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HEICO Corp.  (NYSE:HEI)
Q4 2018 Earnings Conference Call
Dec. 18, 2018, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

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 speakers' remarks, there will be a question-and-answer session. (Operator Instructions) Thank you. It is now my pleasure to introduce your host for today, Laurans 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 in 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 cost and complete contracts, governmental and regulatory demands, export policies and restrictions, reductions in defense, space or homeland security spending by US and/or foreign customers or competition from existing and new competitors which could reduce our sales, 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 ongoing (ph) 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 aviation, defense, space, medical, telecommunications and electronic industries which could negatively impact our cost and revenues and defense spending or budget cuts which could reduce our defense-related revenue. 

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 statements whether as a result of new information, future events, or otherwise except to the extent required by the applicable law.

Laurans Mendelson -- Chairman and Chief Executive Officer

Good morning to everybody on the call. This is Larry Mendelson. We thank you for joining us and we welcome you to the HEICO fourth-quarter and full-year of fiscal '18 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.

Now I'd like to summarize some of the highlights of our record fourth-quarter and full fiscal year results. Consolidated fourth-quarter fiscal '18 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 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 high -- 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. In addition, 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 '18, up from 20.1% in fiscal '17. Consolidated net income per diluted share increased 26% to $0.49 in the fourth quarter of fiscal '18, up from $0.39 in the fourth quarter of fiscal '17.

In addition, consolidated net income per diluted share increased 39% to $1.90 in fiscal year '18, up from $1.37 in fiscal '17. Consolidated EBITDA increased 15% to $123.3 million in the fourth quarter of fiscal '18, up from $107.6 million in the fourth quarter of fiscal '17. In fiscal '18, EBITDA increased 22% to $453.4 million and that was up from $372.6 million in fiscal '17. 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 '18 and that was up from $288.3 million in fiscal '17. Cash flow provided by operating activities increased 17% to $113.7 million in fourth-quarter fiscal '18 and that was up from $97.3 million fourth-quarter fiscal '17. As of October 31, 2018, the company's total debt to shareholders' equity decreased to 35.4% and that was down from 54% as of October 31, 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 October 31, 2018 and that was down from 49.8% on October 31, 2017. Net debt-to-EBITDA ratio improved to 1.04 times as of October 31, 2018, compared to 1.67 times as of October 31, 2017.

During fiscal '18, we successfully completed four acquisitions and in November '18 an additional two acquisitions. We have no significant debt maturities until fiscal '23 and 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 January 17, 2019, to shareholders of record on January 3, 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 human kind's knowledge and well-being and HEICO is very proud to be part of this journey. As always, we thank Sierra Microwave, VPT, and 3D-Plus for their outstanding accomplishments and we're humbled by their persistence excellence and innovation as well as execution. In August '18, 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 and we expect the acquisition to be accretive to earnings per share within the first 12 months following closing.

In November '18, 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 and we expect that acquisition to be accretive to earnings within the first 12 months following closing. In November '18, 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.

And 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 in the environmental, safety, and health committee. Wolfgang was a great friend to us, to HEICO, and many others and with his trademark combination of great knowledge and experience, humility, open-mindedness, hard work, determination, compassion, and humor. He possessed 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.

And now, I would like -- 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.

Eric Mendelson -- Co-President of HEICO and President of HEICO's Flight Support Group

Thank you very much. The Flight Support Group's net sales increased 13% to a record $290.3 million in the fourth quarter of fiscal '18, up from $256.9 million in the fourth quarter of fiscal '17. The Flight Support Group's net sales increased 13% to a record $1.0979 billion in fiscal year '18, up from $967.5 million in fiscal year '17. The increase in the fourth quarter and fiscal year of '18 reflects organic growth of 13% and 8% respectively mainly resulting from increased demand within all of the Flight Support Group's product lines and our fiscal '17 and '18 acquisitions.

The Flight Support Group's operating income increased 17% to $54.6 million in the fourth quarter of fiscal '18, up from $46.5 million in the fourth quarter of fiscal '17. The increase in the fourth quarter of fiscal '18 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 '18, up from $179.3 million in fiscal year '17. 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 of '17. The increase in the fourth quarter and fiscal year of '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 accrued contingent consideration.

With respect to fiscal '19, we are estimating net sales growth of approximately 7% to 8% over the prior-year and the full-year Flight Support Group operating margin to approximate 19%. Further, we estimate mid-to-high single-digit organic growth in fiscal '19. These estimates exclude additional acquired businesses, if any. Now I would like to introduce Victor Mendelson, Co-President of HEICO and President of HEICO's Electronic Technologies Group to discuss the results of the Electronic Technologies Group.

