Good day, ladies and gentlemen, and welcome to the Parker-Hannifin Corporation Third Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, there will be a question-and-answer session, and instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Cathy Suever, Chief Financial Officer. Ma'am, you may begin.

Thank you, Shannon. Good morning, and welcome to Parker-Hannifin's third quarter fiscal 2017 earnings release teleconference. Joining me today is Chairman and Chief Executive Officer Tom Williams; and President and Chief Operating Officer, Lee Banks. Today's presentation slides, together with the audio web-cast replay, will be accessible on the company's investor information website at phstock.com for one year following today's call. On slide number 2, you'll find the company's Safe Harbor disclosure statement addressing forward-looking statements, as well as non-GAAP financial measures. Reconciliations for any reference to non-GAAP financial measures are included in this morning's press release and are posted on Parker's website at phstock.com. Today's call agenda appears on slide number 3. To begin, our Chairman and Chief Executive Officer, Tom Williams, will provide highlights for the third quarter of fiscal year 2017. Following Tom's comments, I'll provide a review of the company's third quarter fiscal year 2017 performance, together with the guidance for full fiscal year 2017. Tom will provide a few summary comments, and then we'll open the call for a Q&A session. At this time, I'll turn it over to Tom and ask that you refer to slide number 4.

Thanks Cathy, and welcome to everyone on the call. We appreciate your participation this morning. I'd like to take a moment to congratulate Cathy on her new role as Chief Financial Officer, which we announced earlier this month. We will certainly miss Jon Marten, who announced his retirement; we thank Jon for his great leadership and service during his 30 years with the company. We're very fortunate to have someone of Cathy's leadership and experience to step into this important role, Cathy has 30 years of experience in operational and financial roles at Parker, and has been acting CFO since November of last year. This seamless transition is an indicator of the effectiveness of our leadership succession planning at Parker. Now, moving onto the results, I'd like to share highlights of our third quarter results, which were strong across many measures, give you an update on the CLARCOR integration, and comment on our changes to the fiscal year 2017 guidance. Before I get into the financials, I'd like to first report on our safety performance since keeping our people safe is our highest priority and our most important measure. During the third quarter of 2017, we were able to reduce our recordable injuries by 28% compared to the prior year. Importantly, we reduced our lost time due to injuries by 39% compared with the prior year period. This builds on a significant year-over-year improvement in the last several years, and it's even more impressive considering the increase in volume we've experienced this quarter. This improvement is being driven by strong leadership, training, and engagement of our team members globally through high-performance teams that are focused on achieving the goal of zero accidents. Now onto the financial highlights for our third quarter results: This was another strong quarter for Parker across…

Thanks, Tom. Please refer to slide number 5. I'll begin by addressing earnings per share for the quarter. Adjusted earnings per share for the third quarter were $2.11 versus $1.51 for the same quarter a year ago. This equates to an increase of 40%. Third quarter earnings have been adjusted to exclude CLARCOR acquisition related expenses of $0.27 per share incurred during the quarter and business realignment expenses of $0.09 per share, which compares to business realignment expenses of $0.14 per share for the same quarter last year. On slide number 6. You will find the significant components of the walk from adjusted earnings per share of $1.51 for the third quarter of fiscal year – fiscal 2016 to $2.11 for the third quarter of this year. Increases included higher adjusted segment operating income of $0.44 per share, of which Legacy Parker was $0.37 and CLARCOR contributed $0.07. Lower income taxes as compared to the prior year equated to an increase of $0.18, due largely to the stock option expense tax credit, while lower other expense and the impact of fewer shares outstanding equated to an increase of $0.03. Adjusted per share income was reduced by $0.05 due to higher interest expense and corporate G&A. Moving to slide number 7, we review total Parker's sales and segment operating margin for the third quarter. Total company organic sales for the third quarter increased by 5.7%, compared to the same quarter, last year. There was a 5.6% contribution to sales in the quarter from acquisitions, while currency negatively impacted the quarter by 1%. Total segment operating margins adjusted for realignment costs as well as CLARCOR acquisition related expenses was 16.1%, versus 14.7% for the same quarter last year. Business realignment costs incurred in the quarter were $16 million, versus $25 million, last…

