Hi, good morning. My name is Evelyn, I will be your conference operator today. At this time, I would like to welcome everyone to the fiscal year 2016 full year and fourth quarter earnings 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 followed by the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Certain statements made in this 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, but not limited to, lower demand for commercial air travel or airline fleet changes or airline purchasing decisions, which could cause lower demand for goods and services, product development or product specification costs and requirements, which could cause an increase to our cost to complete contracts, governmental and regulatory demands, export policies and restrictions, reductions in defense, base, or homeland security spending by U.S. and/or foreign customers, or competition from existing and new competitors, which could reduce our sales, our ability to introduce new products and product pricing levels, which could reduce our sales or sales growth, product development difficulties, which could increase our product development costs and delay sales, our ability to make acquisitions and achieve operating synergies from acquired businesses, customer credit risk, interest and income tax rate, and economic conditions within outside of the aviation, defense, space, medical, telecommunications, and electronic industries, which could negatively impact our cost and revenues and defense budget cuts, which could reduce our defense-related revenue.
Those listening to this call are encouraged to review all HEICO 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. I would now like to turn the call over to Laurans Mendelson. Thank you. You may begin.
Thank you very much. Good morning to everyone on the call. We thank you for joining us, we welcome you to HEICO's first quarter fiscal 2017 earnings announcement teleconference. I'm Larry Mendelson, Chairman and CEO of HEICO Corporation, 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, Carlos Macau, our Executive Vice President and CFO. Before I start, I want to thank the approximately 5,000 HEICO team members who really make HEICO what it is today. Senior management can lead by example, the people that are in the field getting the daily performance done the way we want it to be done in the most admirable manner, they are the ones who deserve the credit for the great success of this company.
I can't mention 5,000 names on the telephone, or I'd be here until next week, but I do thank each and every one of our HEICO team members for their outstanding performance. I'd like to take a few minutes to summarize the highlights of our outstanding first quarter results. Consolidated net income increased 31% to $40.9 million or $0.59 per diluted share in the first quarter of fiscal 2017, and that was up from $31.3 million or $0.46 per diluted share in the first quarter of fiscal 2016. Consolidated operating income increased 23% to $64.6 million in the first quarter of fiscal 2017, and that was up from $52.6 million the first quarter of fiscal 2016. In addition, HEICO's operating margin increased to 18.8% in the first quarter of fiscal 2017, and again, that was up from 17.2% in the first quarter of fiscal 2016.
Cash flow, which as you all know is what HEICO management keys on, the most important quantitative factor in our business. Cash flow provided by operating activities was extremely strong, increased 24% to $56 million in the first quarter of fiscal 2017, and that represented 137% of reported net income as compared to $45.2 million in the first quarter of fiscal 2016. As of January 31, 2017, the company's total debt to shareholders' equity was 38.3%. In addition, our net debt to shareholders' equity was 34.1% as of January 31, 2017. With net debt, and we define that as total debt less cash and cash equivalents, net debt of $371.4 million, and that had been principally incurred to fund acquisitions in fiscal 2016 and 2015. In January 2017, we paid an increased regular semiannual dividend cash of $0.09 per share.
This represented our 77th consecutive semiannual cash dividend, and that represented a 13% increase over the prior semiannual per share cash amount of $0.08. In addition, given the strength of HEICO share prices and the company's history of stock splits and dividends, the board of directors intends to consider a stock split or stock dividend at its next regular meeting on March 17, 2017. To remind you, historically, we have declared 14 stock splits or stock dividends since 1995. In January 2017, we were happy to announce HEICO's 60th anniversary in business. The company was founded in 1957, and our current management group took over in 1990. Since 1990, HEICO has grown from approximately $26 million in revenues and market cap of about the same amount to a current market cap of approximately $5 billion and sales of nearly $1.4 billion in fiscal 2016.
Again, we thank our nearly 5,000 team members worldwide, as well as our customers and our suppliers for getting HEICO to this unique milestone. In January 2017, Institutional Investor magazine named HEICO to its All-American Executive Team and named me, Laurans Mendelson, the best CEO in the aerospace and defense electronics sector and named HEICO's investor relations program as the second-best such program in the aerospace and defense electronics sector. These honors could only have been achieved through, again, the dedication of our nearly 5,000 team members and their outstanding and diligent commitment to excellence. At this time, I would like to 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.