Victor Mendelson -- Co-President and President of HEICO's 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 '18, up from $169.1 million in the fourth quarter of fiscal '17. The increase in the fourth quarter of fiscal '18 resulted from our fiscal '17 and '18 acquisitions as well as organic growth of 3%. The organic growth in the fourth quarter of fiscal '18 principally reflects increased demand for certain aerospace and other electronic products partially moderated by lower demand for certain space products and I should further mention that organic growth in the fourth quarter of '17 was over 14%. So 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 the fiscal '18, up from $574.3 million in the 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 '18 principally reflects the previously mentioned net sales growth and an improved gross profit margin 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 product mix for certain space products. Further, the increase in operating income in the fourth quarter of fiscal '18 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 '18, up from $157.5 million in fiscal '17. The increase in fiscal '18 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 '18 from 30.2% in the fourth quarter of fiscal '17, but remained very strong. The slight decrease in the fourth quarter of fiscal '18 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 '18, up from 27.4% in fiscal '17. The increase in fiscal '18 mostly resulted from the previously mentioned improved gross profit margin.

With respect to fiscal '19, we are estimating net sales growth of approximately 10% to 11% over the prior year and anticipate the full-year Electronic Technologies Group's operating margin to approximate 28% to 29%. Further, we estimate low-to-mid single-digit organic growth in fiscal '19. These estimates exclude any additional acquired businesses, if any. I turn the call back over to Larry Mendelson.

Laurans Mendelson -- Chairman and Chief Executive Officer

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 '18 and that was up from $0.39 in the fourth quarter fiscal '17 and it increased 39% to $1.90 in fiscal '18, up from $1.37 in fiscal '17. Depreciation and amortization expense totaled $19.7 million in the fourth quarter of fiscal '18 and that was up from $17.9 million in the fourth quarter of fiscal '17. For the year, it totaled $77.2 million and that was up from $64.8 million in fiscal '17.The increase in the fourth quarter and fiscal year '18 reflects the incremental impact of higher amortization expense of intangible assets from our '17 and '18 acquisitions.

Research and development expense totaled $16.8 million and $12.6 million in the fourth quarter of fiscal '18 and '17, respectively, and for the year totaled $57.5 million and $46.5 million in fiscal '18 and '17 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 '18 and that was up from $70.6 million in fourth quarter of fiscal '17. For the year, it increased to $314.5 million in '18, up from $268.1 million in fiscal '17. The increase in the fourth quarter and fiscal year '18 principally reflects our fiscal '18 and '17 acquisitions as well as higher performance-based compensation expense. The increase in the fourth quarter of fiscal '18 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, but 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 '18 and '17, respectively, and 17.7% and 17.6% in fiscal year '18 and '17, respectively, too. The increase in consolidated SG&A expense as a percentage of net sales in the fourth quarter of fiscal '18 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 fiscal '18 compared to $3.4 million in the fourth quarter of fiscal 2017 and $19.9 million in fiscal '18 as compared to $9.8 million in fiscal '17. The increase in fourth quarter was due to higher interest rates. The increase in fiscal '18 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 a late fiscal '18 acquisition.

Other income and expense in the fourth quarter in (ph) fiscal '18 and '17 was not material -- I won't comment on it. Our effective tax rate in fourth-quarter '18 decreased to 24.9% from 31.5% in the fourth quarter of fiscal '17 and decreased to 19.8% in fiscal '18, down from 30.3% in fiscal '17. As we have mentioned on previous calls, the decrease in the effective tax rate for the fourth quarter and full fiscal '18 is directly related to the Tax Cuts and Job Act or the Tax Act under which US federal tax rate was reduced from 35% to 21% effective January 1, 2018.

As a result of the Tax Act, the Company remeasured its US federal net deferred tax liabilities and recorded a discrete tax benefit of $16.5 million in fiscal '18. In addition, the Company recorded a provisional discrete tax expense of $4.4 million in fiscal '18 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 (ph) fiscal '18 was partially offset by the unfavorable impact of lower tax exempt unrealized gains in cash surrender values of life insurance policies related to HEICO Corporation leadership compensation plan.

The net income attributable to non-controlling interest totaled $6.7 million and $5.4 million in the fourth quarter of fiscal '18 and '17, respectively, and totaled $26.5 million and $21.7 million in fiscal '18 and '17, respectively. The increase in the fourth-quarter fiscal '18 mainly reflects improved operating earnings of certain subsidiaries of Flight Support and Electronic Technologies in which non-controlling interest 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 '19, we estimate a combined effective tax rate and non-controlling interest rate of approximately 26% to (ph) 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 '18 and that was up from $288.3 million in fiscal '17. Cash flow provided by operating activities increased 17% to $113.7 million in the fourth quarter of fiscal '18 and again up from $97.3 million fourth quarter of fiscal '17.

