Good day, ladies and gentlemen, and welcome to the Quarter Three TransDigm Group Incorporated Earnings Conference Call. My name is Kelly, and I will be your operator for today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of the conference. (Operator Instructions). As a reminder, this call is being recorded for replay purposes. Now I would like to turn the call over to Liza Sabol. Please proceed, Lisa.

Thank you. I would like to thank all for calling in today, and welcome to TransDigm's fiscal 2012 third 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. Before we begin, the company would like to remind you that statements made during this call, which are not historical in fact, 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's website. 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 related to 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 net income and adjusted earnings per share to those measures. With that, let me now turn the call over to Nick.

Good morning and thanks to everybody for calling in to hear about our company. Before I begin with the quarterly results, I would like to just talk about one tragic event that occurred in Q3. Al Rodriguez our Head of M&A, passed away suddenly at 51 years old. Al was a significant contributor to the company since the formation of TransDigm. We lost a business partner and a good friend here. But moving on, Bernie Iversen, another long term member of our senior management team, who has also been with us since the formation of the company has taken over the M&A position. Bernie has had a broad range of operating positions at TransDigm at a number of different locations. He was most recently a Group Vice President, a Group Executive Vice President in charge of a number of our operating units. Bernie has been involved with many of our acquisitions, which will facilitate a smooth transition in his role. Bernie hits the ground pretty well running here. Now with that behind me, I'd like to review our consistent strategy, our current sense of the status in the aerospace market, as it applies to us and a few miscellaneous items. To reiterate, we believe our business model is unique in the industry, both in its consistency, and in its ability to sustain and create intrinsic shareholder value through all phases of the aerospace cycle. To summarize some of the reasons why we believe this, and that these are highlighted on page 4 of the slides. About 90% of the net sales are generated by proprietary products and around three quarters of our net sales come from products, for which we are the sole source provider. About 60% of our revenue, and a much higher percentage of EBITDA comes from aftermarket…

Thanks, Nick. As he mentioned, in total we had a very busy third quarter with good operational results. We were quite busy with acquisition transitions in several divestitures. Operating units, we also continued to diligently work our value drivers and we continued to create shareholder value. Let me explain our third quarter acquisition integration and operational activities in a little more detail. Almost six months ago, we acquired the AmSafe businesses. Our acquisition transition work is progressing well and starting to generate real value. To-date, we have closed and absorbed the AmSafe corporate office into our own, we have consolidated four AmSafe satellite locations into several of the existing AmSafe locations and we have also restructured the AmSafe aftermarket process. These consolidation moves and pricing actions have started to expand the EBITDA margins and we believe we're running ahead of our value creation expectations for this acquisition. We are now implementing our proven product line structure at AmSafe. Each business now has several product lines. Our product line structure consists of a product line manager who is responsible for the product line, P&L and creating real value. Implementing this product line structure at acquisition takes a lot of work. In addition to the product line manager, we formed a product line team that's focused on our three value drivers, those being value pricing, productivity improvement, and managing profitable new business generation. We're also applying our proven set of product line metrics that are focused on tracking value creation process. Additionally, we are conducting specific product line training, ranging from negotiating customer contracts, implementing value pricing, driving productivity improvement and managing and financially modeling new business programs. At our other recent acquisitions, Schneller and Harco, those are also transitioning well. At Schneller, their Kent, Ohio building expansion is nearly complete. We…

Thank you, Greg. Operator we are now ready to open the lines.

Okay, thank you, Liza. (Operator Instructions) And the first question comes from the line of Carter Copeland from Barclays. Carter Copeland – Barclays Capital: Hey, good morning.

Good morning. Carter Copeland – Barclays Capital: Two question one, Nick, I wondered if you might talk about the environment as we think about the set up here for your fiscal '13. It doesn't look like we've had a year like this during an up cycle where we've seen aftermarkets slows since sort of '05, '06. And you guys saw at that time a pretty good snapback in organic growth in the commercial aftermarket following that period. Are we setting up for something like this? Or do you think we are going to be in this sort of weak level next year, especially given the traffic numbers kind of coming in a little bit better than people would forecast all year long? I wondered if you might help us think about what you are thinking about 2013.

