Welcome to this HEICO Corporation fiscal 2008 first quarter Earnings Call. During this call, there will be breaks for questions. (Operator Instructions) At this time, I will turn the call over to Larry Mendelson, Chairman, President, and CEO of HEICO Corporation.

Thank you very much and good morning to everybody on the call. We welcome you to the HEICO first quarter fiscal '08 earnings announcement teleconference. I am Larry Mendelson, the CEO of HEICO, and I'm joined this morning here by Eric Mendelson , President of HEICO's Flight Support Group; Victor Mendelson, President of HEICO's Electronic Technologies Group; and HEICO's General Counsel; and Tom Irwin, HEICO's Executive VP and CFO Before we begin, Victor Mendelson will read a statement.

Thank you. Certain statements made in today's conference call will constitute forward-looking statements, which are subject to risks, uncertainties and contingencies. HEICO's actual results may differ materially from those expressed in or implied by the 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 US 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 stability to make acquisitions and achieve operating synergies from acquired businesses, customer credit risk, interest rates and economic conditions within and outside of the aviation, defense, space and electronics industries, which could negatively impact our cost and revenues; and HEICO's ability to maintain effective internal controls, which could adversely affect our business and the market price of our shares. Those listening to today's call are encouraged to review all of HEICO's filings with the Securities and Exchange Commission, including but not limited to filings on Forms 10-K, 10-Q and 8-K. We undertake no obligation to publicly update or advise any forward-looking statements whether as a result of new information, future events or otherwise. Thank you.

Thank you, Victor. Before reviewing our first quarter operating results in detail, I would like to take a few moments to summarize the highlights of what we consider to be an outstanding first quarter. Both Flight Support and Electronic Technologies reported higher sales and earnings in the first quarter of '08, combining for an overall 18% improvement in consolidated net sales and a big 36% increase in consolidated net operating income over the first quarter of last year. Consolidated operating margins increased 2.2 percentage points to 17.3% in the first quarter of '08, up 15.1% in the first quarter of last year. I would like to point out that as most of you know, at HEICO we focused on operating income and not so much on the top line growth and our guidance at $580 million is about 14% top line growth over the prior year. We do show very strong growth in operating income. The higher sales and operating margins contributed to a 27% increase in consolidated net income over the prior years first quarter, again that’s what we focus on. In the first quarter of '08 we completed our 36th and 37th acquisition since 1990, with the addition of two small companies, one a PMA company and one an MRO services company. These were both acquisitions that were easy fold ins for us and just added to our product line, very, very synergistic, very compatible. In January '08 we paid our 59th consecutive semi-annual cash dividend since 1979. The cash dividend of $0.05 per share represented a 25% increase over the prior per share amount of $0.04. We do believe that our operating results and our acquisition successes are a further indication of the concentrated efforts for long-term sustainable growth at HEICO. As I have said many times…

(Operator Instructions) Arnie Ursaner on the line from CJS Securities.

Larry, good morning to you.

Arnie, good morning

Couple of record questions, the biggest one that I can ask these days about your business is obviously people are worried about the economy and while you have had growing growth I keep believing that your business is about to slowdown. What are you seeing and what’s your outlook?

Well, at this point I am aware of what economic gloom and doom is out there and what the press is saying. I can tell you that we have as late as last night Eric has been in touch with a number of his subsidiaries, the significant ones and we are not seeing that kind of slowdown. So again we've given a guidance that we truly believe we'll hold up. Now saying all that we are aware that some airlines say that old things may slow and so forth and so on, but as of now we are not seeing that happen. In addition keep in mind that the international sales and foreign sales, which are increasing for us, are holding up very, very well and those guys are doing great and Lufthansa had a blowout year. Lufthansa’s indicative of foreign sales and of course is a great customer of ours. So at this point Arnie, we are not seeing it, we're concerned. We're saying well maybe the other shoe is going to fall, but we came out with guidance that we believe in, annual guidance and we raised it a little bit. So that’s what we honestly see and you know us pretty well, we're not going to tell you something that we think is not going to be there.

