Good day, ladies and gentlemen, and welcome to the Third Quarter 2018 TransDigm Group Earnings Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this call will be recorded. I would now like to introduce your host for today's conference, Ms. Liza Sabol, Director of Investor Relations. You may begin.

Thank you, and welcome to TransDigm's fiscal 2018 third quarter earnings conference call. Presenting on the call this morning are TransDigm's Executive Chairman, Nick Howley; President and Chief Executive Officer, Kevin Stein; and Senior Vice President of Finance, Jim Skulina. A replay of today's broadcast will be available for the next two weeks and replay information is contained in this morning's press release and on our website at transdigm.com. It should also be noted that our Form 10-Q will be filed tomorrow and will also be found on our website. Before we begin, we'd like to remind you that the 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 found through the Investors section of our website or at sec.gov. We'd 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, EBITDA As Defined, adjusted net income and adjusted earnings per share to those measures. I will now turn the call over to Nick.

Good morning, and thanks to everybody for calling in today. Today I'll start off with a brief overview of our recent organization announcements, some summary and comments on our consistent strategy, a quick overview summary of the third quarter and fiscal year 2018. Kevin will review the business performance for the quarter and the year; and Jim will then run through the financials. As you may have seen, we recently announced three significant organization changes. Mike Lisman has been elected by the board to be our new Chief Financial Officer. Mike brings a very attractive set of skills and experience to the new job. His experience in private equity and investment banking provides a key element to our new management team. Mike has worked with us for about three years in both operations and M&A roles. He knows the company and culture well. Interestingly, Mike has a degree in aerospace engineering. So like Kevin, Bernie, Jorge, and I can help with engineering work in a pinch. That's a joke by the way.

Yeah. I hope so.

Not that he has a degree, but he can help. Mike is a good cultural fit and a great candidate. Kevin and I both believe he's going to do a fine job. Bernie Iversen will continue to report to me and remains Executive Vice President of Merger & Acquisition. Jim Skulina has agreed to continue as Senior Vice President of Finance and Chief Accounting Officer for a six to 12-month period to assist Mike in the transition. Jorge Valladares has been elected by the Board of Directors as the Chief Operating Officer of our Power Systems segment. Jorge came to TransDigm almost right out of college and has been with the company in a broad range of operating positions for about 20 years. Jorge is a proven executive and an outstanding cultural fit. Kevin will expand on this a little. Now to reiterate, we believe our business model is unique in the industry both in its consistency and its ability to create intrinsic shareholder value through all phases of the cycle. To summarize why we believe that, about 90% of our net sales are generated by proprietary products. Over three-quarters of our net sales come from products for which we believe we are the sole source provider. Most of our EBITDA comes from aftermarket sales. Aftermarket revenues have historically produced a higher gross margin and have provided relative stability in the downturns. Our long-standing goal is to give our shareholders private equity-like returns with the liquidity of a public market. To do this, we have to stay focused on both the details of value creation as well as careful allocation of our capital. To do that, we follow a consistent long-term strategy. We own and operate proprietary aerospace businesses with significant aftermarket content. Second, we have a simple well-proven value-based…

Thanks, Nick, and thanks for joining the call this morning. As you've seen, we had a strong third quarter. Jim will provide more details on the financials, but our third quarter and year-to-date operations in revenue and EBITDA As Defined were up nicely over last year and ran a little ahead of our expectations. Q3 GAAP revenues were up 9% versus prior-year Q3 and up 7% versus prior year-to-date. EBITDA As Defined margin ran close to 50% of revenue in both periods. Now let's review our revenues by market category. For the remainder of the call, I will provide some commentary on a pro forma basis compared to the prior year period in 2017. That is assuming we own the same mix of businesses in both periods. Please note, this analysis excludes the recent acquisitions of Kirkhill and Skandia. In the commercial markets, which makes up close to 70% of our revenue, we will split our discussion into OEM and aftermarket. In our commercial OEM market, Q3 revenues increased approximately 1% when compared with Q3 of fiscal year 2017. Commercial transport OEM revenues, which make up the majority of our commercial OEM business, were down slightly in Q3 when compared to the prior year period. As was the case last quarter, the vast majority of this (00:10:39) softness is attributed to weakness in the wide-body market and the impact these reductions or delays have on the extended supply chain. As was the case in previous quarters, commercial transport OEM sales can fluctuate from time to time, but at its core, our shipset content remains robust, so any softness is simply timing related. Business jet and helicopter OEM revenues make up about 15% of our commercial OEM revenues. In total, year-to-date revenues in this market grew in the low-teens percentage range…

