Good day, ladies and gentlemen, and welcome to the Q3 2017 TransDigm Group Incorporated Earnings Conference Call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will host a question-and-answer session and our instructions will be given at that time. As a reminder, this conference is being recorded for replay purposes. It is now my pleasure to hand the conference over to Ms. Liza Sabol, Investor Relations. Ma'am, you may begin.

Thank you. Welcome to TransDigm Group, Incorporated third quarter – excuse me – thank you for calling in today, and welcome to our third quarter earnings conference call. With me on the call this morning are TransDigm's Chairman and Chief Executive Officer, Nick Howley; President and Chief Operating Officer, Kevin Stein; and Chief Financial Officer, Terry Paradie. A replay of today's broadcast will be available for the next two weeks. Details are contained in this morning's press release on our website at transdigm.com. Before we begin, we would like to remind you that statements made during this call, which are not historical in fact, are forward-looking statements. For further information about important factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, please refer to our latest filings with the SEC, available through the Investors section of our website or at sec.gov. We would also like to advise you that during the course of the call, we will be referring to EBITDA, specifically EBITDA As Defined, adjusted net income and adjusted earnings per share, all of which are non-GAAP financial measures. Please see the tables and related footnotes in the earnings release or a presentation of the most directly comparable GAAP measures and a reconciliation of EBITDA, EBITDA As Defined, adjusted net income and adjusted earnings per share to those measures. With that, let me now turn the call over to Nick.

Good morning, and thanks everybody for calling in. Today, I'll start off as always with some comments about our consistent strategy. I'll give a little color on our commercial aftermarket business and a few other topics relating to Q3. I'll summarize the Q3 2017 performance and give some color on the guidance. Kevin will then give a significantly more detail on the operations in Q3, and Terry will run through the financials. To restate, we believe our business model is unique in the industry, both in its consistency and its ability to sustain and create intrinsic shareholder value through all phases of the aerospace cycle. About 90% of our net sales are generated by proprietary products and about three-quarters of our sales come from products for which we believe we are the sole source provider. Over half of our revenue and a much higher percent of our EBITDA comes from aftermarket sales. Aftermarket revenues have historically produced higher margins and have provided relative stability through the cycles. Our long-standing financial goal is to give our shareholders, over time, private equity-like returns with the liquidity of a public market. To meet this goal, we have to stay focused on the details of operating management and value creation as well as careful management of our balance sheet and allocation of our capital. We follow a consistent long-term strategy. First, we own and operate proprietary aerospace businesses with significant aftermarket content. Second, we have a simple, well-proven, value-based operating strategy based on our three value driver concept. Third, we maintain a decentralized organization structure and a unique compensation system that is closely aligned with our shareholders. Fourth, we acquire a proprietary aerospace businesses with significant aftermarket content, where we see a clear path to PE like returns. And lastly, we view our capital…

Thanks, Nick, and good morning to everyone. As Nick stated, Q3 of fiscal year 2017 was a strong quarter. Now let me touch on the details of the quarter and provide some color where necessary. For Q3, total company GAAP revenues and EBITDA As Defined were strong, with revenue up about 14%, EBITDA As Defined up over 15%. EBITDA As Defined was strong at 49% of sales. The strength in EBITDA As Defined as a percentage of sales was due to the continued realization of our value drivers concept across our core or base businesses and the continued integration of recent acquisitions. Now, let's review our revenues by market category. For the remainder of the call, I'll provide color commentary on a pro forma basis versus prior year Q3. In the commercial market which makes up about 70% of our revenue, we will split our discussion into OEM and aftermarket. In our commercial OEM market, revenues were down slightly, less than 1%, compared with Q3 of fiscal year 2016 and down even less year-to-date. Commercial transport OEM revenues which make up most of our commercial OEM revenue were up slightly versus prior year Q3 and by a similar amount year-to-date. As we have said previously, inventory management by our OEM customers, much of which appears due to rate reductions on wide-body platforms, have created headwinds in the commercial OEM market. We will continue to watch trends for any indication of sustained weakness to further modify our cost structure as necessary. Business jet and helicopter revenues make up about 15% of our commercial OEM revenues. In total, year-to-date revenues in this market remain down mostly compared to the same period in fiscal year 2016. No sustained recovery in this market has yet been observed. Although, new business awards and bookings continue…

