Good morning. My name is Tamika, and I will be your conference operator today. At this time, I would like to welcome everyone to the Fiscal 2013 First Quarter Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
Certain statements in this conference call will constitute forward looking statements, which are subject to risks, uncertainties and contingencies. IQOS' actual results may differ materially from those expressed in or implied by those forward looking statements as a result of factors including, but not limited to, lower demand for commercial air travel or air fleet changes, which could cause lower demand for our goods and services product specification costs and requirements, which could cause an increase to our costs to compete contracts governmental and regulatory demands expert policies and restrictions, reductions in defense, space or homeland security spending by U. S. And our foreign customers or competition from existing and new competitors, which could reduce our sales HEICO's ability to introduce new products and product pricing levels, which could reduce our sales or sales growth HEICO's ability to make acquisitions and achieve operating synergies from acquired businesses, customer credit risk, interest and income tax rates and economic conditions within and outside of aviation, defense, space, medical, telecommunication and electronic industries, which could negatively impact our costs and revenues. Those who zoomed to this call are encouraged to review all of HEICO's filings with the Securities and Exchange Commission, included but not limited to filings on Form 10 ks, 10 Q and 8 ks.
We undertake no obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise. Thank you. I'll now turn the call over to Lorenz Mendelson.
Thank you and good morning to everyone on the call. As you probably can hear, I have a terrible sore throat and cold. And therefore, I am going to turn the call over to our very capable management team of Eric, Victor Mendelson, Tom Irwin and Carlos Macau. And I just am available. I will be listening on the call.
If our team can answer your questions, I'll try to do it. But I thank you for understanding that I will not be actively participating in this call. So with that, I'm inviting Eric to step in and to start the call please.
Thank you. Good morning. This is Eric Mendelson, the Co President of HEICO Corporation and I'm joined here this morning with Tom Irwin, HEICO's Senior Executive Vice President and Carlos Macau, our Executive Vice President and CFO. Victor Mendelson is visiting our operations on the West Coast and is also dialed in by telephone. Before reviewing our Q1 operating results in detail, I would like to take a few minutes to summarize the highlights.
Despite a challenging global business environment, our segments performed in line with budgeted expectations and are positioned to take advantage of the anticipated growth in the markets we serve during the second half of fiscal twenty thirteen. Consistent with our philosophy of investing in future growth, we increased spending on new product development during the Q1 of fiscal 2013 by approximately 13% over the Q1 of fiscal 2012. Our consolidated first quarter 2013 net sales and net income represent record results for the Q1. The aforementioned 1st quarter net sales record was driven principally by 1st quarter record net sales within both our Flight Support Group and Electronic Technologies Group. Consolidated net sales increased 2% to $216,500,000 in the Q1 of 2013, up from $212,700,000 dollars in the Q1 of 2012.
Consolidated net income increased by 4% to $20,000,000 for the Q1 of fiscal 2013, up from $19,200,000 for the Q1 of fiscal 2012. Consolidated net income per diluted share increased to $0.37 per diluted share for the Q1 of fiscal 2013, up from $0.36 per diluted share for the Q1 of fiscal 2012. Cash flow provided by operating activities increased $15,500,000 to $13,300,000 for the Q1 of fiscal 2013. As of January 31, the company's net debt to shareholders' equity ratio was 37.3 percent with net debt, which is defined as total debt less cash of $235,800,000 In December 2012, we paid our 69th consecutive cash dividend at a rate of $0.06 per share and the previously announced special and extraordinary cash dividend of $2.14 per share on both classes of our common stock. The dividends, which aggregated $116,600,000 were funded from borrowings under our revolving credit facility.