Thank you, Kevin. I will now review the third quarter financial results. Third quarter net sales were $981 million, up $83 million or approximately 9% greater than the prior year. Organic sales were up 4.4%. The balance of the sales increase was from our recent acquisitions, primarily Kirkhill and Extant. Our third quarter gross profit was $570 million, an increase of approximately 10%. Our reported gross profit of 58.1% was modestly higher than the prior year margin of 57.9%. This was due to several puts and takes. First, dilutive impact of the acquisition mix and the acquisition-related costs decreased gross profit percent by just under 2 margin points. This was offset by the margin expansion in our existing businesses due to the strength of our proprietary products as well as a favorable product mix. Our selling and administrative expenses were 11.5% of sales for the current quarter compared to 12% in the prior year. Interest expense increased by approximately $15 million, up 10% versus the prior-year quarter. This is a result of an increase in the weighted average total debt of $12.4 billion in the current quarter versus $11.2 billion in the prior year. During the quarter, we were very busy in the capital markets. We successfully raised $1.2 billion of incremental debt, including $500 million of new senior subordinated notes and $700 million in additional tranche E term loans. The proceeds were used to replenish cash used to fund the purchase price of Kirkhill and Extant, with the remainder of the net proceeds to be used for general corporate purposes, which include future acquisitions, dividends, or share repurchases. In addition, we repriced $5.1 billion of existing term loans to lower rates from LIBOR plus 2.75% to LIBOR plus 2.5%. We extended the term of our tranche E term loans…

Thank you. We ask that you limit your questions to two per person and then please reinsert yourself into the queue to allow everyone an opportunity to ask a question. Operator, we are ready to open the lines.

Thank you. Our first question comes from Robert Stinegarn (sic) [Robert Spingarn] (00:26:18) with Credit Suisse. Your line is open. Robert M. Spingarn - Credit Suisse Securities (USA) LLC: A couple things. First, on the organic sales, I think you said those were 4% plus growth in the quarter. But assuming fair amount of that is pricing, is it fair to conclude that volumes were flattish overall?

I think so. I think it's fair to assume that the volumes were flattish overall. Robert M. Spingarn - Credit Suisse Securities (USA) LLC: Okay. And then, Kevin, following up on that, if volumes are flattish, and reconciling to this wide-body pressure that you showed in your results and you've talked about, how is that possible with 87 and 350 (00:27:00) ramping? The OE also includes ramping narrow-body. I just – struggling to reconcile where the pressure's coming from. Is it timing? Is it 777?

It's timing. It's 777. It's some other program delays. I think it's across the board. We've gone through and looked at all the places that we've missed versus expectations, and everything correlates back to A380 declines and inventory adjustments, 777 declines and adjustments and on it goes. The encouraging piece for us is that bookings in the commercial transport OEM are starting to improve a little bit. We saw some nice rebound in bookings in Q3 there. So I think this is just a timing-related function that our shipset content hasn't changed on these, and it just has to come through the system. Robert M. Spingarn - Credit Suisse Securities (USA) LLC: And just to follow up, Kevin, is another element of this where you get pricing on the aftermarket, you're getting the opposite on the OE? So, to the extent that we see 10% type increases in narrow-bodies and on a couple of those wide-body lines something similar, you're actually going the other way on pricing?

Yeah, we don't comment on the individual pieces of price. So I don't want to get into the slicing and dicing of that. But again, I think we're looking forward and saying this should be a better story going forward due to the bookings. Robert M. Spingarn - Credit Suisse Securities (USA) LLC: Okay. Thank you very much.

Sure.

Thank you. And our next question comes from Robert Stallard with Vertical Research. Your line is open.

Good morning.

Good morning.

Nick or Kevin, first on the aftermarket. Strong result year-to-date, up 11%. How much of that do you think is being influenced by the unusually low rate of old aircraft retirement and the lack of surplus parts that are out there at the moment?