Thank you, Kevin. I will now review our financial results for the quarter. Third quarter net sales were $908 million or approximately 14% greater than the prior year. The collective impact of acquisitions represented $87 million of the increase in sales. Organic sales were approximately up 3% for the quarter. Our third quarter gross profit was $522 million, an increase of 18%. Our reported gross profit margin of 57.5% was almost 2 margin points higher than the prior year, primarily due to the strength of our proprietary products and continually improving our cost structure. Our selling and administrative expenses were 12.2% of sales for the current quarter compared to 11.8% in the prior year. Excluding acquisition-related expenses and non-cash stock compensation, SG&A was about 10.7% of sales compared to 9.7% of sales a year ago. The higher SG&A was primarily related to higher selling and admin costs of the recent acquisitions. We had an increase in interest expense of approximately $31 million, up 26% versus prior year quarter. This is a result of an increase in the weighted average total debt to $11.2 billion in the current quarter. We still expect our full-year fiscal 2017 net interest expense to be approximately $600 million. Moving on to taxes. In Q4 of fiscal 2016, we adopted a new accounting standard related to the accounting for excess tax benefits for share-based payments, including stock option exercises and dividend equivalent payments. As a result, our GAAP tax rate will now generally approximate our cash tax rate during an entire fiscal year. Our GAAP effective tax rate was 28.1% in the current quarter compared to 17.3% in the prior year. The higher effective rate in the quarter was primarily due to a lower level of stock option exercises in the current year quarter. We now…

Thank you, Terry. Operator, we are now ready to open the lines.

Thank you. And our first question will come from Noah Poponak with Goldman Sachs. Please proceed. Noah Poponak - Goldman Sachs & Co. LLC: Hey. Good morning, everyone.

Good morning.

Good morning. Noah Poponak - Goldman Sachs & Co. LLC: So, I guess, how sustainable should we view this 8% in defense to be, because on the one hand, it seems like a lot of the fundamental drivers of that business for you are picking up meaningfully; on the other hand, it sounds like you're calling out maybe some one-time drivers in the quarter?

Yeah. I guess – Noah, this is Nick. I think the best we can do there is give you the guidance for the year. I don't want to start to forecast into 2018 at this point. Yeah, but I'll say, we feel better about it than we did a year or two ago. Noah Poponak - Goldman Sachs & Co. LLC: The parachute piece that you called out specifically, I mean, if you look at that budget for the army and you mentioned the army there, that had a much greater than 50% peak to trough on you and it looks like it's actually scheduled to pick up significantly kind of starting now. So was that a one-time thing or is that actually just the beginning of a recovery in that market for you?

I'm not sure. No, I'm not sure of budget, you mean the parachute budget? Noah Poponak - Goldman Sachs & Co. LLC: Yeah. Yeah, if you look at the U.S. Army parachute purchases.

I don't know the answer to that, yeah. Noah Poponak - Goldman Sachs & Co. LLC: Okay.

They're fairly active. That business is fairly active in bidding, but I don't know how it compares to the government budget. Noah Poponak - Goldman Sachs & Co. LLC: So it's fairly active in bidding, it's not like you just got that one order and then it flattens back?

That's right. But that doesn't mean you win them. Noah Poponak - Goldman Sachs & Co. LLC: Sure. Okay. And then just on the aftermarket side of the commercial business, commercial aerospace aftermarket, is it possible to lay out for us – I know you gave us a lot of detail there. I appreciate the incremental detail. But is it possible to lay out in the interiors business and then in the business jet helicopter piece, when they first started declining or said another way, when you annualize the sharp rates of decline there? That way we could better understand when they stop being at least the sizable headwinds that they are today.

