Good day, ladies and gentlemen, and welcome to the Third Quarter 2018 Parker-Hannifin Corp. Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. As a reminder, today's conference is being recorded. I would now like to turn the call over to Ms. Cathy Suever, Executive Vice President and Chief Financial Officer. Ma'am, you may begin.

Thank you, Chelsea. Good morning, and welcome to Parker-Hannifin's Third Quarter Fiscal Year 2018 Earnings Release Teleconference. Joining me today are Chairman and Chief Executive Officer, Tom Williams; and President and Chief Operating Officer, Lee Banks. Today's presentation slides, together with the audio webcast 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 also posted on Parker's website at phstock.com. Today's agenda appears on slide number 3. To begin, our Chairman and Chief Executive Officer, Tom Williams, will provide highlights for the third quarter. Following Tom's comments, I'll provide a review of the company's third quarter performance, together with the guidance for the full year fiscal 2018. Tom will then provide a few summary comments, and we'll open the call for a question-and-answer session. Please refer now to slide number 4, as Tom will get us started with the highlights.

So thanks, Cathy, and good morning, everybody. Thanks for your participation today. We really appreciate your interest in Parker. So the combination of the Win Strategy, the CLARCOR integration and the strong growth that we saw in the quarter put some very, very nice results for the quarter. Thank you to the Parker team members around the world for all your hard work and dedication and the great progress that we're making. So let's jump into the quarter, starting first with safety. So our injuries were down 25%, and this is driven primarily because of our engagement initiatives, specifically the high-performance teams. Regarding high-performance teams, this initiative has got about 80% of our people across the company are high-performance teams, about 5,000 teams worldwide. Remember the goal here is to create an ownership culture, and that idea of ownership starts with safety. And the kind of progress we've seen on safety, we expect to translate to the progress we want as we create ownership around quality, cost and delivery. We hit a number of all-time records in the quarter as reported. And just a reminder, when I say all-time records, this means in the history of Parker. So we had sales of $3.75 billion for the quarter, net income of $366 million, net income ROS of 9.8% and EPS of $2.70. We had a third quarter record for segment operating margins of 15.8% as reported. This is especially noteworthy, given the amount of depreciation and amortization we have in CLARCOR, the restructuring, the CLARCOR costs to achieve and all the activities that happened in the quarter, to still put up an all-time record for Q3 is very impressive. Other highlights for the quarter, sales increased 20%. It was 8% organic, which is approximately 2 times the growth rate for global…

Thanks, Tom. I'll now refer you to slide number 5 and begin by addressing earnings per share for the quarter. You see here as-reported earnings per share for the current year third quarter of $2.70 and adjusted earnings per share of $2.80. The $2.80 compares to $2.11 for the same quarter a year ago, a 33% increase year-over-year. The respective adjustments for both years are as follows: fiscal year 2018 Q3 operating income adjustments include business realignment expenses of $0.04 and CLARCOR costs to achieve of $0.06. And Q3 of FY 2017 adjustments include $0.09 for business realignment expenses and $0.27 of acquisition-related expenses. On slide number 6, you'll find the significant components of the walk from the prior year adjusted earnings per share of $2.11 to the $2.80 for the third quarter of this year. The most significant increase came from higher adjusted segment operating income of $0.60 attributable to earnings on meaningful organic growth, income from acquisitions and increased margins as a result of our new Win Strategy initiatives. This $0.60 improvement is net of incremental depreciation and amortization expense of $0.11 taken on with the CLARCOR acquisition. Lower other expense equated to an increase in earnings per share of $0.13, while a lower effective income tax rate resulted in an increase of $0.09. Adjusted earnings per share was reduced by higher corporate G&A equating to a $0.07 reduction, while earnings – I'm sorry, while interest expense was also a $0.07 reduction in the current quarter. Moving to slide number 7, you'll find total Parker sales and segment operating margin for the third quarter. Total company organic sales increased year-over-year by 8.4%. There was a 7.5% contribution to sales from acquisitions, while currency positively impacted the quarter by 4.3%. Total segment operating margin on an adjusted basis improved…

Thank you, Cathy. We're making good progress. We're seeing broad-based improvement demand across geographies. The Win Strategy initiatives are generating improvements in both growth and in earnings. We're increasing our earnings guidance. We're on track for a record year performance. And we really have a bright future ahead. Those new 5-year targets we've announced put Parker in the top-quartile performance versus our peers. So I want to say again thank you to the Parker team members around the world for all their progress, their hard work. And I want to thank the shareholders for their continued confidence in us. At this point, I'll hand it over to Chelsea to start the Q&A portion of the call.

