Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Allison Transmission's First Quarter 2018 Results Conference Call. My name is Melissa, and I will be your conference call operator today. At this time, all participants are in a listen-only mode. After the prepared remarks, the management from Allison Transmission will conduct a question-and-answer session and conference call participants will be given instructions at that time. As a reminder, this conference call is being recorded. I would now like to turn the call over to Mr. Fred Bohley, the company's Vice President of Finance and Treasurer. Please go ahead, sir.

Thank you, Melissa. Good morning and thank you for joining us on our first quarter 2018 results conference call. With me this morning is Larry Dewey, Allison Transmission's Chairman and Chief Executive Officer, and Dave Graziosi, Allison Transmission's President and Chief Financial Officer. As a reminder, this call, webcast, and presentation we are using this morning are available on the Investor Relations section of our website, allisontransmission.com. A replay of this call will be available through May 8. As noted on page 2 of the presentation, many of our remarks today contain forward-looking statements based on current expectations. These forward-looking statements are subject to known and unknown risks including those set forth in our first quarter 2018 results press release and our Annual Report on Form 10-K for the year ended December 31, 2017, and other uncertainties and other factors as well as general economic conditions. Should one or more of these risks or uncertainties materialize or should underlining assumptions or estimates prove incorrect, actual results may vary materially from those we express today. In addition, as noted on page 3 of the presentation, some of our remarks today contain non-GAAP financial measures as defined by the SEC. You can find reconciliations of the non-GAAP financial measures to the most comparable GAAP measures attached as an appendix to the presentation and to our first quarter 2018 results press release. Today's call is set to end at 8:45 AM Eastern Time. In order to maximize participation opportunities on the call, we'll take one question from each analyst. Please turn to slide 4 of the presentation for the call agenda. Now, I'll turn the call over to Larry Dewey.

Thanks, Fred. Good morning and thank you for joining us. During today's call, I will provide you with an overview of our first quarter results, including net sales by end market. Dave Graziosi will then review the first quarter financial performance and the 2018 guidance update. I'll wrap up the prepared comments prior to commencing the Q&A. We are pleased to report that Allison's first quarter 2018 results exceeded the full year guidance ranges we provided to the market on February 14. Allison's first quarter net sales increased 33% from the same period in 2017 and net sales growth, once again, occurred across all our end markets. Furthermore, our established track record of solid financial performance and a well-defined approach to capital structure and allocation continued into 2018. Please turn to slide 5 of the presentation for the Q1 2018 performance summary. As I've just stated, net sales increased 33% from the same period in 2017, principally driven by higher demand in the Global On-Highway, Service Parts, Support Equipment & Other, and Global Off-Highway end markets. Gross margin for the quarter was 51.6%, an increase of 130 basis points from a gross margin of 50.3% for the same period in 2017, principally driven by favorable net sales and price increases on certain products, partially offset by expenses related to our retirement incentive program for certain UAW Local 933 employees and unfavorable material costs. Please turn to slide 6 of the presentation for the Q1 2018 sales performance summary. North America On-Highway end market net sales were up 24% from the same period in 2017, principally driven by higher demand for Rugged Duty Series models. North America Electric Hybrid-Propulsion Systems for Transit Bus end market net sales were up $4 million from the same period in 2017, principally driven by the timing of certain transit property orders. North America Off-Highway end market net sales were up $32 million from the same period in 2017, principally driven by higher demand from hydraulic fracturing applications. Defense end market net sales were up $10 million from the same period in 2017, principally driven by higher Tracked and Wheeled demand. Outside North America On-Highway end market net sales were up 26% from the same period in 2017, principally driven by higher demand in Europe, Asia, and South America. Outside North America Off-Highway end market net sales were up $6 million from the same period in 2017, principally driven by improved demand in the mining and construction sectors. Service Parts, Support Equipment & Other end market net sales were up 28% from the same period in 2017, principally driven by higher demand for North America Off-Highway service parts and global support equipment. Now, I'll turn the call over to Dave.