Thank you. The Flight Support Group's net sales increased 8% to $220.9 million in the first quarter of fiscal 2017, up from $204.6 million in the first quarter of fiscal 2016. The increase was all organic growth of 8%, principally attributed to increased demand in new product offerings within our aftermarket replacement parts and repair and overhaul parts and services product lines. The Flight Support Group's operating income increased 17% on that 8% organic growth to $41.4 million in the first quarter of fiscal 2017, up from $35.5 million in the first quarter of fiscal 2016. The increase is principally attributed to the previously mentioned net sales growth, with operating income increases in each of our three product lines. The Flight Support Group's operating margin improved to 18.7% in the first quarter of fiscal 2017, up from 17.3% in the first quarter of fiscal 2016.
The increase is principally attributed to the previously mentioned higher net sales volumes and the positive impact of higher net sales on the fixed portion of SG&A expenses. With respect to the remainder of fiscal 2017, we continue to estimate mid-single-digit growth in the Flight Support Group's net sales over fiscal 2016 levels and the full-year Flight Support Group's operating margin to approximate 19%-19.5%. 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 21% to $126.2 million in the first quarter of fiscal 2017, up from $104.2 million in the first quarter of fiscal 2016. The increase reflects organic growth of 8%, mainly attributed to higher net sales of certain other electronics, aerospace, and medical-related products, as well as net sales of approximately $13 million, contributed by our fiscal 2016 acquisitions. The Electronic Technologies Group's operating income increased 31% to $29.1 million in the first quarter of fiscal 2017, up from $22.3 million in the first quarter of fiscal 2016.
The increase is principally attributed to the previously mentioned net sales growth and $3.1 million in acquisition costs associated with a prior year acquisition that were recognized in the first quarter of fiscal 2016, partially offset by a less favorable product mix for certain space products and an increase in research and development expenses. The Electronic Technologies Group's operating margin improved to 23.1% in the first quarter of fiscal 2017, up from 21.4% in the first quarter of fiscal 2016. I also note and comment
That is after, of course, around 300- 400 basis points of intangibles amortization expense, which means that if I look at how we evaluate our businesses, which is before intangibles amortization expense, which is an expense that only exists because we made an acquisition and doesn't really reflect how those individual businesses are doing on a trading basis. Those are very strong margins, and we're very pleased with them. The increase principally reflects the previously mentioned net sales growth and decrease in acquisition costs, partially offset by the less favorable product mix and increase in research and development expenses. With respect to the remainder of fiscal 2017, we are continuing to estimate mid to high single-digit growth in the Electronic Technologies Group's net sales over fiscal 2016 levels and the full year Electronic Technologies Group's operating margin to approximately 24%.
I make the same note about amortization as I did a few moments ago. These estimates exclude additional acquired businesses, if any. I turn the call back over to Laurans Mendelson.
Thank you, Victor, thank you, Eric. Moving on to diluted earnings per share. Consolidated net income per diluted share increased 28% to $0.59 in the first quarter of fiscal 2017. That was up from $0.46 in the first quarter of fiscal 2016. During the first quarter of fiscal 2017, we adopted Accounting Standards Update 2016-09, which simplifies several aspects related to accounting for share-based payment transactions. The adoption of this standard resulted in HEICO recognizing a $3.1 million discrete income tax benefit, which net of non-controlling interest, increased net income attributable to HEICO by $2.6 million or approximately $0.03 per diluted share. In addition, the adoption of this standard required us to increase the number of weighted average diluted shares outstanding by 543,000 shares. The increase in shares within of our diluted EPS calculation is recurring, while the previously mentioned discrete benefit is a one-time event.
