Good day, ladies and gentlemen, and welcome to the Parker-Hannifin Q4 2016 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct and question and answer session, and instructions will follow at that time. As a reminder, today's conference call is being recorded. I would now like to turn the conference over to Mr. Jon Marten, Executive Vice President and CFO. Please go ahead, sir. Jon P. Marten - Executive Vice President-Finance & Adminstration and Chief Financial Officer: Okay. Thank you, Candace. And, again, good morning, everybody, and welcome to Parker-Hannifin's fourth quarter FY 2016 earnings release teleconference. Joining me today is Chairman and Chief Executive Officer Tom Williams and President and Chief Operating Officer Lee Banks. Today's presentation slides, together with the audio webcast replay, will be accessible on the company's Investor Information website at phstock.com for one year following today's call. On slide number 2, you'll find the company's Safe Harbor disclosure statement addressing forward-looking statements, as well as our non-GAAP financial measures. Reconciliations for any references to non-GAAP financial measures are included in this morning's press release and are posted on Parker's website at phstock.com. Turning to today's agenda on slide number 3, to begin, our Chairman and Chief Executive Officer, Tom Williams, will provide highlights for the fourth quarter and full fiscal year 2016. Following Tom's comments, I'll provide a review of the company's fourth quarter and full-year 2016 performance, together with the guidance for FY 2017. Tom will then provide a few summary comments, and then we'll open the call for a Q&A session. At this time, I'll turn it over to Tom and ask that you refer to slides number 4 and 5. Thomas L. Williams - Chairman & Chief Executive Officer: Thanks, Jon, and welcome to…

Thank you. And our first question comes from Jamie Cook of Credit Suisse. Your line is now open. Jamie L. Cook - Credit Suisse Securities (USA) LLC (Broker): Hi. Good morning. I guess a couple questions on the guidance. One of the things that struck me is generally when you guys guide for the fiscal year you come in well below consensus and you're sort of at the midpoint, which struck me. So any comment on that? But specifically, I'm trying to get comfortable with – can you give color on the orders in North America, which I think were down in the 10% range, which I guess surprised me. So I'm trying to bridge that with your sales guidance in North America, which seems more optimistic. And then at the same time, on a down sales year over year, you're expecting margin improvement on an adjusted basis. So if you could address those issues, I'd appreciate it. Thank you. Thomas L. Williams - Chairman & Chief Executive Officer: Okay. Jamie, it's Tom. Let me just – the topics are kind of interwoven, so I'll start with the guide, what was behind it. And I'll start with, in case those of you that were on the phone didn't hear my opening comments, this is going to be year of sales leveling off, which after the sharp reduction that we had last year is going to be a very refreshing change for all of our people around the world. But the way we forecasted this is Q1's going to be soft, moving to essentially flat in Q2 with 1% to 2% sales growth in the second half. So our thoughts behind the numbers. The natural resource related end markets – so construction, ag, mining, and oil and gas – are moderating.…

Thank you. And our next question comes from Joshua Pokrzywinski of Buckingham Research. Your line is now open.

Hi. Good morning, guys. Jon P. Marten - Executive Vice President-Finance & Adminstration and Chief Financial Officer: Hi, Josh.

Yeah. Just maybe to follow up on Jamie's question a little bit. Can you talk about some of the mix dynamics that you're seeing in North America that could maybe support a bit of a margin lift here? Maybe ex restructuring, how should we think about the underlying incrementals and decrementals and the progression through the year, and maybe what you saw in the fourth quarter that gives you the confidence in that launch pad? Thomas L. Williams - Chairman & Chief Executive Officer: I mean, if I take Q4 sequentially, I was talking about there's really kind of two things that we saw: the natural resource related end markets – Josh, this is Tom, by the way, sorry. We still saw those in that minus 10% to minus 15% range, mining, oil and gas, ag, and the distribution that had exposure to that. But what gives us confidence is when you look at the non-natural resource related end markets in Q4, those saw anywhere from flat to a plus 15%, so distribution being up mid-single digits, which is a big part of North America. Machine tools, telecom, life sciences, turf, refrigeration and air conditioning has been very strong for us and automotive about flat, slightly positive. So that was really the mix that felt us good about the North America forecast. The other part is that we do know that the natural resource comps in those particular end markets gets much easier in the second half, which is why our first quarter for North America, we're not anticipating anything much differently than what we saw in the current quarter. Maybe a hair better because the comps get easier in the second half, is why we forecasted a better comp in the second half.

