Good morning. My name is Mary, and I will be your conference operator for today. At this time, I would like to welcome everyone to the fiscal year 2018 full-year and fourth quarter earnings results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star then one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. It is now my pleasure to introduce your host for today, Laurans A. Mendelson. 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 and or implied by those forward-looking statements as a result of factors including lower demand for commercial air travel or airline fleet changes or airline purchasing decisions which could cause lower demand for our goods and services. Product specification costs and requirements which could cause an increase to our costs and 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 or our ability to introduce new products and services at profitable pricing levels, which could reduce our sales or sales growth. Product development or manufacturing difficulties which could increase our product developmental costs and delay sales. Our ability to make acquisitions and achieve operating synergies from acquired businesses.
Customer credit risk, interest, foreign currency exchange and income tax rates. Economic conditions within and outside of the aviation, defense, space, medical, telecommunications and electronics industries which could negatively impact our costs and revenues. Defense spending or budget cuts which could reduce our defense-related revenues. Parties listening to or reading a transcript of this call are encouraged to review all of HEICO's filings with the Securities and Exchange Commission, including but not limited to filings on Form 10-K, Form 10-Q and Form 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, except to the extent required by applicable law.
Good morning to everybody on the call. This is Laurans Mendelson. We thank you for joining us, and we welcome you to the HEICO fourth quarter and full-year of fiscal 2018 earnings announcement teleconference. I'm Chairman 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 Carlos Macau, our Executive Vice President and CFO. Before reviewing our record fourth quarter and annual results, I'd like to take a moment and thank all of HEICO's team members. We are proud to lead some of the hardest-working and most successful professionals in our industry. These are people who consistently surpass our targets and milestones without compromising our transparency, our values and our trust.
I take great pride in saying that the combination of exceptional workforce and the entrepreneurial culture has been a winning formula for HEICO and has undoubtedly enabled us to achieve a 28-year compound annual growth rate of 16% in net sales, 19% in net income, and a 23% in stock price. I'd like to summarize some of the highlights of our record fourth quarter and full fiscal year results. Consolidated fourth quarter fiscal 2018 net sales of $476.9 million, operating income of $103.7 million, and net income of $67.4 million represent record results driven principally by double-digit organic growth within Flight Support, as well as the acquisition of profitable, well-managed businesses within ETG, and as well as continued organic growth from our existing ETG businesses.
Consolidated fiscal year 18 net sales of $1.78 billion, operating income of $376.2 million, and net income of $259.2 million represent record results driven principally by our fiscal 17 and 18 acquisitions, as well as the mid to high single-digit organic growth within both of our operating segments. Consolidated net income and operating income in the fourth quarter of fiscal 18 are up 26% and 16% respectively on a 13% increase in net sales. Our consolidated operating margin improved to 21.7% in the fourth quarter of fiscal 18, up from 21.2% in the fourth quarter of fiscal 17. Consolidated net income and operating income in fiscal 18 are up 39% and 23% respectively on a 17% increase in net sales.
In addition, consolidated operating margin improved to 21.2% in fiscal 2018, up from 20.1% in fiscal 2017. Consolidated net income per diluted share increased 26% to $0.49 in the fourth quarter of fiscal 2018, up from $0.39 in the fourth quarter of fiscal 2017. In addition, consolidated net income per diluted share increased 39% to $1.90 in fiscal year 2018, up from $1.37 in fiscal 2017. Consolidated EBITDA increased 15% to $123.3 million in the fourth quarter of fiscal 2018, up from $107.6 million in the fourth quarter of fiscal 2017. In fiscal 2018, EBITDA increased 22% to $453.4 million, that was up from $372.6 million in fiscal 2017.
Our EBITDA margin, which we define as EBITDA divided by net sales, improved to approximately 25.5% in fiscal 18 compared to 24.4% in fiscal 17. Focusing on cash generation is a hallmark of HEICO's success and core to our strategic management philosophy. Electronic Technologies set a net sales and operating income record in the fourth quarter of fiscal 18, improving 13% and 12% respectively over the fourth quarter of fiscal 17. The increases principally reflect our profitable fiscal 17 and 18 acquisitions, in addition to organic growth as well as improved gross profit margins. Flight Support set a net sales record and reported strong operating income in the fourth quarter of fiscal 18, improving 13% and 17% respectively over the fourth quarter of fiscal 17. These increases principally reflect double-digit organic growth and improved gross profit margin.
Cash flow provided by operating activities increased 14% to $328.5 million in fiscal year 2018, and that was up from $288.3 million in fiscal 2017. Cash flow provided by operating activities increased 17% to $113.7 million in fourth quarter fiscal 2018, and that was up from $97.3 million fourth quarter fiscal 2017. As of 31 October 2018, the company's total debt to shareholders' equity decreased to 35.4%, and that was down from 54% as of 31 October 2017.
Our net debt, which we define as total debt less cash and cash equivalents of $472.9 million to shareholders' equity decreased to 31.5% as of 31 October 2018. That was down from 49.8% on 31 October 2017. Net debt to EBITDA ratio improved to 1.04x as of 31 October 2018 compared to 1.67x as of 31 October 2017. During fiscal 2018, we successfully completed four acquisitions. In November 2018, an additional two acquisitions. We have no significant debt maturities until fiscal 2023. We plan to utilize our financial flexibility to aggressively pursue high-quality acquisitions which will accelerate growth and which we believe will maximize shareholder returns.
As we reported yesterday, we declared a $0.07 per share semi-annual cash dividend on both classes of common stock. Payable 17 January 2019 to shareholders of record on 3 January 2019. This cash dividend represents a 17% increase over the prior semi-annual per share amount of $0.06. The cash dividend represents our 81st consecutive semi-annual cash dividend since 1979. The increased semi-annual cash dividend confirms our confidence in HEICO's consistent growth strategy and our desire to continue rewarding shareholders, while at the same time retaining sufficient capital to fund our internal growth as well as our acquisitions. I'm pleased to announce that over the past few months, we reported that our Sierra Microwave subsidiary, VPT subsidiary, 3D PLUS subsidiary, supplied mission-critical equipment and components for various NASA missions.