Thanks, Cathy. We've continued to make progress through fiscal 2017 and our third quarter continued this momentum. I'd like to thank our team members around the world for their dedicated efforts. We are making meaningful progress with the new Win Strategy, which is designed to drive top quartile performance versus our proxy peers and generate long-term shareholder value. All signs point to a strong close to the fiscal year. More importantly we continue to see opportunities that will allow us to achieve our key financial objectives by the end of fiscal 2020, which includes organic sales growth of 150 basis points higher than the rate of global industrial production, 17% segment operating margins and a compound annual growth rate and earnings per share of 8% over this five-year period. This is a special year for us at Parker as we celebrate our 100 year anniversary. We are very proud of our history and confident of the bright future that we see in front of us. So, with that, at this time, we're ready to take questions. So, Shannon, if you could go ahead and get it started.

Thank you. Our first question comes from Nathan Jones with Stifel. You may begin. Nathan Jones - Stifel, Nicolaus & Co., Inc.: Good morning, everyone.

Good morning, Nathan. Nathan Jones - Stifel, Nicolaus & Co., Inc.: If you have the numbers handy, could talk about what the incremental margins were excluding the acquisitions?

Yeah. Why don't I talk about excluding CLARCOR, we've done it multiple ways here to analyze our core business results, but looking at just excluding CLARCOR, we're in the range of – the incremental margins in the third quarter were in the range of the high 40%s. Nathan Jones - Stifel, Nicolaus & Co., Inc.: And I think you had fairly considerably higher incremental margins in the last quarter and probably even at the high 40%s, which is very good, was maybe a little lower than expected. Was there anything in there that dragged those down in the quarter or how should we be thinking about those incremental margins going forward?

I think it's normal for us to be in the high 40%s as we're coming – we're growing and markets are improving. We've seen some also benefit from the simplification efforts we've been making, and I'm giving you a broad total Parker number. On the industrial side, it was higher, in the 50%s. So, it depends on which of the segment of the business you're looking at.

Nathan, this is Tom. Because aerospace was a little challenged with some extra development costs in the quarter that kind of deflated the marginal return on sales a little bit. If you back that out, just look at industrial and then also take all the acquisitions out, we're in the mid-50%s. Now, I would not project a mid-50% MROS for us going forward. We tend to have the first quarter to up about that level, and then glide back down to a more steady state of plus 30%, but these margins are really, really stellar that we put up in this quarter. Nathan Jones - Stifel, Nicolaus & Co., Inc.: Are those aerospace development costs projected to increase or to continue at that level?

Nathan, this was – in this quarter, we pulled in some development works to help some of our customers get to the end of their – to get their development cost programs finished. So, it was more cost that had been planned for fiscal 2018 that we pulled into this third quarter. Nathan Jones - Stifel, Nicolaus & Co., Inc.: Okay. So, it should glide down then. And just a question on industrial, clearly Parker usually is a beneficiary early in the cycle of inventory restocking in the channels. Can you talk about what you think is maybe the growth that you're seeing there, that's due to inventory restocking?

Yeah. Nathan, it's Lee. I mean, I think the exciting part for us, industrial in North America is we saw a lot of our distributor partners see a substantial increase in their backlog throughout the quarter. So that's had a knock-on effect of order entry and shipments. I'm sure there's some marginal inventory restocking, but I wouldn't call that a significant driver of what's happening, I would characterize it more as real demand. Nathan Jones - Stifel, Nicolaus & Co., Inc.: That's helpful. Thanks, I'll get back in the queue.

Thank you. Our next question comes from Jamie Cook with Credit Suisse. You may begin. Jamie L. Cook - Credit Suisse Securities (USA) LLC: Hi, good morning. One question and then I guess a follow-up. Tom just to be clear on the last question with the incremental margins, I guess more broadly, we shouldn't assume that CLARCOR dampens incremental margins assuming things continue to recover, so we should think about sort of Parker – you know what I mean? We should think about Parker's historical incremental margins and assume that's how we think about things going forward. I just want to make sure there is no short-term issues with the integration of CLARCOR? And then, second, obviously the orders inflected higher broadly, if we think about North America, although easier comps and on the international side, so Lee, perhaps you could provide some color on which markets inflected more positively versus last quarter or last year. Thanks.