Thank you, Larry. Please turn to slide 7 of the presentation for the Q1 2018 financial performance summary. Given Larry's comments, I'll focus on other income statement line items and adjusted EBITDA. Selling, general and administrative expenses increased $13 million from the same period in 2017, principally driven by unfavorable product warranty adjustments and higher warranty expense commensurate with increased net sales, partially offset by lower incentive compensation expense. Engineering, research and development expenses increased $5 million from the same period in 2017, principally driven by increased product initiatives spending. Interest expense net increased $5 million from the same period in 2017, principally driven by the interest expense associated with our 4.75% senior notes due October 2027. Other expense net increased $4 million from the same period in 2017, principally driven by unfavorable changes in foreign exchange on intercompany financing, partially offset by net periodic benefit credits related to postretirement benefit plan amendments. Income tax expense for the first quarter of 2018 was $40 million, resulting in an effective tax rate of 21% versus $44 million of income tax expense and an effective tax rate of 35% for the same period in 2017. The decrease in effective tax rate was principally driven by the U.S. Tax Cuts and Jobs Act enacted into law in December 2017. Net income for the first quarter of 2018 was $151 million compared to $83 million for the same period in 2017. The increase was principally driven by increased gross profit and decreased income tax expense, partially offset by increased selling, general and administrative expenses, increased product initiatives spending, and increased interest expense. Adjusted EBITDA for the first quarter of 2018 was $275 million or 41.5% of net sales compared to $292 million (sic) [$192 million] or 38.5% of net sales for the same period…

Thanks, Dave. Before we open the question-and-answer session, I'd like to take a few moments to comment on the forthcoming leadership transition here at Allison. As we have previously announced, I will be retiring on May 31, and Dave Graziosi will succeed me as CEO. Accordingly, this is my last quarterly results conference call, and I would like to thank you for your interest in Allison and the courtesies extended to our team. It's been a privilege to work with the talented men and women here at Allison Transmission for the past 29 years and an honor to lead them since July 2000, nearly 18 years. Since our divesture from General Motors in 2007 and our IPO in 2012, we've continuously made strides in pursuing Allison's vision delivering our brand promise and living our values. Today, Allison is in its second century as a well-balanced commercial, defense, and engineering-based propulsion solutions provider. The power of Allison is derived from our proven ability to utilize our most valuable assets, our people. Allison people create our technologies, manufacture our high-quality products, and drive our unrelenting focus on creating value for our customers. I believe Dave Graziosi and the entire Allison team is well positioned and prepared to continue to deliver the kind of performance that our customers, investors and all stakeholders have come to expect. This concludes our prepared remarks. Melissa, please open the call for questions.

Thank you. Our first question comes from the line of Tim Thein with Citigroup. Please proceed with your question.

Thanks, and best of luck to you, Larry. It's been quite a run for you. Maybe, Dave, just to – if you can put a little bit more color around the change to the full year revenue outlook, just highlights in terms of what's accounting for the larger parts of the change in the outlook? And then as part of that, does your assumption on pricing, has that changed just given the increase to the overall volume outlook? Thank you.

Sure. Good morning. A couple of things. So, in terms of sales outlook changes, obviously with the strong first quarter results across all of our end markets, if you start to focus on the larger drivers there, in terms of North America On-Highway, clearly the market has a larger, brighter outlook frankly than we expected this year. That's borne out by third-party forecasts, as you're well aware. If you look at our North America On-Highway business, the key focus there in terms of 6, 7 truck as well as Class 8 straight, continue to perform above our expectations. So, that's certainly been reflected in our guide. I think it's worth noting in terms of feedback that I'm sure you have from other public reporting and comment, that the market at this point, appears to be more constrained by supply issues than demand, and I think we're continuing to expect that for the balance of this year. If you look at the other end markets in terms of off highway, North America frac certainly has been a stronger market than we expected. We see that continuing, and as we've talked about the transition from the increase in parts per units over the year is playing itself out as we expected, except at a higher level. Again, I'm sure you're well aware of some of the constraints in that broader market in terms of increasing capacity and the challenges going forward. And our team has, I believe, done a good job managing that and we'll continue to work on that for the balance of the year. Outside North America, in terms of on-highway, continuing to see I would say stable to solid demand in Europe. A number of initiatives there that the team has been driving but overall, pretty stable conditions in…

Got it. Thank you, Dave.