Such equipment and components were utilized on NASA's landing vehicle named InSight, which recently landed on Mars, NASA's Jet Propulsion Laboratory radar in a CubeSat mission, and NASA's ICESat-2 mission. Technological innovation in the space realm continues to be a crucial factor in advancing humankind's knowledge and well-being. HEICO is very proud to be part of this journey. As always, we thank Sierra Microwave Technology, VPT, and 3D PLUS for their outstanding accomplishments. We're humbled by their persistent excellence in innovation as well as execution. In 18 August we acquired 100% of the business and assets of Optical Display Engineering, which we refer to as ODE. ODE is an FAA-authorized Part 145 repair station focusing on repair of LCD screens and display modules for aviation displays used in civilian and military aircraft. ODE also holds FAA PMA authority to supply products that it repairs.
It is part of our Flight Support Group. We expect the acquisition to be accretive to earnings per share within the first 12 months following closing. In November 2018, we acquired 93% of the stock of Apex Microtechnology. Apex designs and manufactures precision power analog, monolithic, hybrid, and open-frame components for a wide range of aerospace, defense, industrial measurement, medical, and test applications. Apex is part of our ETG group. We expect that acquisition to be accretive to earnings within the first 12 months following closing. In November 2018, we also acquired all of the outstanding stock of Specialty Silicone Products, which we refer to as SSP, and they design and manufacture silicone material for a variety of demanding applications used in aerospace, defense, research, oil and gas testing, pharmaceuticals, and other markets.
It is part of our ETG group, and we expect the acquisition to be accretive to earnings per share in the first 12 months following closing. Last week, Moog reported that it has appointed our Blue Aerospace subsidiary as its sole international distributor for its F-16 leading edge flap drive system. This cooperation will further expand Blue Aerospace F-16 capabilities and enhance their ability to provide nose-to-tail support for F-16 operators worldwide. We're very happy for the success of Blue Aerospace, and we look forward to growing our business through this mutually beneficial OEM partnership. On a sad note, earlier this month, we reported that Wolfgang Mayrhuber, a member of our board of directors, passed away at age 71. Wolfgang had served on HEICO's board since March 2001, and as an advisor to the board since 1997.
On the board, he served on our executive committee and the Environmental, Safety, and Health Committee. Wolfgang was a great friend to us, to HEICO, and many others. With his trademark combination of great knowledge and experience, humility, open-mindedness, hard work, determination, compassion, and humor, he possessed a legendary insight into business, aviation technology, world affairs, culture, and people. We counted on his wise counsel over the course of several decades, and he will be deeply missed, and we will miss his advice and participation at HEICO. After that long introduction, you must be tired of listening to me, so I'm going to pass this over to Eric Mendelson, Co-President of HEICO and President of HEICO's Flight Support Group, and he will talk about the results of the Flight Support Group.
Thank you very much. The Flight Support Group net sales increased 13% to a record $290.3 million in the fourth quarter of fiscal 2018, up from $266.9 million in the fourth quarter of fiscal 2017. The Flight Support Group's net sales increased 13% to a record $1,097.9 million in fiscal year 2018, up from $967.5 million in fiscal year 2017. The increase in the fourth quarter in fiscal year 2018 reflects organic growth of 13% and 8% respectively, mainly resulting from increased demand within all of the Flight Support Group's product lines in our fiscal 2017 and 2018 acquisitions.
The Flight Support Group's operating income increased 17% to $54.6 million in the fourth quarter of fiscal 2018, up from $46.5 million in the fourth quarter of fiscal 2017. The increase in the fourth quarter of fiscal 2018 is principally attributable to the previously mentioned net sales growth and an improved gross profit margin, mainly reflecting a more favorable product mix within our specialty products product line, partially offset by changes in the estimated fair value of accrued contingent consideration associated with a prior year acquisition, resulting from an improved outlook and better than previously estimated operating performance. The Flight Support Group's operating income increased 15% to a record $206.6 million in fiscal year 2018, up from $179.3 million in fiscal year 2017.
The increase in fiscal year 18 is principally attributable to the previously mentioned net sales growth and an improved gross profit margin, mainly reflecting higher net sales within our aftermarket replacement parts product line. The Flight Support Group's operating margin increased to 18.8% in both the fourth quarter of fiscal year 18, up from 18.1% in the fourth quarter of fiscal 17, and from 18.5% in fiscal year 17. The increase in the fourth quarter and fiscal year 18 principally reflects the previously mentioned improved gross profit margin. Additionally, the increased operating margin in the fourth quarter of fiscal 18 was partially moderated by the previously mentioned unfavorable impact from changes in the estimated fair value of approved contingent consideration.
With respect to fiscal 2019, we are estimating net sales growth of approximately 7%-8% over the prior year, and the full-year Flight Support Group operating margin to approximate 19.0%. We estimate mid to high single-digit organic growth in fiscal 2019. These estimates exclude additional acquired businesses, if any. 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.
Thank you, Eric. The Electronic Technologies Group's net sales increased 13% to a record $191.1 million in the fourth quarter of fiscal 2018, up from $169.1 million in the fourth quarter of fiscal 2017. The increase in the fourth quarter of fiscal 2018 resulted from our fiscal 2017 and 2018 acquisitions, as well as organic growth of 3%. The organic growth in the fourth quarter of fiscal 2018 principally reflects increased demand for certain aerospace and other electronic products, partially moderated by lower demand for certain space products. I should further mention that organic growth in the fourth quarter of 2017 was over 14%. Despite a difficult comp, I am very proud that our team continued to win in the markets they serve and performed at a very high level.
The Electronic Technologies Group's net sales increased 22% to a record $701.8 million in fiscal 18, up from $574.3 million in fiscal 17. The increase in fiscal year 18 principally resulted from our fiscal 17 and 18 acquisitions, as well as organic growth of 6%. The organic growth in fiscal 18 principally reflects increased demand for certain defense products. The Electronic Technologies Group's operating income increased 12% to a record $57.1 million in the fourth quarter of fiscal 18, up from $51 million in the fourth quarter of fiscal 17.
The increase in the fourth quarter of fiscal 2018 principally reflects the previously mentioned net sales growth and an improved gross margin, profit margin that is, mainly from increased net sales for certain other electronics and aerospace products, as well as a more favorable product mix for certain defense products, partially offset by a decrease in net sales and less favorable products mix for certain space products. Further, the increase in operating income in the fourth quarter of fiscal 2018 is partially moderated by higher performance-based compensation expense and intangible asset amortization expense. The Electronic Technologies Group's operating income increased 30% to a record $204.5 million in fiscal 2018, up from $157.5 million in fiscal 2017.
