Good day, ladies and gentlemen, and welcome to the Semiconductor (sic) [ON Semiconductor] Third 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 follow at that time. [Operator Instructions] As a reminder, this conference is being recorded. I would like to introduce your host for today's conference, Parag Agarwal, VP of Corporate Development and Investor Relations. Sir, you may begin.

Thank you, Terrence. Good morning and thank you for joining ON Semiconductor Corporation's third quarter 2016 quarterly results conference call. I'm joined today by Keith Jackson, our President and CEO; and Bernard Gutmann, our CFO. This call is being webcast on the Investor Relations section of our website at www.onsemi.com. A replay will be available on our website approximately one hour following this live broadcast and will continue to be available for approximately 30 days following this conference call, along with our earnings release for the third quarter of 2016. The script for today's call and the additional information related to our end markets, business segments, geographies, channels and share count are also posted on our website. Our earnings release and this presentation includes certain non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable measures under GAAP are in our earnings release, which is posted separately on our website in the Investor Relations section. During the course of this conference call, we will make projections or other forward-looking statements regarding future events or future financial performance of the company. The words believe, estimate, project, anticipate, intend, may, expect, will, plan, should or similar expressions are intended to identify forward-looking statements. We wish to caution that such statements are subject to risks and uncertainties that could cause actual events or results to differ materially from projections. Important factors, which can affect our business, including factors that could cause actual results to differ from our forward-looking statements, are described in our Form 10-Ks, Form 10-Qs and other filings with the Securities and Exchange Commission. Additional factors are described in our earnings release for the third quarter of 2016. Our estimates may change and company assumes no obligation to update forward-looking statements to reflect actual results, changed assumptions or other factors, except as required by law. We will be holding our 2017 Analyst Day on March 10 in Scottsdale, Arizona, and we will be sending out invitations and additional details of the event in coming days. During the fourth quarter, we will be attending the Credit Suisse Technology, Media, Telecom Conference on November 30. Now, let me turn over to Bernard Gutmann, who will provide an overview of third quarter 2016 results. Bernard?

Thank you, Parag, and thank you everyone for joining us today. Let me start by updating you on recent directives from the Securities and Exchange Commission on disclosure of non-GAAP financial measures. Due to new and revised Compliance and Disclosure Interpretations on the use of non-GAAP financial metrics by U.S.-listed companies from the U.S. Securities and Exchange Commission, we are revising our practices with respect to guidance and use of non-GAAP measures. Please see the earnings release for additional information. Now, let me provide you details on our third quarter 2016 results. ON Semiconductor today announced that total revenue for the third quarter of 2016 was approximately $951 million, an increase of approximately 8% as compared to the second quarter of 2016. Third quarter revenue included a contribution of approximately $53 million from our acquisition of Fairchild Semiconductor, which closed on September 19, 2016. The incremental contribution from Fairchild was partially offset by approximately $5 million of revenue we didn't see this quarter as a result of the divestiture of our Ignition IGBT, TVS diodes and Thyristor product lines. GAAP net income for the third quarter was $0.02 per diluted share. GAAP income before income tax for the third quarter was approximately $87.3 million. Non-GAAP income before income tax for the third quarter was approximately $107.3 million. Net cash paid for taxes in the third quarter was approximately $6.5 million and diluted shares outstanding were approximately 420 million. GAAP gross margin for the third quarter was 34.6% and non-GAAP gross margin for the third quarter was 35.9%. GAAP and non-GAAP gross margin for the second quarter of 2016 was 35.1%. GAAP operating margin for the third quarter of 2016 was approximately 4.9% as compared to approximately 8.6% in the prior quarter. Our non-GAAP operating margin for the third quarter was…