It's hard for me to comment. It'd just be speculation, but I'm positive it doesn't hurt our case to have less retirements out there. But I don't know the exact correlation.

I think I might just add, on the surplus stuff, we did a fair amount of work on that whenever it was, Kevin, a year or two ago...

Yeah, two years ago.

...and talked about it. The amount of surplus sold for our product is very small. So, hard to believe that has any significant impact.

Right. And secondly, on the quarter-end cash balance, unusually high for TransDigm. Does that reflect some opportunistic timing in terms of taking out the debt here? Or was it something else going on?

Rob, I'm not quite sure I follow your question. We borrowed, as you know, a little more than – we borrowed and essentially we replenished what we spent for the $600 million of acquisition, reloaded that again. We'll do what we normally do. If we don't buy anything, we'll have a couple billion dollars at the end of the year. We'll see where things stand. And if we don't see a good use for it, we'd probably pay something out the beginning of next year.

Okay. So, it's just sort of normal practice, then, is the way to think of that?

Yeah, right.

Okay.

And we'll see what comes along. I mean, we're fairly busy. We see opportunity. We'll see how things unwind here. As I think you know, we don't sit on money too long.

Yeah, exactly. All right. Thanks for everything.

Thank you. And our next question comes from Noah Poponak with Goldman Sachs. Your line is open. Noah Poponak - Goldman Sachs & Co. LLC: Nick, just following up on that, in your prepared remarks, you actually specifically said that you'll make some decisions on capital allocation during the first quarter of next fiscal year.

Yeah. Noah Poponak - Goldman Sachs & Co. LLC: So should we read that to mean you will either be making an acquisition or announcing a special dividend by the end of 1Q 2019 (00:31:35)?

Yeah, I wouldn't – no, I wouldn't want to get nailed down that much. I'd say we'd make a decision. The decision could be we'll make a decision next quarter, but as you know, if we don't see something moving along. I mean, that's the best I can tell you, is if we don't see something moving along, we don't sit on the money very long. If we have $2 billion and significant capacity, and we don't see some decent deals, we do something. Noah Poponak - Goldman Sachs & Co. LLC: Okay. Yeah, I wasn't trying to nail you down.

But I hate to back into a corner on that (00:32:08). Noah Poponak - Goldman Sachs & Co. LLC: Yeah, and I didn't mean to attempt to back you into a corner. I actually was just a little surprised by the specificity of the comments in your prepared remarks.

Yeah. Noah Poponak - Goldman Sachs & Co. LLC: But understood.

Yeah, and that may be a good point. What I really was trying to say is we probably aren't going to do anything for the next 60 days or so. Noah Poponak - Goldman Sachs & Co. LLC: Got you.

I maybe oversold the point. Noah Poponak - Goldman Sachs & Co. LLC: Got it. Glad to clarify that. And then just one other. On the defense business, if I strip out what I believe you do roughly in price in the business, it looks like units were kind of flattish in the quarter and has maybe been flattish a few quarters in a row. And I was just kind of reading back through your order commentary on the end market, and it's now been several quarters in a row where the order commentary has been quite robust. DoD Treasury outlays were up well into the double digits in the quarter. Maybe you could parse out a little bit more? I mean, I know there can be long lead times in the business. You mentioned the A400M. But, perhaps, you could give us a little more on why it looks like you are trailing the market a little bit there right now.

Yeah, I will comment on what I see in our business. The defense aftermarket is strong in sales and in bookings. Defense OEM, a little less so. The defense business bookings and including shipments can be very lumpy. You can be impacted by delays in contracts and budgets. There's a number of factors that go into this. So it's always difficult to predict when these bookings will come out as sales. Clearly, this is a good position to be in that we're building up some backlog specifically in the aftermarket side but – and on the OEM side of defense. This will eventually come out. It just takes time. And it's why we don't emphasize the defense side as much, because it's difficult to predict when this will all come out as shipments. There are many delays and movements in when things can be shipped even though there are bookings associated with it. So I don't know about trailing market or not. For our shipset of business, this continues to look robust and encouraging as we look into the future. Noah Poponak - Goldman Sachs & Co. LLC: So, Kevin, do you feel like you have a reasonably high probability of the rate of organic growth in that segment accelerating for you next year versus this year?

