Ladies and gentlemen, thank you for standing by, and welcome to the Eaton fourth quarter 2016 earnings conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question and answer session, and instructions will be given at that time. Also, as a reminder, today's teleconference is being recorded. At this time, I'll turn the conference over to your host, Senior Vice President of Investor Relations, Mr. Don Bullock. Please go ahead, sir.

Good morning. I'm Don Bullock, for those of you who don't know me. I'm Eaton's Senior Vice President of Investor Relations. I want to thank you all for joining us for our fourth quarter 2016 earnings call. With me today are Craig Arnold, our Chairman and CEO, and Rick Fearon, our Vice Chairman and Chief Financial Officer. As is typical, our agenda today is going to include opening remarks by Craig, highlighting our performance in the fourth quarter and our outlook for 2017. As has also been our previous practice in past calls, we'll be taking questions at the end of Craig's comments. The press release for our earnings announcement this morning and the presentation have been posted on our website at www.eaton.com. Please note that both the press release and the presentation do include reconciliations to non-GAAP measures. And a webcast of this call is accessible on our website and will be available for replay for those of you who will not be able to listen to the whole call. Before we get started, I'd like to remind you that our comments today do include statements related to expected future results and are therefore considered forward-looking statements. The actual results may differ from those and from our forecasted projections due to a number and range of risks and uncertainties that we describe in both our earnings release, the presentation, or are outlined in the 10-K. With all of that, I'll turn it over to Craig.

Thanks, Don, appreciate it. Hey, let me begin by saying that we're really pleased with our fourth quarter results. Our net income and operating EPS was $1.12 versus our guidance of $1.05, to $1.15, $1.10 midpoint. Our revenues were down 4%, 3% organically, and our organic growth was slightly better, actually, than our forecast, but it was more than offset by weaker FX. Segment margins were 14.6%, but 16.3% excluding restructuring. So our teams really executed well and did a nice job of controlling costs in the quarter. As noted, our restructuring costs in the quarter were $90 million, up $66 million from our prior guidance. This represents an acceleration of approximately $70 million of restructuring actions that were previously planned for Q1 2017 into Q4. Now, we made this decision to accelerate our restructuring spending in the quarter after we determined that we'd have $70 million of other income in Q4 from resolving a number of insurance matters. These matters primarily relate to past expenses, where we were able to finally reach an agreement with our insurers. This was a significant accomplishment by our team, as some of these matters go back multiple years. Operating cash flow was $638 million in the quarter. This includes a $100 million contribution into our U.S. qualified pension plan. And as a result, our operating cash flow was $2.6 billion for the year. In addition, we purchased $163 million of stock in the quarter, bringing our total repurchases to $730 million for the year, or 2.6% of outstanding shares at the beginning of the year. Turning to page 4, we have a couple of unusual items in the quarter, so we thought it would be helpful to create a bridge reconciling the midpoint of our EPS guidance with our actual results of $1.12…

If you have a question at this point, our operator will give you instructions for those of you who have questions.

Thank you very much.

Before we jump into the questions, I do want to make a couple of comments. If you would, please, given the time constraints today, if you would hold your questions to a single question and a single follow-up, to be sure we get through the number of people who have questions for us. Our first question today comes from Steve Winoker with Bernstein. Steven E. Winoker - Sanford C. Bernstein & Co. LLC: Thanks. And good morning, all. I wanted to just ask a couple questions, one on the tax side and one on Hydraulics. On the tax front, I think you're a net exporter from a finished goods perspective out of the U.S., but maybe give us a little more color there and then how you kind of still currently see the out-year tax rate coming together. You used to talk about 10%, or so, or maybe a little higher than that. And if you were to run through the current proposals Brady and Ryan have discussed, how are you thinking that might affect you?

Rick, do you want to grab that one?