As I said it’s just a question we get asked a lot. As long as you mentioned Lufthansa they obviously have recently signed an agreement with JetBlue. When do you expect to see that contribute to your results, adversely no prior relationship with JetBlue. When do you hope to see some impact from that if it all?

Well, I mean optimist. We don't have and as far as I know at this point it's still very early. I believe that JetBlue is far enough to partner with Lufthansa and that means that I think that they are going to listen to suggestions from Lufthansa. If Lufthansa advices JetBlue the way I will assume it will, that it will impact us in positive way. When it will start it's really difficult to tell, I don't know what their schedule looks like, I mean their build schedule and overall and so forth but I mean I personally believe that its going to be a very nice positive, but I can't predict when it might hit.

Would it be fair to say it's not embedded in your current guidance?

That's fair, yes.

Final question I have is you obviously give a lot of detail on margin for the ETG Group both by quarter and what your annual view is. You mentioned on Flight Support Group, the 18.5% was sort of at the higher end due a mixed, but you've also made a number of acquisitions along the way and maybe it's not the exact same business. So, since you didn't provide kind of your annual view of operating margin for Flight Support Group. How much of the 18.5% would you view as an anomaly? What do you think the annual rate is more likely to be? And again given the changes in that and mix what's a longer term view of margin in the Flight Support Group?

That's a complicated detail question Arnie. So I'm going to hand that over to Tom Irwin, I think he could give you the right answer.

Yeah, Arnie. With respect to our Flight Support Group as an example last years full year operating margins ran about 17.6%. We've indicated, and felt consistently that we target modest improvement on that. I would say we target something around 18% on the full year that would be 40 to 50 basis point improvement near term. That could vary depending on mix, but again if the mix changes it would not be at the expense of overall operating income improvement, our real focus. On an ongoing basis near term out three to five years, again we look for modest continuing improvement in operating margins, but again not dramatic 1%, 2%, 3% changes year-by-year.

Excellent quarter, thank you.

Arnie, thank you very much.

Our next on the line is from Tyler Hojo with Sidoti & Co. Tyler Hojo - Sidoti & Co.: Hey good morning, Guys.

Tyler, good morning. Tyler Hojo - Sidoti & Co.: My first question is kind of a follow-up to Arnie's. We are reading an awful lot lately about airline consolidation. I'm just wondering if may be you could give us some idea just how that could impact HEICO one way or the other if something were to happen this year?

Truthfully, it's very hard to speculate on that. It depends what consolidations, where they go and so forth. For example; personally I think if Delta-Northwest, it would be a positive for us. On some of the other ones, it's really hard to say. But we don’t really expect any of the consolidations to have any material impact on our operations one way or the other. We don’t see a major shift in that. It's Arnie's question about JetBlue and Lufthansa, I think that prospectively that has a more positive implication than the discussed American carrier combinations, because JetBlue essentially was little or no customer and Lufthansa was a leading proponent perhaps of alternative parts. So I would love to see Lufthansa double-up everybody on the block. If they did that then I would say we have a blowout result. But the other ones are very hard to predict but I don't see any material changes. I think for us its business as usual, we are in the marketplace aggressively selling, banging away, developing parts and we are going to continue whether they combine operations or they run one-on-one so I don't see a significant change. Tyler Hojo - Sidoti & Co.: Okay, thanks for that and then a follow up to that. Just in terms of the organic growth that we saw in the quarter specific to the Flight Support Group. I guess I'm wondering how much of that was based on pricing increases this year?

I don't think there is that much, I mean some of it is not a significant I think its more of volume. In general our growth is volume related as we've always said, so there may be a little bit but not a significant amount. The driver is really the new parts and the market share and so forth. Tyler Hojo - Sidoti & Co.: Could you may be talk about LTAs coming up sometime in the near future, may be next year and may be had some come up last year and just kind of talk about the environment for those?

