Good day, ladies and gentlemen, and welcome to the First Quarter 2016 TransDigm Group, Incorporated Earnings Conference Call. My name is Dave; I'll 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 this conference. [Operator Instructions]. As a reminder, the call is being recorded. I'd now like to turn the call over to Ms. Liza Sabol, Investor Relations. Please proceed ma'am.

Thank you. I would like to thank you all for calling in today and welcome to TransDigm's fiscal 2016 first quarter earnings conference call. With me on the call this morning are TransDigm's Chairman, President, and Chief Executive Officer, Nick Howley; Chief Operating Officer of our Power Group, Kevin Stein; and Chief Financial Officer, Terry Paradie. A replay of today's broadcast will be available for the next two weeks. The details are contained in this morning's press release and on our website at transdigm.com. Before we begin, we 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 SEC available through the Investors section of our website or 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 presentations of the most directly comparable GAAP measures and a reconciliation of EBITDA, 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. Thanks to everyone for calling in. Today, as usual, I'll start with some comments on our consistent strategy, then an overview of our Q1 fiscal year '16, an update on our guidance, and then, Terry will run through the financials for Q1. To restate, we believe our model is unique in the industry, both in its consistency and its ability to sustain and create intrinsic shareholder value through all phases of the cycle. To summarize some of the reasons why we believe this, about 90% of our sales are generated by proprietary products, and around three-quarters of our net sales come from products from which we believe, we are the sole source provider. Over half of our revenues and a much higher percent of our EBITDA comes from aftermarket sales. Aftermarket revenues have historically produced the higher gross margin and provided relative stability through the cycles. Because of our uniquely high EBITDA margins, and relatively low capital expenditures, TransDigm has year in and year out generated strong free cash flow. This gives us a lot of operating and capital structure flexibility. We follow a consistent long-term strategy. We own and operate proprietary aerospace businesses with significant aftermarket content. We have a simple, well proven, value-based operating strategy based on our three value driver concept; that is steady cost reduction, profitable new business, and value-based pricing. We maintain a decentralized organization structure and a unique compensation system, with executive and senior management, who think, act, and are paid like owners. We acquire proprietary aerospace businesses with significant aftermarket content, where we can see a clear path to PE like returns. And lastly, we view our capital structure and capital allocation as a key part of our efforts to create shareholder value. As you know, we regularly look closely at…

Thank you, Nick. I will now review our Q1 financial results. First quarter net sales were $702 million, up $115 million or approximately 20% greater than the prior year. The collective impact of the acquisitions; Telair, Pexco, PneuDraulics, and Franke, was an increase of $121 million offset by a slight decline in organic sales. Our first quarter gross profit was $375 million, an increase of 17%. Our reported gross profit margin of 53.4% was 1.3 margin points lower than the prior year. This quarter's decline in margin was due to the dilutive impact from acquisition mix and higher acquisition-related cost which accounted for a decrease of over two margin points. Excluding all acquisition activity, our gross profit margins in the remaining business versus the prior year quarter improved over 1 margin point due to the strength of our proprietary products and continually improving our cost structure, despite slight decline in organic sales. Our selling and administrative expenses were 11.7% of sales for the current quarter compared to 11.5% in the prior year. Excluding acquisition-related expenses and non-cash stock compensation, SG&A was about 9.9% of sales compared to 10.6% of sales a year ago. We had an increase in interest expense of approximately $13 million versus the prior year quarter. This was the result of an increase to the outstanding borrowings of $900 million in the current quarter versus the prior year. The increase in outstanding borrowings was partially to fund the acquisitions in the fiscal 2015. Our effective tax rate was 30% in the current quarter compared to 32.6% in the prior year. The low effective rate in the quarter was primarily due to foreign earnings, taxed at lower rates than the U.S. statutory rates, and the reinstatement of the R&D tax credit. Our expected full-year estimated tax rate has…

Operator, we are now ready to open the line for questions.