Thank you. Our next question comes from the line of David Leiker with Robert W. Baird. Please proceed with your question. Joe D. Vruwink - Robert W. Baird & Co., Inc.: Hi. This is Joe Vruwink for David.

Hi, Joe.

Good morning. Joe D. Vruwink - Robert W. Baird & Co., Inc.: I wanted to focus on the on-highway business. So, Dave, you kind of addressed why the international business grew by our math probably double the rate of growth underlying volumes on Q1. But the same comment applies to the North America On-Highway business as well that 24% growth is about 2x what the underlying markets did in the quarter. So, I'm wondering, the obvious answer would be either market share some level of price which you cited, but I'd be interested in a little more color of how you're managing to outgrow the markets in North America.

I think your point in terms of, yes, we did pick up some pricing in the first quarter, I would also say, as you know from prior calls, one quarter is tough to extrapolate from a market share perspective. You really need a run rate on that. So, I would not run too fast on that particular point, but I think to your comment, certainly Class 8 straight is benefiting from a very strong vocational market this year and whether that's construction or even some of the municipal side, fleets continue to expand and we're certainly seeing the benefits of that. But I think it's early to declare a broad based victory around significant market share gains. I would say as we've mentioned before, there is a number of very focused initiatives we have for that market around growing our market share. We continue to be very targeted, if you will, in that process. But I think that the team has certainly executed well in terms of supplying what is a pretty tight market and being responsive to very high levels of demand. And we're going to continue to support our OEMs and end users. But beyond that, I think it's, that broadly speaking, the markets have turned out to be certainly larger in terms of improvement this year than third parties had forecast. And again, we'll stay close to that as we look into the second half. Joe D. Vruwink - Robert W. Baird & Co., Inc.: Okay, great. And, Larry, best of luck.

Thank you.

Thank you. Our next question comes from the line of Ian Zaffino with Oppenheimer & Company. Please proceed with your question. Ian Zaffino - Oppenheimer & Co., Inc.: Hi. Great. Thank you very much. Just kind of wanted to drill down in guidance a little bit and I know you mentioned that the outside North America Off-Highway is going to be a driver. Is there a reason why you didn't include North American Off-Highway in there as well, or do you expect that to kind of flatten where outside the U.S. will continue to ramp and maybe some of the drivers there? Thanks.

Sure. Yeah. In terms of North America Off-Highway, again with the focus here, as you know, the majority of our business is in hydraulic frac. As we've talked about the fleet from external comments here very recently, horsepower continues to be added. Having said that, as we see the market playing out here and I think we've pointed to this before, there's only so much capacity that can be added. And I think the idea of trying to supply it in a timely basis with rational cost is important, and we're supporting our customers, I think, as best we can in a relatively constrained market. That being said, as we start to think about the second half in terms of overall visibility, it's safe to say that what we've seen in parts at elevated levels, frankly, record numbers last year as we've talked before will start to come off in terms of run rate. So, then it's how quick you move from parts to units. Again, a lot of the same components suppliers overall, but the idea is that the upgrades will come to some level of completion and then you'd focus on the unit. So we've reflected that, again, in the guide for the second half from an expectation standpoint relatively level and also understanding we're running into tougher comps on the second half year-over-year basis as well. Outside North America Off-Highway, to your point, that market has not seen a pickup certainly as quickly as North America did on the energy side. That being said, the momentum there is pretty strong. We've also supporting some new releases with several customers in that space. I think the acceptance for those products has been strong, and we're certainly happy to be able to support the OEMs and their efforts. So we're seeing some benefit of that as well. But we think it's from a cycle perspective not quite that early, but it's moving towards more of a midpoint there in terms of run rating, and again, it will come down to some level of expectation around how much inventory is going to be carried in the channel going forward. As you know when the market turned down back in second half of 2012, there was a fairly large hangover for a number of years and we're staying close to the channel and understanding what that means going forward to manage our inventories and frankly throughout Allison's channel. Ian Zaffino - Oppenheimer & Co., Inc.: All right. Thank you very much. Good quarter.