I don't know – Kevin, let me try and if you have a different – well, let me take the business jet and helicopter. The biz jet helicopter business, Noah, continues to surprise us, and it's declined. Noah Poponak - Goldman Sachs & Co. LLC: Okay.

So my sort of forecast on where I think it is, I would – if I were you, I'd take with a grain of salt. I would say we don't get – as Kevin said, more of the aftermarket in the business jet world goes through the OEMs than it does in the rest of our business. So, we don't get a whole lot of clarity on it. And it can at times get a little confused with the OEM buys, you have to sort of parse it out and make a judgment on it. I don't know, that doesn't help you other than to say, it – on the interiors business, I'd like to say, Kevin, I don't think we feel comfortable that we're seeing a bottom there yet.

Yeah, that's right. And I would say, Noah, that started to alter itself this year.

Yeah.

So that's a relatively recent, but the business jet, that weakness has been ongoing. We're on the right programs, we're winning as I listed, the list of the key business jet for platforms for the future, it's any recovery there we're just not seeing yet. Noah Poponak - Goldman Sachs & Co. LLC: Okay. So, the business jet helicopter piece you show up 2%, 2014 to 2016, so maybe that started to bleed on you in 2016 or even 2015, so not insanely difficult comparisons there, but still kind of bleeding lower. And then the interior piece being up 2014, 2014 to 2016 and then down sharply. Sounds like that's only two quarters, maybe three quarters in, so it's still another one or two quarters before that annualizes?

That seems reasonable. That seems reasonable. Noah Poponak - Goldman Sachs & Co. LLC: Okay.

And I think, as Kevin pointed out, we're still seeing projects and activity things just ...

Absolutely.

Things just seem to keep getting delayed.

Yeah.

Or moving out. Noah Poponak - Goldman Sachs & Co. LLC: Right. Okay. Thanks for the time.

Thank you. Our next question will come from the line of Myles Walton with Deutsche Bank. Please proceed.

Thanks. Good morning. Hey, can we have a clarification on the orders for freight first. I think you said bookings were up 18%. Is that year-on-year, and is that year-to-date or in the quarter?

Yeah. So that's – the 18% is year-to-date.

Year-to-date. Well, okay. All right. And then the other one, Terry, the EBITDA margins, I think you had on the last call implied and certainly the guidance would imply a bit of a tick down in EBITDA margins as defined. And obviously they're pretty strong here, heading into fourth quarter and implies a 100 basis point sequential decline. Is that looking like conservatism to just offset if the sales for some reason don't come through where they are, otherwise it looks like there is not a real clear reason why the EBITDA margins would sequentially drop.

Yeah. Myles, I think that's right. As we look at the order book and the backlog, we could – we may be better than what the midpoint that suggests that it coming down, but the highest would suggest that it will continue to be in that over 48% EBITDA margin area.

Okay. And then there is one...

There is nothing systematically changing in the business. If the margin's down a little, it just happens to be the mix of product that goes out that quarter.

Yes. Okay. And then the only last one on the defense side. Within the seconds, I think Kevin you mentioned both aftermarket and now we were strong, anyway to clarify which was stronger and by how much?

They are both- sorry, they're both comparable.

Okay. All right. Thanks. I'll leave it there.

Thank you. Our next question will come from the line of David Strauss with UBS. Please proceed.

Thanks. Good morning.

Good morning.

Good morning.

Terry, one for you. I didn't have a chance to work through all the math on the cash balance, but are you implying any sort of change in the underlying free cash flow guidance for the year, which I think you were targeting around $800 million?

Yeah, no, there is no change and we look at from a free cash flow is trying to hit 50% of our EBITDA after taxes, interest, and CapEx. The interest is running higher this year, we maybe a touch under that, but it should be pretty close to that 50% from the free cash flow standpoint, which gets you in that $800 million to $850 million range, as we kind of define free cash flow.

Okay. And thinking about the way forward, Nick, what would prevent you guys from being able to grow adjusted EBITDA leased in kind of the low double digit range on a go-forward basis?