For all of you on the call, I'm sure that paragraph is rather confusing, Carlos Macau, our CFO, is available at any time at your discretion, to explain the details and how the new accounting requirements are calculated. Depreciation and amortization expense totaled $15.2 million and $13.9 million in the first quarter of fiscal 2017 and 2016, respectively. That increase principally reflects the incremental impact of higher amortization expense of intangible assets attributable to our fiscal 2016 acquisitions. R&D expense increased 25% to $11.2 million in the first quarter of fiscal 2017, that was up from $9 million in the first quarter of fiscal 2016. The increase in R&D expenditures during the first quarter of fiscal 2017 occurred in both operating segments, as well as the incremental impact of R&D expenditures associated with our fiscal 2016 acquisitions.
Significant ongoing new product development efforts are continuing at both Flight Support and ETG. We continue to invest approximately 3%- 4% of each sales dollar into new product development. SG&A expenses were $60.9 million in the first quarter of fiscal 2017, up from $59.6 million in the first quarter of 2016. The increase principally reflects higher performance-based compensation expense as well as the impact from our fiscal 2016 acquisitions. They were partially offset by the previously mentioned $3.1 million decrease in acquisition costs. SG&A expense as a percentage of net sales was 17.7% and 19.5% in the first quarter of fiscal 2017 and 2016, respectively. The decrease principally reflects a 1% impact from the aforementioned decrease in acquisition cost, as well as the benefit of higher net sales volume on the fixed portion of SG&A expenses.
Interest expense increased to $2 million in the first quarter of fiscal 2017, up from $1.6 million in the first quarter of 2016. The increase was due to a higher weighted average balance outstanding under our revolving credit facility associated with our fiscal 2016 and 2015 acquisitions, as well as slightly higher interest rates. Other income and expense in the first quarter of 2017 was not significant. Our effective tax rate in the first quarter of fiscal 2017 decreased to 26.6% from 29% in the first quarter of fiscal 2016. That decrease principally reflects a discrete income tax benefit related to stock option exercises resulting from the adoption of the new accounting standard which I previously discussed, as well as higher tax-exempt unrealized gains in life insurance policies related to the HEICO Corporate Leadership Comp Plan.
These decreases were partially offset by the benefit recognized in the first quarter of fiscal 2016 from the retroactive and permanent extension of the U.S. Federal R&D tax credit that resulted in the recognition of additional income tax credit for qualified R&D activities related to the last 10 months of fiscal 2015. Net income attributable to non-controlling interest was $5.3 million in the first quarter of fiscal 2017. That's comparable to $4.7 million reported in the first quarter of fiscal 2016. For the full fiscal 2017 year, we continue to estimate a combined effective tax rate and non-controlling interest rate between 39% and 40% of pre-tax income, assuming that U.S. corporate tax reform does not become effective during this fiscal year. Moving on to the balance sheet and cash flow. Our financial position and cash flow remain very strong.
As I previously discussed, cash flow provided by operating activities was very strong, increasing 24% to $56 million in the first quarter of fiscal 2017. That represented 137% of reported net income. That was compared to $45.2 million of cash flow in the first quarter of fiscal 2016. Working capital ratio, that's current assets divided by current liabilities, improved to 2.9 as of January 31, 2017. That compared to 2.7 on October 31, 2016. DSOs of accounts receivable were 47 days as of January 31, 2017. That compared favorably to 52 days as of January 31, 2016. As you know, we closely monitor all receivable collection efforts in order to limit credit exposure. Our credit experience is generally excellent.
No one customer accounted for more than 10% of net sales, our top five customers represented approximately 21% and 18% of consolidated net sales in the first quarter of fiscal 2017 and 2016, respectively. Inventory turnover rate improved to 127 days as of January 31, 2017, and that compared favorably to the 130 days as of one year ago, January 31, 2016. Previously mentioned total debt to shareholders' equity was a low 38.3% as of January 31, 2017. Our net debt to shareholders' equity was 34.1% as of January 31, 2017. Net debt, as I described before, total debt less cash and cash equivalents, was $371.4 million, principally incurred to fund the acquisitions in 2016 and 2015. We have no significant debt maturities until fiscal 2019, and we plan to utilize our financial flexibility to aggressively pursue high-quality acquisition opportunities to accelerate growth and maximize shareholder returns.