Thank you very much. [Operator Instructions]. And please standby for your first question, which comes from the line of Noah Poponak at Goldman Sachs. Go ahead please.

Terry, do you happen to have that same EPS bridge from the old guidance to the new guidance?

Yes, I believe it's in the conference materials versus the presentation materials on --

Okay. Excuse me for that then.

-- on Page 7 is like sort of a comparison that should help you to do the reconciliation.

Okay. In terms of the acquired revenue in the quarter the $121 million that you disclosed, does that have the same --?

I'm sorry, Noah. I'm sorry. The page was Page 9 is the reconciliation. Page 9, you see there.

Yes. Got it. Perfect.

Okay.

The acquired revenue in the quarter, does it have the same seasonality as the legacy business kind of as soon as it's brought in? And was it -- what do you expected it to be in the quarter?

Are you talking about the Breeze business, Noah?

No. I'm talking about the combination of the four prior to Breeze that you disclosed as being $121 million in the quarter?

Oh, you mean do they have the same sort of seasonality pattern of less shipping days?

Yes.

Is that your question?

Yes.

Noah, the answer is I believe yes, though I frankly haven't looked at the exact number. But I mean they have the same issue. There is less shipping days. They essentially don't ship anything around Christmas week all that sort of thing.

Okay. I just asked, it just looked a little late of what we had and consensus revenue -- or revenue in the quarter was light of consensus and I just wonder if myself when potentially others were just modeling the seasonality of that incorrectly?

The way we look at this, is I think I try to say if we strip out an acquisition which is only Breeze in this case, the first quarter runs about 10% less shipping days than the average quarter through the year and we see that most years.

Okay. And then, were you mentioned having better margins in the legacy business, which I guess changed in the outlook. Can you talk about where that's coming from?

Well I think it is -- you mean what business or what segment? I mean it's --

I guess, I mean how much of it --

-- the primary driver I would say is the normal, our pricing works as usual, but I don't think it was anything extraordinary. But we're squeezing cost out. I think we simply took about 4% to 5% out of the headcount which is the biggest, one of the biggest controllable cost and the volume was not down 4% to 5%.

Thank you. Next question comes from the line of Carter Copeland at Barclays. Please go ahead.

Just to dig into the headcount again. The comment you made on the SG&A leverage on an adjusted basis the 9.9% versus 10.6%, was that presumably all related to the headcount or how should we think about the headcount reduction in terms of cost of sales versus SG&A?

Now, the cost of network frankly the 4% to 5% is really primarily driven from the sites as probably cost of sales. There will be some overhead cost in SG&A, but the bulk of that piece would be in the cost side and in the gross margin line item.

Okay. So it was actually a decent amount of better SG&A performance on an apples-to-apples basis as well?

I guess what I -- oh, excuse me. Go ahead.

Yes. I would say yes, absolutely we had better SG&A performance on an apples-to-apples basis as well.

And on the shipping days comment with respect to -- I mean I can appreciate the fact that there is fewer shipping days in every single Q1. But when you look at the year-over-year comparison was there a difference in shipping days this Q1 versus the prior year's Q1 because of the timing of holidays and did that have an impact?

The real answer to that Carter is I don't know the answer. That makes sensible answer, Nick.

The pattern is roughly the same every year. I frankly didn't go back and see when the last -- it's when the last, kind of holiday around New Year's falls and I don't -- I just don't remember.

They just seem like flat or organic down 1%, was a little bit less than probably what you would have expected?

Yes, they are. As I said Carter, our revenues for the quarter were just about what we expected them to be.

Thanks. The next question is from the line of Gautam Khanna at Cowen and Company. Please go ahead.

Was wondering if you could talk a little bit about the decisions you re-up the buyback authorization in the context of your other comments around the M&A pipeline being a little softer. Should we expect to see buybacks take a higher priority over M&A in the short-term?

I -- we'll own any capital and capital allocation. We'll do what makes sense at the time we address it. As I said, I would not take the increase of $450 million to mean anything regarding our intention. Other than I think $450 million is roughly what's still available in our credit agreement.