I don't think, David. I don't want to get backed in to next year's guidance, that's – I think we'll put that out when we put it out. We gave you in the last quarter our view of sort of a [long, four or five year trends in that, but I think next call we'll put the guidance out.

Okay. Last one, Nick. You've been pretty consistent and been a little cautious on the commercial cycle overall. Obviously, there is some destocking going on right now, but how are you feeling about kind of the sustainability of the commercial cycle at this point? We've obviously had really good traffic numbers here for quite a while.

Yeah, you know at the – this is always a risk. The absent of destocking, I think we probably feel better about it now than we did 18 months ago.

Okay, great. Thanks.

Whether that translates into anything, who knows, but.

Thank you. Our next question will comes from the line of Hunter Keay with Wolfe Research. Please proceed.

Hey, thank you. Good morning. Nick, can you give us little more color, just a little bit on the discretionary interior stuff? It is presumably just an extension of some of the cabin aesthetics that you guys talked about last quarter. Is there a concern that this is maybe a leading indicator for airlines then, like what you guys have seen throughout the course of the history of your company you see, like it starts with discretionary and then usually the cuts and it's going a little bit deeper. How should we think about this patch of softness vis-à-vis, sort of I don't want to say canary in a coalmine per se, but is it a leading indicator for an expectation that maybe there is going to be more to come?

Kevin, you want to take it?

Yeah. Hunter, this is Kevin. So when we look at it, the OEM business and the repairs business continues to march along. It's really the refurbishment that a united continental rebranding sort of idea. And those tend to go through peaks and valleys. We've seen this when we evaluated businesses for acquisition that they go through peaks and valleys. So we're still winning future refurbishment orders. I referred to that in the – in my words prepared, but we continue to win those. I don't see any reason why in the future those won't return. We are seeing opportunities though on refurbishments on some of the low cost airlines around the world, in the Middle East, Asia, India. So there is still opportunity there, I think which is going through a low timing right now.

Okay. Thanks. And then, I apologize if I missed this in my last question. Did you disclose what underlying organic gross margins excluding the acquisition dilution?

He's talking about EBITDA.

Yeah. I think we said there about 100 basis points higher than the (43:41) average.

100 basis points. Okay, great. Thank you. That's it. I appreciate it.

Thank you. Our next question will come from the line of Peter Arment with Robert W. Baird. Please proceed. Peter J. Arment - Robert W. Baird & Co., Inc.: Thanks. Good morning, everyone.

Good morning, Peter. Peter J. Arment - Robert W. Baird & Co., Inc.: Nick, just kind of a just high level question on kind of the M&A. You mentioned it's down, it's obviously down pretty considerably over the last several years, is it just purely timing, and this is M&A, or did you lose out in some deals, or your just not liking the properties that you're seeing, maybe just a little color on the M&A environment.

Yeah. One, I don't think it's down in the last couple of years. I think the year before was pretty heavy. I think we bought a ballot... Peter J. Arment - Robert W. Baird & Co., Inc.: Right. No, no, I agree with you.

In 2017, my general view is across the industry it seems to be slow, the M&A activity. I mean, we have – we see things, but generally the things we like either have been small. I can't really say we didn't like the prices. I mean, we walked away from that region. I would say mostly the things that we haven't bought, it's because they weren't proprietary enough. Peter J. Arment - Robert W. Baird & Co., Inc.: Got it. Just not fitting the business model.

Yeah. Just not fitting the model, and we're – we ultimately will need to stretch it. I think we generate plenty of cash and capacity, and as we say, we don't see something that meets the model. We tend to give the money back to the shareholders, and we're pretty confident that if we need the money later, we'll have it and we'll find a way to come up with it. Peter J. Arment - Robert W. Baird & Co., Inc.: Okay. And just a follow-up there, Terry to that, could you just mention what's the pro forma leverage you expect after the special dividend?

we'll be at probably just under 7 times gross and 6.8 net, and that...

That will be based on the 9/30.