Our working capital ratio was 2.6 times and 2.5 times as of October 31, 2018 and 2017 respectively. DSOs, days sales outstanding of receivables was 49 days both October 31, 2018 and 2017 and of course, we closely monitor all receivable collection efforts in order to limit credit exposure. As you know, people who have 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 '18 and '17 respectively. Inventory turnover rate was 135 days and 132 days for the years ended October 31, 2018 and 2017 respectively. As I previously mentioned, total debt to shareholders' equity decreased to 35.4% as of October 31, 2018. That was down from 54% as of October 31, 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 October 31, 2018 and again that was down from 49.8% as of October 31, 2017. Our net debt-to-EBITDA ratio improved to 1.04 times as of October 31, 2018, compared to 1.67 times as of October '17. During fiscal '18, we successfully completed four acquisitions and again I mentioned two recently completed after year-end in November '18. We have no significant debt maturities until fiscal '23 and we plan to utilize our financial flexibility to aggressively pursue high-quality acquisitions which will accelerate growth and maximize shareholder returns.

And now for the outlook. We look ahead to fiscal '19 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% to 10% growth in full year net sales and approximately 10% growth in full year net income over fiscal '18. We anticipate our fiscal year '19 consolidated operating margin to approximate 21% to 21.5%, depreciation and 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 want to thank -- again, thank our HEICO team members and it's through their dedication and efforts that we have achieved a significant 28-year compound annual growth rate of 16% in 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 want to make is many of you have heard me discuss the HEICO culture. We think that, of course, the culture of the company is what drives the operating financial results and 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. Operator?

Operator

Yes, sir.

Laurans Mendelson -- Chairman and Chief Executive Officer

Yes, would you please open the floor for questions. I'm finished with my prepared remarks and I'd like -- we have a number of people I believe waiting to ask questions. So would you please handle that?

Questions and Answers:

Operator

Okay, sir. (Operator Instructions) Your first question comes from the line of Robert Spingarn from Credit Suisse. Your line is now open.

Robert Spingarn -- Credit Suisse -- Analyst

Hi, good morning. I hope you can all hear me.

Laurans Mendelson -- Chairman and Chief Executive Officer

Yes, I can. Thank you. Good morning.

Robert Spingarn -- Credit Suisse -- Analyst

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. Are you seeing any headwinds forming in the business that would indicate a macro slowdown, anywhere across your business and 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, but do you see any macro issues?

Laurans Mendelson -- Chairman and Chief Executive Officer

The answer -- Rob, the answer is absolutely not. We don't. I think our business -- we've given guidance. We feel very confident hopefully. 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 and historically 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, but the answer to your question is no, we -- as a matter of fact, we see things as pretty strong and 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. So we have not seen the slowdown.

Victor Mendelson -- Co-President and President of HEICO's Electronic Technologies Group

Rob, this is --

Robert Spingarn -- Credit Suisse -- Analyst

So, Larry, that's --

Victor Mendelson -- Co-President and President of HEICO's Electronic Technologies Group

I'll just add to that --

Robert Spingarn -- Credit Suisse -- Analyst

Yes, go ahead.

Victor Mendelson -- Co-President and President of HEICO's Electronic Technologies Group

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 or 10 days ago I was doing that and generally, I would say almost across the board, almost universally people see -- our businesses see very strong conditions. I mean, there is always in the best of times, in 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 or a market or a product and that will always be the case, again best of times, worst of times and we have those and I expect that will always be the case, but notwithstanding that, the general tenor was strength across the board and in the end markets and the difficulty as my father said is in getting material, supplies, components, and people and 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.

Robert Spingarn -- Credit Suisse -- Analyst

Okay, that's very helpful, both Larry and Victor. Larry 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 '19, if I remember correctly, your operating cash flow at $360 million also represents about 10% growth. There was a use of cash in '18, so you'll -- seems like you'll have a similar use of cash for working capital I should say in '19. So, on working capital, if you could talk to the moving pieces and what seems like a continued I suppose spending on inventory.

Carlos Macau -- Chief Financial Officer, Executive Vice President, Treasurer

Yes, Rob, 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. So do I see that continuing into next year, well, we sort of budgeted in our thought process in how we're going 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 our -- at the levels we're at right now, turning (ph) at 135 days principally works for us. So I don't see a huge use of cash outside of what you saw this year, next year for inventory. The rest of the working capital receivables are days sales are very good, we tend to see the large players dragging out payments, but we're very aggressive on the collections side and our guys have been able to maintain our days sales down. So I don't see, you know, I see normal growth in receivables and inventory commensurate with the sales growth and we treat our vendors very well, our -- a lot of that is a function of timing whether it's payables or accruals and things like that, but the one thing that we are good to not only our customers, but the folks that allow us to be good to our customers, the vendors, we treat them very well also. So I would say similar movement as you've seen historically there, so no real big changes in working capital from our perspective.

