Good day, ladies and gentlemen, and welcome to the fourth quarter 2011 TransDigm Group Incorporated earnings conference call. My name is Virginia, and I will be your conference operator for today. At this time, all participants are in a listen-only mode. Later, we will be conducting a question-and-answer session. (Operator instructions) Today’s event is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Ms. Liza Sabol with Investor Relations. Please go ahead, Ms. Sabol.

Thank you. I would like to thank all of you that have called in today and welcome you to TransDigm's Fiscal 2011 Fourth Quarter Earnings Conference Call. With me on the call this morning are TransDigm's Chairman and Chief Executive Officer, Nick Howley; President and Chief Operating Officer, Ray Laubenthal; and our Executive Vice President and Chief Financial Officer, Greg Rufus. A replay of today's broadcast will be available for the next two weeks. Replay information is contained in this morning's press release and on our Website at transdigm.com. We also note that our Form 10-K will be filed tomorrow and also will be found on our Website. Before we begin, the company would like to remind you that statements made during the call, which are not historical in facts are forward-looking statements. For further information about important factors that could cause actual results to differ materially, from those expressed or implied in the forward-looking statements, please refer to the company's latest filings with the Securities and Exchange Commission. These filings are available through the Investors section of our Website or through the SEC Commission’s Website at sec.gov. The company would also like to advise you that during the course of the call, we will be referring to EBITDA, specifically EBITDA As Defined, adjusted net income and adjusted earnings per share, all of which are non-GAAP financial measures. Please see the tables and related footnotes in the earnings release for a presentation of the most directly comparable GAAP measures and a reconciliation of EBITDA and EBITDA As Defined, adjusted income and adjusted earnings per share to those measures. With that, let me now turn the call over to Nick.

Good morning, and thanks for calling in today to hear about our company. I will start off as usual with some comments about our consistent strategy. I will then given an overview of a busy fiscal year ’11, then a summary of our financial and market performance in ’11 and lastly some initial guidance for 2012. So, we have a fair amount to cover here today. To restate, we believe our business model is unique in the industry, both in its consistency and its ability, staying and create intrinsic shareholder value through all phases in the aerospace cycle. To summarize some of the reasons we believe this, and you can look at Page 4 of the slides now, about 90% of our net sales were generated by proprietary products, around three-quarters of our sales come from products for which we believe we are the sole source provider, about 55% of our revenue and a much higher percent of our EBITDA comes from aftermarket sales. Aftermarket revenues have historically produced a much higher gross margin and have provided relative stability in the downtimes. Because of our uniquely high EBITDA margins, running around 50% of revenue, and relatively low capital expenditure requirements, typically 2% or less of revenue, TransDigm has year-in and year-out generated very strong free cash flow. We pay close attention to our capital structure and view it as another means to create shareholder value. As you know we have in the past and continue to be willing to lever up opportunities or view our leverage as sub-optimum equity value creation. We typically begin to delever pretty quickly. We have a well-proven value-based operating strategy focused around what we refer to as our three value drivers new business development; continue cost improvement; and value-based pricing. We stick to these concepts…

Thanks, Nick. As Nick mentioned, in total, we had a good fourth quarter and good finish to a very busy fiscal 2011. Our operating value drivers and acquisition integrations continue to add solid value, and let me explain our 2011 and fourth quarter operational value creation a little more detail. Again, this was a big year operationally. The rising market drove underlying pickup in operational activity and on top of this market growth, we piled on our biggest acquisition year ever. We acquired nine operating units, sold off three, netted six separate new businesses. Integrating these six businesses created a fully integration of value creation activity and let me add a little color on this. After acquiring the McKechnie businesses and the Talley Actuation products in our first quarter, we quickly went towards transitioning these businesses into the TransDigm value creation mode. As we have done with each prior acquisition, we restructured the businesses in the product line focused group and implemented our value creation metrics. We focused the engineering and new business efforts on viable and profitable new business. We tightened up the cost structure and we applied our value-based pricing and productivity processes at each new entity. Several of these newly acquired operations were consolidated with our existing operations. Over the remainder of 2012, we physically consolidated our Avtech business, with the acquired Tyee business in Everett, Washington. The physical move is now complete and we are in the process of marketing the former Avtech buildings and property. We also moved the Talley Actuation business across country from LA to our Aero Fluid Products group in Northeast Ohio. The electro-mech operations consolidated several Kentucky and Mexico facilities into a new expanded Mexican manufacturing facility in Matamoros, Mexico. We also consolidated our two Duke's Aerospace facilities acquired during 2010.…