Okay, Jamie, I'll start then I'll hand it over to Lee for the markets. On MROS, I think with CLARCOR all in (27:43) you should see us do what we've historically done. If – that plus a little bit more, because everything we've done as a company, with the new Win Strategy, the fixed costs that we've taken out, simplification. So I think you could model historical plus a little bit better. On the integration, it's going terrific. I'm very pleased with integration so far. The teamwork between both companies basically becoming one, they are the talent that the cultural fit, all the synergies, very interesting, the synergies we thought when we're kind of looking at it, more isolated now that we're looking at it jointly. There is a lot of harmony between both teams looking at and saying we've created, this is a dynamite list. So we're very encouraged and there is – as we go forward, we update you in August give you a better clarity as to the cost to achieve and the savings for that fiscal year, but we're off to a good start with that. And then on the markets, I would just tell you that's it's nice – it's really nice having sat in this room now for 10 quarters to have a quarter where we have an exciting organic growth story to tell you. I mean, it's across pretty much board, and I'll let Lee give you the color on that. Jamie L. Cook - Credit Suisse Securities (USA) LLC: Sorry, Tom, just a follow-up on the incremental though, but in – obviously it's very encouraging that you think you can do a little better than where we were historically and you don't see sort of price cost is an issue as well like that's not to be short-term.

No. Jamie L. Cook - Credit Suisse Securities (USA) LLC: Okay. All right, great. Sorry, Lee. Go ahead.

No, that's fine. So I think, I wanted to just to highlight here, which was kind of nice, this is the strongest orders growth we've had since Q1 of FY 2012. So it's been some time that it's been and we've had that kind of inflection. Just talking about the industrial markets. As we look through all our end-markets and we track these kind of on a giant heat map, it's hard to find any significant market that's natural positive year-over-year order entry growth during the quarter. And really, Jamie, to highlight some of the key markets, I think if you bucket all the natural resource end markets, those continue to grow during the quarter. We kind of saw some of it last quarter that I highlighted. But this would include agriculture, construction equipment, mining, oil and gas. The number in oil and gas rigs, North America, nearly doubled from a year ago, and we've just seen an appreciable pickup in quotes and order entry activity for a lot of rigs that have been stored where parts have the cannibalized. So, it's really not new rig activity, it's just a lot of MRO, which is great business for our guys. We also saw a really nice rebound in activity from our distributor partners around the world. So, for the first time and we're up worldwide with all their distributor partners for some time. And I'd say other notable markets that grew during the quarter, microelectronics was strong, HVAC in our refrigeration, very strong telecom, Class 8 truck, were all really strong markets. If I can, I'll just – as long as I'm going here Jamie, I'll just cover the regions real quick, I'm not going to walk through the markets, but just give you some color on the regions. Jamie L. Cook - Credit Suisse Securities (USA) LLC: Okay.

So, in North America, as I just talked was very strong really encouraged by the increasing end market activity. And it was really nice just to see a significant increase in backlog with some of our distributor partners that really been hit hard by the oil and gas, natural resource end market collapse. In EMEA, we saw strong order entry growth during the quarter, and it kind of built as the quarter went on, in fact this will be the first year we expect year-over-year organic growth in three years in EMEA. So, we're hoping that's going to continue as we go forward. And then Asia, Asia is really strong. I mean, China continues the lead with strong industrial and natural resource end markets, and the strength in China really has been led by a significant infrastructure investment and strong housing market. And we also see emerging markets in Southeast Asia continuing to show great growth. So, we're really happy with what's happening. There is clearly a positive global sentiment to growth right now anywhere you go, but I think we'll be happier if we see a couple of more quarters of this can order entry growth going forward. Jamie L. Cook - Credit Suisse Securities (USA) LLC: Okay, great. That was very helpful. I'll get back in queue.

Thank you.

Thanks, Jamie.

Thank you. Our next question comes from Joe Ritchie with Goldman Sachs. You may begin. Joseph Ritchie - Goldman Sachs & Co.: Thank you and congratulations, Cathy and then Jon, if you're listening. You'll certainly be missed and we definitely wish you well. So, first question, maybe just staying with the discussion on organic growth. Did trends improve as we progressed through the quarter, how trends started out in April, any commentary you can have on that, that would be helpful?

