Good morning. My name is Angel, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Third Quarter 2016 Earnings 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. Thank you. Now, from Lear Corporation, you may begin your conference.

All right. Thank you, Angel. Good morning, everyone, and thank you for joining us for our third quarter 2016 earnings call. Our third quarter press release was filed this morning with the Securities and Exchange Commission, and the presentation slides for our call today have been posted on our website, lear.com, underneath the Investor Relations link. Today's presenters are Matt Simoncini, our President and CEO; and Jeff Vanneste, our Chief Financial Officer. We also have several other Lear executives in the room today to help with your questions. Before I begin, I'd like to remind you all that during the call, we will be making forward-looking statements that are subject to risks and uncertainties. Some of the factors that could impact our future results are described in the slide titled Investor Information at the beginning of this presentation and also in the SEC filings. We will also be referring to certain non-GAAP financial measures. Additional information regarding these measures can be found in the slides labeled Non-GAAP Financial Information at the end of the presentation. Slide three shows the agenda for today's review. Following our formal presentation, we will be pleased to take your questions. Now, if you'll all turn to slide number five, I'll hand it over to Jeff.

Thanks, Mel. Lear had another great quarter. As a result of our strong sales backlog and industry-leading cost structure, we achieved record sales, core operating earnings and margins. During the quarter, we entered into a strategic partnership with Tempronics to add seat heating and cooling technology to what are already the most complete component capabilities in the industry. In E-Systems, we continue to develop our system's architecture and connectivity capabilities. Specifically, we have recently been awarded the multiple 48-volt electrical distribution programs as well as several high-powered programs. In addition, we have received our first customer awards for secured gateway communication modules. These continued investments and business wins, combined with our low cost footprint, will enable us to continue our profitable growth in both segments. In recognition of our strong operating performance and financial strength, Moody's upgraded our credit rating to investment grade during the quarter. This follows a similar upgrade from S&P last year. Based on our year-to-date performance and our confidence in the outlook for our business, we are, again, increasing our earnings and cash flow outlook for 2016. Slide six shows vehicle production in our key markets for the third quarter. In the quarter, 21.3 million vehicles were produced globally, up 5% from 2015 and generally in line with our expectations. While the U.S. dollar versus the euro was flat, the dollar strengthened against currencies in other key markets, including China, reducing sales by approximately $50 million during the quarter. Slide seven shows our reported financial results for the third quarter. Our reported sales increased by 5% from a year ago to $4.5 billion. Excluding the impact of foreign exchange and commodity prices, sales increased 7%, reflecting our strong sales backlog and market share gains. Pre-tax income before equity income, interest and other expense was $345 million,…

Great. Great job, Jeff. Thank you. Please turn to slide 16. This slide shows the trend of our earnings growth. Our operating earnings over the last five years have increased at a 14% compounded annual growth rate. Over the last three years, our annual growth was 22%. During both periods, our earnings growth rate was double the peer group average. And over the three years, our sales and earnings have grown faster than any of our direct competitors. We have nearly doubled our core operating earnings and increased our operating margins by 250 basis points since 2011. During the same period, our strong cash flow has allowed Lear to invest in the business and retire approximately 38% of our shares. Please turn to slide 17. The investments that we've made over the last several years have positioned us to continue to drive sales and earnings growth well into the future. In Seating, we have the most complete component capabilities of any seat supplier. We have recently added seat heating and cooling technology through our investment at Tempronics and are receiving great customer response to our craftsmanship initiative and our new Intelligent Seat. In E-Systems, we've expanded our industry-leading capabilities in power and signal management with the acquisitions of Autonet and Arada. As a result, we are extremely well-positioned to capitalize on a rapidly growing vehicle communication and connectivity mega-trend. We offer hybrid and high-power electrical systems including 48-volt architectures as well as industry-leading battery charging capabilities. In addition, we are the low-cost producer in both product segments. Given our unique product capabilities, including industry-leading cost structure and experienced management team, we expect revenues to grow by 5 percentage points or more above the industry growth rate over the next five years to seven years. In summary, our record sales and earnings reflects investments we have made to expand our product capabilities and improve our cost structure. We continue to outperform our peer group in free cash flow yields, earnings growth and return on invested capital. We're well-positioned in both business segments to deliver sales growth of 5 percentage points above the market well into the future. In short, we are in a best competitive position in our history, and we expect to continue our strong sales and earnings growth into 2017. Now, we'd be happy to take your questions.

Your first question comes from the line of John Murphy with Bank of America Merrill Lynch. Your line is open.