Is it fair to say that of the – and I'm sorry, Jon, I missed all the numbers that you gave for restructuring, plus carry-over restructuring. Sounded like something around $40 million, $45 million. If I take those and maybe the gap in your guidance is another $30 million or so to get to the midpoint for segment op income, fair to say that that other $30 million is mix? I mean, I guess there's really not a lot of revenue growth. Presumably, price-cost isn't an inordinate benefit this fiscal year. Just trying to bridge that extra little piece to get to the midpoint. Jon P. Marten - Executive Vice President-Finance & Adminstration and Chief Financial Officer: Yeah. I mean, Josh, altogether I think you've got it. I mean, it's going to be mix. It's going to be further productivity that we're going to realize. It's going to be Lean. It's going to be the normal Parker operating protocols that we use. And we are expecting, without regard to the realignment that we did in FY 2016 and we plan to do in FY 2017, to become even more productive in FY 2017. And so, yes, that's how we bridge that gap internally here.

Okay. So, there's not a scenario, though, where on an underlying volume basis when things are still tough, decrementals kind of ex all the productivity in Lean and restructuring are very low and then you still expect them to accelerate. It sounds like volume is neutral-ish, but there's just a lot of heavy lifting that's going on behind the scenes doing most of that op improvement. Jon P. Marten - Executive Vice President-Finance & Adminstration and Chief Financial Officer: Yeah. I would say that that's correct. I mean, the volume being flat, as Tom described, in North America, maybe getting a little bit better as the year goes on, and FY 2017 is going to help us from a marginal standpoint in North America and internationally. We are seeing good productivity gains that we've made from the restructurings that we've done in FY 2016 and really, frankly, for FY 2015 also. So we feel like we are very well-positioned from a cost structure standpoint, and we are poised with any tailwinds at all at the high level to really be able to generate some impressive incremental margins, once the volume turns around.

All right. Thanks for the color, guys. I'll get back in queue.

Thank you. And our next question comes from Nathan Jones of Stifel. Your line is now open. Nathan Jones - Stifel, Nicolaus & Co., Inc.: Morning, everyone. Jon P. Marten - Executive Vice President-Finance & Adminstration and Chief Financial Officer: Hey, Nathan. Nathan Jones - Stifel, Nicolaus & Co., Inc.: So, I think, Jon, you're talking a little bit here about volume in natural resource markets being essentially flat and the comps get easier as the year goes on. I think we kind of entered last year with a similar expectation of some improvement in the back half of the year, which obviously didn't materialize. Could you talk about the differences between what you're seeing in the market now versus 12 months ago that gives you that confidence that you are going to see a potential uptick in the second half? Thomas L. Williams - Chairman & Chief Executive Officer: Nathan, it's Tom. I think the confidence would be, if you just took oil and gas as an example. Nobody could've anticipated going back 12 months ago the rig count reduction that happened, but now the rig counts have stabilized, and the last several weeks, minus maybe a week or two, have actually improved. We're not forecasting them to get any better, but just by the comps, and the fact that they've decelerated or are starting to hold that level, it makes our second half naturally a little bit better. I don't think we're out on a limb with North America at a minus 1% in the second half, given that we normally have a second half a little bit better, and the fact that I think we've seen the worst behind us in the natural resource areas, and those non-natural resource areas that I mentioned starting to show some…