Thanks Ray and good morning again. I hope everyone have had an opportunity to read our press release, which were issued early this morning. Nick and Ray did a very good update of our business, the markets, and what lies ahead of us. I will focus primarily on our GAAP results for the fourth quarter compared to the prior fourth quarter, commenting on major line items with a little more color. Before I begin, please refer slide 7 for our quarterly financial results. Fourth quarter net sales were $343 million, up $119.9 million or 53.7% from the prior year. The increased sales growth includes $89.2 million as a result of the acquisitions of Semco which we acquired late in the fourth quarter of fiscal 2010 and the McKechnie, Talley, and Schneller businesses we acquired during fiscal 2011. Aside from the robust growth from acquisitions, our organic sales growth was also very strong at 13.7% over the prior-year quarter. Each market channel contributed to this growth. $18.7 million came from commercial aftermarket sales, $6.7 million from commercial OEM, and for the fourth quarter, our organic defense sales also increased $3.9 million versus the prior-year quarter. Reported gross profit was $193 million or 56.3% of sales. The reported gross profit margin decreased by 3 percentage points versus the prior year; however, the dilutive impact from acquisition mix was approximately the 3 margin points in the quarter, of about half was due to acquisition-related startup costs and purchase accounting adjustments to inventory and the other half due to straightforward basic acquisition mix dilution which we have continually talked about. Selling and administrative expenses were 11.2% of sales for the quarter compared to 11.4% versus the prior year. The absolute dollars increased $13 million. The dollar increase is primarily due to incremental selling and…

Thank you, Greg. In order to give everyone the opportunity to ask questions, I would ask that you limit your questions to two per caller. If you have further questions, I would ask that you re-insert yourself into the queue and we will answer those questions as time permits. Operator, we are now ready to open the lines.

(Operator instructions) And your first question today comes from the line of Carter Copeland with Barclays Capital.

Good quarter.

Thanks Carter.

A couple of quick questions for you. The first one, Nick, I really appreciate the commentary on the aftermarket, and the bookings, and shipments. I wondered if you might give us a little color on how far out you can see in your current order book? Is this a sort of one to two quarters out is about the visibility you have got, and then beyond that we are kind of guessing?

Yes. I think that's a fair point, one to two quarters. Surely no more than that.

Okay. And on the margin, I know there is a lot of moving pieces here, it sounded like the acquisition impact was – the dilution from the M&A was 4% for the year, but 3% in the quarter. And then I think you said McKechnie was 2% for the year. I am just looking at next year's margin, the EBITDA As Defined margin that you are showing as 49.3 at the midpoint, and you guys were north of 50 this quarter. And I am assuming that at least it looks like the trend in net acquisition dilution is going down and you think McKechnie would be even smaller next year. So, I am just wondering if part of this is mix between OE and aftermarket or part of it is just a little bit of conservatism, given what you can't see in the back half.

Well, yes, and probably really, the answer is sort of all of the above. The things you can measure are, the OEM is growing faster than the aftermarket. And as you know, Carter, that naturally mixes it down a little bit.

Yes.

In the defense, it is pretty good margin, and it’s – we are assuming it dropped a little. So, you have the same phenomenon going on there. You also have Schneller coming in, we just bought it at the end of the year. And Schneller comes in at a lower margin than the average and dilutes us down. Those are probably the two significant factors that sort of mitigate some of the underlying rise.