Good morning, guys.

Hey, Murphy.

A question on slide 17, this 5% growth above market or more is actually incredibly helpful. Matt, is there a difference between the two segments where the E-Systems might grow significantly faster and Seating might be just a bit slower? I'm just curious if you could give us some guidance on the two segments there.

From a market share penetration, I would say, they're both going to penetrate markets at about the same rate. I would say that the content growth is going to be higher in the E-Systems just by the type of product and content of future improvements that we're seeing in the vehicles. So, I think, the content growth is a little bit higher in Electrical, but as far as penetrating and gaining market share, they're both winning share.

Okay. That's helpful. And then just sort of a follow-up on that market share comment. There's one of your big competitors out there that's saying they're going to take market share in China by another – in the next five years. I'm just curious what your viewpoint is on your market share in China. Is that an issue or an opportunity? And as we think about the dynamics of how the JVs are set up in China, isn't market share a lot stickier and harder to come by in China? I'm just trying to understand the dynamics in the China market.

Yeah. We've been gaining share in China and we've been gaining share everywhere in the world. In China, we expect that trend to continue. We're penetrating the market. Our JV relationships are really strong. I mean, we've got a non-consolidated book of business there that's approaching $2 billion. Our backlog in that region with those JVs are approaching $1 billion. So, I like where we've been. I like where we're going. I think it's a huge opportunity for Lear Corporation. So, yeah, I think it's a great opportunity there. I can't really speak to Adient. For us, really we have a track record of sales and earnings growth. We're not selling a promise in the future of doing those things. I'm flattered that they want to be Lear when they grow up. I guess that's the best form of flattery, right? So that's what my take is on those statements.

Okay. And then, just on Tempronics, I mean, is this the kind of thing where this will replace Gentherm? And I'm just curious what this means for the heating and cooling in seats. Has that kind of become pervasive? Has that got a 100% penetration? What does that mean for content on seats for you?

While it's a better tactical solution, it still needs to be proven out and put into production. But we think it's a much more efficient way to heat and cool a seat at a lower cost than the current solution. I think when you integrate it with what we do already with fabric and leather, sewing and foam, we can provide a solution that is probably the best-crafted seat in the industry at the lowest possible cost. And so, it's just a piece of the puzzle. The technology is pretty amazing and it's very efficient, and we're looking forward to getting into the seats pretty quickly.

Again, just one last one for me for both you and Jeff. I mean, capital allocation in these buybacks have clearly done a great job of shrinking the share count. But given your strong earnings and cash flow and these buybacks, the stock is not responding well to it. Would you consider potentially building up cash on the balance sheet to potentially allay any concern about any fears about a downturn or consider paying down debt instead of buying back shares. I'm just trying to understand if there would be any change in your allocation philosophy going forward in building up a bigger buffer of cash.

No, I don't think so because we have a pretty strong balance sheet as it stands. Our liquidity profiles are very good, especially when we take into consideration the uncapped revolver that we have. We have more than adequate liquidity right now to invest in the business while absorbing any market dislocation. We personally don't see that happening. We think that global market is expected to continue to grow and we ensure that. We think the macros are pretty strong, and the balance sheet as it sits today is actually really, really strong. So, for us, we're going to continue to invest in the business. We're going to continue to look for opportunities to make smart acquisitions, and we're going to return the excess cash and liquidity to shareholders to ensure we purchase for the exact reason that you said, which was, the stock is hugely undervalued. From a multiple standpoint, right now, we're in the mid- to low fours on an EBITDA basis, which is ridiculous. We're the number one seat-maker in the world as far as profitability and sales growth and performance. We have a Electrical segment that is over $4 billion and to subscribe a mid-four type multiple to a company like this is just ridiculous. So, we think it's the best investment in the space.

Okay. That's very helpful. Keep it up, guys. It was a great quarter. Thank you.

Thanks, Murphy.

Your next question comes from the line of Itay Michaeli with Citi. Your line is open.

Great. Thanks. Good morning, everybody.

Good morning.

Just sticking with slide 17, there's two questions there. Matt, I think you mentioned the five-year to seven-year outlook for the revenue growth outperformance. Is that pretty evenly split throughout the five years to seven years or is there may be a back-end loadedness or front-end loadedness to that? And then, just secondly, can you maybe talk about kind of the long-term margin implications of growing revenue at 5 points or higher above market?