Is that correct? Isn't that close rough ballpark to our?

Yes. So -- and we wanted to have maximum flexibility. So we moved the authorization up to roughly about where the -- that limit was. You saw we bought a $100 million bucks back. But I can't say that we're making a specific decision to change our capital allocation. Obviously, if the stock bounces all around and drops -- continually drops, we'll view it as a better opportunity.

Okay. And could you maybe elaborate on what you are seeing in the M&A pipeline? What do you think explains the pause and --?

I don't -- the answer is what explains the pause I don't know. But I can say we just don't seem to see as much activity. Now, this moves around. If you remember in '14, we bought very modest amount of businesses. In '15 over 12-month period we bought -- put out close to $2 billion. It -- and it seems little light right now. But I could tell you just from my past experience, and our past experience in TransDigm is you've seen in the public market, we saw before in the private market. We could end up in 30 days or 90 days with a whole Russia stock. But if I had illicit today, it's little lighter than I would've hoped.

And Nick, could you may be remind us including Breeze-Eastern kind of how -- what's the lag is in terms of your -- the value based pricing initiatives on acquired business? I know it differs by each one of them, but what is the lag there?

Yes. It -- that's hard to say. It really does depend on the businesses. We model businesses when we buy them and we hope to model them conservatively. We model the improvements over a four to five-year period. And I think as I have said before, we assume we're going to buy them, hold them for four or five years and sell them. And we have to see a return on our equity up above 20%, usually well above. And we generally do better than that. And also frankly, we never sell them. So I would say the mix in pricing is very dependent on where company stands in its LPA cycles, what if any commitments they have in the aftermarket, it's hard to give a general number.

I guess sort of because the aftermarket came in a little bit light relative to the full-year guide anyway. Is that -- is the value based pricing on the recently acquired deal the big part of why you think you'll still be able to achieve the up -- mid-to-high-single-digit in the aftermarket or you anticipating something else as an improvement in the underlying market?

We're hoping for an improvement in the underlying market.

Okay. All right. Thank you very much.

I see nothing in the pricing dynamics that concerns me.

Thank you. The next question is from the line of Myles Walton at Deutsche Bank. Please go ahead.

Good morning. This is actually Lou Taylor on for Myles.

That's your alias.

So last quarter you guys -- and just sort of back on the aftermarket now that you were optimistic on aftermarket, little bit of rest on the OE, is that sort of the same as you're feeling now? I know you're cautious overall. But I mean are you still sort of more cautious on the OE side after the first quarter?

I'd say we're at the same place on the OE side. The bizjet frankly was -- the bizjet revenue was -- that was little softer than we expected. But we -- from what our bookings looks like and what our -- what customers tell us we're -- we think that's a timing issue. It's also relatively small part of the business. I think when the commercial transport, we've been cautious and we remain somewhat cautious and that's probably best reflected and the fact we started take the cost down.

All right and just based on what you said just to round out the revenue questions I guess you said they're roughly in line obviously you talked about the slippage of one contract in military and then obviously the bizjet being wide, I mean that obviously would make up for some of the lightness may be not the full amount versus what the industry was expecting but I think those two together they help to buy some of that?

Yes they do, I also they also close the gap some. The military one was just the couple of days issue but that's not a big deal but it moves it -- moves military. I think probably the most significant difference is we typically look at the first quarter is having less shipping days and you're going to ship 10% less than the run rate or something like that I'm not sure that was reflected and the numbers are floating around.

Thank you. The next question comes from the line of Robert Spingarn at Credit Suisse. Go ahead please.

So, Nick, going back to I guess Gautam was getting at this. But can you may be comment that aftermarket is really not a whole lot different than it's been over the last five to six years. Having said that though your organic growth was quite a bit higher going back to couple of years ago than it is now. So either it's not tied to aftermarket or maybe it's tied to either the timing or the magnitude of the price increases on the acquired businesses?

