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2016

UFCS

UFCS #Thanks, <UNK>. Good morning, everyone and welcome to UFG insurance first quarter 2016 conference call. This morning, we reported another quarter with solid performance. First quarter 2016 is off to a good start with operating income of $0.83 per share and a GAAP combined ratio of 92.3%. This compares with operating income of $0.92 per share and a GAAP combined ratio of 89.7% in the first quarter of 2015. Also in the first quarter of 2016, our book value per share increased to $36.69 from $34.94 at December 31, 2015, and our return on equity was 9.9%. In the property and casualty segment, net premiums earned increased 10% and is the result of organic growth and geographic expansion. Rate increases on commercial lines were flat to slightly higher on renewal business and rate increases on personal lines were in the mid-single digits, primarily in our homeowners and personal auto lines of business. I'll let <UNK> to address more specifics with respect to P&C market conditions and performance in a few moments. Catastrophe losses in the first quarter of 2016 at 2 percentage points of the combined ratio were slightly better than we would normally expect in the first quarter of any given year. Our historical average in the first quarter is 2.4 percentage points to the combined ratio. Our expectations for catastrophe losses in any given year is 6 percentage points to the combined ratio was second and third quarters being the most significant quarters with storms and catastrophe events in geographic areas where we conduct much of our business due to spring and summer convective storms and hurricanes. The first quarter of 2016 expense ratio was higher by 1.7 percentage points compared to the first quarter of 2015. The increase in the expense ratio was due to several non-reoccurring employee-related expenses and accruals along with an increase in deferred acquisition costs, amortization from continued organic growth, both partially offset by a decrease in the post-retirement benefit expenses. Strategically, our approach in 2016 remains unchanged from year-end. We are focusing on executing our initiatives, which include expanding our geographic footprint and the agency plant and penetration, growing our specialty business, leveraging expansion of our product portfolio while maintaining true to our core underwriting discipline in a flat to diminishing rate environment and growing our book of business profitably. We are also pursuing additional opportunities in growing small business products, including expanding our service center Moving onto our life segment; for the first quarter we reported net income of $400,000 or $0.02 per diluted share as compared to $600,000 or $0.02 per diluted share for the first quarter in 2015. Sales of single premium whole life policies remained strong this quarter as we continue to focus on executing our strategy of selling traditional life products, and expanding geographically. Net premiums earned increased 62% in the first quarter of 2016 as compared to the first quarter of 2015. Deferred annuity deposits decreased 38% in the first quarter of 2016 as compared to the same period of 2015. We continue to execute our strategy to maintain profitability rather than market share as spreads increased 32 basis points as compared to the same period of 2015. With that, I'll turn the discussion over to <UNK> <UNK>, our Chief Operating Officer. Thanks, <UNK> and good morning. For the first quarter of 2016, we reported consolidated net income of $22.4 million or $0.88 per diluted share compared to $23.7 million or $0.94 per diluted share in the first quarter of 2015, representing a decrease of $1.3 million and $0.06 per diluted share. Our shareholders' equity increased 6% to $929 million at March 31, 2016 from $879 million at December 31, 2015. Book value increased to $36.69, an increase of the $1.75 from $34.94 at December 31, 2015. The increases in shareholders' equity and book value are primarily due to net income of $22.4 million and an increase in unrealized investment gains, which increased $27.4 million to $155.8 million at March 31, 2016. Return on equity was 9.9% in the first quarter of 2016 as compared to 11.4% in the first quarter of 2015. Further adjusting ROE to exclude the impact of unrealized gains, adjusted ROE was 11.8% in the first quarter of 2016 as compared to 14% in the first quarter of 2015. The decrease in ROE as compared to same quarter last year was primarily due to a combination of decreases in net income and increases in shareholder equity. As <UNK> mentioned, the combined ratio in the first quarter 2016 was 92.3% as compared to 89.7% in the same period of 2015. Removing the impact of catastrophes at 2 percentage points for 2016 and 0.1 percentage points for 2015 along with removing the impact of favorable reserve development of 10.9 percentage points for 2016 an 8.4 percentage points for 2015, the quarterly loss ratio would be 69.4% versus 67.9%, resulting in a quarter-over-quarter increase of 1.5 percentage points. We attribute this increase in the loss ratio to an increase in claim frequency in our commercial auto and commercial property lines business. Commercial property line was impacted by weather-related activity in our Gulf Coast region and in particular, as we have discussed earlier, the State of Texas. Losses and loss settlement expenses increased by $15.7 million or 12.4% during the first quarter of 2016 compared to the first quarter of 2015. As has been historically consistent reserving practice for UFG, we're conservative in setting initial reserves. As a result, we often have favorable reserve adjustments that vary from year-to-year across our book of business. Favorable reserve development for the first quarter of 2016 was $23.9 million compared to $16.7 million in the first quarter of 2015. The impact on net income for the quarter in 2016 was [$0.51] per share compared to $0.43 per share in 2015. Two lines combined, provided the majority of the favorable development. The largest single contributor was commercial liability with $19.8 million of favorable development, followed by workers' compensation with $5.4 million of favorable development. Both of these lines benefited from successful claims management and continued successful management of litigation expenses. The favorable development is also attributable to reductions in reserves for reported claims as well as reductions in required reserves for incurred, but not reported claims. Loss reserve reductions were more than sufficient to offset claim payments. These lines were slightly offset by $6.9 million of adverse development in the commercial fire line of business, which experienced an increase in paid claims. Following <UNK>'s comments, with respect to catastrophe, our book of business remains primarily in regions of the country that are susceptible to seasonal weather, including winter and spring convective storms. As a result, I caution our listeners that we may experience volatility in our results from quarter-to-quarter and year-to-year. On March 31, 2016, our total reserves remained relatively flat and within our actuarial estimate. Moving on to investments, consolidated net investment income was $22.2 million for the first quarter of 2016, which was a 9% decrease as compared to $24.4 million in first quarter of 2015. The decrease in net investment income for the quarter was primarily driven by the change in value of our investments and limited liability partnerships as compared to the same period in 2015 and the low interest rate environment. The impact of low investment yields continues to impact the majority of our investment portfolio, and we expect a continuation of low interest rates for the remainder of 2016. During the first quarter, we declared and paid a $0.22 per share cash dividend to stockholders of record on March 1, 2016. We have paid a quarterly dividend every quarter since March 1968. Under our share repurchase program, we may purchase United Fire common stock from time to time on the open market or through privately-negotiated transactions. The amount and timing of any purchases will be at management's discretion and will depend upon a number of factors, including the share price, general economic and market conditions and corporate and regulatory requirement. During the first quarter, we did not repurchase any shares of our common stock. We are authorized by the Board of Directors to purchase an additional 1,528,886 shares of common stock under our share repurchase program, which expires in August 2016. And with that, I'll open the line for questions. Operator. This is <UNK>, Paul. I think we've shown a pretty good track record of reserving. So what I always caution people (inaudible) our accident year loss ratio should be little bit redundant from the reserving that we've done. So, is it a good run rate. We expect that usually to come down a little bit as those claims end up being settled. So, that's ---+ if you look at our historic reserve redundancy maybe, if you are looking for a run rate, you might take that off of that accident year loss ratio that would be one way to look at it. We don't think we've changed anything in our reserving practices and it's a couple of quarters, but I would personally look at it as, we just had some good results. This is <UNK> again. I think it's pretty early to tell, but the second quarter is probably starting off for the most part the way we expect it. We don't ---+ more of our losses are going to come from the San Antonio area. Do I anticipate ---+ obviously if the April storms are a big deal, we would do a press release, I don't anticipate doing that. So it is too early to tell, but I don't think it's going to be anything material. In the Dallas area, we do write a more commercial lines than personal lines. That is a known hail area that we are very careful from ---+ on a personal line standpoint. We do write more personal lines in the San Antonio area. So, our guess is probably going to come more from the San Antonio areas, but our strategy in Texas is like many states, the key is to really use a lot of spread of risk and we try to manage our ---+ where we are write from San Antonio to Houston to Dallas and into West Texas. It's too early to tell, but we're not anticipating anything alarming.

2016_UFCS

2017

FRAN

FRAN #Thanks, Matt, and good morning, everyone. We appreciate your participation this morning in francesca's Third Quarter Fiscal Year 2017 Conference Call. Earlier this morning, we issued a press release outlining the financial and operating results for the third quarter ended October 28, 2017. Please note, the following discussion includes forward-looking statements and actual results may differ materially from these statements. Additional information concerning factors that could cause actual results to differ materially from projected results are contained in the company's filings with the Securities and Exchange Commission. As usual, a replay of today's conference call will be posted on our corporate website. We will begin today's call with comments from our president and CEO, Steve <UNK>. Steve. Thanks, Kelly. Good morning, everyone, and welcome to our third quarter earnings call. During our call today, Kelly and I will give you some color around the third quarter performance, along with our updated thinking on the fourth quarter and full year guidance. We'll also give you a quick update on our progress on our longer-term initiatives. As you saw from our announcement earlier this morning, Q3 was a challenging one for us. Comparable store sales for the quarter came in at negative 18%, primarily driven by the merchandising missteps we discussed in our last call, coupled with the impacts of hurricanes Harvey and Irma. Breaking them apart, we attribute 425 basis points for the decline to the impacts of the 2 hurricanes. While both storms combined to force 112 of our boutiques to be closed anywhere from 1 to 13 days, Harvey had a bigger impact on our business as it disrupted operations at our home office in D. C. including both the warehouse and e-commerce fulfillment and had a longer-lasting effect on our supply chain. One of our key merchandising disciplines is to have a constant flow of newness for our guests, and due to this disruption, we were not able to deliver against it for most of September and even into early October. Turning to the merchandising missteps that impacted our third quarter assortments, we took swift and decisive actions to correct the problems. These actions included: first, we made a change in our leadership in merchandising. Hopefully all of you have had a chance to read the press release we issued November 13 announcing that Ivy Spargo has joined the team as our new chief merchant. Ivy is a brand builder and a world-class leader with deep specialty store knowledge, including stints at The Gap, The Limited, Nike and Land's End. Ivy officially started last week and I'm confident that she's going to have an immediate and positive impact on the business. Second, we took aggressive markdown action in August and September to help accelerate selling on the product while we were still in the natural selling season. While this did help accelerate the rate of sale on these goods, it did also have an impact on our margins for the quarter, which I'll cover in a minute. Third, we worked to surgically cancel an order in the underperforming categories and items. While this was the right thing to do in the long term, it did have a short-term impact on sales in the quarter since it also impeded our ability to flow new merchandise. Finally, we worked hard to course correct and ensure that our Q4 assortments did not replicate the missteps from Q3. During our last call, we noted that approximately 75% of our Q4 on order had not been committed for. The team has worked diligently to course correct and ensure that our holiday receipts were focused on our traditional francesca's target consumer. The aggressive markdown activity led to our Q3 gross margin coming in at 39.6% which is approximately 870 basis points below last year. This decline in margin was the primary driver of our EPS for Q3 coming in at $0.01, which was also at the lower end of the guidance we gave for the quarter. The combination of all these actions did help us drive inventory down 15% on a per-boutique basis, which will help [fuel] ---+ position us to deliver fresh receipts to fuel the all-important holiday season. On a positive front, we believe that the timely actions we took in Q3 have started us moving in the right direction. While the business was consistently challenging throughout most of August and September, we've seen sales trends get progressively better as the new receipts started to land. While we don't think we're completely out of the woods, the selling we saw in the new merchandise receipts during the Black Friday and Cyber Week time periods was definitely encouraging. Also, we've gotten more ---+ as we've got more of the new product on the floor, we've seen sell-throughs in AUR start to stabilize. At this point, we expect comp sales for Q4 to run negative 9% to negative 12%. We also expect some merchandise margin improvement versus last year in the quarter as we don't plan to anniversary the large mark-out-of-stocks that we took last year at the year end. Based on this, we're forecasting EPS for Q4 to come in at $0.35 to $0.40 versus last year's $0.39. While we've had to deal with several short-term disruptions to the business, we've also been working hard to remain focused on the initiatives that will be critical for our success in the long term. 2017 has been a year of investment for us and we've spent the better part of the past year putting in place building blocks for our future. Some of these investments include: after the end of October, we completed the rollout of our new Oracle POS software to all boutiques. We see this new POS as foundational for our long-term success as it enables several much-needed functionalities. First, it is unlocking some much-needed omnichannel capabilities for us as we head into the holiday season. Rapidly growing our dot-com business remains our #1 long-term priority and we now have the ability for our guests to both buy online ship-to-boutique, and buy-in-boutique ship-to-home, with both functionalities going live over the past month. We see these 2 capabilities as key drivers of growth not only for Q4, but for the long term and we're very excited to have these new shopping options available for our guests. The new POS system is also key in helping us develop a deeper understanding of our guests' shopping habits by enabling phone number and e-mail capture. This enables us not only to build a more holistic view of our customer, but also is expanding our ability to reach out to these guests with our various marketing initiatives. We've enabled this data capture as we've rolled out the POS, and through the first 3 quarters of this year, we've grown our e-mail file by over 50%. As we turn the page to 2018, we have a second phase of functionality from our Oracle POS that we will roll out to the entire chain during the spring season including handheld scanners that will allow us to be much more efficient in taking markdowns, handling transfers, and many other labor-intensive tasks, and we will also automate our promotions going forward. This should speed up the checkout process and allow our boutique teams to spend more time helping our guests create the perfect outfit. A second key initiative for us is to build a deeper connection with our guests. One of the best ways we can do this is through establishing a loyalty program. As we mentioned in our last call, we've developed a pilot program that we've been running locally here in Houston over the past couple of months and we're pleased with the results so far. Our plan will be to expand this program nationwide next spring and to have the program rolled out to all markets as we head into the back-to-school selling season. Third, while we continue to see an opportunity to open up new boutiques, which we recognize the traffic patterns in brick-and-mortar stores can be challenging. To that end, we've refined our real estate strategy going forward with a focus on 3 initiatives: first, we will only open up new boutiques in A- and B-rated centers with a heavy emphasis on the As. We believe the landlords are committed to keeping these properties relevant and driving traffic into them by finding ways to make them more engaging and experiential. Within our existing fleet of boutiques, we're also looking to rationalize the store count. We will proactively drive our store count in C and D centers down from roughly 20% today to under 10% over the next 5 years. Lastly, as a company, we have not traditionally placed a heavy emphasis on updating our existing fleet of boutiques. You might remember that we refreshed 3 local Houston boutiques with our updated concept back in early May. We're pleased with the continued performance in these boutiques and based on the look we've seen there, we plan to embark on an aggressive remodel program starting in 2018. Our goal will be to update roughly 90 boutiques a year, while also using this concept in