I think, yes. I think, we should expect that given – I mean, all of these bookings have to come out sometime. Noah Poponak - Goldman Sachs & Co. LLC: Yeah.

I am as curious about it as you are as to when all this will come out. We do look at this regularly, and it's just difficult to predict. But I would anticipate things will get better here. Noah Poponak - Goldman Sachs & Co. LLC: Got it.

And you'll have a forecast when you go through next year's guidance.

That's right. Next quarter, we'll give you some guidance. Noah Poponak - Goldman Sachs & Co. LLC: Yeah, that's why I asked sort of from a probability perspective. But I appreciate the comments, guys. Thanks so much.

I understand why you asked for sure. Noah Poponak - Goldman Sachs & Co. LLC: Thank you.

Thank you. Our next question comes from Gautam Khanna with Cowen and Company. Your line is open.

I was hoping, Kevin, maybe you could comment on aftermarket trends more recently because we've heard of some capacity cuts being planned.

You're breaking up. I can't really hear the question. Can you repeat that?

Sure. Can you hear me now?

You're still fading in and out.

Oh, jeez. Okay. I'll try one last time. Hopefully it works. I'm wondering if you had any comments on trends in aftermarket bookings late in the quarter and early in this quarter, just given some of the capacity cuts announced by U.S. airlines.

I believe you're asking about have we seen a difference in aftermarket bookings or activity because of slowdowns at the end of the quarter beginning of this quarter. Is that your question?

Yes.

I don't believe we've seen any of that, but I'm not sure. I look at it granularly enough on the week-to-week basis to have seen that. But there's nothing that has been highlighted that there has been any difference that I have seen in the aftermarket at the end of the quarter.

Thank you.

Sure.

Thank you. Our next question comes from Ronald Epstein with Bank of America Merrill Lynch. Your line is open.

Good morning, afternoon, guys.

Good morning.

Kevin, can you talk a little bit about Kirkhill and how that's going? And when you look out in the market for other opportunities, that one seems like it was like pretty low-hanging fruit. I mean, are there other opportunities? And maybe more specifically are there other opportunities from that same tree?

Yeah, I don't know. I'll let Nick comment on whether there's other opportunities from the tree. I think Kirkhill has been a good acquisition for TransDigm, and we believe it will deliver the private equity-like returns we're looking for. So we're confident in that. I would tell you that it's still taking some time to understand some of the market segmentation and to determine where some of the opportunities are to improve. I will tell you that so far so good. I'll give you more of an update next quarter as we have more to update. We have only owned the business for a short period of time; really took control at the beginning of June, if I remember right. So there's a limit on how much we can comment so far. There's still a lot of the integration ongoing. But everything we've seen, this is encouraging, and we would certainly entertain other opportunities like that.

And maybe as a follow-on question from – a couple of other people tried to ask this different ways, but I'll just be more direct. I think investors are trying to get their head around, we're seeing the commercial aftermarket business broadly surging for a lot of different companies. Why isn't it surging for you guys?

It's not. So, we're up double-digits year-to-date in aftermarket. Hard for me to comment on that, defend that, but our total commercial aerospace aftermarket is up 11% year-to-date.

Right.

And I think our POS so far year-to-date, we're seeing modest improvements over what we've seen in prior quarters on POS. So it's running above the 11% rate that I discussed. I think we're seeing it.

Right.

I'm not sure that we're not.

Okay. Great. Thank you.

Yeah.

Thank you. Our next question comes from with Seth Seifman with JPMorgan. Your line is open.

Kevin, when you mentioned some of the pressure that you're seeing, you mentioned both wide-body production rate reductions and delays as pressuring OE sales. Do the delays refer solely to the wide-body programs as well, or is that a broader phenomenon?

It refers to wide-bodies. We've seen some selective slowdowns in narrow-bodies here and there, but nothing to really comment on. The main driver is wide-body.

Okay.

And it's true across all – really all wide-body platforms. Yeah.

Okay. And then maybe just following up a little bit on Ron's question, it seems like the guidance implies kind of a 6%-ish growth number for aftermarket in the fourth quarter. And so when you look at what makes that up, kind of where is the deceleration coming from in terms of the double-digit growth we saw in the first half to...

