Good day, ladies and gentlemen, and welcome to the Q1 2018 TransDigm Group Incorporated Earnings Conference Call. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Ms. Liza Sabol from – Director of Investor Relations. Ma'am, you may begin.

Thank you, and welcome to TransDigm's fiscal 2018 first 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, James Skulina. A replay of today's broadcast will be available for the next two weeks, and replay information will be contained in this morning's press release and on our website at transdigm.com. It should also be noted that our Form 10-Q will be filed tomorrow and will also be found on our website. Before we begin, we would like to remind you that the statements made during this call, which are not historical facts, 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 the company's 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 the reconciliation of EBITDA, EBITDA As Defined, adjusted net income and adjusted earnings per share. I will now turn the call over to Nick.

Good morning, and thanks again for calling in. As usual, I'll start off with a quick review of our consistent strategy. I'll then summarize the first quarter of 2018. Kevin will review the key operational and market issues for the quarter. And Jim will then run through the financials and also discuss the near-term impact of the new tax law. As you may have seen, Terry Paradie, our former CFO resigned for personal reasons in early January. Jim Skulina, who is on the call today, has agreed to fill the job until we find and are comfortable with the new CFO either internally or externally. Jim is with TransDigm for 23 years and has extensive experience at the senior level, both as an operating and as a financial executive for the company. For the last six years, Jim has been an Executive Vice President Group Officer responsible for a number of our larger operating units and acquisitions. In addition to other responsibilities, Jim has also been the Corporate Controller and Operating Unit President through his career with TransDigm among other jobs. We are lucky to have Jim willing and available to take this job on. To restate, we believe our business model is unique in the industry both in its consistency and its ability to create intrinsic shareholder value through all phases of the cycle. To summarize why we believe this, about 90% of our sales are generated by proprietary products, over 3/4 of our sales come from products for which we believe we are the sole source provider, over half of our revenues and much higher percent of our EBITDA come from aftermarket sales. Aftermarket revenues have historically produced higher gross margins and relative stability through the cycles in the downturns. Our longstanding goal is to give our shareholders…

Thanks, Nick. As you've seen, Q1 of fiscal year 2018 was an encouraging start to our fiscal year. Now, to review our revenues by market category. For the remainder of the call, I will provide color commentary on a pro forma basis compared to the prior year of 2017. In the commercial market, which makes up about 70% of our revenue, we will split our discussion into OEM and aftermarket as usual. In our commercial OEM market, Q1 fiscal year 2018 revenues were about flat when compared to the Q1 of fiscal year 2017. Commercial transport OEM revenues, which make up most of our commercial OEM business, were down slightly when compared to the prior-year period. We continue to believe inventory management by our OEM customers, much of which appears due to rate reductions on wide-body platforms or simply slower ramp-ups on new wide-body platforms, have created headwinds in the commercial OEM market. As was the case in 2017, commercial transport OEM sales can be up and down quarter-to-quarter. But, at the core, no significant changes in chipset content have occurred. So, any softness is simply timing related. Business jet and helicopter OEM revenues make up about 15% of our commercial OEM revenues. Revenues in this market were up high-single digits in Q1 when compared to the year-ago period. Q1 bookings were up even more, positive for sure, but too soon to tell if sustainable, but not dissimilar to what others in the industry are reporting. Now, moving on to our commercial aftermarket business; total commercial aftermarket revenues grew by about 10% in the quarter. Commercial transport aftermarket, which makes up about 85% of our total commercial aftermarket, revenues in Q1 fiscal year 2018 were up almost 11% over the prior-year period. This revenue increase was driven by strong performance…

