Good morning and welcome to ITT's 2017 First Quarter Conference Call. Today is Monday, May 8, 2017. And starting the call from ITT today is Jason Moss, Investor Relations and Treasury Manager. He is joined by Denise Ramos, Chief Executive Officer and President; and Tom Scalera, Chief Financial Officer. Today's call is being recorded and will be available for replay beginning at 12:00 PM Eastern Time. At this time, all participants' lines have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. It is now my pleasure to turn the conference over to Mr. Jason Moss. You may begin.

Thank you, Jennifer. I'd like to highlight that this morning's presentation, press release and reconciliations of GAAP and non-GAAP financial measures can be found on our website at itt.com/ir. Please note that our discussion this morning will primarily focus on non-GAAP measures. During the course of this call, we'll make forward-looking statements as defined in the Private Securities Litigations Reform Act of 1995. No forward-looking statements can be guaranteed and actual results may differ materially from those projected. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Forward-looking statements made on this call should be evaluated together with the risks and uncertainties that affect our business, particularly those disclosed in our SEC filing. So, let's now turn to slide 3, where Denise will discuss our results.

Good morning, everyone. Thank you for joining us bright and early on this Monday morning to discuss ITT's financial results and strategic progress during the first quarter of 2017. This is a very exciting quarter for ITT as we returned to revenue, order and adjusted EPS growth for the first time in nine quarters. And we also produced record first quarter operating cash flow. All across ITT, dedicated teams pulled together and worked tirelessly to address the continued market uncertainty. Collectively, our people delivered a solid quarter by serving our customers with highly-engineered critical solutions, while positioning ITT for sustained long-term growth. As a result of these efforts, we've already made a number of important advances that fundamentally improved our operational and strategic execution. So, let me highlight some of those here. We successfully implemented our new Chief Operating Officer model under Luca Savi, that is based on consistent, rigorous, bottoms-up analysis of our performance drivers and rapid implementation of required actions. And while we are in the early innings, I believe this approach will be a home run for ITT. We launched a new strategy and business development team under Tom, to accelerate our strategic growth platforms. We combined ICS and CT to create Connect and Control Technologies, a leaner and more focused aerospace and industrial segment. We continued to advance our critical IP strategic reset. We introduced the ITT Smart Pad to the automotive world. We are ahead of schedule on our organic investment in North America to support our long-term automotive platform growth. And we are on track with the integration of our Axtone Railway acquisition. Many of these actions are already contributing to the solid first quarter financial results we delivered that included 2% organic revenue growth, 7% organic order growth, 8% adjusted segment OI, and…

Thanks, Denise. Starting with Industrial Process on slide 7. Organic revenue decreased 11% to $186 million, reflecting a 39% decline in project activity, primarily in oil and gas and general industry markets due to weak backlog entering the year. The organic decline also included a 3% drop in aftermarket, as soft parts demand was partially offset by stronger service activity in chemical and general industry markets. In addition, we did see modest 2% growth in short cycle baseline activity primarily in general industry pumps. IP's adjusted segment operating income decreased 18% to $10 million or 7% excluding $1 million of unfavorable foreign exchange. The decline primarily reflects lower project volumes and impacts from pump projects with a high degree of engineering and manufacturing complexity, which were partially offset by incremental restructuring benefits and improved operational execution on lower volumes. IP organic orders grew 17% on strength in oil and gas, chemical and mining markets. Project orders grew 69% due to the $26 million downstream oil and gas project in Africa. However, excluding that win, project orders would have declined 13%. So, despite the strong result, we remain cautious on the pacing of project activity in the market today. We have seen some stability returning to short-cycle demand following a weak Q4. As orders increased 7% on aftermarket and baseline pumps. This strength drove IP to 4% organic order growth excluding the large project win. However, despite some of these positive indicators, it is too early to call any of these short-cycle dynamics a clear trend. Now, let's turn to Motion Technologies on slide 8. Total revenue increased 12% to $287 million, including $14 million from the acquisition of Axtone, partially offset by unfavorable foreign exchange. Organic revenue increased 10% due to a 14% increase in OEM brake pads from share…

The floor is now open for questions. Thank you. Our first question comes from Nathan Jones with Stifel. Nathan Jones - Stifel, Nicolaus & Co., Inc.: Good morning, everyone.

Good morning.

Good morning, Nathan. Nathan Jones - Stifel, Nicolaus & Co., Inc.: Denise, I wonder if we could just talk a little bit more about the ICS-CT combination. I can see the businesses shared common customers, but the strategic rationale for this combination is just a little bit unclear to me. I would think that while they had similar end markets, you would still be selling to different customer sets through that. Can you talk about what's the strategic rationale for the combination? How you think that's going to help drive growth? And what costs you can take out of the combined businesses?