And now I would like to go into the results of the Flight Support Group. The Flight Support Group's net sales improved slightly to a Q1 record of $139,000,000 for the Q1 of fiscal 2013 compared to $138,900,000 for the Q1 of fiscal 2012. This increase reflects additional net sales of $3,600,000 from our fiscal 2012 acquisitions, partially offset by an aggregate decrease of $1,900,000 within our aftermarket replacement parts and repair and overhaul services product lines and a decrease of $1,600,000 within our specialty product lines. Consistent with previous guidance, domestic economic uncertainty contributed to the demand decline for certain products within our aftermarket replacement parts and overhaul services product lines during the Q1 of fiscal 2013. Furthermore, the decrease in net sales within our specialty product lines primarily reflects the impact of production delays at certain Based on our current economic visibility, we anticipate improving demand and moderate organic growth within the Flight Support Group principally during the second half of fiscal twenty thirteen.
The Flight Support Group's operating income was $24,200,000 in the Q1 of fiscal 2013 compared to $25,500,000 in the Q1 of fiscal 2012. This decrease principally reflects the combination of a less favorable product mix in the previously mentioned lower sales within our specialty product line. The Flight Support Group's operating margin was 17.4% for the Q1 of fiscal 2013 compared to 18.4% for the Q1 of fiscal 2012. The decrease in operating margin principally reflects the previously mentioned less favorable product mix in lower sales within our specialty product lines. Based on our current economic visibility, we estimate the Flight Support Group's fiscal 2013 full year operating margins to approximate those in fiscal 2012.
Operating results for the Q1 of fiscal 2012 were a challenging comparable period to the Q1 of fiscal 2013 because the Q1 of fiscal 2012 was highlighted by 10% organic sales growth, an increase of 25% in operating income and a 1.5% improvement in operating margins. Now I would like to introduce Victor Mendelson, Co President of HEICO and President of HEICO's Electronic Technologies Group to discuss the results of the Electronic Technologies Group and the remainder of HEICO's performance.
Eric, thank you very much. The Electronic Technologies Group's net sales increased 6% to a 1st quarter record of $78,800,000 in the Q1 of fiscal 20 13, up from 70 $500,000 for the Q1 of 20 12. The increase in net sales for the Q1 of fiscal 20 13 principally reflects additional net sales of $4,200,000 contributed by the 2012 acquisitions. Further, the net sales increase reflects greater demand for certain space products resulting in a $4,400,000 net sales increase from this product line, partially offset by a $2,230,000 $1,700,000 net sales decline from defense and industrial products respectively. Ongoing economic uncertainty coupled with weaker market conditions for defense related products in part due to the threat of U.
S. Defense spending reductions contributed to lower sales of certain ETG products during the Q1 of fiscal 20 13. Despite the uncertainty about government budget reductions, we anticipate improving demand and moderate organic growth within the ETG, principally during the second half of fiscal twenty thirteen. And this is not unusual for the ETG's sales progression in prior years. The Electronic Technologies Group's operating income was $15,500,000 for the Q1 of fiscal 20 13 compared to $16,200,000 for the Q1 of fiscal 2012.
The decrease in operating income principally reflects a less favorable product mix of certain higher margin products in the Q1 of fiscal 2013, an increase in new product research and development expenses and increased intangible asset amortization expense from our fiscal 2012 acquisitions. The Electronic Technologies Group's operating margin was 19.7% for the Q1 of fiscal 20 13 compared to 21.8 percent for the Q1 of fiscal 20 12. The decrease in operating margin principally reflects the previously mentioned unfavorable product mix, increase in new product research and development expenses and amortization expense. Based on our current economic visibility, we estimate the ETG's fiscal 20 13 full year operating margin to approximate those we experienced in fiscal 2012. Turning to HEICO Corporation at a consolidated level, our diluted EPS increased to $0.37 in the Q1 of 20 13, up from $0.36 in the Q1 of 2012.