Thank you, Kevin. I'd like to expand on a few items included in our quarterly financial results and provide some color regarding the impact from tax reform. First quarter net sales were $848 million, up $34 million or approximately 4% greater than the prior year. Our first quarter gross profit was $477 million, an increase of 7%. Our reported gross profit margin of 56.2% was 1.6 margin points higher than the prior year primarily due to lower non-operating acquisition-related costs, the strength of our proprietary products and a favorable product mix. Our selling and administrative expenses were 12.6% of sales for the current quarter compared to 12.5% in the prior year. We had an increase in interest expense of approximately $15 million, up 10% versus the prior quarter. This is primarily a result of an increase in the weighted average total debt of $11.9 billion in the current quarter versus $11 billion in the prior year. During the quarter, we re-priced approximately $5 billion of our term loans to take advantage of better rates, decreasing LIBOR to plus 2.75% from LIBOR plus 3%. The expected annualized interest expense savings before fees is approximately $13 million related to this re-pricing. However, LIBOR has increased since our last earnings call. So, we are now currently assuming an average LIBOR of about 1.7% for the full year instead of 1.3%. The 1.7% assumes LIBOR rates approach 2% by the end of our fiscal year. As a reminder, once the rates hit 2%, our credit swaps start to kick in. To analyze the impact of increasing LIBOR rates, there is an interest rate sensitivity table included in the slides we provided this morning. We are also actively looking to re-price to our loans, should the opportunity present itself. The net impact of re-pricing and…

Thank you, Kevin. So, we are ready to open the lines.

Our first question comes from the line of Robert Stallard from Vertical Research. Your line is now open.

Hi. Thanks so much. Good morning.

Good morning.

Good morning.

Good morning.

Nick, can I – I thought we'll start on the Aerospace aftermarket. You had a very good first quarter. But your guidance for the year suggests that things are going to slow down from here. Was there anything unusual that you saw in Q1, or is this just a bit of natural caution given it's the start of the year?

I think it's just a bit of natural caution, Rob. As I said, if sort of things hang in at the end of the next quarter, it wouldn't surprise me if we moved the guidance up. It's just, after some bouncing around over the last few years, we tend to believe that one data point doesn't – isn't enough to move on yet. But there's nothing quirky about it.

Okay. And then, maybe as a follow-up, you mentioned you are active in the M&A arena at the moment. Was wondering if you can give us a little bit of color of what you're seeing out there in terms of the properties, if there is anything that's looking particularly strong or weak or attractive at the moment.

Yeah. Rob, as you obviously – when I say we're active, we're active sort of I guess running around in circles or on a treadmill because we didn't close anything. But I mean, the same – it's the same kind of stuff. Proprietary businesses is what we're looking at. We have two or three or four we've been quite active in, but not substantively different than our patterns in the past.

Okay. That's great. Thank you.

Our next question comes from the line of Carter Copeland from Melius Research. Your line is now open.

Hey. Good morning, guys. Welcome, Jim.

Good morning.

Good morning.

Good morning.

Just a couple of quick ones on the OEM piece. I wonder if you might be able to elaborate a little bit more on the timing. I mean, I know we had some wide-body rates that are down. But did you see any destocking of any significance from the A350? I know a couple of other guys have talked about that this quarter.

Yeah. I'll lump that all into a wide-body opportunities pushing to the left and slow down some of the startup. So, the answer is, yes, across the board to the wide-body. Again, on that OEM side, we're not seeing any change in chipset content. So, the opportunities we have continue to grow and expand. It's just timing related. That's what we see so far.

Okay. Great. And on the freight piece, clearly, encouraging to see that bouncing a little bit here. Can you give us any color on just how significant that growth was either in bookings or shipments?

Well, we don't want to – I was just trying to give you guys some color. We don't want to go through what we presented last year with all the details for the submarkets. It is up nicely. It's not unlike I think the demand in the industry. You've seen the FTK's freight tons shipped metrics out there that continue to grow. I think 2017 expanded at 9%. I can't tie our freight business to that, but just to say that there is both in the metrics and from what other folks are reporting, there's strength in the freight sector and we have seen it in our orders and shipments.

All right. Thanks, Kevin. I'll hop back in the queue, guys.

I think it's fair to say that, if anything, that's probably a little better than...

It is. It is.

Yeah.

Great. Thanks, guys.

Our next question comes from the line of Sheila Kahyaoglu from Jefferies.