Thank you. And our next question comes from Joe Ritchie of Goldman Sachs. Your line is now open. Joe Ritchie - Goldman Sachs & Co.: Thanks. Good morning, everyone. And nice job on the cost control this quarter. Jon P. Marten - Executive Vice President-Finance & Adminstration and Chief Financial Officer: Thanks, Joe. Joe Ritchie - Goldman Sachs & Co.: My first question is really around just distribution. So, Tom, your comments that distribution's going to be neutral – or your (43:25) expectation is neutral in 2017. Can you give us some thoughts there? I mean, clearly as we ended the quarter, the data points that we got from the industrial markets were pretty weak. We got a slightly more positive data point today from Fastenal. And so maybe just comment on what you're seeing in distribution that will give you the confidence that it actually can be neutral in 2017. Thomas L. Williams - Chairman & Chief Executive Officer: Hey, Joe. This is Tom. I'll start off, and I'd like Lee to just tag-team. I mean, the confidence here is that when we look at how the quarter came out, sequentially distribution was basically flat, and those non-natural resource related areas that we've talked about in the past in the various regions are growing mid-single digits. And we have a really on-purpose program to add distribution, especially in the emerging areas in Asia, in Eastern Europe, Africa, Latin America. And our teams are working very hard at that. And when we look at the emerging markets, they're showing some positive growth in distribution. So I think that combination of all those gives us confidence that we can come in at a neutral for distribution. I don't know if Lee has anything else to add. Lee C. Banks - President,…

Thank you. And our next question comes from David Raso of Evercore. Your line is now open.

Hi. A quick clarification first before my question. The savings, the carryover plus the incremental from this year, what's the exact number again? Jon P. Marten - Executive Vice President-Finance & Adminstration and Chief Financial Officer: Okay. The savings carryover into FY 2017, $25 million. The savings related to the FY 2017 restructuring, $30 million.

Okay. So basically the segment profit for the year, total company, has guided up about $72 million, $55 from savings and $21 million from pension. Is that essentially the number you have? (49:56) Jon P. Marten - Executive Vice President-Finance & Adminstration and Chief Financial Officer: Yeah, those are the numbers. I hate to draw a straight line between the restructuring and the savings and our increased guidance, because there's a lot of other factors, as you well know, Dave, that go into that. But, yeah, that would be one way to look at it.

That's a generic flat revenues, keep profit flat ideally on it, at $20 million plus for pension and $55 million for save, and that's the generic framework. Jon P. Marten - Executive Vice President-Finance & Adminstration and Chief Financial Officer: Yeah.

My question was the international growth cadence. Can you walk us through – and you said it earlier, I apologize – I know you said it for North America, but I might have missed it internationally. The up 3% for the year, 3.2% to be exact – how do we get there from the down 3% we're exiting the year? Comps get easier, orders are up, but if you can help us with the cadence. Thomas L. Williams - Chairman & Chief Executive Officer: David, it's Tom. So international, up 3%, 1 point of that is acquisitions; that's the Jäger acquisition for the year. So it's 2 points of growth for international, and our forecast is that that's Europe at flat, Asia plus 4%, and Latin America plus 15%. Now, recognize Latin America is a small number, and it's balancing off a very sharp decline. And what's supporting that is the orders that we saw in Q4 and has continued into July is that of the international orders, we saw Europe around flat. We've seen Asia orders plus 6%, and Latin America orders plus 19%. So we see some opportunities in Asia and Latin America in particular, and we see Europe as neutral. That's what's making up the plus 2% for international.

And the cadence of that then? Could we be positive by fiscal 2Q? How quickly do we get positive to get the full year to 2%? Thomas L. Williams - Chairman & Chief Executive Officer: At the end of the first half.

End of first half. Terrific. Thank you very much.

Thank you. And our next question comes from Jeff Hammond of KeyBanc. Your line is now open.

Hey. Good morning, guys. Jon P. Marten - Executive Vice President-Finance & Adminstration and Chief Financial Officer: Morning, Jeff.

Hey. So you mentioned capital allocation, you'd be kind of within your range of targets for buyback. And just with six months to go from kind of completing that, can you just update us on as we look past that how you may be thinking about capital allocation, the same or different, or do we get some formal multiyear announcement? Just flesh that out. And maybe while you're at it, touch on acquisition pipeline. Thomas L. Williams - Chairman & Chief Executive Officer: Okay, Jeff. It's Tom. So let me start with just a clarification. We only have one more quarter left in the share repurchase plan. It was October to October, 2014 to 2016. So we'll come in at the $2 billion level of that range that we said. And what's really kind of – the factors that we've considered of what that is that 99% of our cash is permanently invested overseas. We do have a desire to maintain that A rating, and our debt to total cap is at around almost 40%. And when we started the program, we were at $13 billion company; now we're $11.4 billion. Now, we're very proud of the double-digit cash flow that we've been able to generate, but it's double digits off of a smaller number. So that's what is kind of framing why we're going to come in at the low end of the range. Now, going forward, our desire – let me first state that we want to be great generators of cash, and I think we've done a great job there. We're going to continue to do an even better job, and we want to be known as a company that really spins off a lot of cash. On the flip side, we want to be known as…