Again, I congratulate our team members, and especially the leaders of our business units, for delivering an exceptional quarter of high cash flow generation as well as earnings per share. It is a testament to their commitment to excellent entrepreneurship, daily focus on delivering high-quality products that exceed our customers' expectation. Again, it is their hard work and dedication that allows HEICO to consistently deliver exceptional results for its shareholders. Now the outlook. As we look ahead to the remainder of fiscal 2017, we do anticipate continued net sales growth, both within Flight Support and ETG, and that will result from increased demand across the majority of our product lines. During the remainder of fiscal 2017, we'll continue our commitments to developing new products and services, further market penetration, as well as an aggressive acquisition strategy while maintaining our financial strength and flexibility.
With regard to our acquisition pipeline, it remains robust. As HEICO shareholders have come to expect, we are aggressive acquirers of successful businesses, are patient allocators of capital and we do not have an acquisition clock. At this time, our due diligence teams are highly engaged at potential targets across the globe. I cannot predict the outcome of our due diligence efforts, nor the ultimate closing of these potentially accretive transactions. We do remain optimistic on the opportunities we are pursuing. As you know, we will not force an acquisition, if we find something that mitigates against acquiring a business, we will walk from the closing table rather than make a major mistake. Hopefully, the transactions that we're looking at will close, again, we cannot guarantee it because we are not finished with due diligence.
Based upon current economic visibility, we are increasing our estimated consolidated fiscal 2017 year-over-year growth in net sales to 6%-8%, and net income increasing the estimate 9%-11%, up from prior growth estimate in net sales of 5%-7% and net income of 7%-10%. In addition, we anticipate our operating margin to approximate between 19% and 20%. Depreciation and amortization expense of approximately $63 million. CapEx to approximate $38 million, and cash flow from operations to approximate $260 million. These estimates, of course, exclude any additional acquired businesses. I would like to mention that we're cautiously optimistic that President Trump's new business-friendly policies will impact HEICO in a favorable manner. Decreases in corporate tax rates would increase HEICO's earnings and cash generation.
In addition, increased military spending would help HEICO, given that we continue to generate approximately a third of our business revenue from defense and space. Furthermore, his pro-business stimulus plans should positively benefit the commercial and industrial markets that we serve. However, given political posturing in Washington and lack of clarity on specifics, we cannot be sure of what or when these impacts, if any, will ultimately translate into increased shareholder value to HEICO. In closing, I promise you that we'll continue to focus on intermediate and long-term growth strategies with a laser focus on growing our core businesses and an emphasis on acquiring additional profitable businesses at fair prices. That is the extent of my prepared comments, and I would like to now open the floor for questions.
As a reminder, if you'd like to ask a question, please do so by pressing star one on your telephone keypad. We will pause for a moment as we compile the Q&A roster, and again, that's star one. Your first question is on the line with Ken Herbert, Canaccord.
Hi, good morning.
Good morning, Ken.
Hi. I first wanted to ask Eric, within FSG, very nice organic growth in the quarter. Can you provide any more detail on, I know obviously you were up against probably your easiest comp from fiscal 2016 at just up 1% a year ago. You didn't raise the full year guidance for sales growth. Was there anything unique in the quarter that was maybe one-time, or can you just talk a little bit more about where you saw strength, either on a geographic or product line basis?
Good morning, Ken. This is Eric. I would be happy to answer that. We were very happy with the positive results with the organic growth up 8%. I think the thing that we were even happier about is that we had organic growth in operating income because all of that growth was organic. Organic growth and operating income of 17%. The people who run our businesses are measured primarily on operating income and cash flow. That's what we focus on. Obviously, revenue is sort of a byproduct. You've got to have revenue in order to have earnings. We try to keep them really focused on as few objectives as possible. The 17%, I think, is very important. We were able, I think, to reduce some sales of some lower margin activities. We were able to get into some higher margin activities.
We've seen strength around the world. You're right, in terms of as the year goes on, our comps get tougher. I would have to say our business leaders are probably conservative by nature. It's tough in a business where you get 70%, 80% of your orders in the month of shipment. It's very difficult to be able to forecast going forward. I'm sure that they're going to do everything that they possibly can to drive the organic earnings growth and hence the organic sales growth up. I wouldn't say that it was due to any one area. I've done detailed sales reviews with our sales leaders and the heads of our businesses. We've got a lot of very good projects in work.