I am going to let Eric handle that. We don’t like to get specific for competitive reasons and you can imagine so Eric’s going to respond his best he can but he can’t be specific. Tyler Hojo - Sidoti & Co.: That’s fine

Alright, Tyler for obvious reasons we can't comment on specific customers due to competitive reasons and also confidentiality that they request of us. However, I can tell you we were comfortable with our long-term agreement and don’t see any new reason why they won't be renewed and expanded in the ordinary course. The British Airways announcement was very powerful for the industry. British Airways is extremely well respected and when they decided to go with us for an entire PMA program, I think that caused a lot of people around the world to look at HEICO in a different light and what we could provide. I think that perhaps will lead to some additional LTAs. There is a lot of enthusiasm in the former, not very interested in PMA airlines. Of course when airlines start the business they have a lot of leverage with manufacturers, because they are taking a lot of delivery and then of course that is the honeymoon phase because the equipment works well. And then as time goes on the reliability typically will go down and the cost will go up and they'll start getting cost wise with some of the original manufacturers and that's when we come in. And I think that the BA agreement really opens the door and opens the eyes of a number of carriers out there and hopefully that will to additional LTAs.

I am just to say more and more things as for Eric read his list. Tyler Hojo - Sidoti & Co.: Okay. Thanks.

Our next question on the line is from J.B. Groh with D.A. Davidson.

Good morning guys.

J.B., good morning.

I had a question maybe for Eric on some of the retirement of some of the older aircrafts. Obviously you guys have foreseen retirement of the [JET/AD] powered aircraft. With the high fuel cost environment, has that occurred faster than you had thought or maybe you can give us some comments there?

I can respond, the answer is no not really. There's still a lot of those airplanes flying out there. Its good business, but we've not seen any significant variation in that.

Right.

We of course have a long-term model and at the older less fuel efficient aircraft will come out of service sooner then the other ones but that's all really consistent with our guidance.

Then that's I guess okay that's reflected in your business plan of course?

Exactly that's why really the focus has been for the last seven years. The focus has been on new modern equipment.

And you mentioned balance between US and sort of rest of world. Can you remind us what that mix is currently?

Well, on the parts business, we disclose that slightly over half is outside of the US. So, we continue to see great strength over in Europe and Asia and frankly the United States with regard to our business holding up as well. Again I think it's important to point out that when the economy slows down and the airlines get in to a more difficult financial position, they more aggressively look and seek out cost savings, and that’s really a time when we build market share. Of course, when the industry comes back and usage goes up we'll build volume, but we'll really get a lot of things approved and we'll get a lot of people interested in what we are doing and really lay the ground work for future expansion as things slow.

I just want to add to that, because I think it's an excellent question. We all know what's happening, US versus the rest of the world in terms of economic growth. And the audience out there knows that HEICO has been increasing its international activity and revenue and so forth. And, we see that continuing, and we are very happy about it, because it gives us additional potential market share. There are a lot of airlines, the non-US carriers were the latter ones or the last ones really to get into the alternative parts utilization activity. And from our point of view that gives us sustainable growth in a different market, even if the US gets a little bit weak. And really that’s what we are seeing and that’s what Eric was talking about; other carriers, non-alternatives parts, utilizers, we are optimistic that a lot of that's is going to change and we see evidence of that.

Okay. And maybe you could comment quickly on what you are seeing on the acquisition front. One of your, another aerospace company, the other day mentioned that they are sort of in a vacuum in terms of opportunity just based on what's been going on in the financial markets. May be you could comment on what you are seeing? Obviously your appetite probably is still the same given your strong balance sheet and good cash flow?

That's exactly correct. We have no problems, credit problems, we have very strong balance sheet, we have the banks every bank in the world maybe is coming down on Tom Irwin, to give him money to do something with and we are very careful as to how we make acquisitions. We have a number of acquisitions on the look list. A number of them that we are doing due diligence on and I would say in total number we probably have about the same as we normally have. So financing is not a problem for us at all. We have all the money we need. We have more money than we need. So we are looking in opportunities and when we get the right opportunistic transaction we are going to make it, and again we are very disciplined as you know, and we are not going to pay crazy prices and make the deal that makes no sense.

