being a part of fleet growth, additional miles traveled, or is it that more planes are coming into their maintenance intervals now? And is it a specific model or pretty well balanced? Eric A. Mendelson: Yes. I would say that I would not attribute it -- of course, I don't have, if you will, the scientific data in front of me, but I would not attribute it to fleet growth nor to significantly higher maintenance activity. I would really attribute it, from my chair, to what I consider to be our structural advantage, where our businesses are broken down into individual business units, each with a very confident, highly incentivized, very intelligent, hardworking leader and team of people. And I think they go out and find these opportunities. The MRO was just in Atlanta about 1 month ago and speaking with other folks in the industry. They're not seeing a, if you will, rising tide in terms of level of activity in the aftermarket. I would really attribute this to our folks having a size business, where they can go out and find opportunities and reap those opportunities, as opposed to higher level of maintenance or flight hours. Stephen E. Levenson - Stifel, Nicolaus & Co., Inc., Research Division: Okay. So it really sounds more like you're capturing more market share. And do you think that's coming because HEICO is a little bit more integrated and coordinated in the way this is being done and that it's tougher for the other guys to compete? Eric A. Mendelson: Yes, I think that we -- actually, we execute very well. And people, in order to have a meeting for the HEICO businesses, they're able to get, if you will, the top 5 folks of each business around the table and figure out what each person needs to do. And these folks are very motivated, very accomplished and talented, and they go out and do it, and I think that really is due to our structural advantage. We're not this type of organization, where you've got these silos and you've got to have all these managers who really don't know what's going on and assemble them all and they're crazy teams of people and figure out how to make decisions and how to move the ball forward. Our guys are like little regimental combat teams, and they go in and they get the job done. And I think that's why in this sort of flat environment, I think that's why we're doing well, and I think that's why my dad mentioned in the beginning of the call that our people are really working very, very hard because I think they're the ones making the difference in an otherwise flat market. Stephen E. Levenson - Stifel, Nicolaus & Co., Inc., Research Division: Sounds great. No, I'm not going to try to build this into a forecast or anything, but if we watch flight -- available seat mile statistics, could we translate that into something that might accelerate in the future then? Eric A. Mendelson: I would be careful about that because, again, in speaking with our peers, people are seeing sort of flattish markets out there. And I think our performance, my sense is -- well, of course, we'll see how other people report, but my sense is I think we're sort of doing better than most out there. And I think it's more of a HEICO market share story in everything that we're doing. Whether it's parts or repair services, we're very close with our customers. I think our -- we deliver great value to them. I think we're the supplier of choice. They want to give us business. So I'd be careful. I mean, some analysts have come out, and I've read -- I read all the material, and some folks have come out and said, "Well, the first half of '13 sort of marked the bottom of the engine cycle, and it should be coming back." Well, I certainly hope that's true, but in speaking with the players out there, they're not really seeing -- they're not speaking about that. Maybe they're being a little conservative, but instead, it's more of an analyst-driven thought as to how we're doing. I think activity does go up from here though, but I would be careful about inferring that the tide is rising, if you will.