One, Carter, as you know, I can't back into 2013 guidance yet. And our view on aftermarket gets you pretty close to the guidance for the year probably, but, I mean, the reality is, we are uncertain. I think this is primarily a function of worldwide economic activity. If you believe we're just in little bit of a dip or slowing down and it moves on sharply again, either as we proceed into the next quarter or after the election, I think you will likely see some kind of a snapback like you talked about. But that looks very uncertain to me right now, Carter. I don't have to call it. If I sit here today, I describe myself as quite cautious. Carter Copeland – Barclays Capital: Can you see anything within the product lines? You said it was bumpy and different throughout the business. But if you look at products that are discretionary versus nondiscretionary, are you seeing weakness in discretionary items that would support that conclusion or is there any data on a more granular basis that helps you get comfortable with that kind of viewpoint?

No. The true answer is, Carter, no. By the way, hopefully, all the answers are true, but I can say and frankly this somewhat surprised me. As I look at our more discretionary things, parts in the last month and we are in the middle of our business planning review process so we are looking at detail of all the product line. Surprisingly, they don't look down any more than average or I can't say they are systematically off more. It's kind of surprised me which I don't know what that tells me, other than I don't see a systematic pulling back on discretionary items, particularly at this point. Carter Copeland – Barclays Capital: Okay, thanks. And one question quickly on the margin, Nick, you mentioned a 2.5 point impact from acquisition dilution and then Greg mentioned two. Is that just a difference between the quarter and the year and how you were talking about?

There are two things. For the quarter, I am always talking EBITDA margins and Greg was talking gross profit. So for the quarter, the dilution was 4 points on EBITDA margin for the acquisitions. For the year-to-date, it was 2.5 points for the acquisition dilution. The Greg's 2 points was gross profit, Greg, am I correct? Not.

Not EBITDA because we also – the SG&A is higher because of the acquisitions also. Carter Copeland – Barclays Capital: Yes, exactly. And so with respect to that, if you look specifically at the acquisitions, it will look sequentially the margins were similar, did they increase or was there something going on there in terms of your cost efforts, in terms of the relocation and what not that would cause that to be the case. Can you comment on how the acquisition margins trended quarter-to-quarter?

I am not following the question. You're drawing some conclusion that they changed somehow from here? Carter Copeland – Barclays Capital: Yes. It looks per our math that the sequential margins – the margins would have been roughly flat sequentially for the acquired businesses. And I was wondering if that was actually the case per your numbers?

The truth is I don't remember exactly what specifically the acquisitions were quarter-to-quarter, but I would be surprised if they were flat. Generally, they are moving up. Carter Copeland – Barclays Capital: Okay.

But I can't remember, Carter, what they were the last quarter, but in general they are moving up. Carter Copeland – Barclays Capital: But the G&A way down, is that the right G&A going forward?

Yes. And I suspect somehow we are losing this in a quarter in rounding or something like that, I suspect.

They are smaller numbers versus the total, but the trend is that they are expanding. Carter Copeland – Barclays Capital: Okay, great. I will let somebody else ask.

The next question comes from the line of Myles Walton from Deutsche Bank. Myles Walton – Deutsche Bank: Thanks. Good morning, guys.

Good morning, Myles.

It looks like the fourth quarter commercial OEM sales if I have done the math kind of right, it implies slowing up to mid-single-digit growth. And I know Nick you mentioned some of the 787 inventory, but I am curious if that math is right and are there other things driving it compares and/or 787?

Well, what are you getting when you saw for the fourth quarter?

Kind of mid-single-digit growth if it's 24% year-to-date and up high-teens for the year?

Yes. I would have thought you get closer to 10% but yes it's a little bit slower. That I wouldn't – that is just reflective of what the timing is on different product lines. I mean, generally, we are primarily in the commercial OEM. If you look at the commercial transport production rates, we are pretty evenly distributed across the miles. We probably run, I don't know depending on the product line somewhere between 3 and 12 months ahead, so maybe 6 months. So any whatever you are saying is just quarterly impact.