Thank you. And our first question comes from the line of Ann Duignan with JPMorgan. Your line is open.

Hi. Good morning.

Good morning, Ann.

Good morning. Can we talk about the realignment costs and the CLARCOR costs? Maybe you could give us some color in terms of have the absolute costs gone up? Or are we just pushing out costs because volume is too strong, and we have duplication? And any color you can give us around quantifying how much more we're going to spend now in fiscal 2019 than we might have thought a quarter ago or a couple of months ago.

Yeah, Ann. It's Tom. So we're moving some costs from 2018 to 2019. I'll talk about that in a minute. But what we experienced during the quarter is what I described at the beginning. It's a significant amount of restructuring that we're doing, a tremendous amount of floor space, and we took the long approach on it as far as protecting our customers and making sure that we protected lead times and service our customers to the best of our ability. So we ran redundant plants, and we also have redundancy in bridge builds that we did to help cover for that. Now we track productivity at all the closing and the receiving plants, and what we saw during the quarter is that productivity started to get better. So I fully expect that what we experienced this last quarter was kind of the worst of what we're going to experience in inefficiencies. We moved only three plant closures from this year to next year. So it was 39. We're now at 36, and so those three that we moved were tied to the CLARCOR integration, mainly because of the volume that we've seen. So we really think that we've got some nice gradual improvement in front of us. Even with all this, I keep coming back to the fact that these are all-time best margins that the company's had, and the EBITDA margin improving 120 basis points adjusted year-over-year. So to me, the glass is very much half-full on this, that we accomplished a tremendous amount. We're only at the beginning of year two of CLARCOR. When you look at all the synergies, the buckets that we look at, they're all ahead of schedule. The footprint, we fully expected year two to become a big year for all the footprint activity, and that's what it's turned out to be. And even with the slight push-outs and running the plants longer because of the volume, which obviously is a good problem to have, we're still on track for the original footprint plan that we had when reviewed this with the board and when we communicated to everybody here. So this is short-term noise that's going to work its way through, and we look forward to seeing nice, nice progress as we progress in the next several quarters.

Yes, Tom, can you give us any color on the cadence of the improvement of incremental profits, particularly in North America? I mean, I think what investors are focused on is the incremental profits. When will we get back to your more normal 25%, 30% incrementals?

Yeah, what we've got in the guide for Q4 is a 19% incremental for North America. I'm not going to go beyond that at this point because I'd like to just have another quarter under our belt to see all the plant metrics and how that progresses. So I'm not going to get into FY 2019. We do expect that we're going to see some of those inefficiencies go into the first half of FY 2019, but that is going to continuously get better as we go into 2019. The low-water mark was this last quarter, going to get a little better in Q4. Obviously, we'll give you a full look in August of what we think for the next year. But you're going to see some of it in the first half of 2019. It's just going to lessen each quarter as we go. Now on the restructuring, which I want to come back to the costs achieved, so we lowered it from $52 million this year to $45 million. So that's $7 million we moved into FY 2019. So originally, it was $10 million FY 2019. It will be $17 million in FY 2019 as far as the costs achieved for CLARCOR.

Okay. I appreciate the color. I'll get back in queue.

Okay. Thanks, Ann.

Thank you. And our next question comes from the line of Nathan Jones with Stifel. Your line is open. Nathan Hardie Jones - Stifel, Nicolaus & Co., Inc.: Good morning, everyone.