But in general have you seen either asking multiples come down or have you seen deals getting pulled, because sellers don't think the environment is good?

The answer is no.

Okay.

That neither of those has impacted us.

Okay. Thanks a lot, congratulations to a nice start.

Thank you very much.

Next question on the line is from James Foung with Gabelli & Company. James Foung - Gabelli & Company: Hi good morning everyone.

Jim, how are you? James Foung - Gabelli & Company: Good. Actually I get a better understanding firing dynamics between global flying hours and your business and also I guess if flying hour starts to decline globally, does airlines then kind of look at PMA parts in a more aggressive way which would offset the volume decline that you might see industry-wide?

We would hope that that might be the result you really never know, but there is no question that on a macro basis throughout the world the alternative part is coming into its own. Its being more accepted by more airlines we're getting request from airlines for different parts, can you do this and that. So I think the appetite overall is yes, its definitely expanding and I would hope that if things get tougher then there’s going to be more appetite for it. James Foung - Gabelli & Company: Now have you see that impact cycles going global flying hours kind of drop because of just economic weakness for a while. Did you see kind of more a pick up on PMA activity?

I think the answer is yes, people become more concerned with costs than in the past. They are looking for places to earn money and by cost savings is how they increase their margin. I wouldn't say it's a major, it’s not a macro change to our business but definitely we get more demand and more calls.

Also Jim, this is Eric. One of the things that of course is most frustrating about our business is that an airline will decide that they want to use our products but then they need to actually enter it in the system and get it approved. And where philosophically there may not be an issue it becomes just a matter of priority and of course when -- you are absolutely right when economic conditions slowdown those priorities get pushed up to the front of the list. James Foung - Gabelli & Company: Okay.

And that's why I was saying earlier that we really build market share when the economy starts turning down and we really lay the ground work for additional expansion going forward. Of course we ultimately need the volumes to kick in. James Foung - Gabelli & Company: Right.

For those products but it really becomes a very good opportunity for us. James Foung - Gabelli & Company: Okay and I guess second question is do you have contingency plans in terms of where you might cut costs if the economy is weaker than you expect than you expect this year or going into…

Well, I can comment from the Flight Support side, we continue to see great strength. James Foung - Gabelli & Company: Okay.

So we have not thus far trying to look at that. We see a lot of internal growth in the business, we continue to recruit and develop our people and we are really very committed to that and we don't see the slowdown in the business, so I really think it would premature. James Foung - Gabelli & Company: Okay, good. And then could you just speak to us on another broad issue with liberalization of the air travel, European de-regulation -- with your strong ties with non-US carriers basically Lufthansa. How would that help your business, that's seems to be a very big positive for you?

That's a good question. Our business is directly related to available fleet miles and as AFMs expand they need to overhaul the engines, the components, the airplanes and that's really what drives our business. So I think we are very well positioned throughout the world and as more aircraft enter service and the price points go down it will only help our business. We obviously do a lot with the established carriers, whether it's Lufthansa, American, United and they are very, they are very capable of building their ground networks and really getting their costs down and competing very seriously. So, I think that we will continue to do very well. James Foung - Gabelli & Company: How will you see the effective impact of that? It just takes awhile because you have to go through the -- because you have the huge installed base that you have or you think you can…

Well, I think, specifically in case of Lufthansa which a lot of people want to know about, Lufthansa has got a very important long haul market that we serviced and they are also very good at protecting and expanding their short haul markets. If you look they are low cost subsidiaries and they are very aggressively participating in that. So, I think that it's going to be awhile. There is some question as to how much additional flying is going to occur because of this. I mean, while it's interesting as for example, Lufthansa and Air France and others are going to be able to fly out of Heathrow, of course British Airways has got the hub there, so it makes it much more difficult. James Foung - Gabelli & Company: Right.