Thank you. Our next question comes from the line of Jamie Cook with Credit Suisse. Please proceed with your question. Jamie L. Cook - Credit Suisse Securities (USA) LLC: Hi. Good morning, and congratulations, Larry, on a great run. I guess, a couple questions. One, just as we're talking about a transition, Dave, and you take over, how do we think about any subtle changes to your strategy or approach going forward, if any, sort of balancing margins versus growth opportunities outside of your core markets, I guess, would be my first question. And then just on sort of the easy front, you guys had made some announcements earlier in the year. Can you just talk to whether or not we should be expecting additional announcements coming at Allison or how you're thinking, if there's any change in your view, on how quickly EV develops. Thanks.

Sure. In terms of priorities, look I mean, our strategic priorities are not going to change. This business is well positioned, as Larry said, as you know, from our perspective, continuing to drive the vision, the brand promise, and frankly, our values. We're not going to change the way we do business. I think it's fair to say that the market is changing constantly. This business has to evolve with the market. The pace of change is accelerating. I think our team is well equipped and very talented to handle that. I'm certainly privileged as Larry's been to be with this business for many years. I am as well privileged, going forward, to lead it as well. And I would tell you that, for us, I think the opportunities are out there. I would also tell you the amount of initiatives that we're pursuing at this point versus 10-plus years ago, when I joined the business is dramatically different. So, from my scorekeeping perspective, it's really around executing to those strategic priorities, bringing to completion frankly those initiatives, but also adding others in terms of what the voice of the customer and the market is demanding. I think, to your point, on the EV side, it continues to be a market that's evolving like the rest of our business, and we've pursued that and continue to pursue that. We've done that for decades. So, we feel good again about the positioning there and the number of initiatives we're pursuing. I think there's been some recent developments, as you mentioned, as well as some that are continuing to be worked from a planning perspective, but I would say, overall, our going-in position as we've looked at our spend to support technology development, et cetera, is up this year as we talked about in the original guide. It's not solely focused on EV. It goes across all of our solutions. And, again, we think about it as a range of solutions. We compete in a complex and fragmented space. So, one size doesn't fit all, and we plan on being able to support a range of propulsion solutions from conventional to hybrid to fully electric, and that's an important point because as you read about announcements, et cetera, you really need to take that back to what portion of the market does that refer to and again how does Allison play in that space. I think we're a logical player in this space certainly given our capabilities. Jamie L. Cook - Credit Suisse Securities (USA) LLC: Okay. Thank you.

Yeah. I would just tag on a little bit to that. Dave, I think, has kind of captured all the key points, but a couple I want to emphasize. As you know, we've been engaged with the OEMs for some time regarding electrification. Dave talked about decades, and it literally goes back to the late 1990s that we've been involved. So we understand the technology. We understand what it takes to integrate electrification into a vehicle. We understand the capabilities, and frankly, we understand the limitations. And those are the things that we focus on. We want to deliver products that provide value to customers and applications as they use them in the real world, not a science fair project, but something that they can use in their revenue service. And those products in addition to providing value to customers need to provide returns to shareholders, jobs for our employees, and business for our suppliers. And so, we're focused on those things, the fundamentals, not necessarily headlines for executives or photo ops. And so that's really been our focus and it will continue to be our focus. Jamie L. Cook - Credit Suisse Securities (USA) LLC: Okay. Appreciate the colors always and congratulations again.