Good morning, Nathan. Nathan Hardie Jones - Stifel, Nicolaus & Co., Inc.: Again, following up on some of the margin questions here. I think we've seen several companies report so far this quarter having some trouble passing through raw material inflation. And I think probably some of the stock reaction here is people wondering how much of the margin drag here is CLARCOR stuff versus price cost. And I know you guys track those indices very closely. So can you talk about where you are on price costs, both in the quarter and what your expectations are going forward?

Nathan, it's Lee. Yeah. I thought that was going to be the first question. So, as you know, you've followed us for a long time. Pricing for us is more than just passing through input costs. I mean, we've got a very strong discipline in this company on how we do things when it comes to price. But we're definitely in a period of inflationary costs throughout the supply chain. And it's not the first time we've been here before. I mean, we've been through several cycles before in the past where this has happened. But I will tell you first and foremost, this is not contributing to the North American margin incrementals. I mean, I think, one way you can look at that is the nice margin accretion we had in International and in Aerospace as just some indication that price costs, you know, our processes are recovering price costs. But just as a reminder on how this works maybe for everybody on the phone is we've got standard processes inside the company that really start at the division level or business unit level. And we've got core teams that work around price and then work around purchasing. And in both of those, we track our selling price index, what we're charging for something this year versus prior year, and our purchase price index, what we paid for something this year versus prior year. And the benefit of that is we've got teams that have good communication about what's happening on input costs, and we can take actions very quickly. And for myself and Tom and our senior management team, all this rolls up to us, so we have a very good visibility at the corporate level on what's happening. So year-to-date, to be specific, we do have a positive spread between our price and input costs. We use surcharges on heavy commodity-based contracts. Those contracts that have heavy commodities like copper would be a perfect example. So those contracts are material-indexed, and we get out in front of that. And then just in terms of the channels distribution, a lot of channel checks have gone on. You can see we've done price increases there, and we can do those frequently. And then on OEM customers, it's really customer-by-customer negotiation. Nathan Hardie Jones - Stifel, Nicolaus & Co., Inc.: So just to put a ball on that. You said year-to-date, you're positive on price costs. Were you still positive in the third quarter?

Yes, we were. Nathan Hardie Jones - Stifel, Nicolaus & Co., Inc.: And then my follow-up question, you've still got very strong orders going on here, 11% North American Industrial versus a 9% comp and 8% in International versus a 13% comp. Raising revenue guidance here for the year. Can you talk about which markets have been better than you thought they were going to be coming into the back half? Because I think you guys have been pretty clear that you didn't think the double-digit North America order rates were going last this far into fiscal 2018. So any color you can give us there?

Well, I would say that inorganic growth really moved in the direction we highlighted and expected during our call. I mean, maybe I'll just -I'll do my typical quick walk here, and it will be brief. But on Aerospace, we continue to see very good demand for single-aisle commercial aircraft. So build rates are up, and we're seeing that, and which goes hand in glove with that is the commercial MRO increase throughout the quarter with continued traffic growth and then the benefit that there is fewer retirements with planes because fuel prices are so low. So that increases the spares and repairs opportunity. There are some headwinds in commercial. It's really has to do around product mix. There's some changeover in some wide-body aircraft and a pullback on some build rates with some of the wide-body, but that's really a product mix. On the military side, we continue to see very strong military MRO growth with fleet upgrades. And then we've seen on the military side on an OE level F-35 production continues to ramp up, so that's been positive. On the industrial side, I have to tell you, if I look at all our heat maps, it's really hard to find an end market that's not accelerating. We continue to find significant markets that have had year-over-year growth and continue to grow during the quarter. All the natural resource end markets continued to grow during the quarter. This includes agriculture, construction equipment, mining, oil and gas, to name some. And on the oil and gas, the land base is really back very strong. And we've also seen, for the first time, some increased activity in offshore activity, so a lot of quoting and exploration at this point in time, which is positive. And then semicon and distribution, I'll…

Yes. Thank you, Nathan.

And our next question comes from the line of Joe Ritchie with Goldman Sachs. Your line is open. Joe Ritchie - Goldman Sachs & Co. LLC: Hi. Good morning, everyone.