Yes.

...the kind of 6% to 8% for the second half?

I understand the question, where you're coming from on that, and maybe we're being too conservative in this. But my goal is to not get out ahead of ourselves. We told everyone last quarter that we thought things were running a little too hot, and we were a little bit lower this last quarter. I don't know where it's going to come in. The order book continues to look strong. This is just our forecast from what we see and our desire to be a little conservative in this market segment.

Great. Thanks very much.

Sure.

Thank you. Our next question comes from David Strauss with Barclays. Your line is open.

Thanks. Just following-up there on the aftermarket. Obviously, the comp was more difficult here year-over-year in the third quarter. Sequentially, Kevin, was the aftermarket up, flat, or down in the quarter?

Was it up, flat, or down? I'm looking at that. Aftermarket was up a little. A little.

Got it. Okay. And then following up on Seth's question, so on the narrow-body seg, are you seeing anything related to kind of the ramp-up issues that both Airbus and Boeing seem to be having on narrow-bodies in general but also in particular on the new narrow-body side?

Not really. I would say that I'm not hearing any trends or concerns across the company that any kind of engine delays or issues in the extended supply chain are causing us any problems that I can see on narrow-bodies. Yeah, so nothing that we've seen.

Okay. And last one for me, your margin performance in the quarter was really good. I think you said adjusted EBITDA margins from the base business were up 50 bps. Was that just mix, or was there anything kind of exceptional in that number?

I think it's mix and operational performance. It's ongoing what we do day in and day out to drive value, drive our performance in our business productivity and the like. So I can't point to any one thing, which is good. It goes across all of our businesses in the organization.

Okay. Thanks, guys.

Sure.

Thank you. Our next question comes from Peter Arment with Baird. Your line is open. Peter J. Arment - Robert W. Baird & Co., Inc.: Yeah, thanks. Good morning, Nick, Kevin. Congratulations, Mike. Hey, Kevin, I guess, this is just more of a clarification because we talked a lot about the OEM. So just circling back to, I think, Rob's original question, so it sounds like the takeaway is this is all timing related and then ultimately, I know you're not giving 2019 guidance, but you would expect commercial OEM to be up when we're thinking about these rate increases next year?

We'll provide next year's guidance next quarter. I haven't seen it all come in. But yeah, this is a wide-body phenomenon. Again, we haven't lost any shipset content. This is 100% timing related and we'll give you some more guidance next quarter for the following year. But I see this as a timing related phenomenon. Peter J. Arment - Robert W. Baird & Co., Inc.: Okay. And then just as a follow-up, just, Nick, just a bigger picture question. I guess, defense is now 35% of the mix, and I know M&A is very deal-specific and has to meet your criteria. But is there a natural cap on how big you would let the defense exposure get if you saw the right deals?

Yeah, I mean, we don't look at deals based on whether defense or commercial. We look at them whether they meet our proprietary aerospace significant aftermarket, our criteria and whether we get the return. We have, obviously, seen more attractive defense stuff the last year or so than we did in the past, not surprisingly. I don't know that we have a hard limit. We sure wouldn't want – we don't want to turn this into a defense company. So I mean, I think we kind of like the range we're in. But whether it's 35% or 37% or 32%, I don't know, makes a whole lot of difference. Peter J. Arment - Robert W. Baird & Co., Inc.: Okay. Appreciate the color. Thanks, Nick.

Thank you. Our next question comes from Michael Ciarmoli with SunTrust. Your line is open.

(00:46:04) in for Michael. Just to go on to the A220 Airbus, the CSeries, Airbus commenting that they're asking for 20% price concessions from current suppliers. Any impact for you guys there?

I've read that as well, but I have not heard of any requests or changes for us. The CSeries is a great program. We hope that it's a very successful platform. But I have not heard of any concrete requests or changes for us.

Okay. Thanks. On the aftermarket interior side, you commented that you've seen some color on recovery there. What's driving it? I mean, is it interior retrofit activity (00:46:54), any impacts on the Pexco and Schneller product lines for you?