And do you have a sense, you said McKechnie was 2% for the year, do you have a sense of what you are expecting that dilution to be next year?

Carter, we had a couple of different measure points. This is Greg talking. When we said it in total of 4, it included both, what I will say, normal operating margins, but then don't forget during the year, we had to write up inventory, we had to write up backlog, and those what I would call purchase price accounting adjustments, accounted for the other two. So, your 4 is a combination of, what I would call, accounting and operational. So, sorry to confuse you there.

But if you compare it to EBITDA –

As adjusted that we talk about – it’s about 2%, that’s correct. So, hopefully that helps you a little bit there.

And next year – that does help it. And next year, how much do you anticipate that falling?

We will continue to have some amortization from that and from other acquisitions. I think that was about $0.17 on an EPS basis. And quite frankly, we don't or we haven’t – we don’t look or measure as McKechnie in total year-over-year. I mean, they are all going toward our value drivers and they are all improving their margin position. So, we lose that comparison pretty quick.

But Carter, I will just add. There are three things to think about, when you think about business. Again, the commercial OEM business is growing faster than, much faster than the defense business and faster than the commercial aftermarket, and that's the lowest margin. We do still have some residual from the McKechnie business, but that's getting better, but we have added the Schneller business also, and that's a significantly lower margin.

That’s great. Thank you very much for helping.

Those are the two things it sort of ends up almost – the increase in improvement is sort of offset by them and time will tell. We will see how that mix works out through the year.

Great. Thanks and congrats on a great year.

Thanks.

Your next question comes from the line of Robert Spingarn with Credit Suisse.

Good morning, guys.

Good morning, Robert.

Wanted to dig a little bit into the organic growth embedded in the guidance. When I do the math and I get a little twisted up between pro forma organic growth and regular organic growth, but I am coming up with about 7.5%. Does that sound right?

That's kind of a low.

This is in for revenue?

Organic growth –

And revenue you are talking about now?

Yes, I am talking about revenue, and I am just assigning your guidance from slide 6 across the businesses. So, up mid-teens in OE to –

We gave you the pieces in the mix, I just didn't do the math.

Yes, I was doing the math, but maybe not quite right or maybe it’s how to treat, how you define organic, but Greg, do you think that’s low 7.5?

I was thinking on an EBITDA space, I would have to see your math, because I don’t want to send people off, because again we try to give you all the details here, Rob.

It’s the way we are assigning, x percent [ph] of the business is OE versus –

Let me give you the pieces again, Rob, and I think that and you can sort of assign the mix you want. Commercial transport aftermarket is about 10% up, business jet aftermarket mid-single digits. The commercial OEM business all of it is mid-teen percent up and defense is down low-single digits.

We are talking ’12.

And what I want to say is –

And that’s pro forma, that’s all pro forma.

I will check with Rob after the call, because when you do GAAP versus pro forma and you can get a little bobbed up.

But everything I gave him is our attempted same-store base.

And that’s the best way to look at our business.

Okay. Couple of things on that. How do we think about that units versus pricing, particularly with regard to the aftermarket business?

You know, Rob, you ask this question every quarter. And every quarter, we closed the pricing.

But it’s a valid question.

Of course, it’s a valid question, and it’s a valid answer.

Well, let me – in '11, did you say what the organic aftermarket growth was in '11? Now, you gave us a lot of terrific information there. But was it in there?

I gave total. It was just aftermarket. The amounts I gave for organic for '11 was total.

And you do that for aftermarket?

We gave you, we have given to you, it was 21%.

Organic?

Yes, that was by our same-store.

Okay. So, my question –

Rob, just a second.

21% on a quarter versus quarter basis, 23% on a full-year basis.

Right. So, what are you showing?

And that’s our best guess. It’s same-store sales.

Okay. You have got RPM growth at about 4% or 5%, just down a couple of hundred bps from this year, but commercial aftermarket growth is having from '11 to '12?

Yes, that’s right. I think I said in my comments, we don't think the 20% plus is sustainable.