Sure. Thanks for the question, Nathan. When I looked at where we were with ICS and CT, in my mind, this was the next logical step to take with them, because we've been working on stabilizing the operations and improving the operations. And so, the objective is to maximize the value of the business to cost, scale and leverage. So you're right, we have some of the same end markets. In fact, aerospace and defense represents about 60% of CCT. And that's a very highly technical business. And so, one of the things that we're able to do is share engineering resources and know-how, and we get a lot of shared learnings associated with that. And from a scale perspective, we're able to leverage our footprint, reduce SG&A costs and be able to leverage our supply chain. So, we're just at the beginning of this, in this combination. As we go through it, I'm sure that we're going to find other things and other ways to optimize with these two organizations now being joined together. Nathan Jones - Stifel, Nicolaus & Co., Inc.: Okay. Thanks for the color there. Even outside of the one large order in Industrial Process, you had in aftermarket orders up 12%, short-cycle pumps still up 2%. So, coming off the bottom here, how have the orders trended in April? What's your outlook for the order rates in IP as we progress through the year, specifically on the short-cycle business?

Nathan, we were happy to see what happened from an aftermarket perspective and a baseline perspective in Q1. We do think that a portion of that was due to the very low spending that occurred in the fourth quarter of last year. And so, we believe that there was some make-up that occurred in the Q1 associated with that. When I look at how the orders have been trending into April, I would say that the aftermarket has come down from what we saw in that February-March timeframe. Baseline, pretty consistent. And projects, they're still very, very lumpy at this point. So, pretty hard to call. When I look forward into the rest of the year based on what we see today and based on what we saw in Q1, we did actually improve our short-cycle business in the – and as we go through the year than what we had at guidance time before. And because of what we're seeing from a project perspective and with some challenges in the project market, we actually brought that down slightly. But – so, from an aftermarket perspective, better than what we though three months ago. But we do think that in March, what we saw, this nice improvement in orders that that's going to come down from what we saw. Nathan Jones - Stifel, Nicolaus & Co., Inc.: Okay. That's helpful as well. And then, just a quick one for Tom on the corporate line. Tom, how much moved around out of the first quarter and what should we be expecting corporate to run at quarter-to-quarter for the rest of the year?

Yeah. Nathan, I think, the original view on corporate still holds for the remaining quarters of the year. There really wasn't too much of timing, I would say, in Q1 to a degree. But I would say most of the efficiency that we drove in corporate were some one-time items that are not going to repeat and some improved efficiency in areas like legal, environmental, and overall functional spending. But by and large, it really hasn't changed our view for the balance of the year at corporate. We did also generate some favorable returns below the line on some investments that we have as well based on the strength in the markets. So overall, really no change to the balance of the year. We basically just passed through the strength we saw in Q1. And that's reflected in our guidance increase at the midpoint. Nathan Jones - Stifel, Nicolaus & Co., Inc.: Okay. But no catch-up from – there was no cost that shifted out of 1Q into later quarters, it's just good first quarter, the rest of the quarter stay the same.

Exactly. Nathan Jones - Stifel, Nicolaus & Co., Inc.: Okay. Thank you.

Your next question is from Mike Halloran with Baird. Mike P. Halloran - Robert W. Baird & Co., Inc.: Hey. Good morning, everyone.

Good morning, Mike.

Good morning. Mike P. Halloran - Robert W. Baird & Co., Inc.: So, on the Motion margins, could you help a little bit – just dig a little deeper into why the lack of leverage there? I know, Tom, you referenced the aftermarket build was a little slower than expected. I'm sure that's part of it. In any of the build-out that you're seeing globally to support all these project wins, is that a factor? What else is in there? And then, how do we think about the cadence though the year and is there any catch-up in the margins as that customer brings back that aftermarket business?