all of our new boutique openings. Finally, we continue to look for ways to improve our processes and reduce expense. As most of you know, one of the largest expenses we have is our staff out in the field. To help us better manage this going forward, we worked with an outside consulting firm to help build out a new store-level staffing tool. The team has worked hard to get this tool up and running and we're utilizing it to help optimize schedules for the entire chain as we head into holiday. We feel that this tool will be a huge help for us in 2018 and beyond. As I stated earlier, while we still have a lot of progress to be made, we feel that the work which we've been doing over the past several months is helping us see improvements in the business and should position us to start reclaiming our competitive moat and deliver on our fourth quarter guidance. On a longer-term basis, we have spent most of 2017 laying out a lot of foundational work for the future. We believe that we should start seeing a pay-off for this work in the fourth quarter with the majority of the benefit being felt in 2018 and beyond. We also believe that our differentiated positioning in the market continues to set us apart and will allow us to not only survive, but thrive in the fast-paced evolving retail marketplace. Now I'd like to turn it over to Kelly who will do a deeper dive on the financials. And after that, we'll open it up for questions. Kelly. Thanks, Steve. Today, I'll discuss our third quarter 2017 results as well as provide some color around our 2017 fourth quarter guidance and our revised full year guidance. Net sales for the third quarter decreased 11% to $105.8 million compared to $119.5 million last year, primarily due to an 18% decrease in comparable sales. We primarily attribute the decrease to a lower conversion rate as well as a decline in boutique traffic as our merchandise assortment did not resonate with our guests. As we discussed in our last call and as discussed by Steve during his prepared remarks, we deviated from our core merchandising philosophy and [core guests], which resulted in poor sales. In order to work through this inventory, we took heavy markdowns, which led to a decrease in the average unit rentals ---+ or average unit retail, but was partially offset by an increase in units per transaction. Hurricanes Harvey and Irma also adversely impacted comparable sales by approximately 425 basis points. As discussed, the impact of these hurricanes went beyond boutique closures. Our corporate offices, located in Houston, Texas were shut down for a few days and deliveries were interrupted for several weeks. As a result, we were not able to receive merchandise into our distribution center, fulfill e-commerce orders, or ship fresh merchandise to our boutiques. Because our operating model relies heavily on fresh merchandise, this disruption had a significant impact on sales for all boutiques and e-commerce. The comp decrease was partially offset by 45 net new boutiques opened since the third quarter of last year. Additionally, we recognized $1.5 million of gift card breakage income during the quarter due to a change in the redemption period estimate. During the quarter, we opened 23 new boutiques and closed 1, bringing our total boutique count to 714. This consists of 348 mall locations and 366 non-mall locations, including 68 outlets. Note that several boutique openings during the quarter were delayed and are now expected to open in the fourth quarter of this year or first quarter of next year. Total gross margin for the third quarter decreased 860 basis points to 39.6% from 48.2% in the prior year due to a decrease in merchandise margins related to deeper markdowns and significant occupancy cost deleverage. This decrease was more than expected as we took additional markdowns and inventory reserve on the slow-moving product. Third quarter SG&A expenses decreased 1% to $41.4 million compared to $41.9 million in the prior year. This decrease was primarily due to a decrease in short-and long-term performance-based incentive expenses as the achievement of the required performance metric is not probable given our current financial results. This was offset by higher corporate and boutique payroll to support our new boutiques and infrastructure investment. Higher professional fees and software fees related to our continuing investments in technology, including our new POS, CRM and HR systems, and higher marketing expense. Our effective tax rate for the third quarter was 45% compared to 38.3% last year. The increase in our effective tax rate was principally due to $69,000 in net income tax effect related to stock-based awards. This had a magnified effect on our tax rate because of the low pretax income. In previous years, this expense would have been recognized in additional paid-in capital. Diluted EPS for the third quarter was $0.01 compared to $0.26 last year. This is within our guidance of flat to $0.05. Now let's turn to the balance sheet. We ended the quarter with $19 million in cash compared to $24.7 million at the end of the third quarter last year. The third quarter is typically our lowest cash quarter as we build inventory for the fourth quarter. The company had no debt outstanding at the end of the quarter and we did not borrow during the quarter. Inventory at the end of the quarter decreased 9% to $38.8 million from $42.8 million in the prior year. On a per-boutique basis, our ending inventory was approximately $54,000, down 15% compared to last year's third quarter level of $64,000 and was consistent with our sales decrease. This is favorable to our guidance of a high single-digit decrease in per-boutique inventory. During the third quarter, we repurchased 491,000 shares of our common stock at a total cost of $3.5 million. At the end of the quarter, we had $45.2 million remaining available for future repurchases under the $100 million program announced last year. Our primary use of cash is investment in our long-term strategies, which we believe will have a strong return. Steve and I, along with our board of directors, will continue to evaluate the best use of excess cash and our capital structure. Now let's move on to our guidance. We revised our full year guidance based on third quarter actual results, as well as a revision to our fourth quarter expectation. When we gave guidance on our last call, we were in the midst of the hurricane supply chain disruption and were trying to disentangle that impact from the merchandise issue. Now that we have more visibility on the delineation, we are better able to understand the trends going into the fourth quarter. As previously guided, we expect fourth quarter to sequentially improve from the third quarter. However, it is lower than what we had previously guided. For the fourth quarter, we expect net sales of $145 million to $150 million, a decrease of 1% to an increase of 2% versus last year. This assumes a 9% to 12% decrease in comparable sales and 9 new boutiques opening in the quarter. Please note that our sales guidance includes November actual results, but we have much of the quarter's volume left to come during this holiday season. Total gross margin is expected to increase modestly versus last year, primarily as a result of lower mark-out-of-stock charges, somewhat offset by occupancy deleverage. As a reminder, last year we took a large mark-out-of-stock expense in order to start fiscal year 2017 with the right inventory level to implement our end season clearances strategy. This strategy has been successful and while we had merchandise issues in the third quarter, we have still been able to lower our mark-out-of-stock expense compared to last year. SG&A for the fourth quarter is expected to increase in the high single-digit range, primarily due to infrastructure investments, new boutiques and marketing. Diluted earnings per share for the fourth quarter are expected to be in the range of $0.35 to $0.40 based on 35.7 million diluted shares outstanding and a 38% tax rate. This compares to the prior year's diluted EPS of $0.39. Based on our third quarter results and our fourth quarter outlook, for fiscal 2017, we now expect total sales of $478 million to $483 million, a decrease of 1% to 2% versus last year. This assumes a 9% to 10% decrease in comparable sales as well as 52 net new boutiques for the year. Also please remember that fiscal 2017 is a 53-week year. So our guidance includes approximately $5 million to $6 million in sales for the 53rd week. I'd also like to remind you that this additional week is expected to be neutral to EPS. We expect total gross margin for the year to decrease compared to last year, primarily as a result of occupancy cost deleverage. We expect full year SG&A to increase in the high single-digit range compared to fiscal year 2016. Diluted earnings per share for fiscal year 2017 is now expected to be in the range of $0.67 to $0.72 versus the prior year EPS of $1.09 and prior guidance of $0.71 to $0.81. Assumed in this guidance range is average diluted shares of 36.3 million and an effective tax rate of 38.7%. Capital expenditures for the year are expected to be in the range of $30 million to $33 million, primarily for new boutique openings, existing boutique remodels and relocations and IT and corporate investments. This concludes the financial review, and we'd now like to open up the call for questions. Operator. We'll try to tag team that. I'll take the second part of the question. When we look at what we're starting to see in terms of improvement, particularly over the last couple of weeks, we do attribute a lot of that to the merchandising change or pivot. When you think about what we talked about in the last call, we'd mentioned that we had 75% of the receipts still to be placed. That being said, when you think about it, as you get deeper into the quarter, we were more liquid, right. So the early November time period was somewhat placed, but as we got deeper in, we had more open to spend. And we've really seen a positive reaction to a lot of the new products from a sell-through perspective, rate of sale, et cetera. So we feel really good about that. I think our challenge that we're still seeing is, there's still some of the old ---+ that clouds the customer's viewpoint or visibility to the new. And so we believe as we get deeper and deeper into the quarter and the new starts to become a bigger more prevalent piece of the floor, we'll see the sales trends continue to get better. So that would be the ---+ what we're seeing in terms of improvement from a sales perspective. Right. And regarding the 2-year stack, that ---+ you are absolutely correct on the lower end of the guidance, but on the upper end of the guidance, it does show a sequential improvement in the 2-year stack, so that's kind of the range. Yes. I would say we're not ---+ in the past, we've talked about outlets as a separate strategy and we really don't think of it as a separate prong of our strategy going forward. I mean, we want to be in the best possible locations, the A and B centers, as I mentioned, with a heavy weight towards A if it's a main outlet, it's going to be a candidate for a new boutique for us. So it's ---+ we're somewhat agnostic of, of outlet ---+ or even mall more often, well, candidly, it's just A- and B-rated centers. In terms of the total store count, we've previously talked about the number being somewhere north of 900. We haven't zeroed in on exactly what we think the number is end state. I believe it could be somewhere between 900 to 1,000 stores at full maturity, but we're also doing a lot of work, not just in looking for locations where we could open stores, but, as I mentioned, rationalizing our store count and making sure we're very aggressive about shutting down these Cs and Ds. So that's still a work in progress, but I would say somewhere between 900 to 1,000 stores would be probably the end state for us from a (technical difficulty) [strategic] count. So I'd say a couple of things. When we look at the opportunity to kind of pivot and change our merchandising focus, really what it was and I think Kelly talked about, and I mention it in my script as well, it's refocusing on who our core guest was. And you might remember in the last call, we talked about some of the things we felt like we missed on. We probably had product that was overengineered, had too many trends in it. So one of the things we've gone back to the team and worked on, is making sure that, that everything has a great hand, a great fabric, feels fantastic, has special details on it, but isn't overly engineered or overly tricked up. So usually, it's a great warm-handed product for fall. One of the key fabrics for us is a brushed [cochi], feels almost like a lightweight cashmere, so it feels fantastic. And it's got one detail on it. Maybe it's a tie hem or a sleeve detail, not 3 or 4, which is one of the things when we kind of diagnosed our problems in back-to-school we felt like we had done. Focus on value, making sure that these things relative to our competitive set offer a great value so setting a fair price upfront on it has been another thing we've worked on. So I think those ideas do translate into spring. I mean, obviously, as we move from long sleeve to short sleeve products in spring, you start shifting fabrications, moving to lighter-weight fabrications, but it's still going to be about great hand, great detail, value-packed, on-trend, not too far ahead of the trend. So I definitely do think those things have legs into spring. We ---+ as you've called out, we do underpenetrate on bottoms and see there being an opportunity to improve our bottoms-to-tops ratio. We've had a big push on denim this fall. We feel like that's paid off for us. Obviously denim becomes a little less important as we get into spring or even later into the summer months, but we definitely continue to see a bottoms opportunity. But recognize that it's still not going to be the predominance of our assortments, still going to be primarily a tops-driven assortment. Yes, I mean, I would tell you, that's one of the things that's really exciting about the new POS that we're rolling out is, traditionally, we've only had really some pretty good data on our dot-com or online customer. We haven't had great data on our brick-and-mortar customer. Our sense is, there's a fair amount of overlap between the 2, but the short answer is we don't have a lot of statistics behind that, we're building that database and can probably give you better data ---+ or better visibility into that into the future. Right now, our sense is that there's a fair amount of overlap, but I don't have statistics that can tell you that. So I'll try to answer your questions in order. In terms of the Black Friday - Cyber Week performance, yes, they were better than the performance we saw, obviously, in the earlier part of November and certainly better than what we saw in Q3. So we have seen trends improve based off of that and we do attribute a lot of that to the new product landing. In terms of category performance, if you look at Q3, it was pretty lackluster across most categories. We do believe, obviously certain categories, such as apparel, jewelry are traffic drivers for us. Other categories feed off the traffic, right. So we know getting apparel right is a key part of our success going forward. Within apparel, we've seen certain categories, we mentioned bottoms continues to be ---+ do well, but once again, it's a small percentage of the total. Tops more recently has been improving, so we're pretty excited about that. Our dress business has been a bit challenging candidly in Q3 and it's continued into Q4. So we're doing a lot of work on trying to get our dress business back up to speed. And that is something that's kind of we're known for, so we've got to get that fixed. Jewelry, earrings have been doing very, very well. So we're pretty excited about our earring trend. Necklaces haven't been as great. So we do see a trend or a shift there between the 2. Gifts, we've got a lot riding on gifts for holiday, I think that's a differentiator for us. And we've done a lot to kind of change up the assortment. And the new categories that we've gone into in a bigger way, such as kids and tech and beauty have all done really well for us. So we feel pretty good about that going forward. Shoes continues to be a standout for us as well. In terms of slowing down our brick-and-mortar stores, we really don't believe or feel like there's a cannibalization of our brick-and-mortar business by our dot-com business. We believe, as I kind of responded, I think, to Pam's question, that it is an omnichannel shopping customer, and they want a frictionless environment. We see them complementing each other. We know that as we open up new boutiques and new markets where we're underpenetrated, it helps us build our brand awareness. With the functionality we're putting in place in terms of buy online, ship-to-boutique or buy-in-boutique, ship-to-home, we see those as things that are helping complement each other. So we're trying to be very thoughtful about our real estate. I guess, the thing I'd want you to take away from it is we're not just blindly opening up stores. We put a lot of rigor into the process around determining locations. We've raised the hurdle rate internally in terms of what we want a new store to produce to make sure we're being very challenging and requiring of ourselves. And we're being more aggressive on store closures. So I think we ---+ it will [go down to see] slightly from our initial estimate for next year. But we don't see one cannibalizing the another, to be honest with you. Well, I'd say a couple of things. I mean, yes, we do ---+ on one hand, we do not traditionally at this point in time give spring guidance, right. I mean, we still have almost 70% of the fourth quarter ahead of us. And so it's hard to extrapolate a number off another number, but our general sense is that we see the business starting to stabilize in the spring season, so we see it getting progressively better quarter-over-quarter. We have our new chief merchant Ivy who's come in. She's hit the ground running, but in terms of her full impact on the assortment I would expect it to be really back-to-school when you kind of see her vision fully formed on the floor. So I think you're going to see that being a big inflection point for us. In terms of fixing our dress business, we've got a lot of energy and effort behind that. And as a matter of fact, we recently are bringing back our dress buyer who had left the company in early spring, she's coming back. And she certainly has a great eye and viewpoint on who our guest is, and we think that she's going to be instrumental in helping us turn around the dress trend there. Great. Thanks. I'd like to, first off, thank the entire francesca's team for all their hard work over the past quarter as we prepared for this all-important holiday season. As I just mentioned, we still have roughly 70% of the quarter's business ahead of us and I know that the hard work and effort that the team has put in is just starting to pay off. And I also want to thank everybody for joining the call today and we look forward to talking to you again during our fourth quarter earnings call.