Steve, let me jump in on that one. It's a very popular topic these days. First of all, let me just make the comment that it is really impossible to know what changes at the end of the day we're going to see in U.S. tax policy. As you well know, there are many different proposals and strong supporters of each proposal, and so how that sorts out, I really don't know. But let me just say this: Without knowing the exact policy changes, if the policy that came in was something along the lines of a border adjustment tax, we believe the impact on us would not be significant, since we are balanced if you total up our imports. And we've recently been looking in some detail at this just to make sure we fully understand the numbers. But we're balanced when you total up the imports versus our direct and indirect exports. When I say indirect, we make a lot of parts that go into other assemblies, other people's products that are then exported. And so we believe the way it would come out, we would likely be able to get an offset for all of those exports. So we should be neutral. Beyond that, there are proposals about interest limitations, (25:18) some of which would only have new interest limited. And so it's very hard to figure out what of the other proposals would come about. The one that seems to be getting the most attention is this border adjusted idea. Steven E. Winoker - Sanford C. Bernstein & Co. LLC: Okay. All right. Go ahead. Sorry.

No. That was all I was going to say. Steven E. Winoker - Sanford C. Bernstein & Co. LLC: Okay. I'll leave it there for now. I mean, I know it is hard to tell, but I guess the only other question on that front is, if in fact just the rate side comes, ignoring the interest deductibility, given where your current rate is but your marginal impact in the U.S., you guys would still benefit from any kind of marginal reduction in the U.S., absent – all other things being equal; is that true?

Yes. Yeah, that is true, and so depending on how much the headline U.S. rate comes down, we would see some benefit in our overall rate. And you did have one other part your question. Let me address that as well. And that is, we're a 9.5% to 10.5% as a guided rate for 2017, and I think you were wondering how that's likely to change into the future. But we continue to think that the rate it's likely to move up slowly, perhaps a point or so each year over the next few years. And so we don't really see any change to our prior guidance. Of course, subject to the rules not changing. As the rules change, it could have some impact. But, as I just said, we can't know exactly what the new rules are. Steven E. Winoker - Sanford C. Bernstein & Co. LLC: Okay. And then, Craig, just on Hydraulics, after I think 10 quarters of negative year-on-year bookings growth, at least having a plus 8%, even if it's on an easier comp, do you think there's real sustainability here? And why aren't we yet hitting those – even the bottom end – of the through-the-cycle margins ex restructuring for next year?

Yeah, no, I'd say that, to your point, we too are optimistic and encouraged by the fact that we saw orders grow 8% in the quarter. This is the first quarter of growth in orders that we've seen in a long time, but it is only one data point. And so what we're looking at as we try to forecast what the revenues will be in our Hydraulics business in 2017, is we're obviously looking at lots of data points, including what many of our customers are saying. And so we think – we're very comfortable saying that we think we'll see very slight growth in Hydraulics during the course of the year. But at this point, we're not forecasting kind of the V-shaped recoveries that we have historically seen in this business. You never know. When these markets turn, they tend to turn hard and fast, but we're not yet in a position to call that turn. With respect to margins, I would tell you that we're not finished, and we are in the midst of some pretty significant restructuring actions in our Hydraulics business, so still a lot of work to be done during the course of 2017. We still have not – you're right, we absolutely have reached new bottoms, and quite frankly, we've reached lower bottoms than we ever imagined that we would reach in the business. And so we're comfortable once fully completed that the business will in fact deliver the 13% that we articulated and committed to, but we're not yet finished with all the restructuring. Steven E. Winoker - Sanford C. Bernstein & Co. LLC: Okay. Thanks.

Our next question comes from Shannon O'Callaghan with UBS.

Morning, guys.

Morning.

So, Craig, just in terms of the trends in ESS, when you're referring to the industrial projects and the oil and gas projects, I mean, you're referring to them as large projects, and those still being down. I mean, is there no, I guess, offset or any signs of improvement in smaller projects or MRO activity? Could you just maybe fill that out a little bit?

Yeah, no. We, in the light commercial piece of the business, we clearly are experiencing and seeing growth in that segment of the business, but it's simply being overwhelmed by the large industrial projects and what's happening in the manufacturing sector. So while we're seeing some signs of strength on that part of the business, it's not anywhere near enough to offset what's going on in large projects and oil and gas. And we do think, as we take a look at the oil and gas assumption for 2017, yes, rig counts have increased nicely, and that's a good indicator, but we've not yet seen a significant turn in orders. And we think in our harsh and hazardous business that we talked about in Electrical Systems and Services, we think it's another down year. We could be wrong. We hope we're wrong, that a lot of the enthusiasm today that's built into a number of expectations, we hope that translates into orders and sales, but we've just not yet seen it. And I think what we've been pretty consistent about is that we've said that we'll call the turn when we actually see it show up in our orders and not before.