Okay.

It's just a timing question on shipments. Now I would say sometime if things start to back up in '14 in the commercial transport growth rate, we will start to see that sometime in '13.

Okay. Those kind of the first part of the questions. So it looks like your implied aftermarket growth is about the same as your implied OEM growth, maybe it's slightly smaller in the fourth quarter, but it looks like that mix won't be hurting you as much in the fourth quarter. And presumably your acquisitions will be a little bit better in the fourth quarter. And I think the guidance doesn't imply much of an uptick in EBITDA margins as defined in the fourth quarter. So I was just wondering if I am missing anything or if it's just conservatism?

I think probably the difference in those growth rates is probably too close to call and it's in the noise level in the quarter when you look at it over full year. I think we are trying to get pretty close to what we think now.

But that implied flat EBITDA margin as defined is about 47% in the fourth quarter versus 47% you did here in the third quarter, any reason that shouldn't be higher given higher volumes in another quarter of integration?

I think you are in the – whether it could be 0.5 one way or the other, I think you are in – I think it's in the noise level.

Okay. And one other cleanup one, just a clarification I guess. You mentioned you had agreement on some divestitures of $3 million, $4 million in sales – a $3 million, $4 million in EBITDA, what the sales corresponding to that?

Let me – I think we probably – we have confidentiality agreements on that. I think I had probably said about as much as I can say. Myles Walton – Deutsche Bank: All right.

But I think use the figure is around $3.5 million of EBITDA and you can probably figure they aren't the most profitable businesses in the world or we wouldn't be selling them. Myles Walton – Deutsche Bank: Right, okay. For that, that's good enough. And then one last one sorry if the stock option comp expenses trending higher here and I know obviously the EBITDA is growing, but what's the underlying rate we should expect for that stock comp expense on a go forward basis?

I haven't gone through the '13 guidance yet, but the reason it's going up is the combination of these acquisitions and issuing options and we value among there is the Black–Scholes. So just to kind of put in perspective, in 2010 they were going for about $20 or is valued at about $20 a share. In '11, it was $35 a share. And this year in terms of the price of the stock, it's between $40 and $44. But let me remind, as you know, it's a non-cash charge, it's based on expensing stock options. Myles Walton – Deutsche Bank: All right. Thanks again.

Thank you. The next question we have comes from the line of David Strauss from UBS. Please go ahead. David Strauss – UBS: Good morning.

Good morning David. David Strauss – UBS: Last quarter, you guys gave guidance I think AmSafe EBITDA contribution this year, around $50 million. If I take what you said this time in terms of 51% EBITDA margins for the base business, and then dilution by about 3% from the acquisitions, it would imply that AmSafe is running better than kind of that $50 million, can you give an update to that number?

I don't remember what the – do we give this guidance?

That would be on a GAAP basis, David, and that will (inaudible).

As I said, the AmSafe businesses will – let me put the ground face to face aside for a minute. It looked like there we were doing as well. If not, as I said, a little better than we expected when we bought it. These are more happy legs. David Strauss – UBS: Nick, where is that upside specifically coming from, is it pricing, or what are the value drivers, where are you seeing the upside?

All. They say new business isn't ticking in yet, but we are doing reasonably well in pricing and we are also getting costs out pretty aggressively. Greg, how many plants have we cost? Four plus the corporate office?

Yeah. We closed the corporate office plus four facilities.

Which is a lot of movement in six months. David Strauss – UBS: Have you been able to reprice the entire business or what percent of the AmSafe was under LPAs that you haven't been able to address?

I don't remember, but we haven't, we are not done yet. David Strauss – UBS: Then my last question. Nick, you talked about that the aftermarket is not consistent and across your businesses you are seeing different things at different businesses. Can you give some additional color there, which businesses are kind of outperforming expectations, and which are underperforming specifically on the aftermarket front?