No, I see that, but it's very sensitive. You have talked about in the past being very correlated with that RPM growth.

Yes, but Rob, as I think you know, in inflection points in the market, it disconnects. And in the downturn – sort of in the downturn year, it disconnects, in the upturn year, it tends to disconnect.

Okay. I will leave it with that. I guess I am hoping that aftermarket guides are little conservative.

Yes. I will say, we are clearly – we have some concern about the economy. And where you will see that, if the economy softens a little, where you will see that first is in commercial aftermarket revenues.

You know, where we could be a little bobbed up to, we are talking about total organic growth here. That includes our defense, as we call it, flat. We have been focusing on commercial.

Specifically talking to me, I am specifically talking –

Yes, I am trying to isolate the commercial aftermarket.

All right. But those inventory swings are going to system.

Okay, thanks guys.

Your next question comes from the line of Joe Nadol with JPMorgan.

Hi, good morning.

Good morning.

One more question on that aftermarket. Since you do have, combining the prior two questions, since you do have one or two quarters of visibility, I know you have been running over slightly above 20% commercial aftermarket organic growth, all year in '11, do you have visibility for that to decline all the way to 10% in Q1, or are you basically saying it's going to start to slide, and you have more concerns about the back half of the year?

I think we will just leave our guidance for the year where it is. We don't give quarterly guidance.

Okay. Turning to the margins, I guess a couple of things. There is obviously some major muscle movements that happened during this year, with McKechnie coming and diluting early in the year, and then taking a lot of cost out and getting those margins up through the year. As we think about seasonality in the business, is it fair to say that maybe Q4, you know, putting aside the acquisition impact, as we think about as adjusted EBITDA margins, that there really isn't a heck of a lot of seasonality, and that this past year was just – really just impacted by McKechnie?

I would say, no, there is not a lot of seasonality in the business. The impacts in margins, typically, when you look at this business and this year is no different, it's impacted by two things primarily, the OEM aftermarket mix in that particular quarter and acquisitions. That's what impacts it. And usually when you see a point or two swing, when you strip out the acquisition impact, it's almost exclusively the aftermarket OEM mix generally.

On that point and just finally, if you look at Q4 in isolation, your growth margins were flat if you exclude the impact of acquisitions, because you were down 300 bps and you said that was all acquisitions, half operational and half mix. And since your commercial aftermarket growth was so strong in Q4, why weren't margins – why weren’t organic margins, if you will, up a little bit in the quarter?

I lost all of that, I don’t know the question.

I don't know, if you are coming up from prior year sequentially.

Margins were flat, gross margin year-on-year in the quarter, if you strip out the acquisition impact, because you were down 300 bps you said, that was all acquisitions. And so as this mix improved year-on-year, because your aftermarket growth was so strong, why weren't margins up a little bit?

As we have said, we are always cautious on straight quarter-to-quarter pure comparisons. When we discussed last year's fourth quarter, it was a record quarter, which we said all the stars were aligned and this isn't sustainable. Having said that, our full-year margins have improved year-over-year, and we are pretty proud about that.

Okay, all right. Thanks.

Your next question comes from the line of Michael Ciarmoli with KeyBanc Capital Markets.

Hi, good morning guys. Nice quarter. Thanks for taking my questions.

Thanks.

Just a follow-up still on this aftermarket growth. Nick, the growth rate last year or even next year, was there any provisioning for the 787 or 747-8 that, that added to the growth or that is expected to add to growth for 2012?

Yes, that’s a good question. It's hard to say there was none in 2011, but I don't know there was nothing significant and I can't think of any. And there was surely nothing of any significance that's impacting that number much. In 2012, we really have not considered provisioning orders. They are awful difficult to predict. They are very dependent on when airlines buy, you know, and who provisions and who doesn't when they buy. You might have some upside on that.

Okay. And then, just on the softness in the bookings. I mean, are you seeing or can you break that down geographically? I know if you look at certainly what the U.S. carriers, European carriers are saying about capacity plans for next year. I think Lufthansa had some pretty significant cuts and it seems like the only reason some capacity is even increasing modestly is from new deliveries coming online, but are you seeing specific areas of softness in certain geographies, or you don't have that kind of visibility?