Thanks, Bernard. I will start with update on progress we have made thus far on integration of Fairchild, and then I will provide commentary on current business trends and on various end markets. We are pleased with our acquisition of Fairchild and also with the progress we have made thus far in the integration process. As of now, we are tracking significantly ahead of our announced synergy targets. Recall that at the close of transaction, we announced that we were targeting to achieve annual synergy run rate of $75 million six months after the close of the transaction. We already have exceeded our six months post-close target and we plan to implement further actions in the current quarter to realize additional synergies. We expect to start to see the impact of these measures on our operating costs in the early next year. Let me now provide additional detail on the action we've taken to realize synergies in various functional areas. On the R&D front, we have identified redundant or uneconomical programs and are in a process of eliminating many of these programs. A sizable portion of R&D program rationalization will likely be achieved in the current quarter. As we previously mentioned, although ON Semiconductor and Fairchild had very complementary product portfolios, both companies were investing to grow in similar areas. In sales and marketing, we took actions on the first day after close of the transaction to effectively integrate the sales team. Redundancies in account management were eliminated and customer accounts were allocated immediately after close of the transaction. Based on inputs from our customers, we retained the best talent between the sales forces of the two companies. With addition of Fairchild's portfolio, ON Semiconductor has significantly improved its presence in the distribution channel. We intend to leverage our expanded…

Thank you, Keith. Based on product booking trends, backlog levels and estimated turns levels, we anticipate that total ON Semiconductor revenues will be approximately $1.19 billion to $1.24 billion in the fourth quarter of 2016. Backlog levels for the fourth quarter of 2016 represent approximately 80% to 85% of our anticipated fourth quarter revenues. Our guidance for the fourth quarter is in line with normal seasonality, with our organic business down approximately 2% at midpoint and Fairchild down approximately 7% at midpoint. We expect inventory distributors to be flat quarter-over-quarter on a dollar basis. We expect total capital expenditures of approximately $40 million to $50 million in the fourth quarter of 2016. For the fourth quarter of 2016, we expect GAAP gross margin in the range of 27.4% to 29.5% and non-GAAP gross margin in the range of approximately 33.6% to 35.6%. Factory utilization in the fourth quarter is likely to be down sequentially. We expect total GAAP operating expenses of approximately $327 million to $359 million. Our GAAP operating expenses include the amortization of intangibles, restructuring, asset impairments and other charges, which are expected to be approximately $54 million to $72 million. We expect total non-GAAP operating expenses of approximately $273 million to $287 million. We anticipate GAAP net other income and expense, including interest expense, will be approximately $40 million to $43 million in the – for the fourth quarter of 2016, which includes non-cash interest expense of approximately $6 million to $7 million. We anticipate our non-GAAP net other income and expense, including interest expense, will be approximately $34 million to $36 million. Cash paid for income taxes is expected to be approximately $7 million to $11 million. We also expect share-based compensation of approximately $13 million to $15 million in the fourth quarter of 2016, of which approximately $2 million is expected to be in cost of goods sold and the remaining amount is expected to be in operating expenses. This expense is included in our non-GAAP financial measures. Our diluted share count for the fourth quarter of 2016 is expected to be approximately 424 million shares, based on the current stock price. Further details on share count and earnings per share calculations are provided regularly in our quarterly and annual reports on Form 10-Q and Form 10-K. With that, I would like to start the Q&A session. Thank you and, Terrence, please open the line for questions.

Thank you. And our first question comes from Ross Seymore from Deutsche Bank. Your line is open.

Hi, guys. Thanks for letting me ask a question. I guess the first one, heading into the fourth quarter and then potentially into the first quarter, can you just talk a little bit about the demand patterns you're seeing by sub-segments? And I realize sequential math is a little screwed up by the full fourth quarter of Fairchild. But just trying to get into what normal seasonality will be for the full company for the first quarter and then what the pluses and minuses are that get you to your revenue guide for the fourth quarter itself.

Okay. Well, it's a good time to address some of the differences between the Fairchild patterns and ON. ON normally would be down 2% to 3% in the fourth quarter and then down another couple of percent in Q1. Fairchild had a very different pattern. They were down like 7% or 8% in the fourth quarter and then up 1% or 2% in the first quarter. So the net of that is a little more smoothing of the transitions on a quarterly basis. Primary drivers were really the mix of business that the two companies had and what you see is a pronounced impact on the Fairchild side from the communications or handset market, which had the stronger patterns. So, right now, we're seeing things a little better than seasonality going into the fourth quarter and with the backlog patterns going into the first quarter for both companies, which basically says computing's down a bit, the handset's down a bit, automotive down a bit, and basically across all the markets, they're going to be down a little bit from Q3. There's really no strengthening in Q4 over Q3 market-wise. Q1 should see a strengthening in industrial and automotive, and the other markets should be approximately flat.