Okay. That makes sense. Just maybe also, just on the power, kind of utility business, can you give us an update what you've been seeing there, and if there's any change on that going into 2017? Thanks.

Yeah, really no change. I mean, we see that business being – essentially running slight increases year-over-year, and we don't anticipate to see any material change in the power systems business. We'd expect that it would see very, very slight growth during the course of the year.

Our next question comes from Nigel Coe with Morgan Stanley. Nigel Coe - Morgan Stanley & Co. LLC: Thanks. Good morning, guys. Craig, I want to switch back to restructuring, and looks like you got about 80 bps of benefit year-over-year from the payback on the actions. I think you're forecasting about 20 bps clean, ex restructuring, expansion on flat revenues obviously. But maybe just fill us in, in terms of some of the offsets to those cost actions and maybe touch on price/cost for 2017, and maybe some comp adjustments and maybe mix. Anything to help us bridge those margins would be helpful.

Yeah, (32:12) appreciate the question. There's really one bridging item that I would say. I think most of the other items, we don't necessarily expect dramatic changes in mix during the course of the year, although we continue to see the large projects, and large industrial projects do tend to be more profitable than certainly the light commercial stuff. But the big issue for us that we're dealing with during the year of 2017 is really commodity prices. And over the last 10 years we certainly have seen price volatility, and we have always been kind of net neutral. So we've always been able to get price or offset commodity price increases to the point where it's really had no impact on our overall underlying margins. What we are really dealing with, we think, today is a lot of speculation built into the expectations of global growth, and hence the demand for commodities or the price of commodities have really been fluctuating quite significantly. Just to give you, as a point of quantification, post the U.S. elections, our commodity prices on the basket of commodities that Eaton acquires are up 7%, making this issue obviously a bit more difficult to manage and to pass on quickly in the marketplace. We're seeing also large swings in volatility. To give you maybe another couple of data points that will maybe be helpful, bar steel prices over the last 12 months have been as low as $185 a ton, and they hit a high at the end of the year of $303 a ton. And today, they're $265 a ton. Copper prices over the last 30 days have been as low as $2.49 a pound. Today they're $2.73 a pound. So a 10% change over a 30-day period. And so this period of volatility is really going to have to work its way through the system before we can really understand exactly where commodity prices are going to settle out and where we can put plans in place to either offset them or pass it on in the marketplace. And so as a result what's built into our guidance is this $80 million of commodity price increase cost that is not being offset by either price increases or other measures during the course of the year. But that's on an $8 billion to $9 billion direct materials spend, and we do expect to offset it, but we think will probably going to be a quarter or two later than we'd like to be ideally. Nigel Coe - Morgan Stanley & Co. LLC: Okay. Just to clarify that point, Craig, so $80 million is baked in as a hedge to margins, but you think – you can probably get that, but it's not baked into your guidance?

No. What I'm saying is, we can get it. But we think the timing that it's going to take us to actually implement the actions will be delayed by essentially a quarter or two, and we actually will see an $80 million of negative impact in our year-over-year margins as a result of commodity price increases. Nigel Coe - Morgan Stanley & Co. LLC: Okay, that's clear. Yeah.

But it will be delayed in the implementation. Nigel Coe - Morgan Stanley & Co. LLC: Understood. So that's clear. And then my follow-on question is, I think your revenue plan looks very reasonable overall, but a big surprise for us was the single-phase UPS down in the quarter, and then you talked about three-phase being down in 2017. Can you maybe just add some color there in terms of what you're seeing perhaps in the data center markets?

Yeah. And I'd say that it's just been another one of these markets that's bounced around quite a bit, and as you may have heard from others, we had a number of large projects by Microsoft and others that were delayed out of 2017 as they look at reconfiguring data centers and the way they protect their centers. And so the market for us, it's been volatile, some of which you'd say is structural, but a lot of it is simply customer-specific issues as they work through their future architecture of the way they'd like to protect their global data centers. But we continue to see the underlying strength in the cloud, and that's going to be a long-term positive for the business. But we have in fact seen some short-term, let's say, volatility in demand in those markets. Nigel Coe - Morgan Stanley & Co. LLC: Great. Thanks for the color.