Yeah. The trend – Joe this is Tom. The trends through the quarter, North America and Europe showed steady progress through the quarter and Asia Pacific and Latin America were pretty much consistent, stayed at a high level for the quarter, and April is consistent with what we saw and it's reflected in the guide. So, in general, I think Lee kind of hit it, we're encouraged, but couple of more quarters would just solidify that for us. Joseph Ritchie - Goldman Sachs & Co.: Got it. That's helpful. Maybe when I kind of take a look at your organic growth guidance for the year, I recognize the commentary around March being a healthier quarter from a shipment perspective for CLARCOR. I'm just trying to break up your total organic growth guidance in the North America business. It seems like you were expecting at least high single-digit maybe even low double-digit organic growth in that business for 4Q. And I just want to make sure that I'm calculating things right for CLARCOR, so any other detail you can give on the components, it would be helpful?

Sure, Joe. Yeah, we're expecting for North America high single-digits organic growth in the fourth quarter. CLARCOR right now is running more mid-single digits, but total Parker North America high single-digits. Joseph Ritchie - Goldman Sachs & Co.: Okay. All right. That's helpful. And then maybe if I could ask one more on CLARCOR, the $103 million in costs this year, how much integration cost, I think you guys had highlighted about $90 million in integration costs that you expected to take on CLARCOR to get the synergy benefits. How much of any of those integration costs are going through this year, and maybe if there is some cadence for 2018 as well, that would be helpful?

Yeah. It's very small so far this year and expected in the fourth quarter as we're just getting started, we do have the full-time team on board, and so we're including the cost for that team. I would say, you can think of it in terms of a couple of million dollars for FY 2017. And then for FY 2018, we're expecting, I think initially, we told you the $90 million would be split about 75% of it would be in the first and second years, you can continue to think in those terms for FY 2018. Joseph Ritchie - Goldman Sachs & Co.: Okay, great. I'll get back in queue. Thanks, guys.

Thanks.

Thank you. Our next question comes from John Inch with Deutsche Bank. You may begin.

Thanks. Good morning, everyone.

Good morning, John.

Good morning. So Cathy, CLARCOR was what, mid-single digit organic growth in this quarter, I realize you only owned it for a month, but that – if you just look at their quarter, is that about the number?

Because it was only the month of March with the high sales compared to a normal quarterly month sales, it was higher than mid-single digits for just the month of March. It was actually double-digits.

Okay. So it was double – all right, that makes more sense. So you think it reverts to more of a mid-single because – why again, just because they had such a big March?

Yes. So March had 23 shipping days and that's a bit unusual. When you look at shipping days per month on a quarterly average, it's closer to 21 days. And CLARCOR tends to have heavy burden of fixed costs, and if you think about amortization being layered in there, you get quite a bit of absorption improvement when you have higher volume. And they saw that in March, but that isn't a normal trend.

And then – okay. So I wanted to ask about the tax rate. I mean, obviously, I am assuming the stock option expense issue is sort of driving this lower quarterly, is there not a better way to forecast this like what – your tax rate for the year, do you assume that no options get exercised as part of the derivation of this because it did add a significant amount to EPS versus the forecast last quarter, is this something we've just got to live with or what?

Yeah. John, we look at that and we do not forecast any because there is so many variables involved. We don't know how many people will be exercising their options, we don't know what options they're going to exercise at what grant value, and we'd have to also know what we've already incurred as expense because it's only the differential of where they exercise versus what we had already recognized as expense. So there are so many variables that we choose to not try to forecast that, so it's an upside.

No, no, that's fine. I just want to make sure, I'm not missing something. There is a lot of interest expense running through for CLARCOR, maybe Tom or Lee or Cathy, can you remind us what's you plan to deleverage? And when do you start paying that debt back, so we get even higher accretion, because I guess accretion is running kind of $0.15 to $0.20, but could be up a lot more if you could pay this debt down?

John, I'll start at a high level and I'll let Cathy fill in, add any more details, but our goal is, we're about 3.2 times debt-to-EBITDA. Over the next 24 months to 36 months, we want to drive it down to the 2.0 debt-to-EBITDA. So, we're going – the cash flow, we're very proud of at almost 12%, CFOA, we're going to be using that to help pay down the debt and we're encouraged by what we've seen so far as far as synergies and our ability to put these businesses together, so we think cash will continue to be a very strong component of it. But that's the focus is driving that down.

Well, people are already building out to 2018, I guess the question is how much – are you still going to make a big pension contribution next year or do you channel that into debt, like how much debt can we reduce in 2018 to kind of help us with the accretion?