Additionally, diluted EPS for the Q1 of 2013 includes a $0.02 per share diluted benefit or other $0.02 per diluted share benefit net of expenses attributed to a tax credit for qualified research and development activities for the last 10 months of fiscal 2012 that was recognized in the Q1 of fiscal 2013. The aforementioned tax credit is the result of a retroactive extension in January of 2013 R and D tracks credit to cover a 2 year period from January 1, 2012 to December 31, 2013. Of course, the fiscal 2012 diluted EPS amounts have been a dilutive read through respectively for our 5 for-four stock split distributed in April 2012. Depreciation and amortization expense increased to $8,100,000 for the Q1 of fiscal 20 13, up from $7,000,000 for the Q1 of 2012 and this increase is primarily a result of higher amortization expense of intangible assets that was principally the result of our acquisitions in fiscal well. In research
and development, consistent with
our philosophy of investing in future growth, we increased spending on new product development during the Q1 of 20 13 by 13% to $7,300,000 up from $6,500,000 in the Q1 of fiscal 2012. Significant ongoing new product development efforts are continuing at both the Flight Support and Electronic Technologies Groups as we invest approximately 3% to 4% of each sales dollar. Our effective strategy for the last 22 years has been to reinvest a portion of our earnings into the development of new products and services that we can offer at lower cost as to our customers, which in turn facilitates market share growth sufficient to meet our growth goals. Our SG and A expenses were $42,700,000 $40,600,000 Q1 fiscal 2013 fiscal 2012, respectively. The increase in SG and A expenses principally reflects an increase of $2,500,000 attributed to the fiscal 2012 acquired businesses.
SG and A expenses as a percentage of net sales increased from 19.1% in the Q1 of fiscal 2012 to 19.7% in the Q1 of 2013, principally reflecting the impact of higher SG and A expenses as a percentage of net sales at the acquired businesses, of which 4 tenths of a percent of the increase attributed to amortization expense of intangible assets recognized in conjunction with the acquisitions. Interest expense approximated $600,000 in both the Q1 fiscal 2013 and fiscal 2012 and our outstanding debt balance was $255,000,000 as of January 31, 2013 at a weighted average interest rate of approximately 1.2%. Other income in the Q1 of fiscal 2013 fiscal 2012 was not significant. Our effective tax rate was 27.8% in the Q1 of 2013 compared to 34.2% in the Q1 of 20 12. The decrease in this tax rate is principally due to the previously mentioned income tax credit for qualified research and development activities that was recognized in the Q1 fiscal 2013.
The decrease in the effective tax rate was also attributed to an income tax reduction for the special and extraordinary cash dividend paid in December 2012 to participants of the HEICO 401 plan holding common stock HEICO common stock that is. For the full fiscal 2013, we are now estimating an effective tax rate of approximately 33%. Net income attributable to non controlling interest was $5,000,000 in the Q1 of 20 13 compared to $5,300,000 in the Q1 of 20 12. The decrease in the Q1 of fiscal 20 13 principally reflects our purchases of certain interest during fiscal 20122013 resulting in lower allocations of net income to control non controlling interest, partially offset by higher earnings of certain CTG and FSG subsidiaries during the Q1 of 2013. Turning to the balance sheet.
As I mentioned earlier, our financial position and forecasted cash flow remains strong. Cash flow provided by operating activities increased $15,500,000 to $13,300,000 for the Q1 of fiscal 20 13. And we continue to expect strong cash flow provided by operating activities approximately a total of $140,000,000 for fiscal 2013. Our working capital ratio, current assets divided by current liabilities is a strong 3.5 as of January 1, 13, up from 2.8 as of October 31, 2012. Days sales outstanding of accounts receivable was 47 days as of January 31, 'thirteen compared to 46 days as of October 31, 'twelve.
We continue to closely monitor all receivable collection efforts in order to limit our credit exposure. No one customer accounted for more than 10% of our net sales and our top five customers represented approximately 15% of consolidated net sales for the 1st quarters of both fiscal 2013 and fiscal 2012. Our inventory turnover rate was 129 days as of January 31, 2013 compared to 114 days as of October 31, 2012. Decrease in our turnover rate principally reflects an increase in inventory levels toward the end of the Q1 of 20 13 due to anticipated sales growth in the second half of the fiscal year. Capital expenditures were $4,500,000 in the Q1 of 2013 compared to 3,800,000 'twelve.