Well, the interiors business is really Schneller and Pexco largely. So as we look at that, we've seen a slowdown in some of the OEM programs on the interior side as they are doing fleet refurbishments, rebranding campaigns and the like, as well as some of those refurbishments. But what we are seeing pick up quite dramatically is the repairs and upkeep of the interiors that were put in over the last couple years. So our interiors business has, from the aftermarket side, has recovered nicely in the last quarter and having a decent year. I think really ahead of our expectations on the interior side on the aftermarket.

Okay. Got it. Thank you. Actually one more if I may, on the supply chain side, I mean, we've heard a number of industry participants commenting that they're seeing some constraints or, perhaps, bottlenecks. Any impact for you guys, perhaps, looking at raw materials, maybe even components? Any impact, any color there that we can add?

No. I don't have any color that concerns. We monitor our on-time delivery, our days delinquent, how we're doing in servicing our customers across the business, and we're not seeing any dramatic dips across the company in on-time delivery performance. We're not seeing problems sourcing raw materials. But you have to also understand where we are in the supply chain. Maybe simpler at the beginning, and so maybe not an issue for us. So I'm not hearing any real complaints on capacity or ability to produce right now at the rates that we have.

I think it's safe to say, Kevin, we're not having to stretch out our lead times significantly...

We are not. We're not doing that.

...which you think you'd see if that was happening.

Yeah. And you might also see your on-time delivery dip. And you do see that once in a while in a business that has a surge, but everyone recovers quickly. I haven't seen any problem here.

Thank you for the additional color, guys.

Sure.

Thank you. Our next question comes from Hunter Keay with Wolfe Research. Your line is open.

Hi. Thank you. Good morning.

Good morning.

Good morning. Hey, Nick, what kind of a correlation have you seen between fuel prices and commercial aftermarket spend as in the level of correlation or maybe a lag? And how are you planning for higher fuel prices as you think about how your customers budget their own discretionary spend for 2019?

I don't know how to correlate it. And I don't know that we've seen a great correlation. Obviously, when your customer is not as profitable, you'd prefer your customer will be more profitable. But I don't know that we've seen any particular correlation, and I don't know how we really plan for it. I guess, that's probably like all I know to say about it.

Yeah. I mean, we react to the...

Yeah.

...orders that come in and deal with it. In terms of predicting that, it's difficult. There doesn't seem to be a lot of correlations possible there.

And we haven't seen any there.

Right. Yeah, I guess, I was just wondering if you were in regular contact with your customers around their own planning process, so you're not sort of caught by surprise because it can be a lumpy business.

We are in constant contact with our customers, but we're not talking about their necessarily planning needs long-term on this and how fuel prices may impact them. But we certainly are talking about what they need, what their issues are, and how we can help them.

Okay.

But that hasn't been an overwhelming point of discussion.

Okay. Thanks. And then – and maybe a little bit more on that. Could you tell us a little bit about discretionary spend to the extent that you can? Maybe how much of your sales come through, like, multi-quarter, under the umbrella of this all being discretionary, like multi-quarter improvement projects versus sort of like one-off things that may kind of be lumpy and come in through sort of like master purchase agreements or something that you may have with a customer?

I don't know how to answer that question. We don't look at our data that way. So – and I don't want to speculate or guess on that. So I don't really have a good answer for you.

But I think we can say the vast majority of our aftermarket is not lumpy special project business. It's stuff they order due to activity.

And anything – one business is lumpy one year, but someone else may be lumpy the next. So it has a tendency to average out. But beyond that, I don't know how to answer that question.

Okay. Thank you.

Thank you. Our next question comes from Sheila Kahyaoglu with Jefferies. Your line is open.

Thank you.

Good morning.

Morning. EBITDA grew 9% in the quarter in line with the top line. How do we think about timing of EBITDA acceleration? And are there any material cost or mix headwinds or offsets with the Kirkhill we should be thinking about?

I don't know of any headwinds or issues that we have to think about right now. So, I continue to see us improving margins as we go forward in line with our guidance that we've provided. The value drivers continue to show the same level of engagement as always on price, productivity, and profitable new business. So I don't see any change.

Thanks, Kevin. And then just one more on aftermarket. Is this sort of a normalized high single-digit rate we should be thinking about now that interiors is picking up and freight is probably normalizing off the highs?

Can you repeat that question, Sheila? I missed a couple of words there.