I'm not sure that's what I said. So let me try and mean what I meant to be saying, maybe I didn't make it clear. If we can go back and trace take something like RPM and track that over say five or six years and then take our aftermarket sales and whatever index you want to use for the other people in the business and track them, you'll see a lot of variation around that, you will see some way higher, way lower run rate along. If I look at a graph it doesn't look that unusual to me now that's what I'm saying. I noticed, rough, you had a chart that tracked it that you put out this morning for a couple of years, I mean we look at this over the last five years and track ourselves against rest of the industry and there is a fair amount -- it doesn't look that different than other cyclical variations have looked.

Well, but our -- and look our numbers could be wrong but it's lower than it used to be and I’m wondering if this is one different aftermarket behavior which would contradict a little bit that five to six year comment or is it simply that your acquisitions as a percentage of the total business are smaller today than they used to be. And therefore that pricing dynamic has a smaller effect on the organic?

I don't think that's the answer Rob but I honestly can't give you a direct answer to that. I don't I would tell you just to be clear. I've seen no change in the pricing dynamics. I’ve seen no change in the pricing dynamics of the business we buy. Now I guess your point is, if you buy $300 million business it's nowhere near the percent of our total as it was in the past but that's just true.

Yes and I'm wondering if that's ultimately the factor and people should calibrate around that?

I don't -- my own, I happen to be looking at a chart that anybody could make up. My own guess is we'll see a cycle back.

Okay.

I have to admit Rob; I'm a little surprised as we move faster.

Okay, fair enough. I had another question just on the bizjet you mentioned the OE was a little bit soft and it might be timing related. Is there anything seasonal about that period of time historically with the bizjet OE?

Not this seems disproportionate Rob, but it's down substantively versus the prior Q1.

Okay. And reason I asked is we're getting a lot of mixed commentary from the manufacturers in bizjet and what is going on, some stronger than others?

Yes, and we take some comfort there and the bookings were pretty strong in the bizjet. And the two big customers, the two biggest we sell all the biggest are Gulfstream and Textron and they seem to still be expecting a decent year though we do seem to have a lot of sort of moving around the deliveries and that sort of thing.

Okay. Last question on FX or those who are domiciles and weak currencies, have you seen any change in behavior on the aftermarket side from airlines that might be struggling with currency more than others that aren't?

That I don’t know that I can pin to that specifically Rob, but I mean that could make sense to me. There's awful lot of we sell everything in dollars, the majority of our aftermarket customers are believing in some other currency and things were very expensive to them. Now I can’t give you any specifics on that but that's sort of make sense to me. Now that can’t go on very long right, the consumption the same at some point you're going to buy.

Right, right or fly less.

Yes, or fly less, that's right, that's right. But anecdotally that could make sense but I have to tell you I can't -- I can't put any numbers around that. Now one of the things we did put some effort into as I mentioned we're putting numbers around was the surplus parts. And we have a very hard time seeing; we don't see anything in there when we track the high dollar value parts.

Thanks. The next question comes from the line of Seth Seifman at JPMorgan. Please go ahead.

On the headcount reduction, were there cost associated with that in the quarter and if so were they in the acquisition-related adjustments?

No, the costs would be pretty; pretty tied to be honest but you know be included in whatever line item will be in cost of sales and/or SG&A.

Okay. So they were very small but they are in the adjusted, they are in the EBITDA as defined?

They are in the numbers.

They would be in the regulatory, yes.

They are in the numbers.

Okay, great. And then just I'm curious a little bit about the share repurchases your decision to buy back stock, it sounds like you become a little bit more cautious on the OE side, I feel like you sound a little bit more cautious about aftermarket than you did last quarter and the decision to ramp up the repurchases in the context of those end market sentiments?

I'm not exactly sure how to answer that. I mean, we obviously we bought shares because we thought the price looks good is why we bought them. Now, may be the reason for that is because the market assumptions that the market -- the market is making but what we bought we just look at this as a capital allocation when the buy looks good and we don’t immediately see any near-term uses, no matter, we buy.