Yeah. It's pretty even, and it's evidenced by that. If you look at our history of backlog, we've been adding about $1 billion in revenue through the backlog, which is independent of content growth and mix. We've been adding about $1 billion of backlog a year pretty steadily. In 2017, it will be no different. We don't expect that to change with what we're seeing in our bookings and the booking rates in some of the development programs that we have. We don't expect that to change. So, it's not a hockey stick. We're not promising something in the future. We're saying this is going to happen pretty consistently throughout the five-year to seven-year period. From a margin profile standpoint, we're happy with the margin profile that we have right now. We think at this rate, we can continue to gain share and deliver performance well in excess of our cost of capital and the investments that are required to support the backlog. So I think the margin profile stays pretty consistent through the period.

Great. And then just lastly, I think you raised your free cash flow outlook by more than the earnings outlook. And Jeff, I think you talked about cash flow conversion improving this year. Is that sustainable going into the next couple of years or is there anything kind of special unique that can help your cash conversion from 2016?

No. No, I think it's just the – as I've said in the presentation, it's the strong quality of earnings. Earnings are high. We're converting that to cash. There's nothing special either in the actual results or the guidance for the year. And we can continue to generate strong free cash flow beyond 2016.

Great. That's very helpful. Thanks, guys.

Your next question comes from the line of Ryan Brinkman with JPMorgan. Your line is open.

Hi. Thanks for taking my question. Assuming that Adient does become more aggressive in bidding for new seating business, which it looks like they're saying that they are to restart their organic growth, what is the most appropriate strategy in that scenario for Lear? Would you look to maybe leverage your low-cost footprint to protect the share or prioritize margin? And then, could you comment, how much of the impressive expansion in seating margin in recent years, particularly this year? Do you think it's coming from a stronger pricing or operating leverage provided by a less aggressive Adient versus how much is coming from more company-specific structural factors like the amount of cost that you've been able to take out of the business?

Well, rational pricing space is nothing new. We've seen it by different competitors throughout our history. For Lear, we like to compete on our capabilities in our footprint, which is low-cost footprint, great capabilities and selling, and combining that with leather and fabric and the ability to assemble a seat. I think that drives our performance. For us, our backlog is profitable. We've proven that over the last five years as we've added new business through the backlog and through the net bookings that that business has come on and support margin expansion. We don't expect that to continue. In the end, we like to compete on our capabilities and our footprint, not on irrational pricing. So, I don't think that's going to change.

Okay. And then, just last question on the CapEx guide of $525 million for the full year. It does imply a pretty big increase in 4Q to about, I think, $225 million or so. Looking back over the past five years, it does appear that 4Q is always the highest spending quarter, but the increase this year would be more. So, is that potential upside to your free cash flow for the full year if you don't quite hit that $525 million guidance or is there something sort of specific impacting the timing this year?

Ryan, we expect to hit it. It might be a bit aggressive. We're using the holiday break in many cases to get the plants refreshed or add some of the capital when we're down both in Europe and North America over the holiday break. It could be a little bit conservative, if you will. And we might do a little bit better on that line, but it's really just timing issue between Q4 and Q1. So, yeah, there might be a little bit upside there. There might be a little bit upside. But right now, that's our best call for the quarter.

Okay, great. Thanks. Congrats on the quarter.

Thank you.

Your next question comes from the line of David Leiker with Baird. Your line is open. David Leiker - Robert W. Baird & Co., Inc. (Broker): Good morning, everyone.

Good morning, David. Welcome to the call. David Leiker - Robert W. Baird & Co., Inc. (Broker): Yeah. Thank you. It's a pleasure.

It's been a while. David Leiker - Robert W. Baird & Co., Inc. (Broker): Yeah. I want to follow-up on some of the couple of other folks that have touched on the slides.

Let me guess, you've got a question on Adient. David Leiker - Robert W. Baird & Co., Inc. (Broker): No. Actually I don't. On slide 17, if I point somewhere above market, I think the numbers you gave in Detroit with your backlog and the new business, how that flows on, you're lower than that year the next couple of years. Am I right in the way we're looking at that?

No, you're not actually. I think, from our standpoint, the backlog like this year is roughly $1 billion, next year is roughly $1 billion, and that's how we do the math. Because the way we define the backlog, David, is net new business, it's not raw bookings, it's not high probability, it's not assumption of content growth. It was just raw bookings. And to me, 5% in that regard on $18 billion base is $900 million. We're in excess of that, and we'd expect that to continue. David Leiker - Robert W. Baird & Co., Inc. (Broker): Then I think, if we look at your full-year guidance and we back into what the Q4 revenue guide is there, the organic growth there actually steps down in Q4 versus the balance of the year. What's the...