Our next question comes from David Raso with Evercore.

Hi. Good morning. We always spoke the last few years about November of 2007 (sic) [2017] as an interesting time, just given the ability to spin some businesses tax-free. Now that that's upon us, only nine months away, I just wanted to get an update if that's still accurate, and how you're thinking about that event?

Yeah. And for us, as we've said pretty clearly in the past -for us there is nothing magical about the end of 2017. We have today a collection of businesses that we like. We fully intend to continue to invest in all of them. We have no intentions to spin any of our businesses, and so for us, we're not spending even a moment thinking about it.

Okay. So I'm just trying to think through. Some people look at the sum of the parts, and if they feel there is a gap between how the company's being valued in aggregate versus maybe how it would be separate, is that something you're averse to? Or just as it goes right now, you're not really thinking of it that way in how you're running the businesses?

There's lots of different points of view around sum of the parts and how you do the math, and is it pre-tax or post-tax. And so without getting into a large discussion on this issue, today we think from a shareholder value perspective, we spend a lot of time looking at the business. We have, over our history, have acquired and divested many businesses, and so we're not in any way averse to divesting businesses. We've laid out a very specific criteria around businesses in terms of what they need to deliver to continue to be part of our company, and we're comfortable today that all of our businesses are either delivering against that criteria, or well on the way towards delivering it.

All right. I appreciate it. Thank you.

Our next question comes from Julian Mitchell with Credit Suisse. Julian Mitchell - Credit Suisse Securities (USA) LLC (Broker): Hi. Thank you. My first question is really on the vehicles. In 2016 you missed your initial revenue guide in that segment by 4%, and then if we look at your 2017 it seems to embed a very substantial V-shaped recovery. The NAFTA deliveries are down 30% right now; you're assuming they're flat for 2017. So particularly in light of the experience in 2016, why did you decide a sort of a V shape around the middle of the year was the right guidance?

Again I'd say, first, acknowledging your original point, we and the industry overall missed our North America Class 8 forecast for the year, and as the year unfolded, we and others had multiple downward revisions in the North America Class 8 market, and principally because the industry really came into the year carrying a lot of excess inventory that needed to work its way through the system. So today we think the North America Class 8 market in 2017 is flat with 2016. And based upon our analysis, the age of the fleet, the amount of inventory that's in the system, what we're hearing from fleets and customers, we think that's a prudent forecast. And the shape of the year, as you well know, the truck industry does tend to be lumpy. There's big quarters and there's small quarters, and it's not nearly as linear as we'd all like it to be. And so we think that our teams have put a lot of work into modeling what the year looks like, and we're confident that flat is a reasonable estimate at this point in time. And largely consistent with what we're hearing from our customers. Julian Mitchell - Credit Suisse Securities (USA) LLC (Broker): Got it. Thank you. And then my follow-up would just be on the phasing of the $100 million or so of restructuring costs that you expect through 2017. How much of that is sort of coming in the first quarter and first half of this fiscal year?

It's clearly going to be oriented more to the first half of the year, Julian. That's what you would expect. But we did, as Craig mentioned, we did pull some actions forward already. And so it won't be quite as lumpy as it was in 2016, but it'll still be majority oriented to the first half of the year. Julian Mitchell - Credit Suisse Securities (USA) LLC (Broker): Okay. So we should expect maybe about half of it coming in the first quarter or something?

Well, I don't want to be pinned down by quarter, but it's going to be the majority will likely be in the first half of the year. Julian Mitchell - Credit Suisse Securities (USA) LLC (Broker): Very helpful. Thank you.

Our next question comes from Joe Ritchie with Goldman Sachs. Joe Ritchie - Goldman Sachs & Co.: Hey, good morning, guys. So one comment, I guess. I give you some kudos for continuing to be appropriately cautious, because you're not seeing the trends really turn positive in your business, so kudos for being conservative there. But I guess maybe focused on ESS for a second. The organic growth has decelerated now throughout the year. You're forecasting organic growth to be down for the third straight year. I guess my broader question is, is it end-market trends? Do you feel like there are maybe some missed opportunities? And are you configured correctly in that business today? Or do you need to invest or divest any potential businesses within that business today?