Yeah. Absolutely, Mike. Lot of different dynamics inside of Motion Tech obviously in the first quarter. The investments are obviously ones that we've talked about quite a bit. Those support our long-term growth, so if you look past the investments, the foreign exchange and the acquisitions that really a reflection of kind of the global nature of the business. We did have a slight 20 basis point improvement over the prior year despite the headwinds on the independent aftermarket mix that you referenced. So, we would expect as the year goes on that that particular issue will actually be beneficial to margins compared to the prior year, but what we're going to continue to see quarter in and quarter out this year is higher commodity costs. So, the one thing that impacted Motion Tech relative to our expectations coming into the year was the increase in commodity costs primarily as we referenced copper, tin and steel. Those are the ones that will continue to impact Q2, Q3 and Q4. And were part of our thinking when we look at the guidance going forward. We did add in specific headwinds at the ITT level based on the increase there, which is about in the neighborhood of $6 million to $8 million of incremental commodity costs compared to the initial guide. So, in summary, I think, we're off to a good start with Motion Tech operationally. We're funding our investments for growth. As we're growing globally in Motion Technologies, we have done that in a very margin positive way, particularly our business in China. So, as we're growing in China now that we're beyond the incremental investment phase, we are seeing very strong execution inside of that operation. So, to your point, Mike, as we're growing, once we get up to kind of run-rate production, we do see good margin performance and that's our plan right now in North America, is to make those investments, get that facility up to run rate production and start to see those margins be accretive sooner rather than later. Mike P. Halloran - Robert W. Baird & Co., Inc.: And on the investment side, the win rate that you referenced picked up relative to the previous rate, good wins in China, how does that influence what your CapEx thought process is going forward? Are you going to have this phase, you're going to have to start that next phase of build out in Wuxi or anywhere else for that matter?

Yeah. It's a great question, Mike. We are continuing to kind of build out. So, we have visibility to these wins and we're working them with our customers certainly for a good 12 months to 24 months in advance of the awards. So we have good visibility in our capital planning. It's a nice kind of acceleration of our win rates, but not outside of our planning scope for the year. So, no impact to CapEx expectations for this year. We're continuing to build out not only the North American facility, which as we mentioned all the brick and mortar work is done, and now we're bringing the equipment online in North America and that's progressing nicely. But elsewhere, in Europe and in Wuxi we are moving equipment inside of our locations and leveraging some of our facilities to deal with the additional ramp, including adding more production capabilities in the Czech Republic in addition to continuing to fill equipment inside of Wuxi. Mike P. Halloran - Robert W. Baird & Co., Inc.: And then, just one clarification on the 2Q thoughts down 2% sequentially. Is that – the down sequentially, is that an expectation for all three segments or is it just normal sequentials for Motion and then a little bit of a build elsewhere?

I would say a little bit of a touch down across all three, Mike. More so, in the case of Motion Tech as is the pattern of their Q1 activity. But a little bit of softness relative to Q1 just because we're a little bit more cautious about what happened in the short cycle, particularly at IP, where as we mentioned, Q4 was strong on the short cycle and we're not anticipating that level of strength necessarily coming back. So, a little bit of a drop sequentially in each one of the segments. And I would say also on CCT, very strong oil and gas business in Q1, and we're not expecting that level of strength necessarily to repeat in Q2, although we'll be happy if it does. Mike P. Halloran - Robert W. Baird & Co., Inc.: Great. Appreciate the time.

Thanks, Mike.

Your next question is from Ryan Cassil with Seaport Global.

Hey. Good morning.

Hey, Ryan.

Good morning.

Just wanted to ask about the large project order, $26 million. Is that indicative of sort of what you're seeing more broadly in the project market that things are starting to pick up there, or you see that as a little bit more of a one-off? And can you talk about is that supposed to contribute in the 2017 outlook or if that's more of 2018 shipment?

You know, Ryan, with large projects, we're still seeing that that's a very challenging environment out there. So, we're happy with this large project order that we received, but I would not use that to call a trend going forward until we see some more clarity around what's happening with oil price. There's still a lot of volatility with it. I doubt that we'll see a lot of projects in the funnel and in the pipeline right now. In terms of that order that we received, there will be some impact in it in 2017. It will be in the back half – more in the back half of the year. It's about $10 million associated with that. We are utilizing POC accounting with that. And so, that will be part of how you see it progress throughout the year and then into 2018.

Okay. Great. And then moving over to Motion, if I could. Little bigger picture, I mean, there's a lot of trepidation in the auto space right now. Your story has been about share gains. Still sounds like it's going to be. Sounds like you're winning share at a faster rate and you've got great visibility on platforms ramping here as we progress through the year. What comfort can you give us on that business looking forward? Can this sort of sustain a mid-single-digit growth rate as we look into 2018 or perhaps better just based on what visibility you have in backlog today?