Thanks.

Thank you. Our next question comes from the line of Jerry Revich with Goldman Sachs. Please proceed with your question. Jerry Revich - Goldman Sachs & Co. LLC: Hi. Good morning, everyone, and, Larry and Dave, congratulations. And, Larry, quite the quarter to leave on as well.

Thank you. Jerry Revich - Goldman Sachs & Co. LLC: I'm wondering if you could talk about price cost. Dave, you had mentioned you had tweaked up your pricing expectations by 25 basis points for the year. Does that really cover the material cost inflation? Can you talk about how you expect that to shape up over the course of the year? And looking at the guidance for the year, typically, your margins will land more or less in line with your first quarter margin performance based on normal seasonality for the full year, and looks like you're giving yourself some room to execute or maybe you expect the price cost to be less advantageous, et cetera. Can you just help us through price cost and other drivers of your margin expectations in coming quarters compared to what we just saw in the first quarter?

Sure. In terms of price cost, our original guide assumed increases for steel and aluminum. So we've continued to track that. Our revised guide has some increased incrementally for both of those as well. So, we think we've reflected what's out there from a forecast perspective. I would say on the price side, again, we don't price for cost. We price for value. So, our ability to execute there is going to be derived from the value that we deliver. And I think the team continues to push that agenda, and so what we can do and how we benefit end users as well as OEMS for that matter. So, I think the overall guide moving that up to 50 basis points certainly, I believe, more than covers what we see from a commodity cost perspective. I do think it's fair to say we're also seeing as you've heard others report some level of cost creep in other areas, whether to a degree supplemental charges to fill in from a components perspective. I think there's a fair bit of labor tightness out there throughout the supply chain that's being addressed. Freight is up as well. So, we've reflected that as well. And as some other initiatives in our guide we started the year out, the team has with creating some tailwind for us in terms of resourcing as well and have continued to execute on that front. That being said, given how busy the market is, those things become that much more challenging to execute, but we feel good about the overall guide in terms of components and driving the pieces there. In terms of the guidance for the year when you look at the quarters, understand as we talked about with selling, general, administrative, there is some seasonality to our spend from a marketing sales and service perspective. So, I would, at this point, assume relatively flat to higher levels on a quarter-to-quarter basis Q3 and Q2 versus Q1. I think the engineering side we're continuing to ramp, as I mentioned on to an earlier question, in terms of initiatives. We expect spending to elevate into the year as initiatives are ramped, so you'll see some increases there. Overall from a gross margin perspective, typically we perform frankly, I think, the best historically in quarters one and three. I'm not sure I would see those playing out that much differently at this point this year. And then Q4 typically is weaker because of the reduction in days in terms of operating there and sales for that matter. So, I think we're being prudent in terms of approach on cost. Again, we resource this business from an over-the-cycle perspective. So, we're trying to manage that very closely relative to opportunities. And some of the commercial initiatives that I mentioned earlier, we certainly plan on supporting through the second half.

Yeah. This is Fred. Specifically on commodities, in the 10-K, we disclosed that of our cost of goods sold, about 70% is purchased component. And of that 70%, about 11% is exposed to raw material. And then we have a sensitivity laid out in there that a 10% increase in aluminum and steel is going to drive about a $2 million and a $5 million per year increase in our cost. That doesn't include any offsets we get from pass-throughs to our OEMs via the material surcharges that we have in place. Those typically do lag. We'll see the raw material come in, in the quarter and the pass-throughs to the OEMs will lag about six months. Jerry Revich - Goldman Sachs & Co. LLC: Okay. Thank you. And just a clarification. Dave, you had mentioned labor tightness and freight costs, are things incrementally escalating from first quarter levels, or are you seeing greater inflation over the course of the year as you look at your plans or does that comment reflect the escalation that we saw in the first quarter?