The backlog actually in the fourth quarter is probably the highest that we're going to have out of the four quarters. It's a mix issue. You got to shutdown periods in Europe as well. So it's getting some headwinds at some of the car lines that aren't doing as well as others in the fourth quarter. You've also got FX and some commodity adjustments that go to that line. But the backlog in the quarter is about $250 million, about $250 million. I might be off a couple of cents, but that's about the number. David Leiker - Robert W. Baird & Co., Inc. (Broker): Okay. And then, on the 48-volt launch, can you talk a little bit more about what it is that you have on there? What you're doing, the contents you have on there? Can you play a role of an integrator and just kind of what the scale of that opportunity is for you?

I've got – Frank Orsini is here today. He's the President of E-Systems and he can talk about that. So, Frank?

Yeah. So, David, on the 48-volt technology, we have scalable technology in all three of our product lines. So, the electrical distribution business with both wire harnesses and thermals and connectors, and we also have electronic products. And in some cases, as you mentioned, we are doing the full integration of the entire architecture for certain customers. So just to put some scope on it, we have active projects, awarded projects with four different customers now, which is up from the last time we're on the last earnings call, and 12 different nameplates. All those projects, we'll be launching in the 2018-2019 timeframe right now as the slated SOPs for both 2018 and 2019, and all those programs that I'm mentioning. So, a lot of activity going on in the area. It ranges by customer by product line, but we have content across all three of our main products, and it's with multiple customers. David Leiker - Robert W. Baird & Co., Inc. (Broker): And is there a way you could get us a rough value of what the content per vehicle would be on something like that? I'm guessing it's probably a range.

Yeah, it ranges. Because on certain car lines, we actually have all three product lines going in. And on uncertain car lines, we have terminals and connectors and wire. So, it can be anywhere from 10% to 30% higher than a standard program, depending on its configuration. David Leiker - Robert W. Baird & Co., Inc. (Broker): Okay, great. Thank you very much. Good talking with you.

Yes. Thank you.

Your next question comes from the line of Rod Lache with Deutsche Bank. Your line is open.

Good morning, everybody.

Good morning.

Just one point of clarification on that 5% growth comment and the $1 billion backlog. On this year's revenue, $1 billion should be like mid-5%. And if you subtract about 2% price, you're in the mid-3%s. And I would presume that your backlog would need to accelerate into the, maybe, $1.3 billion, $1.4 billion range to get there. Is that – am I doing the math wrong or forgetting about something when you're commenting on your...

No, you're doing the math exactly right. For us, from a backlog standpoint, backlog represents organic sales growth and market share penetration. Obviously pricing impacts the top-line as does commodity adjustments, as does FX, but you're doing the math right, Rod.

Okay. So, you're saying that the organic growth above market basically maybe a little bit lower in the next year or two but then ultimately grow to the...

We're comfortable with the 5% in the near-term.

You are?

Comfortable with 5% in the near-term, yes.

Above market?

Above market, yes.

Okay. So it's coming from something other than the backlog?

No, it's coming from the backlog.

Okay. Maybe we can revisit that offline. Just another question I was curious about is, you made this comment a couple of years ago, and I'm not sure if still really applies. But in the past, you'd mention that margins typically decline a lot in the first year when you win a completely new piece of business. I think you were referring to this when I think it was 2013 when, like 40% of your business rolled over in one year.

Yeah, right. (30:19). Right.

Yeah. So, as we look out over the next couple of years and things like the K2 becomes the T1 contract in 2018, let's say. How sure we'd be thinking about that just kind of preparing for the various faces of maturity in the business? Is that still a relevant comment?

It is a relevant comment, Rod. But what happened in 2012 and 2013 was that 40% of the book of business changed over in 18-month period, which was highly unusual. And so, with us now, we don't see that massive turnover or changeover in a period that's so narrow. We do believe that new programs come on through efficiencies and what have you. The number comes down, and then we work up as we get more efficient in the production, and we're able to execute some of the engineering changes that benefit both the customer and Lear Corporation. We're comfortable with the margin profile and seating with the current configuration of structures, trim, sewing, leather, fabric, what-have-you in assembly in that high-7%s to low-8%s. We're comfortable with that margin profile, and we think that's reflected in the backlog to backlog. We continue to support that type of performance in Seating.