We feel very, very positive about this business. You think about where we've been positioned. And so, let me just take it by geographical region here for a minute. So, when you look at what's happening in Europe with us and you saw the performance in Q1, we continue to win new platforms in Europe. Part of that is due to the fact that we have good technical capabilities with copper-free platforms, which is getting a lot more important these days in the marketplace. And then we're also getting more opportunity to win in the front axle. And the advantage of that is because the front axle wears a lot more than the rear axle, and therefore we would get more aftermarket content associated with that. So, despite the strong position we have in Europe today, those two dynamics are helping to improve and continue to grow our position in Europe, so that's Europe. When you think about China, Tom already talked about China and what we've been doing in China. So, today we probably have about a 13% market share in China. We continue to grow that every year. We've talked about the new platforms that we have in production in 2017, which will help in 2018. We also have these 11 new platform wins, which we just received this quarter, and we're winning not only with global players, but also with local players. And we're not only winning new platforms, we are also being able to bid and win platforms that are already in production with that. So, we feel very good about our progress in China and with these new platforms and the ability to continue to have very strong growth in China. And then when you look at North America, today, it only represents about 8% of Motion Technologies. It – we have about a 10% market share in North America today, so very, very small. We are looking to grow that, again, based on the same model that we utilized when we grew in China. And we've been winning these new platforms, which really justify the investment that we've been making in North America. And so, despite some of what could be lower growth rates or flat growth rates in North America because we're winning these platforms, that will continue to give us growth as we go out into the future. So, we feel very strong about the business. We're in a unique position, and we've got these big growth areas in China and North America, and still winning in Europe. So, that's why we feel good about the business, and you should expect to see continued growth as we go into the future.

Great. Thanks for the color.

Your next question is from Matt Summerville with Alembic Global.

Thanks. A couple questions. Tom, you talked about the incremental headwind you're seeing from commodity. But – commodities. If you can though, can you parse out the three or four variables you highlighted that are impacting kind of your guidance versus your original when you entered the year? Those being operational improvements on the plus side, lower corporate cost on the plus side, and then FX on the negative side. And I think you said $6 million to $8 million of incremental commodity inflation. Can you provide similar numerical granularity on those other pieces?

Sure. Absolutely, Matt. The – we're looking at foreign exchange which is obviously moving quite a bit these days, but the global impacts of all the currencies we think that's about a $0.05 negative impact compared to our initial guide. We think the commodity cost increases is also about a $0.05 negative hit to our previous guidance. You saw that we had some strength in Q1 relative to our internal expectations that we're going to pass through, largely tied to some of the corporate performance, which was around $0.05 of strength there. So, the balance is really our increased conviction around operational execution, which is around the $0.10 balance, is around execution and performance inside of our operations. So, those are the main components of our guidance raise.

And then, given the visibility you have on the OE side of the business in MT specifically as it pertains to China. Is it time at this point to start to revisit your market share objective in that country? And if so, where do you ultimately think it can go? And then similarly, at some point, the aftermarket channel needs to be developing, if it isn't already in China. So, Denise, maybe can you provide an outlook on how you think you might be able to participate on the aftermarket side there as well? Thank you.

Sure. In terms of our market share, we've indicated 25%, but obviously if we can do more, we're going to do more and we're not going to stop there. So, we'll see where it evolves to, but we really like our positioning in China. We have a preferred position. And then, Matt, as you rightly indicate, there's going to be an aftermarket that develops in China. And we want to be able to evaluate that, see how we can participate in that as it develops. We're working through that right now and thinking through that. In fact, that's one of the things that is teed up for our strategic planning process that we're going to be talking about in July and August with the team. So, it is something that interests us. That's another avenue of growth for us in China. And we think we're going to be well-positioned to be able to participate in that. But we need to first understand what does that look like and how is it going to unfold, so that we can figure out the best way to participate in that.

And just lastly as a follow-up to MT. Denise, maybe can you speak to – you made the point of bringing it up – speak to the significance of the new product development you've announced today with respect to Friction and then maybe how the ASP on that might differ versus copper-free, versus your legacy brake pads? Thank you.

Yeah. We're pretty excited about what they're doing with their – with the Smart Pad and the sensor technology associated with that. What it really does is it's sensors that are going to be embedded in Smart Pads, which is going to measure temperature, torque, vibration, noise, and wear. Right now, where the initial phase is a development phase, so using it as a development tool to really help our OEMs and our Tier 1 caliper customers, to be able to shorten the brake system development cycle that they have underway. So, we hope it's going to dramatically reduce this development time for the Tier 1s. The Smart Pad, as I said, is going to measure torque in real time and that's going to be able to make it easier when you think about the brake systems and the calipers that contribute to making these two brake systems align closer together. So, we think there's just going to be a lot of opportunity. And then, once we move from the development phase, we're going to be looking at putting this on board and seeing how we can utilize that to help drive it from a customer perspective and from an end user perspective to create some more real-time information associated with the braking systems in the car for safety, efficiency and things like that. We're very excited about this because this is going to launch MT into a whole new sector of technology and driving that, and utilizing the knowledge that we have today to go in this higher technology field that's out there in the automotive space today.