2017_FRAN

2016

INTL

INTL #Good morning. My name is <UNK> <UNK>, CFO of INTL FCStone. Welcome to our earnings conference call for our fiscal second quarter ended March 31, 2016. After the market closed yesterday, we issued a press release reporting our results for the fiscal second quarter. This release is available on our website at www.intlfcstone.com, as well as a slide presentation, which we will refer to on this call in our discussions of the quarterly results. You will need to sign on to the live webcast in order to view the presentation. Both the presentation and an archive of the webcast will also be available on our website after the call's conclusion. Before getting underway, we are required to advise you, and all participants should note, that the following discussion should be taken in conjunction with the most recent financial statements and notes thereto as well as the Form 10-Q filed with the SEC. This discussion may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements involve known and unknown risks and uncertainties which are detailed in our filings with the SEC. Although the Company believes that its forward-looking statements are based upon reasonable assumptions regarding its business and future market conditions, there can be no assurances that the Company's actual results will not differ materially from any results expressed or implied by the Company's forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Readers are cautioned that any forward-looking statements are not guarantees of future performance. With that, I'll now turn the call over to Sean O'Connor, the Company's CEO. Thanks, <UNK>. Good morning, everyone and welcome to our fiscal 2016 second quarter earnings call. We continue to post solid results during the quarter in spite of the very negative earnings backdrop for our industry, with most entities reporting sharply lower trading revenues. We maintain our position as a strong and positive outlier in the industry. The macro environment was challenging with major declines in most markets driven by oil in fear of a recession. Our revenue diversity and the fact that our business model is not dependent on taking directional views served us well in this environment. We recorded net income of $14.5 million or $0.77 per share, up 12% from a year ago and up 65% on a sequential basis. This resulted in a return of equity for the quarter of 14%, close to our long-term target. Our core operating results for the second quarter, as represented by aggregate segment income, were down 5% versus the prior year, while the year-to-date results were up 9% over the prior year. In addition to the core operating results, overall net income was positively impacted for the quarter by mark-to-market gains on our portfolio of interest rate instruments held to enhance the return of our exchange traded client deposits. This is a reversal of prior mark-to-market losses recorded in the immediately prior quarter. On a year-to-date basis, our earnings were $23 million or $1.22 per share, up 4% from a year ago. Our ROE for the six-month period was 12%. On a segment basis, the quarter and year-to-date performance is summarized as lower revenues in OTC and our structured products areas, which is part of our commercial hedging segment, offset by strong gains in our securities segment. OTC revenues were down 42% for the quarter and a similar percentage for year-to-date. This was driven by a decline in both volumes and rate per contract as low volatility made our OTC products less attractive to our hedging clients, especially in Brazil, which faced additional market and political challenges. On the futures side of our commercial hedging business, we saw a good 7% increase in segment revenue driven by an 18% volume increase, but offset by a 10% rate per contract decline. Offsetting this was another very strong performance from our securities segment with net income up 49% for the quarter and up 188% for the six-month period to-date. This was off the back of strong revenue gains from all product lines, equity market-making, debt trading and asset management. More on this later. Global Payments continue to show good transaction volume growth of 14% for the quarter and 25% year-to-date. This was largely offset by a reduction in revenue per trade as the exceptional market conditions in certain currencies abated and spreads narrowed. A couple of other notable items. We renewed our three-year holding company revolver, which was oversubscribed, and we increased from $140 million to $205 million and we are likely to increase it further to $220 million. We now have good headroom on our liquidity for our next growth phase. We appreciate the support of all our banking partners. This was an active quarter for us in terms of share buybacks where we repurchased 400,000 shares at an average price of $25.89. We have a disciplined approach and only buy shares when we believe the intrinsic value of the stock is not represented in the market. Life-to-date, we have repurchased 1,772,059 shares at an average price of $20.97. On this basis, we have now become one of the biggest shareholders in our own Company. Starting a couple of years ago, we began focusing significant time, effort and resources into creating a more streamlined and data-centric approach to marketing and sales. We now track and monitor various aspects of customer engagement that better enable us to serve our existing customers, identify new revenue opportunities both with existing customers and driving new customers to us. Changing how people work is not easy, but we are now seeing tangible signs of increased customer engagement evidenced by our strongest quarter-to-date in terms of new account openings. By way of example, we're rolling out our market intelligence platform to better showcase our unique market insight being from our dealings with midmarket commercial customers globally. This platform now sends out approximately 40,000 automated emails to our customers every day. This allows all our customers to see the breadth of our knowledge and drives cross-selling opportunities. We're also using our website and webinars to drive qualified leads to our sales and relationship people and we now roughly see five qualified leads per day, many of which we've already turned into revenue producing customers. This is still early days and a big project, but over time, it should allow us to more efficiently and effectively grow and service our customer base. Last item to point out to our investors that every filing we include a histogram showing our mark-to-market revenues per day. We think this is the clearest empirical demonstration of our approach to provide execution to our customers, but not to run excessive inventory directional risk positions. Despite the extremely volatile three months, in many, but not all of our segments, this product table shows that we had zero losing days. This pattern is repeated even if you look over a much longer timeframe. I would urge you to look at this histogram. I will now hand you over to <UNK> <UNK> for a more detailed discussion of our financial results. <UNK>. Thank you Sean. I'd like to start my discussion with a review of the quarterly results. I'll be referring to slides and the information we have made available as part of the webcast, specifically starting with slide number 3, which represents a bridge between operating revenues for the second quarter of last year to the current year fiscal second quarter. As noted on the slide, second quarter revenues were $166.1 million, which represents a 6% increase as compared to the $156.5 million in the prior year. Looking at the performance in our operating segments, the most notable change was the $9.5 million or 26% increase in Securities segment operating revenues. The largest drivers of this increase was within our equity market-making and debt trading businesses. Equity market-making increased operating revenues $4.2 million or 27% despite relatively flat volumes as spreads widened. We completed the acquisition of G. X. Clarke & Company at the beginning of the second quarter last year, so this is the first quarter where the operating revenues are included in both the current and comparative quarter in our debt trading business. Operating revenues in the debt trading business increased $3.6 million or 22% versus the prior year, driven by both improved performance in the domestic institutional fixed income business acquired from G. Clarke & Company as well as in our Argentina operations. In addition, we experienced 23% growth in operating revenues or $1.5 million in our Physical Commodities segment versus the prior year, primarily as a result of the widening of spreads in the precious metals market. Clearing and Execution segment operating revenues also increased $1.8 million or 6% as revenues in both our exchange traded and FX Prime Brokerage businesses improved versus the prior year. As Sean mentioned, these gains in operating revenues were offset by a decline in operating revenues in the commercial hedging segment, which decreased $10 million to $54.7 million in the current quarter. Leading to this decline was lower customer volumes in Latin and South America as well as lower energy prices, which combined to drive a 33% decline in OTC volumes and a $12 million or 42% decline in OTC revenues versus the prior year. This was partially offset by growth in exchange traded revenues, which increased $2 million or 7% versus the prior year, particularly in the domestic grain markets as well as in our London operations. Finally, Global Payments segment operating revenues declined $1 million to $17.4 million despite a 14% increase in the number of payments made as spreads narrowed in this business. Moving on to slide number 4, which represents a bridge from second quarter pre-tax income in 2015 to the current period, overall pre-tax income increased 10% to $20 million in the second quarter of 2016. Similar to the discussion of operating revenues, the largest contributor to the increase in pre-tax income was the performance of the Securities segment, which increased $6 million versus the prior year. In addition, as Sean mentioned, and disclosed in our earnings release and 10-Q filings, the next largest contributor to the growth in pre-tax net income was the mark-to-market unrealized gain on investments held in our interest rate management program. In our corporate unallocated overhead segment, we recorded a pre-tax unrealized gain of $6.9 million on US Treasury notes and interest rate swaps held in this program. This was a complete reversal of the $6.7 million unrealized loss that we had recognized in the immediately preceding first quarter of 2016. The bottom of slide number 12 of the presentation shows the after tax effect of these unrealized gains and losses by quarter. Finally, all of the other segments recognized incremental changes in pre-tax income in line with the change in operating revenues versus the prior year, with the exception of the physical commodity segment, which declined $500,000 despite the growth in operating revenues. This resulted from a $1.3 million increase in bad debt expense related to customers in the renewable fuels industry. Slide number 5 shows the interest income on our investments and our exchange traded futures and options businesses which hold our investable customer balances and encompasses our interest rate management program. The continued implementation of this program and an increase in short-term interest rates led to an underlying increase in interest income shown here of approximately $970,000 versus the prior-year period. Overall customer segregated deposits declined 4% versus the prior year, primarily as a result of lower margin requirements due to lower commodity prices. Overall, our portfolio of treasury and money market fund investments averaged $1.5 billion for the second quarter which combined with $375 million in interest rate swaps earned $2.7 million in interest income for an average yield of 71 basis points. The overall portfolio, including both the US Treasuries and the swaps, had a weighted average duration of approximately 22 months at the end of the period. Moving on to slide number 6, our quarterly financial dashboard. I'll just highlight a couple of items of note. Variable expenses represented 57.4% of our total expenses for the quarter, exceeding our target of keeping more than 50% of our total expenses variable in nature. Non-variable expenses, which are made up of both fixed expenses and bad debt expense, increased $2.6 million or 5% driven primarily as a result of increased competition and benefits related to our expansion of our information technology department and an increase in meeting and hosted conferences expenses. Net income from continuing ops for the second quarter was $14.5 million versus $13 million in the prior-year period, which resulted in a 14.3% return on equity, which was relatively consistent with the 14.4% in the prior year. Finally, in closing out the review of the quarterly results, our book value per share increased 12% to $21.84 per share, driven by both the trailing 12 months results and our share repurchase program. During the second quarter, we repurchased 400,000 shares at an average price of $25.89 a share. Next, I'll move on to slide number 4 (sic . see slide 7), for a discussion of the year-to-date results. This slide demonstrates revenue growth across all of our business segments with the exception of the Commercial Hedging segment. The largest increase was in the Securities segment, which added $41.1 million in operating revenue as a result of both a $29.9 million increase in debt trading revenues and a $6.5 million increase in equity market making revenues. The increase in debt trading was a result of the acquisition of G. Clarke, which was effective on January 1, 2015 and this only contributed operating revenues beginning in the second quarter of the prior year, as well as strong performance in Argentina as a result of the effect of the devaluation of the Argentine peso. Global Payment revenues continue to grow, adding $2.1 million in the year-to-date results. However, similar to the quarterly performance, weaker performance in our Commercial Hedging segment, which declined $23 million, offset some of these revenue gains. Moving on to slide number 8, which represents a bridge from pre-tax net income in the prior year-to-date period to the current year. Similar to the growth in operating revenues, the largest driver of growth was the Securities segment, which was partially offset by weaker performance in the Commercial Hedging. Physical Commodity segment declined $2 million, primarily as a result of the increase in bad debt and interest expenses. These gains were partially offset by a $7.7 million increase in unallocated overhead, which was primarily incremental cost from the acquisition of G. Clarke, higher management incentives earned in Argentina, the expansion of our information technology department and an increase in meetings and hosted conferences. These increases were partially offset by lower professional fees, primarily legal fees. Finally, moving on to slide number 9, the year-to-date dashboard, I will highlight just a couple of metrics. Net income from continuing operations has increased 4% over the prior year-to-date period to $23.3 million which represented an 11.6% ROE for the current year-to-date results. In addition, we have exceeded our internal target for the year-to-date period in average revenue per employee, which grew $508,000 per employee in the current year. With that, I would like to turn it back to Sean to wrap up. Thanks, <UNK>. In prior earnings calls, we have focused some of our time on both the Payments and the Commodity segments and I thought I would take a few minutes in this call to focus on our Securities business, which has really been transformed over the last three years. If you turn to slide 10 in the presentation, you can see the composition of segment net income by quarter for the last three years. The green section of the bar graph represents Securities, and as you can see, it has grown significantly over this period and been responsible for a large portion of the overall growth in segment net income. The next slide shows the same information, but is scaled to 100%, so the relative contribution is easier to see. As you can see in the last quarter, Securities is now the biggest percentage contributor from being a pretty small percentage two years ago. Obviously, this is a snapshot and can change over time. We have a number of businesses within our Securities segment, so a quick overview. We are a full-service market maker, specializing in providing institutional customers with access to blue chip international securities and ADRs. We use our strong capital base, our expertise in these markets and our technology to offer best-in-class execution as well as block-sized liquidity, both during and after local market hours. Our customers include most large broker dealers and investment banks in the US and we specialize in access to blue chip international securities, ADRs and ETFs. We are the number one ranked market maker by dollar volume in the over-the-counter market in foreign securities. We are ranked number one market maker in over 2,500 specific securities. In addition, we added about 45% of all new foreign securities and ADRs to the OTC markets, providing these issuers with greater access to capital. Companies we added to the OTC alternative trading system include names such as Nissan, Bayer and [Alliance]. A year ago we acquired the G. X. Clarke business, which now forms our Rates business. Here we use our capital and expertise to meet the demands of our broad base of over 700 institutional customers in over 5,000 CUSIPs, including treasuries, agencies, mortgage and asset-backed securities. We provide inside analytics to assist our clients with security selection and portfolio allocation decisions. Our Rates Group has thrived while many others in this sector, including the big banks, have struggled and indeed many have started to retreat, providing us with great opportunities to leverage our capabilities in the Rates market. Included in the overall debt trading sub segments is the municipals business. Approximately two years ago we started a greenfields capability offering institutional customers execution in the municipals market. This business has now got traction and is making a good contribution to the bottom line. Our capabilities are now being recognized by the institutional market and we are now focusing on monetizing the synergies with our Rates customers, many of whom are also active in municipals as well. We have a large local investment banking and trading capability in Argentina. We provide liquidity and execution to many local institutional investors in a broad array of local fixed income instruments. We are the largest player in the local asset-backed market, where we specialize in arranging and structuring asset-backed securities for local issuance. We have done many hundreds of issues over last 10 years and have never had a default. And many of the local companies rely on us to meet their ongoing capital needs. In addition, this expertise was leveraged into an asset management capability, largely driven by the need to provide access to these asset-backed products for the retail market. This asset management capability has now grown dramatically over the years and we are now the largest non-bank fixed income asset manager in Argentina with a broad array of fixed income products. We currently manage over $500 million in assets in a variety of fund offerings. The opening up of the Argentine economy provides us with great opportunity to leverage our local expertise and capabilities into the international institutional market now looking for access into Argentina. With the addition of Tradewire some four years ago, we added a high-touch execution capability for large institutions in Latin America, looking to access US markets. Our ability is to match unparalleled service as well as best execution in multiple asset classes and has allowed us to become the execution counterparty of choice to these institutions. We are starting to expand this capability beyond Latin America and are looking to offer the same capability to European and US based institutions. We have always striven to diversify our business by product, market and customer segment to protect our bottom line from the inevitable cyclicality in each of our individual segments. We have been a bit of a contrarian in this regard as others in our peer group have sought to be focused mono-line businesses. We believe that we have definitely outperformed this mono-line peer group which is now challenged by higher regulatory and infrastructure costs, the need for greater capital and declining margins. Our ability to leverage our infrastructure and our capital across different and complementary capabilities is a key differentiator driving our returns. More importantly, perhaps we are able to provide execution and clearing services for our institutional customers now across asset classes and markets in an environment where customers are looking to reduce the number of counterparties and better manage their collateral and exposure. So with that, I'd like to hand back to the operator to open the question-and-answer session. Operator, do we have any questions. Well, we don't like to give forward guidance, specifically, but let me address your comment in general. So I do think we are generally at a cyclical low point in our specific commodities business. A lot of that has been driven by two factors, I guess, which are sort of related. Firstly, the biggest part of our commodities business is grain followed by metals. The grains part of our business has been adversely affected in two ways. One, we've had very low prices in grains and very low volatility. The result of that has been a lot of the grain harvest from last year has not yet been sold to the elevators. We get the hedging revenue when the elevators get the crops. So there are leads and lags and we discussed this a number of times previously, as there are leads and lags in terms of when that product gets to the elevator network and then when it generates revenue for us. And a lot of end producers were sitting on such low prices, they didn't really see any incentives to sell at that point. So that certainly has been one factor and that's driven more just the general hedging revenues on the futures side. And then the low volatility makes it quite difficult for us to offer structured products, because again no incentives to really hedge, a lot of times we're using volatility to price products with an attractive profile for our customers, that also makes it difficult. So a combination of those two environments is not ideal for that segment, combined with the fact that we have a big business down in Brazil and Brazil had both of those factors weighing on it, but also additional political and lots of volatility in the local market. So all of those factors, I think probably argue that that was not a good environment for us. What we have seen, and I think this has been reported in the Wall Street Journal, the grains prices bumped up recently and a lot of that product is now coming to market. And of course when prices bump up, volatility goes up a little bit as well. So at some point that product has to come back into the system, it has to come to market, I anticipate that will probably happen over the next two or three quarters. I don't know what's going to happen with volatility, obviously hard to predict, but if volatility does pick up, and it was almost at historical lows, that will probably bode well for us on the OTC side, but we'll have to see how it plays out. So that's really what's been driving that and it's largely in the grain business. Our metals business has performed very well, it hasn't been impacted by any of those factors, but grain is still kind of a big piece of what we do. Does that answer your question, <UNK>. Okay. Well, bear in mind, just based on my background I gave you, our Argentina business really has two components and both are included in the Securities segment. One is a transactional execution business and a ranging and underwriting, almost an investment banking component and then you've got asset management, right. We certainly were beneficiaries of a one-off, I guess, or a non-recurring gain due to the devaluation of the peso. And the reason for that is we had invested a lot of the capital we had in Argentina and we couldn't repatriate that capital and that business has been very profitable for us over the last three years. We had invested a lot of that surplus capital in dollar-linked products down there and obviously they went up a lot, that comes through the income statement and that was sort of a one-off gain. But you're right, now that that's settled down, that is probably not repeatable. The core business there has honestly been one of our steadier performers over the last three years, and I think what we see is both potentially a bit of a risk and probably a much bigger opportunity now. And the risk is we had ---+ I guess we had reconfigured our business over time down there to adjust to the market conditions and we had adapted very well to the bizarre situation that was in Argentina, which was money couldn't leave, so our funds became a very attractive source for people looking to protect value, we were able to create dollar-linked type products. So if people were concerned about the peso, our funds in the domestic markets looked very attractive. There wasn't a lot of access to capital, so a lot of people were using us in the asset-backed securities market. So we adapted in a very difficult environment, and we are very large participants in the market down there, I mean a much large participant than people think. Obviously now it's a whole new world for us and the opportunity is we can leverage our very significant footprint in Argentina into a more international component by helping investors access the market, helping our companies access international capital, so we already for the last six or nine months have been thinking and planning for that and we see that as an opportunity. The offset for that is it's a bit of a different market down there. We haven't seen any impact from that on a negative basis, but customers will have different alternatives available to them that they didn't have previously. So we're trying to be adapt, I think we've been very adept at doing that. We sit with a tremendous platform down there, a great franchise and I think we're way ahead of everyone else. So we're overall pretty excited about Argentina. But you're right, there was a bit of a bump we got with the FX distortions there, which I think are probably not repeatable. <UNK>, we don't like to give guidance in that form. I think we can discuss this at our next call. But, we don't ---+ our business is not ---+ we don't take directional positions, we're not a direct beneficiary nor do we have any issues when markets go up or down, we're really focused on our customer activity. Volatility is good for us, I think we've said that repeatedly. In some of our markets, higher prices like the grains markets is better than lower prices just because customers lock in and do more hedging. And markets are very volatile at the moment, but prices are moving up and down a lot. It's very hard for us to, at this point, give you any clarity and therefore we choose not to so, apologies. <UNK>, do you have those figures for <UNK> yet. Yes, I'm just pulling in here real quick. While <UNK> is looking for that, let me just touch on our buyback program and to answer the second part of your question, <UNK>. So we originally had a 1 million share authorization, I believe. Our buyback program, we've chosen to be ---+ and this is a repeat of what I've said before, but just to put it on the table ---+ we like to be very disciplined about buybacks. I think a lot of corporate buybacks empirically, if you look at them, destroy value and that's because CEOs are trying to get the share price up to put their options in the money or they're trying to change market perception. We think both of those are pointless exercises. So our only driver is to buy the shares when we believe they are intrinsically cheap and this should be accretive for our shareholders. So our intrinsic value determination is largely based around book value, that's not necessarily book, but we come back to that as being sort of the whole guideline for intrinsic value. And then in terms of how much money we prepared to allocate, if that first decision is yes, they're intrinsically cheap, the next question becomes how much of our liquidity do we focus on this opportunity. And that has to be weighed against the much more important opportunity of growing our business, keeping liquidity headroom available and positioning ourselves for cap decisions and so on. Because the last thing we want to do is go do a whole bunch of buybacks and then five, six months later an amazing opportunity comes and we are unable to take advantage of it because we do not have sufficient liquidity or access to capital. So we have to weigh those things carefully and I think out of those three decisions, liquidity headroom to make sure we can survive market events, capital for growth and acquisition, share buybacks ranked third on that priority list. So just so everyone's aware, but when we decide that we have sufficient headroom to do that and when we're buying our stock, we are taking advantage of the market in our view. I want to be very clear about that. When we buy, we are taking absolute advantage of the seller. Before we get down to that, <UNK>, do you have those two numbers for <UNK> there. Yes, I mean the remaining shares in the buyback program is roughly 600,000, so we have 1 million authorized share to buyback. And was your other question the total outstanding at the end of the quarter. Outstanding shares were 18,812,000. No, I'm sorry, that is the end of September. It is 18,688,729 at the end of March. So just under 18,700,000 outstanding. Sorry, <UNK>, (inaudible) your question on acquisitions is. Yes, well, you always get influenced by what's happened in the last two months, I guess at some level. So stepping away from that a little bit, I think the environment we've seen developing over the last two, three years is one where there are a number of small and mid-sized mono-line companies. So by mono-line, I mean, they only offer equity execution or they're a fixed income execution shop or they do futures or they're just an FCM, right, they just do one of the things we do. And that's been very popular with analysts, that's been very popular with bankers, because it's easy to understand. We've been exactly on the other side of that spectrum, right. We've heard from our investors and our bankers, you guys do so much stuff and it's very hard to understand. And we've done that really to protect our bottom line, right. But the environment we're now finding is those mono-line firms are really starting to struggle for a whole bunch of reasons. The first is the cost to be in business now due to regulations have gone up significantly. The infrastructure and the procedures you have to implement and the people you have to hire and the compliance requirements and oversight requirements have gone up multiples. So that's just a straight cost on all of these businesses. The additional factor is, I think since the crisis, and it's strange how long it's taken for this to all unwind, but customers are requiring lots more capital, so the counterparty credit worthiness. Even in execution businesses where there is no real direct risk, I mean, it may be delivery versus payments or a clearinghouse, but all our counterparties are just saying, I can't deal with a small company; unless you have $100 million of equity, I can't get my guys to deal with you. And then of course the regulator sometimes almost (inaudible) capital, it depends what the higher of those are. And then you've got sort of technology and transparency forcing spreads down, so that's sort of on Holy Trinity is really impacting those mono-line businesses and it's fine for the guys who may be number one or number two in any defined mono-line, they probably have the scale to survive that. And of course they also have to deal with cyclicality. But the guys further down the chain, I think those are flawed and failing business models across the spectrum. I mean in every one of our asset classes. And we are seeing a lot of those businesses starting to figure out that they need to do something and a lot of them are calling us or are getting shown to us. So I think in a bizarre way, I mean we always thought after the crisis that there was going to be some impact and we saw Dodd-Frank happen, we really thought the whole wash up would almost have been over by now and maybe two years ago even would have sort of been over. But it seems that people have hung on for way longer than we thought, and it almost seems like there's an accelerating pace of consolidation right now, and we're in the thick of that. So the answer to your question, long story short is, we are seeing lots of opportunities and they continue to come at us on a regular basis. But we like to be very picky. We are very patient, we're very persistent and we like to be very disciplined. And our fundamentals of the starting screen is this has to be a customer-orientated business. If you are not and can't demonstrate that you've got real customers, then we're not interested. So that immediately disqualifies a lot of businesses. The next thing is even if you have customers, we want to know that what you do for customers is value. Are you solving real problems for real customers, or are you just picking up the phone faster than the next guy or undercutting the next guy by a penny to get the trade. If that's your business model, we have no interest in that business model, right. Then the third thing is, what is the capital the business uses. And can the business make a return. A lot of these businesses are run for the employees. The employees do great, but the investors do badly. Not interested in that. And then the fourth thing is, all of those things being satisfied, is this going to be accretive to our shareholders and what does one pay for that kind of business. And we're very cheap. The way I think about businesses, and it's a little bit different in other industries, but if you pay a 5 PE for a business, which sounds really, really cheap in our business, that means that business doesn't grow. We work and support that business for five years, before our shareholders see a dime. And I don't know how a lot of these businesses are going to look five years out. So we've got to make sure that these businesses are accretive, our shareholders see some benefit from owning these businesses in a relatively short period of time, because we're in a very dynamic industry. We can't take, when we're buying a business, a view that we'll pay 15 times earnings because this business is going to carry on exactly as it exists now for the next 15 years and support that business and handle additional capital requirements, or additional compliance requirements. And so, that's sort of our initial screen, those four things. Customers, what do you do for your customers, what are the financial economics and what's the price for the business. And honestly once we've run through those four screens, there are very few businesses that get through those four screens. All right, last chance, I don't see any other questions out there, but anyone wants ---+ like to ask the question, we have a couple of seconds. Okay. So we still strongly believe that we are in the early part of the game in terms of volumes. We have a tremendous pipeline developing, in fact, we just had another couple banks that have made another milestone in signing up with us and getting on-boarded, each of these are very large customers, but because I don't recognize your name, so I'm not sure if you've been on some of our other calls. But our on-boarding process with the payments business, particularly when we're dealing with large banks, is a long process, right. It's probably from the time of the first call until the time where we are seeing a lot of their flow come through our pipe, that could be anywhere from two to four years, it just takes a long time, right. So we're sort of still we think in the early innings of leveraging all of those flows that we're already embedded into. So we feel pretty good about how volumes are going to track out for us. I mean, clearly you can never be certain and we may be undershooting or we may be over shooting a bit, but this is probably one of the areas that we feel more confident about rather than less confident about. So that's the volume part of the conversation, right. What we are going to see are two things that are going to impact the value per transaction. The first is we started off with a very large ---+ well, not large but an institutional business in the NGOs and charities where the average ticket was very large. That was kind of the start of our business. As we're starting to layer on the bank volume, we are getting much larger flows coming in in terms of transactions, but the average size of the transactions from the banks tends to be smaller. So our average ticket size is going down, okay, which means that naturally, we're going to make less per ticket. So if our growth rate is X, our growth in sort of operating revenues is going to be some factor of X, right, because the ticket sizes are getting smaller. So that's probably the best way I can think about the long-term growth rate, if you assume the long-term ---+ and I'm not saying these are the numbers you should assume. But if you assume that we have an embedded growth rate in transactions of 20%, I would say that might translate into more like 10% to 15% in growth in gross revenues, right, because the tickets are getting smaller. Against that that we've got a scalable kind of infrastructure, so that may drive a little bit higher growth to the bottom line, so you can list all those variables. The other factor, which is much less predictable for me to give you any guidance on is market conditions. So we act as a principal in this business. Someone comes to us wanting to get local currency into the local bank account that they hold in Kenya or wherever it is. We go into the market and we buy that currency from the local market participants. We actively seek the lowest price and we execute on behalf of our customers. But we are making in that business a bid offer spread, and those bid offer spreads move depending on market environments. And what happened this quarter when you compare this quarter against last quarter, last quarter in certain of our key markets, we had a huge blow out in the spreads. To the extent that we were starting and continue to offer price improvements to our customers, because the spread is so wide that we thought it was inappropriate for us to actually take all of that spread for ourselves. And we've gone back to some of our customers, because these are long-term relationships for us and we've got to be ethical and prudent. We've actually gone back to some of these customers and said, you know what, we're going to actually price you inside the market because the spread is just way too wide. And we started ---+ we thought this sort of phenomenon was temporary. In some market it was temporary, in other markets it persisted and we've actually changed our pricing policy. So we're trying to be responsible, we're trying to build a long-term business, these banks are partners of ours. All of our institutional players are partners, it's how we think about our business. We always think about ourselves as partners with our customers. And so what you're really seeing was an (inaudible) of sort of temporary market conditions which blew our spreads out. So I think you should ---+ and if you look at all the data points we give you and graph them out, I think you will see very clearly how the value per transaction spiked up a couple quarters ago for a couple quarters and that is not sustainable. So if you're trying to model out our business, I think you've got to look at a sort of sustainable or predicted growth rate in revenues, you've got to assume some decline in the average size of the trades and I think you've got to assume a sort of normalized average rate which ---+ and that can move around and I think was exceptional in some of our prior-year quarters. Does that help you. All right. I don't see any other questions. So I think we'll wrap it up. Thanks, everyone. Appreciate it. And we will see you in three months' time. Thank you.