Really, the escalation in the first quarter in terms of run rating it, Jerry. And again, I think the team is certainly making an effort there to try to manage that closely. I think frankly also sanity check., when you get into these types of markets, it's well worth your time to dig in to request and ask for support if they're coming through on incrementals and how you think about that. We certainly know from the structure of our business there's a fairly high level of operating leverage at these volumes well we typically expect others that we deal with to have some of those similar economics. So, I think there's always some balance that you have to have there. That being said, the urgency to supply and be able to support our customers is obviously key to us. And we're committed to continue to do that and have made those investments, both with our business as well as within our supply chain, and we expect to execute. But at the same time, there needs to be a rational approach there in terms of cost because what you, I believe, do not want to do is create that negative annuity, so to speak, going forward without the support for it. So we'll stay close to that and, as I said, continue to work with our partners on that front as well as resourcing effort globally. Jerry Revich - Goldman Sachs & Co. LLC: Okay. Thank you.

Thank you. Our next question comes from the line of Larry De Maria with William Blair. Please proceed with your question. Larry T. De Maria - William Blair & Co. LLC: Hi. Thanks. Good morning. Best of luck, Larry. I was just wondering if you could just update us on two things. First of all, just anything on FuelSense 2.0 and the impact we might see in your pricing assumptions, up 50 basis points this year. And secondly, more importantly, been a lot of articles and discussion about AMT being used in more applications. Can you discuss what you're seeing and where those lines are being blurred? And just what's going on overall from your perspective, so we can kind of rebase our expectations since you see a lot of articles about this stuff. But I want to hear what you guys have to say. Thank you very much.

Yeah. This is Larry. The relative – I'll answer the second part, and then Dave can jump on the FuelSense piece. Relative to the AMTs, they have made some inroads primarily in areas where manuals had historically been. In fact, as we look at the data, and I think Dave's earlier comments are right on, you don't look at one quarter's worth of data and say, okay, that's how it's going to play out over the full-year seasonality. Having said that, it would be fair to say we feel pretty good about what we're seeing relative to those growth initiatives that we have been pursuing relative to driving our market share around the world in the on-highway space. And so to the extent there are more AMTs being sold, we have not really seen that in our market share numbers year-over-year. First quarter, obviously, you guys have done the math. Again, we caution against just extrapolating that for the year; having said that, it certainly would suggest that we're in very solid shape relative to continuing to drive our market share. So, it's typically in applications, tractors, and even there we're up a little bit, although we're still a small player, but we're up there as well. But it's primarily in those tractor applications over the road, if you will, that we're using manual transmissions.

On the FuelSense question, as we talked about I believe on the fourth quarter call and the guide for 2018, the initial guide, that FuelSense 2.0 is being introduced into the market. It's going to follow OEM releases, so Allison does not dictate timing there, the OEMS do in terms of their releases and those will be staged throughout the year. I would say that the benefit of FuelSense currently is reflected in our Parts, Support Equipment & Other end market. So, it's not in the pricing comments that I mentioned earlier. So to be clear, we're tracking that separately and we'll continue to assess the opportunities. I would say that at least the feedback from end users has been very positive concerning their experience with FuelSense, but again, we're going to follow what the OEM timing is there. But I would say from where we sit today versus our expectations coming into the year, we feel well positioned there to see some level of pick-up relative to second half versus first half there; and more importantly, how we're positioning FuelSense for 2019. Larry T. De Maria - William Blair & Co. LLC: Great. Thank you very much.

Thank you. Our next question comes from the line of Ann Duignan with JPMorgan. Please proceed with your question.

Hi. Good morning. And same for me, Larry, I wish you the best.

Thank you.