Thanks, Denise.

Thanks, Matt.

Your next question is from Joe Ritchie with Goldman Sachs. Joe Ritchie - Goldman Sachs & Co.: Hey. Good morning, everyone.

Hi, Joe.

Good morning, Joe. Joe Ritchie - Goldman Sachs & Co.: So, can you maybe just comment a little bit on – so clearly, the backlog improved a little bit in Industrial Process. But comment a little bit on the pricing environment. Has that changed at all, especially on the large project activity? Just very curious to hear what you're seeing today.

Pricing is still challenging out there, Joe, from a large project perspective. I mean, there's not a lot of large projects out there. In fact, some of the projects that we're seeing tend to be more smaller in nature than the large ones. So, it's still a very, very competitive environment. That hasn't changed, and I don't expect it's going to change for a while here. Joe Ritchie - Goldman Sachs & Co.: Okay. Fair enough. And then, I guess, a follow-on question. I noticed that you guys haven't given any specific synergies as it relates to either cost or revenue synergies to the new combination of Connect and Control Technologies. Can you maybe at least talk about what potential opportunity there are? Either on the cost side or the revenue side of combining these two entities?

Yeah. Absolutely, Joe. I think, the two main categories on the cost side, maybe it's three, would be SG&A, leveraging one segment overhead. So, we had two $300 million segments with two teams running each one of those, we brought that together that provides us an opportunity for a ton of leverage and synergies in cost actions. So, that's the first category, and that also carries over into some other categories where we have some shared leverage opportunities. From a supply chain perspective, we are in similar component categories. We operate in the same ecosystem, particularly in aerospace and defense. So, there are number of other synergies in how we operate our procurement channels, what we buy, when we buy it. So, there's another big opportunity there. And then within our facilities, there are also some footprint locations where we are currently co-located, CT, their recent acquisition of Hartzell, which is our environmental control systems business. That is currently in the process of being co-located with our connector facility in Mexico. So, there are a lot of footprint opportunities that we're currently capturing as well. So, this is a logical move, a lot is already in motion, we've put these actions in place in many cases, there are more opportunities for us to continue to drive. It's not necessarily about the front-end, as Denise mentioned, we are not bundling or bringing products to market together. But we do have the ability to leverage engineering, customer intimacy, and other resources, as I mentioned, to drive some improved efficiency going forward. So, this will provide some nice upside and we'll certainly provide more insights as we go forward over the next couple quarters and get some more momentum there. Joe Ritchie - Goldman Sachs & Co.: Great. That's helpful color, Tom. Maybe one last follow-up there, and I know that you're going to be reporting this as a combined entity moving forward. But any other color that you, guys, can provide on Interconnect, the margin progression? I know that we've been kind of hoping for an exit rate of like double-digit margins this year. Just any other color there would be helpful.

Well, I'm happy to say that ICS continues to improve. I'm happy with the progress that we've made. We continue to reduce rework, and we're optimizing the operations, better on-time delivery, better production rates. Really, really happy with that. And so, ICS has continued to have stronger margins as we went through last year. And we continue that into the first quarter of this year. So, Tom, you may want to have some additional comments?

Yeah. I think, this would have been ICS's quarter in the sun.

Yeah.

Given how strong their revenue growth was at 13%, orders would have been up about 6% organically. Margins, as I mentioned them in the prepared remarks, up 590 basis points. So, really seeing good sustained sequential improvement inside the operations, a nice pick-up in the oil and gas market, given the short-cycle nature of what they produce, but really good sustained momentum inside the ICS operations. And, unfortunately, it didn't get its own commentary on the call until this question, but we would like to highlight the hard work that that team has continued to do with ICS in the connector locations to bring us to this point, we had a very solid quarter that we can keep building on from here. Joe Ritchie - Goldman Sachs & Co.: Great. Thanks, guys.

Thanks, Joe.

The next question is from John Inch with Deutsche Bank.

Thank you. Good morning, everyone. Hey.

Hi, John.

Morning. Tom, what's it going to cost, roughly speaking, do you think to unlock or capture the CCT synergies of the combined entity?

We – inside of our guidance, we do have our restructuring total for the year around $30 million. The bulk of that, as we mentioned, was related to our acquisition, so half of it was acquisition-related, the next – which is primarily Axtone. The other chunk was IP-related. So, the balance in and around $5 million to $8 million relates to CCT activities.