Okay. And just one last one. I don't know if you could comment on this, but in the past, there were a number of specific kind of discrete initiatives that you had outlined for us to improve margins. And one in particular was the North American structures business back in 2013 was like $1.1 billion business at break even and I think you've turned this around to at least maybe high single digits by now. Are there a few things that you would be able to call out as opportunities still going forward to kind of mitigate headwinds if we do see some pressures in the industry?

Well, there's still performance improvements that we can make in our North American structures business. They've done a great job returning that business to solid profitability. But I still think there's opportunities to get that business performing even better still from a structural standpoint. In South America, we returned to profitability this quarter. But I still think there's more opportunity there to get that into a more sustainable run rate. That would be an opportunity. And I think there's opportunities in Europe to improve the margins, which is still a little bit below in Seating, the target margins overall for the business as we continue to look at structure cost and abilities to do business there differently. So, yeah, there's always opportunities to get better, Rod, and offset headwinds that you may see in other places. And I think the same is true for us.

Great. Thanks, Matt.

You're welcome, Rod.

Your next question comes from the line of Joseph Spak with RBC Capital Markets. Your line is open.

Good morning. Congrats on a great quarter.

Thank you.

I guess, I just want to revisit something you said about the fourth quarter because the guidance implies your sales will be down about 1%. You're basically sticking with IHS, which has industry up about 1%. The $250 million in the backlog seems worth about five points, and then you could take maybe another 2% off for price. So, is about a 5% headwind from what you, I think, called mix about the right way to think about? And what's really underlying that headwind in the fourth quarter?

Yeah, really what we're seeing is a little bit of weakness. It's been publicized in the FordPass cars, which we have a lot of content on electrical and seating, Focus, Fusion, Taurus, and that's probably the key driver. I mean, we're literally on hundreds of different car lines. And so, it's an incredibly complicated mix to articulate. But those car lines are probably the biggest driver of the mix headwinds that we're facing in the fourth quarter.

Okay. So, mostly North American passenger car?

Right.

Okay. And then, I guess, just the other one in terms of housekeeping. I know you called out materials, is there any color you could give us in terms from a material perspective in commodities, how much that impacted the quarter and an update for the year?

Didn't have a significant impact at all in the quarter. I think what we've seen on commodities, let's say, between the end of the second quarter and this quarter is steel, for example, actually improved pricing-wise between July (35:24) leather relatively flat and copper continues to slightly go down. So, it didn't have a significant impact in the quarter because we bought ahead largely on steel, and we're indexed largely on the copper and on the hide market side. So it didn't have a significant impact in the quarter.

Okay. Thanks a lot, guys.

Your next question comes from the line of Chris McNally with Evercore ISI. Your line is open.

Hey, guys. Thanks so much for taking the call. Just one quick question on this idea of mix, which would lead into sort of a question on the truck outlook for 2017. A bunch of us have tried to ask the question about the five points of outgrowth. Isn't sort of this 2% that maybe people are trying to fill the hole for -- isn't it from sort of mix and truck, premium, higher tech because you've been beating sort of your $1 billion backlog number for several years, including the last two. And so, could you comment a little bit on how favorable mix is impacting the business and how that sort of may play out over 2017 and 2018?

Right. What we're seeing is a growth in the global market. And while we may see the growth rates in North America slow down and mix change a little bit, when the mix does change, it seems to be rotating to CUVs and SUVs overall. And typically, CUVs and SUVs have more content, especially in seating, than pass cars. And that's kind of a global phenomenon in Europe, and it has been going on in Asia. So that rotation, especially with the industry growing overall is, I think, beneficial in the long term to Lear just because CUVs and SUVs typically have more content. So, from our standpoint, I think everybody's kind of laser-focused on North America, and obviously that's a major market. But we're seeing continued growth in Europe and in Asia. And overall, the growth is expected to continue into 2017 from an industry standpoint. A mix -- the key is to be on the right car lines. Our mix is pretty diversified around the globe. We sell to virtually everybody at some level and we're well represented in every kind of sub-product category. So, right now, we're just seeing a rotation out of pass cars, but we're seeing strength in luxury brands, which we're more than well represented on, as well as SUVs and CUVs.

Okay. That's great. And so, as I think about 2017, this sort of -this trend of 2017, 2018 and beyond, this trend should continue. I mean, I think one of the questions people also have is, when we think about GM into 2017, it's probably more like a flat, maybe down year in truck, just given that they're running sort of flat out. Is it fair to say that the trends globally are still supportive for mix going forward?

Absolutely, it's fair to say that.

Okay. Thanks so much, guys.

You're welcome.

Your next question comes from the line of Matt Stover with SIG. Your line is open.