Hey, Joe. It's a good question, and I'd say, maybe just hitting your specific point head on, no, we're absolutely convinced that we're not losing share in this business. If you take a look at the peers who report in the same space and the data that we give, it's pretty convincing that it really is a market issue largely tied to what's going on today in industrial markets and manufacturing and large projects. And so we don't in any way feel like we have a market competitiveness issue in that business. And as you'll likely understand as well, is that many of the things that we make in our products business ends up in our systems business as a consume components out of our products business. And so, no, we like the Electrical Systems and Services business. We have some work to do to continue to restructure that business, to deal with the inherent volatility that's inside of that business, so that even at very low levels of economic activity we can deliver attractive margins. And that's the path that the team is on. Joe Ritchie - Goldman Sachs & Co.: Okay, fair enough. And I guess my one follow-up there would be on just cash flow and your guidance for the year. It looks like you made about a $100 million pension contribution in 2016. Are you expecting to make contributions in 2017? Because if I add that back I get closer towards the midpoint of your guidance range, and so just wanted to understand the puts and takes in the cash flow for 2017.

Yeah, Joe, you'll see it on the last page of the presentation. We made a $100 million contribution in December of 2016, and we made a $100 million contribution in January of 2017, and so that's already factored into the cash flow guidance we're giving for the year. Joe Ritchie - Goldman Sachs & Co.: Got it. I see that now. Any other puts and takes that we need to be aware of, Rick?

Not really. I mean, as you see, revenues are relatively flat, absent FX, and so you don't see significant use or cash flow from working capital, because it's typically oriented at the top line, and so nothing else that's unusual. Joe Ritchie - Goldman Sachs & Co.: Hey, thanks, guys.

Our next question comes from Jeff Sprague with Vertical.

Thank you. Good morning. Just wondering if you could touch on lighting. Craig, you called it out as strong in the quarter. There's been a lot of mixed results out there in this quarter, as you probably know. How did your volumes perform? What's going on with pricing? Any color you can give us on your LED mix would be helpful.

Yes. Appreciate the question. We did have another what we think is a strong quarter in lighting in Q4. Our actual revenues were up mid-single digit, and our LED sales, as a percentage of overall sales, came in at 72%, and so we continue to feel like our lighting business is performing well. The LED penetration continues to grow. We, like others, continue to see price concessions in that business as the cost of the technology comes down, and we're essentially shedding price in that business. But the price and the costs are essentially largely balanced. And so, from an underlying margin standpoint, we continue to make progress and improvements in our overall lighting business.

Great. And I was wondering also just back to energy and not seeing any kind of firming up there. Can you just remind us or maybe update us on what your mix is now, upstream versus downstream, after two years of energy down cycle? Has your mix changed materially? In particular, if you could give us some color on U.S. upstream, would be interesting.

Yeah. Let me jump in and take that. As you know, before the downturn, we were very heavily – we had a higher orientation to upstream. We still had very good downstream exposure as well, and not so much in the midstream area. And so with this production downturn over the last couple years, we are definitely more balanced now. And more of an orientation towards downstream than upstream. And I can't give you an exact number because we haven't yet tallied exactly where we are from 2016, but clearly the upstream part has suffered in this downturn. And, as Craig said, it is interesting that the rig count has gone up as much is it has and yet we haven't really seen orders come through as a result of that. Now, whether that's because there will be a delay as some of these rigs that they're now putting back into action don't have aftermarket needs yet, it's hard to know. But it's something we're obviously watching closely.

Great. Thanks for the color.

Our next question comes from Eli Lustgarten with Longbow.

Good morning, everyone.

Morning.

Can we just get a little more color on two segments? One on vehicles. You talked about a flat Class 8 market. But can you talk about what you're seeing in the automotive sector? I mean, there's a lot of projections of slightly declining sales this year. There's some talk of – some company talking about maybe a material production cut in the second half of the year versus European auto. Can you give us some idea of what you're seeing in that part of the business?