So, what's the run rate? If you – just the strategic move, what do you estimate doing this move is going to cost you before you've actually fully captured all of the benefit of combining the two companies or businesses?

Yeah. I think that's pretty much the bulk of it, John, it is a lot about SG&A and straight cost out, so these are high quick return, quick payback type actions that give us an initial boost of synergies. Obviously, as we get into supply chain and other kind of operational type things, those synergies will – they won't require major investments, but I think the restructuring payback should be probably a little – around half of the year just to pay that back. So, we'll generate some of those benefits this year, some carryover into next year, but those should be very achievable. Some of those are already very much in motion at this point.

What – I apologize if you've said this before, what was the strategic – why is this happening now in terms of the timing? Was there – is it tied to some obvious events conclusion...

No, John, it's not an obvious event. In my mind, it was the next logical step. We've been working on stabilizing the operations at ICS. And as we were doing that, we had the leader of CT that was involved and helping from that perspective and working through that operation. And as part of that process, we started thinking about combining these businesses and what we could potentially achieve with cost, scale, leverage, some of the same end markets. And so, that really drove us to say that we think that this is the right solution for this business going forward as we continue to try to maximize value and create some scale here, which is what we've really needed in both of those independent businesses.

Yeah. That's fair. IP, I think it had a two to three points of FX drag. Is this going to be an ongoing issue? Because as you identified, right, you've done a lot of restructuring in IP both historically, it was still a big source of the restructuring. But I think I'm assuming it captured the bulk of the $12 million of the restructuring benefit, right, which is seemingly being lost with this FX. So, when do those lines cross, Tom, that we can actually start to get the IP margins sort of on the trajectory that's higher than mid-single digit?

Well, John, I think FX is something we're continuing to kind of to look at. A lot of it is the global nature of the business. We've denominated a lot of transactions in petro dollars.

Yeah.

So, that creates all of the cross-currency challenges. It's the nature of doing business inside of IP in the oil and gas industry. So, that won't go away, but we are trying to mitigate some of the FX impact. Certainly on the restructuring side, as I mentioned, we do have more restructuring in IP that is ongoing for the balance of the year. So, I would expect to see additional benefits accruing from those actions, but certainly at a much lower level than we had last year. And we're generating a significant amount of carryover from the prior year. The one area of focus, I would say, that is important to the margin trajectory is our project execution. And as we mentioned, there's a lot of highly complex projects in the first half of this year that we are working to move out the door. And as soon as we can get those fully processed, I think that's when you'll start to see the margin profile shift up, because these projects are big, complex and in many cases, we took these orders year, year-and-a-half, two years ago and we're still working those too at this point. So, that to me will be one of the inflection points from a margin perspective and that will be the case in the second half of the year.

But it sounds like it's going to tough for IP to get to double-digit margins this year, but presumably, it exits on a double-digit basis based on your plans. I realize you can't forecast FX, I was implying if you hold it constant as of today.

John, the goal is the second half margins would definitely be better than the first half margins based on this progression. But yes, sequentially quarter-by-quarter, we do expect the margin profile to improve within IP. One of the key variables is how the short cycle plays which is really reflective of kind of the marketplace dynamics that are fairly erratic at this point, but with a similar mix, similar FX, we would expect sequential margin improvement quarter-after-quarter and certainly, therefore, we'd expect the second half to have a pretty solid exit run rate compared to the first.

Okay. So, that makes sense. That makes sense. And just likely, Denise, what's Luca going to be working on? You haven't had a COO before. What are his, kind of, mandated strategic priorities? How does he fill his time basically?

Well, right now, since we don't have an IP president, he's been spending a lot of time working with the IP team to sort through some of these challenges that they've been faced with. And so, he's been spending again a lot of his time on that. But what he's really been doing here is a lot of blocking and tackling. He has a really intense focus on execution and driving it hard in each one of these businesses. As part of that, he's been reestablishing some processes and procedures with each of the businesses. And he's really been working on changing the mind-set and really making sure that we're very granular and very detailed from an execution perspective in these businesses. And I'm happy with what he's been doing and I think he's going to make a huge difference as we go forward.

Thanks very much, guys. Appreciate it.

Thanks, John.

Yeah.

Your next question is from Jim Giannakouros with Oppenheimer. Jim Giannakouros - Oppenheimer & Co., Inc.: Hi. Thank you for taking my questions.