2016_INTL

2017

PRAA

PRAA #I want to make sure that, number one, we get the transition right between <UNK> and I. Although, talking about a transition between two guys who have work together as long as we have, I think we both feel pretty confident about that. Also I want to be around to support <UNK>'s new administration, as it were, especially around this concept of business development and strategy. <UNK> and I foresee that this is a certain position over the next year to 18 months and, after that, we'll play it by ear. There's not a hard drop-dead in it, but if at the end of the day, <UNK> doesn't feel like it's a value-added, then I'll find my way onto the Board. But as long as I can add value, and as long as <UNK> sees it as, indeed, value-added, I'm ready, willing, and able to continue to pay that row. I think it's somewhat less than a full-time role, but it's a pretty significant role and far from a part timer. I probably wouldn't couch it in exactly those terms, but what I'd say is that over the course of the year, as we went through the year, we gained better understanding of what it was that was really driving our collection shortfalls and the amount of the forecast miss that we had in the fourth quarter caused us too really dig into that more deeply. As I highlighted in my prepared remarks, we made some significant assumptions around 2015 and prior vintages regarding whether or not to consider recouping those cash flows and based on we sit now, we've assumed we do not have any recouping of prior cash shortfalls on a go-forward basis. The main thing that drove the bigger allowance charges in the fourth quarter, with regards to the outlook on a go-forward basis, I would say based on that assumption that we've made, barring something really significant that we haven't foreseen at this point, I wouldn't expect any sizable allowances in the US core portfolios on a go-forward basis. It was $0.15; hang on. Just give me one second. Fee income was $14 million, roughly, of the $21 million that we reported for the quarter and, call it, $43 million of the $77 million we reported for the full year. That's right, <UNK>. <UNK>, I'd say that, as we said in the script, it appears to us as though we're seeing some signals, some body language, in some cases, some movement by existing sellers to offer, perhaps, a bit more volume than we might have anticipated at this point in time. We are believing that it might be appropriate to extrapolate some of those moves, both throughout the year and perhaps to other sellers as well. We'll see if that, indeed, comes down the pike, but we've seen some, from our perspective, a positive movement, albeit subtle, thus far in Q1. It's still a small business for us, <UNK>, although, obviously, coming from nothing, it's growing substantially. It's safe to say we believe very strongly that it's an interesting market for us to be in long term. We couldn't be more pleased with the local partners that we are in business with. They're really smart guys, and the deals that we've purchased thus far are performing at or better, or in some cases much better than expectation. So for us it's so far, so good, but it's a new geography and so we don't want to get overly excited. Obviously, there's also a volatile currency down there. All of those things play into how comfortable we're going to be growing that business. But thus far, as you observed, it's been a good place for us to invest. Yes, I would agree with your thesis around both availability of capital, as well as significant amount of cash generation by the business on a normal basis. We're always in discussions with our banks and we're always connected with the capital markets and thinking about different alternatives for raising capital and we'll be ready when the opportunity arises. The thing to keep in mind that it's not going to be a light switch on/off, that's going to catch us off guard. We'll have advance warning before significant volumes are coming to market. No, <UNK>, I don't think so. It is tough to exclude the media impact, by the way. That's a big deal for us. But from our perspective, we're just dealing with mostly the shortage of reps and how we're working through that process. But the consumer themselves seem to be not changing a lot. I would say, we are booking on payment plans at record rates, actually. It all feels pretty good from a health perspective. No, I didn't give a target. What we're doing is we're layering on reps, we are analyzing call quality and looking at some other call metrics that we add folks, so I didn't provide an update, other than we do have 2,200 seats and about 1,700 FTEs and we can always part time shift work folks if we ever got to that level. Remember, they collect cash too. I don't have any of that data with me, but I anticipated a question like that. Just keep in mind that when you add these folks, it does take a while to ramp them up. They are revenue-producing people and incremental to the overall Company. Just keep those things in mind as you're modeling. That's a great question. No, I think I'm actually generally very, very pleased with the reps we've been sourcing. There's also ---+ I had something in my script and took it out, but I'm going to say it anyway. It's actually changed the tenor on the floor. We're buying a lot of new accounts. We're hiring a lot of people. We've had some Management changes and there is a real, real interesting vibe going on the floor as well. It's a bit of a contagion, so to speak, but back to your question, the reps we're hiring on, I'm very pleased with. They're ramping up as we might expect. Hi there, <UNK>. This is <UNK> <UNK>. I think generally the market in Europe, whilst it remains strong in terms of supply, remains competitive in most of the markets now. One of the things that <UNK> referred to was consolidation in Europe and what we're seeing is a handful of competitors expanding internationally across those markets and looking to grow rapidly. It's difficult to say there are some markets where the returns our different to others. What we are doing is we're finding opportunities with vendors that like our proposition. That's enabling us to still continue to invest at what we think are decent levels. The UK market has been competitive for quite a while now. I'm not sure that, that ---+ I'm not sure which one you're referring to but there have been a number of acquisitions of UK platforms by these handful of competitors over the last few years. We've continued to invest decent numbers in the UK. I expect it to continue as it has been, I'll be honest with you. In fact, we see a decent supply as we go into the first half in the U K. The answer is, yes, <UNK>. I'm looking at a chart in front of me. Just for the sake of everyone on the call in case they're not familiar with it, there was this Path Act there where the IRS was holding refunds for two weeks anyone who'd claimed an earned income credit or a childcare credit. If you look at the charts, between what we've experienced so far in the quarter versus what we experienced in the last two years, you can see it very, very plainly, very plainly, and over the last handful of days, it has just leapt off of the page and coming back in line. It's definitely there and whatever you read is accurate. There's a lot of money flowing at this point. Yes, I feel comfortable saying we're seen pricing improving, probably since the second half-ish of 2016. We've been monitoring some of those same things related to our European funding structures, changes in the UK and other jurisdictions. I'd say probably for 2017, we're thinking somewhere in the 34% to 37% effective tax rate, and possibly towards the higher end of that, the higher end of that range. There's some legislative changes that'll go into effect with regards to interest rate deductions in the UK this year. We're anticipating that will have some impact on taxes related to UK, in particular. But again, we operate in quite a number of different jurisdictions in Europe as well as having a big America's business. We're a global Company, so we can get lots of put and takes in the effective tax rate. <UNK>, I expect to see them in court in May. As best as I can tell you, everything is still scheduled and we're going through the process and most of the stuff is out there in the public. You can read it. I would expect us to (technical difficulty) in May. Thank you, operator. Thank you all once again, for joining our Q4 2016 earnings call. We look forward to speaking with you again next quarter. Good night.

2017_PRAA

2016

PTC

PTC #I think at this point, we have a lot of data points to show that we are winning with our subscription offer. We're competing competitively, we're competitive in many of the deals, especially the large deals, and 90% of them were subscription. Thanks, <UNK>. Great, thanks Kate. And I'd like to thank everybody for joining us on the call. As Andy stole my thunder a little bit earlier, the one programming note is that we're going to be hosting that webcast on November 11, 2016. It will be at 11:00 Eastern time ---+ November 8, 2016, sorry, at 11.00. Look for details on the coming days, on the details. We look for you to you join us on that call. If not, we will update you on our Q1 call in January, and with that I'd like to toss it back to <UNK>. I just wanted to say thank you to all of you, for your support. We feel good about the business. I'm looking at Barry here, and the way we changed the strategy and the strategic positioning of the company, and the way we pivoted into IOT and analytics, in a way that is supportive of the core business, it is really just phenomenal. I think about how we're changing the business model, and I'm looking at Andy, and the progress we are making on discounting, and business model, and cost containment, margin expansion, it's really phenomenal. The one problem I had a year ago was execution in the core business. And Craig isn't in the room with us here, but my God, that man has made such a difference in terms of improving our execution. He is like General Patton, rocking all of us here. Things get done and they get done well, and we have seen the results. So I'm very pleased with the progress the Company has made in the last year. It's really been a phenomenal year. I'm sorry the Wall Street Journal didn't see it that way, but I'm confident that all of you here on the call do, and I certainly appreciate your support. Thank you and have a good evening. Good-bye.

2016_PTC

2016

BDX

BDX #Yes, sure, <UNK>, and thanks for the question. First off, in this quarter there was some timing in the R&D spending, it was that. We knew it was going to happen and of course that timing, that money is going to get spent ---+ I'm talking before the Medical Device Tax in the back half of the year, it's the timing of things like clinical trials and whatnot. And so, but in addition, the money that is being spent on the Medical Device Tax is being spent in both segments, and it is a combination of some new things that we are doing. But mostly, it's current strategies where we are accelerating those strategies, where we had platforms where we could push them faster. And part of that, which is a bit new for us, is moving the informatic side of things quicker. So you can think of major platforms going faster, and an informatics piece on top of that, both sides of the Company. Yes, so good morning. So if you look at the liquid cytology business in the US, as you mentioned we're really starting to see a flattening of that business. So the interval testing, we think we're mostly through. Outside the US, we're actually seeing strong double-digit performance. And then the entire platform, both in the US and ex-US is being helped by the total automation we're doing across both our FocalPoint and our Totalys system, so complete control of the sample from collection through the result. So that's driving a lot of growth, both in the US and ex-US for us. Thanks, <UNK>. And on Pyxis ES, so we're about 25% of our base business has been converted over to ES. And so, we continue to see strong demand there, and we still do have certainly quite a wide runway ahead. Okay, thanks for the question. Okay, <UNK>. Yes, just you're not wrong, but at this point in the year, the impact that it has is still within the range of guidance that we gave. So we had a fairly broad range, and it's still in that range, so arguably it's the higher end of the range. Okay, and <UNK>. And <UNK>, this is <UNK>. So the 25 is not kind of a straightforward answer, and the fact that it's really a combination of ---+ just think about ---+ of course, we couldn't submit all files simultaneously so it just takes time to work through those. So think about those just being ones that we submitted more recently, and didn't work through certain regulatory processes. In other cases, it's a combination of, they're in certain countries that have longer registration. China has longer registration processes than most of Europe, as an example. And then, the other one is that certain product categories, so ChloraPrep for example, is registered as a drug in many markets, particularly let's say, Latin America, it's registered as a drug. Those typically sit in the regulatory process longer than medical devices. So it's a combination of those three items, not one thing specific, and not unexpected at all. It's right in line with our projections. And you have to pull together the data for these files. And so, certain product lines that may not have done that kind of clinical trial work for China, so we had to do some pre-work to get them into the funnel. So that's all that is. Okay, thanks very much. Thanks, <UNK>. Sure, VIjay. So what I'd say is you really have to look at the EPS guidance in two buckets. One is the FX inside, and then the FX impact. So what we did, is we did flow through everything on the FX impact, and that was the $0.13. On an FX end basis, you're right. We were up around $0.14 to $0.16, but we see that as timing. And the timing buckets are the Medical Device Tax spending, which we know where we want to spend it, but because of the timing don't forget it, happened in January, and we couldn't ramp that quickly. So that past quarter, we really got a lift from that, but we fully intend to spend that in the back half of the year. And then you had timing on the tax rates. So the tax rate was lower than our 21% to 22%, and that's just lumpy throughout the year. We expect that to fall back within the rest of the year. So you had that piece. And then we had the pull forward of some of the revenues from the third quarter to the second quarter, and the impact of that. So all of that accounts for the bulk of that $0.14 to $0.16 on an FX end basis. The other thing I'd point out, is we actually raised the FX and EPS guidance last quarter by $0.28. It was lost from the standpoint, that at that point FX was getting worse across the world, and it offset that, but the FX end was raised prior. So you really got to think about it in those two buckets. Good morning, <UNK>. Sure. Sure. So <UNK> will address those. <UNK>, do you want to start with diabetes. Sure, this is <UNK>. So we haven't specifically sized the opportunity on infusion sets. But I think as we've said all year, we were expecting to get the product into some early stage release in a controlled patient group this fiscal year, and see more of the impact in the diabetes care business in FY17. That remains unchanged. So we remain very excited about that opportunity. It's of course our first venture outside of the pen, needles and syringes for the diabetes care business, moving into a fast growing market with a market leader, Medtronic. And we're equally excited about the product technology and what it can do to help patients, and the partnership and what the power of us working together can do, to make an impact there. So think about solutions, so as we've, of course, shared before, we have announced a solutions partnership with Fresenius. We are looking at launching that, not necessarily now in Q4 of 2016, but more in early FY17 just based on regulatory approval time lines there, but that does continue to move forward. And again, we had not shared a specific number there, but we said it would certainly make up for any reduction in BDRX sales that we had planned over the coming horizon, and that remains right on track. Okay. Thank you very much for your participation on the call today. It was a real pleasure to talk about a very solid quarter, and to raise our EPS guidance. It was also a pleasure to talk about the progress we're making on the CareFusion integration, and progress with those businesses, the synergies, the team's in place. And then, lastly the strategic partnerships that we're doing including the Parker Institute relationship, the new products that are being launched. We didn't spend a lot of time on the life science business today. There weren't that many questions, but with BD MAX, with Kiestra, all these things happening over there, very, very exciting, and of course, the new products on the medical side. So thank you very much for your time, and look forward to updating you next quarter.