Just the point I would like to make on that. What I expected to see, and this is to Carter's question at the beginning, I expected when we looked at the details, we see a more discretionary stuff, which is the minority of our products would be dropping off much more than rest of them. I don't see any consistency across that. The discretionary stuff is not, it was not reacting substantially different than the non-discretionary, which just says to me, [Myles], we're just sort of in a -- above the uncertain market. That's the only conclusion I draw from that now. David Strauss – UBS: All right. Thanks a lot.

Thank you for that question. The next question comes from the line of Robert Spingarn from Credit Suisse. Robert Spingarn – Credit Suisse: So, on the same topic that you have addressed, both in David's question and Carter's question, I don't know, maybe this is a question for Ray actually, but are you seeing in any categories, anything that would explain any categories or parts, the different growth rates we have seen so far in the result season, from the engine guys, versus the airframe guys, on the aftermarket. Is there something going on in the distribution channel for certain types of parts that you are not seeing elsewhere? Is there a cannibalization effect from parts, aircrafts? Anything you can help us with here?

Well, I would echo what Nick said before. We are not seeing any kind of panic.

I see geographically, though it's hard to get the data exactly every quarter, but we have a decent idea. Obviously, the European market is worse than the others. So presumptively items that were used more heavily in that area, or probably down more, but I can't put a number around that. But it's hard, as you know across the world, sort of the economic situation is slowing down a little bit. Robert Spingarn – Credit Suisse: Do you see much evidence of cannibalization from that aircraft?

No. Robert Spingarn – Credit Suisse: Then Nick, on M&A, you mentioned activity is up. Are you seeing more targets in the pipeline, or is it more about the bid-ask spread narrowing? What's driving that?

As of right now Rob, we are seeing more in the pipeline. Robert Spingarn – Credit Suisse: How is pricing?

I can't say, because they have been close. The real answer is, I am not sure. But my guess is, if things close, won't close, the price is substantially different than they did, than they had over the last year. Surely, just from the outside looking and watching other deals that have closed, they have still closed at pretty healthy prices. Robert Spingarn – Credit Suisse: Then just a couple of quick things. You mentioned a fair amount of activity, moving product lines around, reducing the number of plants. Is that driving the higher CapEx we saw in the quarter?

In the quarter especially, Ray mentioned the Kent facility, Schneller, we moved it in (inaudible).

They are putting out a couple of (inaudible), about 10,000 square feet, and want more and more.

They are a significant (inaudible). Robert Spingarn – Credit Suisse: So how should the fourth quarter look on CapEx?

Do we give guidance for CapEx? Not regularly.

I mean, we are not going to be way off from where we typically are. Robert Spingarn – Credit Suisse: Means you go back to where you were?

I mean, you think of 1.5 to 2 for the year, and at the high end of that, you will probably be pretty safe. Robert Spingarn – Credit Suisse: Thanks guys.

The next question we have comes from the line of Joe Nadol, JPMorgan. Joe Nadol – JPMorgan: Thanks. Good morning. On the defense side, another good quarter, and I think perhaps a few quarters ago, if someone had told you that your defense growth will be higher than your commercial aftermarket this quarter, you probably would have been a little surprised. So as you are looking for all that data in your process here, and you look business-by-business within the [sems], have you learned anything about why that continues to remain stronger than you would have expected?

We kind of (inaudible) government spent more money than we expected. Our product lines are weighted towards helicopters and transports, and not so heavily towards Tigers and ground vehicles, we are really seeing a slower stuff, and they are just holding up better. They are continuing to buy parts and repair services at a rate more than we expected. But I am mostly focused around, I would say, probably helicopters first and the transport plane second. Joe Nadol – JPMorgan: Do you have a clear read-through in most of your businesses, as to whether it's aftermarket or OE that's driving it? I would imagine that's topical?

Pretty clear. It sometimes gets a little more confused in the defense world than commercial, but generally pretty clear. I mean, the OEM rates don't change very quickly or very much and we know the (inaudible) content, so we can pretty well back in the production. Joe Nadol – JPMorgan: It is really the aftermarket remaining a lot far.