Yeah, September.

Yeah, I mean June.

That will be at June and then at September, that will go down to, net down will between 6.4 and 6.6 depending on the size of the dividend. Peter J. Arment - Robert W. Baird & Co., Inc.: Got it. Thanks very much, guys.

Thank you. Our next question will come from the line of Robert Spingarn with Credit Suisse. Please proceed. Robert M. Spingarn - Credit Suisse Securities (USA) LLC: Good morning. Nick, I wanted to ask you something high level as well. With all the supply chain discussion and some of the pressure that Boeing and other OEMs are imposing on the suppliers, or on certain suppliers, how do you think this affects the M&A environment? And I say this in the context of very large deals being discussed out there in the media. Do you see more consolidation at greater levels and is TransDigm a buyer or a seller in this environment?

Well, I would say, Rob, the reality is, we are either. We are – we're pretty commercial and mercenary, as we should be as represented in the shareholders' money. I would say as a – let me – I don't know where this goes. Yeah, I – you might think it would generate some more activity, but I can't say it has. We surely haven't seen it. I've seen the same room or this big deal that you have. I think when we see something with the right value proposition, we're a buyer. And I don't think we're necessarily particularly capital constrained. But we're constrained by that we have to see our kind of return and fit our kind of profile, which is a fairly tight restraint. Robert M. Spingarn - Credit Suisse Securities (USA) LLC: But do you think maybe this loosens some larger pieces that might not have been in within your traditional aperture?

Rob, I don't know. I can say we haven't seen it yet. Robert M. Spingarn - Credit Suisse Securities (USA) LLC: Okay. Maybe it's a little early for that.

Yeah. Robert M. Spingarn - Credit Suisse Securities (USA) LLC: Second question, and this could be for anybody. But back to something we talked about earlier in last time. Just the bookings versus the shipments and the math behind that might have implied a little bit better commercial aftermarket. Are we going to see these bookings numbers come through or am I thinking about it wrong? Do I look at your slide 6, that Kevin spoke to, and are the bookings really specific to the passenger business and you do it differently in interiors, which is why we don't see the pressure on the bookings that's translating into the pressure on the sales?

I don't know that I can answer that. I think the one take it into pieces the passenger business, I think we feel pretty good about. I think the Interior business, we don't believe we've seen the bottom of that yet. And I don't think our bookings make us feel great about it. The bookings in the freighter business were pretty good. And I would say the biz jet, helicopter sort of the incoming work is probably roughly consistent with the outgoing. Robert M. Spingarn - Credit Suisse Securities (USA) LLC: I guess, Nick, what I'm saying is that the bookings that you've shown us throughout the year would have suggested we would not have a 19% drop in the commercial transport interior business, unless those bookings are excluded from the number of bookings, from, what is included in your bookings number?

I'm not sure I follow the question, Rob. Everything is in our booking number. Robert M. Spingarn - Credit Suisse Securities (USA) LLC: So it's all there? So, okay.

It's all there, there's nothing excluded from any of our bookings or our total bookings. Robert M. Spingarn - Credit Suisse Securities (USA) LLC: Right. So it goes back to – I can't remember the – I don't know if you've given the number for this quarter, but you had been sort of at 1.1 book-to-ship, at least up through the last quarter, but we haven't seen that 10% type of overall aftermarket growth, that would be implied by 1.1 book-to-ship?

Yeah. I'm not sure we're apples-to-apples, Rob, and I don't think I can answer your question here. Robert M. Spingarn - Credit Suisse Securities (USA) LLC: Okay. We'll take it offline.

Not that I'm unwilling to, it's just that I'm not sure. Robert M. Spingarn - Credit Suisse Securities (USA) LLC: No. No. It's complex and I think what it has to do with what's included in the bookings versus what's included in the sales, in the growth numbers?