We continue to plan for approximately $18,000,000 to $20,000,000 in capital expenditures during the current fiscal year. Continue to anticipate depreciation and compensation expenses in this fiscal year to approximate $35,000,000 Our net debt to shareholders' equity ratio was 37.3 percent as of January 31, 2013 with net debt, which is total debt less cash and cash equivalents of $205,800,000 As of January 31, 2013, we received a total of $250,000,000 of outstanding borrowings under our revolving credit facility with a maturity in fiscal 2018. The $123,000,000 increase over the $127,000,000 outstanding as of October 31, 12, principally relates to borrowings made to fund the previously mentioned aggregate $2.20 of cash dividends paid in December 2012 and to purchase the remaining 13.3% interest in one of our subsidiaries. Turning to our outlook. As expected, global economic uncertainty and domestic governmental spending reductions were principal contributing factors to the nominal sales growth and lower operating income reported in the Q1 of fiscal 20 teen, we remain optimistic in the consensus outlook for the commercial airline industry and expect to see growth in airline capacity and maintenance spending in the back half of twenty thirteen.
In fact, additionally, we expect improving demand Excuse me. Additionally, we expect improving demand for certain products of our Electronics Technologies Group in the Space, Aerospace and Medical Industries. Based on current economic visibility, we are increasing our estimates of full year fiscal 2013 year over year growth in net sales to 6.8% excuse me, 6% to 8% and growth in net income to 9% to 11%, up from our prior growth estimates of 5.5% to 7% in both net sales and net income. Additionally, we continue to estimate consolidated operating margins to approximate 18% for the full fiscal 2013 year. Roughly 75% of this growth is expected to be organic, would represent organic growth of approximately 7% for the balance of fiscal 2013.
These estimates do not include the impact of any potential 2013 acquisitions. In closing, we will continue to focus on intermediate and long term growth strategies with an emphasis on acquiring profitable businesses at fair prices. And we are currently actively pursuing within both of our segments that complement our existing operations. And with that, I am going to ask the operator to please the floor for questions. Thank you.
Your first question comes from the line of Tyler Hojo with Sidoti and Company with
1st question, if we look at your organic growth within the Flight Support Group, this is now the 5th consecutive quarter where we've kind of seen decelerating growth rates on an organic basis. And I'm just wondering if you could talk a little bit about what gives you confidence that you will see a rebound as we move through the remainder of fiscal 2013?
Tyler, good morning. This is Eric. So I'll go ahead and answer that. If you look at our sales in fiscal 2011, we were up about 23%. We had about 23% organic growth, which obviously was a huge number.
And I think we outperformed a number of our peers in the industry in turning out those numbers. And even in the Q1 of fiscal 2012, we were up about 10%. And I think in hindsight when we look back, the airlines were a little over optimistic perhaps for the ultimate results that fiscal 2012 would generate and ended up in hindsight probably over ordering a little bit in fiscal 2011, not because they were worried about shortages or not because they were trying to restock, but when the economy started stalling and all the political issues came to light in the beginning of 2012, things softened up. So I think that we're just really seeing a continuation of that and really a continuing burn off of the inventory. Can tell you that I've met recently with our sales folks and I've asked them exactly that question.
Why are they optimistic? And I can tell you that we've gone through on a customer by customer basis and our normally extremely conservative and I would say sandbagging sales folks were had very concrete answers as to why they thought the results would be better. We are aware of certain airlines who kept inventory levels down for their 12/31 of fiscal year end. And there were some other issues going on. So our folks really when you dive into the details, they're pretty optimistic on a rebound in the second half.