The increase in fiscal 2018 is principally attributable to the previously mentioned net sales growth and an improved gross profit margin attributable to increased net sales and a more favorable product mix for certain defense products, partially offset by a less favorable product mix for certain space products. The Electronic Technologies Group's operating margin decreased slightly to 29.9% in the fourth quarter of fiscal 2018 from 30.2% in the fourth quarter of fiscal 2017, but remained very strong. The slight decrease in the fourth quarter of fiscal 2018 principally reflects the previously mentioned higher performance-based compensation expense and intangible asset amortization expense, partially offset by the previously mentioned improved gross profit margin.
The Electronic Technologies Group's operating margin improved to 29.1% in fiscal 2018, up from 27.4% in fiscal 2017. The increase in fiscal 2018 mostly resulted from the previously mentioned improved gross profit margin. With respect to fiscal 2019, we are estimating net sales growth of approximately 10%-11% over the prior year and anticipate the full-year Electronic Technologies Group's operating margin to approximate 28%-29%. Further, we estimate low to mid-single digit organic growth in fiscal 2019. These estimates exclude any additional acquired businesses, if any. I turn the call back over to Laurans Mendelson.
Thank you, Victor and Eric. Moving on to further information. Diluted earnings per share, consolidated net income per diluted share increased 26% to $0.49 in the fourth quarter of fiscal 2018, and that was up from $0.39 in the fourth quarter of fiscal 2017. It increased 39% to $1.90 in fiscal 2018, up from $1.37 in fiscal 2017. Depreciation and amortization expense totaled $19.7 million in the fourth quarter of fiscal 2018, and that was up from $17.9 million in the fourth quarter of fiscal 2017. For the year, it totaled $77.2 million, and that was up from $64.8 million in fiscal 2017. The increase in the fourth quarter in fiscal year 2018 reflects the incremental impact of higher amortization expense of intangible assets from our 2017 and 2018 acquisitions.
Research and development expense totaled $16.8 million and $12.6 million in the fourth quarter of fiscal 2018 and 2017, respectively. For the year, totaled $57.5 million and $46.5 million in fiscal 2018 and 2017, respectively. Significant ongoing new product development efforts are continuing at both Flight Support and ETG as we continue to invest approximately 3% of each sales dollar in new product development. SG&A expense increased to $82.8 million in the fourth quarter of fiscal 2018, and that was up from $70.6 million in fourth quarter of fiscal 2017. For the year, it increased to $314.5 million in 2018, up from $268.1 million in fiscal 2017. The increase in fourth quarter and fiscal year 2018 principally reflects our fiscal 2018 and 2017 acquisitions, as well as higher performance-based compensation expense.
The increase in the fourth quarter of fiscal 2018 also reflects an unfavorable impact from changes in the estimated fair value of accrued contingent consideration associated with a prior year acquisition resulting from an improved outlook and better than previously estimated operating performance. That's kind of a confusing sentence, but bottom line is, it cost us more, but it was a very good thing for it to happen to us. If you want more detail later on, you're welcome to discuss it with Carlos, and he can explain it to you. When a situation like that happens, we're very happy. Consolidated SG&A expense as a percentage of net sales were 17.4% and 16.8% in the fourth quarter of fiscal 2018 and 2017, respectively, and 17.7% and 17.6% in fiscal year 2018 and 2017, respectively, too.
The increase in consolidated SG&A expense as a percentage of net sales in the fourth quarter of fiscal 2018 reflects what I mentioned earlier, the impact from changes in the accrued contingent consideration. Again, a good thing. Interest expense was $5.1 million in the fourth quarter of fiscal 2018, compared to $3.4 million in the fourth quarter of fiscal 2017, and $19.9 million in fiscal 2018 as compared to $9.8 million in fiscal 2017. The increase in fourth quarter was due to higher interest rates. The increase in fiscal 2018 was principally due to higher interest rates, as well as a higher weighted average balance outstanding under our revolving credit facility, and that was associated with the late fiscal 2018 acquisition. Other income and expense in the fourth quarter in fiscal 2018 and 2017 was not material. I won't comment on it.
Our effective tax rate in fourth quarter 2018 decreased to 24.9% from 31.5% in the fourth quarter of fiscal 2017, and decreased to 19.8% in fiscal 2018, down from 30.3% in fiscal 2017. As we have mentioned on previous calls, the decrease in the effective tax rate for the fourth quarter and full fiscal 2018 is directly related to the Tax Cuts and Jobs Act, or the Tax Act, under which U.S. federal tax rate was reduced from 35% to 21%, effective 1 January 2018. As a result of the Tax Act, the company remeasured its U.S. federal net deferred tax liabilities and recorded a discrete tax benefit of $16.5 million in fiscal 2018.
In addition, the company recorded a provisional discrete tax expense of $4.4 million in fiscal 2018, and that was related to a one-time transition tax on the unremitted earnings of the company's foreign subsidiaries, again, as a result of the Tax Act. In addition, the decrease in our effective tax rate in the fourth quarter in fiscal 2018 was partially offset by the unfavorable impact of lower tax-exempt unrealized gains and cash surrender values of life insurance policies related to HEICO Corporation Leadership Compensation Plan. The net income attributable to non-controlling interests totaled $6.7 million and $5.4 million in the fourth quarter of fiscal 2018 and 2017, respectively, and totaled $26.5 million and $21.7 million in fiscal 2018 and 2017, respectively.
The increase in the fourth quarter of fiscal 2018 mainly reflects improved operating earnings of certain subsidiaries of Flight Support and Electronic Technologies, in which non-controlling interests are held, as well as the impact of the Tax Act. Again, a cost which is a good cost, so we're happy about that. The full tax, fiscal year 2019, we estimate a combined effective tax rate and non-controlling interest rate of approximately 26%-28%. Moving on to the balance sheet and cash flow. As you all know, our financial position and forecasted cash flow remain very strong. As I previously discussed, cash flow provided by operating activities increased 14% to $328.5 million in fiscal 2018, and that was up from $288.3 million in fiscal 2017.