So Rob because we were strong with some bookings number last quarter, you're expecting higher sales? Robert M. Spingarn - Credit Suisse Securities (USA) LLC: Well, and I think it was more than just last quarter, I think it was the prior quarter, I mean the bookings have been coming through it, I think at a stronger level than the aftermarket sale. So I was asking you is that because the interior weakness is the difference and those bookings aren't counted the same way.

No. All bookings are counted the same. All booking are counted the same. Robert M. Spingarn - Credit Suisse Securities (USA) LLC: Okay. All right. Thanks for trying.

Thank you. Our next question will come from the line of Ron Epstein with Bank of America. Please proceed.

Hey, good morning, guys. A big picture question that maybe a more detailed question. So I guess it was last week Boeing announced that they're opening this avionics business and they're going to be a supplier. How do you think Nick that, that changes the dynamics in the supply chain kind of broadly speaking, , if they start to do actuators and other bits and pieces of airplanes. I mean, I guess, I'm trying to get a sense of how do you think about that?

The real answer is, I don't where they go with it. I don't know what the impact is. So far, at least in the businesses that we're familiar with, anything they've done that with has been make the print non-proprietary stuff. I think it will be a tough row to hoe if they start to move into the proprietary kind of content. They got all kinds of agreements they're tangled up in and the like. Now, where it goes? I don't know. We haven't seen. We haven't really seen anything in our business jet. In non-proprietary things, you are probably going to be at risk.

Yeah. If I just kind of can dig down a little further. Why is proprietary going to be such a tough row to hoe for them? I mean, why is that safe to assume?

I think it's – look, nothing is impossible. It takes a fair amount of engineering, typically the supplier owns the intellectual property. The requalification is fairly lengthy. They're typically tangled up in agreements by platform that get pretty ugly if you start to try – somebody started to try and pull out of them.

Got you. Got you. And then, maybe just a more detailed question. When we look at, specifically the refurbishment business, is that work, A, being delayed, rescheduled, deferred, and is it coming specifically from one region or fleet type? So I guess what I'm driving at, do you think a lot of this is coming out of the Middle East, on wide bodies, is there any way you can speak to that?

Kevin.

There is some softness in the Middle East on that. Certainly, some softness on the wide-body side, but it's specific to refurbishments, rebranding, it's significant fleet-wide overhauls that we're seeing the weakness.

Got you. And then maybe one last question. With the fleet of 787s kind of getting bigger out there where there's over 500 or so flying around and they've been in the fleet for a while, when do you expect to see some aftermarket on those airplanes pick-up?

We see some now, but I mean you can almost do the math. This isn't exact, but you can almost calculate the rate, which I just don't know as I sit here.

Yeah.

You can calculate the rate at which they get beyond about their five-year life and that's probably going to be a pretty good proxy for the aftermarket pick-up.

Got you. So just typical standard...

Yeah.

...is the way to think about it, yeah. Great, cool. Thanks, guys.

Thanks.

Thank you. Our next question will come from Matt McConnell with RBC Capital Markets. Please proceed.

Thank you, good morning.

Good morning.

Just a follow-up on your comments on M&A, you said you didn't see enough proprietary deals or deals that meet your characteristics. Is that – would you categorize that as kind of the normal lumpiness of deal flow on a year-to-year basis? Or if you think about the medium and long-term opportunity, are you still seeing proprietary assets that make you have a rich pipeline for the next couple years?

Matt, I think so, but I say I think. One thing I know is predicting the closure rate of deals is difficult. I mean there's, you can easily come up with a list of attractive, medium or decent size things you'd like to buy, but will they close, will they come up for sale? At least this year, no. In the past, we've seen this. I would say probably three years ago, we did almost nothing and then we had big years in 2015 and 2016, and this year is a little soft. One of the, I believe, attractiveness of our capital allocation mindset model is that we try hard to get the return back to the shareholders another way if we can't get it by buying stuff in the year.

Okay. All right, great. And then just on the commercial transport interior business. Are you sure that's a market issue, or has there been any change in the competitive landscape there? I mean, is somebody else winning that work, or is it – are you pretty sure it's just project deferrals?

Kevin, you going to take that?