Robert Spingarn -- Credit Suisse -- Analyst

Okay. Appreciate the help. Thank you, all.

Laurans Mendelson -- Chairman and Chief Executive Officer

Thank you, Rob.

Operator

Your next question comes from the line of Louis Raffetto from UBS. Your line is now open.

Good morning, everybody.

Laurans Mendelson -- Chairman and Chief Executive Officer

Good morning.

Operator 

So we're just going to stick with the cash flow for now. The CapEx you finally came closer to spending where you thought you'd spend and it looks like next year, it's going to be another high year. So is there anything going on or is it's just the business growing, anything specifically under the -- to base that $48 million?

Carlos Macau -- Chief Financial Officer, Executive Vice President, Treasurer

Yes, Louis. How are you doing? This is Carlos. We actually do, our board approves the CapEx budget every year and we go through and we ask our subsidiaries to come up with what they call critical capital spend required and then nice to have, sort of, three columns and as you can imagine that the number that in total of those three columns would (ph) 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. We tend, I mean sorry critical and required, we tend to under-spend those budgets, but coming out of the box, it's hard for me to... I don't want to underestimate if you would the CapEx. So 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 at auction as opposed to going out and spending for new and sometimes we have to ratchet that number down. So let's see how the year progresses, but there's nothing unusual. It's principally growth capital in that budget and I think that will be sufficient for our upcoming year.

Operator

Okay and so you think that's more of a sustainable rate going forward, I guess, as well.

Carlos Macau -- Chief Financial Officer, Executive Vice President, Treasurer

I think the way I have looked at, if you're looking at a sustainable rate 2% to 2.5% of our sales is generally where the CapEx budget falls out. Sometimes a little more, sometimes a little less, but that's a good barometer.

Operator

All right. That sounds good. And then any contingent consideration payments for 2019, I know, usually it's in the K, but jump ahead here.

Carlos Macau -- Chief Financial Officer, Executive Vice President, Treasurer

We'll have one in -- we'll have one payment in Q1. Sorry, it will either go out at the end of Q1 or early in Q2, but that's it.

Operator 

Okay and then 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, so I just don't know... is the 24% sort of average we saw over the final three quarters sort of the area to think about.

Carlos Macau -- Chief Financial Officer, Executive Vice President, Treasurer

No, I wouldn't think of it that way. The best way to look at it, I think Larry mentioned it earlier was we think that the rate will be on a combined basis 26% to 28% and that roughly breaks out 19%, 20% (ph) tax 7% to 8% (ph) NCI. That's kind of how we're looking at it right now.

Operator 

So the, sorry, the 26% to 28% is the combined NCI and tax.

Carlos Macau -- Chief Financial Officer, Executive Vice President, Treasurer

That's correct.

Operator 

Okay, sorry, I missed him say that earlier. All right and then 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 going to guess around $50 million in sales. I know the leverage is way down again. I guess it will go up a little bit, but any size you can add to that.

Carlos Macau -- Chief Financial Officer, Executive Vice President, Treasurer

We actually, we haven't -- in the acquisitions that we made in November, we haven't disclosed sales and size other than employees. I think you can, you could probably do some math. We give you the number of employees, and if you look at the revenue per employee in each segment, you can get kind of close. They were good acquisitions, normal size, single, double-type acquisitions for HEICO that will be accretive to us in '19.

Operator

Okay, sounds good. Thank you, gentlemen.

Your next question comes from the line of Peter Arment from Baird. Your line is now open.

Peter Arment -- Baird -- Analyst

Hi, guys. Good morning, Larry, Eric, Victor, Carlos.

Laurans Mendelson -- Chairman and Chief Executive Officer

Good morning, Peter.

Peter Arment -- Baird -- Analyst

Maybe this is a question for Eric on FSG just 13% organic growth really impressive and I know you guys aren't (ph) pushing price so, you know, volume that you're seeing, can you give us a little more color on whether this is all the benefits of new products or is there new customers maybe any color there would be helpful. Thanks.

Eric Mendelson -- Co-President of HEICO and President of HEICO's Flight Support Group

Hi, Peter, this is Eric. You're right that the 13% organic growth I think was even somewhat more exceptional considering we only get roughly 1% pricing. So it is all volume, 12% of it is volume-related and I would say that it's strength across the board in all of our product lines and 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 is not really a lot, if you will, new names out there because we are already doing business with everybody, but it is just increased penetration and I think it shows basically the support that HEICO has got at our customer base because we provide very good value at a reasonable price.