I think, as we've said for many years, as time goes on, I think that HEICO's market credibility improves. Customers are interested in us developing additional products, in related areas, adjacent spaces that we haven't been in the past. I anticipate that to continue.
Okay. That's helpful.
Ken, this is Carlos. I want to add one thing to that because you had mentioned geography, and I do want to clarify one thing, because as you know, last year, we spoke quite a bit about Latin America and South America, and I suspect that's where your geography question came from. What we have noticed so far this year is quite a bit more optimism out of our business unit leaders in the repair and overhaul business, for that marketplace. That was not a drag, as Eric mentioned, in the organic growth that we posted this quarter, that was not a drag. We've got, I say we're cautiously optimistic that that's behind us. As the year plays out more, we'll have more color on that particular topic.
Okay. That's very helpful. Eric, I know you specifically highlighted the new product introductions as a source of growth or upside in the quarter. Is it possible to give any more detail around maybe some numbers on that relative to legacy products or maybe just sort of mix of the growth from newer programs or products versus more mature or established products within the segment?
No. I think that's a very good question, for competitive reasons, we don't like to get into specific platforms. I can tell you, I think we're doing very well on the legacy side. We're also getting into the new products as well. As I mentioned before, the new products tend to be extremely expensive. Of course, the competitive dynamic in the newer area is increasing because there are fewer suppliers, and those suppliers tend to have a greater amount of content on the aircraft. That also provides greater opportunity for companies like HEICO. I would say we're doing very well in both areas, and we're meeting our objectives without going into the specific numbers which would cause competitive issues for us.
Okay. Thank you. Just finally, if I could, Larry, obviously, you continue to see what sounds like a fairly robust M&A pipeline. Can you just comment on maybe some of the issues with, is it issues with valuation? Is it issues with maybe just not seeing the right business that's contributing to, I don't want to say a delay, but obviously you're going to be disciplined in how you think about the M&A process. Second, as a part of it, do you have a particular preference for companies now with more commercial versus defense exposure?
The answer is that I'll answer your last question first. We are neutral. We like defense, and we like commercial. It all depends on what the company looks like. We're not afraid of defense. I think the defense budget, we all believe the defense budget is going to be increased. They're talking about a $57 billion increase. I think that in itself will be helpful to us. We have some wonderful defense businesses, so we like them. We also are looking at very good commercial businesses. It really depends on the opportunity. We are, as you know, we are opportunistic buyers. The rest of it, the M&A business is, as you know, very difficult. One is a question of pricing. As interest rates were lowered, multiples expanded. You get a lot of competition in there.
First thing, we have to consider pricing and what people are asking. Once we get to that point, and you know we only look at companies that have operating margins of 20% or more, with the exception of some tuck-away deals where we can cut overhead and so forth. Most of them, say 80%, will be standalone operations. We want strong companies, strong history, strong cash flow, low CapEx. To find these companies is difficult. Once you find them, the due diligence process that we use is extremely thorough. I would say that, and we do it in-house. It takes us a little bit longer. We send our people out to the field, and they scrutinize these companies. Sometimes private companies take longer to generate the data that we need.
Again, we really take a deep dive into companies, products, customers, and everything else. We're not going to force an acquisition. Again, I do believe that we're going to make a number of these transactions. In order to sound good to the market, we're going to do the right thing for the long term of HEICO. Again, we focus on growth of 15%-20% bottom line. We had a strong quarter in organic of about 8%. So between organic and acquired growth, I think that target of 15%-20% over the next number of years is doable, and we're going to continue to shoot at it. There's nothing that's troubling us about the acquisition pace. We just have to do our homework, and that's really what delays it. Does that answer your question?
No, that's very helpful. Thank you very much. Very nice quarter. Thank you.
Thank you.
Thank you. Your next question comes from the line of Larry Solow with CJS Securities.
Good morning, guys.
Good morning.