Maybe you could talk a little bit about off-highway and the supply chain issues. Is there any risk that your customers will turn to other suppliers whether they be will fits or remanufactured products or international products? Is there any risk that you lose market share because you just cannot keep up with demand?

At this point, I think there's always a challenge there, and we're peddling the bicycle as fast as we can. One of the things that we have done, and Dave touched on this in his earlier remarks and I'll put a little sharper point on it, one of the areas where we have taken some cost increases is in the off-highway space component supply relative to securing additional validated sources that we can use to make sure that we are covering the needs of our customers. And while it's nip and tuck every month and literally there are daily updates on particularly in that space, it's across – all of our end markets are strong – but particularly in the off-highway space. So at this point in time, I think that's a pretty manageable risk and one that we think we were in good shape on. Obviously, we're in dialog with our OEMs, our customers, and we feel certainly a lot better than we did 60 or 90 days ago. And we're clearly keeping up, and we don't have any cushion, but we're keeping up.

And can you expand on the supply chain issues where you've had to validate incremental suppliers, what specific components are those?

Well, obviously, in terms of some of the specific components, we probably wouldn't get into that level of detail, Ann. But certainly, they are complex. Our transmissions are complex. And so we've engaged with suppliers, in some case, previous suppliers that we've been able to reactivate at a cost and secure some incremental volume from them. Again, our focus is making sure that while the urgency to supply is strong, it's important that we maintain the quality focus that our reputation is based on.

And I appreciate that. Good luck, and best wishes.

Thank you.

Thank you. Our next question comes from the line of Seth Weber with RBC Capital Markets. Please proceed with your question.

Hey. Good morning.

Good morning.

Good morning.

Just a couple a couple of quick ones. I'm sorry if I missed this, but is there any color around the 7% sequential decline in Asia that you called out in the press release? Is that all China, or is there anything you could expand on that with?

So in terms of Asia, we talked about this before in terms of some of the end markets, specifically around applications, for instance, China bus, typically, it's going to be relatively lumpy from a tender standpoint. So, that plays itself out. And you saw that we had a very strong fourth quarter last year versus first quarter this year. That scenario continues to play itself out. We don't have any expectations that market is going to change. I would say, overall, with Asia, the big performers this year in terms of strength is really focused more so on Japan and China truck, and that's where we have the team really driving a number of initiatives this year. Japan again more so from an export standpoint, as you know, they have very strong position into Australia really on the medium side and other markets, but they certainly have seen some strength this year. But I would say overall for Asia, India continues to be a bit of a challenge from a market standpoint. It's been slower to develop. But overall, it really gets down to some of the tender timing on a year-over-year basis, how we manage that.

Okay. Thanks, Dave. That's helpful. And then just on the SG&A, you continue to call out this unfavorable product warranty adjustment. Is that the same as we've been seeing in prior quarters, and is it getting bigger or smaller, or is there any way that we should kind of handicap that going forward?

Look, I mean, as we've talked about, it's not necessarily linear, right? There's some that has obviously driven by volume, to a degree, but it's also experience with the products, and we're continually evolving and so are our customers in terms of how they use that. So, we have, on a consistent and constant basis, always looking at warranty, and there is adjustments up and down. But that's really the nature of the beast in terms of what's there. I would say with the level of usage that we're seeing in end markets the products are being used, and that's evident in some of the experience that we have. We also have what we believe is the most liberal warranty policy in the industry. So that's one of the things that you receive as part of our premier industrial product like ours. You're going to get that experience and we stand by that. And we'll continue to drive that as one of our core competitive advantages. But I would say it's not necessarily something that's a continuing issue as much as it is a continuing result of constantly refining and looking at our experience.

That makes sense. Appreciate the color, guys. Thanks.

Thank you. Ladies and gentlemen, that does conclude the time we have allowed for questions. I'd like to turn the floor back to Mr. Graziosi for any final comments.

I like to again thank everybody for joining us on the call this morning, and I look forward to our next quarterly call. Thank you.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.