I don’t. As I sit here, I don't know if I can give you any specifics on that. My general sense is we saw softening almost everywhere. Not softening, I will say flattening is a better way to put it. And I also would say I would not draw a lot of conclusion from that. Couple of months particularly in booking space, when you are running hot, pumping in a whole lot, but you would rather, you would pump hard to see it, often flat. But I wouldn’t draw much from that. I would say if we come talk to you next quarter and say the same thing, then I would be starting to draw more of a conclusion.

Okay. That’s helpful. And then the last one, your defense expectations for next year, what are you assuming pricing-wise? I mean, do you have to reign back on your pricing policies with the defense? Can you give us any color there in terms of what, I am assuming you are getting pressured on price increases from the defense end market?

Yes, I would say there is always some pressure there and it always has been. I don't anticipate any significant change in our procedure, in our pricing policies.

Okay. All right. That’s helpful. Thanks a lot guys.

Your next question comes from the line of Myles Walton with Deutsche Bank.

Hi, good morning.

Good morning, Myles.

It’s actually Amit Mehrotra here for Myles Walton. Can you just give us some impact on revenues in 2012 from divestitures, fasteners and AQS? What impact that has to divestitures in 2012?

Minimal. We didn't own the fasteners for about 45 days during our fiscal year. And the AQS wasn’t that big. It's obviously excluded from our guidance already in 2012, but the year-over-year, wasn't that big. In fact, actually you don't even see it because of discontinued –

I thought we had that discontinued.

We discontinued (inaudible) for both years.

Yes, so it’s not neither of the numbers.

Okay. And then just looking, Nick, it looks like you guys are going to end 2012 with about $600 million of cash, and that's pro forma for the Harco expenditures?

The $700 million I gave you and back drop 80 [ph].

Right. And how long do you think you will wait for the pipeline to fill up before you make any more cash deployment decisions?

I just don't know. I mean, as you know, in the past, we have moved on that when it made sense. It's very hard to say. We will watch the capital markets, we will watch the acquisition markets, and we will sort of make our call-by-call, almost a quarter-by-quarter call on that.

Okay. And just last question on the defense market guidance, can you give us some color on the growth assumptions you have for both the aftermarket and the OE within defense?

No, we just give the one. I would say, one of the issues always in the defense is it's a little harder to separate them out, because more of the aftermarket then happens in the commercial business, more of it sort of sneaks through the OEMs and sometimes it's harder to sort out. That's why we have given this one number.

Okay. That’s fine. All right. Thanks guys, good quarter.

Your next question comes from the line of Carter Leake with BB&T Capital Markets.

Thanks for taking my question. On the guidance on defense, you say you are quite cautious and we can all guess why, but can you tell, is this related more to just general macro concerns on super committee or are you looking at specific ops tempo trends on legacy platforms?

All right. It's mostly just concern about the overall budget. It all depends on spending. I would say it's not – in fact, as we try to give you a little sense, if you take the helicopter or helicopter/fixed-wing platforms, and the tanker transport platforms, which are probably, I think most people would say about this, maybe the most stable. That's about 60% of our business. So, that makes us feel okay. But we can't buy the fact that we are very uncertain, it's the way the spending levels go. And I would mostly describe it as, we are concerned about the receding tide drops all ships sort of a phenomenon.

So, what would it be in a negative super committee scenario, the 60% I agree with you, I think we all feel comfortable with those platforms. Any color on what it would be, specifically to TransDigm that we could look to? What in super committee discussions, if it went against us, would concern you?

Carter, I have no idea how to – I just have no idea how to call that.

Okay.

We sort of looked at everything we see now, everything we know now, we found our operating units take their best guesstimates and we tried to sort of put on a little bit of judgment to it at the corporate level, and this is sort of the best number we can come up with now. But I will tell you, if you ask me what my level of certainty around it is, I would say not real great. If you wanted to tell me it was 5% more than I said or 5% less than I said, I wouldn't argue with it. That’s all I know.