Absolutely. Joe Nadol – JPMorgan: Then just on some of the data you gave, Ray, I thought it was interesting on the platform-by-platform basis for the newer commercial platforms. Just a couple of questions on that. Those are pro forma numbers I imagine, including the say AmSafe and Schneller content on the legacy platforms?

Yeah, they are. I think I said in the script on a same store basis. Joe Nadol – JPMorgan: Clearly, listening to the lists, obviously it ran across all your businesses, platform by platform, but definitely it seems like a little heavy on some of the newer acquisitions, AmSafe and all of them. Schneller sounded like, if you had taken this measurement a year or two ago, would those increases have been as high or have you really targeted that via your acquisitions, is that a coincidence or not?

In our prior year's Investor Days and so forth, we had given some of our -- an indication of how we were expanding our footprint. And really I didn't want to have the call go on for another half hour with me mentioning every product line. So we tried to pick kind of a cross section that wasn't heavy and either the new acquisitions are in the existing platforms, we just took a cross section. There's many, many other product point applications I just didn't mention. I was just trying to add color there. But we've -- prior to these most recent acquisitions, we had very good success expanding our footprint and these acquisitions are no different.

Yeah, I would say -- to answer the, is it systematically or is it just (inaudible), we picked up good stuff on the acquisition vital, I'd like to say the commercials -- I believe it could be true also. The commercial stuff we have bought in the last year and a half has been good fresh product lines and they've cap up and they've been companies with cap up with their products, which means that cap up with decent positions on the new platforms. Joe Nadol – JPMorgan: Okay. All right, thank you.

Thank you. The next question we have comes from the line of Rama Bondada from the Royal Bank of Canada. Please go ahead. Rama Bondada – Royal Bank of Canada: Thank you. Starting on the margin side, it looks like on the legacy business, you've been able to mostly offset the margin dilution from the mix shift over the last couple of quarters here. If aftermarket remains at the current growth levels and you have these Boeing and Airbus production rates go up, do you think you can hold that EBITDA margins of about 50% for your legacy businesses?

Can you say that again? If the OEM continues to grow faster than the aftermarket? Rama Bondada – Royal Bank of Canada: Yeah, can you hold for these margins?

Well, you'll get -- we'll give out the guidance for next year when we give it out. But I would say it would -- I would be surprised if the difference in growth rates next year between the two was enough to materially impact our margins? Rama Bondada – Royal Bank of Canada: Okay. And on the M&A side, now that the UTX and Goodrich deal is closed, it looks like there are some parts of Goodrich that UTX is looking to dispose of. Can you just comment on the potential there for TransDigm, whether it fits in your criteria [in terms of acquisitions?

(Inaudible) the companies that we call in all the time to see what they have -- to see what they're having to sell. We've been following that for six or seven months and we're hopeful we can see some things from (inaudible) there, but it's too soon to tell. Rama Bondada – Royal Bank of Canada: Okay, all right. Great, thanks a lot.

Thank you. The next question we have comes from the line of Noah Poponak from Goldman Sachs. Please go ahead. Noah Poponak – Goldman Sachs: Good morning, everybody. A few part question on balance sheet utilization and capital deployment. So with the comments on the M&A pipeline picking up, I'm curious is there anything that's fairly late-stage there and it's just a matter of time to close or is it kind of just early in things popping their head up for the first time? Secondly, at the Investor Day we started to get the sense that you were looking at a special dividend again maybe, is that something that's kind of still relatively on the table or not? And then third part is, you talked about the net debt to EBITDA metric getting to 3:9 by the end of the year. I'm curious just what the current thinking is on how comfortable you are with that, whether or not that's floating with the suboptimal balance sheet that you referred to or not?