So I would say that's why we feel good. And then in addition, normally November December are slower months for us just due to the number of working days and people trying to conserve working capital. But in January of 2013, our sales were up and that trend continues into February of 2013. So we do have some tangible results. Now I don't want to mischaracterize and say that we're going to go back anywhere near the 2011 numbers, but we do see affirming, which leads us to be able to increase our estimates for the back half of the year.
Okay. Got it. And the kind of inventory stocking and destocking seems to be kind of a theme your competitors have talked about. Is it possible that perhaps you're being a little overly conservative in regards to kind of the growth expectation in FSG if you do see some sort of restock occur in the back half of your fiscal year?
Yes. I mean, I would say normally we air to the side of being conservative because that's just in our DNA and how we're wired. But yes, I suppose there is a possibility that things will be even better. But I can tell you when we look customer by customer, we do expect the rebound, but we're not anticipating any sort of restocking levels or huge movements that would be beyond our guidance. Yes, it's possible, but we're really not anticipating that.
Got it. Okay. Thanks so much for that color. And just one more for me, maybe for Victor. Just kind of curious, what is kind of baked into the full year outlook in regards to kind of this overhang in regards to sequestration?
Tyler, hi, it's Victor. By the way, I apologize for probably sounded like a Marco Rubio moment there where phone went quiet, but some loud fans in the hotel room and I had to turn it off.
No problem.
I don't know what it was about. Anyway, the answer is at this point on sequestration, it's really very murky. And I'm not sure what we attribute to sequestration at this point in the Q1 and even beyond versus what I would say would have been some of the normal defense cuts that we've talked about in the past just because of operations levels. And right now, we're seeing I think a little evidence of it possibly in a couple of our businesses where DoD is reticent to place orders and we're waiting on orders and we just aren't certain though whether that is in fact a result of the sequester, Obama sequester or something else. So we're just sort of staying flexible at this point and we'll see what happens.
Okay, great.
I wish I had better answer, but everyone I talk with by the way pretty much in our level within the industry seems to be feeling the same thing.
Yes. No, I can definitely get that. All right. Thanks so much guys.
Welcome. Thank
you. Your next question comes from the line of Arnaud Arsena with CJS Securities.
Hello?
Arnie?
Hello. Can you hear me?
We can hear you.
Yes. This is Lee Jagoda for Arne.
Good morning.
Good morning. So since Q1 was flat organically and you did see a pickup in January, how far down were November December?
This is Tom Irwin. We report on a quarterly basis the consolidated numbers. Again, our commentary back in our Q4 conference call was that the November, December were down. But again, we don't really subscribe to monthly or weekly sales forecast or sales reporting. But again, as Eric said, we did see recovery in actually both of our segments in the month of January.
And again, based on our updated second quarter forecast from our business units, that's what's baked into our updated estimate growth.
Okay. And you highlighted R and D spending by segment, which you rarely if ever do. Was the increased ETG R and D spending more broad based or more project specific? And as a follow-up to that, how or did it have any impact on the spending you did related to the FSG segment?
Again, this is Tom Irwin. The answer is, it was really R and D spending, principally in the ETG group. We've actually spoke about it last year. We began ramping up ETG in fiscal 2012. The Q1 kind of reflects the Q1 of this year versus the Q1 of last year kind of reflects that growth in that As an example, R and D spend in the Q1 was about 3.4% of sales.
That's pretty close to where it ran for the full year of last year. It was about 3.3%. So we saw some ramping up after the first and second quarters of last year. The net net gross increase is principally in ETG. And I would say it's broad based and I'd say broadly reflective of our targeted areas of growth such as space, aerospace, industrial given the uncertainty of near term defense spending.
Okay. And one more question and I'll hop back in queue. Corporate expense was higher as a percent of sales in the quarter. Can you just give us more color on what caused that jump and the outlook for corporate expense for the remainder of the year?