Cash flow provided by operating activities increased 17% to $113.7 million in the fourth quarter of fiscal 2018. Again, up from $97.3 fourth quarter of fiscal 2017. Our working capital ratio was 2.6 and 2.5x as of 31 October 2018 and 2017, respectively. DSOs, days sales outstanding of receivables was 49 days, both 31 October 2018 and 2017. Of course, we closely monitor all receivable collection efforts in order to limit credit exposure. As you know, people who followed HEICO, we have very low receivable losses. No one customer accounted for more than 10% of net sales. Top five customer represented 20% and 18% of consolidated net sales in fiscal 2018 and 2017, respectively.
Inventory turnover rate was 135 days and 132 days for the years ended 31 October 2018 and 2017, respectively. As I previously mentioned, total debt to shareholders' equity decreased to 35.4% as of 31 October 2018. That was down from 54% as of 31 October 2017. Our net debt, which is total debt less cash and cash equivalents of $472.9 million to shareholders' equity decreased to 31.5% as of 31 October 2018. Again, that was down from 49.8% as of 31 October 2017. Our net debt to EBITDA ratio improved to 1.04 x as of 31 October 2018, compared to 1.67x as of October 2017. During fiscal 2018, we successfully completed four acquisitions. Again, I mentioned two recently completed after year-end in November 2018.
We have no significant debt maturities until fiscal 2023. We plan to utilize our financial flexibility to aggressively pursue high-quality acquisitions, which will accelerate growth and maximize shareholder returns. Now for the outlook. We look ahead to fiscal 2019 and anticipate net sales growth in Flight Support and ETG, resulting from increased demand across the majority of our product lines. We will also continue our commitments to develop new products and services, further market penetration, aggressive acquisition strategy, and maintaining, at the same time, our financial strength and flexibility. Based upon current economic visibility, we are estimating 8%-10% growth in full-year net sales and approximately 10% growth in full-year net income over fiscal 2018.
We anticipate our fiscal year 2019 consolidated operating margin to approximate 21%-21.5%. Depreciation amortization expense approximately $84 million. CapEx around $48 million. Cash flow from operations around $360 million. These estimates exclude additional acquired businesses, if any. In closing, I wanna thank again our HEICO team members, and it's through their dedication and efforts that we have achieved our significant 28-year compound annual growth rate of 16% net sales and 19% in net income. We believe the focus on developing new products and services as well as increasing market penetration while maintaining strong financial position, disciplined acquisition strategy, relentless focus on cash generation will continue to provide the company with opportunities for substantial growth and profitability.
One other point I wanna make is many of you have heard me discuss the HEICO culture. We think that, of course, the culture is, of the company, is what drives the operating financial results. We continue to believe that working with our team members, having a strong culture, making team members feel part of HEICO, that they are owners, is a critical factor in our success. That's the extent of my planned comments, and I'd like to open the floor for any questions. Thank you. Hello? What happened to Operator?
Yes, sir.
Yes, would you please open the floor for questions? I'm finished with my prepared remarks. We have a number of people, I believe, waiting to ask questions. Would you please handle that?
Your first question comes from the line of Robert Spingarn from Credit Suisse.
Hi. Good morning. I hope you can all hear me.
Yes, I can.
Good.
Thank you. Good morning.
Okay. Okay, good. I'm on the road doing my best to dial in here. The first question is a high level, and it's for all of you, is, are you seeing any headwinds forming in the business that would indicate a macro slowdown anywhere across your business? I ask that because I know the growth rates are moving around a little bit, and that sounds like that's just specific to the business. Do you see any macro issues?
The answer, Rob, is absolutely not. We don't. I, you know, I think our business, we've given guidance. We feel very confident, hopefully. As we start out, as you know, with a bottoms-up projection based upon what our subsidiaries are telling us. I don't like to say they sandbag us, but they are conservative. That historically, you know, we've been able to move the guidance up as the year progresses and as we digest additional acquisitions, and they see, get more visibility into their operating results.
The answer to your question is no. We, you know, as a matter of fact, we see things as pretty strong. The big issue that we have coming from some of the subs is their ability to access material to fill the orders. I mean, meaning by that, we've had to increase inventory. If you look at the balance sheet, you'll see the increased inventories, and we've had to increase inventories in order to be confident that we have enough materials on hand to supply the demand of our customers. We have not seen the slowdown.
Rob, Laurans.
I'll just add to that.
Go ahead.
I've spent roughly the last seven, eight weeks on the road in our budget process, visiting our subsidiaries or up to about a week or so, 10 days ago, I was doing that. Generally, I would say almost across the board, almost universally, people see our businesses see very strong conditions. I mean, there's always, in the best of times and the worst of times, there's always a business out there that's struggling with something, and there's always whether it's a customer, a market, or a product, and that will always be the case. Again, best of times, worst of times. We have those, and I expect that will always be the case.
Okay
Notwithstanding that, the general tenor was strength across the board and in the end markets. The difficulty, as my father said, is in getting material, supplies, components, and people. That seems to be the greatest challenge that we're dealing with. Now, whether the media talks the economy into a slowdown more broadly, well, time will tell. Hopefully they don't, but our businesses aren't seeing it.
Okay. That's very helpful, both Laurans and Victor. Laurans, something you said and Victor expanded on was the increase in inventory. I actually had a question for Carlos on this. You're growing your net income 10% in 2019. If I remember correctly, the operating cash flow at $360 million also represents about 10% growth. There was a use of cash in 2018, so it seems like you'll have a similar use of cash, you know, for working capital, I should say, in 2019. On working capital, if you could talk to the moving pieces and what seems like a continued, I suppose, spending on inventory.
Yeah, Rob, you know, this year, as the guys mentioned, we did see situations where we had to, if you would, pre-buy material to keep our folks with enough material to meet demand. Do I see that continuing into next year? We've sort of budgeted in our thought process and how we've gone about the cash flow estimates, a slight increase, but not much more than what we had this year as far as the overall change in inventory between years. I think at the levels we're at right now, you know, turning at 135 days principally works for us. I don't, I don't see a huge use of cash outside of what you saw this year, next year for inventory. The rest of working capital receivables or days sales are very good.