Peter Arment -- Baird -- Analyst

Appreciate that. Could you and just related to that, Eric, if you could just how about on the introduction of new products? I mean, I think you guys have been continuing to develop, you know, 400 to 500 parts a year. Does that still look like an achievable plan for '19?

Eric Mendelson -- Co-President of HEICO and President of HEICO's Flight Support Group

It does, yes. We're running consistent with past practice and we've got the development pipeline running really wide open right now and there is a lot of great products in there.

Peter Arment -- Baird -- Analyst

Appreciate the color. Thank you.

Eric Mendelson -- Co-President of HEICO and President of HEICO's Flight Support Group

Thank you.

Operator

Your next question comes from the line of Ken Herbert from Canaccord. Your line is now open.

Ken Herbert -- Canaccord -- Analyst

Hi, good morning, everybody.

Laurans Mendelson -- Chairman and Chief Executive Officer

Good morning, Ken.

Ken Herbert -- Canaccord -- Analyst

I first, Eric, just wanted to ask you regarding or Carlos regarding the guidance within FSG, I mean you've got the first half of '19 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 '18. 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 or maybe just a little bit of color around the cadence within FSG in '19 would be helpful.

Carlos Macau -- Chief Financial Officer, Executive Vice President, Treasurer

Hey, Ken, this is Carlos. As you know, within the FSG, we principally get the majority of the orders in the month of shipment. So we have a pretty good sense for what, let's say, Q1 is going to look like based on backlog and sort of what we got in the pipes right now, but it is difficult and which is one of the reasons why we don't give quarterly guidance outside of ETG's fluctuations is the FSG's lack of if you would visibility too far out in the future, so I would say for right now to try and guess at that cadence, it would not be in our best interest. I think our guys are projecting at the moment, at least within our budgets, linear growth and that sort of looks like in the budget and of course, we can adjust as we move forward, but 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.

Ken Herbert -- Canaccord -- Analyst

Okay, Carlos. That's helpful. I guess then fair to say and based on earlier comments you haven't seen here heading just from 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?

Carlos Macau -- Chief Financial Officer, Executive Vice President, Treasurer

No, I think from my perspective, Ken and I think I've -- I may have mentioned to you and others before, I find this environment, particularly in the FSG, to be really a special one. We had the benefit of all the new builds coming in and we've got all the older equipment still running. We see the airlines purchasing and a high need for materials. We offer a great value proposition to our customers. We are always there for them and that pattern hasn't stopped. It's been a pretty robust environment for us in that regard. Inevitably, trees don't grow to the sky, but for fiscal '19, what we're seeing right now is a continuation of that fantastic environment.

Ken Herbert -- Canaccord -- Analyst

Okay, that's great and 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, but 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.

Eric Mendelson -- Co-President of HEICO and President of HEICO's Flight Support Group

I'd be happy to speak to that. We are doing nicely I would say in the, if you want to call them the emerging markets. I think there is 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 to that continue for quite some time, but 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.

Ken Herbert -- Canaccord -- Analyst

Is there any reason to think that structurally those airlines wouldn't have the same opportunity as a legacy airline in the United States or Europe?

Eric Mendelson -- Co-President of HEICO and President of HEICO's Flight Support Group

(multiple speakers) No, I think as things mature, they're going to have a lot of demand coming out of those areas.

Ken Herbert -- Canaccord -- Analyst

Great, thank you. And just one final one for Carlos. Within ETG, can you give us what the fiscal '19 guidance implies for the intangible amortization expense?

Carlos Macau -- Chief Financial Officer, Executive Vice President, Treasurer

Yes, for ETG, amortization expense is roughly 5% of sales. It's a pretty big slug with it. I think it's ran historically between 4% and 5%. We are getting closer to 5% right now.

Ken Herbert -- Canaccord -- Analyst

Great. Excellent. Well, thank you very much. Really nice end to the year.

Laurans Mendelson -- Chairman and Chief Executive Officer

Thanks very much, Ken.

Operator

Your next question comes from the line of Sheila Kahyaoglu from Jefferies. Your line is now open.

Sheila Kahyaoglu -- Jefferies -- Analyst

Thanks, good morning, guys and thank you for the time.

Laurans Mendelson -- Chairman and Chief Executive Officer

Good morning, Sheila.

Sheila Kahyaoglu -- Jefferies -- Analyst

Good morning. Maybe you my first one for any of you. 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 such a deal?