Thanks. The next question is from the line of Hunter Keay at Wolfe Research. Please go ahead.

Good morning. So trying to touch on a couple other questions, one that may be Rob was asking was the FX question but Nick I'm kind of curious if you’re seeing any changes in behavior with how some of your U.S. customers and customers in markets as currency have really gotten ahead in particularly emerging market customers. As it relates specifically to some of the really, really discretionary stuff, have you seen any major sort of disparate changes in how you deliver?

I don’t think we have -- I don’t think we have. No, no, I don’t I know we haven’t. We have a few businesses that are tied to more discretionary things like inferior upgrades and things like that and frankly they are doing okay.

Yes.

So I can't -- no, I like to be able to put my finger on something like that and say there it is but I can’t.

And can you may be help us think about Nick I don’t know if you put this out there, I'm sorry if I missed it but how much your aftermarket exposure in actually U.S. based and how much is not?

It’s roughly; it’s roughly the same as the installed base of airplanes. I mean, we're pretty well market weighted so take RPMs, take installed base of airplanes, I’m saying this from memory but I’m guessing that’s something around 30%.

Okay. That’s helpful and then --

And if that’s not exactly the right number it doesn’t mean that our business is disproportionately weighted it means I forgot the right number.

Sure, yes, of course absolutely. Thanks for taking a stab and then we saw, Nick, we saw change in your compensation structure, I’m assuming this is unrelated to next part of this question but can you talk about any updated thoughts around succession planning at the company. Thanks for the time.

I think no different than we've said before, no different than we've said before. I have a contract and you know what the contract -- what my contract says. With the change in the compensation up, frankly, I -- probably 95% of my compensation for the last 10 years has been equity driven anyway. And I -- I'm going to make it all equity driven, which I think is generally a vote of confidence.

Okay.

Now, after I do that by the way, the stock is supposed to go up, not down by the way. That's a joke guys.

I was on mute. I enjoyed it. Thank you.

Thank you. The next question comes from the line of David Strauss at UBS. Please go ahead.

Nick, your cautiousness on commercial OE, I mean is it anything specific beyond just emerging markets looks week, airlines just scrapping fewer airplanes. I mean is there anything else that you're looking at and seeing and saying that this just doesn't feel right relative to the OE rates that are out there?

David, I don't have any unique insight any more than any of you guys do. As I said before, it feels long it took to me. I noticed some rates were starting to move down in the wider bodies. I noticed airline monitored and I'm sure you follow them. I noticed they soften their sort of soften their outlook here and the last time they published it, it concerns us. I don't -- again, I have no unique knowledge, nor do I have any certainty about it. But our view is and you're better off to get cost out quick and you can always adjust the other direction that you have to.

Right. And talk about how much more you can do from a cost cutting side, if you end up being right and OE rates end up moving lower rather than higher over the next couple of years?

Yes. I think -- to say so much potentially, I think we do whatever we have to do to try and hold the margins. But I think it drops in the 10%, 15%, 20% kind of range particularly, with the fact that the aftermarket typically doesn't drop like that at all and you get a little mix. I think we can pretty comfortably between cost reductions and the balance for our business hold the margins, hold the margin percent.

Right. I got it. Okay. Last one for me. Terry, on the free cash or on the cash balance that you're implying for year-end at $1.2 billion, did that imply something around $700 million to $750 million in free cash flow? And obviously, adjusted earnings are going up, cash taxes are also in a fair amount. Can you just help us what the big working capital moving pieces are to get you to that kind of level on free cash flow?

Yes. I think our working capital has stayed fairly consistent. What we try to do is, we look at receivables, inventory, net of payables, and we try to keep that in the 26% to 30% of pro forma sales on a regular basis. And that's where we're at today and that's the plan to continue going forward. I think where you're going to see from, to get us to the $1.2 billion is very consistent what we said last quarter. We said we will just under $1.5 billion for the year and think about the buybacks that we've done and the acquisition of Breeze, I think you can reconcile down to the $1.2 billion. So we really haven't changed anything from where we were last quarter, from our outlook of cash at the end of the year.