Okay. Let me just ask this, because we have already had several questions on aftermarket, organic aftermarket growth and I would still will have to go through machinations to get there. Is there any way that we could request that we do get some kind of a much clear organic, at least year-over-year organic growth rates on commercial aftermarket OE and military at least for just putting the request and rather than us doing sort of backwards math and stuff? Is there any –?

We gave it to you. Didn’t I? I am trying to follow –

I don't know. You can tell by the questions. Sometimes it is difficult in getting to true organic rates, but maybe I am –

You mean, you want to – are you asking if we will strip the price out?

Yes, just you would have a table, I mean –

We don’t know. We don't disclose our pricing, but I can go back through, I mean, if that's unclear, I can go back through our organic growth rates for 2012.

Let's do it. I know it's probably trying a long trend for us.

What we gave you is pro forma, same-store, it’s our best shot in organic growth.

And then let's just do it again, one more time for commercial aftermarket OE and military, just want to print it one more time.

Okay. Commercial transport aftermarket, which is the big bulk of our aftermarket, 10%. Just for one second. Is this one on the slides?

Slide 6.

I thought it was on one of the slides.

If it's all out on slide 6, you don’t need to go through it.

That’s why I am just going to read again.

Okay, all right. Because if it’s on slide 6, my fault. All right, that’s all I have. Thank you.

Your next question comes from the line of Eric Hugel with Stephens Incorporated.

Hi, good morning guys. Good quarter.

Good morning. Eric Hugel – Stephens Incorporated Can you talk about, your defense numbers were up 2% in the quarter, they have been down all year. Was there something that just hit or can you sort of talk about or sort of what drove that or is it just timing versus last –?

I wouldn’t draw any conclusion. I would just, I would call that random fluctuation of the data.

All right. With regards to, you went through the adjustments that you were expecting, I guess the dividends and the non-cash and the acquisition. Is there any sort of specific timing that we should sort of think about? I know the dividend equivalency you think hits in the first quarter, but what about the other, the two $0.17, the non-cash? Should we spread those out evenly or are there timing items in there?

You are right. The dividend thing is the first quarter. The non-cash compensation is ratable over the year, and the acquisition stuff is going to be front-end loaded, most of it done by the first six months. Because some of it is tied to acquisition, as you got to peel off inventory off of an inventory toward backlog’s 12 months. So, it's going to be front-end loaded.

Okay. And your 35% tax rate, is that assuming or does it even matter for the R&D tax credit extension?

That includes the – no, for the extension. We don't include the extension when we do that, do we? Yes, not until it’s passed by law.

So, if it was passed, what would be the benefit that you would get?

Less than $1 million right now as we look at next year.

Okay, great. Thanks a lot guys.

Your next question comes from the line of Christopher Chung [ph] with Rudman Capital. And Mr. Chung, your line is open.

Hello, this is Errol Rudman for Chris Chung. I wanted to ask what the – could you give us an estimate of, you give us an estimate of what the revenues are in the quarter from the acquisitions, because you gave unit growth, but can you give us an indication of what the margins were on the acquisitions?

Errol, this is Nick. We don't break that out, but I think you can see the margins on the acquisitions are moving up, because we averaged down when we bought them, and we are starting to come pretty close to approaching the margins on our full business before we made all these acquisitions, but we don't break them out separately.

Yes, perhaps the question is to understand better how much room or how much potential there is of those acquisitions to get to the corporate average?

Yes, there is more. They are not used out yet.

Errol, this is Greg. I would like to point out that our goal when we make an acquisition isn't to get it to the corporate averages, our goal is to whatever we buy, it is to create the shareholder value. So, in an absolute or a theoretical example, here I would love to buy something that’s 5% or 10%, and if I took it to 35% or 40%, we would all be happy. So, we don't have a firm goal to say, whatever we buy has to get through a TransDigm average, our goal is whatever we buy has to create shareholder value.