2016_BDX

2017

NKE

NKE #Thanks, <UNK> and <UNK>, and hello to everyone on the call We are pleased with the results that we delivered in Q3, and, at the same time, we are not satisfied We are pleased, because we continue to strengthen the fundamental drivers of NIKE’s long-term revenue growth and earnings potential Our financial strategy has three pillars; delivering strong revenue growth; expanding profitability, and generating high returns on invested capital In Q3, we delivered revenue growth in line with the guidance that we communicated 90-days ago We drove strong double-digit currency-neutral growth in aggregate across our international markets, which now represent more than half of our global portfolio, and we re-positioned NIKE for sustainable, profitable growth in North America long-term We also expanded profitability, well in excess of our guidance, with EPS growing 24% Finally, we delivered return on invested capital of over 33%, and at the high end of our targeted range, by continuing to edit within our core spending, to amplify more focused strategic investment in areas such as product innovation, digital commerce and membership, while also more tightly managing inventory Over the past several years, NIKE has become even more fit for growth On a currency neutral basis, we have built a more efficient and profitable business model We have sustained momentum in the drivers of full-price gross margin expansion We have systematically reduced SG&A as a percent of revenue And we have significantly expanded our currency neutral EBIT return on sales But, we are not satisfied We are clear-eyed with respect to the challenges we have faced and opportunities we have not fully capitalized upon in the short-term We have and we will continue to attack those opportunities with urgency We are also obsessing over the triple-double that <UNK> referenced: doubling the cadence and impact of innovation, doubling our speed to market, and doubling NIKE’s direct connection to consumers in the marketplace That is the formula we are employing to fuel NIKE’s next horizon of accelerating growth As for innovation, we have more than doubled our investment in innovation of late, and you will now see us double the flow and impact of innovation we bring to market, immediately beginning in Q4. We also see tremendous growth potential in doubling our direct connection to consumers NIKE’s Direct to Consumer business continues to grow much faster than the broader market, and NIKE-branded concepts operated with our strategic partners continue to grow faster than undifferentiated multi-brand stores In short, NIKE always wins when we create a home field advantage, that brings together a curated assortment of our products, a NIKE-branded environment, and direct, personal service of the consumers To be clear, this opportunity is not simply about branded space It goes well beyond We see the opportunity to leverage NIKE digital membership to elevate personal service broadly across the marketplace And, today, NIKE digital members already spend nearly two times what other NIKE consumers spend per transaction Identifying, and then aggressively seizing upon these compelling growth opportunities is what we mean when we say NIKE is on the offense, always But, before I speak to our go-forward outlook in more detail, let’s take a few moments to reflect on the results that we delivered in Q3. In Q3, NIKE, Inc revenue increased 5% On a currency neutral basis, revenue grew 7%, led by continued double-digit growth in Greater China, Western Europe and the emerging markets Third quarter diluted EPS of $0.68 increased 24% versus the prior year, driven by revenue growth, SG&A leverage, higher other income, a lower tax rate, and a lower average share count Gross margin contracted 140 basis points in the quarter Full-priced average selling prices continued to expand However, margin contracted overall, due to higher product costs, FX headwinds, and off-price sales Demand creation decreased 7% to $750 million for the quarter, as our fiscal year spending was front-loaded, due to significant investment around the Olympics and European Football Championships Operating overhead decreased 1%, as our continued strategic investments are being funded by productivity gains within our core operational spending The effective tax rate for Q3 was 13.8%, compared to 16.3% for the same period last year, primarily due to a reduction in tax reserves and an increase in the mix of earnings from operations outside of the U.S , which are generally subject to a lower tax rate As of February 28th, inventories were up 7%, driven by a higher average cost, due primarily to product mix and to support growth of our DTC businesses Wholesale inventory units were down 3% Next, let’s turn to a few of our key operating segments North America revenue grew 3% on both a reported and constant-currency basis, as we continued to see balanced growth across both footwear and apparel, highlighted by another quarter of strong growth in NIKE Sportswear and the Jordan Brand EBIT growth of 9% outpaced revenue growth as gross margin expansion and SG&A leverage delivered increased profitability As <UNK> detailed, we continue to make great progress in North America, rebalancing supply and demand, reigniting momentum in our Basketball business, and sustaining momentum in Sportswear That said, the North America retail landscape is not in a steady-state Digital disruption and other dynamics are resulting in more aggressive promotional activity than we expected 90-days ago So we are going to remain tight, with respect to the supply that we are putting into the North America market in the short-term, while aggressively driving the initiatives that will reshape and grow the market, and extend NIKE’s leadership long-term Now, turning to our international markets, where we continue to have very strong momentum First, in Western Europe, revenue increased 10% on a currency neutral basis, as we delivered another quarter of strong multi-dimensional growth led by our Sportswear, Running and Global Football categories On a reported basis, revenue increased 4%, while EBIT declined 13%, reflecting the impact of transactional FX headwinds and higher product costs on gross margin, partially offset by SG&A leverage In our emerging markets, revenue grew 13% on a currency neutral basis, led by our Sportswear and Running categories We also saw double-digit growth across most territories On a reported basis, revenue increased 8%, while EBIT decreased 4% as results continue to be heavily impacted by FX Last, but certainly not least, Greater China delivered another quarter of extraordinary results with currency neutral revenue growing 15% We continue to see strong momentum across the business, with double-digit growth in wholesale and DTC, footwear and apparel, and nearly all categories China as a nation is accelerating towards sport, both in terms of participation and passion, and urbanization continues at full-speed With over 350 million Chinese millennials, one of the largest and most important demographics in the world, we believe we’ve just scratched the surface of our growth potential in this important market On a reported basis, revenue grew 9% and EBIT expanded 6% due to strong revenue growth and SG&A leverage As evidenced in Q3, we extended our longstanding track record of managing all of the levers within our global portfolio to deliver strong results in the near-term, even amidst volatility As we look ahead, we will also continue investing and innovating to exceed consumer expectations and fuel long-term sustainable, profitable, capital efficient growth As for our specific guidance, in Q4, we expect reported revenue to grow in the mid-single-digit range, slightly below our Q3 reported rate of growth On a currency neutral basis, we expect growth in the high single-digit range We continue to see very strong growth in our international geographies, ranging from Greater China to Europe to emerging markets In North America, we have made great progress over the course of this fiscal year, solidifying the fundamental drivers of growth We are by far the leading and largest brand in North America with a $15 billion growing portfolio Based upon the breadth and depth of our portfolio, we anticipate that the currently dynamic overall retail marketplace will create both puts and takes in the short-term So we are being appropriately measured with respect to our Q4 financial targets for North America We will keep supply tight, maintaining the strong foundation we’ve created, while we bring new innovation to market and accelerate more direct consumer connections Shifting to gross margin, 90-days ago, we anticipated less Q4 gross margin contraction versus prior year than we have seen year-to-date While we were anticipating greater FX headwinds in Q4, we were also expecting to partially offset that with significant expansion in our operational, or currency neutral gross margin versus prior year Today, we expect the same FX impact that we anticipated 90-days ago However, based upon the currently more promotional environment in the overall North America marketplace, we do not believe it is prudent to target as much short-term expansion in our operational gross margin Instead, we are going to maintain the financial flexibility to ensure that we continue to optimize sell-through Accordingly, we are now targeting 150 to 175 basis points of gross margin contraction in Q4 versus prior year, with the year-over-year variance largely driven by FX As for Q4 SG&A, we expect it to be roughly flat versus the prior year, as we continue to systematically drive productivity gains through our Edit-to-Amplify initiative Other income, net of interest expense is expected to be approximately $15 million in Q4; and, we expect our Q4 effective tax rate to be approximately 22% Note that NIKE Brand futures orders are down 4% on a reported basis versus prior year, and down 1% on a currency-neutral basis As previously discussed, futures are an important part of our operating model, but futures growth is no longer a reliable proxy for revenue growth based upon several factors we’ve previously articulated Illustrating this point, you will see that China futures are growing low single-digits based on changes we have made to our monthly shipment flow globally However, we continue to project strong double-digit revenue growth in China We are in the early stages of our planning for fiscal year 2018, and will provide financial guidance on our next earnings call Today, I'll share some preliminary thoughts We are employing a balanced, three-pronged approach to our planning for fiscal year 2018. First, we will remain appropriately measured Second, we will be sharply focused, attacking the most compelling growth opportunities in the marketplace with speed and agility And, third, we will be on the offense, executing the triple-double that will fuel NIKE’s next horizon of accelerating long-term growth Financially, we are targeting continued revenue growth across all geographies in fiscal year 2018, led by strong growth internationally We also project significant operating leverage and expanding profitability, which on a currency neutral basis would result in earnings growth consistent with our long-term financial model That said, at our investor day in October fiscal year 2016, we communicated that we expected FX to be a significant headwind through fiscal year 2018, as our long-dated hedge portfolio matures and rolls forward And since that time, the U.S dollar has further strengthened against most international currencies At current rates, we project that we will have absorbed $1.6 billion to $2.0 billion of cumulative FX downside over fiscal year 2016, fiscal year 2017 and fiscal year 2018, with the most significant annual impact being in fiscal year 2018. We look forward to putting these extreme FX headwinds behind us, as we exit fiscal year 2018. In the meantime, we will continue to deliver strong revenue growth, and make NIKE a much more efficient and profitable enterprise on a currency neutral basis In closing, we will continue to manage all of the operating levers within our portfolio to deliver strong performance in the short-term At the same time, we will remain relentlessly on the offense, investing, innovating and, in some cases, revolutionizing the industry to exceed consumer expectations, fuel long-term growth and create value for shareholders With that, we’ll now open it up for questions Question-and-Answer Session And <UNK>, I’ll take the China question The short answer is, the China futures in a low-single-digit range reflects purely timing impacts As we continue to optimize our management of supply and demand and inventory, one of the opportunities we’ve identified is with the respect to the flow across the three months that comprise a season And so we’ve made some changes that help us better identify opportunities and capitalize on being in stock in the marketplace It also has a benefit to us from an inventory management and capital management perspective We see continued strong double-digit growth in China In no way do the futures reflect any change in our very bullish view with respect to the tremendous performance that we’ve had, and we continue to expect in China Yes, well, these cushioning systems, all three of them, and in fact there’s four If you listen carefully, there’s a fourth comfort cushioning system in the works These have been in development for the past two or three, in some cases, four or five years This is part of our double the investment in R&D, and we’re really seeing that investment paying off One of the most important outputs of performance innovation for NIKE is in the area of cushioning So we see – some of this work actually led up to Rio The top three finishers in the marathon were all wearing the Zoom X technology, and also in the Olympic trials leading up to the Olympics So you’ve seeing bits and pieces of some of this but not out in the market at scale So we’re basically ready to launch the product, excited about every one of the cushioning systems They not only create a new level of performance and incredible breakthroughs in the case of the Zoom X, but they also create a whole new aesthetic, which is translatable not only into performance product, but also to the street So the leveragability and the scalability of these technologies is tremendous The challenge we have frankly is to make sure that we’re – the focus is on these and we scale these in a way that we can really tell the stories independently But together, they form what is truly – and I mentioned it, a cushioning revolution for NIKE and the industry As a product geek, I am incredibly excited about what’s coming in the next six months I’ll just add couple of other things I would just say that what we see from the marketplace is consumers want both great performance, and they want style, and they want those two things together And I think a great example of that is the product that we’re actually just launching, which is the Air VaporMax, which you’ll see that there are actually different variations to that product; one which is a very clear high performance product, the running shoe and we’ve also got a laceless version, which actually appeals to more of a style perspective But the shoe in and of itself is both great performance and it’s also superiorly stylish And so that is what we believe the consumer wants So when we bring new platforms, you will see us bring more variations, that gives the consumers more choice on the thing that they actually love all the time Go ahead It’s a great question <UNK> To be clear our top priority is investing to fuel long-term growth So that’s where the dialogue with respect to SG&A or capital expenditure starts at NIKE But we’ve identified is in over time, our growth has allowed us to invest appropriately, and in some cases in a very ample, maybe even a little more than we necessarily needed to And I would think about this way We have existing and new truly differentiating capabilities or competitive advantages in NIKE Those include things like product innovation, design, digital, brand marketing, including sports marketing and our supply chain, especially the elements of the supply chain that <UNK> spoke too, the ones that we're looking to get greater speed out of, in service to the consumer That’s where our focus is on investment The other functions that we have within the Company are certainly important, but they’re not differentiate capabilities for NIKE and we look at those other functions as functions where we can optimize our spending, not just for purposes of saving expense, but it actually makes us more streamlined and nimble as an organization So in some cases, our editing is aligned with shifting business priorities, or with existing business priorities, and in other cases our editing is really a form of zero basing in areas where we believe, we have the opportunity And that’s what I would call from the financial perspective, my version of <UNK>'s Edit-to-Amplify initiative from a product and business perspective And we believe that we continue to have opportunity in this regard Again, if you exclude FX, we've made ourselves much more efficient and profitable over the last couple of years And we still see opportunity ahead in that regard Hi, <UNK> It’s <UNK> I’ll start on that one The first part of your question was about what we’ve been talking about over the last several quarters, and we have made great progress in that regard You obviously saw revenue growth and margin expansion in the quarter with inventories declining That is pretty squarely in the zone of effective and efficient supply and demand management So we have re-solidified our foundation in that regard As <UNK> and I think <UNK> to some extent touched upon, we’ve also solidified the fundamental drivers of growth in North America <UNK> talked about all of the work we’ve done to reignite momentum in Basketball We have continued momentum in Sportswear So what we’re referring to when we talk about being measured in the short term in Q4 is the recognition and reality that it’s a promotional marketplace, particularly in North America is, in light of some of the digital disruption that’s going on I think <UNK> earlier referred to there, select channels that are more challenged than others What we’re most excited about is there are dimensions of the market that are tremendous opportunities And so as we move into fiscal year 2018, what we’re really focused on is creating a springboard for accelerated growth in North America, again, through the triple double And in the marketplace, obviously, one of those ---+ the three doubles is doubling our direct connection to consumers through DTC and our wholesale strategic partners Frankly, we’re probably more bullish than ever on the long-term growth projection in North America And why I say that is it’s becoming even more crystal clear to us that the strategies we’ve been employing to elevate the experience, the personal service of consumers in the market, digital, we’ve been leading the NIKE com but also membership, we’re seeing much stronger growth in the dimensions of the market where NIKE is connecting with consumers Of course, we connect with consumers in our Direct-to-Consumer business We do it through concepts like House of Hoops, with Foot Locker And as we said, in each of those dimensions, and when you get down to purely digital membership, we’re just seeing the growth outpace or the sales per transaction outpace And so we see our way to incredibly strong growth in North America long term There will be puts and takes in the short term Clearly with innovation and disruption, comes both puts and takes I think by analogy, you might look to greater China Greater China is a market with extraordinary growth, by really focusing on aligning product, a NIKE-branded environment, both owned and through partners and digital to fuel sustainable sustained growth So as you probably know <UNK>, and for others, we can't eliminate the impact of foreign exchange And as you know, over two years ago, we saw significant strengthening of the dollar pretty dramatically and quickly against a lot of international currencies, particularly the euro And we've seen a lot of volatility over the last couple of years But largely dollar strengthening Our hedging strategy is largely using longer dated So 12 to 24 months out forward hedging to mitigate and delay that impact So when I spoke to the $1.6 billion to $2 billion of impact over two years, on a rate basis you see those moves happened in the foreign currency impacts immediately Our hedging strategy essentially steps us down or frankly in the opposite would steps us out, but steps us down to that impact The largest single annual impact will be in fiscal year 2018. That said, it hasn't been insignificant in fiscal year 2016 or 2017, it is actually ---+ the FX impact has been a double-digit negative headwind on EPS growth So while we continue to deliver strong EPS growth, what we're actually most proud of is that excluding foreign currency, that would be double-digit higher in terms of our growth So that hopefully gives you a little bit more dimension, but we're not providing a specific forecast as to the impact of FX on fiscal year 2018 today Absolutely And we have certainly done that over fiscal year 2016 and 2017. First and foremost is growth We are obviously a growth company and in fact with attacking compelling growth opportunities in the market Long-term obviously is our focus but in the short term as well I'd say from a margin perspective, the underlying drivers of gross margin expansion are very strong and we see those being very strong in fiscal year 2018 versus fiscal year 2017, again on a currency neutral basis I mentioned that we continue to see opportunity to become even more fit for growth from an SG&A perspective through Editing to Amplify And what I would say is most importantly for us in the short term is how we're executing against our long-term strategy And that's what we’re going to be most focused on as we finalize our plans for 2018 and as we move through 2018, as executing against Triple Double that <UNK> referenced

2017_NKE

2017

AMGN

AMGN #Thank you, <UNK>, and good afternoon folks You'll find the details of revenue starting on slide number 10 of your deck Strong and continued volume growth by Prolia and our more recently launched brands like Repatha, KYPROLIS and BLINCYTO helped offset declines in our mature brands Excluding the impact of foreign exchange, sales growth was flat year-over-year as reported sales declined 1% declined 2% year-over-year, and sales outside the U.S grew 5%, excluding the impact of foreign exchange, driven by a robust 8% volume growth Let me start with Prolia Prolia continues to deliver exceptional performance after being on the market for over seven years Prolia grew 22% year-over-year with double digit volume growth in all markets, primarily from share gains Quarter-on-quarter, we saw a slight decline, which follows the typical pattern for Prolia in the first and the third quarters Prolia, as Bob said, is a unique asset with a very strong value proposition There remains a large underserved osteoporotic population at risk for fracture These fractures often cause loss of independence for patients and place a large burden on caregivers and society We remain focused on improving diagnosis and treatment rates in order to bring Prolia to more of these patients in need With share around 20% in most markets, there continues to be a lot of room for Prolia to grow and we are investing accordingly As I mentioned before, there are some countries such as Australia, Switzerland and Ireland with better diagnosis and treatment rates for osteoporosis where Prolia has a 50% share or better These are countries that truly understand the societal costs of nonintervention KYPROLIS grew 13% year-over-year in a competitive multiple myeloma segment with several new entrants Outside the U.S , we continue to see strong growth from both existing and new markets KYPROLIS is a unique product in a competitive position having two compelling sets of overall survival data in relapsed multiple myeloma patients Our most recent market share data in the U.S shows an improvement in new patient share in second line setting This is an important leading indicator for sales growth into future quarters KYPROLIS also continues to have a prominent position in the NCCN Guidelines for all lines of therapy XGEVA declined 2% year-over-year, primarily due to a shift in timing of purchases from some larger end customers We believe XGEVA's positioned for growth in 2018 with the addition of a multiple myeloma indication Neulasta declined 6% year-over-year due to a shift in timing of purchases by some larger end customers as well as a small decline in the number of myelosuppressive chemotherapy regimens The Onpro kit grew share to 56% of Neulasta units and we expect to continue to drive additional Onpro adoption into 2018. Our most recent in-market data shows that Onpro drives better adherence to therapy, which leads to lowering of rates of febrile neutropenia, and in fact lower rates of hospitalization Simply put, Onpro is a better value to the healthcare system and this is an important point of potential differentiation for the future With NEUPOGEN, the impact of short-acting biosimilar competition was consistent with prior trends We exited the quarter with 41% share of the short-acting segment and we have continued to maintain pricing discipline despite the competitive pressures NEUPOGEN has faced over the last several years Enbrel sales declined 6% year-over-year, in line with prescription trends We expect these prescription trends to continue into 2018. Segment growth year-over-year was in line with last quarter across both rheumatology and dermatology segments, confirming the rebound from the slower growth seen in quarter one Enbrel lost less than 1 point of share in both segments in this quarter, consistent with prior trends Quarter three saw a low single digit year-over-year decline in net selling price Overall, we expect there to be a very slight year-over-year decline in net selling price for the full year 2017. Most formulary decisions for 2018 have now been finalized and we expect the net selling price trends of 2017 to continue into 2018. You may recall that we noticed some potential excess end-user inventory at the end of quarter two End-user inventory levels are estimated by deducting the value of prescriptions from the value of wholesaler shipments to end customers Based on this data, we did not see a depletion in the third quarter And if prior fourth quarter patterns hold, we would not expect a depletion in the fourth quarter either We continue to make investments to maximize Enbrel's long-term value such as the imminent launch of our Enbrel AutoTouch, a reusable auto injector that is ergonomically designed to meet the needs of rheumatoid arthritis patients Lastly, we look forward to extending our information franchise into Europe next year with the launch of AMGEVITA, our biosimilar to HUMIRA Aranesp saw modest declines of 3% year-over-year We had a small unfavorable impact from foreign exchange and unit volume declined slightly globally EPOGEN declined 21% year-over-year The primary driver was lower net selling prices, in line with quarter one and quarter two as a result of our extended DaVita agreement In the third quarter, we did not see any underlying changes in the EPOGEN business, did have some unfavorable inventory changes which added to the year-over-year decline Sensipar increased 10% year-over-year, primarily due to net selling price We've now launched Parsabiv in over 10 countries in Europe and our partner ONO has had a very successful launch in Japan We're preparing to launch in the U.S when CMS reimbursement code for Parsabiv becomes effective on January 1, 2018. Now to Repatha Our cardiovascular team continued its strong competitive execution, reaching 60% of total prescription share in the U.S and 57% in the EU. In the U.S , new to brand share, which in my mind is a forecast of future sales, in the U.S reached 74% Sequentially, our Rxs grew by 20% in the U.S , however, sequential sales growth was tempered by changes in inventory and accounting adjustments that benefited the second quarter We continue to work hard with payers to improve access for appropriate patients And we look forward to the FDA's priority review of Repatha's cardiovascular outcomes data, which will allow us to start promoting Repatha's ability to reduce heart attacks and strokes with both physicians and patients in December this year Cardiovascular disease continues to be the number one cause of death and disability in the world and it's a top priority of Amgen to ensure that appropriate patients have access to Repatha So in conclusion, we are focused on a strong finish to 2017. As we prepare for numerous launches in 2018, which include our Repatha outcomes label, the Enbrel AutoTouch device, Aimovig for migraine, Parsabiv, the XGEVA multiple myeloma indication, as well as large opportunities from our biosimilar franchise Let me for a moment stop and say thank you to all the Amgen staff, who have worked so hard and tirelessly this quarter to get our important drugs to patients around the world And now let me pass you to <UNK> So, Chris, this is Tony Clearly, I'm not happy with 56% If I look at the product value that this thing brings in terms of enhancing patients' ability to go home, the value to a large institution in terms of how they treat patients, we will continue to drive hard to increase that share beyond 56% Okay, Matt, so Tony, let me respond there So, the market share we've achieved to date has been in the presence of a competitor So as I think about going forward, we will continue to be competitive And I think getting more and more patients on Repatha is our objective, which we've been quite successful with We are working extensively with payers at the moment in terms of improving potentially the utilization management criteria and working on trying to reduce the onerous bureaucracy that takes place and frustrates physicians at the moment We look forward to being able to pull some of these things through potentially in 2018. So, <UNK>, clearly we think that the market in the beginning will be a branded biosimilar market And therefore, the value we bring as an organization about the quality and the continuity of our supply is really important The relationships we have with large institution, with small community clinics is really going to be important as well So we will focus very clearly upon our relationships of the past, our skills of the past, as well as the value of the product we bring to market Okay <UNK>, so as I've said, the end-user inventory is a triangulation we do in an attempt to give you guys as much visibility as possible about what we know to allow you to run your models But fundamentally, we do the calculation based on what the Rxs are in the marketplace, which I'm never 100%, minus what we know our wholesaler have sold to the end users and the balance we assume is an inventory build When I look back five years, I've never seen an inventory burn in the fourth quarter, so we're making the assumption that there wouldn't be an inventory burn this fourth quarter as well As regards to 2018, as I said in my earlier comments, most of our contracts have been negotiated, although that doesn't mean that there won't be negotiations that continue going forward during 2018, but we do expect the net selling price for Enbrel, the trend you've seen in 2017, we expect that to continue to 2018. So we are bringing Parsabiv to market based on the clinical data we have at present, right So by definition, secondary HPT is a very difficult thing to treat and adherence is a real problem I think we have about 150,000 patients on the drug at the moment which is only about a 26% penetration The head-to-head data we have shown great levels of efficacy of Parsabiv and without doubt in our mind, we will see a better level of adherence as physicians are back in control All feedback we have had to date from nephrologists in the marketplace has been very good They are looking forward to having this drug available So whether it's a switch or replacement or usage during a treatment period will be dependent upon the physician or the dialysis unit in terms of their guidelines So this is Tony Thanks, <UNK> I just came back from the International Headache Conference (sic) [International Headache Congress], which was in Vancouver, where I was meeting with a group of key opinion leaders and individuals who run headache clinics together with me with my counterpart from Novartis, Paul Hudson So he and I, we're working this together So as we think strategically, the two organizations are doing a lot of strategic thinking together We both jointly agree that we probably saw more enthusiasm from this set of neuro physicians than we've ever seen in many other physicians in other congresses People are talking about this is the first time they are being able to potentially prescribe a migraine drug for migraine patients in two decades So I came away feeling much more positive about the scientific understanding, the clinical need and the large population that is waiting for this The work we've done at the moment with migraine bloggers and patients who are suffering from migraine has also been very beneficial We understand much better now the patient's journey, the importance of the work we have to do with patients and their willingness to work with us to spread this good message once we have our drug approved Obviously, we continue to work with payers in strategic discussions, but we haven't made any final decisions around pricing as we go forward Sure, <UNK> So I think first of all, the magnitude of the market is different, right? In the U.S , we estimate about 3.5 million patients right now are being treated for prophylactic treatment of migraine A lot of those patients fail A lot of those patients go off treatment because of side effects A lot of those patients find the treatment is not effective I think we believe that we will clearly be positioned for patients who failed existing therapy And last but not least, I think patients are much more aware of the disease This is a symptomatic disease When you have a migraine, you're very much aware of it So I think patient mobilization in terms of their voice around the need to have access to drug is going to be important The value these drugs bring to the marketplace too, when you think about how debilitating migraine really is in terms of stopping people from going to work, preventing people from being mothers or caregivers, there is huge value to society to allow these people to get back their independence and to become normal citizens again So we clearly believe that having a single J-code is not what you want, right? If you believe that a biosimilar has to be a decision made by a physician, you want clarity around each single product has to be able to reflect in the marketplace So we're working hard to ensure that we have actual J-code by product as we go forward On the pricing one, I'm not quite sure what the competition is doing and that's their decision Yeah, I don't think any of the inventory movement had anything to do with the hurricane Most of the discrepancies were as a result of contracts ending early and buying in that took place in the second quarter which would normally happen in the third quarter There was sufficient inventory both in our supply chain here as well as in the wholesaler supply chain during this period I think if you were at the ESC recently when we presented some of the subcuts of the Repatha outcomes data and we looked at the cohort where you had patients who entered at LDLs below 70 and how as you drove LDL down to levels way below 70, you actually got a higher reduction in myocardial infarction and reduction in stroke, and our data alone showing up to about a 33% reduction in MI I can't understand why you wouldn't want to do anything other than drive LDL down as low as you can So our drug does that, other drugs don't