Good call, Larry. That was great.
Good color on the acquisition environment. Thank you. Just a question, Eric, for you. Obviously, a nice quarter, 8% organic growth, and it's more operating income, but just on that you guys look at, but just on the sales side, I guess there was some improvement in the repair and overhaul market, particularly. I know that was sort of what hurt last year's, made that comp a little bit easier. Was there some improvement there?
Yes, there was. There was improvement in the overhaul business. That of course, helped the comp. I would say that there was strength all the way around, really in all of our businesses. It was really quite strong.
Okay. The growth in aftermarket in particular, that's been sort of mid-single digits. Was that higher this quarter? Any change sort of that you've seen just industry-wide?
Well, I think actually, when I look at our numbers and the fact that we're up 8% on sales and 17% on operating income on an organic basis, from the numbers I've seen from other companies, I think that's a big outperformance. Of course, we sort of report early, so I don't know how the other companies are going to report for their first quarter. My guess is that HEICO is outperforming. We've always felt that due to HEICO's business model, the businesses that we're in, with the margins, with the cash generation, and as well as with our operating structure, where we divide these businesses into smaller business units so people can have the authority and the responsibility to execute and generate these results. I think we have a structural advantage.
My sense is, yes, the tide is rising, I think that HEICO, my guess is, of course, we'll see when other people report. Based on the numbers that came out for other people's fourth quarters, which included our November and December from our first quarter, I think HEICO is way outperforming.
Got it. Okay. Then just a question quickly for Carlos, just on the, obviously, you guys have done a great job on DSOs and your overall working capital management cash flow. DSOs were basically been steady, sort of in the high 49 range. Was this something that sort of made it bounce up a little bit? I have to go back and look. That made it bounce a little bit higher last year or that drove the improvement this quarter?
I think at the end of last year, we had some receivables outstanding and some larger contracts that got paid off. I think that our guys did a fabulous job in the first quarter, managing cash flow and collecting on receivables. Nothing out of the ordinary, as Larry mentioned earlier in our prepared remarks. Generally speaking, from a receivables standpoint, we're pretty quick cash collectors, and I wouldn't say that there was anything unusual. Our run rate has typically been in the high 40s to very low 50s. There has been a tendency by larger corporations to stretch out terms. At some companies, we've been successful in not having that impact our DSOs. Nothing new to report there.
Last question for Larry. Clearly the new presidential, sounds like things should help you guys or could certainly help you. On the defense side, hypothetically, if things were to increase, can you just remind us how long it would sort of take to potentially flow through into your business?
I think it'll take a little while. Victor can give you a little bit more color. He's closer to the ground on this, he has definite thoughts on it. Let me ask him.
Hey, Larry. This is Victor.
Hi, Victor.
The answer is, of course, we all have the same visibility. I'll start with that. We all read the same newspapers. I don't have any particular insight or inside information out of D.C. that anyone else has. Our general view is the increase in the defense budget that would come is not going to really impact us materially in 2017.
Right.
It's probably not necessarily even early 2018. It's somewhere, we would think, in 2018. I don't want to put an exact date on it. What has to happen, of course, is first the budget has to get through. Then once the budget gets through, the POs, if you will, get cut.
That takes some time, and those things get on order, and then there's a lead time to produce, and so on. I don't anticipate that the current discussions on a larger defense budget are going to impact the industry materially in our fiscal 2017. I do think we'll start to see it sometime in 2017. What we are noticing, and I think people in the industry are noticing, is something a little bit different, a little more positive, particularly in the current, excuse me, administration, and that is the lack of reticence to spend money. What we were starting to notice was that.
Money that had been approved in the defense budget, that had been planned for spending in the defense budget, wasn't actually getting spent. Things were moving around to fund other priorities, and spending was just getting delayed, and excuses were appearing and things of that sort. We've noticed more recently that that is abating. Specifically in the current calendar year we've been noticing that abating. There is what we believe to be a greater willingness to fund what has already been approved. We'll see how that works through for us during the year and for the industry during the year. I think that the concept of rising tide lifts all ships applies to the industry as a whole. Of course, keep in mind, we will ultimately have to see which budget priorities affect which ones of our companies.