Your next question comes from Michael Ciarmoli. Kevin Ciabattoni - KeyBanc Capital Markets Inc., Research Division: It's actually Kevin on for Mike. Obviously, you put up record margins in FSG this quarter. Just wondering what, other than the obvious volume, was responsible for that and how maybe we should look at that in the back half of the year given the acquisition? Thomas S. Irwin: Again, this is Tom Irwin. As I mentioned relative to ETG, our full year estimates for operating margins really haven't changed, so I think, again, in the FSG, we're looking for the full year to run somewhere around 18%. So again, that has some impact reflected of Reinhold, but again, it's certainly less -- obviously, less than the full 6-month period, so there might be a little bit impact. But again, overall, we're still targeting the same operating margins for this -- for really both segments, as well as the consolidated operating margins. Kevin Ciabattoni - KeyBanc Capital Markets Inc., Research Division: Okay. Great. And then, realizing you haven't closed yet, I was wondering if you could give us some color around Reinhold and maybe end-market breakdown of sales there, obviously, without going into the exact numbers and how it would fit into the existing business. Eric A. Mendelson: Sure. Reinhold, when we look to make the acquisition, we've got a number of criteria: one, that they're fairly priced; number two, that they're in very good businesses, with strong barriers to entry; and number three, superior leadership team and the type of people we want to be in business with and we want to work with for decades. And we met the folks over at Reinhold, and we got to know the business, and we felt we were able to structure a deal that was fair to everybody, in a business which is excellent, with a management team that is really top-notch. So I think that it fits with us philosophically. I think I had mentioned that we -- if you will, I think we have a structural advantage in the way HEICO is structured, that we have these autonomous business units, which are each very close to their customers, understand their manufacturing processes and their -- the financial results, and they don't feel like a cog in somebody else's big wheel. And they are very rifle-shot-approach businesses, and Reinhold fits in that criteria. They are very strong in the composite market. They're both in the commercial aviation, as well as defense and space applications. Most of their defense and space is not for -- directly for U.S. government programs. Much of it is done through foreign military sales. With all of the concerns in the world, folks need these products. So we think that it fits very well. It's more of a specialty product type company, whereby it becomes -- a customer comes to it with a problem to solve. Reinhold figures out how to solve that problem, and it has proprietary manufacturing and design technology to be able to solve that problem at a very competitive cost and make a fair profit on top of it. So we've already proven over the last 50 years we've been in -- we supply specialty type products not necessarily directly to the aftermarket but to other players in the aviation industry, and I think that this just further broaden HEICO's productive ability, as well as customer reach. There's other things that we can sell to some of these customers in the other HEICO business units, where Reinhold will be able to open the door for these other HEICO units. And likewise, the other HEICO units will be able to open the door for Reinhold. And I think we've proven that we're able to buy this kind of businesses, we maintain the leadership there, make sure that they're motivated, they're incentivized, we stay out of the way, we don't load them down with a bunch of corporate reporting, and corporate activities which are non-value-added, and we let them stick to doing their business. So Reinhold has operated in that fashion for many years, and we think it will be a great fit. And frankly, the people at Reinhold are very excited because this is what they wanted to do [indiscernible] businesses, and we think that there's a good synergy opportunities. So it's -- I think it's a great fit. Kevin Ciabattoni - KeyBanc Capital Markets Inc., Research Division: Eric, would you be willing to kind of give a ballpark in terms of how much of that business is commercial versus the space and defense piece of it? Eric A. Mendelson: Yes, the majority is commercial, but no, we're not, at this point, providing further detail than that. Kevin Ciabattoni - KeyBanc Capital Markets Inc., Research Division: No, that's good enough for now.