Hey, thanks very much for taking the call.

Welcome.

I wanted just a couple of tactical things and then a bigger picture. Could you give us a little color on the delta in the North American CPV? I assume some of the issues on the car side, but if you could eliminate that for us, I think that's $424 million versus $442 million last year?

Yeah, I think you hit it. It's largely the impact of lower production on pass car vehicles, specifically more of the Ford lineup and the Chrysler lineup of vehicles, but certainly more of them in the Chrysler lineup. The impact that commodities had a drag effect in North America also in the quarter. And the backlog for us, albeit $900 million to $1 billion is largely, at least for 2016, in Asia and Europe. So we didn't get a large tailwind on the backlog for North America. So those are the primary drivers.

Okay. And if I look at the ER&D delta and incremental margin in the third quarter, it just looks like it converted a little higher, where – is there any unusual recoveries or anything like that in there?

No, not really. It was a pretty clean quarter. That number is driven largely by the timing of the backlog. As we're winning new business, obviously we're going to have to engineer it and get ready and that drives kind of that rate. So, there's really nothing, I think, unusual that went through there. Jeff?

No, it was a clean quarter.

Okay. And then, I guess, sort of following on to Rod's question, I think what Rod was getting at is, when you talk about this 5% delta, that's on content growth. But that does not...

No, no. Actually it's not content growth. That's on a new business win and market share gain.

Sure. Sure. All the above, it's the backlog...

All of the above, right. I mean...

Yeah.

Right. I mean, the biggest driver on that number though, Joe (40:57), is the penetration gains on that new business. And yes, it's impacted by mix share industry, actually in this instance, content growth, pricing, FX, a lot of things on the line.

So that's after the effects of pricing on your business?

After pricing. That's after the effect of the pricing. Correct.

Okay. So you feel as though your growth rate will elevate to the 5% after the effect of pricing? I guess, the question then becomes, should we think then differently about your ER&D investment and CapEx because that will be somewhat of a delta from where you have been?

Not as a percentage of revenue, no. As a percentage of revenue, yes, and a raw number it will go up as a percentage of revenue, no, it won't (41:49).

Okay. Thanks, guys.

You're welcome.

Your next question comes from the line of Emmanuel Rosner with CLSA. Your line is open.

Good morning, everybody.

Good morning, Emmanuel.

First, a quick additional point of clarification on the backlog comments. We're talking about this 5% of performance and roughly $1 billion of backlog a year. At least $1 billion is pretty consistent with the, I guess, $800 million, $900 million that we're sort of reporting in the last backlog disclosure for 2016 and 2017. However, 2018, last time you updated us was at $300 million, are you basically saying that by the time we hear back from you with a new backlog, that would look much more like $1 billion?

Yes, that's exactly what I'm saying.

Okay, perfect. And then I guess more – that's it. It's clear.

Let me put more color on it. We are winning business in that timeframe. And if you know – and I know you noticed that if you would have looked at 2017 a year ago, that number would have looked a lot different, in fact closer to how 2018 looks. So, there's still a lot of open sourcing in that period, and we've been winning more than our fair share.

Perfect. And then, I guess, more strategically you've expressed countless times and early in this call some frustration at the stock valuation. You were talking but low 4 times EBITDA, which is obviously the case. And earlier, a few months back, you looked at sort of the opportunity from, I guess, spinning off what is now called E-Systems and whether that would create value. I know at the time, you concluded, it wouldn't. Looking at Adient, that's now sort of trading primarily. It's a pure seating player and it's getting the same 4 times, 4.5 times, next year's EBITDA that you guys are getting without having that E-Systems exposure. Does that make you reconsider sort of these dynamics in terms of the valuation opportunity?

No, not really. What I'm concerned about is that, Adient should trade at a discount to Lear for the simple reason they have no track record of performance whatsoever. They're selling a promise in the future when we've had the performance over the last five years, seven years. And we're also committing to continue that performance. So we are the most profitable seat-maker as it relates to margin performance, cash generation, with a track record with the management team that's been stable. So from that standpoint, they should be at a discount to Lear. Said a different way, Lear should be at a premium to them on seating alone. Now, when you take into logical businesses like our E-Systems division are trading anywhere from 7-type to 10-type multiples. So, I look at it slightly differently, which is, I think, as a whole, we're undervalued. But when operating earnings of over $600 million are coming out of E-Systems, yes, they actually come in at a higher multiple. We think the best way to get that valuation is to continue to tell a story and take advantage of a low stock price through our share repurchase program. These two business segments are converging. I think one of the advantage is that we have, quite frankly, over a firm like Adient or Magna or even a Faurecia is the fact that we have over 600 software engineers in Electrical, and that's driving a lot of this Intelligent Seating that's really going to be the next-generation how this product looks like in years, five years to 10 years from now. So, I don't think it really makes sense to split the businesses, and you probably said that before. I think the frustration is that firms that should be selling at a discount or firms that we should be selling at a premium to from a valuation standpoint is not happening. And I think part of that is, there's a lot of misinformation right now that's out in the marketplace driven by a whole lot of reasons, namely that, a company that's trying to sell themselves in the marketplace. So, once that clarifies, I think we'll get the right valuation.