2017_AMGN

2017

MPWR

MPWR #Sure. <UNK>, thank you very much for the question. As we look at 2017 and 2018, certainly going into the Kaby Lake, we benefited significantly by having the reference design, and we've been able to see a lot of very good traction for our power solutions. Because as we mentioned in the script, the efficient overall efficiency and the small form factor. So as we look at the current year, we continue to see the similar growth rate as we've experienced in the previous generation of Intel products. Now as we look out to the product, which I believe you are referring to, of Intel's next generation, Cannonlake, which I believe may come out at the end of this year or in the early part of 2018, we go from not only being a reference design, but also, we have been designed into their core product, which is a significant enhancement over our previous position. So we remain very optimistic and that relationship for the high-end notebooks. <UNK>, <UNK>. Let me add on. I'm very aware, like any other investors, that notebook is associated with lower margins. And however, we develop based on the QS Mod technology. We developed those products and these are very unique ones, and we're only focused on size constraint and requires ---+ mobile longer runtimes, which is a very highly efficient, and also it is a time to market, because our products it is very easy to use. So we only focused on those high end markets. As I see the mobile market segment, it's only one of the product lines, and we're not really concentrated on it. We really focus on the balance to growth in the overall MPS. You mentioned exactly right. All these ---+ all the other market segments, MPS couldn't within the industrial, even auto and medical, and for some of the products segments, so we could not address it. And we think the long haul, the high-voltage SOI is the best way. So it took us a couple years to develop that technology, and the first products, the first few products will be in the medical market segment. Both, actually. This product is implemented in the new foundry. There are a number of opportunities that we are designed into, in automotive. I think that our initial footprint, when we started out in the area four years ago, was definitely in the infotainment, and now we have moved into any of the lighting systems, a lot of the systems that are either in the body or designed into sensors. We are into some of the light ADOS areas. So I don't think that we are necessarily restricted in any way, and that I think we have a broad set of offerings for automotive. And as we referenced, we've had design wins and a lot of momentum that we expect to continue out into 2018 and 2019. I think with server, we feel very positive and optimistic, and that optimism is due to a lot of the reference designs that we have, in addition to the fact that in the next generation, Purley, we are going to be not just increasing in the number of OEMs that we will be working with, but also, we will be increasing the dollar content, going from something in the mid-teens up to the high $40 on a per-server basis. So, we see as the rollout occurs here in the second half of the year, that we should get some good momentum, and that we really should see some sales gains occurring in the early part of 2018. I think to begin with, on the servers, this is an area where we had essentially zero market share just as recent as a couple of years ago. So this is almost a continuing Greenfield opportunity for us. Obviously, there is a couple of very dominant players in this market, who are very well established as far as their relationships, as well as the technology. The feedback that we've been receiving, particularly in the area of cloud computing, that we are most interested in being able to take advantage of, has been very positive. We think that we have unique offering that sufficiently differentiates ourselves in order to be able to get the design win, and also to command very attractive ASPs and margins. I think in an earlier call, that we allowed for the potential of being between 10% and 20%, and again, I think that's a long-term opportunity, and what we want to do is remember there is well-established competitors here, and that we are starting from a very small space. Let me add something, and we can divide into what the market share means. You see, our servers are pretty steady growth, and we will continue to see the acceleration in the end of this year and next year. So which are these areas. A few years ago, our [point and below] product and penetrated into server now is widely adopted, and across the board. Two years ago, we introduced electronic fuse, and now became almost a sole-source for some for the first tier server makers. And from core power, we penetrated in the last couple years, we are penetrating the second-tier server makers, and now as we are growing the revenue. And also last year, we penetrated a few first tiers. However we emphasized not on the bulk of the volumes for a common footprint, we are not participating in that, because those are lower-margin products. We only concentrate on highly efficient, high frequencies. So those servers require that, and we believe in the longer term that's the market trend, and we will get a majority, we will get a high percentage of our market share in 2018 and 2019. The programmable modules, we are launching it already and you will see our ---+ we are still selling through the traditional channel, however the new website will be delayed a little bit, but it will be either in March or in April, we will see the new website. If I can add to this, there is a continuum here, where what we are beginning to see is good traction with regard to our pre-designed modules, where they are generating a good amount of money, good amount of revenue on a quarterly basis, and than what we expect to do is introduce the new website, and that will be how we will launch the field programmable modules, as well. I think that everything is tracking exactly as we had hoped it would. We cannot comment too much, because that's in a courtroom in the legal proceedings and that's only thing we said, MPS will defend vigorously our IP. We think in the second half of this year in the server side, the revenue will ramp. Of the design-in activity, even though in the core power, even the core power, we still will gain a significant amount of market shares. And those are not ---+ may not be in the mainstream, but we have an order ---+ I'm talking about other first tiers, but it is a giant step for MPS. I think as far as automotive, that's a continuation of the momentum that we've been generating in each of the last three prior year. Whereas gaming, I think that we have some new opportunities that will be additive, and we should look for those to start to kick in, in Q3 of this year. I think you are familiar with what our long-term model is, and we want to grow operating expenses at a rate that is 50% to 60% out of our revenue growth rate. Certainly in 2016, we have mentioned that we had some excellent opportunities as far as generating new product investment, as well as sales and marketing resources, as well as the investment in our fourth fab. And we expect to continue to invest in all three of those initiatives, albeit at a lower rate of growth in 2017, and we do not plan to add headcount at the same level as we did in 2016. Sure. I think just the way you position that comment is actually very helpful to understanding the dynamics here. We actually have three, four, or five unique opportunities that are coming on stream in 2017. And when we look at the timing and the order of magnitude for them, I think it is good to be a little bit cautious, only because there's certain events that are not 100% in our control, and those that are, we have some level of execution risk. So as we look ahead to 2018 we believe that those elements will all have sorted itself out, and that we will be able to fully capitalize on the ---+ take advantage of these opportunities. Let me add on. To me, the 2017 is done. All the designing, products, I don't think our customers can change it. And it would take extraordinary effort to change that. And so, when the revenue happens, and again, many particularly in the cloud computing, some of the notebooks, some of the servers and some of the data centers and these are depending on our customers. And also the third-party really the product like Intel, the processors. To me, within the plus or minus of a few months. So related to other market segments like auto, this is a very steady state of growth. We see a lot more designing activities in the last couple of years. That will all translate into revenues. Second half of 2017 and 2018. And at the same time, don't forget we still have a high-end consumer business I've seen IoT will grow this year tremendously. Frankly, I see the very similar growth rate, and the Company designed it that way, very balanced the growth, and growth at a high rate. Right. I would have to agree with <UNK> there, that I think that you would be limiting the message to focus solely on servers. We again are very excited about that opportunity, but not at the expense of what we are seeing with the high-end notebooks, what we are seeing with the gaming opportunity. And <UNK> brought to light what we are seeing with appliances through the Internet of Things in high-end consumer. I think if you look at how we progressed gross margin in 2016, we went up 10 to 20 basis points quarter over quarter. So we ended up with the gross margin in Q4 that was 40 basis points higher than the year before. And I would expect a similar trend line to occur. You are right, that a lot of the new revenue growth is at higher margins, and we're also seeing some of the investments we made, particularly with the new fab, that those should also generate improvements to gross margin. But the thing we want to manage first and foremost is very predictable, modest as I said, 10 to 20 basis points increases in gross margin, and to the extent that we can afford to add in lower margin business to accelerate revenue growth, that's really what our business model is based around. Exactly. And including other components down the road. We think this is a really, a game change. We can take a look at other opportunities and the technology that we targeted. So we will be able to deliver single much more cleaner, and also we integrated a lot more than the silicon technology is capable. It is in production now and sales volumes are very little, and very ---+ at the initial stage. And these are mostly for industrial applications, smaller, and also smaller customers. A variety of them, including some of the small customers in the consumer space. We will really emphasize the website, which will launch in March or April. I think that there's also a longer-term opportunity in the communications market for the field programmability, so it is an interesting product family, where we are trying to encourage more these low end, small volume, industrial and consumer opportunities, but at the same time, we see a longer-term opportunity in the wireless infrastructure for the comms market. I forgot about the programmable product for telecom, for the infrastructure. We launched the product and again you can see on YouTube, you can see on our website, you can parallel all of them from 20 amps to all the way to 1,000 amps and in the APAC show in March, we will demonstrate something like a 1,000 amp or 2,000 amp solutions and those are one-of-a-kind. Well received among the telecom companies. I think at this point, and again let's talk about the nature of the market. You've got the gateway wireless, which tends to be a little bit low end and has some characteristics that are similar to consumer. And then you have the higher end network, which as we were just talking, we believe has great promise for us. We are very committed to that part of the market. As we are just introducing the products now, and while the feedback has been very positive from the telco companies, it is like any product release. It takes time, and this tends to be a lumpy marketplace where you can, if you win a large customer, you can have a significant order. But the time it takes to win the trust and win the relationship, and demonstrate the value of your technology, it makes it a little hard to predict. So I think the way we intended to look the comms market physically any quarter plus or minus $1 million, and there will be a point of inflection, but it is probably later in 2018. Very much, I agree. Yes. We made the investments in order to be able to manage the growth for 2018 and 2019 and even beyond that, and it is not just on pure capacity, but as we are referencing, as far as a partner to help us with the new technology, we feel very, very well-positioned. That's a very good question. We are also puzzled. As you have seen MPS started about four or five years ago, have a transitional to more diverse market segments. And last year, I hoped that we had every quarter as consecutive growth, with the lack of Q4. But Q1 Q2, Q3 and Q4 is shy of it just a little. And so obviously the pattern is changing, and what we will see probably this year is a very similar or even, I can hope, I still hope we could have a consecutive quarter to quarter growth for four or five quarters in a row. Great. I would like to thank you all for joining us for this conference call, and look forward to talking to you again during our first-quarter conference call, which will be most likely at the end of April. Thank you, and have a nice day.

2017_MPWR

2017

CPRT

CPRT #You're welcome. No. Go ahead. We do not and in these, and in our strategy we won't do much to these. So every yard is unique. The question whether we fence it is even one that's subject to discussion. If we don't fence it, that means in times of use, we need to have security. So then it's just a math equation, of how many times do you think you will use it and need security versus the cost of a fence. Generally in these temporary, they're not temporary, but these standby locations we'll put in roads, we'll rock some roads, and that's about it. So beyond the cost of the land there's very little capital necessary to put them in a stand by state. I believe it is. And this doesn't provide salvage frequency. It provides the drivers to that decision. And so this is more focused on accident frequency. So the numbers I cited were that the number of paid claims on a year-over-year basis, and this is based on the third quarter of last calendar year, we're up 3.5%, and on a two-year period we're up almost 8%. While at the same time the paid losses were up 10% and 20%. And I guess I will also note that accident frequency reached 6% for the first time. I don't know if it's the first time. I only go back to 2011. And it's never been 6%. So the effect of accident avoidance systems, and some of the new technology isn't being demonstrated in the numbers at least at this point. Yes. That's correct. You are welcome. I would just add some closing remarks from listening to some of the questions. One is that you may want to look into the use of adaptive headlights, and the multiple component bumpers today that exist in the market. There is plenty of research out there that you can find, you named off CCC and some of the other sources that are out there, but there's no doubt that bumper covers being three components, and now being 15 components, and all the complexity in headlights, headlights are now as high as $5,000 for a headlight. Coming from the days when they were less than $100. So we're seeing some big increases there. You may want to research on some of the carriers as well, because they're reporting that in their claims costs, and why their claims costs are up because of that. That increase in cost is increasing severity, and that severity going up causes total loss frequency, or salvage frequency as we call it, to go up. The other thing that I'm not sure that the analysts maybe you understand it, I'm not positive that you fully understand it, is this cost that we have associated with building yards, and asking questions about what would be normal. Right now we have got people in advance of all of this growth, that are finding locations, developing locations, and it takes a number of resources to do that, and then once those yards are ready, we have got to staff them, and turn them on completely before we ever assign one car. And so you have got all of this cost when you go from adding I think <UNK> stated three locations over four years, to ten locations this year, and we believe we'll open up in addition in the calendar year we are in, another plus ten or more. So there are a lot of costs that's associated with that, and then once we start to see some normalcy in total loss frequency and the total losses that are coming in, those yards will have excess capacity. So we don't build those yards for 85% capacity. We'll build those yards for 30% or 40% utilization, and a much higher number of capacity, so that they have room to grow into that. As <UNK> stated, we want to operate the Company at 85% on an average for our locations. So these new stores are being built, these new yards are being built with significantly more capacity than that, and so that, you're going to see some of these costs. And then finally I would just mention in addition there was the towing component that <UNK> outlined, could be a pretty significant component when you're out of a space in a market. You may have to shuttle cars and we have had a few scenarios like that, we're okay with that, we're handling those cars, we're moving them to areas where we have room, and then when we expand all of that cost goes away. So we looking all of this as a upside, we're getting a lot of volume. In the history of my career I have not seen where the volume increases like this, and then goes the other direction. So at some point this may start to shrink. As <UNK> stated, we don't see that currently, but at the point that we start to see volume normalize, we don't think it goes into a negative situation. So we slow down at that point. The adding of yards, we slow down the expansion of facilities, and we process those vehicles as incremental units. So that was it. Just wanted to add that color. Thank you all for attending the call, and we look forward to reporting third quarter. Thank you much.

2017_CPRT

2015

GME

GME #Let me start us off here, <UNK>. I would say that remember that we are a player in digital downloads. You don't do $228 million of digital receipts without having technologies, APIs, relationships and all those things that you need to sell digital downloads. <UNK>, maybe you want to talk about some of the intelligence you have in DFC on this subject. And you know the difficulty, of course, here is that digital is a complex animal and people ---+ every publisher measures it in slightly different ways, etc. So <UNK>, you have something you want to add on this. 2016. Oh, the 2016 titles, right. Yes, I think it's important to remember that the results of the third quarter, while $0.05 below consensus, really for us amounts to about $5 million. With 60% or so of our earnings to be made in the fourth quarter, we believe it's not that difficult to make up that $5 million. And so that's, I think, the principle reason behind the guidance range we gave. That's a good question and you can imagine, <UNK>, for us, a company that's in the transformation of the kind we are in, it's a trade-off every day, how do we disinvest in the core as the core becomes a smaller part of our business and how do we invest in these new businesses and we've had our struggles on some of these. And <UNK>, I don't know if you want to take that, but that's a key question for us and we are attacking it very aggressively. <UNK>. Yes, I think if you were to ---+ let me put it to you this way. The growth in SG&A year-over-year is almost solely attributed to Tech Brands. Obviously, you had some currency impact that work for us, but, ex that, Tech Brands is the bulk of that addition and as we indicated, there are costs that we invested into the openings that impacted the overall Tech Brands numbers. So I would say that the bulk of those costs are behind us. We would not expect to go into next year with the type of store opening cadence that we talked about, <UNK> mentioned 190 plus stores that were opened this year. And so we would not expect to see the same level of investment necessary next year. And of course, with the store base that we now have as we move forward, whatever investments we do make come on a much larger base. And <UNK>'s ---+ just so you know, <UNK>, one of <UNK>'s primary missions for this budget season is to tighten up our core SG&A separate from all the new stuff, how do we tighten up the core videogames business that we know very well, have been at a long time, understand all the different metrics. We've just got to tighten that up a little harder than we have in the past given the fact that it's less a part of our business than it has been. And I think we can do that. Yes, we watch the Tech Brands performance in several categories, including from the core stores that we acquired, stores that were added as whitespace or conversion stores, by type of store, meaning the RadioShack versus other whitespace versus GameStop conversions. We analyze those by year of opening. We analyze each of the acquisitions individually against the pro formas that were created behind them and other than the store opening cadence being slower than we had anticipated and the conversion cadence, we are very pleased with the base stores. We are very pleased with the whitespace stores that were opened in late 2013 and in 2014. We are pleased with the performance of the stores we've opened in 2015; it's just that they are growing slower than we expected and we remain very pleased with the performance of the acquisitions that we've made as well. Again, when we acquire a reseller, we can typically increase the productivity by 30% plus and that continues as we move forward. <UNK>, you may want to share with <UNK> some of the exciting stuff that AT&T is doing because that's a big part of our growth here is our DIRECTV plan and (multiple speakers). Well, I think we can see it by the videogames business with demand through the holiday season. We definitely see it in the Loot category. As you know, with the launch of the Star Wars game and movie, Star Wars collectible products are pretty hot right now, as well as performance within our Tech Brands segment. I think this is something we look at almost every day, <UNK>. So do you want to take that on. We expect Star Wars to be one of the strongest titles for the holiday season, so sort of move beyond launch and think about Star Wars as a brand with the movie coming out. So we expect it to get back towards our ---+ or on track for our expectations. So we think as we talked about the guidance internally as a team prior to issuing the release, we think the guidance is appropriate. I think in terms of new software sales, we are surprised a little bit by it too. As you know, we expect growth in that category. Holiday behaves very differently and we've got to understand ---+ we've been at this a long time. We know that there are certain things ---+ <UNK>, anything you want to ---+. The other thing too is that the installed base on hardware is so much greater than it has been. You've got to believe there's going to be people chasing software for that installed base. They can't all be streaming Netflix. There's got to be some people playing video games on all those consoles. So that gives us a little bit of optimism. I will point out too that our Black Friday ad leaked before the launch of Star Wars and given the pricing that we've got in the Black Friday ad, we are really not clear as to what impact that may have had on our results during the launch. That's a product of the diversification of the business because remember GameStop historically was a lower margin business and we've increased ---+ I think I said in my remarks, we've increased it 400 basis points in three or four years. We think that's very sustainable because it's the contribution of these new categories, which are richer categories. The real question you should be asking is can we reel in the SG&A costs in a way that we can bring more of that margin dollar to the bottom line. Fair to say, <UNK>. Yes, I think that is fair to say. It's also ---+ I think it's probably fair to say that, within the Tech Brands, we are seeing continued margin expansion and that's as a result of the overlap of the Next program. And as it's continued to increase as a percentage of the activity within the store, it is beneficial to margins. It's important to do ---+ the reason we are in these categories, if you go back to our strategic work, the reason we are in these categories is because they are higher margin than video gaming. It would be hard to find categories, by the way, that are lower margin than video gaming by the time you add in the hardware. So Tech Brands, Apple and AT&T, as well as Loot are additive to our gross margin, so that's going to create more profitability. Our issue is we've got to control costs on these transitions. That's really the biggest part of it and the Company is in transformation. We've studied a lot of cases, companies in transformation go through short-term cost pressures like this. Well, I probably should've clarified that if you look at the store counts quarter over quarter over quarter, where the growth is coming from is in the AT&T store base. Cricket and Simply Mac are relatively steady state for us. And so the AT&T stores drive the highest margin. As those grow as a percentage of the Tech Brand category, that is also having a dramatic impact. Yes, <UNK>, what do you think. And many of these titles are not available on the older generation. Hard to say at this point, <UNK>. We are doing a lot of modeling. I don't think we are prepared for saying anything about 2016 yet, guys. Yes, I think the holiday season is important as a data set to incorporate into our modeling and we will be prepared to talk about that, I think, as spring rolls around. By the way, <UNK>, I will say this. I will say telecommunications, Loot and digital will grow very aggressively in 2016. I would say that is not going to change. You will continue to see that. Our business that we are trying to manage is the core videogame business, trying to understand it, because it is, as you know, fairly volatile. Okay. Well, thank you for your support of GameStop. We appreciate you dialing in today and we look forward to speaking with you soon. Thanks.