Good morning, Joe. Joe Ritchie - Goldman Sachs & Co. LLC: So I guess, just maybe touching on the CLARCOR disruptions one more time. Can you guys try to quantify what the disruptive impact has been? I know you took down your North America guidance by roughly 50 basis points. Was all of that – can all of that be contributed to CLARCOR? And then I know you talked a low bit about the first half of next year you're seeing a bleed-in. Yeah, talk us through your confidence and what you're looking forward to really start to see the improvement in incremental margins as we progress through the early part of next year?

Joe, its Tom. So just to clarify, the disruptions that we see, everyone wants to talk about CLARCOR, obviously, there's a lot of activity that's happened there. We're closing 36 plants. 19 of them are tied to the CLARCOR integration. 17 is the rest of the company. And the high volume that we're seeing obviously hits all of those activities. So this isn't just a CLARCOR. So this – the inefficiencies related to plants closures really hits across the company because of the higher volume and the fact that we are doing absolutely the right thing long-term is protecting our customers and running a little more redundant activities to protect those customers. So the issue is just to help for people to understand, when we say inefficiencies, what does it mean? It's things like premium freight, it's overtime, its scrap, rework, lower productivity rates at the closing plant and receiving plant and just the redundant cost that you have if you happen to run plants simultaneously. You need to build a bridge inventory or because you're running both plants you've got too much volume and you need to do that. And if you have a totally redundant plant structure and redundant variable costs, you can imagine what that does to your incrementals. So that issue is more than CLARCOR. It cuts across the grain. And we think about for 2019, again, I'm not going to get over my skis and start predicting 2019, we will benefit from having an extra 90 days of seeing how all the plant closure work is going. We check this we – again, I'll give you clarity. So we're closing 36 plants. Within those plants are dozens and dozens of individual product line, pieces of equipment. So when you add it all up, you get…

I think we're in a pretty good trajectory for that. I mean, we've got the order entry right now for Q4 and all that. We've pushed the three plants into FY 2019. So we're really close to that 36 number for what we think is going to happen this year. Joe Ritchie - Goldman Sachs & Co. LLC: Okay, got it. Thanks,guys. I will get back in queue.

Okay. Thanks, Joe.

Thank you. And our next question comes from Joel Tiss with BMO Capital Markets. Your line is open.

Hey, how is it going?

Hey. Good morning, Joel.

You gave us a little bit of color on Aerospace, and I just wondered, are we kind of coming into a period of – is this a new higher run rate on the operating margins, or is it just a lot of things came together or coming together in the shorter term, and there has, you know what I mean, the balance between structural change and shorter-term or medium-term trends is like we're going to have lower margins going forward?

Yes, Joel, I would say that for the third quarter, things all aligned pretty nicely for us where it was a nice aftermarket mix. We tend to have our best aftermarket mix in the third quarter as the big airlines have lower traffic, so they're bringing aircraft in for maintenance. So it's typical for third quarter to have that nice mix. We'll see a little more of that extend into the fourth quarter, but as it wraps around the first quarter and second quarter next year, we don't enjoy as nice of a mix for aftermarket versus OE. We also had lower development costs this quarter. This is the lowest cost we had all year so far. Some of that is delays and will move into the fourth quarter. So if you notice in our guidance, the fourth quarter margins aren't quite as high as third quarter came out to be because we are going to be experiencing high development costs in Q4. Beyond that, we are seeing nice, continuous growth in aftermarket, and that comes at higher margins. So as time moves on and we continue to have more and more hardware out there flying, the aftermarket continues to improve. So in addition to that, the team has done a lot of hard work on simplification and the whole Win Strategy, and they're taking a lot of costs out. So I think the higher margins are the future, but it does mix a little differently in Q3 and Q4 versus the first half of the year.

Okay. And then just one cleanup question, can you talk a little bit about the why the free cash flow was down year-over-year? And then if you take out that pension contribution, it looks like it was down a little bit even more than the year ago.