Yes, a little too early to tell, we're having only CLARCOR for one month, John, but we do – we are optimistic in performance we're seeing and what they will provide for us in cash, we did purposely keep some of the new debt short-term, so that we can be paying it down as we have the cash available, but too soon to tell how much it will happen in FY 2018.

Okay. And then just last, I think Lee you were in China recently, is China getting better, it seems Chine is a source of strength for a lot of industrials this quarter, versus last quarter, but you guys had strong Asia-PAC results before, because of I guess the build out of your distribution network and so forth, if you just try and pro forma for that, what's going on in China, did it strengthened for you or is it sort of status quo strong or anything you could say about it would be helpful? Thanks.

Well. It's been strong the last couple of quarters and I talked about this infrastructure build. You've seen – if I look at all the Chinese national manufacturers' construction equipment. I mean their production has more than doubled than what it was a year ago. So, it's just really strong, but there has been strength over the last year in rail, there has been a lot of strength in life science industries that we serve. So, it's been positive across many different fronts.

In fact, when you look at all the end markets in China, it's hard to find anything that's red.

I don't know, your folks on the ground that will think it can be sustained, I guess is where I'm going or is it a little bit...

Well...

...stimulus and all that other stuff?

I think the consensus is going to be sustained, but I mean you know how that works. So...

Yeah.

...there is definitely a lot of things driving it right now.

Yeah. Growth Chinese style. Okay. Thanks, guys. Appreciate it.

Yeah. Here we go.

Thank you. Our next question comes from Andy Casey with Wells Fargo Securities. You may begin.

Thank you. Good morning.

Good morning, Andy.

A couple questions, you mentioned earlier that you really didn't see any meaningful restocking in the North America distribution channel. Did you notice any occurring in the North American based OEMs, I'm just wondering if they maybe staging for further production increases?

Andy, I think order entry up is across many different markets. So, those customers are placing orders. To what extent they're trying to create a buffer of inventory is really hard for me to see, their say. But I would characterize most of the demand that we're seeing is real demand based on what I see on production rates with our customers is being passed through.

Okay. Thanks, Lee. And then I'm wondering if you could elaborate a little bit more on the revised outlook for the Industrial North American margin, you shaved 20 basis points, not a lot, but 20 basis points of the top end. Was that all CLARCOR or was there anything else that you were considering in that guidance revision?

North America, Andy, we've actually bumped it up, if you consider pulling CLARCOR out, so what you see as the little bit of deterioration is CLARCOR related.

Okay. Thank you very much.

Thank you. Our next question comes from David Raso with Evercore ISI. You may begin.

Hi, just one question. I was curious, I know you're speaking encouragingly about some of your end customers, end demand, not just stocking. But just so we can kind of baseline where do you feel we're launching into fiscal 2018 guide, if the order rates stayed where they are, the comps do get a little bit harder, but I'm just trying to understand, where are the orders exiting fiscal 2017 on a year-over-year basis if we just run it sequentially flat for the quarter?

David, it's Tom. We can't predict it at this point. I mean I know everybody would like me to start talking about FY 2018 in April, but FY 2018 is hard enough to talk about in August. So we'll give you the color on that, we just started our process internally. So, I'm going to just ask you to wait until we get to August.

Well that's why I asked it the way I did, I wasn't asking for a prediction, I was asking current levels, run straight out flat sequentially, where would we exit the year?

Really, so I mean, have to go do that math, but part of it'll be (43:15) doing that math, but also, we'll be talking to our customers, looking at economic forecasts. So, it's not just trying to take current quarter and projecting it out and comparing it to prior periods. It's actually looking and understanding end demand and what's going on. So, we will do that, but that's not the only factor that will influence it.

Well – I mean, again just mathematically, the comp gets a little harder, right, negative 6 a year ago for this quarter, it's negative 1 comp next quarter, and you can double stack it, however you want to look at it. But I'm just trying to get a feel, we're up 8%, or especially the Industrial business is up 9% and 13%. If I can just maintain this level, comp actually gets a little easier in North America, a little harder internationally. I'm just trying to make sure we manage expectations, but also understand the launch for 2018 CLARCOR side, the core business, again it's hard – you have the exact numbers, but it would seem like Industrial, the orders would still be running up, call it, high single digit at a minimum on the two Industrial businesses, Aero obviously it's over 12 months, a little harder comp analysis there, but is that a fair assessment? And again, it is just the math, and if you want to talk offline, that's fine, I'm just trying to understand for modeling 2018, should at least, talking the Industrial businesses, the orders just being flat sequentially, should launch into 2018, up high-single digit?