Great. Very clear. Thank you.

Your next question comes from the line of Colin Langan with UBS. Your line is open.

Hello. Great. Thanks for taking my question.

Hello, Colin.

You seem very confident in the margin outlook based on a 5% outperformance going forward. What is your sort of underlying market assumptions needed to hold those margins? I mean, is that – can you actually still hold margins in a flat global market or market goes down? And where does that...

On a flat market – global market, we can. If it goes down, obviously that would put pressure on the margins. We don't see that happening. This time, IHS is calling it. If we did see a pullback globally, Colin, that would put pressure on the margins, but we think that we have cost offsets that could mitigate the downside.

Okay. So your cost offset and then the benefit of the backlog rolling on would offset and keeping margins flat, okay. Can you provide more details around Tempronics, I mean, when would the new products be hitting the market and how would – it's a strategic partnership, so how is it structured? Will you be getting all of the revenue from the sales? Or will you be getting just a portion of the component revenue? How will it work?

The key person through that strategy and our seat strategy is Ray Scott, our President of Seating. He's in the room today. I'll have him answer that question for you.

Well, first of all, with Tempronics obviously focused on this value proposition, we believe that there's going to be increased content, like Matt just mentioned, on the convergence of the E-Systems with Seating with the Intelligent Seat, and this is one other step that we're looking at as how we can grow and really give a value proposition for our customer. Right now, we have invested in Tempronics, and we're all selling it today. And so, we have properties in the customer. We're collaborating with the technology. We're integrating it into seat designs, and we're working in the early phases with our customers as we're speaking. And so, we have three targeted customers right now that we're working not exclusively with, but we-re working on development or development-type program. So we're eager to really get this thing moving.

And do you share that through like a joint venture or is it just your licensing and technology and you get to realize all of the profits or how will it work?

We have an equity stake in the company and we also have licensing – an exclusive licensing agreement with them for the automotive space.

So they're going to move through equity income if you win business (49:06) essentially.

Yes.

Okay.

Plus the benefit of having a technology, the (49:13) technology comes through our operating results.

Got it. Okay. All right. Thank you very much and congrats on a great quarter.

Thanks, Colin.

Your next question comes of the line of David Tamberrino with Goldman Sachs. Your line is open. David Tamberrino - Goldman Sachs & Co.: Hi, great. Thanks for taking my question. Just one, as I look at the margin expansion throughout the 2016 period so far, we've been seeing the level of year-over-year expansion decelerate from 1Q to 2Q and then from 2Q to 3Q. And just penciling in what your updated guidance is for the fourth quarter, it looks like that trend should continue. Could you may be speak to what you're seeing apart from the mix headwinds that might be driving that lower expansion year-over-year? And is that expected to kind of continue and flat line into 2017?

Yeah. For us, margins are really just an outcome of return on investment. Right now, we're judging our cost of capital in the high single-digit percentage point. Our return on invested capital is the highest in the space. And so, to me, margins are really just an outcome, because we believe that we're creating value whenever we're posting double-digit type return on investments. In Seating, that happens right when we start approaching a 6% margin. Obviously, we're well beyond that. In Electrical, it's close to probably 7%, 7.5%, and again we're well beyond that. So, from my standpoint, we're comfortable with the margin profile. Both businesses are performing well. Both are returning well in excess of our cost of capital. And at this rate of margins, we're going to continue to penetrate the market and gain share. So, yeah, the rate is decelerating but it's decelerating to a pretty high number. In fact, I believe we're – I can't imagine anybody is making a higher margin in Seating than Lear Corporation quite frankly. So, it may be decelerating but it's decelerating to a pretty high level. David Tamberrino - Goldman Sachs & Co.: That's fair. I mean, and maybe asking it another way. And I don't disagree with you. You're certainly making a much higher margin than any competitors that I've at least looked at. But previous conversations that you've had with the Street, you've been talking towards 8% margins for Seating and maybe mid-14%s for margins on E-Systems, and we're there. So the question is, is this a mature portion of the cycle for you for margins or is there further runway? I mean, you've gone through the integration of Eagle Ottawa, which certainly helped the synergies probably realize maybe a little bit better than communicated. So trying to understand if there's further runway for that margin expansion in the later stages here or if we should be looking at kind of flat margins and harvesting the solid ROIC that you're generating.