I understand, thank you.

Your next question comes from the line of Ken Herbert with Wedbush.

Hi, good morning everybody.

Good morning.

Just wanted to ask a question on the original equipment guidance for the year. You talk about obviously margins being impacted by the greater mix and up mid teens, can you talk then, Nick, about the visibility you have in this segment? It seems like the initial outlook, specifically on the 787 certainly seems to be lower than what Boeing is talking about in terms of shipments that they try and ramp production, even if I apply a fairly significant haircut to what they talk about. How does the visibility look and what are you seeing on the original equipment side heading into 2012?

Yes, let me separate the 787 from the rest of the commercial transport business. The rest of the commercial transport business, we have a fair amount of visibility. As opposed to the aftermarket, whereas I think it was Carter Copeland who started off and asked me whether he had one or two quarters of visibility, and I said, surely, no more than that. In the OEM world, and again, I am separating 787, we have more like three to four quarters of visibility. We are pretty well locked in. So, if you separate out the 787, we know it pretty well – you know, absent some disruptive event that makes everybody slow down. The 787 frankly, we are just wary. We have had so many false numbers over the last four or five years, and we are unsure exactly how much inventory there is in the system, or how much they are going to leave in the system, it makes it a little bit difficult call. Now, that's the bad news on it. The good news on it is particularly at the beginning of the program like that, you don't make a whole lot of money. So, whether you call it wrong by 5 or 10 or 15 airplanes, is not going to make much a difference in the answer this year.

Okay. So, I know the bigger scheme of things, it's a very small piece of the pie.

Yes, that’s right.

Yes. So, it sounds like then, good visibility on the legacy of the mature Boeing programs.

And Airbus.

And Airbus of course as well certainly. Can you give any, perhaps bookmark or way to think about how opportunities are for your content on the OE side, in your discussions with Boeing, specifically on the 737 MAX?

I think it’s too early to really say much about that. There is not much we can say. In general, which 787 – which plane did you say again?

The MAX, the new narrow-body.

The new one.

Not the re-engine, new brand though.

It’s a re-engine.

Yes. Okay. I didn't know that you were making a distinction between a re-engine and a brand new airplane. A brand new airplane, I am going to say I have no idea. On the re-engine one, in general, this isn't 100% true, but in general, as much as possible, they try and stick with the suppliers they have on a base platform. So, you would expect to be fairly close and maybe hopefully pick up a little. But in general, it isn't a big disruptive event. That's probably about the best I can say.

Okay, great. But I would imagine though that as on these mature programs, you have got opportunity for margin improvement over the course of the year from the existing businesses? Correct?

I am not sure whether it's unique to the mature programs or not. But we generally between the mix of pricing and cost reduction, we generally think we have margin expansion opportunities almost everywhere.

Okay. I was trying to make more of a distinction between the established versus, say the 787?

Because their volume is going up?

Exactly. Volume versus cost and productivity.

Yes, I really wouldn't get too hung up on the 787. It isn't a big deal. It's not going to impact the 2012 number much, no matter what happens to it.

Okay, perfect job. Thanks again and a great quarter.

Your next question comes from the line of Greg Halter with Great Lakes Review.

Hello and good morning.

Good morning.

You provided some commentary on tax rates and so forth. Just wondering what your thoughts are on the share count for fiscal '12?

Share count? It is – I don’t think, Greg, I don’t have that memorized.

It was 53.9 million.

For next year also? And where is that, what page is it? It's a small amount that it’s going to go out.

So, the amount is going to be 53.9 million.

We have to make an assumption of people exercising options, but it's not a material increase.

All right. And the previous questions, I think was surrounding the organic growth on Page 6, and is that what the question was? Was it fiscal '11 or fiscal '12, because I think '12 is what is presented on Page 6 of the presentation?

Yes, Page 6 is ’12.

Okay.

Now, page – I don’t know these pages, but Page 5 is '11.