Inherent again in our guidance is about round number just about 2% of sales. That's about what's been running just between 1.8% and 2% of sales is what's baked into our guidance. I don't recall, Karl, so you can add any color on any detail changes in the Q1, but No, the only incremental increase if you would do overhead and corporate expenses would be from the new acquisitions and that was not a needle mover.
Okay. Thanks very much.
Thank you.
Your next question comes from the line of Michael Ciarmoli with KeyBanc Capital Markets.
Good morning, Michael.
On for Mike. Real quick first, Tom, just kind of a housekeeping question. But I know you mentioned that the tax rate for the full year is expected to be, I think, it's a 33%. Does that bake in additional impacts from the R and D tax credit? How are you guys dealing with that?
The answer is yes. Our updated tax rate for the full year reflects the additional R and D credit, which will be eligible for the full year, which wasn't eligible. And of course, we mentioned earlier the retro impact of the Q1 as well as the other things that impacted the Q1 effective tax rate, the deductibility of a portion of our special dividend payable to our 401. On the other hand, we have some other things going the other way such as the acquisition of some non controlling interests that were that are basically entities of LL limited liability corporations that are taxed as part of partnerships. So that kind of goes the other way.
But inherent in our updated full year tax effective rate of 33% or all of the above.
Okay. Okay, great. That's helpful. And then just one other one. Are you guys expecting to see any material impact or I guess potential opportunities from the U.
S. Airways American merger? I mean should it go through?
Yes. We normally don't comment on specific customers or products due to competitive reasons. Since we have our competitors on this call and bigger airlines are good for what we do or good for HEICO because when they've got more aircraft or more aircraft of a particular type, we're able to develop more products and be a more meaningful savings target for them on all the different stuff that we do for them. So I would say in general, that's good for us. And of course, both of the other major U.
S. Combinations, I think, help Tycho. So and of course, both American and U. S. Airways are currently our customers and have been for a very long time.
So I would say that we're optimistic on that.
Okay, great. Thanks. That's all I have.
Your next question comes from the line of Steve Levinson of Stifel.
Good morning, Steve.
And Larry, hope you feel better soon. Just going back to the R and D spending increases, are these line extensions or are you expanding to new aircraft and engine families?
This is Tom Irwin. Again, it's mostly in the Electronic Technologies group that increase. And so it wouldn't be specific
Not in airline.
Yes, exactly.
But in the point of
Steve, I can tell you as a matter of course, we do continue to develop products for new aircraft that are developed and being used by the airlines. So there's a natural evolution towards developing parts for newer aircraft.
And our spend was consistent.
Yes. And our spend was consistent with that.
Okay. Thanks. As leasing becomes a bigger part of acquisition, are you seeing any change in attitude from the leasing companies to some of your products, Greater Acceptance, for example?
Yes. We have seen we have had success with certain lessors permitting their lessees to use our parts. And we think that we've got to continue to educate and make sure that the operators understand the benefit and understand the lessors understand that this is not detrimental to the value of their aircraft or engines. So yes, I would say we made continued progress on that front.
Okay. And last one, in terms of acquisition opportunities, are they skewed more towards one side of the business or the other?
No. I would say we're right now, we are looking at a number of opportunities in each of our business segments. Of course, we never know what we're going to end up being able to close on, but I would say there are plenty of opportunities in each business segment. And I think that when one of the things which is sort of interesting as we go out on the road and we meet new leadership teams and talk to them about their businesses. I think what's becoming more and more consistent to us is that HEICO seems to be an acquirer of choice for these folks because of our operating style, because we treat people fairly, both customers and team members, shareholders.
I mean, that's all part of our DNA. And when they have the opportunity to select with whom they are going to work, whether it is an entrepreneur who's built up a business or a management team, they or even a private equity firm that feels that HEICO can write a check and close, we continue to be I think favored in that area. And we just got to make sure that we find businesses that match with our DNA and that can be acquired at fair prices where it's fair for the seller, it's fair for the seller's leadership team and employees and also it's fair for HEICO. But there are plenty of opportunities, many opportunities in both businesses and both business segments that we're working on right now.