Hi, Jim. Jim Giannakouros - Oppenheimer & Co., Inc.: I'll piggyback off of Joe's and John's questions, appreciating you outlined the cost synergies, the moving parts earlier. But is there a target margin that we should be thinking about in CCT both near-term? And where do you think you could take them once inefficiencies in legacy ICS are stamped out and you've integrated it to your segments in a normalized demand environment longer term?

Yeah, Jim, I think this year, we indicated we are expecting kind of solid margin expansion inside of CCT compared to the prior year. So, the operational improvements that we're lining up would give us a nice margin lift from the prior year. So, right now, we're kind of terming it a solid, but you can infer from that what you will, but we are expecting some good margin lift in CCT in the short term. For the long term, this business profile is in the mid- to high-teens. That's the nature of what we do in this highly engineered space. We think these leveraged opportunities will allow us a better opportunity to reach that entitlement level. But that's what we're driving this business towards on a combined basis, is a mid- to high-teens level margin profile. And then, we'll go from there. Jim Giannakouros - Oppenheimer & Co., Inc.: Got it. Thank you. And free cash flow conversion, clearly you continue to invest high-return investments, I get that. You got Luca on the job of driving efficiencies, et cetera. Do you have line of sight to getting conversion close to parity in, say, the next two to three years, or will investments you envision certainly in MT cap that from getting there? Thanks.

Yeah. Jim, I think the only acceptable, in our opinion, variable that prevents us from 100% or more conversion is the increased investment in Motion Tech to support platform wins that we've already locked up. So, our goal is to continue to drive for conversion in excess of 100%. And we have a lot of focus on the working capital improvements of this business. We have seen some good performance in the accounts receivable category, bringing delinquencies down. We've improved inventory turns. So, the operating model is going to help drive core working capital improvement. And that's going to give us a stronger foundation going forward. So, I would say the only X factor that we really are managing going forward from a free cash flow conversion perspective is additional investments in MT. But as you alluded to, Jim, those are ROIC-type investments in the 40% range. So, those are the investments we're happy to make with visibility and certainty on performance. Jim Giannakouros - Oppenheimer & Co., Inc.: Got it. Thank you.

Thanks, Jim.

Your next question is from Brett Linzey with Vertical Research.

Hi, good morning all.

Good morning, Brett.

Good morning. Just wanted to come back to Industrial Process, could you maybe just quantify the negative impact of the complex pump project? In the quarter, it sounds like some of those issues should abate here in the front half. I guess, as you look through the existing backlog and as these customers ask for release of these projects, I mean, do you expect to maybe face more of these issues as we look into H2 or 2018?

Yeah, Brett, I think in the quarter, those complex projects probably impacted us by a couple of hundred basis points. We're driving these to conclusion and we don't see that kind of hit coming from projects going forward. So, you have a negative mix inside of those projects because of the complexity of those compared to what we had last year. So, that's about how we think about the impact in Q1 relative to what we saw last year at this time. So that was one of the big drivers on a year-over-year basis in addition to the other items that we pointed out, particularly FX.

Okay.

Go ahead, Brett. Sorry.

Yeah. I was going to shift to Motion Tech, but yeah, go ahead if you have an additional comment.

No. That's primarily the way we're thinking about it.

Okay. Yeah. And just on Motion Tech, specific to the earlier expansion in North America brake, there was a step up in strategic investments versus 2016 as you seemingly prepared for that. Should that taper back down as we look into H2 and in 2018? Or do you carry some higher strategic investment costs to support that ramp here in the next couple of quarters?

The strategic ramp should kind of slow down in the second half of the year where we're really focused on driving the kind of production up in the new facility inside of North America. So, I would expect those levels to come down in the second half, and quite honestly to be lower in 2018 because we don't have new facility starts on the horizon. So, it would be ramping down this year and certainly would be at a lower level both from a strategic investment perspective and from a CapEx perspective in Motion Tech in 2018 compared to 2017.

Okay. And then maybe just one follow-up on that. I mean, as you prepare for the ramp and you look at your contracts in hand and you start to roll those wins up, I mean, do you expect outgrowth in North America closer to 13 times, you outgrew China in the quarter or closer to kind of 2, 3 like you're doing in Europe? Any color or quantification will be helpful as we look over the next couple of years here.

Yeah. It's probably a little too early to get specific on the numbers, but clearly the platform that we are driving in North America is one of GM's largest platforms and we have good content across that platform. So, it will certainly be a multiplier on top of the market, that would be a meaningful one, but just a little hesitant at this point, Brett, to give specifics. But it's a unique ramp in 2018 and 2019, particularly this T1XX line that we're driving for GM.

Okay. All right. Great. Thanks for the good color.