Yeah. I'm pretty sure it's project deferrals. We haven't seen any indication that any significant pieces of business went anywhere else. It's simply delays of what we had expected.

Okay. Thank you very much.

Thank you. Our next question will come from the line of Seth Seifman with JPMorgan. Please proceed.

Thanks very much and good morning. Probably never expected to spend so much time talking about interiors, but I'll ask one more. So the declines that we're seeing, why isn't this to some degree – I mean it seems over the past three years, this business is up 50%. Why isn't this to some degree just some mean reversion on project work that should be kind of lumpy? And if it's not that, then should we think about the interiors business typically as something that should be one of your best businesses, and grow well above average?

I'll try that. The retrofit portion of the interior business is, over time, tends to be more cyclical than our other businesses because it's more discretionary. Over time I suspect if you take a long enough period of time, 5 or 10 years, I suspect it has on average the same kind of patterns as the rest of it, but it definitely, you can be lumpier.

Right. And so if that's the case, if we've been up 14% on average for the past three years, maybe it's not so surprising to see what we're seeing now.

Well, you're going to see a downturn sometime when you're running 14% or 15% a year.

Yeah.

Right, right. Okay.

Well, I think I would say it came on frankly a little suddenly.

Yes, it sort of slowed down kind of quick.

Kind of quick ...

Right.

...but that's, no one blows the whistle before you hit the top of the market.

Right. And is your direct customer here the airlines or is it another manufacturer or an MRO shop?

The answer to that is all of the above.

Right. Okay, okay. Nick, and then maybe one more, based on some of the slides you guys have disclosed recently, it seems like your pricing over a period of years in the cargo freight piece of the aftermarket is essentially zero. Can you talk about how that business kind of fits into your model given that sort of unusual pricing dynamic for a TransDigm end market?

I have no idea where you're getting those numbers, other than I don't. I don't know because I don't know. I would say in that business the Telair which is the bulk of the business, the Telair United States, is proprietary staff stuff and does reasonably well. The containers and the net business is nonproprietary and doesn't do as well. But I don't think the average is up down or zero.

Right. Okay, yeah. I was looking at some of the real growth numbers you guys put out in the May slides and then what you've put out today for the pro forma.

Yeah. There're different timeframes.

Right. Right. Okay. Okay. Thank you.

Thank you. Our next question will come from the line of Michael Ciarmoli with SunTrust. Please proceed.

Hey, good morning. Thanks for taking the question, guys. Maybe just, Terry, point of clarity, I don't know if I missed this. The free cash flow this year, $1.75 billion to $2 billion, but I think you said looking at the capacity going up to – or I'm sorry not the free cash flow issue, I'm looking at the capacity you said going up to $3 billion in 2018 versus what you guys would have in terms of capacity of $1.25 billion at the end of this year. So, how do we bridge that gap to get the $3 billion? I think your free cash flow is typically 50% of EBITDA, So what get you to $3 billion of capacity if I heard that right?

You also have to look at the EBITDA of the target, right. We would be able to pick up 7 times their EBITDA as part of an acquisition strategy, and that's part of the – to build up into that – into that number.

Okay. Okay. That helps. Okay. And then just maybe, Nick, one more on this interiors. If I go back to Rockwell Collins, it sounded like they were starting to see some of their backlog build for retrofit next year, and I think you just said you provide to all of the big manufacturers' airlines, retrofits, what's sort of you lead time, I mean if they're starting to see their backlog build, I mean how soon do you guys get orders ahead of a retrofit project?

Well, probably, and this is a real guesstimate, but I'd say six months-ish. The problem is with these programs is they tend to stretch out.

It's the delivery – when they slow down, is they're going to do them in March, so you we expect the order in September and then suddenly March becomes May and May becomes July, and that's what we're seeing some of now.

Got it.

Best we can tell, we don't have any projects dying.

Okay, okay. That's helpful. Thanks, guys.