Hi. Good morning, guys, and thanks for the time. Can we talk about the commercial aftermarket? It was up very nicely at 10%, but your EBITDA grew 5%. So, maybe just mix and what drove some of maybe the more muted profitability growth?

Kevin, do you want to...

Yeah. Sure. So, it's a good question. Our profitability was up close to 1% year-over-year. I know that, with the 10% growth in aftermarket, some would feel that maybe it should be higher. As we look through it, the shipments that we had, we were impacted by some margin softness on the defense side that lowered our margins as a whole business. Specifically, I look to the parachute business that we have; our Airborne businesses in North America and Europe. Certainly, we've seen some lumpiness in shipments and that has impacted some margins a bit across the business. Beyond the shipments that we had available to us we shipped, that's the only thing that I can see that might explain or does explain the somewhat lower margin than we would have expected. Some headwinds on the defense side of the business specific to our parachute business, which we've seen in the past can be extremely lumpy and that came to pass this Q1 as well. Now, for the year, in those businesses, I think we still feel confident in our plans. That's just what we saw in the first quarter.

And for our year, we're still comfortable that we get up just a little under 50%.

Yeah that's right. Good point. So, we have a first half and a second half ramp that is not unusual for us, getting close to the 50%, which is in our full year margin guidance. It's ramping over the year as per usual. I don't think there's any concern that we have that there is anything impacting us there.

Sure. Thanks, Kevin, for the color. And then, I guess, just one more. How does tax reform change capital deployment? Does it – how...

Can you speak up? We can't hear you. Could you speak up a little?

Believe it or not, Nick, I'm yelling. But I always come off...

All right. (33:28).

I'm loud. But how does tax reform change and interest rate deductibility change your acquisition hurdles from here?

Is the question, just to be clear I have it, how does the tax rules, the change in tax laws change our acquisition criteria?

Yeah, exactly.

I don't think it changes it at all. I mean, we go through the same math we always go through, maybe you pay a little net more for interest, but on the other hand, you pay less taxes in total. I doubt if it has any material impact.

Got it. Thank you very much.

Our next question comes from the line of Matt McConnell from RBC. Your line is now open.

Thank you. Good morning. Just to follow up on the transport OEM sales decline, any – are you seeing any change in the portion of your sales that are sole sourced or are their pricing dynamics , or I'll just ask, as most of your biggest content programs are probably seeing increases in production rates, so anything else there that we should be thinking about?

Nothing that I can put my finger on. No changes in chipset content. No change to sole source position. No changes. It's very clear as I look across the business, there's really nothing to report there.

Okay, great. Thanks. And maybe just another one on tax and how it might impact M&A; is it changing seller expectations in any way? I don't know if private companies are seeing better after-tax cash flow and that changes their willingness to sell. Is it impacting the M&A market in any way like that?

This is Nick, Matt. Not in a – I mean, if it is, it's too soon to tell. I suspect – I think that's probably slicing it too thin. I think people by and large make the decisions for sort of more macro issues than that, but it's too soon to tell. But I'd be very surprised.

Okay. All right. Thanks very much.

Our next question comes from the line of Seth Seifman from JPMorgan. Your line is now open.

Thanks very much, and good morning. Nick, can you update us on the status of your partnering for success negotiations and when you expect to conclude them?

Yeah. I mean I can tell you where we stand, which is, we really – there's no great progress going forward. We're in periodic discussions. The contract runs out at the end – Kevin, I want to say calendar year 2018.

Yes.

Calendar year 2018, right? Not fiscal year 2018. I suspect there'll be little to report until we get very close to that. And we will still have the issue; if you recall, they typically conclude with a mutual confidentiality agreement which says you can't report a lot anyway.

Right. That makes sense. Thanks. And then, on the – it sounded like things were kind of tracking to your expectations in the interior retrofits business. But I was wondering kind of when you thought you might start to get some better visibility there given that I would think it's one of your aftermarket businesses that has a relatively large backlog relative to sales.