Your next question comes from Arnold Ursaner. Arnold Ursaner - CJS Securities, Inc.: A couple of quick follow-ups on Reinhold. First, it's going to go in the FSG segment, is that correct? Eric A. Mendelson: Yes. Arnold Ursaner - CJS Securities, Inc.: Okay. And if you can continue to -- well, in your prepared remarks regarding earnings and revenue guidance for the balance of the year, even if I take the high end and the percent that was coming from acquisition, it would imply for the 5 months, you might own at about $36 million of revenue and roundly 90 -- $90 million or so for the year. Is that about the right math? Thomas S. Irwin: Arnie, this is Tom. We haven't provided any financial details on the Reinhold transaction. I think going forward, post closing, et cetera, we'll be able to provide additional details. What we did disclose was, obviously, the employment number of 200 people roughly. Commentary, it's a typical bolt-on acquisition, as Larry described, single, doubles. We historically said that these bolt-on acquisitions typically have revenue of $10 million to $70 million. At 200 team members, this would put it on the high end of that range. So within those kind of parameters, I think that is the reasonable estimate. Laurans A. Mendelson: And then on an annual basis. Arnold Ursaner - CJS Securities, Inc.: Yes, again, if they were not as much as $90 million or so of annual revenue, then it would imply a slowdown in your growth rate in the organic business, which I don't think you're hinting at, at all. Laurans A. Mendelson: We are not hinting at that, no. Arnold Ursaner - CJS Securities, Inc.: Okay. Again, that's just pure math based on what you said. The other question I have regarding Reinhold is, they have a very important contractual relationship with Bee Aviation [ph] as a component supplier. I know you do tremendous diligence before any acquisition. What more can you tell us about that contractual relationship that gives you confidence it will continue for the next decade, which is sort of driven by the new programs that they're involved with? Laurans A. Mendelson: I think, Arnie, in general, we do a very thorough due diligence, and part of the due diligence is customer contact and discussion. So based upon all of our due diligence, we think it was a wise acquisition. In addition, I think that Reinhold makes a very -- extremely high-quality, unique kind of product. The process to make this product is not very simplistic. I was surprised at the complexity when I saw the manufacturing operation. Also, they have the capacity to supply large quantities to important users. So putting all that together, and I think competitive pricing focus and so forth, I think that our due diligence told us that this is a pretty good bet. Arnold Ursaner - CJS Securities, Inc.: Again, just focusing on the math, to the extent you're going to have an inventory write-up plus amortization expense, and you indicated, overall, the operating margin can be maintained even after this acquisition, it would imply that Reinhold is a low- to mid-20s operating margin business. Is that, again, the right way to think of it? Laurans A. Mendelson: I don't think we give that color. I do think that we normally say -- and you know that we always say that our acquisitions have to meet our hurdle rate of a 20% operating margin, so we've said that publicly. But as to the specific operating margins of individual businesses, we prefer not to give it out. If it was a low-margin or a lower-margin business, we would not be interested just by its basic nature. So I think that, again, looking at Reinhold in the overall key components that we look for in an acquisition, I think Reinhold fit right in there, so it meets all of the requirements that we normally look for. Arnold Ursaner - CJS Securities, Inc.: Larry, Tom mentioned it was towards the larger end. Was this as large as Switchcraft for you? Laurans A. Mendelson: I think it was in the range of Switchcraft. It's in the -- it's within Tom's range, maybe slightly lower but slightly smaller, but it was in the Switchcraft range.

Your next question comes from Eric Hugel. Eric Hugel - S&P Equity Research: Eric, can you talk about -- with regards to the FSG business any sort of highlights in terms of regional strengths and weaknesses? Eric A. Mendelson: I would say there's sort of consistent strength from the Americas, as well as Asia. Europe continues to be weak across the board for all the reasons everybody reads about. But it could just -- really, European weakness would be the only clarifying comment there. Eric Hugel - S&P Equity Research: Okay. And with regards to when you look at the products and services, is there any sort of strength or weakness in sort of the engine-related products and services versus maybe non-engine-related products and services? Are the airlines focused more on engines or non-engines or can we read anything from that? Eric A. Mendelson: I mean, I would say that no, nothing in particular, and some of the analysts have written that they thought engine overhaul sales have bottomed in the first half or bottoming in the first half of this year and will be rebounding in the second half of this year and in 2014. But I would say that probably is the only additional color there. Remember that engine sales -- the engine manufacturers reported significantly higher sales in 2011 than then they did in 2010. And we all thought, we all surmised that, perhaps, some of the sales that occurred in '11 occurred in -- should have occurred in '12, but the airlines thought that the level of activity would continue growing at that rate and it didn't. So I would say it was probably just due to more of, if you will, overbuying in 2011 on the engine side, of those being slightly bloated and then being a little under going forward. Eric Hugel - S&P Equity Research: Great. And last thing, maybe, Tom, can you quantify the tax benefits in the quarter? You said -- you talked about a tax benefit from the dividend that you paid, as well as your R&D tax credit. Carlos L. Macau: Yes, this as Carlos. The effects of the dividend and the income tax benefit related to the R&D credit was about 1% on our rate in the quarter. And we expect -- as I think Larry mentioned in his prepared comments, for the full year, we expect about a 33% effective rate.

Your next question comes from Julie Yates Stewart.

This is Russell on for Julie today. Maybe just one more question on organic growth. So if 80% of the organic growth in FSG was attributable to aftermarket, that's a pretty incremental positive compared to what we've heard from some of your peers. Can you talk a little bit about maybe what drove your specific out-performance when previous quarters have been more in line with industry trends? Laurans A. Mendelson: That's easy, superior management. You know that. Yes, Eric will answer. Eric A. Mendelson: Yes. I mean, I really do think that it was more due to our structural -- the structural advantage, what I consider to be the structural advantage of the company, that we have these groups of people, and they are each focused in their particular areas. And I think that they were just able to outperform. I mean, even when we reported in the first quarter that things were a little weaker than we had hoped that it would be, I think our peers were even below us in terms of their comparisons overall. So I would think that it's really just due to the focus that our folks put in and going out there and getting the sale.