Yeah, Eli. I mean, I'd say today, the global auto markets around the world continue to do extremely well. Even if we got the January numbers for the U.S. market and down from the fourth quarter kind of record levels but still north of 17 million cars and about flat with prior year, which is largely what our forecast is for North America. So we think North America continues to run at flat at very high levels. We think Europe is maybe some modest slight growth, and we think China continues to be kind of a standout performer. I mean, China really posted very large numbers during the course of 2016, and we think it moderates a bit, but we think it's still positive. So our own perspective on global markets around the world is that we think they continue to be slightly positive at very high levels, and there's been really no indication at this point of those markets turning over.

Okay. And as you talk about Hydraulic, you sort of have a flat number. It's sort of hard with an 8%, I said we all keep talking we have (50:07) an 8% order step up in the quarter. Is that flatness because you expect a continued weakness in the OEM side or distribution? Or is it across the board? I mean, you had – the OEM side started to show some signs of life, but it's pretty hard to get just flat with the kind of numbers you're showing unless you expect parts of OEM to be weaker, or something happening in the marketplace.

No, I'd say for us, Eli, it's largely a function of we have one quarter of data. And so we have one data point where we have strong orders off of relatively weak comparables in the prior year. And at this point you read the same kind of forecasts that we read. We see what our customers are saying about their forecasts for the year. And whether it's – you know all the big names in those markets. And then they're forecasting largely for another year of modest declines. We are very encouraged by what we're seeing in China. A lot of the government stimulus activities have certainly resulted in growth, and we saw growth in China during the course of 2016. And we think that continues. But at this point we just think it's too early to call bigger term, given the total composite of everything that we're seeing.

I mean, your basic scenario is an up distribution market being offset by continuing weakness in OEM. Is that the balance of...

Yeah. I'd say even on the OEM side, right, it's different pictures of what's going on in OEM. We actually had a very good quarter of bookings in the OEM side in ag (51:48) and construction equipment in Q4. Question how much of that was inventory rebuild? How much of that was underlying demand in the market? I mean, you see some of the big customers' retail sales data. And so for us ultimately speaking that will be the governing item for what we eventually experience in our business.

And probably to beat some price increases, I suspect. Thank you.

Yes, Thanks.

Okay.

Our next question comes from Ann Duignan with JPMorgan.

Hi, thanks. A lot of my questions have been answered. But I'm going to focus on your outlook for Aerospace margins. Very strong, above 19%. Craig, could you talk a little bit about is there any concern that Aerospace is not investing in its own future? We need those engineering R&D dollars so that we win the next platform so we have the aftermarket 20 years from now? If you could just talk a little bit about the high margins versus the R&D spend.

It's a great question, Ann, and you know this space very well. And so today, as we think about the R&D spend in the Aerospace business or any business, there are the dollars that you're investing in kind of off-line technology development, anticipating that, to your point, 10 or 20 years from now we'll need technology ready to insert in a new platform. And then there's specific customer programs and customer development projects, and that's the piece that we and quite frankly everybody in the industry has seen a significant fall-off in. The industry went through this massive period of refresh, whether that was on the commercial side or on the military side, and R&D spending really went up quite dramatically over the last 10 to 15 years as the industry went through major new program developments. And now they're coming down the other side of it, which is kind of a natural part of the Aerospace cycle. To your point, we are in fact continuing to invest in what we call off-line technology development, so that we're not sure when the next-generation single-aisle plane will be developed. We think it's 2025 or beyond, but we need to be ready when it does come. And we are making those investments.

Okay. That's helpful color. I appreciate that, because we don't like to see them too high for too long, either. And then a follow-up on your input costs. You said your basket of commodities that you purchased were up – or the index was up 7%. Can you just talk a little bit more about your spend? Are you being impacted more by copper or more by steel or a combination of both? Just a little bit more on the commodities (54:43) please.

Yeah. I'd say for the most part, Ann, most of the commodities, certainly the two that you mentioned, are up, whether it's bar steel or flat steel or hot roller beam. So really it's almost across the board where we've seen commodity inflation creep into the system. And so it's – I mean, there are a few commodities, like silver and the like, that have perhaps come down slightly. But, for the most part, we've seen most of our commodity input costs go up over the last 90 days or so.