Let me start. By the time I answer the first question, I probably would have forgotten the third, but I'll give it a try. On the acquisitions I would say we just don't comment -- we can't comment on that where they stand in the process (inaudible) we'll see what falls out. Sometimes things move fast, sometimes they all die and you end up with nothing. So I just -- I don't know how to handicap that now. What was the next question? Was the next question on the special dividend? I would say, as I've said in the past, you see our leverage drop down into the 3s, it's getting into the kill zone for us. I would think [absent] any acquisitions of significance or if we look ahead, we think we don't see any pending. If it gets down into that area, we probably very seriously considered doing something with our capital structure. Last winter, whenever -- November, December, we were almost in the throes of that and then this AmSafe came along and we -- and Harco together and so we had $850 million which is always our preference (inaudible). I mean we still believe that this is a company that should be leveraged. And letting the leverage drop down too low is not the way to optimize equity value. But it's a very fact and circumstance specific call. Noah Poponak – Goldman Sachs: Okay, that's helpful. Thank you. One follow-up on the aftermarket. Is the value-based pricing model not in any part of the business specifically, just broadly, is it even a little bit more difficult in a slower growth, generally tougher aftermarket environment or is it just still humming along as normal?

I don't think it's substantially different. Obviously, you get more handwringing and (inaudible) mashing at people when the market's tough, but -- I mean the fundamental economics don't change. Noah Poponak – Goldman Sachs: Okay. And then just one last one for me. You [quoted] business jet and general aviation aftermarket growth was negative. Just curious what you think of that or what you're seeing or do you think that's strictly the comparison or do you think the business jet user and buyer is much more spooked now than they were three, six months ago, maybe tell us broadly what you're thinking about the business jet market?

Yeah, first it's not a big number. It's down -- it's down modest (inaudible) volume steadily, so that was noteworthy to us. I suspect it's just part of the general economic concern and so [I think] little bit of a feeling in Malaysia right now, that's what I suspect that I don't know whether it's a one quarter phenomenon. If we see it for two or three quarters in a row, then we'll be getting a pretty good idea. In the general aviation, which isn't a huge part of our business with impacts of a little, that comes to be impacted by [add gas] prices and [add gas] prices are pretty high for those propeller operators. But that's not new for me, that's been a phenomenon for a little while. But my overall guess is, is that we're just -- this is just part of the general economic concern we're seeing across things. I'm sure everyone else is seeing across a lot of industrial businesses. Noah Poponak – Goldman Sachs: Okay, thanks a lot.

Thank you. The next question we have comes from the line of Gautam Khanna from Cowen and Company.

Yes, thank you. Just two...

Speak up, we can't hear you.

Yes, two quick questions please. Just following up on Noah's question about leverage, given where we are on the cycle and from the choppiness in the aftermarkets, do you have a different level of comfort with the amount of leverage you might put on, so -- would you be reluctant to go to the 5, 5.5 or 6 times debt to EBITDA and want to keep it five times or under or do you have any criteria that you can share with us, given the changing landscape?

Yeah, I don't think we'd share a number. I would say all things being equal if we feel uncertain about the economy, the number would probably be a little [low] and we felt very good about the economy. But I don't know -- I don't -- in the numbers kind of ranges you've been talking about, I don't think any of those would concern us.

Okay. And could you also just talk about in the incoming order rates in the aftermarket in the fourth quarter, have you seen any discernable change in pattern just in the month and a week we've had since the close of the quarter, have things deteriorated sequentially? Have they got stabilized sequentially? And is there any trend that you can draw?

I can't really speak to that. I can't really to speak to that, this one.

Okay. Could you talk -- I mean when you think about the fourth quarter, is there -- are you looking for sequential aftermarket stability or you expecting that to rise a bit year-on-year?

Well, I think we gave you the number. We expect the -- we gave you guidance for the year, of aftermarket of 8 to 10, so if you put the middle point 9 say, that would imply a 7% quarter-over-quarter growth from fourth quarter to fourth quarter.

Okay, so I see that here. Okay, thank you very much.

Thank you. The next question we have comes from the line of Carter Leake (BB&T Capital Markets). Carter Leake - BB&T Capital Markets: Nick, let me follow-up on that. If I put in -- this is commercial aftermarket growth, if I put in the 8% to 10% number for sequential growth I get either down minus 4% or up 3%. Does that make sense to you?