Okay. Then just as a follow-on on international. Can you speak to what's inflecting in Asia to drive that plus 6%, and then conversely in Europe, any kind of near-term signals of deterioration around Brexit? Thomas L. Williams - Chairman & Chief Executive Officer: Yeah. Jeff, I'll start on Asia. I'm going to let Jon make some comments on Brexit. But what we saw on Asia, we actually had positive sales in Asia for June and with the positive order entry that we had in Q4 and will continue into July. We saw plusses in life sciences – I'm speaking about Asia in general – passenger rail, power gen, machine tools, and probably of significance, because for the many years we've been talking about this, we've started to see some signs of life in mobile construction, in particular India and Japan, but the good thing is China has finally flattened out, and we've actually saw some new incremental orders in China. And we have all the countries across Asia growing, with the exception of Korea, and Korea just has a little more exposure to some of those global OEMs, and so that will to start to recover as well. So that's what behind our thoughts on Asia, and I'll let Jon talk about Brexit. Jon P. Marten - Executive Vice President-Finance & Adminstration and Chief Financial Officer: Just a quick comment on the Brexit impact, Jeff. We're in a position where we manufacture and ship out of the UK more than we buy into the UK. And so, since we export more than we import, we don't see that really having an impact on our near-term financials. Now, to the extent that the Brexit impact long term starts to impact the economics there, we'll be watching that very closely, but the UK overall, in terms of our sales there, will not meaningfully drive our top line numbers in any event.

Thanks a lot, guys. Jon P. Marten - Executive Vice President-Finance & Adminstration and Chief Financial Officer: Okay, Jeff.

Thank you. And our next question comes from Steve Volkmann of Jefferies. Your line is now open.

Hi. Good morning, guys, for two more minutes. Can I just follow up? I think, Tom, you made some initial comments about simplification plans. And I'm curious if there's kind of more to come in that area in terms of things like SKU reduction, or business unit consolidation, or maybe even have some more divestitures. I know you've done a couple of small ones here and there. Can you just talk a little bit about what that's going to look like over the next couple years? Thomas L. Williams - Chairman & Chief Executive Officer: Yeah, Steve, it's Tom. I think there's really been great momentum for us across the company on simplification. I think I mentioned in my opening comments, the combination of putting simplification with our Lean enterprise efforts is really giving us an amplification of being able to look at costs and processes differently than maybe we have in the past. But, as I've mentioned before, and I'll kind of give you some comments as to where I think we can go on these, there's four big areas that we're focused on. The first is that whole revenue complexity, or maybe another way of saying it is that product line simplification, the tail of revenue, the last couple percent of revenue. We are in very early days on that. That is probably our biggest opportunity going forward, and that will be a multiyear journey as we continue to find more efficient ways to service that tail, take care of our customers, but work on the SG&A, the speed at which we can handle those type of orders, speed at which we can service customers. A lot of organization design activity will happen related to that. So that will be a net win for our customers as well…

Just on potential divestitures going forward? Thomas L. Williams - Chairman & Chief Executive Officer: Oh. Yeah, so we continue to look at the divestitures. That's an ongoing basis. But we like the portfolio as a whole. And you look at our nine motion control technologies, and you look at the seven operating groups. 60% of our customers buy from four or more of those seven groups. So our customers see the power of the systems we can do, the synergies that we can do, across those technologies. That being said, we still look at properties that we think potentially weren't strategic to us or where we weren't the best corporate owner. We'll continue to do that, but I would characterize that as very small, trimming around the edges type of divestitures.

Great. I appreciate it. Thanks. Jon P. Marten - Executive Vice President-Finance & Adminstration and Chief Financial Officer: Okay. And Candace, I see that we're running up against it here. Could we just take one last phone call here, please?

Absolutely. Our final question comes from the line of Andy Casey of Wells Fargo Securities. Your line is now open.