Great. And I guess as my follow-up one for Bernard, can you just walk us through your expectations sequentially and then kind of going into next year on the synergy side and specifically, on the OpEx line? How should it trend from that $280 million mark that you are guiding to in the fourth quarter?

So, as we mentioned in the written remarks, we are ahead of schedule on the savings and ergo, our midpoint of our guidance is $280 million. In general terms, we expect those numbers to be flat to down. We expect the first quarter to still show some improvement over that. And then, as you go into the back half of the year, we should expect still some small reductions, but it will be partially offset with our normal merit increases. But in general terms, we expect that our OpEx to move towards the 22% of revenue towards the end of the year.

Great. Thank you.

And our next question comes from Chris Danely from Citigroup. Your line is open.

Hey. Thanks, guys. Just a clarification on end markets. So I think you said in the comments and prepared remarks that there was a slowdown from the PCN market. Was that the reason that you came up a little short with the Q3 revenue? Maybe talk about how the slowdown in the PC market is impacting Q4 and then any impact from the Note 7 problems as well.

So primary difference in Q3 was not computing; it was actually the divestiture of the business we mentioned for the Ignition IGBTs and the Thyristor businesses. So that difference was basically made up the entire gap. On the computing side, our comments were we did start to see some inventory corrections through the computing side. I believe we see them a little earlier than others, but I think you're going to see that in Q4. But in general, there was not a big change Q3 over Q2 or Q4 over Q3 for our market, basically due to the increased Skylake content.

Okay. Great. And then for my follow-up, can you just maybe talk about where you're finding these additional synergies? Is it more on the COGS or the OpEx side?

It's both. On the OpEx side, we're identifying continued opportunities as we understand the investment profiles in more detail and just getting rid of redundancies there. That's opened up some new doors for us. And on the COGS side, we now have enough data to do the analysis on insourcing and that should provide some earlier-than-expected opportunities in 2017.

Great. Thanks, guys.

And our next question comes from Chris Caso from CLSA. Your line is open.

Yes. Thank you. Good morning. I guess the first question, if you could clarify what the Fairchild revenue was for the full quarter. In addition, Fairchild had a sell-in revenue recognition policy. Do you guys continue that as part of ON Semiconductor and what are the implications of that?

Yes. Thanks, Chris. So Fairchild's stub period, which is the one we had on our control, was $53 million. We don't have full visibility of what occurred before. It wasn't under our ownership and there was no public forum for that. In general terms, I believe it was pretty much in line with what their management was expecting and was not a surprise in general terms, but we don't have a precise number. Indeed, Fairchild, you see, recognizes revenue on a sell-in basis. We will continue recognizing revenue on a sell-in basis for the Fairchild piece and we are exploring the possibility of early adopting the sell-in conversion, which, as you know, all companies will have to migrate to sell-in as of 01/01/2018 as the latest. So we're exploring whether we do an early adoption of that at the beginning of 2017. It's still not completely defined, but that's the current thought process. So pretty much after 01/01/2017, we should all be changing to a sell-in methodology.

Okay. Thank you. And as a follow-up, perhaps you could talk about the handset business a bit. Obviously, a lot of moving parts there with some new product ramps going. How is that going versus your expectations and what can we assume as we go into Q1?

Yeah. That's a little bit of why seasonality is a little better than normal. We've actually seen some pickups in our design platforms, both with the global providers and in China. And so we think there should be some good opportunities for strength in Q1, and I think that certainly is going to remain so at least through the early Chinese New Year this year.

Great. Thank you.

And our next question comes from Vijay Rakesh from Mizuho. Your line is open.

Hi, guys. Thanks. Just briefly on the gross margin side, I know long-term, you guys have maintained that 40% outlook. Is that a 2018 target? And what top line do you need to get to that 40% longer-term gross margin? Thanks.