Yeah. I think, as the year progresses, we'll get more visibility on backlog, orders, business, as it splits out. There's a lot that the teams are working on, on retrofits and fleet upgrades that continues to be promising. So, time will tell as the orders are booked and placed. But there's a lot of activity. I think it's probably safe to say, I mean, we gave some rough guidance in the beginning of the year. We really don't see any need to change that now.

That's right.

Yeah.

Great. Thanks very much.

Our next question comes from line of Rajeev Lalwani from Morgan Stanley. Your line is now open. Rajeev Lalwani - Morgan Stanley & Co. LLC: Good morning, gentlemen. Thanks for the time.

Good morning. Rajeev Lalwani - Morgan Stanley & Co. LLC: Kevin, a question for you on the aftermarket front. Are you seeing a growing incidence of interactions with Boeing at all as a customer there just given their push to take over some of the maintenance and procurement activities of some of the airlines?

I would say we're not seeing any activity there that is any different from the past. Nothing that I'm aware of. Rajeev Lalwani - Morgan Stanley & Co. LLC: Okay. That's helpful. And then, just a clarification or a quick question on the tax side. Can you maybe just go over what you're expecting the tax rate to be going forward? I think, before, you're highlighting no real benefit from tax reform, but that seems to maybe have a changed a bit. Maybe I'm just misreading what you guys are highlighting now.

Let me try – at least, I'll just answer the cash. And, Jim, you can answer the rest of it. I think, as we said, we expect $20 million extra cash this year in 2018. So, that's one clear benefit. And, Jim, do you want...

Yeah. I mean, is your question 2018 or 2019 going forward? Rajeev Lalwani - Morgan Stanley & Co. LLC: Yeah, more of the rest of fiscal 2018 and then just on a go-forward basis of 2019 and beyond, both tax rate and maybe from a GAAP perspective and then a cash perspective.

It's a little bit hard to forecast 2019 and forward. All the regulations aren't yet fully defined. We believe it's going to be slightly higher than the statutory rate of 21%. The interest rate cap of 30% EBITDA kicks in, in 2019 to 2021. That's going to be – that's the piece you should probably take a look at that will impact us the most. But it's still going to be down from where it has been historically. So, it's still going to be positive for TransDigm. So – if you're going to – for planning purposes, slightly higher than the statutory rate of 21% is what I suggest you use.

And I think it's safe to say, Jim, that we will be reasonably significantly (00:39:59), correct.

Versus what it would have been otherwise. Rajeev Lalwani - Morgan Stanley & Co. LLC: Thank you, gentlemen.

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

Hi, good morning, everybody.

Good morning.

I just wanted to ask first, on the defense side, I mean, you highlighted or called out some really strong bookings for both the OE and the aftermarket. Can you just remind us again maybe how the business splits on the defense between OE and aftermarket or maybe what portion of your sales are book and ship? I mean, it sounded like you were clearly not wanting to get too excited about the bookings, specifically, as it relates to the second quarter. But how should we think about this from a timing standpoint or the business mix?

So, you asked a few things there. Let me – just to – for the split of OEM and aftermarket for defense business, it about splits like the rest of our business, 40%, 60%; 45%, 55% about on with the rest of the business of OEM being slightly less than the aftermarket.

What were the follow-up pieces to your question again? Can you repeat those?

Just how much of the businesses is book and ship perhaps or what's the timing with the really strong bookings because it sounded like you were a little cautious about direct read-through to the second quarter?

Well, I do that because sometimes we give more – we try to give some bookings guidance and there's always confusion about when that will come in. We book – we allow our businesses to place orders that – or put orders into the booking system that are due in the next two years. So, on the defense side, you have a lot more planning into the future on both the OEM and aftermarket side. So, I was cautious that I wouldn't expect Q2 to go up some dramatic number. We're confident with our guidance on the defense side, and we see the opportunities coming in and the order book seems to support that. That's – it's just caution as well as the timing of defense orders and when they're due to be shipped.

Okay.