Sorry. No, no, no. It's my fault. On commercial aftermarket, is the high single-digit growth rate what we should be thinking about on a normalized basis now that interiors is picking up off the bottom and freight is normalizing off of very high levels?

Yeah, Sheila, we'll give next year's guidance next year. There's a lot to think about in that as we unpack it and go forward. So, can I get back to you on that...

Sounds good.

...and give you some more concrete guidance on that as we go forward? Clearly, this isn't a bad situation as we go forward, but we need to unpack that and give you some exact numbers.

Thank you.

Yeah, now we've given – we gave – at the Investor Day, we've given some sense...

Yeah.

...of long-term growth kind of numbers...

Yeah.

...that make sense, and I don't know of any reason that they don't still make sense.

Yeah.

Makes sense. Thank you.

Sure.

Thank you. Our next question comes from Drew Lipke with Stephens. Your line is open.

Yeah, thank you for taking the question. I guess, can you remind us how much of your commercial aftermarket sales are engine related? And then just tied to that on the aftermarket settlement that CFM signed last week to allow the use of third-party PMA parts, how do you think this could change the aftermarket competitive landscape just in the engine piece of the aftermarket itself?

Well, we don't slice and dice the aftermarket by engine and non-engine sellers. I would tell you that although the engine side is important for us, it's not a driver for us. So, there are opportunities there, but I don't know how to think about it beyond that. And in terms of the settlement, I don't believe there will be any impact to us in our business going forward, as that segment isn't a huge segment for us.

Okay. And then...

Just naturally for our products.

Okay. And the better growth in aftermarket that you saw in the second quarter, I think you're up 15%. How much was tied to the distribution agreement that Adams Rite signed with Wincor (00:55:37)? How much was kind of a pull forward there?

There was some movement of distributors over the last several quarters for two businesses, specifically, but I wouldn't say that that has a material impact on our aftermarket. It's in those numbers, but I don't think it has a material impact.

All right. Thanks, guys.

Thank you. Our next question comes from Carter Copeland with Melius. Your line is open.

This is the last good morning you're going to get, all right? You got three minutes left, so.

Good morning.

Good morning, gents. Wondered if you could give us just a clarification on one of those earlier answers, Kevin, on the volumes. If you split that out and said – I think you would imply that OEM volumes were down modestly and aftermarket volumes were up modestly if we correct for price. Maybe a little bit better than that on the aftermarket depending on military volumes. But just wanted that clarification, if you could.

Yeah, I don't disagree with your clarification.

Okay. Good. And then just another one on – this kind of gets to Hunter's question a little bit. When you look at buying behavior among the customer set globally in the aftermarket, are there any notable differences in behavior as you take a step around the world and look at various regions? Or are we seeing relatively coordinated activity among the customer set?

I would say that each region has its own idiosyncrasies. So they have different practices and – but it's still directionally accurate that the procedures, processes, the way people go to market, their ordering practices, I haven't seen any changes. Yes, there are some subtle differences when you go, like I said, region to region but I haven't seen any differences in anyone's approach to the market; their buying practices, their inventories, stocking, whether it's airlines or distribution. I really haven't seen any market changes.

Yeah, I'm just trying to understand, you said directionally, so when you look at bookings trends in Asia versus Europe versus U.S. versus LatAm or whatever, take your pick, directionally they're all similar is what you're saying? Or not?

I would say they're all directionally similar and dependent on the air fleet that's present in the region, so. But I think they're all directionally equal. I'm not seeing any – if your question is, are they – is one region more PMA activity than another and you don't see the same growth, we don't see those kinds of changes region-to-region. It's amazingly robust around the world and follows pretty similar practices.

Okay.

I guess, it's safe to say in the last three to six, you don't see any discontinuity, I would say.

I haven't seen anything like that.

Discontinuity, whatever the practice was it is.

Yeah, yeah, nothing has really changed.

Yeah.

Do I – am I interested in Asia and inventory practices there and the like? Sure. But I really haven't seen anything manifest itself differently.

Okay. Thanks, guys.

Yeah, sure.

Thank you. And I'm showing no further questions at this time. I'd like to turn the call back to Liza Sabol for any closing remarks.

Thank you, again, for calling in to listen this morning, and please look for our 10-Q, which will be filed tomorrow.