So we will be giving details on that at the next Analyst Day, but the fundamental tends to get to that 40% remain intact and we actually believe that the Fairchild acquisition enhances our ability to get there. And in general terms, as we have said before, it consists mainly of fall-through in incremental revenue, of self-help on manufacturing and consolidation, and mix improvements and potentially divestitures. Those are the four legs that will really allow us to get to that 40%. We have, in the past, talked about a 5% growth in revenue. That has fallen short in 2015 and 2016, but we do expect that there will be some low to middle single-digit growth in the markets that will allow us to get there.

Got it. And on auto side, you mentioned ADAS being a nice tailwind here. Can you talk about what percent of your autos is now ADAS and how that is growing and how you see your mix of auto revenues in 2017? Thanks.

Yeah. I don't have precise numbers of ADAS because it's defined slightly different by each of the makers and whether it's class I through class V. And so, I don't really have access to precise data to give you there. What I can tell you is we're going to be up double digits in automotive in 2016 and the opportunity is there in 2017 as well, really on the backs of more adoption of more safety features.

Thanks.

And our next question comes from Rajvindra Gill from Needham & Company. Your line is open. Rajvindra S. Gill - Needham & Co. LLC: Yeah. Thanks for taking my question. So just a housekeeping. So on the Q4 guidance, the Fairchild business implies something like $335 million revenue to get to the midpoint. And if I look at the organic business being down about 2%, it implies that it's up about 5% year-over-year. So I just want to make sure that those numbers are accurate.

In general terms, they are indeed in the ballpark. As we said in the prepared remarks, we expect ON legacy to be down about 2%, which is seasonal, and Fairchild to be down about 7%, which is also seasonal or maybe slightly better. Rajvindra S. Gill - Needham & Co. LLC: Okay. Thank you. And in terms of the gross margin drivers next year – and you talked a little bit about that in your prepared remarks, but I was wondering if you could maybe elaborate on the Fairchild business, how that will contribute to a higher gross margin either through fab consolidation or back-end test assembly consolidation. I was wondering if you could describe where you see some of the gross margin levers as you fold Fairchild in.

Yeah. There won't be any consolidation savings in 2017. It takes us more than a year to actually realize those. What we're looking at next year is additional insourcing into the combined factory network, so basically less outside manufacturing. This will get us better factory utilization and frankly some much lower costs in some of ON's factories by moving them from the low 80s up further from there. So a lot of factory loading, mostly insourcing would be a primary driver. And then, secondarily, continued mix shift, which has been enhanced with the acquisition. Rajvindra S. Gill - Needham & Co. LLC: And last question from me and I'll hop back in the queue. In the press – earnings release, you have a restatement of the end markets going back to March of 2014, and there are some slight changes there in terms of the actual end markets and then you're kind of consolidating on a business unit split to those three categories. Wondering what was the reason for that and what was the changes that you see that occurred throughout the different products and end markets.

So, typically, we do look at that end market every quarter and there is – it typically happens. We fine-tune our end market information. So that's pretty much a regular process that we go through, just fine-tuning the information.

The product groups we specifically – are organized the way we did because we felt it would accelerate our synergies and by aligning similar businesses across the company. And so, basically that whole restructuring, I think, has really helped us get ahead of the synergy game.

And your next question comes from Craig Ellis from B. Riley. Your line is open. Craig A. Ellis - B. Riley & Co. LLC: Thanks for taking the question. Team, I wanted to follow up on the ahead-of-schedule synergies progress and just explore the longer-term implications. The prior calendar 2017 to 2019 targets were $160 million, $200 million and $225 million. If you're tracking ahead both on OpEx and COGS now, should we expect there to be upside to those targets? And if so, can you provide either quantitative or qualitative color on that?

I'll chime in. Bernard can give more details. But the answer is yes, we do expect upsides. We're not ready to give specific numbers at this point, but there's no question we will both accelerate, meaning bring them in in time and actually have identified more total numbers that we'll be able to deliver. Craig A. Ellis - B. Riley & Co. LLC: And then the follow-up, Keith, is on the end markets. And it's not so much about the near-term dynamics, but for the last couple years, ON's had a focus on auto, industrial and communications as its core end markets where it strived to drive above-industry average growth. Now that you've got an inside look at the Fairchild portfolio, what did those products do to your relative growth rates in your core end markets?