Okay. Thanks very much for additional detail.
Thank you.
Your next question comes from the line of Chris Quilty of Raymond James.
Good morning, Chris.
Good morning. I know you don't provide quarterly guidance, but the guidance seems to imply that most of the growth is in the second half of the year and I'm assuming that Q2 in terms of both growth rate and margins might be more similar to Q1 or is there a different progression that we should expect throughout
the year? Chris, this is Tom Irwin. As you pointed out, we don't give quarterly earnings guidance or revenue guidance. I think as we reported in our press release and the commentary from Eric and Victor earlier, I think we see the strengthening more push towards the back half of the year based on what we see today. And other than that, we won't be more specific.
So somewhat back ended, if you will.
And that would be for the margins also as you get volume?
Typically, historically, we get a bump in margins with increased volumes, yes. Obviously, a piece of our cost structure is either fully variable or semi variable. So volume definitely does help and tends to move the margins. That being said, as we've commented in the past, in the ETG group, sometimes you'll get some abnormality based on mix and lumpiness. But just generally, yes, we do have historically seen and would expect to see margin improvement with volume increases.
Great. Thanks a lot.
Thank you.
Your next question comes from the line of Jim Fong of Guggenie and Company.
Good morning, Jim.
Yes. I guess just circling back on the R and D, as you're spending on the in the primarily in the ETG segment. Are you expecting a, I guess, a fast payback on that? I mean, is it kind of on new products that can be developed relatively sooner than you normally spend on the Flight Support Group?
Jim, this is Victor. I would say it is our typical payback. There's nothing here that's going to be accelerated by the higher spending in let's say, we'll see special results in the next quarter or 2 quarters out or something like that. I think it's in the normal flow of the business.
Okay. So it's kind of your normal kind of time frame, but you're stepping up because you need to continue to maintain your edge in the marketplace?
Yes. And I think there are a lot of opportunities out there particularly in the space side for us that we're working on and spending on the moment. And actually as well as in some defense related areas as well that offer opportunities even in a shrinking budgetary environment.
Okay. And then Jim, let me
just clarify. I mean, the commentary was that the growth in the spend Q1 to Q1 was an EBITDA. But I don't want to that to be misconstrued. We continue to spend, again, typically we spend 3% to 4% of each sales dollar towards new product development in both of our segments. And as Eric said earlier, we continue at that targeted level in FSG as well.
But it's just as you look quarter over quarter, the dollar increase was principally in ETG. But again, for the full year, pretty close to what we ran last year about 3.3 percent of sales.
Okay. So it's pretty much in line then with your typical spending? Yes. And then could you just kind of give me some color on just what you're seeing in Europe overall from a corporation? Are you seeing activity improving?
Or are you still kind of see pretty sluggish in terms of the environment out there?
Yes. Jim, this is Eric. Yes, I mean, a year ago, everybody thought Europe was going to collapse and things sentiment got very bad. I'm not sure sales ever got down to that level, but certainly, emotion was very raw back then. I would say Europe is still very slow.
There are a lot of issues over there. I don't think the fundamental issues have been corrected even though the market seem to be rallying a little bit. But we're doing fine over there, but I would say there's not really any pockets of tremendous strength over there. Number of the airlines have got labor issues, have got cost issues and they've got to work through those. I think that they will and since we provide cost saving alternatives, whether they're in parts or repair, I think that we continue to grow our share, but Europe is still a pretty tough place right now.
So have your results been hurt by kind of the weaker Europe in the last 12 months?
I'm sorry, have they been hurt by what?
By the weaker economies in Europe in the last 12 months?
Yes. Yes, I would say so. I would say so. Yes, they've been hurt.