You know, we tend to see the large players dragging out payments, we're very aggressive on the collection side, and our guys have been able to maintain our days sales down. I see normal growth in receivables and inventory commensurate with the sales growth. You know, we treat our vendors very well. You know, a lot of that's a function of timing, whether it's payables or approvals and things like that. The one thing that we are good to not only our customers, but the folks that allow us to be good to our customers are vendors. We treat them very well also. I would say similar movement as you've seen historically there. No real big changes in working capital from my perspective.
Okay. Appreciate the help. Thank you all.
Thank you, Rob.
Your next question comes from the line of Louis Raffetto from UBS.
Good morning, everybody.
Good morning.
We're just gonna stick with the cash flow for now. The CapEx, you finally, you finally came closer to spending what you thought you'd spend, and it looks like next year it's gonna be another high year. Is there anything going on or it's just the business growing? Anything specific under the, you know, to base that $48 million?
Yeah. Louis, how you doing? This is Carlos. We actually do, you know, our board approves a CapEx budget every year. We go through and we ask our subsidiaries to come up with what they call critical capital spend, required, nice to have, sort of three columns. As you can imagine that the number that in total of those three columns would be much larger than what we reported on what we think we'll spend. The $48 million is nothing more than what we call critical and nice to have right now. I mean, sorry, critical and required. We tend to underspend those budgets, coming out of the box, it's hard for me.
I don't want to underestimate, if you would, that CapEx. Right now, we think it's around $48 million. I think if you look back historically as time passes, we'll buy used equipment. We'll buy equipment that at auction as opposed to going out and spending for new, and sometimes we have to ratchet that number down. Let's see how the year progresses. There's nothing unusual. It's principally growth capital in that budget and I think that'll be sufficient for our coming year.
Okay. You think that's more of a sustainable rate going forward, I guess, as well?
I think the way I've looked at it, if you're looking at a sustainable rate, you know, 2% to 2.5% of our sales is generally where the, where the CapEx budget falls out. Sometimes a little more, sometimes a little less, but that's a good barometer.
All right. That sounds good. Then, any contingent consideration payments for 2019? I know usually it's in the K, but figure I'd jump ahead here.
We'll have one payment in Q1. I'm sorry. It'll either go out at the end of Q1 or early in Q2, that's it.
Okay. Also go-forward tax rate. I know usually you guys will give a combination of tax and the minority interest expense. I don't think I saw one. I just don't know, is the 24% sort of average we saw over the final 3 quarters, sort of the area to think about?
No, no, I wouldn't think of it that way. The best way to look at it, I think Laurans mentioned it earlier, was we think that the rate will be on a combined basis, 26%-28%. That roughly breaks out, you know, 19/20 tax, 7-8 NCI. That's kind of how we're looking at it right now.
Okay. Oh, sorry, the 26-28 is the combined NCI and tax?
That's correct.
Okay, sorry. I missed him say that earlier. All right. Last one, any guidance or any info you can give us on the deals from November from a size? I mean, 170 employees based on the organic growth, gonna guess around $50 million in sales. I know the leverage is, you know, way down again. I guess it'll go up a little bit, but any size you can add to that?
We haven't in the acquisitions that we made in November, we haven't disclosed sales and size other than employees. I think, you know, you can, you could probably do some math. They give you the number of employees, and if you look at the revenue per employee in each segment, you can get kinda close. They were good acquisitions. Normal size, single-double type acquisitions for HEICO that will be accretive to us in 2019.
Okay. Sounds good. Thank you, gentlemen.
You bet.
Your next question comes from the line of Peter Arment from Baird. Your line is now open.
Hi, guys. Good morning, Laurans, Eric, Victor, Carlos.
Good morning, Peter.
Maybe this is a question for Eric on the FSG. Just 13% organic growth, really impressive. I know you guys aren't pushing price. You know, with the volume that you're seeing, you know, can you give us a little more color on whether this is all benefits of new products or is there new customers? Maybe any color there would be helpful. Thanks.
Hi, Peter. Yeah, this is Eric. You're right that the 13% organic growth, I think, is even somewhat more exceptional considering we only get, you know, roughly 1% pricing. It is all volume, you know, 12% of it is volume related. I would say that it's strength across the board in all of our product lines. It's a combination of basically new parts getting sold to our existing customer base as well as some increase in sales on some older parts that we've had.
We pretty much sell to everybody in the world, so in terms of picking up new customers, there's not really a lot of, if you will, new names out there because we're already doing business with everybody. It is just increased penetration. I think it shows, basically the support that HEICO has got at our customer base because, you know, we provide very good, value at a reasonable price.
Appreciate that. Just related to that, Eric, how about on the introduction of new products? I mean, I think you guys have been continuing to develop, you know, 400-500 parts a year. Is that still look like an achievable plan for 2019?
It does, yes. We're running consistent with past practice, and we've got the development pipeline, you know, running really wide open right now, and there's a lot of great products in there.
Appreciate the color. Thank you.
Thank you.
Your next question comes from the line of Ken Herbert from Canaccord.
Hi, good morning, everybody.
Good morning, Ken.
I first, Eric, just wanted to ask you, regarding or Carlos, regarding the guidance within FSG, when you've got a first half of 2019 with, again, relatively easy comps, but then obviously much more difficult comps after the sort of the inflection you've seen here in the fiscal third quarter of 2018, do we, how should we think about the full-year? I mean, is it fair to assume that you continue to see double-digit growth organically through the first half and then maybe a step down in the second half to get you to the full-year number? Maybe just a little bit, little bit of color around the cadence within FSG in 2019 would be helpful.
Hey, Ken, this is Carlos. As you know, within the FSG, we principally get the majority of our orders in the month of shipment. We have a pretty good sense for what, let's say Q1's going to look like based on backlog and sort of what we got in the pipes right now. It is difficult, and which is one of the reasons why we don't have a quarterly guidance, outside of the ETG's fluctuations is the FSG's lack of, if you would, visibility, too far in the future.
I would say for right now to try and guess at that cadence would not be in our best interest. I think our guys are projecting at the moment, at least just in our budgets, linear growth, and that's what it looks like in the budget. Of course, we can adjust as we move forward. We're not prepared, and I don't think it would be wise for us to give quarterly guidance or any type of cadence at this point.
Okay, Carlos, that's helpful. I guess then fair to say, and based on earlier comments, you haven't seen here heading just from, you know, into the calendar third to the fourth quarter, you haven't seen any change or inflection one way or another, I guess, in the FSG customer buying habits or patterns?