(Inaudible) math, I didn't do the sequential, I did the quarter-over-quarter. I just don't -- and it's math, you'd figure it out. It is what it is. Carter Leake - BB&T Capital Markets: Well, I just wondered so could -- fourth quarter could we see a decline as much of -- as sort of 4%, that would hit an 8% full year number based on what we've gotten. Is that something that you could see and fourth quarter could be down that much?

I think we gave you the ranges 8% to 10%. So whatever that works out to, that's what we think the [band] is. Carter Leake - BB&T Capital Markets: All right. You won't be selling AmSafe. Was that in -- I assume that was not in any guidance, was it?

AmSafe's what? Carter Leake - BB&T Capital Markets: You had said you won't be selling AmSafe ground piece?

It was included in our GAAP numbers.

It's always been…

It's always been in our GAAP numbers. The ground transportation business has always been in our numbers.

It's in our go-forward numbers and there's no cash -- no, we're not assuming any cash from the sale. Carter Leake - BB&T Capital Markets: Okay. Moving to the platforms that you gave us, I appreciate the color. I just want to clear up a couple of things. When you speak about the aircraft and the engine content, you do single out Rolls. Perhaps I should know this but do you only have igniters on rolls power, is that…?

No we haven't made -- our igniter (inaudible) GE, basically there's two suppliers in igniters and ignition systems. Ourselves and Unison, GE owns Unison, so that we tend to get Rolls work, we tend to get the Pratt work and we tend GE, on new platforms they tend to get it. Now on historical platforms like the CFM56, that's a situation where we're dual-sourced. So we share the aftermarket, on the CFM56. And each GE engines gave us a little bit of different sweat between it. Carter Leake – BB&T Capital Markets: And then when you were signing these platforms you were signing large content increase for example A380 up 90%, versus I think it's sort of prior platforms, what would be the prior platform we'd be using a long.

We make – when we do this, we track this from a – we start a program. On a program restructuring, we start investing in it. We make an estimate on what we think it will replace, so maybe with that when we might say, if it takes a job it will replace three quarters of a 747, and one quarter of a A338 – 340 or something like that. So we make some weighted index, and then we hold it consistent. In that way we calculate what our base chipset content is, weight it that way, and then we keep measuring it as we go forward. And now A380, there's a little bit of a disconnect there. Because you've got more seats, but even if you were – right the if you have 90% more content doesn't mean you have 90% more content per seat or per body in the plane. But even if you adjust for that, you're still –I want to say if you just remember seats, I want to say, [Ray], you're still up 40% or something like that. Carter Leake – BB&T Capital Markets: Yeah.

Did you follow what I mean there? Carter Leake – BB&T Capital Markets: Yeah, well but I.

If you take airplanes so everything was perfect, you had more dollars on it. And you can see in some of the literature, where people will plot the number of seats versus the range of the aircraft. And it's a scatter diagram of all the Boeing and Airbus aircraft. And we kind of look at that scatter diagram and we say, geez what airplanes -- predecessor airplanes are kind of plotted around that aircraft its replacing. And you can get quite academic on how you're going to weight them. But we – we basically put a stake in the ground, we kind of – try and measure consistently. Carter Leake – BB&T Capital Markets: And these numbers – 787 up 60% versus whoever thought it would a be a 767 or whatever, is this volume you're telling us or you're telling us it's dollar-based.

Dollars per aircraft. Carter Leake – BB&T Capital Markets: Okay.

So they're selling one whatever – let's say it was 100% replacement on the 747, which it's not. Not a way, it's an index. You know we're saying if we have $100 on that we'll have a $190 on the 380 as it goes out. Carter Leake – BB&T Capital Markets: And then if I look at some of this content is there -- because some of the composites, it's nice but it doesn't seem I wouldn't think it would have as much aftermarket as say, igniters. Are you telling us these figures today to sort of speak to top-line growth, because this is attractive to that end but it also could have some dilutive impact in here?