2015_GME

2015

INCY

INCY #I'm sorry, I didn't really get your first question. Of the 47 patients how many are what. Oh, lung. It's ---+ you'll have to wait, but it is not an enormous number of patients at this point in time. More data will be coming, and we continue to enroll patients in each of these indications. With respect to LFTs, all I'd say is that we're quite happy with the emerging safety profile, and we'd ask you it wait for the detailed data coming. And the last question was not a development question. Yes, hi <UNK>, it's <UNK>. The unit growth accounted for almost all of the growth quarter-over-quarter. We took a price increase in the middle of September, so that really only added about $1 million to the sale, so almost all of it was unit growth. For peristency, we don't have that much data in PV. Obviously we just launched really in January. You can look to our clinical trials. So, if you look at RESPONSE, for example, and the follow up on RESPONSE, you have 83% of patients who are still on drug at about two years. In MF, if you looked at the COMFORT trials, you had 50% of patients were still on drug at three years. We believe that persistency will probably end up being greater with PV, but we still need to accumulate more data. Thanks. This is Rich on the first question. The data that's in the abstract that was released this morning does show that in these patients the rate of all grade 3 or higher, and they were all only grade 3, was lower than the rates of related grade 3s with the ipilimumab/nivolumab combination. There will be more data, more robust data, later in the week. And as we said, our goals here are both to be able to have more effective therapy than the background treatment in this case, pembrolizumab. And in terms of comparison to establish combinations to either have better efficacy or equivalent efficacy and better safety. And as we've said, we're pleased with the data so far and we look forward to sharing more data with you on Friday. On the second part of your question on the PD1 optionality and how it\ Okay. Thank you, thank you for your time today. Thank you for your questions. I know a lot of the questions were related to data that is not yet available. We look forward to seeing you at the SITC conferences where a lot of this data will be presented in the next few days. And I also want to remind you that the Lilly and us will have an investor call from 9am eastern in the morning of November 11 where Lilly specifically will be speaking about the data that has been presented for baricitinib. So thank you, and good-bye.

2015_INCY

2017

TREE

TREE #Let me give you the history of SEO at LendingTree. LendingTree has never been, call it, a trick company. And by the way, as old-time SEO was all about tricks. So we wanted to get real customers to come to LendingTree because they really wanted to come to LendingTree. And we started that, fortunately, with TV advertising. And we grew digital as a ---+ very successfully ---+ much later, under <UNK>'s leadership when he got here many years ago. And then we became a digital powerhouse. We were never great at SEO because it was all about tricks. So the acquisition we made is not about that. It's about producing very, very, very high-quality content that consumers actually want, that is meaningful to them, that actually helps them; it just so happens, Google likes. So that's the way we approach SEO, is we want to create high-quality content for consumers, and if it just so happens Google likes it, and Google likes it because lots of other people like it and link to it, that's where we want to go. So I think we will, over time, build an earned media operation here with more and more people who can speak honestly and clearly in specific areas. And that's our strategy. Sorry, merging what. I got the My LendingTree part. So, it will be both. There's no reason to ditch a brand when you have one, but then you can move the product. So I would assume, for example, just like we did with our credit card acquisition, we compared ---+ we continued to run the CompareCards brand and we migrated ---+ we gave the LendingTree brand to them, too, because two brands are better than one; but, boy, are we going to use the My LendingTree brand. And then we get CompareCards for free, if you will. The same thing would be true with Magnify Money. We've always wanted, at LendingTree, a high-quality content team that could create great content that is usable for consumers, like I talked about. So yes, we'll do that under the LendingTree brand. And in deposit accounts, you'd expect to see us (technical difficulty) LendingTree. That's the reason ---+ one of the key reasons we can obviously do these acquisitions so profitably and pencil them out really well, in addition to the great management team, and our leadership on doing this. And by the way, we look at a hell of a lot more than we buy. But it's because we have the LendingTree brand and we know that we can put these products on LendingTree, and it's going to add incremental revenue to the Company with no additional cost. Good question. We're ---+ <UNK>, you take that first. Yes, look; over time, we have been able to expand EBITDA margins. We have done a really good job controlling how we scale our staffing and our cost as a business. We have definitely grown that more slowly than we have revenue and VMD. Over time we would expect those ---+ and we've said ---+ to be kind of in the mid-20s in the long-term. And we still think that's achievable. Right now, we're really leaning into growth in offline investment and things like that. So that puts a little bit of a short-term squeeze on VMM margins, which affects EBITDA. But over time, those should expand back to normal levels. And as we ---+ some of our businesses mature a little bit, we expect those margins to expand as well. So I think it's completely on track to our long-term goal. And the other thing I would add to that is, like some other successful companies, like ---+ even like an Amazon, we could have operating margins where we want them to be, and we can almost decide, and we will always communicate it with you. I don't like ---+ this Company, one of our philosophies is we don't look at percentages; we look at dollars. And unlike a lot of investment-laden other companies where, for example, those ---+ your cost of goods sold, which for us is marketing, effectively ---+ variable marketing margin as a percentage, I would drive down as long as the dollars are going up. Because what that shows is that we can find more profitable ways to advertise, that we're advertising more and more offline; but more importantly that we have crazy demand from the lenders. So that margin going down but the dollars going up is actually a good thing. And it's a good thing for other leading Internet companies that have pulled this off. I actually think the same thing on the operating margin line, is that we should actually focus on dollars, not percentages, but we should always be very clear as to why. So for example, as <UNK> said, I would expect operating margins going on our business to continue to improve. At the same time, we really care about how ---+ the after-tax cash flow that we're generating for this Company and how fast that is growing. And if we could find investment opportunities that might decrease our percentages, but they're going to increase the pace of our dollar growth, we will do that. But we will always call it out and make sure that investors understand it. And as I've said before, I view this not only as a CEO, but for me it's also a significant investor. So I'm sitting on your side of the call, too. And I'd hope you guys would have the same view, that the higher the profit growth is, the better. Oh, gosh. You just hit on one of the age-old challenges of LendingTree that goes back to probably 2000, when we bought a company called HomeSpace, which had a realtor referral network which we turned into RealEstate.com, which was one of the earliest home listing sites that unfortunately isn't part of our business anymore. Purchase mortgage ---+ because we had realtor referral network because of the problem that you just talked about. And it's not going to take a lot of investment, but expect to see some of those tools coming back. So for example, many customers come to LendingTree ---+ over half of our purchase customers come ---+ and, by the way, I've been working on this one for 20 years, so I know this one like the back of my hand ---+ they come without having a home identified. Those people we have to incubate. And our incubation tools ---+ some of which we had before, we got to regain those muscles ---+ will come back again, where we're able to continue to engage customers. And a very key part of that is what you said, which is keeping the realtor informed. So expect to see that through technology in keeping the realtor informed. And then the lenders now are applying a lot of those same tools. And now you've got realtor networks and other things that exist out there that we can also leverage. So I believe we're ---+ 18, 19 years ago, even 10 years ago, probably even two years ago, where purchase mortgage conversion rates were always inevitably low ---+ the fact that lenders are now so focused on it, the fact that that's where they ---+ that's the pond they have to go fish in. They are improving their processes, they are improving their pricing, they are improving their technology, and they are listening to us. They are listening to our advice on our end, and it's getting better. So yes, there is a bit of [consumer meet]. I don't want to change consumer behavior. What we actually need to do is merge in with the existing consumer behavior. Because I don't think you're going to change the consumer behavior of using a realtor. There's so many different loan products in there, it's kind of hard to use that metric reliably to understand pricing. There's all kinds of mix shifts and other things. I'd say, in general, we are seeing good traction on the revenue per lead, the coverage, the match rates, matches per. And so we feel really good about our monetization overall. I would caution you of ever using that revenue divided by loan requests as a meaningful indicator, because there are just too much mix shifts going on in there. And just to add to that, from my IAC days, and when we had a search engine ---+ granted it wasn't Google, it was Ask.com. And even with Google, you'll see revenue per query ---+ which is the measure there, which would be analogue to us ---+ can bounce around so much because of mix shift. So for example, you could see revenue per query ---+ for revenue per request go down for us because we're driving a lot more personal loan business highly profitably. And that's gone up versus our mortgage business, but our mortgage business might be going up, where revenue per request is much higher because it's a higher loan product. So there could be noise in that. But that is one number that we've actually been talking about and giving that in con ---+ because we can put context around it for like some other companies in the search space or in the travel space, which are the closest analogues to us. So, the way I would think of this, and there's actually ---+ I would refer you to a much more detailed page in our Investor Relations deck where we talk about the core market, the served market, and the expanding market. What you are seeing right now is basically what you saw in travel in 2002. And after September 11, travel companies needed to go online because the travel market was in the dumps. Lenders now need to lend. And over the past few years, as they now need to lend coming off of 2007, they are increasingly turning to digital. If they go to digital, they can do their own search advertising. But they bump up against people like LendingTree who have been doing it for 20 years and have better online brands and better monetization. Or they can come to people like LendingTree, and we can just give them the customers that they want at the price they are willing to pay at the volumes they want. Which, that's a pretty darn good deal. It's basically the same deal we have with Google when we're doing search marketing there. And it's what we do with all of our other advertising partners. We're basically an advertising partner. So you keep adding more lenders to that, and then you keep adding ---+ and then you keep improving conversion rates, and that's basically how it works. Absolutely. So pricing is dictated by the lenders. But to your market share point, that is actually a really key indicator, and expect to see us talking about that. We look at market share in a couple ways. We look at it as our percentage share of total originations. We know what our lenders are originating, but they are closing. And we know what the originations are, because they are reported. We have seen share significantly increase of the share of originations. That roughly from 0.7%, for about 15 years in mortgage, to now a little over ---+ right around 2% of all the mortgage in the United States. And we could take you through each one, but I don't have them in front of me. That's really the biggest change. And that's happening because of lender shift online and because of online moving from search and other types of advertising into the comparison-shopping businesses. And then pricing, you asked about. Pricing is dictated by lenders in a bidded model based on their conversion rates, which as I said, have been improving. It's funny; we've seen this ---+ we've talked about this with lenders over the last 20 years. And in many lenders over the years have done studies looking at credit performance. I could actually refer you to one lender in the home equity space, interestingly. His view ---+ we've never heard credit performance from LendingTree being worse than overall credit performance. And I've heard it be better many times. And I think that is really because of the filters. It's because you can, through LendingTree's technology, which goes back to what Rick Stiegler built 20 years ago, is the fact that you can match precisely the types of consumers that you want. And you can ---+ and obviously you are using learning in that from where your credit from the best credit losses. So I think, on average, it's better. Honestly, I don't know. And I'm going to give you a big, fat I-don't-know on that one, because we're always honest with you. I would bet ---+ if I'm guessing, every mortgage lender can do HELOCs. And, however, the mortgage companies doing HELOCs in the past they are basically, in the most instances, selling those to banks. What we saw in the past was banks doing HELOCs at very low rates and highly automated. It's what I talked about before. So every mortgage company can do them; I don't know how many mortgage companies will. What I'm (technical difficulty) is the return of highly automated home equity loans. And when you see that, then this thing is going to sing. Now, in the meantime, it's singing already because basically any mortgage lender can switch over. And these are easier loans to close, as I talked about before. Oh, gosh. There's so many. I think for what the specific thing that you say that ---+ said ---+ is I think our biggest learning is that we should be in everything, even if it's small. Because someday it's going to change, and we might make a change, or the industry might make a change. But we got to place some small bets because they don't cost anything to do it. And let me illustrate that for you. Home equity loans have been on our site forever. There was no home equity business, roughly, from 2007 until a couple years ago. But we didn't take home equity off the site. It was still a good little business. Auto loans are not a fast grower for us because of the interference with auto dealers. Guess what. Someday we're going to solve that. And the auto ---+ we're going to be sitting here talking about the auto loan business taking off. Personal loans have been on our sites since 1997. It was one of the first loan products. And we used to have one lender that we had to fax them to and they got back to you five days later, so we didn't have very good conversion rates. But personal loans have been on our site. We never had credit ---+ the only difference there is we never had credit cards on our site. And we didn't have credit cards on our site because LendingTree is true to our consumer model. And the credit card technology was never far enough along where consumers could actually really compare multiple options. And it's still a bit ---+ it's still a click-out model, but it's getting better and better every day. And there's more ---+ and the tools are better. So we looked at credit card for years, and we didn't do it because it took till now that the consumer model is right. The same thing is true in insurance. You can't, in the United States, like you can in other countries, get fully bindable quotes from multiple insurance companies online. So that's the LendingTree model. So to fill out a form and give you the names of four insurance companies, like, that's not too exciting. So we did a partnership with Answer Financial, and we think they have the best user experience. And we think, as the user experience comes around, the minute you can do what you can do in the UK in the US, LendingTree will be, I think, the biggest, baddest thing in insurance on the Internet. So, it's essentially this: we're constantly ---+ every time we're doing advertising, we're looking at the expected value of the revenue stream and we're ---+ and the revenue coming in. I could tell you right now, if LendingTree wanted to, we could sit here on the call and say that My LendingTree makes money on advertising, but it makes it over time. However, a LendingTree form, when we advertise mortgage, that makes money in a second or in a minute. So we want to continue to improve the monetization of My LendingTree and get the product precisely right before we jam on the advertising. And that's because we're pushing our teams internally to not take the easy way out to say, oh, we're just going to do a bunch of brand fluffy stuff that will pay off over a couple of years, because we're more disciplined than that. But when we do it, we're going to be the leader in it. And it's basically going to happen when the expected value gets to the point where we think we can step on the gas. We don't ---+ the good news is, to your second point, we don't need lenders to be ready for it. Because the leads coming off of My LendingTree will not only be exclusive, because we're just telling you the deal that can save you money; they will also convert much higher for lenders. And we're already seeing that, so they are going to be much more value to us. So back to those three circles, it's better for the consumer, it's better for the lender, and it's more money for us. And we're just going to keep plugging away until the monetization gets good, and then we're going to step on it like a NASCAR car. This is <UNK>. I can take that. No, absolutely not; it is absolutely ---+ all you need to do is go on to Google Trends, do a search on personal loans, do a search on credit cards, do a search on buy a home, and you'll see that Q4 is for our three large categories, very seasonal in Q4. And so the guidance in Q4 has zero to do with any sort of negative headwinds or anything like that, and 100% to do with just completely expected and normal seasonality. And the only other thing I'd add to that, too, is media prices go up typically in Q4 around the holidays, so you get squeezed out of media. And so you end up with lower volumes. And then lenders know that, so lenders staff down for it, and that's Q4. It's everybody. And refer you to our IR deck. We got a number of names in there. The Goldman Sachs guys are recently up. I think what we're seeing in the personal loan space is just like what we saw in migration over the early days. It starts off with the early adopters, which in this ---+ well, the early adopters were the traditional guys years ago that I referred to, so let's leave them out. But the early adopters of the Internet were the so-called marketplace lenders. And now that same business model can move to other entities. A lot of Internet companies who are looking to create a marketplace lending platform, they switched to technology platforms. They are selling these to lenders. They are not that hard to build. And as technology gets better, more and more lenders can do these profitably. And then it doesn't become a processing question; it becomes a risk question for the lender. Do they think there's good enough risk and return based on their own credit analysis. So the beauty of this industry over time ---+ which we have betting on, and we've seen ---+ is that the cost to transact a loan transaction goes down because people get replaced by technology, and it gets smoother and smoother. As that cost go down, conversion rates go up and lender desire goes up because they are making more money with the advent of technology. It's just like what you saw in Google. It's just like what you saw in travel. And as technology is now being applied in this industry, lenders now can open this channel in the same way that we can open the TV channel, because that's profitable for us. So that's the analogy there, and we're just continuing to see it. I just want to once again thank all of our shareholders for your trust and faith in us; thank our employees for the great work they've done; thank our lenders for just continuing to improve, and for their partnership and trust; and obviously the millions of customers we serve every day. And other than that, I have nothing I can say, because I think the numbers this quarter really speak for themself. And so, thank you, and we will see you again in three months.