Laurans Mendelson -- Chairman and Chief Executive Officer

Well, that's a good question. Other people have asked that question. We are 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 are a bigger company and 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 and so, our compensation, our benefit is on the bottom-line cash flow, earnings per share, and growth. So to grow the top line so we gain a couple of million dollars in compensation is not what motivates us. So 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, but unfortunately corporate America generally runs on a 7% to 11% operating margin. To us, that's not very tempting because our all-in operating margin before amortization or eliminating amortization is around 25%. So we're not going to go for that kind of thing just to get bigger for the sake of getting bigger. So we have to be careful on what we buy.

Now, we have looked at larger companies where we could make an acquisition, possibly trim some expense, possibly consolidate and gain some additional sales, but 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. So 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 debt to EBITDA right now is around one times, so we could probably acquire anything that we may want to acquire in the future, but we are going to be very disciplined because we want the cash flow and truthfully most acquisitions, if you look at all acquisitions, most are not successful. They buy a pig in the poke and they get stuck with it and we are very entrepreneurial and we do not plan to do that. However, we do focus on bottom line growth and cash flow.

So that is going to make the determination, but 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 and I've also been asked how much debt would we be willing to take on and my answer is we would do something like (inaudible) six times, seven times. However, it's got to come down within a couple of years, say two years to around the three time level -- two to three time level. So 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 want to get into a jackpot like that. As you know, we have grown pretty well, close to 20% over 28 years. We intend to continue. Our bottom line is the growth and the cash flow and the compounding of earnings. So I don't know -- that's a long answer to your question, but I hope I've given you some light.

Sheila Kahyaoglu -- Jefferies -- Analyst

It's very helpful and 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 (ph), what you are seeing in defense and space into '19?

Victor Mendelson -- Co-President and President of HEICO's Electronic Technologies Group

Hi, Sheila. Yes, this is Victor. Both of those companies AeroAntenna and Robertson had excellent years. We're very pleased with them. We're excited about '19 for both of them. They've so far proven to be great acquisitions. 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 there are also product developers, meaning that they continue to develop new product, they stay out there and they stay ahead of the curve that way. They're not in harvest mode or anything like that -- they are sharp, they are very focused on staying competitive, and so I'm optimistic beyond just the short term and beyond '19 for both of those businesses.

And in terms of what we see in defense for 2019, our budgets internally are for growth in our defense businesses overall in fiscal '19. We are 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've known 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 is going to be defense budget growth that in the long term, there has to be normalization to that and so we want to keep our cost structure to that line and enjoy ourselves when the times are good, but at the same time, we really want to do an excellent job for our customers and to deliver for them and to deliver competitively. So we take all of that into the mix.

Laurans Mendelson -- Chairman and Chief Executive Officer

Shelia, this is Larry. Just want to 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, US specifically have two companies in AeroAntenna and Robertson, but this applies to many of our subsidiaries. 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 the financial statements, but they are the guys that make it happen. They are fantastic.

Sheila Kahyaoglu -- Jefferies -- Analyst

Great.

Laurans Mendelson -- Chairman and Chief Executive Officer

Sheila, any other question?

Operator

Yes, sir. Your next question comes from the line of Michael Ciarmoli from SunTrust. Your line is now open.

Michael Ciarmoli -- SunTrust -- Analyst

Hey, good morning, guys. Thanks for taking my questions and a real nice quarter here to close out fiscal '18.

Laurans Mendelson -- Chairman and Chief Executive Officer

Thank you, Michael.

Michael Ciarmoli -- SunTrust -- Analyst

Carlos, just maybe a quick housekeeping first. Can you give us the value, the change in fair value of contingent consideration in the quarter that was the little bit of the headwind for FSG?

Carlos Macau -- Chief Financial Officer, Executive Vice President, Treasurer

Yes, it is just a -- it's a tick over a couple million dollars that we took a charge for in Q4, but that was based upon as we mentioned earlier, a little rosier outlook and you also got some FX things going back and forth between periods, but that was roughly the charge that went through.

Michael Ciarmoli -- SunTrust -- Analyst

Got it. You've given us a lot of line-by-line detail for '19 interest expense. Should we kind of assume this $20 million run rate... is that a good barometer for '19?

Carlos Macau -- Chief Financial Officer, Executive Vice President, Treasurer

Yes, I think, if you're -- it just depends. I mean, look, it depends what the Fed does and how that impacts LIBOR that (ph) we're tied to. I'm estimating somewhere between $20 million to $22 million in interest and we'll see how that ferrets out. If we're able to generate the cash that I think, you're probably going to be right at $20 million and if we find further investments, we're both going to be wrong, but right now that's in the guidance and that's what we're estimating.

Michael Ciarmoli -- SunTrust -- Analyst

Got it and then maybe, Eric just on FSG, I mean you've kind of hit this multi-year high here in organic growth. I mean is there -- obviously, if we look at the planes coming off warranty, the fleet growing, is there any correlation there with the 787s, I guess there have been 100 or so that were delivered before and during (ph) 2013. Are you getting growth on some new platforms that you haven't seen before? And then maybe can you just -- any other color on, it seems like there is broad-based strength, but any noticeable differences between parts, repair or distribution?