Yeah. Compared to last year, we are behind in our percent of sales of free cash flow. A lot of it is the growth that we've had to invest in working capital, higher inventory and higher receivables moving through, and then – and just as we're moving through the higher volume. The end of the year tends to be our best cash flow generation, and the trend is always very good towards the end of the year. So we still expect to make the targets that we have. We're at the 100% conversion of net income. We expect to finish the year that way, and we expect that free cash flow percent to improve during the rest of the year.

Great. Thank you very much.

Thank you, Joel.

Thank you. And our next question comes from the line of Andy Casey with Wells Fargo. Your line is open.

Thanks a lot. Good morning.

Good morning, Andy.

Question on the facility consolidation activities. I mean, you've had a lot of questions on this already, but I just want to go back and to a response, I think, it was to Joe Ritchie's question. Do you expect to have all but 3 of the 36 completed by the end of this fiscal year?

Andy, its Tom. The three I was referring to, last quarter, we said 39 plants that we're going to close. So we've updated it to 36. So those three are going to be pushed into FY 2019, but we're on track with the 36 to finish this fiscal year.

Okay. So I know you don't want to talk about fiscal 2019 right now, but how linear is this? Is it really truncated into the two quarters that just have reported already the next quarter, and then it just kind of tapers off in the first half of 2019? I'm asking because it's pretty clear people are worried about carrying costs into kind of a decelerating environment.

Yeah. Well, I would say, when I look at – again, it's Tom again, Andy. The plant closure work really started in Q1 and then picked up steam in Q2 and Q3. Q4 will be another important quarter, and you'll see a tail off, which is why the MROS, when you look at what happened over so far this year, incremental margins for North America bottomed in Q3. We're expecting to get better in Q4. Based on in-process productivity metrics that we see that you don't – obviously can't see, but we see that the progress is starting to turn and we should be able to experience that in the numbers that we give to you into Q4. And then it's going to gradually get better from the first half of the year. So the worst is behind us. It's not going to flip like a switch to all of a sudden where, bang, it's not an issue. It's going to get a little better in Q4 and will continue to get better the first six months of FY 2019, and we should be through with it at that point.

Okay. Thanks, Tom. And then, if I go back to the Investor Day, there was a question, I forget who asked it, about the incremental margins assumed over the next – within the next five-year plan. And I think one of the answers was those will be truncated to the first. Those will be higher in fiscal 2019 and kind of trail off a little bit as you go through the five years. With this extension of the consolidation activities, is that still your expectation?

Andy, it's Tom again. Yes, they'll be higher in 2019. The first half will be a little bit impacted by it, but they'll be higher in 2019. When you look at that forecast, as that walk to 19% in FY 2023, and if I remember correctly, I think it was a 37% MROS through that whole period, it was running higher in 2019 and then starts to glide down to a more normal path as we go into the future years. So yes, even with this, you'll see an uplift in 2019.

Okay. Thank you very much.

Okay. Thank you.

And our next question comes from the line of Jamie Cook with Credit Suisse. Your line is open. Jamie L. Cook - Credit Suisse Securities (USA) LLC: Hi. Good morning. I guess, my first question, just based on the shrink that you saw in your North American order book in the quarter, I mean, how much visibility do you have? And what's the risk that as we're shifting to 2019 does mix continues to play an unfavorable role in terms of margin shifts with the mobile equipment markets being so strong?

Jamie, it's Tom. So, if you just take the big – lead one through all the more specific markets, but if you just take the three big constituents, distribution grew high-single digits for us in the quarter, industrial grew mid-single digits, and mobile was low-teens. So yes, when we look at it year-over-year, mix was still a challenge for us. Compared to the previous quarter, mobile was up at 20%. So mobile has softened a little bit in comparison, and I think you'll see that continue to temper as we go forward. So it will be a headwind a little bit year-over-year, but it will – these things will equalize. I would tell you that the lion's share of our challenges from incremental margins in North America is not tied to mix. It's tied to just all the work we're doing on plant closures, both CLARCOR and legacy Parker and all that work across the company. Jamie L. Cook - Credit Suisse Securities (USA) LLC: Okay. And then sorry to ask the incremental margin question again, but I just want to make sure we're crystal clear. At the Analyst Day, you said post this inefficiency period, you would be able to generate above-average incremental margins, so above the 25% to 30%. That is not off the table. Whether it's the second half of 2019 or whatever, but we're still – that's still the right to think about it, just a delay?