Yeah. I think two areas were pretty exciting. One was industrial in the motor control and the higher voltage power control areas. They actually were very well established and so we're pretty excited there. Actually, I'd give you three areas. In handsets, the charging wall-to-battery products were very well designed into next-generation platforms. And then, lastly, the opportunity for EV and HEV vehicles with their silicon carbide products is well positioned as well. So those three areas, one in each of the three markets, we think, provides us a much stronger position. Craig A. Ellis - B. Riley & Co. LLC: Thank you. And if I could sneak one in for Bernard. Bernard, is the $45 million midpoint CapEx number a decent proxy for what we should expect next year?

We still are targeting a 6% to 7% of revenue. It is a little bit lumpy. Sometimes it's higher; sometimes it's lower. But in general terms, 6% to 7% is still our model. We don't expect to deviate from it. Craig A. Ellis - B. Riley & Co. LLC: Thanks, guys.

And our next question comes from Tristan Gerra from Baird. Your line is open. Tristan Gerra - Robert W. Baird & Co., Inc. (Broker): Hi. Good morning. A quick question on the insourcing. I think a while back here, 10 years ago, you were touting how outsourcing enabled you to reduce the cyclicality in the business by using the outside fabs as a buffer whenever things were slowing down. Could you remind us now what's the percentage of outsourcing? What it's going to be once you make those changes? And is it fair to assume that you had a view of the business being less cyclical that allows you to do this relative to your stance from years ago?

Yeah. Our model was to have approximately 20% of our business outsourced to help deal with cyclicality. It turns out the Fairchild business on the back ends, for example, was over 50% and so significantly in excess of our target. And we look at ON's cost structure specifically again in the back end and it's substantially better than any of the outsource opportunities. So really, Tristan, it's just truing us back up to that 80/20 model with 80% inside will get us most of the gains that we're after. Tristan Gerra - Robert W. Baird & Co., Inc. (Broker): Great. And then if I heard the number well, your Image Sensor Group revenue implies a little bit of a year-over-year decline in the quarter. Could you talk about the trends in that business? Are we still on track in terms of the accretion for the year and also the type of growth drivers that you see going forward?

Yeah. We had a very substantial double-digit growth in the automotive sector, which is the focus in that business. The slight declines year-on-year were all coming out of handsets in the consumer side, which again we mentioned at the time of purchase we wanted to de-emphasize those because they were quite low margin. And so, really, everything remains on track as we look at it another year long. Tristan Gerra - Robert W. Baird & Co., Inc. (Broker): Great. Thank you.

And our next question comes from Vivek Arya from Bank of America. Your line is open.

Thanks for taking my question. I wanted to just revisit this synergy question. So when I look at ON and Fairchild separately in Q2, the combined OpEx, if my math is right, was about $285 million, and for Q4, you're guiding to $280 million. So first part is, is that the right baseline for looking at where you are in terms of synergy success? And the other part of that is, what is the right way to look at absolute OpEx for 2017, even if it's in a somewhat qualitative way?

So the Q3 is probably a better base. If you look at the midpoint of our guidance for the ON legacy, it was $205 million, so in that sense. And if you take Q2 actuals for Fairchild, which I think was around $85 million, you're looking at a starting point of about $290 million. The way to look at it for next year is we intend to gradually come down to achieve about a 22% of revenue level. So it will be trending down from the existing approximately 23%.

Got it. Thanks, Bernard. And as my follow-up, Keith, one thing. As I look at the power discrete sector, denser trade at a lower valuation and one reason could be the lower gross margins versus the rest of the semis. And I think you mentioned that there are opportunities for some potential divestitures. So are there things that you can do beyond just top line growth that can help you accelerate the improvement in gross margins so you can get your 40% target? Thank you.

Yeah. I think there's two things pretty strong in our favor there. One, we do think with our manufacturing network and the specific market focus we've got, that business just naturally can be in the high 30s, so 38%, 39%, which is really not 40% but it's very supportive directionally from where it was run by the two companies separately. On top of that, there are divestiture opportunities and I can't give any details on those, obviously, but there are some lower margin parts of that business we will be looking to spin out.

Okay. Thank you.