Eric Mendelson -- Co-President of HEICO and President of HEICO's Flight Support Group

Yes, Mike, I would say the strength is really very broad based. 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 and 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, but I would just say that it's very, very broad based and as you know, the way HEICO was structured with operating with these smaller businesses that have the authority and the responsibility, we've always said that over time, they are able to drive above-average sales and earnings growth because of their structure and because they are very close to the customers and 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, but again, it's very broad based.

Michael Ciarmoli -- SunTrust -- Analyst

Got it. That's helpful and then maybe just one last one, can you give us any update or changes or developments on the IATA and CFM sort of competitive agreement that they've come up with.

Eric Mendelson -- Co-President of HEICO and President of HEICO's Flight Support Group

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 and I think that there should be decent opportunity for independents to grow in the marketplace and decent opportunity for HEICO to cover some lost ground.

Michael Ciarmoli -- SunTrust -- Analyst

Got it. All right. That's helpful, guys. That's all I had. Thanks again.

Eric Mendelson -- Co-President of HEICO and President of HEICO's Flight Support Group

Thank you.

Laurans Mendelson -- Chairman and Chief Executive Officer

Thank you.

Operator

Your next question comes from the line of Joshua Sullivan from Seaport Global. Your line is now open.

Joshua Sullivan -- Seaport Global Securities LLC -- Analyst

Hey, good morning.

Laurans Mendelson -- Chairman and Chief Executive Officer

Good morning.

Joshua Sullivan -- Seaport Global Securities LLC -- Analyst

I just -- what's in that bottoms-up approach in your guidance? Any way you can parse out some of the specifics for us. I know you said you're seeing continuation of the attractive trends here, but just interested to hear your thoughts on air traffic growth expectations for '19 and maybe beyond.

Eric Mendelson -- Co-President of HEICO and President of HEICO's Flight Support Group

This is Eric. I mean we read frankly the same analyst reports that everybody looks at and that's where we get our information. We believe that it to be consistent and we believe that it to be supportable. I mean clearly we're seeing the sales growth in our various businesses and I think it's very believable. Rob asked the question up front about do we see any changes in the marketplace and, no, I mean we see continued strength. So I think everything is pointing in a positive direction.

Laurans Mendelson -- Chairman and Chief Executive Officer

A few of the analysts, Wall Street analysts, over the past few weeks and days 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% to 7%. That's an enormous growth. It's like double GDP, and if you go back 10 years, HEICO has been talking about the growth of the aerospace industry in those terms and Boeing has been putting out those kind of figures too and it's coming true and so we believe -- and 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 and we can only see a continuation of this kind of growth. Now, if the economy is pulled back, yes, we'll see a little slowdown and so forth, but as a general trend over the next -- our outlook over the next 10 years or more is a very strong growth industry and that's why we're in this business.

Joshua Sullivan -- Seaport Global Securities LLC -- Analyst

Okay, thanks for that. And then just on the M&A front, given the recent market volatility here, it had any impact on M&A conversations with targets, are valuation expectations getting to more (ph) reasonable.  Any change in behavior there?

Laurans Mendelson -- Chairman and Chief Executive Officer

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, but 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. So that makes it a little more difficult, but to answer your question, I think we can make our normal number of acquisitions. We see good opportunities. Companies that want to sell to us normally want to sell because of our culture and so we differentiate ourselves that we tell people at the outset, we are not going to be the highest price and we back out of different types of options 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, but lipstick on the pig, cut expenses, do all kinds of things and financial engineering and then dump it to somebody else and we're just the opposite. So 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. So it's a long answer, but I think we see our number of acquisitions and that's fine, it's fine.

Joshua Sullivan -- Seaport Global Securities LLC -- Analyst

Okay, thank you.

Operator

(Operator instructions)

Laurans Mendelson -- Chairman and Chief Executive Officer

Okay, next question.

Operator

Your next question comes from the line of Colin Ducharme from Sterling Capital. Your line is now open.

Colin Ducharme -- Sterling Capital Management LLC -- Analyst

Hi, good morning. Thanks for the time. Just a quick question for Eric -- more of a clarification, again on that IATA, CFM rolling 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 geos and for other OEMs. Just curious there.

Eric Mendelson -- Co-President of HEICO and President of HEICO's Flight Support Group

Well, just as -- a little bit of history. 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 and in the, I would say at the end of that informal investigation before it was going to become -- 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 and I want to be careful to not misspeak, I think you can get it online, but there were all sorts of behavior that is now not permitted. So 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 want to make sure that they behave consistent with 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. So that's sort of what we are hearing, but if you want to see the specifics, I think you can get that online.