I think from my perspective, Ken, and I think I, as I mentioned to you and others before, I find this environment, particularly in the FSG, to be really a special one. We have the benefit of all the new builds coming in. We've got the older equipment still running. We see the airlines purchasing and, you know, a high need for materials. You know, we offer a great value proposition to our customers. We are always there for them. That pattern hasn't stopped. It's been a pretty robust environment for us in that regard. You know, inevitably, trees don't grow to the sky. For fiscal 19, what we're seeing right now is a continuation of that fantastic environment.
Okay, that's great. If I could, Eric, can you just level set us? I know as fleet growth really on the commercial aerospace side accelerates in emerging markets in China and Asia in particular, and it's probably a few years off before a lot of these aircraft maybe hit some of the sweet spot for your business. Can you just talk about what you're seeing from customers in China and the Middle East, in areas that have maybe typically not been as big a customers as legacy airlines, but over time, as those fleets evolve could potentially be much larger depending upon penetration. I mean, how are you thinking about these markets today and maybe what you're doing to better position to access those markets down the road?
Yeah, I'd be happy to speak to that. We are doing nicely, I would say, in the, if you wanna call them, the emerging markets. I think there's still very great potential for us in those markets. We're very much focused on them, and I think we're continuing to do nicely. There's no question that the majority of our business comes out of the Americas and Europe, and we expect that to continue for, you know, quite some time. We are picking up a nice chunk of business in the emerging markets as well. There's a lot of interest in our products, and I anticipate further growth there.
Is there any reason to think that structurally those airlines wouldn't have the same opportunity as a legacy airline in the U.S. or Europe?
No, I
Enter Europe?
No, I think as things mature, they're going to have a lot of demand coming out of those areas.
Great. Thank you. Just one final one for Carlos. Within ETG, can you give us what the fiscal 2019 guidance implies for the intangible amortization expense?
Yes. For ETG, amortization expense is roughly 5% of sales. It's a pretty big slug. I think it's ran historically between four and five. We're getting closer to five right now, so it's that.
Great. Excellent. Well, thank you very much. Really nice end of the year.
Thanks.
Thank you.
Thanks very much, Ken.
Your next question comes from the line of Sheila Kahyaoglu from Jefferies. Your line is now open.
Hi. Good morning, guys, and thank you for the time.
Good morning, Sheila.
Good morning. Maybe my first one for any of you've seen just bigger deals in the space, a lot of consolidation. How do you guys think about maybe a potentially bigger transaction and your capacity to do so?
Well, that's a good question. Other people have asked that question. We are very as you know, we're very disciplined in what we buy, and we want to make sure that it makes sense. We don't want to grow for the sake of growing and saying that we're a bigger company. We don't grow because the CEO and the executive office gets its compensation based on gross revenue, which so many corporate players do. We own, as you know, Sheila, we own equity, probably the largest shareholders individually. Our compensation, our benefit is on the bottom line, cash flow, earnings per share, and growth. To grow the top line so we gain $2 million in compensation is not what motivates us. We're going to focus on something that comes down to the bottom line.
We have been shown many opportunities to acquire, merge, whatever you want to call it, with other entities. Unfortunately, corporate America generally runs on a 7%-11% operating margin. To us, that's not very tempting because our all-in operating margin before amortization or eliminating amortization is around 25%. We're not going to go for that kind of thing just to get bigger for the sake of getting bigger. We have to be careful on what we buy. We have looked at larger companies where we could make an acquisition, possibly trim some expense, possibly consolidate and gain some sale, additional sales. A lot of these companies, these bigger companies or companies our size, don't have the bottom line cash flow operating margins that we like to have.
We certainly have the firepower. We can buy companies. We probably could spend $4 billion, maybe more, because we are not a capital-constrained company. You know our, you know, its debt to EBITDA right now is around 1 time. We could probably acquire anything that we may want to acquire in the future. We're going to be very disciplined because we want the cash flow. Truthfully, most acquisitions, if you look at all acquisitions, most are not successful. They buy a, you know, a pig in the poke, and they get stuck with it.
We're very entrepreneurial, and we do not plan to do that. However, we do focus on bottom line growth and cash flow. That is gonna make the determination. If we get an opportunity to buy or merge or something with a much larger entity, and we can still get the juice out of the orange, and we get the bottom line that we look for, we can do it, and we would do it. I've also been asked how much debt would we be willing to take on, and my answer is, we would do something like TransDigm 6, 7x .
It's gotta come down within a couple of years, say two years, to around the 3-time level, 2-3-time level. It's not the initial expenditure, but how quickly we could bring that debt down to a manageable level, particularly in current times when there are many articles that are in the press today about excess debt all over the place and the ability to service debt and to handle it. We don't wanna get into a jackpot like that. You know, as you know, we have grown pretty well, close to 20% over 28 years. We intend to continue. It's Our bottom line is the growth and the cash flow and the compounding of earnings. I don't know. That's a long answer to your question, but I hope, I hope I've given you some light.
It's very helpful. I guess on that note, Victor, maybe if you could talk about two of your bigger deals, AeroAntenna and Robertson, how they're going, and as you look at your organic growth for the past, what you're seeing in defense and space into 2019.
Hi, Sheila. Yes, this is Victor. Both of those companies, Aero Antenna and Robertson, had excellent years. We're very pleased with them. We're excited about 2019 for both of them. They've so far proven to be great acquisitions. You know, as you know, they occupy very important market spaces, market positions, in what they do. They're very well regarded by their customers, which is critical, and they're also product developers, meaning that they continue to develop new product. They stay out there, they stay ahead of the curve that way. They're not in harvest mode or anything like that. They're sharp. They're very focused on staying competitive. I'm optimistic, beyond just the short term and beyond 2019, for both of those businesses.
In terms of what we see in defense for 2019, our budgets internally are for growth in our defense businesses overall in fiscal 2019. You know, we're very careful. We all read the same newspapers, so to speak, and the same reports out of Washington on what might happen with the budgets. I think you know us well, that we don't get too excited, and we run the company very conservatively and very cautiously, so that we kind of base our assumptions on the fact that we always assume that even when there's going to be defense budget growth, that in the long term, there has to be a normalization to that.