Thanks. The next question is from the line of Robert Stallard at Royal Bank of Canada. Go ahead please.

Nick, I'll just follow-up on David's question? You've got this hunch about OEM aerospace that's up cycle there may be not lasting forever. But you stand pretty confident about the aftermarket. I thought if you could give us some more clarity on why you think this expected [indiscernible] spare part purchasing is going to improve pretty radically over the next nine months? And also what your assumptions might be for the smaller bizjet and helicopter off the market?

Yes. The -- on the commercial transport aftermarket, it's just -- if I look at previous cycles around the -- around flight hours this seems to me to be down a while, it seems to me typically these have started to come back and caught up. I don't know of any change in the underlying user consumption of the parts. So at some point it's got to pick up. Now, do I call the term exactly right? I don't know. That's our best judgment as we sit here today. As I said, if we're off a little we think we have some -- may have some margin room, well, if you look at down at EBITDA or EPS. But I mean I don't have any crystal ball to call the term exactly. And what was your other question about the bizjet?

Yes. I mean what your assumptions are for the aftermarket in the bizjet and helicopter, because I think they were a bit of a drag in Q1?

Yes, they were down pretty significantly. Our assumptions are roughly they don't stay like that. They pick up a little bit through the year. We -- it seems to us to be an overreaction. Now, I don't -- the helicopter business, the commercial helicopter business is pretty bumpy as I'm sure you know in aftermarket and OEM, but that's not a lot of our business. So I don't see that driving it much. But I would expect the aftermarket for the business jets to be a little better. Though I have to say the aftermarket business jet bookings weren't great in the quarter, that's in the aftermarket. The OEM bookings were quite good.

Thank you. The next question is from the line of Michael Ciarmoli at KeyBanc Capital. Go ahead please.

Just on the whole aftermarket trend here, last quarter I think you kind of characterized it we're guiding to mid-to high-single-digit may be hopeful for some upside. Now, you kind of maintain that forecast. Did you know there is may be more of a bias towards from downside there? I mean can you kind of give us a sense of what you're seeing quarter-to-date, I mean just how do we get comfortable? And without having that visibility into what you were just talking about kind of deferral unwinding there, how do we see this acceleration in the remaining quarters here to get --

I mean I've seen a pickup in demand. Michael, as you know, I'm not -- if you take the numbers this quarter and take the numbers for the year and divide by three you got to see a pickup in demand. Historically, that's happened there for a period like this. You've ended up with some pretty high quarters. If the pickup doesn't happen then we won't meet the number. Now, that doesn't mean we won't meet our revenue or EPS number some other way. But --

Got it.

But that segment we wouldn't meet it.

Got it. And then you're appropriately conservative and cautious I guess on commercial transport OE, but you don't sound that cautious on business jet OE. And I'm wondering it seems like there is more reasons for concern there given what we're seeing in emerging economies. And I know what we've heard from Gulfstream and Textron. But it seems like there is more risk at that production definitively, I mean are you guys hedging bizjet OE in a similar manner to a commercial transport?

Well, your assumption going into the year wasn't much growth there. Now, it wasn't a drop like we saw in the first quarter. So we're trending the same place as we were going into the year that that's sort of a flattish market.

Okay.

So -- and it's not running at a real high level. Every year everybody thinks it's going to pick up, but it hasn't. Now, the underlying takeoff and landings aren't great, but they're not drastically down.

Yes. Okay. And then just last one for me. The revenue change, was that entirely Breeze, was there any other moving part there I mean 777 rate being cut?

Almost entirely Breeze, almost entirely. Anything else was puts and takes.

Got it.

If some unit went up, some else was down to offset it. It's almost dollar for dollar Breeze.

Thank you. And you now have another question from a line of Noah Poponak at Goldman Sachs. Go ahead please.