And our next question comes from Steve Smigie from Raymond James. Your line is open. J. Steven Smigie - Raymond James & Associates, Inc.: Great. Thanks a lot, guys, and congrats on all the good work on the synergies. The first question was on some of the R&D. You've said you got some of the success there was in figuring out stuff that maybe you weren't going to focus on anymore. Or is there something you might share, sort of what products maybe you'll be deemphasizing? And if it's not appropriate for a public call, I understand, but any color there on what does not work for you guys anymore.

The majority of those synergies are redundant programs where we are both going after highly attractive new markets, and I'd say that accounts for most of it. The balance is in some, I don't want to call them skunkworks, but just some exploratory work that was going after some markets that we had not anticipated that do not look very attractive and some technologies that we don't think make any sense. So, it's really just odds and ends, but it added up to some reasonable numbers. J. Steven Smigie - Raymond James & Associates, Inc.: Okay, great. Thanks. And then, Bernard, I was wondering if you've looked at this yet. In the event that you do shift ON over to the sell-in models that everybody sort of has to do, I guess, at some point here, what – how should we think that that would impact results? Is there sort of a one quarter shift over pulls forward and then we're kind of on track going forward? Or how do you anticipate that might look like, if you've had a chance to look at it yet?

Yes. We have had a chance to look at it. There should be no impact to the P&L. The guidance or the rules for this basically eliminates all of the sell-through deferred margin through equity without flowing through the P&L. So pretty much the only thing that will happen is on the financials is that the balance sheet will stop showing a deferred margin side and it will be all rolled into equity. From the P&L point of view, there will be no impact. J. Steven Smigie - Raymond James & Associates, Inc.: Okay. Great. Thanks very much.

And our next question comes from Shawn Harrison from Longbow. Your line is open.

Hi. Good morning. I wanted to just delve into maybe debt reduction and how you're looking at that through the end of the year. I know the Series Bs were out there. But maybe if you could you talk about does the guidance include any additional debt reduction associated with Fairchild, how you think about that during 2017 and maybe a minimum cash balance that you'd like to maintain.

So as we said in – when we announced the deal on September 19, reducing our leverage is going to be one of our priorities. We do have debt that becomes due at the end of the year and we do have a good amount of cash on the balance sheet that allows us to have the flexibility of basically reducing that debt. As we increase our free cash flow generation, we'll be focusing on using that cash to de-lever up until we get to a level of about 2 times net over the next couple of years.

Okay. And then as a follow-up, if I may, the $75 million run rate achieved, was that all OpEx-related or did any of that fall into COGS? And second, I know the accretion target was $0.20 for 2017, I believe. What is the new accretion target for 2017?

So the majority of the initial savings are coming from OpEx. There is some savings on a purchasing leverage on different COGS. The $0.20 right now remains intact and we'll provide more details in our Analyst Day, but right now, we're definitely on track to that $0.20 accretion for 2017.

Thank you very much.

And our next question comes from Chris Rolland from Susquehanna International Group. Your line is open.

Hey, guys. Thanks for the question. So in your written commentary, you guys highlighted bringing capacity potentially in-house to Fairchild to help increase utilizations there. So what current facilities do you guys plan to bring in there? Or what products do you guys plan to bring in? And then also, do you guys plan to equip the half of Fairchild's Korean facilities that were currently empty?

Okay. So kind of two fronts. One on the assembly test side, across the board, we're looking at increasing utilization in those locations and we will be focusing capital expenditures to expand the factories for increased leverage on bringing things inside. From a wafer fab perspective, really we're looking at doing much more, including expanding Korea on the high-voltage and medium-voltage areas. So the discrete factories of Fairchild should be seeing significantly more loadings from design wins that are ramping now on the ON side.

I see. Okay. Thank you. And then I think you guys addressed the revenue associated with your IGBT business. I guess it's less than like $25 million a year, but the purchase price was more than $100 million, so call it 4 to 5 times sales. That's significantly above 2 times sales where you guys trade at. So, I'm making an assumption that that business was significantly more profitable than the rest of your business. And if that is true, we know it's 2% of revenue, but what kind of percent of profits are we talking about here? Is it 4%? Is it 5% of profitability? How should we think about that divestiture?