Are you able to kind of quantify that a bit or you think it's
a I really don't have the data in front of me right now, but I can tell you definitely that customers over there are struggling, unit volumes are down, while we may be winning share, unit volumes are challenged because they're trying to save as much money as possible and cut back on maintenance spending. I think that it will they're not going to be able to do that indefinitely and that will there will be a rebound, but it still continues to be a tough region. And I think in other corporate executives with whom we speak are basically saying the same thing.
Okay, great. Thank you. Larry, I hope you feel better. Jim,
thank you.
Your next question comes from the line of Ken Herbert with Imperial Capital.
Good morning,
Ken. Actually for Ken this morning. I had a question about FSG, specifically, I mean, it seems like the number of aircraft getting torn down is going up. I was wondering if you felt like the amount of used parts within the channel was hurting maybe sales within FSG at all?
Yes. We don't that's a very good question and we're asked that quite a bit at the conferences that we attend. And again, it's important to remember that most of what we sell in the parts side are expendable parts. And those are typically not recovered in these teardown operations. So we have not seen any meaningful impact, I would say, as a result of the teardowns nor really do we anticipate a big impact there.
The other thing which I think is also very important to point out is that HEICO is not a trading operation in that we don't take inventory positions in various inventories where if suddenly the price goes down due to teardowns that we will be impacted. Likewise, the price goes up due to lack of teardowns where we'll benefit. We tend to be more focused on the expendable area and in our asset management business more on serving the customers and acquiring a pretty short term what they need and not buying out big inventories. So, no, I don't think we're impacted significantly
there. Okay. Okay. Yes, that's helpful. And then can we still sort of look at FSG as creating 500 new PMA parts a year?
Is that still sort of the run rate that you guys are going at?
Yes. We a couple of
years ago, we started talking about parts and DER repairs because the 2 are interchangeable depending on sort of what the customer wants. But yes, I mean, we're running at the same rate that we've been running now for the last couple of years. So there's no meaningful change there.
Okay. And then my last question was just on your OEM counterparts. And I was just wondering if they were at all maybe getting more creative as far as like the sort of service packages that they're offering or if you just were finding it maybe more difficult to maybe get sort of maybe deeper penetration within airlines. Is that are you finding it more difficult at all to move PMA or products now than maybe 1 or 2 years ago or?
No, no. I would we're not. We have a tremendous amount of respect for our OEM competition and they're always doing the same stuff that they've always done. I mean, we typically say that the card they like to play is the FUD card, fear, uncertainty and doubt. And they're very effective in doing that and they're also very focused on maintaining their margins.
So no, we haven't seen any special activities. The other thing which I think is important to point out is that we're not greedy in that. We only go for up to a 1 third market share on each of the parts we provide. So we intentionally leave them with 2 thirds. So if you look at the economics of that, they can get 2 thirds at an aggressive price.
And if they want to try to squeeze us on the 1 third that we're going to take and compete on price, then we're just going to have to go after some of the 2 thirds some of the other pieces that they've got in order to capture our target market share. So I think we've sort of look, they don't like us and they wish that we didn't exist. Nobody likes competition. But I think if we didn't exist, somebody else would do it ultimately. And we're probably the best type of competition to have.
So, no, I don't think there's anything there are no material changes in those areas.
Okay. Okay, great. Thank you very much.
Thank you.
And there are no further questions at this time. I would now like to turn the floor back to management for any closing remarks.
Thank you very much. We appreciate everybody attending our Q1 earnings call and we will be having our 2nd quarter earnings call towards the end of May. And perhaps our Chairman, Larry Mendelson, would like to say a few parting comments Or maybe not. So anyway, he is recovering very well from his cold, nothing serious. And all of us will be here for our Q2 conference call.
Eric, I will I just wanted to say goodbye to everyone and I look forward to speaking to them this time for real at the Q2 meeting. And I'm going to get off and rest my voice and you can all hear the problem. So thanks very much for your interest in HEICO and let us know if we can answer any questions you may have. Thanks.
Thank you. And that's the end of the call.
Thank you all for participating in today's conference call. You may now disconnect.