There could be. There could be. There could be additional margin expansion. But the reality is that, at this level, I think we can penetrate the market and gain share. And our focus right now is profitable growth, profitable sales growth. We've proven that our backlog comes in profitable. So, at this rate, I think we can drive shareholder returns, profitable growth, earnings growth, and that's really been our focus. And so, yeah, I mean, could seating margins go higher than electrical margins? Yeah. But we think, from our standpoint, where we're operating now as a total company on the plus side of 8% margins, that's a healthy way to run. And at this level, that will continue to provide return on invested capital well in excess of the peer group and create a lot of shareholder value. David Tamberrino - Goldman Sachs & Co.: Understood. I appreciate the insight and congrats on the quarter.

Thank you.

Your next question comes from the line of Brian Johnson with Barclays. Your line is open.

Yes, hi. Good morning, team. It's actually Steven Hempel on for Brian. Just wanted to drill down a little bit further on Tempronics. I'm not sure if this question is for Ray Scott or for Frank or both. But in terms of kind of technology, how should we be thinking about in terms of the vehicle electrification trend in terms of kind of power draw? Is this really kind of a needle mover for the OEMs in terms of cost savings and kind of any way to quantify that? And then also, in terms of this technology, is this going to be targeted more so for kind of luxury/high-end trim vehicles and EVs or is the cost kind of low enough where it could be basically a mass market? I believe, right now, heated seats are running around 40% to 45% in the United States.

Well, first of all, to give you some insight in the technology, it is the most efficient system in the market. And when you look at the system that's out there today, there is a tremendous amount of waste when you talk about CO2 or energy, or just overall efficiency. And then, just the fact that it's a lot more efficient when we talk about comfort. Actually you can heat and cool the occupant within the seat system without a tremendous amount of waste as far as how you have to exercise the heat through the seat system itself. So, we think, when you look at the penetration right now, it's more of a replacement of what's out there right now. We do think that the integration of these components is key because we all know the continued cost that's going on in the auto space, we have to offer our customers a value proposition that gets them a greater efficiency, a greater comfort, at the same time drives an overall cost efficiency within the system. So, the way we're looking at it is it's just an upgrade to what's out there today. And it's going to be more of a replacement to what's out there. But we do also see a tremendous amount of opportunity for growth that's not there today. I think there's a limitation on the market percentage of what's being – as far as penetration with this option that we're going to be able to increase that.

Okay. And then kind of a more bigger picture question on just seating options overall in power seats, heated/cooled leather, what-not. I guess, how should we think about the variable profit or contribution margins as potential takeaway to increase for that type of technology? And just thinking about Lear's margins overall in electrical and seating, and then also from an OEM and supplier relationship standpoint, if take rates do inflect or increase moving forward, is that something that comes on at kind of a higher than average level margin, just given the kind of capital that's already in place at certain facilities or how should we thinking about those variable profits/contribution margins?

I think it all supports the maintaining kind of the 8% target margins in seating, because it's still a relatively small portion of the content growth that we're seeing in seating. So, for us, again, it comes back to the return on invested capital of 8%. Even with the penetration rates that we're seeing, we believe that the return on invested capital would be significant. It's significantly higher than our cost of capital, which is averaging in the high single-digit. So, there could be some margin opportunities on the technology, especially with the heating and cooling. Some of the power options, I don't think really will be a key driver of margin expansion. But overall, we think what it does do is support sales growth, continued profitable sales growth.

Okay, great. Thanks for taking my questions.

You're welcome.

And your final question today comes from the line of William Keller (56:57) with – I'm sorry, he disconnected. So that there are no further questions.

Hopefully we can sell the stock. Well, I guess everybody that just laughed right now are probably our employees. And again, I want to thank all of you for your hard work and dedication. This is the best team in the industry, bar none. I will tell you this that we need to continue to work hard, work as a team, drive performance, and I just want to thank you for all your hard work and dedication. Results like this just don't happen. They happen as a result of good, hard team work. So, thank you very much.

This concludes today's conference call. You may now disconnect.