I personally think that it's more excitement than real fact. Yes, there will be some opportunities and people will pick of each others flights a little bit, but I still think that the established European carriers whether its Air France, KLM or Lufthansa, British Airways are going to continue to maintain a dominance over their hub and even though others will be able to fly in more I think they are still going to remain very strong. James Foung - Gabelli & Company: Thank you all gentlemen.

Thank you, Jim.

Our next question on the line is from Chris Donaghey with SunTrust Robinson Humphrey.

Chris

Good morning guys

Good morning

Good quarter. Eric, I wonder if you could just talk a little bit more about the British Airways relationship and how it ramps and if you can talk about what your expectations would be maybe on just a comparative basis for the margin in that business as the volume ramps in it. And then also just kind of qualify the pipeline if you can of other airlines that you are trying to propose this type of arrangement to?

Well again we have to be a little careful on the specifics that we give out for particular customers, because we are really prohibited from doing that, but I can tell you that the British Airways is ramping. We have been working with -- now we announced our deal I guess its may be nine months ago or so and things are moving along very well. As I mentioned earlier in the call, I think there is a lot excitement throughout the world just when they saw HEICO signing up with BA on a total PMA support program where British Airways is going to buy all of our PMA parts through HEICO and if HEICO doesn't have and we'll go out and a source and get other suppliers approved. I think that that's a very important concept in one where we can really do well. So on BA things, without into detail they are going very well and the opportunity at least again we can't get into specifics names of other carriers that with whom we are working, but needless to say that we think that concept is going to be very successful and we're very optimistic that others will endorse it and accept as well. Does that answer your question or is there more that you'd like me to cover?

Well, can you talk about just as the potential margin opportunity there, is there a better margin opportunity when you're and they have essentially outsourced PMA to you guys or can you comment on that?

No, I would say that it's consistent with our existing business. We for competitive reasons we can't comment on specific margin. But I can tell you as far as HEICO is concerned the benefit, we're not trying to make a whole ton of money in distributing other peoples products into BA. First of all HEICO has the lion share in the PMA market, anyway so most of them are coming from HEICO. Really the benefit is that it exposes us to other areas. Traditionally our customers have viewed us in the engine and the component world and this really opening our eyes to some other opportunity. So we go out and qualify the sources for BA we go and we and do all of the technical evaluation, make sure that it meets the HEICO standard. Of course HEICO stands behind the product, so we take that very seriously, BA gets the comfort that we do it and it really opens up additional opportunities for us on products that we hadn’t considered in the past. So as far as margins, we're not trying to really pass through other people's product at a big profit we're really trying to see what's going on in the marketplace so we can develop additional products for our customers and save them incremental dollars on those additional products that we are going to ultimately do.

Okay, that's fine and just going back now to your product development, you've talked about 400 PMAs being the target for 2008. Can you tell us what you think your notional capacity is with your existing infrastructure in terms of annual parts? In other words if you wanted to go from 400 to 500 or 600 obviously have to be dictated by the customers, but what type of capacity do you think you have with your existing infrastructure related to that 400 parts for your target for this year?

That's a good question. I think our existing capacity now exceeds the 400 and the internal goals are even more aggressive. I think it really depends on the customers and what they are able to approve and get done of course if the markets slow, the economy slows then they become more serious about approving of our spare parts and I think that that will help drive our internal development. That means there is no magic to the 400 number. I mean, there is no reason it can't be 500, 600 or even more than that. It really depends on the focus that the customers want to put on working with us to identify parts to get them adopted and putting to service that's what really drives. So I think it's a very scalable number.

Okay. Great thanks.

You're welcome. Thank you.

There are no more questions in queue at this time.

Okay well that is the extent of the teleconference for the first quarter. As you know we are available if you do have questions, If we can to respond to them. You know where to reach us and we look forward to speaking to you at the Q2 teleconference in another three months. So, you all have a good day and we'll speak to you real soon. Bye, bye.