David, I think the best approach would be take it offline. You and Robin and Ryan can talk about in the follow-up call.

All right. Appreciate that. Okay. Thank you so much.

Thank you. Our next question comes from Ann Duignan with JPMorgan. You may begin.

Hi, guys.

Hi, Ann.

Can we go back to CLARCOR again, just talking about the synergies, I know you're just working through everything, but when we did our bottom-up analysis, the one assessment we made was that there probably wasn't that much opportunity on the purchasing or strategic sourcing side. Could you maybe describe to us where we could be wrong on that or where do you think the opportunities will be? I know you don't want to break into buckets some of the other synergy opportunities, but at least on the strategic sourcing side, just give us a little bit more color there? And at least whether you think there's some overlap that you can achieve savings?

Yeah. Sure, Ann. This is Tom. We actually think the supply chain side has a tremendous amount of synergies because CLARCOR is a very decentralized company similar to us. However, they ran a very decentralized buying organization. So they didn't leverage any of their spend or very little of the spend across their various businesses. So, you've got leverage there, first, just by itself. But then combining it with our spend as well, you have that aggregation. So, we see big upside. And I think all of you know, we've been careful on breaking the buckets up, because obviously, some of those buckets are sensitive to how you – how we would disclose these things. But you can rest assured, we have a very finite detail by major cost bucket and supply chain being one of the largest actually, and it's the natural things you would think of. The Win Strategy initiatives, corporate SG&A, supply chain, leveraging the manufacturing capabilities for both of our companies. And the advantage here is not just looking at one isolated, it's the combination, so looking at both of our manufacturing capabilities and leveraging that. And just part of how we did – we did this with our own insight and what's really been great is now with the CLARCOR team's viewpoint, and we've been spot on as far as in agreement as what we think we need to do, which has been very encouraging.

Okay. And is there a point in time where you will at least break out the buckets, at least on the strategic sourcing side, I know you said it's a major part of the $140 million, will you break that out for us at any point?

I think what we'll certainly do is every quarter, starting in August we'll give you the projection that we think we'll do for that fiscal year as far as cost to achieve, then the synergies that we're going to get and then we'll update how we're doing every quarter against that. The supply chain savings, I am not worried about disclosing that, so if that's something in particular that you'd like to see, we can provide more detail. I also don't want to scatter the herd on my suppliers either, so we'll have to think about how much of that we actually do. But the team on the phone has to – you have to be very confident that we have this down to a very finite detail by major bucket. There is various sensitivities as you disclose that, that we'll just have to consider, but certainly we're going to give you the total and how we're tracking against it.

Okay. I appreciate that and I appreciate you not wanting to tip your hand to your suppliers, that's certainly understandable. Can you just talk – spend a little bit finally about the one month. You're one month in, you're probably talking to the CLARCOR team well before that. Has there been any upside surprise, anything that you've learned in the short time that you've owned CLARCOR that maybe you hadn't anticipated prior to the acquisition?

Ann, it's Tom again. I guess the encouraging thing is there's been no negative surprises, it's all been positive reinforcement and affirmation of the assumptions we made. And I am very pleased with the leadership talent and the strength of the organization. I am pleased with the cultural fit, I am pleased with the fact that both teams are working as one. When I look at these synergies and there's been a lot of buy-in as to what we have to do to make both of our filtration businesses, the best filtration business in the world. So – and I'm knocking on wood, I couldn't be happier with the start.

Okay. I'll leave it there, and get back in line. Thank you. Appreciate it.

Thanks, Ann.

Thank you. Our next question comes from Mig Dobre with Baird. You may begin. Mig Dobre - Robert W. Baird & Co., Inc: Yes. Thank you for taking my question. Just – I want to go back to this tax issue just to clarify something. Can you confirm that your adjusted tax rate in the quarter was just under 25%, first and foremost? And then I guess related to this, I'm trying to figure out, why the step-up sequentially in the fourth quarter in the tax rate? And whether or not, we should be really thinking about this number to migrating actually quite a bit lower than 27% for the year as a whole going forward?