Yeah. I think, Kevin, we don't know that we can draw any conclusion versus our year yet other than it's – you got to look at it as a positive rather than – it's a kind of a favorable data point.

Yeah. And if I could just one on the commercial aftermarket, I'm just curious with the OEM sort of getting maybe a little bit more aggressive on the aftermarket airframe OEMs. Has anything changed in your thinking or philosophy around distributors and maybe the types of distributors you use or for your aftermarket business going direct versus distributors?

We use distributors significantly in aftermarket. That is something that I think will continue. We always evaluate our relations on a business unit by business unit. But as a company, TransDigm, we do not direct our business units what to do. They have that local autonomy that we encourage as a key part of our culture. So, they make decisions on what's best for their business. The major distributors that we track and sometimes report on, they only make up 25% to 30% of our business. So, we already take a considerable amount of our aftermarket business direct. So, moving distributors is a small part of the aftermarket business and is really up to the individual business units to decide on. That's what we see and how we drive the business.

Perfect. Thank you very much, Kevin.

Sure.

Our next question comes from the line of Michael Ciarmoli with SunTrust. Your line is now open.

Hey. Good morning, guys. Thanks for taking the question.

Good morning.

Good morning.

Nick, I may have missed this. But did you give details on the commercial aftermarket bookings? I know you talked about the strength in defense on the OE and aftermarket. But any color on how the commercial aftermarket trended in the quarter?

Yeah. The bookings – we didn't talk about it. The bookings are – we didn't give a specific number. But the bookings are coming in ahead of the revenues...

The book-to-ships is up.

Okay, okay. And then, just sticking with the aftermarket, we're seeing a lot of provisioning strength in the marketplace on some of the newer platforms. You obviously had a good growth this quarter. I know you're hesitant to change anything for the rest of the year. But are you seeing any – on some of your products where you have positions on those new airframes? Are you seeing any provision-related growth in that aftermarket?

No. Generally speaking, provisioning – initial provisioning is not a significant piece for us. And so, we don't see provisioning as a headwind or a tailwind to any given quarter or year.

Got it. That's helpful. And then, just last one. Any color on the defense booking strength, specific product lines or platforms?

It's largely spread across our business units as well. In the past, we had called out a unit here or there that had significant bookings in a quarter, and that's not been the case. It is nicely spread both on the bookings and shipments across all of our business units – or most of our business units, I should say. And so, it's nicely spread. It's not due to one program or one product or one company.

Got it. Perfect. Thanks a lot, guys. I'll jump back in the queue.

And our next question comes from the line of Gautam Khanna from Cowen and Company. Your line is now open. Gautam Khanna - Cowen & Co. LLC: Thanks. Good morning. Nick, can you comment on your comfort with leverage here? Just in terms of – in the past, I think you've talked about willingness to go to seven or eight times for the right acquisition. Is that still your level of comfort given tax reform in the market and where we are in the cycle?

I don't think the tax reform changes my view on that. I mean, the fundamental question – the fundamental issue there is that debt is very substantially cheaper than equity on an after-tax basis. And to the extent you're comfortable carrying it, which a business like this should with its stability you ought to be very biased on the debt side, if you want to maximize the equity return. I don't think the tax law changes that. I think it's a fairly small tweak in the calculus there. What was the other question? On the leverage level, I would say, as a practical matter, in the marketplace, you've been limited to around seven times in the last probably year or so. That may be loosening up a little bit, but it's too soon to tell. Gautam Khanna - Cowen & Co. LLC: Okay. And you mentioned an active M&A pipeline. Are you seeing larger properties than that pipeline that's in your criteria...

I would say more are typical size range of stuff. Gautam Khanna - Cowen & Co. LLC: Okay.

I can't say there's any – I can't say there's disproportionately large group of candidates. Gautam Khanna - Cowen & Co. LLC: Got it. And is it mostly private or there are also some public?

All of the above. Gautam Khanna - Cowen & Co. LLC: Okay.