It will be important, of course, for funding to apply and for spending to apply to the programs we're on. Right? That's what we remain to see. We just, as a general rule, have a sort of a positive outlook based on what we're reading in the press, and we'll update as things go along. Was that helpful?
Absolutely. Very helpful. Thanks a lot. I appreciate it, guys.
You're welcome.
Thank you.
Thank you. Your next question is from the line of Sheila Kahyaoglu, Jefferies.
It's Sheila. Good morning, and thank you for taking my question.
Good morning, Sheila.
Good morning.
Did you listen to my advice?
No, clearly I didn't. I'm calling again. From now on, maybe I should just listen. Howard would like to hear that. Eric, can I ask you a question on within the repair and overhaul business? I know you said it improved. I guess, is there any way you could give a bit more color on what you're seeing on the activity side as fuel prices rise, maybe on a year-over-year basis, or is that changing repair activity at all or not so much?
No, Sheila, that's a good question. We have not seen the increase in fuel prices impact repair activity thus far. Of course, the cost of new equipment is very high and you and others have written about the perhaps oversupply or potential future oversupply in the wide body and the narrow body market. I think the airlines are looking to maintain the equipment that they've got, and we're in pretty good shape with regard to fuel. Of course, if fuel were to spike, which people don't believe is likely at this point, if fuel were to spike, that would not be good for it. We have not seen any real significant impact as a result of fuel in our component overhaul businesses.
Understood. Thank you. I guess, Victor, can I ask you about the organic growth within your end markets, just I guess specifically on medical and electronic. What drove that, could you expect that to continue throughout the year?
Yeah. Sheila, this is Victor. I'll come sort of answer the last part of the question first. As a rule of thumb, if you look back over time, these things tend to shift, we may have a stronger quarter in growth in one group, let's say defense, the next quarter it shifts around to other electronics or products that go into medical equipment, it can shift to space and so forth. I would say that if I look for growth over the course of the year, I would expect that as the year wears on, we'll see it more evenly distributed across the businesses. We are seeing particularly good signs, if you will, in some of the electronics, medical, and other markets these days. They've been strong.
When I look at the backlog, I look at the orders, I look at book-to-bill, things like that in those other product lines and companies, they've been fairly strong. I would, if past is prelude, which it usually is, I would expect those to moderate somewhat and some of the other lines to increase somewhat and see a fairly even distribution over the course of the full year.
Got it. Thank you.
You're welcome.
I guess just one more on Robertson. Do you mind providing an update of maybe what's integrated, or just how the business is progressing thus far now that you've owned it for a year?
Yes. Sheila, so far so good. We're very happy with how it's done. I would say more or less right on the mark with our expectations. Happy with the people, happy with the management team there. That's not to say that everything is always easy. It never is in any business. We're always cautious with how we proceed. It's really been on the mark.
Great. Thank you very much and great quarter.
You're welcome. Thank you.
Sheila, thank you very much.
Thanks.
Thank you. As a reminder, if you'd like to ask an audio question, please do so by pressing star one. Our next question comes from the line of Michael Ciarmoli with SunTrust.
Hey. Good morning, guys. Thanks for taking my questions and nice quarter.
Thank you, Michael. Thank you for your interest, too.
Hey, Eric. I just wanted to go back. The 8% organic growth, I know we've talked a lot here about the MRO and maybe those headwinds alleviating, but can you talk maybe about the parts sales business? Some of the other suppliers out there have talked about strength with the CFM56, with the V2500. It seems like the expectation is there that the shop visits would pick up. Can you just give some color in terms of what you're seeing on the actual parts side and maybe even layer in some of the data points about used aircraft? I think United has been making some statements that there's a desire to operate used and, what the expectation for part demand would look like as the year progresses.
Hi, Mike, this is Eric. I'd be happy to address your question. We are seeing strength. I can't, unfortunately, get into specific product lines or product types, as you know, due to competitive reasons.
Sure.