Sure, Mig. Yes, you're correct in that our effective rate for the third quarter was 24.7%. And we are forecasting a higher rate in Q4, and that's really driven by – we have a lot of – a fair amount of the acquisition related expenses that we're incurring are going to be – are not tax deductible. So we're expecting to have to finish the year at an overall effective rate higher than what you saw come through in Q3, reflecting those non-deductible expenses, and also a little bit of shift in mix between U.S. and foreign. You're right in that there will be upside to the rate if we have a heavy amount of stock option exercises at the current stock price, it's likely going to be a nice credit for us, but we just have no way of forecasting how much that might be. Mig Dobre - Robert W. Baird & Co., Inc: All right. That's helpful. Thank you. And maybe to ask a demand question, when I'm looking at your various technology platforms that you're reporting, I'm looking at motion systems expense, for instance. That platform is down, call it, 20% versus the peak from a couple of years ago. How do you think about demand progression over the next few years? Really what I'm trying to get at is in order to get the prior peaks, what do we need to see in terms of volumes from OEMs versus maybe some other things that are internal initiatives for you such as market share gains, new products, things of this sort?

So Mig, it's Lee. I think when you think about motion systems, some of the big drivers in there are really around those natural resource end markets. So, think about construction equipment, mining, even land-based oil and gas. And I think what's encouraging is, globally, we're seeing a significant rebound on those. So, it's been a big driver of what's happening in China. So, it is trending in the way of getting us back to where we've been.

Thank you. Our next question comes from (52:22) with Morgan Stanley. You may begin.

Thanks. I just wanted to ask a question about the longer term segment margin target. You've expressed confidence about this in the past. Obviously, this is before CLARCOR. So, I guess are you willing to comment on potential areas for upside to this goal, or perhaps if you don't want to comment at this time, is this something we should be looking for, I don't know, in the coming months as we think about fiscal 2018 guidance?

Yeah. Millie (52:47), it's Tom. Well, first of all, when we set those targets, they were top quartile performance threshold for our peer group and that continues to be a good number. I am very happy to relook at that number once we've achieved it. I don't want to de-motivate the team by moving it before we've actually achieved it. So, we're going to achieve it first, we're going to obviously continue to drive continuous improvement and we'll also look at what top quartile is running at that time because we see our abilities to continue to get more profitable all the time, but we're not going to move the 17% target until we actually achieve it.

Okay. Understood. And then I guess just as a quick follow-up. More of a clarification, I think, you mentioned price cost a little bit earlier in the Q&A session. I just want to clarify, you said, you don't think that that's going to be a challenge as the year goes on?

Millie (53:40), it's Lee. I mean, price cost absolutely is a challenge but I don't think it's going to be a challenge for us in terms of affecting margin. So, we've seen escalation in some key commodities, but we've also been able to realize price in certain parts of our channel. So we track our cost input, that's our PPI index and we track our kind of our sales number which is our selling price index and we've got a positive GAAP between the two and we expect that to continue going forward.

Okay. Understood. Thanks.

Thank you. Our next question comes from Joe Giordano with Cowen and Company. You may begin. Joseph Giordano - Cowen & Co. LLC: Hey, guys. Thanks for taking my question. I just want to get a sense of – as you look at the simplification outside of anything in CLARCOR, just – where do you think you are in that? How far along that spectrum have you progressed? And is 2018 like a bigger year potentially than 2017 in terms of the cost you can take out? Just how you're looking at that broader transition that you're doing?

Joe, it's Tom. Again, I'd characterize it as early days still. There's some things that we moved out more on division consolidations and those type of things. But we'll continue to look at that and we'll certainly update you on the plans we might have there in the future. But the bigger area that has, I think, the most upside is that whole revenue complexity that looking at the product line simplification, that last couple percent of revenue and the complexity associated with that want to service our customer to make it faster and better experience for them, but also to redesign our organization and our processes and SG&A cost that supports that. So I am very encouraged because every time we look at that, I still see tremendous upside. That part that I just described, the product line complexity is hard work, I've described this as hand-to-hand combat, you got to go part number by part number to go through that. So that's why I characterize that it's still very early days because a company of our size with the number of part numbers, there's still a lot of work we're doing and we're very active on that, and I think you'll see that'd be a contributor for margin expansion for multiple years. Joseph Giordano - Cowen & Co. LLC: And then on the – I think, you mentioned earlier today, $30 million you're planning on savings that are in guidance from the $48 million that you're spending this year. Is that like a realized $30 million for this year, like what's the exit rate and how much of that spilled over?