Colin Ducharme -- Sterling Capital Management LLC -- Analyst

Okay, great, thanks and then just a follow-up on the FSG guidance out of the box here, trying to just triangulate various comments thus far in the call, but clearly an exit rate from Q4 with a fantastic top line trend, you got higher CapEx expectations going in on a consolidated basis for '19, yet if memory serves, kind of the out-of-the-box guide versus last year just a little bit lower. So making sure I understand, is it primarily the larger base now because your color comments through the windshield there was that you're not seeing material weakness and I just want to be sure I'm properly putting context around that.

Carlos Macau -- Chief Financial Officer, Executive Vice President, Treasurer

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, maybe just a tick under, but this is all for the most part organic growth, so we're actually very happy with the guidance that we put out and are excited about it. As we've mentioned earlier on the call, we would prefer to under-promise and over-deliver and I think that the, at least the attitude in the industry dynamics that we see suggest that we're going to have a fantastic year in that space, but for right now from a bottoms-up budgeting perspective, if you would, the 7% to 8% top-line growth is kind of what we're seeing and 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. So the cadence to that growth is going to be hard to articulate. We won't be able to articulate that to you, but from my perspective, that's robust growth and that's indicative of mid-to-high single-digit organic growth, which is kind of what we expect out of the Company right now.

Colin Ducharme -- Sterling Capital Management LLC -- Analyst

Okay, great, thanks and then 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 and 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 chipset (ph) exposure on the payload side or on the launch vehicle side or both? How are the relationships trending there and what you're seeing? Thanks.

Victor Mendelson -- Co-President and President of HEICO's Electronic Technologies Group

Yes, 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 and 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. So that is offsetted (ph). I wouldn't call it very weak, but it's been -- we had to identify where there has been some weakness that offset the strength and that was it and -- but overall, the space business is a very good business for us. Thank you. Operator, it sounds like we're ready for our next question.

Operator

Your next question comes from the line of George Godfrey from CL King. Your line is now open.

George Godfrey -- CL King -- Analyst

Good morning and thank you for taking my questions. A very nice job on the quarterly and annual results.

Laurans Mendelson -- Chairman and Chief Executive Officer

Thanks, George.

George Godfrey -- CL King -- Analyst

If I roll and I've heard all the comments and business is great, the organic growth rate is great here in Q4, and I know it actually accelerated through the year. If we roll back the clock to, say, the 2008-2009 time frame and with the benefit of hindsight, 2009 revenue was down about 8%. Were there any leading indicators or signs that you looked back and say that was a good foreteller of what was coming ahead perhaps in '08 or were things more coincidental that it kind of all went south simultaneously? Thanks and nice job.

Laurans Mendelson -- Chairman and Chief Executive Officer

Yes, George. I would say it became pretty clear that when the financial crisis hit, 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. And so we saw back then 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 their alliance (ph) wouldn't be able to get money. I mean the situation today couldn't be any more different than it is. We continue to see strength in our end market, strength with our customers. So 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 and right now we're seeing quite the contrary.

Victor Mendelson -- Co-President and President of HEICO's Electronic Technologies Group

But, 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 and we want to be prepared for all seasons.

George Godfrey -- CL King -- Analyst

Understood. Thank you very much.

Victor Mendelson -- Co-President and President of HEICO's Electronic Technologies Group

You're welcome. Operator, I don't think there are any more questions. Are there?

Operator

There are no further questions at this time. Presenters, you may continue.

Laurans Mendelson -- Chairman and Chief Executive Officer

So, this is Larry 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. And we wish you all a very happy holiday, a healthy and wonderful New Year, and unless we hear from you, we will speak to you first quarter next year around February when we release first-quarter results. So that is all and we are signing off right now. Operator, we're done.

Operator

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

Duration: 84 minutes

Call participants:

Laurans Mendelson -- Chairman and Chief Executive Officer

Eric Mendelson -- Co-President of HEICO and President of HEICO's Flight Support Group

Victor Mendelson -- Co-President and President of HEICO's Electronic Technologies Group

Robert Spingarn -- Credit Suisse -- Analyst

Carlos Macau -- Chief Financial Officer, Executive Vice President, Treasurer

Peter Arment -- Baird -- Analyst

Ken Herbert -- Canaccord -- Analyst

Sheila Kahyaoglu -- Jefferies -- Analyst

Michael Ciarmoli -- SunTrust -- Analyst

Joshua Sullivan -- Seaport Global Securities LLC -- Analyst

Colin Ducharme -- Sterling Capital Management LLC -- Analyst

George Godfrey -- CL King -- Analyst

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