Your next question comes from Ken Herbert.

It's -- I'm actually Andrew Doupé on for Ken Herbert. I had a question for Larry. Larry, could you just provide some color around M&A, just what you're seeing out there? Are you seeing more opportunity within commercial relative to defense? Laurans A. Mendelson: I think that we're seeing opportunity on both sides of defense, so we're an equal opportunity buyer. We're opportunistic in what we look at. I would say that the pipeline is what I would call normal. At any one moment, the pipeline can be way up or way down. And then once we get into the due diligence and start kicking the tires and everything else, we probably drop -- we look at 100 companies and we may buy 1. We look -- we do a very thorough due diligence, and most companies we drop after the due diligence because people -- as you very well know, people who promote the companies, they give you information which is always a hockey stick, and then when you go in and kick the tires and you discover there are a lot of pitfalls there. But we buy -- we try to buy very strong companies. The result of our acquisition program of 46 acquisitions has been really excellent. So I would say, at this time, the pipeline is normal. We're looking at a number of transactions. And if they fit our model, we're not financially constrained in any way, as I mentioned earlier. We're going to go Flight Support or Electronic Technologies, either one, we will buy. And we are looking at companies in both segments. Eric A. Mendelson: And Andrew, this is Eric. Just to add a little bit of color, I think we tend to be -- due to our operating structure, we tend to be the acquirer of choice because, unlike a large vertically integrated business, where you've got all these functional areas and functional executives come in and try to change everything in these businesses, we like to retain the focus of the business down in the business unit. So that's very, very advantageous to the companies that we acquire. And we hear this very, very frequently that we are management's choice. We're the leadership's choice on a company, on an acquirer. And with regards to the due diligence, I think what my dad means is that we are given certain data up front, and then we go and we check it out. And if people have misrepresented what that data is, then we're very, very thorough, we go in, and we figure it out. And obviously, we would not be a finalist in that particular type of case. But when it comes to -- we are very knowledgeable in our areas. We do a lot of homework. We verify what management says, and we tend to be the company that they want to acquire them. So I think that there's good opportunities, really, in all the areas that we continue to focus on.

Okay. Great. That's very helpful. And then, Eric, I just have one more question for you. When you sort of structure out your plan to go into these airlines and sell to them, I mean, are you seeing more opportunities within the mainline carriers and more than sort of startup airlines? I guess, any sort of color there, if you're seeing any sort of -- any more opportunity for PMA products there? And then, obviously, assuming the more startup airlines that, obviously, occur within Latin America or Asia or these parts of the world, so any sort of color there as far as how you approach these customers would also be very helpful. Eric A. Mendelson: Yes. In general, our best customers are those who have mature fleets because, obviously, there's a maintenance honeymoon when somebody buys new equipment. So if somebody is a startup airline, they probably don't have much experience nor need for maintenance, so that would not be a prime target for us. What has to happen is that equipment has to age, they have to realize how expensive it is to maintain, they have to see the annual price increases and, frankly, the way that they are treated, and then we walk in and offer a suite of services, where we're able to make sure that they're very happy with what we have to offer. We give them personalized attention because our business units are structured to really understand their product, and that's something that a bigger company cannot do. So it would not be a brand-new airline with brand-new equipment. It's somebody who has the equipment that starts to age. But we sell to both, if you will, legacy mainline carriers, domestic, international, low-cost carriers, we work with everybody out there.

There are no further questions in queue, sir. Laurans A. Mendelson: Well, thank you very much. We thank all of the people out there who are listening to HEICO and interested in the company. As you know, we are available. If you have questions, call anyone of us, and we'll try to accommodate you and be responsive. We look forward to our next -- third quarter conference call, which will be in about 3 months. So we wish you all a pleasant summer, and we look forward to speaking to you real soon. Thank you.

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