You're right, we have seen the airlines continue time, some of the older equipment where it makes a lot of sense to operate, especially in this fuel environment, the lower priced equipment. What I can tell you, though, is in the surplus market, going back to the roughly 2013, 2014, 2015 time, even a bit of 2016, we saw a lot of money pouring into the space, frankly, where financial investors without experience, really, in this space, thought that it would be a good business to get into. I would say that in our opinion, nothing is easy. Everything looks easy from the outside, but when you get on the inside, it's extremely difficult. In order to do it on a consistent and successful basis, you've got to have the right methodology and the right people.
I think that some of these, my sense is some of the financial investors who went in and bought equipment at prices, I think that were fairly aggressive in, let's just say, roughly the 2013- 2015 area, have realized that it's not such an easy business, and you really have to know what you're doing. I think the returns have not been what they've expected. I think some of the pricing from what we've seen has come down to more reasonable levels, I think, where people can start to make wise investments there. We see, obviously, continued growth in all of these markets, and tremendous need for our products.
Got it. That's helpful. Just one more, and I'll get out of the way here. Just any more data or color in terms of what's happening within the EU with the investigation ongoing, I guess, into maybe the practices of some of the engine providers and trying to lock up airline customers over the longer term? How do you guys see that shaking out? It would actually be an opportunity if you see some ruling inside of the airlines, any additional color there?
Well, just to give everybody a little bit of background, what you're referring to is IATA, the International Air Transport Association, started looking into, and has been expressing for many years, their disappointment with the very high prices on spare parts from original equipment manufacturers, in particular in the engine area. IATA has been talking about this. The membership has been very upset about it. They had their annual general meeting, and they all spoke about it. I don't know how it ultimately got started, but I think they went to the European Commission, and they complained and said that the cost of spares was inappropriate, and there were certain unfair things happening there. HEICO is not part of that complaint. We are aware of it, really just to the extent that everybody else is. I don't know what the timing is on this.
I think these kinds of things can take a long time. I don't know what possible remedies could occur. We have not baked any of that into our projections or guidance because honestly, we have no idea what is happening. We have confidence and conviction in our opinion as to what's happening there and believe that IATA has a tremendous amount of credibility and tremendous information on this. If they've complained, I believe that it's a very serious issue. I don't know where it is going to end up for the time.
Got it. Thanks a lot, guys.
I think Carlos also wanted to expand on something.
Yeah.
I wanted to just make a point because, I don't want you or the other investors on the call to lose sight of the fact that geography was mentioned earlier. You've asked Eric about repair and overhaul. We're very proud of the guys this quarter. They had growth, and last year we had growth in our repair and overhaul business, but the drag down, if you will, was highly concentrated, and it was geographically concentrated. As we talked about at the end of December, we had a feeling, and our team members in that particular business area had a feeling that that was not a sustainable drag, if you would, or deferral of that repair type work down in that part of the marketplace. We did see some improvements in that area, and we did have growth in our repair and overhaul, and parts business.
We're very proud of the guys there. I hope that adds a little color to your initial question.
Yes, definitely. Thanks a lot, guys. Nice quarter.
Thank you.
Thank you.
Okay, that was our final question. I will now turn the conference back over to you.
Well, I want to thank all of the folks that have been on this call, and one second. For your interest in HEICO. Apparently, a lot of people have begun to focus on the company, and we're very happy. We work very hard. As you know, we consider all shareholders partners. We're probably the largest shareholder, the Mendelson family, and our executive management team, and the company's 401(k) plan. We have to lead by example, and as long as we do the right thing, selfishly for ourselves, every one of our shareholders who we consider partners will continue to do well. In that vein, somebody just gave me a paper that shows that the market approved what we did. This morning, we hit a new high in the HEI stock of 88, and on the HEI.A, we were $75.90.
I think that the stock market has recognized what all of you investors have recognized. Many of you on this call have been long-term investors in HEICO, and we thank you so much for your continued confidence. We try to earn it every day, and we look forward to speaking to you at the next quarter two conference call, which will be, I guess, sometime during the month of May. Thank you all. If you have any questions, as you know, we are available. Eric, Victor, Carlos Macau, me, we'll try to answer your questions. Thank you all, and thank you for your confidence.
This concludes today's conference call.