Chris, let me clarify something. The Ignition IGBT was $25 million, but we also sold some TVS and Thyristor product lines in conjunction with that same sale that was more on the mandated side by the FCC. So the total revenue for that was definitely more than twice what you quoted for that business. And we don't give details on the profitability, but I would say it's not above corporate average.

Got it. Okay. Thank you for that clarification.

And our next question comes from Kevin Cassidy from Stifel. Your line is open. Kevin E. Cassidy - Stifel, Nicolaus & Co., Inc.: Thanks. This time of year, you typically renegotiate contract prices with your customers. Can you say how this year's negotiations went and maybe give us an idea of what kind of price declines we'd expect in 2017?

Yeah. They are going well, and so we're quite pleased. Our expectations for next year are actually a little better than they were this year, but they should still average in that 1%, give or take, range per quarter. Kevin E. Cassidy - Stifel, Nicolaus & Co., Inc.: Per quarter. Yeah. And what percentage of your revenue would be under contract?

It's – a little less than 40% is under contract. And of that, a little more than half of that total contract number is annual. Kevin E. Cassidy - Stifel, Nicolaus & Co., Inc.: Okay. Great. Thank you.

And our next question comes from Harlan Sur from JPMorgan. Your line is open.

Morning. Thanks for taking my question. Historically, in a disciplined supply/demand environment, the team has trended between kind of 9 to 10.5 weeks on distribution inventories. Can you just give us an update on where inventories are currently sitting and then maybe just some qualitative views on customer discipline on the inventory front?

So we're running approximately the same 10 weeks we've been running. It went up a little bit with Fairchild, but not much. And so relatively good discipline on the acquired piece and I think very good discipline on the traditional ON side.

Great. Thanks for that. And then, Bernard, how should we think about the cash tax rate for 2017?

So we're basically going to be growing towards that 10% of pre-tax income as we go throughout the year.

Okay. Thank you.

And our next question comes from Mark Delaney from Goldman Sachs. Your line is open. Mark Delaney - Goldman Sachs & Co.: Yes. Good morning, and thanks very much for taking the questions. Two questions from me. First is on the fourth quarter, if you could help us with the gross margin between the two businesses. What will be normally (48:23) expected for traditional ON and then how is Fairchild affecting the gross margins in the December quarter?

So we are merging the companies very quickly together, so we're not splitting the gross margin. In general terms, I think our normal 50% fall-through on incremental or decremental revenue is the short-term view of things. That's pretty much what affects the comp, supplemented by additional synergies coming on the Fairchild side. Mark Delaney - Goldman Sachs & Co.: That's helpful. And then for a follow-up question, if you could talk a little bit more on your market share opportunities with NXP divesting its Standard Products Group to Chinese holders and then there's talk about some opportunities for ON to pick up shares, especially in auto and industrial. Could you give us either a quantitative or qualitative assessment about how successful you've been on that front?

Yeah. Quantitatively, it's going to be difficult right now. It's still early. But qualitatively, those two markets are very sensitive to supply and supply disruptions, and I think we're looking like a very good alternative to some of the changes that are out there. Mark Delaney - Goldman Sachs & Co.: Thank you.

And your next question comes from Craig Hettenbach from Morgan Stanley. Your line is open.

Hi. Good morning. This is actually Diana calling for Craig. Thanks for taking my questions. First, you mentioned about reducing the debt, focusing on using the cash getting 2 times lever. Wondering how should we think about the interest expense run rate going to 2017 and 2018.

So the interest rate on our repriced Term Loan B is now LIBOR plus 3.25% as compared to LIBOR plus 4.50. If you look at the blended average of all of our debt that we have, it's approximately a little bit higher than 3%.

Okay. Got it. Thank you. And then just a follow up on the inventory. When you look at the adjusted inventory days, it's around 113 for the quarter and 120 for ON Semi. So that's kind of like within your 110 and 120 target. So, would Fairchild kind of influence that target? Like, what kind of inventory level you guys want to hold going forward? Thank you.

We believe that the 110 to 120 is a comfortable place to be at and we'll continue with the – targeting to be within that range.

And at this time, I'm showing no further questions. I would like to turn the call back to Parag Agarwal for closing remarks.

Thank you, everyone, for joining the call today. We look forward to seeing you at various conferences during the quarter. Thank you.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect. Everyone have a great day.