Yeah. That's a real number. We are benefiting $30 million this year and certainly that carries over and we will see some rollover full year impact from the initiatives we've done this year. Joseph Giordano - Cowen & Co. LLC: Of that $30 million, like how much have you done through three quarters and maybe that will kind of frame into next year?

Yeah. The majority of that is tail-end of the year, because some of the initiatives that we've done, it is – it takes time to see the benefit of it, so heavily weighted towards the second half of the year. Joseph Giordano - Cowen & Co. LLC: Perfect. Thanks, guys.

Thank you. Our next question comes from Jeff Hammond with KeyBanc. You may begin.

Hey, just a couple housekeeping items on CLARCOR as you get it closed. I think you said $163 million in amortization, is that still a good number? And as you kind of put together your debt, how did the debt costs come out relative to your initial assumption?

So, that $163 million was our initial estimate, but actually we're seeing that much lower, it's $130 million a year as we have preliminary – preliminarily estimated the beginning balance sheet, and we're still fine-tuning that and it may tweak slightly as we finish the fourth quarter. But right now, we're estimating a $130 million a year. The debt costs also came in lower. We were estimating additional interest expense of about $100 million, and that's now solidly in the books at $73 million incremental per year as we were able to get better rates on the bonds that we sold.

Okay, great. And then just within the 13% order growth in international, where do you get kind of place where Asia, Europe and LatAm were either exactly or directionally?

Sure, Jeff. We're seeing for Europe mid-single digits; Asia Pacific is mid-teens; and Latin America also in the mid-teen range.

Okay. Perfect. Thanks a lot.

Thanks.

Thank you. Our next question comes from Stephen Volkmann with Jefferies. You may begin.

Hi, good morning, all. Thank you for taking the questions. Just a couple of quick fill-ins. Cathy, is there any type of shorter term step-up amortization that we should be thinking about that rolls off kind of quickly versus the longer term step that will be with us for a while?

Yeah, good question, Steve, I'm glad you asked. So, in the number of one-off acquisition related expenses is the gross up of the value of the inventory that we bought from CLARCOR, that's about $39 million, and that will roll through cost of sales over a three-month period. So, we incurred one-third of that in March and we'll incur the rest of it in April and May and then that rolls off.

Okay. So, just sort of thinking about that, if you're sort of in a $0.04 accretion for the fourth quarter, the number in 2018 would be higher than that because you wouldn't have the step-up accretion?

Yeah. But keep in mind that we have adjusted that out. So, the accretion that we're telling you has taken the impact of that out.

So the $0.04 take that out already?

The $0.04 is the run rate, correct.

Got it. Okay. That's helpful. I appreciate that. And then totally unrelated, but I'm just curious, I think you guys probably have a reasonable amount of visibility in Aerospace business and we sort of ticked down to zero and I know it's very chunky on a quarter-to-quarter basis with respect to orders, but does that business grow next year and as you see the programs come down the pike, how do we think about that in sort of in the next couple of years?

Yeah. We still anticipate growth in Aerospace. What you see in the zero order rate for the 12-month rolling now in March – as of March 31, we had a pretty significant military OEM order come through in January of 2016, it was a multiyear order. That has now dropped from the numerator into the denominator causing tough comparables. So, it's a little bit of a misnomer. It's a little bit deceiving to see that flat. We do anticipate continued growth. We're seeing nice improvement these days in the MRO, especially the military MRO business. Commercial OEM is a little down year-over-year, but commercial MRO is strong. So, military good, commercial struggling a little bit in the OE side, but strong in the aftermarket side.

Great. I appreciate that. Thanks.

Thank you. I'm showing no further questions at this time. I'd like to turn the call back over to Cathy Suever for closing remarks.

Okay, thanks, Shannon. This concludes our Q&A and our earnings call. Thanks, everybody, for joining us today. Robert and Ryan will be available throughout the day to take your call should you have any further questions. Thank you everyone. Have a great day.

Ladies and gentlemen, this concludes today's conference. Thanks for your participation. Have a wonderful day.