Thanks a lot. Good morning, everybody. Jon P. Marten - Executive Vice President-Finance & Adminstration and Chief Financial Officer: Hey, Andy.

Got a question on Aerospace, one backward-looking and then a little bit forward-looking. The first – can you give a little more color about the relative performance of commercial versus military, if you want to break it OE versus aftermarket in the quarter? And then also, a little more color behind what drove the 50 basis point margin decline versus last year? Jon P. Marten - Executive Vice President-Finance & Adminstration and Chief Financial Officer: Okay. On the margin decline, basically, last year, there were a few contractual settlements in the Aerospace numbers. They did not repeat for this year. Of course, those are lumpy, and they can come sporadically. And so that's really the driver there, Andy. Now, from breaking those numbers down a little bit in terms of the sales, we are basically essentially flat in the commercial market. That's being kind of impacted by the ability for us to be in a position where our bizjet reduction is being overcome by our normal commercial increase. There's not been a significant change in the aftermarket there, and it's been basically flat for us. From a military standpoint, both OE and commercial, that has been up low double digits for us in the quarter, and that would be reflected not only in our sales but in our orders, and again all of these data that I give to you, because it's such a long-term business, it tends to be very lumpy. Our perfect world, we would be 50% commercial, 50% military. We're not now. I mean, we are 65% commercial, and the balance military right now. And in a perfect world, we'd be 50%-50% OEM versus aftermarket, and we're at 66% OEM right now. So that would be indicative of further aftermarket revenues to come as we are successful in our entry into service for all the commercial aircraft, and as the military ramps up over the next several years on some of the key programs that we're on. And so we have a lot of very high expectations for our performance and our growth there in Aerospace, and it's been a key to our successful FY 2016, and key to our guidance in FY 2017, too. So I hope that gives you some color there, Andy.

It does, Jon. Thank you. And then I guess two more – I'm sorry to belabor it. But on Aerospace, on the guidance, modest growth, kind of flattish to modest growth, and margins flat to up 40 basis points. Is the margin growth or the potential expansion really mix driven, or are there other factors that are driving that? Jon P. Marten - Executive Vice President-Finance & Adminstration and Chief Financial Officer: Well, I think it's going to be efficiency. It's going to be the same adherence to all the programs that Tom has outlined before in our Aerospace segment. And it is going to be a natural mix, a positive for us here into FY 2017. Our growth on our new programs is going to be in the low single digits, and our growth in the repairs and aftermarket is going to be in the low single digits for FY 2017. And we also would expect to see our normal growth in our military aftermarket in FY 2017. So there's no one segment of the Aerospace that is driving the growth, and there's no one answer for you on the margins. It's more mix, and it's our ability to just continue to be productive in Aerospace on the margins, and it's across-the-board increases at each one of the major segments there in FY 2017, too.

Okay. Thanks. And I'll follow up on that offline. On the diversified international, if I strip out – take kind of 50/50 split on the savings literally, if I strip that out, it looks like the core incrementals are somewhere around mid-20% range. Is that just application of what you'd expect in year one of some sort of recovery after the downdraft we've seen? Or is there upside opportunity given the Lean operations relative to the past? Jon P. Marten - Executive Vice President-Finance & Adminstration and Chief Financial Officer: Yeah. I think that it is a reflection of our ability to implement Lean. There is an uptick in of course the incremental returns they're going to get, because as Tom and Lee have kind of described, we're going to see an upturn in sequential revenues as the year goes on, especially in Industrial international. That's our best estimate right now. And so we will see some marginal returns there. That 20% number, it seems, off the top of my head, reasonable, but I don't want to give you the impression that there's not also a lot of favorable disposition in our international Industrial margins because of our ability to continue to penetrate markets, gain market share, and grow in ways that are really quite favorable for the company here and helping us with our guidance in 2017.

Okay. Thank you very much. Jon P. Marten - Executive Vice President-Finance & Adminstration and Chief Financial Officer: Okay. Thank you. And I think this will be the balance of our call here today. I appreciate everybody's questions. I want to thank everybody for joining us. Robin and Ryan will be available throughout the day to take your calls, should you have any further questions. And I want to thank everybody again and wish everybody a good day.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Have a great day, everyone.