Which does not – as I say all the time, predicting closing rates or closures is very difficult. Gautam Khanna - Cowen & Co. LLC: Understood. Last one for you, Nick. Maybe you could just talk a little bit about your plans, this comp agreement that goes a number of years and just what do you see kind of in the next five years do you expect to be with the firm and in the same role or if any of your thoughts have evolved on that.

Yeah. I don't think my thoughts have changed from all the things I've shared with people. As you know, I have a contract that runs out through 2019, and that contemplates at some point I would transition into a role like, say, an Executive Chairman that would be probably maintain a reasonable amount of responsibility for capital allocation, M&A activity and things like that. I don't think my thoughts have changed on that. I'm in no hurry to get out of here and no hurry to disengage. Gautam Khanna - Cowen & Co. LLC: Thanks a lot, guys.

Our next question comes from the line of Hunter Keay from Wolfe Research. Your line is now open.

Hi. Thank you. Good morning.

Good morning.

Good morning. How do you think about the risks and the opportunities prevented from Boeing potentially forming a JV with Embraer?

I don't -- I can't really assess that. I don't see whether there's any being particular impact us to that. Embraer is one of many customers for airplanes, not disproportionately large or small.

Okay.

I think probably is always risky, but I'll say it anyway. I think we – our content with Canadair is larger than our content in Embraer. Just to put it into context. But Embraer is a good...

Good account.

Good account – good partnership we have.

I got you. And then, Nick, last time where you said – last May, you talked about there have been no growth – real growth in commercial aftermarket revenues in terms of pricing – X pricing over the last few years. It's early in the year obviously. But given the start you're off of 10% commercial aftermarket revenues and the way you just said about bookings being up more than that, are you hesitating to raise the guide even they are suggesting it's obviously impossible? But are you hesitant – you raised the guide so soon because maybe you are seeing some pricing improvements and you haven't seen that in so many years that you're hesitant to sort of bank on it?

All of it. I never said we weren't seeing pricing improvements.

I thought you're saying that there was no growth like X pricing or whatever it was last May?

What I said is across the industry. What I said is, last year, we went through a road show and also posted it up on our website a look at the organic growth across the industry and for ourselves, and we concluded that, over the last five years, if you strip out price, the commercial aftermarket in total growth was de minimis. I guess that's what you're referring to.

Yes. I guess I misinterpreted that, but...

I don't – just to be clear – I don't think we ever said that there was particular pricing pressure.

Okay.

It was the underlying real growth and we saw that across the whole industry when we went through all the public comps of our competitors. I would say 10% is obviously better than that. The prices aren't up 10%. So that's obviously is real growth. And are we a little wary because of the volatility in the last three or four years? Yeah, we are. Hopefully, that's not to say that we would very much like to be wrong, and I think we feel quite comfortable with our guidance. And as I said, if it hangs in pretty well, it wouldn't surprise me if we bumped it up next quarter.

I got it. Thank you very much.

But we're reticent – as we said at the beginning of the year, unless our guidance changes outside of the ranges, we're going to stick with our original guidance until we think we have a material change.

Okay. Thank you.

Our next question comes from the line of Drew Lipke from Stephens. Your line is open.

Yeah. Good morning. Thank you for taking my question. Maybe just sticking on that last point there and to your commentary last May about traffic no longer really driving after market volume just due to the impact of younger aircraft. I'm curious, if you look at the number of aircraft that are reaching five years in service, maybe just using that as a proxy, you know it kind of points to double-digit growth in calendar 2017, high-single digit growth in 2018 and 2019. And I think the ultimate conclusion from that was that the aircraft coming on lease was a bigger factor. So it seems like we should be seeing that now. And I'm curious, are you seeing that come to fruition or not and can you just kind of talk around that a little bit?

I think you saw the quarter. I would say – and I just want to emphasize, one quarter – one data point doesn't make a trend. But, obviously, what we saw in the first quarter, we view it as a positive.

Okay. Yeah, I was just thinking...