We wanna keep our cost structure to that line and enjoy ourselves when the times are good. At the same time, we really wanna do an excellent job for our customers and to deliver for them and to deliver competitively. We take all of that into the mix.
Great. Thank you.
Sheila, let Sheila, this is Laurans. I just wanna add one thing which is really critical to the mix, and that is the ability and the quality of the managers that operate those companies. You know, you asked specifically of two companies, AeroAntenna and Robertson, but this applies to many of our success. It's really in the brilliance and the dedication, the focus, and capability of those managers. They're fantastic, and they don't appear on the balance sheet and financial statements, but they're the guys that make it happen. They're fantastic.
Great. Thanks.
Sheila,
Yes, sir. Your next question comes from the line of Michael Ciarmoli from SunTrust. Your line is now open.
Hey, good morning, guys. Thanks for taking my questions, and real nice quarter here to close out fiscal 2018.
Thank you, Mike.
Carlos, just, maybe a quick housekeeping first. Can you give us the value, the change in fair value contingent consideration in the quarter? That was the little bit of the headwind for FSG.
It's just a tick over a couple million dollars that we took a charge for in Q4. That was based upon, as we mentioned earlier, a little rosier outlook. You also got some FX things going back and forth between periods, but that was roughly the charge we went through.
Got it. Then, you've given us a lot of line-by-line detail for 2019. Interest expense, should we kind of assume this $20 million run rate? Is that a good barometer for 2019?
Yeah. I think if you're, you know, it just depends. I mean, look, it depends what the Fed does and how that impacts liability tied to. I'm estimating somewhere between $20 million to $22 million in interest, and we'll see how that, how that fares out. You know, if we're able to generate the cash that I think, you're probably gonna be right at $20 million, and if we find further investments, you know, we're both gonna be wrong. But right now, that's in the guidance. That's what we're estimating.
Got it. Then maybe Eric, just on FSG. I mean, you've kinda hit this multiyear high here in organic growth. I mean, is there obviously, you know, if we look at the planes coming off warranty, you know, the fleet growing, is there any correlation there with the 787s? You know, I guess there have been 100 or so that were delivered before and during 2013. Are you getting growth on some new platforms that you haven't seen before? You know, then maybe can you just any other color on, you know, it seems like there's broad-based strength, but any noticeable differences between parts repair or distribution?
Yeah, Mike, it I would say the strength is really very broad-based. It's, it's all over the business. It's in parts, repair, distribution, specialty manufacturing. All of those businesses are doing quite well. In terms of any specific programs, I would say we're doing nicely on the new platforms, and we're also doing well on all of the historical platforms. I think it speaks to the value proposition that HEICO creates in any of our businesses. Since, of course, we have all of our competitors on the telephone call, I would rather not go into specifics on which businesses are seeing what kind of strength. I would just say that it's very, very broad-based.
As you know, the way HEICO is structured, with, you know, operating with these smaller businesses that have the authority and the responsibility, you know, we've always said that over time, they're able to drive above average sales and earnings growth because of their structure and because they're very close to the customers. If you look at it, I'm even more proud than the 13% organic growth. I'm proud of the, whatever it was, roughly 15% operating income growth that we had in these businesses, all organic. Again, it's very broad-based.
Got it. That's helpful. Maybe just one last one. Can you give us any update or changes or developments on the IATA and CFM sort of competitive agreements that they've come up with?
Sure. There's been a lot of buzz and talk in the industry about this. That agreement takes effect at the end of February, I believe. And airlines have really taken notice of what's happened here. I think that there should be, you know, decent opportunity for independents to grow in the marketplace and, you know, decent opportunity for HEICO to recover some lost ground.
Got it. All right. That's helpful, guys. That's all I had. Thanks again.
Thank you.
Thank you.
Your next question comes from the line of Josh Sullivan from Seaport Global. Your line is now open.
Hey, good morning.
Good morning.
Just within that bottoms-up approach in your guidance, you know, any way you can parse out some of the specifics for us? You know, I know you said you're seeing continuation of the attractive trends here, just interested to hear your thoughts on air traffic growth expectations for 2019 and maybe beyond.
This is Eric. I mean, we read the, you know, frankly, the same analyst reports that everybody looks at, and that's where we get our information. We believe that it to be consistent. You know, we believe it to be supportable. I mean, clearly we're seeing the sales growth in our various businesses. I think it's very believable. You know, Rob asked the question up front about, you know, do we see any changes in the marketplace? No, I mean, we see continued strength. I think everything is pointing in a positive direction.
You know, a few of the analysts, Wall Street analysts over the past few weeks and days have pointed out the strength in airline seat miles growth, and it's growing somewhere, it depends on which month, but it's growing anywhere from 5%-7%. That's an enormous growth. It's like double GDP. If you go back 10 years, HEICO has been talking about the growth of the aerospace industry in those terms. Boeing has been putting out those kind of figures too, and it's coming true.
That's why we're in the business. We believe that this particular area of business, this industry, is a very strong growth industry because of the shrinking of the world and world trade. We can only see a continuation of this kind of growth. If the economies pull back, yes, we'll see a little slowdown and so forth. As a general trend, our outlook over the next 10 years or more is a very strong growth industry, and that's why we're in this business.
Okay. Thank you. Thanks for that. Just on the M&A front, you know, given the recent market volatility here, have you guys had any impact on M&A conversations with targets? You know, are valuation expectations getting any more reasonable? Any change in behavior there?
I think that we probably are normalized, which is good. I think we're seeing lots of opportunities. We're doing due diligence on a number of companies at the moment. We can't predict that we'll make these deals, last year and we did, I think, four acquisitions. In November, we closed two. I think pricing is getting a little higher. I think private equity has a lot of money in their pocket and they're competitive. That makes it a little more difficult. To answer your question, I think we can make our normal number of acquisitions. We see good opportunities.
Companies that wanna sell to us normally want to sell because of our culture. We differentiate ourselves that we tell people at the outset, we're not gonna be the highest price, and we back out of different types of auctions and things because we won't pay a price that private equity can pay. We intend to keep the company essentially forever and build it. Private equity likes to keep it for one to five years, put lipstick on the pig, cut expenses, do all kinds of things and financial, you know, engineering, and then dump it to somebody else.