Still the right way to think about it. Jamie L. Cook - Credit Suisse Securities (USA) LLC: Okay. Thank you. I'll get back in queue.

Okay. Thanks, Jamie.

Thank you. And our next question comes from the line of Jeff Hammond with KeyBanc Capital Markets. Your line is open.

Hey. Good morning, guys.

Good morning, Jeff.

Just a couple cleanups on CLARCOR. One, can you just talk about the core growth rates that CLARCOR's seen? And maybe how much is – more broadly, how much is tied up in working capital around some of this plant transition?

Jeff, the growth rates that we see for CLARCOR are the standard in the filtration markets, I think low- to mid-single digits growth. Tom quoted that on the longer-term CAGR, we see about 3.5% growth for the CLARCOR business. But with the revenue synergies that we're adding in, that's going to go up to more like 4.5% over the long-term CAGR. So, but think of it in the terms of standard increases that you would see in the filtration market. And the second part of your question was about inventory. Yeah, we certainly have higher levels of inventory as we are bridging from sending the inventory from the sending plant to the receiving plant. We do not want to fall behind on customer deliveries. So there is incremental inventory in the system today longer as we've delayed closing some of these plants that have extended longer than we had hoped. But we hope to see that come down a fair amount in the fourth quarter and then continue to come down as we finish these closures and these transitions in the first half of 2018.

Okay. And then finally, just I know the focus is debt pay down. But just with the stock being so dislocated, is that making you rethink buybacks and being more opportunistic? Thanks.

Jeff, it's Tom. So on the capital deployment, I went through some of those priorities in my opening comments, but just to refresh. Again, it's dividends, and we're very proud of the strong increase that we just made in our consecutive increase record, and we're going to invest in this organic growth. It's a fantastic time to do – it's always a good time to do that. The debt pay down, we've got $550 million of debt coming due in Q4 and Q1 that we want to make sure we're on top of. So that's top of mind to make sure that that happens. You've seen a nice improvement already, but we have those payments out that we want to make sure that we do. Once we clear that, clearly – and we're going to continue the 10b5-1 share repurchase, we'll be able to look at acquisitions and discretionary share repurchase and evaluate both of those simultaneously. And you've all heard me talk about how I want to make sure we have a more assertive balance sheet and that we're active and we'll look at both of those, and we'll look at the pipeline of acquisition. We haven't let off that, even with all the work we're doing. We're just not ready to do anything this minute. But we continue to build those relationships, and we think there's never a bad time to buy Parker stock, especially now. And so we will keep all those as potential opportunities as we go forward.

Thanks, guys.

Thank you, Jeff.

Thank you. And our next question comes from the line of Jeffrey Sprague with Vertical Research Partners. Your line is open.

Thank you. Good day, everyone.

Good morning, Jeffrey.

Good morning. Hey, I just wanted to come back to the disruptions one more time. Obviously, we've done a lot of analysis around this. It seems like we measure everything. To put it bluntly, the stock is kind of responding to concerns you guys have missed the cycle here by over restructuring at the wrong time. I wonder if you could just address that. I mean, is the plant footprint actually where you wanted to be when this is done? But also, kind of secondarily, can you give us some sense of, in aggregate, the headwinds that you have absorbed this year so we can try to make some sort of judgment on our own or where this might normalize or moderate as we move into 2019? Thank you.