Thank you. Our next question will comes from the line of Gautam Khanna with Cowen & Company. Please proceed. Gautam Khanna - Cowen & Co. LLC: Yes. Thanks. Good morning. To follow-up on Rob Spingarn's question earlier, in the aftermarket, what is – when we think about book-to-ship, what is your average lead time for aftermarket order-to-ship timeline?

I don't think, I can give you an average. I mean, it's kind of all over the map. Retrofits are different than spare parts, and that sort of thing. But I don't think it'd be – the average is kind of a meaningless number with all our product lines but maybe three, four, five months, something like that. Gautam Khanna - Cowen & Co. LLC: Okay. That's helpful. Also Nick, I think I heard you say on the biz jet side, it's hard to parse out what's aftermarket and what is OE sometimes. Is that because the pricing is the same and is the profitability the same on those sales?

Sometimes it is, sometimes it isn't. It depends on part number in the account. So the frequently the biz jet manufacturers control more of it than in other sectors. So when they order, yeah, to your point, you can always tell exactly what it's for. So sometimes it's hard to parse out inventory fluctuation from aftermarket fluctuation at the OEM, if you follow me. Gautam Khanna - Cowen & Co. LLC: Yep. I understand. And any sense for how much of the biz jet aftermarket is falls into that more amorphous category? Is it like half of it or is that...

I think it's more than half. We make our best judgment, and we try and do it consistently. The aftermarket OEM split, we have a consistent way we do it quarter-by-quarter-by-quarter to try and keep some legitimacy code. But there is a little – as Kevin said, there is always a little bit of a gray in there. But I don't think it changes the fact. I don't think it changes the fact that it's soft, whether it's soft by 2%, 5% or 7% you might argue. Gautam Khanna - Cowen & Co. LLC: All right. It makes sense. One last one just on the M&A pipeline. Over the next couple of years, do you think there is going to be better pipeline for defense related acquisitions or commercial aero, and do you think the valuations will be much different between the two segments?

I obviously don't know the answer to that. I would say, if you look over the last few years, there shortly have been more defense stuff came up than it had come up in the two or three years before that, and the price has moved up. Whether that will continue, I just don't know. Gautam Khanna - Cowen & Co. LLC: Thanks a lot.

Thank you. Our next question will come from Drew Lipke with Stephens. Please proceed.

Yeah. Good morning. Thanks for taking the time.

Good morning.

Good morning.

One question just on the interior, just to round that out. How much of that business do you view as traffic or usage or maybe spares driven as opposed to how much is rebranding or refurbishment or retrofit, is it all retrofit?

No, no retrofit. There is a – there is an existing OEM content, there is the repairs of things that get damaged during usage, which is kind of when you're referring to and then there is the refurbishments, rebranding, which are esthetic and take longer to plan out. So what goes through the wear and tear, that gets repaired as usual and we might expect that to follow with usage of the airlines.

And do you know the percent mix between those?

I would be speculating, but I would guess it's probably a third. A third, a third, and a third, but I'm -that's up for revision I guess, as I dig into that, but that's my sub-thought at the top of my head there.

Okay. And then just second question, I guess the last couple of quarters, you'd talked about look through sales that the distributors being up I think double digits. And I'm curious what sort of sell-in versus sell-through component did you see at the distributor level here in the quarter and did you see any kind of inventory build in the quarter?

It was similar to previous quarter. So, it was up as before we continue to trend upwards on the look-through sales. I didn't call it out this time, but it continues to move in the right direction.

But I think what he is – Kevin is it true that the – there the increase year-over-year in their shipments for this quarter look relatively close to our increase year-over-year.

Yeah, that's right. That is true.

Okay. That's helpful. Thank you.

Thank you. And I'm showing no further questions at this time. So, now it's my pleasure to hand the conference back over to Ms. Liza Sabol, Investor Relations for some closing comments and remarks.

Thank you for participating on this morning's call, and please look for our 10-Q that we expect to file tomorrow.

Ladies and gentlemen, thank you for your participation on today's conference. This does concludes the program and we may all disconnect. Everybody have a wonderful day.