Okay. And I know you have approved a share repurchase program, just curious if you bought any in the quarter?

Yes. A small amount is kicking under that program, very small. We are talking fourth quarter, right?

Correct.

Yes, fourth quarter, yes. It was a small amount. You will see it all in tomorrow's Q, but it was a small amount.

Yes, very small.

And for the year fiscal ’11, what were the international revenues to the total, if you have that?

What I tell most people is, when you look at the GAAP numbers, the GAAP numbers reflect the destination of the sale. The best example is, if we sell to Airbus, it looks like the sale going to Germany and France, but then Airbus sells back to the United States and everywhere. If you want to think about how our sales are, you have to look at where the installed base is across the world, because that's ultimately where our sales are consumed and our products are consumed. And I know that's a tough answer because when you look at our GAAP statements, we look like we are predominantly selling within the States, but when you sell to Boeing, Boeing exports to Singapore. So, think of our sales as the installed base.

Yes, and the other way to make that even more obvious is, Aviall through Boeing is one of our biggest customers. A vast majority of those sales get recorded, and so it's going to Dallas, Texas. Almost none of that ends up in Dallas, Texas, it ends up all over the world.

Okay. And one last one, what are your expectations for capital spending for fiscal '12?

Fiscal '12 will be right around 2%, just a bit under. You know, we range between 1.5% and 2%, and we think we will be closer to the 2% than the 1.5% for fiscal ‘12.

Thank you very much.

You have a follow-up question from the line of Joe Nadol.

Thanks. Yes, just a couple of these. You noted that 60% of defense sales were fixed-wing helicopter and tanker transport, what's the other 40%?

Very, very broad range of platforms. We are on almost everything.

Right. I mean, that includes almost everything, except for unmanned. Is this ground vehicles, is this –?

No, it doesn’t. Doesn’t include any fighters.

Okay. I thought that was fixed-wing, okay.

Fixed-wing, I mean, helicopters and fixed-wing – did I say fixed, I am sorry. I didn't mean to, I apologize – I meant helicopters and rotary wing. If I said fixed-wing, I am sorry, that confused everybody.

No, not at all. It could have been my mistake. The second follow-up though is, at the same time, you guys are –

Let me just brief that again for everybody, because I am looking at my script. I said fixed-wing and helicopter, I meant rotary wing and helicopter, helicopters, and freighters and tankers.

Okay, that’s helpful. The second thing is a bit more strategic. Nick, going into the last, into this downturn a few years ago, you guys were very quick to react to the financial crisis, etcetera, and you said you are cautious going into next year in the economy. There's a lot of uncertainty, but you are growing a lot, you are investing a lot, you are making all these acquisitions, you are promoting all these people, and at the same time, you are cautious. I know that we are looking for a nice growth next year and everything, but I am just wondering where you put your caution level on the spectrum of thinking about three years ago?

We are nowhere near that numbers yet. But I would say, when Ray talked about the promotions, and that is mostly to fill holes that we found in acquisitions. In other words, that's not new hires, that's replacements. I would say in general, on adding costs and adding people, we are wary. Frankly, we are trying to be as careful as we can on that right now, just buy time, to see how things develop.

Okay, fair enough. Thank you.

You have a follow-up question from the line of Michael Ciarmoli.

Hi, thanks. Nick, what are you anticipating from Schneller for next year? I know you guys had it for, I guess it was maybe just about a month. It's fair to say that's going to add about $70 million or so for the full year?

I think we don’t disclose that, but I think we gave the revenue? Didn't we? And as you know Michael, we only owned it for two weeks, something like that. So, you can do the math.

All right. Perfect.

There is a little market growth, but you could do the math and come close.

Okay, great. Thanks.

Ladies and gentlemen, this concludes the question-and-answer portion of today's event. I would like to turn the call back over to management for some closing remarks.

Thank you. I would like to thank everyone for participating on this morning's call. And just as a reminder, we expect to file our 2011 10-K no later than tomorrow.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the presentation and you may now disconnect. Have a wonderful day.