I also think as we went through this last year, I don't think this is something that changes rapidly. This age of the – this aircraft over percent (53:48) less than five years and over five years, that doesn't make a step change that sort of a gradual thing is it changes. It'll change fastest if the production rates drop off, that doesn't mean we're cheerleading for production rates to drop off. But, just mathematically, that'll happen. But I think you have to look at the first quarter as a good data point.

And I think you guys always talk about rolling four quarter averages for your commercial aftermarket organic growth. And I think the last four quarters it's been kind of 4%, and that includes price. And so, I mean, maybe is that a reason that we should point to for the mid-single digit growth maintaining for fiscal 2018 for that guidance?

I think we gave you the guidance for the year and I think we're telling you is that's the guidance we continue to stick with. If we see – if we get more data points that would make us think differently, then we'd likely adjust it, but as of right now, I think we're comfortable just staying with it.

Okay. And then just a quick one maybe for Jim; it looks like you restated the December 2016 adjusted EBITDA and adjusted earnings lower and I wasn't quite clear in the release as to why that was, perhaps I missed it, but can you just talk through that a little bit?

Oh, from Q1?

Yes. 2016, fiscal 2017?

All right. Yeah. Basically what we did – from Q1 of 2017, we basically aligned our EBITDA As Defined with our credit agreement. All right? So, when we report EBITDA As Defined, the As Defined is basically per our credit agreement, we found a disconnect in that we were including the FX adjustments for revaluating the balance sheet. So we went back and corrected that.

In both periods.

In both periods, so that we had apples-and-apples, correct.

Okay. That's helpful. Thanks, guys.

Our next question comes from the line of Peter Arment from Baird. Sir, your line is now open. Peter J. Arment - Robert W. Baird & Co., Inc.: Yeah. Thanks. Good morning, everyone.

Good morning. Peter J. Arment - Robert W. Baird & Co., Inc.: And Nick, just a quick one on the defense bookings or I guess the environment. Looks like we're going to get another CR extended out into March. Are you guys seeing any impact from that or when would you start to feel an impact if it got extended again?

I don't – you know, by the time that dribbles down to our level of buy, it's awful hard to see. I would be surprised if we see much.

But the truth is that's going to dribble its way, way down the waterfall before it gets to our waters. Peter J. Arment - Robert W. Baird & Co., Inc.: Okay.

I don't see much change at least now. If you made some assumptions, it's going to be a substantive dislocation in defense spending and we start to see that, but I don't see people saying that. Peter J. Arment - Robert W. Baird & Co., Inc.: Okay. Great. And then, just a quick one, Jim, a clarification. You said net leverage by the end of the year if you did no M&A or any sort of cash to shareholders.

It was 5.6% to 5.8%.

Which is what we said at the beginning of the year.

So, no change. Peter J. Arment - Robert W. Baird & Co., Inc.: No change. Okay. Thanks again, Nick.

Our next question comes from line of David Stratton from Great Lakes Review. Sir, your line is now open.

Hello. Is anyone there?

David Stratton, your line is now open.

Hello?

Hello?

Can you hear me now?

Yes.

Okay. Sorry about that. The question was, given your credit swaps, what do you estimate is the percentage of your fixed debt to total debt?

It's about 74%, 75% fixed.

Yeah...

Thanks to our collars.

Right. And then given that LIBOR is increasing. At what point, do you get away from that derivative base protection and transition your balance sheet to more fixed rate debt in general?

You're talking about now a future philosophy, correct? Not where it exists now?

Right, exactly, if you continue to raise the interest rate?

We'd – I would say we just have to evaluate that, as the situation comes up. I'm very, very to speculate on what we're doing in different capital market conditions until we see them.

All right. Thank you.

As of right now, interestingly enough, though the LIBOR is rising, essentially the spread on our debt for variable debt is dropping.

This is so far such that the net interest paid isn't changing.

And I'm currently showing no further questions. I would now like to turn call back to Ms. Liza Sabol for any further remarks.

We just want to thank everyone for calling in today, and that concludes this morning's earnings call.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program, and you may all disconnect. Everyone, have a great day.