Thanks, Brett.

The next question is from Joe Giordano with Cowen. Joseph Giordano - Cowen & Co. LLC: Hey, guys. Thanks for running long here and taking my questions. If you could just scale those 11 platforms in China, like how should we think about that in terms of the contribution of those 11 programs at run rate like relative to the size of your existing business?

Yeah. It's pretty significant, Joe. It represents a pretty meaningful uptick in our production level volumes inside of China. So, these 11 wins that we referenced with a good mix of both local and global OEMs give us pretty good visibility to significant upturns in volume. We're hesitant to give the exact number, but it's a meaningful increase. Joseph Giordano - Cowen & Co. LLC: Is there any margin implications when it's a local provider versus a global OEM?

No. Haven't seen that. It's pretty much consistent across the board. Joseph Giordano - Cowen & Co. LLC: Okay. And then, if I could just follow on, Jim, this question on cash flow like as you start working down some of this backlog in the project business in IP and you get some delinquencies, like what could we be thinking about in terms of working capital? Forget about the spending that you're going to do in MT, but just the working capital piece of the business.

Yeah. We're still driving working capital improvements around the 100 basis point as a percent of sales, that's our target for the year. Certainly, getting some of the large projects delivered and collected will be a big part of that equation within IP. But that is what we're targeting, about 100 basis points of improvement in a sustained repeatable way that we can build on and keep driving further improvements beyond that into 2018. Joseph Giordano - Cowen & Co. LLC: Okay. And then, last, as you guys go through your journey here with the new CCT, how do you think about M&A into those kind of businesses that might have exposure there? Is that off the table for a bit?

No. There's opportunity when we think about CCT. One of the areas that we've mentioned before that we're interested in is if there's something that we can do from an aerospace perspective considering that's 60% of that business. We like that space. We have good positioning in that space. We know how to play well with it. And so, that would be a good opportunity for us, is to think about something with aerospace. Joseph Giordano - Cowen & Co. LLC: Okay. Thanks, guys.

All right. Thanks, Joe.

Your final question is from Andrew Obin with Bank of America Merrill Lynch.

Yes. Good morning. Thank you for fitting me in.

Hi, Andrew.

Hi, Andrew.

Just a question. You highlighted several times in reference to oil and gas and the IP business that April is slower than March and I just want to understand is that because March is lumpy or you're seeing customers actually react to volatility in oil prices?

Yes. Andrew, probably a little too early to call the recent change in the oil and gas price kind of flowing into the oil and gas orders at this stage. It probably would be more of a question around will it impact May? But I would say that we did see some uptick in oil and gas compared to the prior year in April, so it's slowing from where we were, but it's still up compared to the prior year and I think April is more a reflection maybe of oil in the $50 range with more stability, the recent move could change the calculus there. So, certainly too early to call is just how we continue to feel about it.

But right now, the commentary is more about just the volatility of the orders as opposed to any macro change, right?

Correct. Yeah.

And just thinking about – just to follow-up, I apologize, I joined a little bit late. Thinking about CCT on asbestos liability, so does that have any implication on your structure, on how you think about it? And second, are you envisioning any changes that would lead you to walk down the existing amount of asbestos liability, is there anything on the horizon impacting it? Thank you.

Very simply, there was no connection whatsoever to setting up CCT with asbestos. So, nothing from that standpoint. And then any changes with our asbestos, if there is any way we would report on it. Nothing at this point in time, it's basically, what we talked about last year when we do our annual review of it. But there's nothing significantly that has changed at this point.

Okay. So, nothing coming out of this administration, right?

No.

Thank you. Thank you very much.

Thanks, Andrew.

Okay. Thanks, Andrew.

Ladies and gentlemen, that is our final question. I would now like to turn the conference back over to Ms. Denise Ramos to close.

Thank you. So, just to sum it up, I feel good about where we are. You think about MT, we continue to gain share and we have new avenues for growth when you think about the local OEMs in China, Europe with our copper-free pads and the front-axle platforms, the North American facility. We've talked on the call about China aftermarket and the potential for that and then, we also talked about the Smart Pad and how that's leading us into a different world from a technology standpoint as we go forward. With IP, it's really this year getting through the project's execution of these very complex pumps that we've got, and at the same time driving productivity and optimizing our operations. And then with CCT, it's about building scale and gaining leverage, both across and front-end improvements. So, I hope that gives a nice synopsis of where we are. And I look forward to talking with you on our next earnings call. Thank you, everyone.

Thank you. This does conclude today's teleconference. Please disconnect your lines at this time, and have a wonderful day.