Terry, on issuing debt where you mentioned you think you would be 50 basis points higher tomorrow than where your active wheels are. You have a number of products and they all have different coupons and have the different changes in yield and there is new issue discount and I don't know if you're including that or not. Could you maybe also frame that as one of the products you issued in the last year you got of coupon of X and if you issued of the same or a very similar product tomorrow you'd have a coupon of Y?

Yes, Noah. I can cover that. So the last product -- the last thing we did was last, I think it was April or May of 2015. I think the coupon on that was about 6.5%. Just kind of again stepping back from standpoint of the market, the high yield market there is a lot of volatility in there and it is primarily in the oil and gas area. There is a lot of demand for quality paper that we have. We talk to our banks on several occasions and we stay close to them and there will be a lot of interest in us issuing more paper if we had to. We don’t see the need at this point in time. But ultimately, if we were to go to market today in today’s conditions, we will probably looking at something in 7.25%, 7.50% range as a coupon rate for --

That is for step up the leverage, steps up the leverage not to replace it.

Right, just to step up the leverage for new issuance of bonds on secured bonds at this point in time.

Great, that is very helpful. On the business jet discussion, Nick, you’re saying bookings were ahead of shipments, can you maybe go a little more specific on where that was because that is surprising unless I guess possibly just a function of the denominator there being there?

Well I think the group of shipments are so low, Noah.

Okay.

I don’t think it’s just – it’s not that the bookings are so off but shipments are disproportionately, down that is the point I was trying to make.

Okay. And then Breeze, Breeze has a pretty healthy mix of military. Are you actively looking to acquire more in military just given where we are in the respective cycles?

No, we’re not and we’re not avoiding it, it’s just we have the sort of the same sort all the time proprietary aerospace significant aftermarket comping. What we pay is dependent on what we think of the outlook of it but we are neither avoiding nor are we seeking military disproportionately.

Okay.

We’re just going to look at the platforms, look at our forecast, look at our view of it and price it accordingly.

Okay, it makes sense. Final one, Terry, the R&D tax credit potential further incremental step you mentioned anything you can say on rough order of magnitude and timing related to that?

No, we’re too early into the study period right now, I think there is some opportunity but we ought to do our due diligence, we're decentralized, we have 31, 32 business units. We’re going to have to go, do our homework there and see what qualifies and once we have that data and we’ll come up and change our effective tax rate for you guys.

Thank you. We now have our next question from Gautam Khanna. Go ahead please.

Yes, thanks again. I just wondered could you give us any color on how the aftermarket expanded since December 31.

You say since reception at the end of the quarter?

Yes.

I don’t – we just I don’t want to comment on sort of short term times like that. I think we’ll wait for the quarter and talk about it when we have the data. I don’t want to start anecdotally comment it.

I just wonder do you think any part of the softness could have been year-end inventory management and many of your MRO and airline customers as opposed to.

It surely could be, it surely could be but I don’t want to – I don’t want to hang in on anything specific unless I have the data pretty clearly. But it’s not unusual that we see inventory adjustments at the end of the year people want to kind of polish things up.

Okay. And in terms of how your catalog pricing changes, is the changed price kind of ratably throughout the year or is there a big price hike that is coming to effect?

It’s all over the map; it is all over the map for the businesses. Some have a catalog they put out once a year but it’s not necessarily on a calendar cycle, some don’t have a catalog, they price a lot of it on demand, so there is not a one point of time we would certainly step up.

Since January was not significant base from…

I don’t think so. I mean we may answer is I think it’s pretty ratable through the year maybe a little weighted towards the prices going in the first half of the year but then have to work through the backlog a little bit.

Okay. And just one last one, are you seeing any differences between the products we sell through distribution that's out there in Aviole [ph] versus the direct sales?

No.

Is that different aftermarket trend?

No.

Thank you very much. As there are no further questions for you now gentlemen, so I would now like to turn the call back to Liza Sabol for closing remarks.

Thank you all for participating on this morning’s call and please look for 10-Q that we expect to file tomorrow. Thank you.