Jeffrey, to help put it into context, I would take you to back what EBITDA margins have done over this period of time. 14.7% just from when we made an announcement was December of 2016 to 17.6% now. If you could have told me in little less than 1.5 years, I could – we could drive almost 300 basis points of EBITDA margins, I would have been ecstatic, and I'm still ecstatic with that kind of progress. It's absolutely fantastic. We put all-time records up on operating margin for the quarter even with all this. We are going to put the businesses together, and we doing it in a very constructive, thoughtful fashion And this is -- again, I would just emphasize this is short-term so unless you're an investor for the quarter, and I'm hoping most of the people are listening are investing for the long term with us. You are absolutely ecstatic that we're doing what we're doing. We're taking care of our customers. We're taking share. We're driving margin expansion. And we put up a tremendous amount of records in the quarter even with all this. And we're setting the future up to put numbers up that nobody would have ever guessed this company could do. 19% up margin, 20% EBITDA, 10%-plus EPS growth, fantastic vision for where we're going to go. And I would just encourage everybody to jump on the bus because the bus is going places.

Thank you.

Thanks. Thank you, Jeffrey.

Thank you. And our next question comes from the line of Joe Giordano with Cowen. Your line is open. Joseph Giordano - Cowen & Co. LLC: Hi, good morning, guys.

Morning, Joe. Joseph Giordano - Cowen & Co. LLC: I just wanted to ask about we're starting to see some kind of directional changes in some of the more – in some of the broad macro indicators that impact your business. Still at really healthy levels, but just directionally, kind of plateauing or maybe starting to move lower and start to see them in Europe. Now how do you kind of reconcile that with your order growth? We're still seeing some – looks really good, and Lee's commentary about acceleration. When do you kind of flip into, okay, now we have to start thinking about growing slower and different types of actions and you take about dealing with accelerating markets and decelerating? Where is that line? How does that change your thought process?

Well, I think, Joe, I think the key thing is that if we look at all our markets today, we can chart them all, and if I drew a line, 95% of them are growing. Now some are growing even on top of tougher comps on previous year, but the reality is they're still growing. So that's what we're looking at. When I'm out with our customer base, very encouraged by the level of activity that's happening. And so I think this is – I think we're in for a fairly decent cycle here of continued economic activity and growth. Yes, I mean, it's the law of numbers here, right? I mean, the comps keep getting tougher as we go forward, but the bottom line is we're growing and we have a chance to put up some decent incrementals on top of that. Joseph Giordano - Cowen & Co. LLC: So at this point, like growing but decelerating is not something you're seeing too much yet that you have to start changing the way you kind of approach spending or anything like that?

No. It's not – I don't have that approach right now. Joseph Giordano - Cowen & Co. LLC: Okay. Thanks, guys.

Okay. Thank you, Joe. All right, Chelsea, we have time for one more question.

Certainly. And our last question will be a follow-up from Ann Duignan with JPMorgan. Your line is open.

Yeah, hi. I just have a follow-up question from an investor asking to clarify whether the incremental costs you're not going to see in the first half of 2019 is only from the three final plant closures, or is it – I know you said 36 will be closed at the end of the year. But are there still lingering costs associated with those 36 that will be incurred next year? If you could just clarify what the cost in 2019 are going to be?

Ann, again, it's Tom. It's hard for us to give you 2019 numbers, again, given where we're at right now But the cost for the three plants, obviously, you're going to see that. The inefficiencies, you'll see some of that, but it's going to continue to get better. So again, I'm trying to paint the picture that this was the low watermark in inefficiency we continue to get better as productivity gets better first yields get better, scrap is down, let's see if it get better in Q4, you'll see it get better in each quarter going forward. But when we look – when we gave you that five-year look, we still expected FY 2019 to be a very good year as far as how we can – as we launch towards our new five-year targets, FY 2019 will be a very nice year.

Yeah, I appreciate that. But I think, if I'm interpreting what you said correctly, there will still be some lingering costs associated with the 36 plants that the flow into early part of next year?

Ann, it's Tom. If I'm not being clear, yes, inefficiencies for the 36 continue. They just get less and less in the first half.

Okay. Perfect. I just wanted to get that clear. So I appreciate that. Thank you.

Thank you, Ann.

Okay. This includes our Q&A and our earnings call. Thank you for joining us today. Robin and Ryan will be available throughout the day to take your calls should you have any more questions. Thank you, everybody. Have a great day.

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