And, Ann, it's fair to say that amongst our big spend items are clearly steel and copper. I mean, those, for obvious reasons, within the different products that our businesses make. And so those prices, the increases we've seen clearly have a significant impact on them.

And just a quick follow-up. Will it be easier or faster to get pricing in places like Electrical Products because you're going direct to end markets versus Hydraulics, Aerospace, Vehicles where you're shipping into OEMs and maybe contracts lag? Is that the right way to think about it? Or how should I think about that?

Yeah, no, I'd say in general, that would be an accurate way of thinking about it, Ann. I'd say the bigger issue that we're dealing with right now is really the volatility. We've seen, yes, this upward trend certainly in commodity prices, but we've also seen very high volatility. And as I shared a few examples with you in my opening commentary around – in the last 30 days, the price of copper has swung 10% over a period of 30 days. And so when you're living in a period of high volatility, it's really difficult to think about sitting across from a customer and saying, here's the price; therefore, we need to increase our prices. Or to really even talk about, how do you look at things that you can do to potentially offset it when you're living in this period of very high volatility. So we really do believe we need to see a little bit of stabilization in commodity prices, and a lot of the expectations around future growth to settle before we know where these commodities are actually going to land. We do believe that we think we're at higher levels today in commodity prices than it'll eventually settle out at, largely because of the global supply/demand equation. So we do think there's a lot of speculation today in commodity prices.

Yeah. It doesn't help with your forecasting jobs. Okay. I'll leave it there. Thank you very much. Good luck.

Our next question comes from Deane Dray with RBC.

Thank you. Good morning, everyone. Hey, we've covered a lot of ground here. I wanted to circle back on this decision to do accelerated restructuring. And be curious to know about the timing of this. Which actually came first? Did you have the need to do the restructuring and capacity to do the restructuring in the fourth quarter and then you were able to harvest those insurance settlements? But I'm also hearing a number of companies, facing the administration change, you saw a lot of settlements happening in the fourth quarter because of that uncertainty. So which came first?

Deane, as I think we laid out more than a year ago, we had a very large and comprehensive restructuring plan that our teams had already identified a number of actions that we intended to take. And so in our case, it was simply the fact that we had the plans and the actions already identified. We ended up with – our team did an outstanding job of negotiating a settlement on these insurance matters. And so we simply pulled forward the actions from early Q1 into Q4.

Yeah. And just from our perspective to be able to get that much restructuring done in a fourth quarter is a pretty tough task, and it looked like it happened pretty smoothly. And then maybe just some context about shifting to the pay-as-you-go restructuring in 2018. How do you decide that $60 million is the right run rate?

And I'd say that it's probably more art than science around the number of $60 million, and I would ask that you not hold us precisely to that number. We think, as a placeholder and looking at what we've spent historically to take on various improvements in underlying efficiency in the organization, that's a good placeholder number to use. But we'll certainly – we'll likely see some slight variation around that number.

Sure. That's helpful. Thank you.

As we cross the top of the hour, we're going to have time for one more question here, and that comes from Andy Casey with Wells Fargo.

Thanks a lot. Good morning, everybody. On the Hydraulics, just return to that; I know there's been a lot of questions on it. But the order improvement, was that truncated to December? We've seen some other reports that kind of suggest the end-of-quarter surge, if you will. And then I know it's not really common practice for you, but if it was truncated to the end of the quarter, did you see those trends continue into January?

Yeah, in our case, Andy, the simple – short answer to the question is no, it was not a December surge, as we also have heard others articulate, spending budgets at the end of the year. We really did see the strength largely play out throughout the quarter. And so far in January, I'd say that we're encouraged that some of the strength that we've seen in Q4 has continued.

Okay. Great. Thank you very much.

Thank you all for joining us today. As always, we'll be available for follow-up questions today, tomorrow, and into next week. Thank you again for joining us for our 2016 fourth quarter earnings call.

Thank you. And, ladies and gentlemen, that does conclude your conference call for today. We do thank you for your participation and for using AT&T's Executive Teleconference. You may now disconnect.