I wouldn't draw any conclusion on that. Carter Leake – BB&T Capital Markets: Okay.

We don't see any reason that the mix – that the mix of parts that we – the way we look at is if – we think the mix of parts that are going on a platform and we sort of run it out for – sort of a mature point when there's a reasonable aftermarket we want to be sure that we still got 50% EBITDAs and more. We don't see anything significantly different here. Carter Leake – BB&T Capital Markets: That's okay.

Okay, so we – we didn't as Ray said, we didn't go through everything, we tried to kind of highlight the stuff we thought was a little different and we hadn't talked about before. You know if we have 40,000 ER system, he didn't get through all the 14 valves and that sort of thing. Carter Leake – BB&T Capital Markets: Thank you.

Thank you, the next question we have comes from the line of Michael Ciarmoli from KeyBanc Capital Markets. Please go ahead. Michael Ciarmoli – KeyBanc Capital Markets: Hey, good afternoon, guys thanks for taking the question. Nick, I guess you know, with your defense exposure, you're clearly not as exposed as some of the other players in the space, but how are you guys going to handle, the impact of sequestration when you give your year '13 outlook?

You'll just have to wait till we give the '13 outlook. I – we're going to collect data and we'll make our best guess when we get there. I mean you know, we our shifts, we know what shifts we're on we know what the aftermarket demand is by different platforms, we'll keep gathering information and we'll do the best we can when we get there. If is -- truth is I don't know. Michael Ciarmoli – KeyBanc Capital Markets: Fair enough, and then most of mine have been answered just if I look at – your passenger traffic growth assumptions for the year 4.5% I think the recent data implies IDA saying we're annualizing at 2% growth. Should we look at that correlation, you're 4.5% this year that aligns with your midpoint on aftermarket essentially 9%, is that a good multiplier to use, if we're assuming growth next year, might be 3% to 4%, can we use that as a good proxy for your expected effort?

I don't know. Michael Ciarmoli – KeyBanc Capital Markets: You don't know?

I don't know. I think I said 4% and 4.50% by the way. In the range of 4% to 4.50%. I don't have a good feel for that. Michael Ciarmoli – KeyBanc Capital Markets: Okay, perfect, thanks a lot guys.

Thank you. The next question we have comes from the line of J. B. Groh from D.A. Davidson. J. B. Groh – D.A. Davidson & Co.: Hey, guys thanks for taking my call. I think you pretty much addressed, how you're looking at channel inventory and that kind of thing. But is there – different product lines, we can sort of look through the list, it's pretty diverse of – some products that are – more heavily inventoried than other and maybe more subject to – some drawdown, if perhaps there was a lower capacity may have some growth next year.

Yes, the answer is yes, there are – as I sit here I don't think I can come up with a list for you. The ones that go through distribution probably are a little more risk, because they have two levels of inventory. You know, you've got distribution level and an airline level. But I don't have a good sense of how much that is. J. B. Groh – D.A. Davidson & Co.: So when we think about that – what percentage of your product go through distribution and what -- how much is what percent is for direct?

I want to say, if you take the commercial aftermarket something a little under half I think goes to distribution. J. B. Groh – D.A. Davidson & Co.: Okay, that's helpful.

But, even that – depending on the product they have different stocking requirements, you know, some have very low stocking requirements, some have longer ones, depending on lead times and thing like that. But as a general rule that's probably a little more susceptible to fluctuation than the ones that aren't. J. B. Groh – D.A. Davidson & Co.: Great, okay. And did I miss the backlog number, or is that just show up in the Q?

We show it just in the K.

In the K, yeah. J. B. Groh – D.A. Davidson & Co.: Okay ,thank you. Maybe it just show up in the Q or just the K.

Q.

Q, okay. J. B. Groh – D.A. Davidson & Co.: Okay, thanks.

As we have no more questions in the queue?

No. Thank you. I would like to thank you all for participating in this morning's call, and we expect to file our third quarter 10Q tomorrow.