We're just the opposite. What we look for is a company and a management that wants to be in it for the longer term, that wants to continue running the company with minimal interference and pressures to get immediate profits today and tomorrow. It's a long answer, but I think we see our number of acquisitions, and that's fine. It's fine.
Okay. Thank you.
Again, if you would like to ask a question, press star one on your telephone keypad.
Okay.
Next question.
Yes.
Your next question comes from the line of Colin Ducharme from Sterling Capital. Your line is now open.
Hi, good morning. Thanks for the time. Just a quick question for Eric, more of a clarification, again, on that IATA-CFM ruling over the summer. Could you remind us of the You said it's coming in force, I believe you said in February. Can you remind us of the broader implications that that ruling might have, in particular, in other OEMs and for other OEMs? Just curious there.
Well, just as a little bit of history, you know, the airlines got upset. They complained through their Worldwide Trade Association, IATA, to the European Commission. European Commission started looking at practices of a number of OEMs. They decided to launch an informal investigation into General Electric and CFMI. In the, I would say, at the end of that informal investigation, before it was going to become a, what we believe was a formal investigation, there was the settlement between IATA and GE CFMI. That agreement has a number of specific clauses. I don't have it in front of me, so I don't have the details, but basically it prohibits the manufacturer from doing certain things that they were doing. I want to be careful to not misspeak. I think you can get it online.
There were all sorts of behavior that is now not permitted. That, I think, is what the airlines are interested in. With regard to how it impacts other manufacturers, I think everybody in the industry is taking note at this, and they are, you know, they wanna make sure that they behave consistent with, you know, whatever was in that agreement, because presumably, if other companies go outside of what's in that agreement, they may have issues down the road. That's sort of what we're hearing. If you wanna see the specifics, I think you can get that online.
Okay, great. Thanks. Just to follow up on the FSG guidance out of the box here, trying to just triangulate various comments thus far on the call, clearly an exit rate from Q4 with a fantastic top-line trend. You've got higher CapEx expectations going in on a consolidated basis for 2019. If memory serves, kind of the out-of-the-box guide versus last year, just a little bit lower. Making sure I understand, is it primarily the larger base now? Your color comments through the windshield there was that you're not seeing material weakness, I just wanna be sure I'm properly putting context around that.
This is Carlos. I think our out-of-the-box guidance, 7% to 8% growth is pretty consistent with where we came out last year. It's maybe just a tick under, this is all, for the most part, organic growth. We're actually very happy with the guidance that we put out and are excited about it. As we've mentioned earlier in the call, we would prefer to underpromise and overdeliver. I think that the at least the attitude and the industry dynamics that we see suggest that we're gonna have a fantastic year in that space.
For right now, from the bottoms-up budgeting perspective, if you would, you know, the 7% to 8% top line growth is kinda what we're seeing. We'll adjust that as we go through the year and as we get more visibility. We don't give quarterly guidance, as I mentioned earlier, the cadence to that growth is going to be hard to articulate. We won't be able to articulate that to you. From my perspective, that's your most robust growth, and that's indicative of, you know, maybe high single-digit organic growth, which is kind of what we expect out of the company right now.
Okay, great. Thanks. Final question, I guess, for Victor. You talked about slightly lower sales of space products, but we're starting to see some of the larger private space companies begin to get traction with launch vehicles, et cetera. I just wanted kind of broader, kind of higher level comments here on where you think ETG is currently positioned, how it's positioned for the private commercial space trend. Is more of the kind of ship set exposure on the payload side or on the launch vehicle side or both? How are the relationships trending there, and what are you seeing? Thanks.
Yeah. Hi, this is Victor. Most of the overwhelming majority of what we do in the ETG that is space related is on the payload side. It is not on launch vehicles. We do very little actually on launch vehicles. So our focus tends to be on, let's say, what stays up in space. You know, our business there is heavily weighted to the commercial sector and has really always been more weighted toward the commercial sector, although we have a pretty good defense business there as well. Where the weakness has been has been in the large, in the geosynchronous Earth orbit satellite segment. The rest of the space business has been very strong for us and continues to be very strong. That has offset it.
I wouldn't call it very weak, but we had to identify where there's been some weakness that offset the strength, and that was it. Overall, the space business is a very good business for us.
Thank you.
Operator, it sounds like we're ready for our next question.
Your next question comes from the line of George Godfrey from C.L. King. Your line is now open.
Good morning. Thank you for taking my questions. Very nice job on the quarterly and annual results.
Thanks, George.
If I roll. I've heard all the comments. Business is great, the organic growth rate is great here in Q4, and, you know, it actually accelerated through the year. If we roll back the clock to say the 2008, 2009 timeframe, with the benefit of hindsight, 2009 revenue was down about 8%, were there any leading indicators or signs that you look back and say, "Hmm, that was a good foreteller of what was coming ahead," perhaps in 2008? Were things more coincidental that it kind of all went south simultaneously? Thanks. Nice job.
George, I would say it became pretty clear that when the financial crisis hit, you know, immediately the whole world went into concern mode and panic mode and spending went down, and it was a totally different situation than we are seeing right now. Just completely different. We saw back then, you know, immediate action being taken by everybody. If you recall, back then there was concern that the OEMs wouldn't be able to deliver the backlogs because airlines wouldn't be able to get money. I mean, the situation today couldn't be any more different than it is. You know, we continue to see strength in our end market, strength with our customers. You know, I would say that we would have to see a major market dislocation and panic in order to see something like we saw back then. Right now we're seeing quite the contrary.
George, this is Victor. Having said that, it's all the more reason we always have to be careful within our company and stay lean and cautious, and it's why we run the business the way we do because we never know what will happen with the broader economy. We wanna be prepared for all seasons.
Understood. Thank you very much.
You're welcome.
Operator, I don't think there are any more questions, are there?
There are no further questions at this time. Presenters, you may continue.
This is Laurans Mendelson again. We thank you all for your interest in HEICO. We appreciate it. We are available. If you have further questions, give us a call, Carlos, Eric, Victor, myself. We wish you all a very happy holiday, a healthy and wonderful New Year. Unless we hear from you, we will speak to you, first quarter next year, around February when we release first quarter results. That is all, and we are signing off right now. Operator, we're done.
This concludes today's conference call. Thank you all for joining. You may now disconnect.