2017_TREE

2016

RRC

RRC #<UNK>, this is <UNK>. I think that when we went back ---+ let me take you back in time and talk out the acquisition, and how we evaluated this thing. As we went through we recognized the Upper Red was really the dominant producing interval at that point in time. We recognize that changing target interval, optimizing target interval was going to have, could have a material impact in terms of productivity per well. And well result and EURs could improve over what we're currently providing for you right now. With that, and we also think that also applies to the Lower Red and the Pink intervals as well. So the same type of thing is going to happen. With that, it's going to give us a fairly significant inventory of locations throughout Terryville from the Upper Red down through ---+ the Upper Red, the Lower red and then up shallower with the two Pink zones. So not going to give you a specific number, but I can tell you it is going to give us a fairly significant inventory going forward. Going back through the whole process, we think we will be able to grow productions down there fairly significantly and be able to drive down the gathering and processing rate as well because of the [pec]. And all be able to do it within cash flow, is what our acquisition models show. We think it's right in line with what we currently have. I'm going to come back to our analysis. When we did our analysis we didn't look at Netherland Sewell's analysis, we didn't look at MRD's analysis, we did our own analysis. My answer on this thing is when people have asked me this, we have what we believe is our analysis going forward. There is a lot of confusion I think that has been out there historically between some of the different analyses that are out there. As we continue to roll through this thing and get our arms around it we will provide more clarity, probably toward year end.

2016_RRC

2016

STE

STE #No, and I think you may have meant the US linens business because the UK business we sold. We do both have the US and the Netherlands businesses. As we have mentioned in the past, those are relatively low margin businesses and so we haven't seen a significant change. They are still relatively low margin, low growth businesses and we haven't seen a change there. In the HSS business again, that business is a profitable business in the UK and we are investing in other parts of the world to grow that business to duplicate the UK model. So again no change. We still have a lot of interest from customers who are talking to us about potential outsourcing in the US. But again, as we've said many, many times, it is going to take time for that to come to fruition, and we do see it as a nascent business. We don't anticipate any significant revenue or profitability in that business certainly in this year, and it is going to be a while before it becomes a material part of the total STERIS profitability map. First of all, it is a range, not a number and so we have a $0.15 range there. And this is a $0.15 range and it is a $0.05 headwind. So that certainly is encompassed in that kind of range, and obviously we didn't have our point forecast of where we are at the bottom of that range ---+ on the bottom number of the range. So that is one answer. The second answer is we do see strength in the North American operation in general in healthcare, and in the global operations in both life science and AST. So we have some very strong positive feelings about that. The rest of the globe for healthcare is a little tough, and so we are just mixing and matching all those components, and at this point in time in the year, we did not see it appropriate to change the range. The short answer is we are seeing real strength and we are not alone in that. The other guys in the capital business in North America are seeing real strength there in both orders and generally speaking in backlog. And we also have visibility in the pipeline as we mentioned several times. Usually three to six months of pretty clear visibility in the pipeline, and our pipeline looks the same as our orders. It is just strong in North America right now. But that can always change, but at this point in time, we are seeing real strength and it has been double-digit kind of strength now for six or nine months or so. And it looks like the same kind of strength out in the future. So out in the future meaning six months out or nine months out. So it is a combination of replacement orders are staying strong and projects are increasing and you put those together and you get some nice increases. I'm going to separate the capital piece from the rest of the consumables and service parts. On the capital side, that business has now been steady for five years maybe and our backlog has bounced between $40 million and $45 million roughly for five years. So I don't see any material long-term change there. Mix has changed and our willingness to accept no profit business has changed and so the profitability from that business has changed significantly for the good. Now when we look at the consumable side, there are a couple of pieces that make that up. First of all, our chemistry business has just been quite strong and we have a nice set of chemistries and we've mentioned that we have also added some chemistries to our portfolio and so those are just picking up speed. So it is a pure organic growing business. We do think we are targeted at good spots. We are targeted at vaccines and biologics which are nice growing pieces of the pharmaceutical business. So we are just targeted in the right spots and we have some nice products. We have had good organic growth and we see that continuing. Then the acquisition of our barrier products which was the company called GEPCO, which is also consumable products in life science, have also been strong. They had good growth, but we also have the ability ---+ they were essentially a US company ---+ and so we have a global footprint in the sales force, so we have the ability to move those products to global customers outside the United States. It is a real opportunity for us to grow. So we have just seen very nice positive movement in life science, and we continue to expect that on the consumable side of the business. On the consumable side, I think the comps are fine and the growth rates are fine. On the capital side, we had some really nice shipments I want to say in the mid-part of last year, and so we will clearly not see these kind of growth rates going forward. I think to say the capital business is flat to slightly increasing is the right kind of general way to think about it for the year and for longer term. It is a 40% growth for this quarter but that was just because of easy comps and a strong quarter, not a long-term change. Well, Healthcare Products it is more dominant in the US. I don\ About 70% of our Healthcare Products revenues come outside the US. Inside the US. All you have to do is ask what countries are experiencing fiscal difficulty because most countries outside the US are, for lack of better terms, are largely national healthcare programs. So it is government budgets. So all of the countries that are mineral-based or oil-based, all is a big word, but generally speaking those that are mineral-based or oil-based are having difficulty in their government budgets ---+ and as a result are having difficulty in their healthcare budgets. So kind of off the top of my head in Latin America, Venezuela is just really, really challenged. Brazil is quite challenged. Moving to the Middle East, a big part of the Middle East which was a very strong healthcare business has slowed down significantly and Saudi Arabia in particular which was a very good healthcare business has the dual challenge of the weaker oil prices as well as having to fund some war issues at the same time. So Saudi is particularly challenged. But much of the Middle East, the oil-based economies are challenged. We have seen actually a bit of a pickup in Asia, not China per se although we have actually done nicely in China. It is a small business for us but not so much China but the areas outside ---+ so Southeast Asia has clearly been picking up for us. But it is still challenged. And Australia again, a mineral-based economy, has been challenged the last 12 or 18 months. Certainly, <UNK>. So the 34% operating margin that you mentioned with AST, I mean a lot of that is ---+ and we have talked about this before ---+ is we have a high fixed cost base and we did see exceptional volume increases this quarter so that volume once we cover the fixed cost is extremely profitable for us and that is the major driver. On top of that, the integration with Synergy Health is actually moving along very nicely so we will probably get a little bit of a benefit there as we integrate our businesses. But I would say first and foremost it is the volume piece that is driving the large increase. I would mention, <UNK>, we are bringing a number of plants online and when we are bringing plants online, it means the ones that are currently running are full. So we are running capacity-like numbers in a lot of places and that is a good time to be making some money. We would expect some averaging of that over time. We are trying to have them not come all at once so we don't have this nice build up and then a cliff, nice build up and a cliff. We tried to even them out over periods of time but there is some, if you look at a plant by plant basis, it does look like that. We are now getting to be good enough size, and we have 60 facilities roughly, and so we are getting to be a large enough size that one or two facilities doesn't crush us. But you notice them when they come on board. <UNK>, <UNK> is looking for the number but while he does, consumables are not really impacted by that. They are sometimes because we go through distribution and sometimes our distributors stock up a little more, stock a little less, or the hospitals don't quite catch their seasonality correct. But that tends to be minor fluctuations. On the capital side, the 75/25 is roughly a good rule but we have clearly ---+ it goes in cycles and we had been to where replacement was the stronger piece a couple of years ago. Projects have been picking up and they are continuing to pick up. So again, <UNK> is doing some math right now. I will let him report it but it has clearly picked up the last six months or eight months or so. The outlook is also that way, there is more project kind of business out there. <UNK>, we have gone from roughly 70/30 replacement versus projects and we are more looking like closer to now 60/40 so we have made a pretty substantial switch with the replacement versus the projects. I would say from a cash flow standpoint, the seasonality will be tracking to income and for the most part, legacy STERIS has typically been more second-half weighted, legacy Synergy has been pretty much even throughout the year. So I don't think it would be that much of a directional change from what we have seen historically. AST is generally ---+ all things being equal, there is growth across, but all things being equal, AST tends to be stronger in the first half and Synergy was more AST oriented. And the rest of STERIS has tended to be a little more back half particularly the capital side. So it kind of mixes and matches. I would still expect it to be generally speaking for seasonality a little stronger in the back half, A, just due to growth in general and B, because the back half tends to be a little more weighted particularly on the capital side. First, I would say there are basically three projects in this integration and each of the two major businesses that are integrated. The HSS, IMS business is one, and the AST business from both sides or formerly Isomedix and AST business the other. The businesses integration for all intents and purposes is almost complete. That is the organization structures and people and all those things. Those integration teams are down to just a few items with the exception of the classic IT, where we are trying to get on common systems and all that stuff, which is much more like the central office integration functions. But in terms of what I will call the business sales force, those kinds of things, we are coming into the home stretch if not in the home stretch and it has gone nicely, just full stop nicely. The longer-term issues relate to systems, getting on common systems. Both getting all the back office people ---+ whether that is human resources, IT, finance ---+ those systems take longer to integrate. And so I will call it the long-tailed systems and that project team is still heavily working on their part of the integration not the least of which is things like legal structure type things. Because we had ---+ I've forgotten exactly ---+ but 60 0or 70 legal entities in our business and they had 60 or 70 legal entities in their business. We would like to get to 60 or 70 legal entities and that just takes time with lawyers and accountants and those kind of things. It saves us money in the long run because we don't have to do 140 statutory reports, we do 60 or 70. So those kinds of things are taking the time, and that was always expected. Now to come down to the bottom line side of it, we hit our $5 million that we expected last year. We are very comfortable with our $15 million forecast for this year and we are very comfortable with our $40 million or more now total forecast over the longer period of time. And whether $2 million or $3 million of it slides into 2019 instead of 2018, my own view is we will probably hit 2018 and have a little extra that we can maybe slide into 2019. But at a high level, any way you would look at it, we are quite comfortable with the numbers that we have in place.

2016_STE

2018

INN

INN #Thank you, Kevin, and good morning. I am joined today by Summit Hotel Properties' Chairman, President and Chief Executive Officer, Dan <UNK>; Executive Vice President and Chief Financial Officer, Greg <UNK>; and Executive Vice President and Chief Investment Officer, <UNK> <UNK>. Please note that many of our comments today are considered forward-looking statements as defined by federal securities laws. These statements are subject to risks and uncertainties, both known and unknown, as described in our 2017 Form 10-K and other SEC filings. Forward-looking statements that we make today are effective only as of today, February 22, 2018, and we undertake no duty to update them later. You can find copies of our SEC filings and earnings release, which contain reconciliations to non-GAAP financial measures referenced on this call, on our website at www.shpreit.com. Please welcome Summit Hotel Properties' Chairman, President and Chief Executive Officer, Dan <UNK>. Thanks, <UNK>, and thank you all for joining us today for our fourth quarter and full year 2017 earnings conference call. As you know, 2017 was an extremely active year for us, as we completed nearly $600 million of high-quality acquisitions, sold 12 hotels for $120 million, raised $320 million of prominent preferred equity, and closed on nearly $275 million of debt financing transactions. Overall, we're very pleased by the stronger-than-expected performance of our portfolio this past quarter that drove both top and bottom-line results above the high end of our guidance range. We continue to believe that our portfolio of high-quality hotels in great locations with efficient operating models will garner an outsized share of the industry's demand growth and are encouraged by the operating trends that drove our financial results in the fourth quarter. We remain optimistic that tax reform, strong demand and continuing economic improvement will benefit our portfolio of hotels with great locations and efficient operating models. On a pro forma basis, we reported fourth quarter RevPAR growth of 5.5%, which was driven by a 4.9% increase in occupancy to 76.3%, 0.6% increase in average daily rate. Our pro forma portfolio outperformed both the total U.S. lodging industry and the Upscale chain scale, and most importantly, continued to gain market share among its competitive sets in the fourth quarter with a RevPAR index of 115.6, which represents a 3.3% market share gain, while occupancy gains in the quarter were partially driven by hotels located near recent natural disaster affected areas. Excluding these markets, RevPAR would have still increased a healthy 3.6%. For the fourth quarter of 2017, we reported adjusted FFO of $31.5 million, an increase of 17.9% as compared to the same period of 2016. And our AFFO of $0.30 per diluted share exceeded our guidance range of $0.26 to $0.29 per share. For the full year, pro forma RevPAR increased 1.3%, which exceeded our guidance range of 0.25% to 0.75%. The RevPAR gain was driven by a 1.4% increase in occupancy and partially offset by a 0.2% decline in average daily rate. Our revenue management strategies continue to be effective as we once again increased our RevPAR index versus our competitive set by 1.6% for the overall portfolio. For the full year, we reported adjusted FFO of $134.1 million, which represents an 8.4% increase, as compared to 2016. And our adjusted FFO of $1.34 per share exceeded the high end of our guidance range of $1.29 to $1.32 per share. A few of our better performing markets in 2017 included Portland, where RevPAR increased 6.6% as our 2 hotels continue to benefit from recent renovations and a still favorable supply and demand dynamic. Our 2 Indianapolis hotels delivered outsized RevPAR growth of 8.9%, following recent renovations and the successful implementation of new group strategies. This compares favorably to the comp. set RevPAR growth of 4.2% and the Indianapolis market RevPAR growth of 3.3%. Our 2 Houston hotels posted combined RevPAR growth of 7.5% for the year in large part due to the Super Bowl in the first quarter and demand related to Hurricane Harvey in the third and fourth quarters. Our recently acquired Homewood Suites Tucson and Courtyard by Marriott at Yale University delivered RevPAR gains of 13.1% and 10.1%, respectively, highlighting our ability to find acquisition opportunities in higher growth markets. In general, our acquisition portfolio outperformed as RevPAR grew 4.0%, compared to a 0.2% increase in our same-store portfolio. In 2017, we acquired 14 hotels, totaling nearly 2,500 guestrooms for an aggregate purchase price of $586 million, which are all well positioned for future growth that we expect to lead the portfolio through 2018. We continue to differentiate ourselves with capital recycling during 2017, as we completed the sale of 12 hotels for an aggregate sale proceeds of $120.2 million. To date, all net sale proceeds from dispositions have been redeployed into high-quality, premium-branded hotels that we believe are well positioned to create long-term shareholder value. Turning to capital expenditures. During 2017, we invested $37.2 million into our portfolio on items ranging from common space improvements to complete guestroom renovations, including furniture, soft goods, fitness areas and bars. Notably, the Marriott Boulder is currently undergoing a $6.7 million comprehensive guestroom renovation that includes the conversion of underutilized meeting space into 8 additional guestrooms. The project is expected to be completed by the second quarter of 2018. We also began a comprehensive guestroom renovation at our Holiday Inn Express & Suites in Fisherman's Wharf. The project is expected to be completed in mid-2018 and will position the hotel well in anticipation of the reopening of the Moscone Convention Center. Over the last 6 years, we've invested well over $200 million into our portfolio, and 83 hotels that we own today have an average effective age of approximately 3 years, further proof of our commitment to maintaining a high-quality portfolio where guests want to stay. With that, I'll turn the call over to our CFO, Greg <UNK>. Thanks, Dan, and good morning, everyone. For the full year 2017, on a pro forma basis, we reported hotel EBITDA of $211.7 million and hotel EBITDA margin contraction of 136 basis points to 37.3% from 38.7% in the prior year. The margin contraction was primarily as a result of elevated property taxes and the occupancy-driven RevPAR growth that drove variable expenses higher. But excluding the 16% increase in property taxes, pro forma hotel EBITDA margin contracted by 59 basis points to 38.1%. Our adjusted EBITDA grew to $180.1 million, an increase of 8.2% over the same period in 2016. For the fourth quarter 2017, our pro forma hotel EBITDA increased to $48.8 million, an increase of 4% over the same period of 2016. Pro forma hotel EBITDA margin contracted by 65 basis points to 35.8% from the same period in 2016. Again, excluding the 22% increase in property taxes, pro forma hotel EBITDA margin expanded as expected by 39 basis points to 36.8% as compared to 2016. Moving on to our balance sheet. Our balance sheet continues to be well positioned with no maturities through 2018 and liquidity of more than $300 million as of year-end. Throughout 2017, we continued to strengthen our balance sheet by laddering our debt maturities and reducing our cost of debt financing. At December 31, 2017, we had total outstanding debt of $873.1 million with a weighted average interest rate of 3.89%. We ended 2017 with net debt to pro forma trailing 12-month adjusted EBITDA of 4.1x, which continues to be well within our stated range of 3.5 to 4.5x. Today, more than 65% of our portfolio EBITDA is unencumbered, which is proof of the progress we continue to make in assembling a highly flexible balance sheet. Earlier this month, we announced a 5.9% increase in our common dividend to an annualized $0.72 per share, which is now yielding 5.1% and results in a prudent AFFO payout ratio of approximately 52% at the midpoint of our 2018 outlook. Commensurate with our increased cash flow, this is the fourth dividend increase we have announced in the last 8 quarters and demonstrates the consistency and strength of our cash flow generated by our well-diversified portfolio of high-quality hotels. With that, I will turn the call over to our Chief Investment Officer, and soon to be Chief Financial Officer, <UNK> <UNK>, to discuss the capital markets activity and guidance for 2018. <UNK>. Thanks, Greg. As Dan previously mentioned, we were very active in the capital markets throughout 2017, raising nearly $320 million of common and preferred equity and nearly $275 million of debt capital. Prior to the recent increases in interest rates, we were able to execute on a couple of timely transactions in a more favorable rate environment, which both lowered our overall borrowing costs, and gave us increased exposure to fixed rate capital, including issuing a $160 million of preferred equity at a 6.25% coupon, which is an all-time low for the lodging industry. In conjunction with this issuance, we redeemed our $75 million, 7.875% Series B Preferred and recently announced the redemption of our $85 million, 7.125% Series C Preferred scheduled for March. These transactions reduced our annual dividend, preferred dividend payments by nearly $2.0 million, resulting in perpetual accretion of approximately $0.02 per share. We also executed $200 million of forward-starting interest rate swaps to lock in LIBOR at less than 2.0% for the next 5 years. Including these swaps, our total debt is now approximately 70% fixed and well positioned to withstand further increases in interest rates. Just yesterday, we announced the closing of a new 7-year, $225 million unsecured term loan that matures in 2025. This is the largest ever unsecured 7-year bank term loan for a lodging REIT. And with the support of our bank group, we were able to improve the pricing to a range of 180 to 255 basis points plus LIBOR depending on our leverage ratio. Proceeds were used to replace our existing 7-year, $140 million unsecured term loan that was scheduled to mature in 2022. The new term loan includes a 90-day delayed draw feature at no additional costs and allows for additional lender commitments of up to an aggregate of $375 million. We drew an initial advance of $140 million on the facility to fund the repayment of the previous loan and intend to draw the remaining $85 million of commitment in March to fund the redemption of the Series C preferred. Turning to guidance. For 2018, in our release you will see that we provided full year 2018 guidance for adjusted FFO of $1.33 to $1.45 per share, a pro forma RevPAR change of 0% to 3% and same-store RevPAR change of negative 1.0% to positive 2.0%. For the first quarter, we provided AFFO guidance of $0.28 to $0.31 per share. Pro forma RevPAR growth of 0.0% to 2.0% and same-store RevPAR growth of negative 2.0% to 0.0%. We've incorporated capital improvements of $45 million to $65 million, which includes both renovation and recurring capital expenditures. Much of the increased capital spend is related to recently acquired hotels as well as some carryover projects from 2017. This capital expenditure activity is forecasted to result in a RevPAR displacement of approximately 80 basis points in the first quarter and 50 basis points for the full year 2018. Our guidance also assumes the redemption of the 7.125% Series C Preferred Stock for approximately $85 million in the first quarterand the opening of 168-room Hyatt House Orlando Universal Studios hotel in the third quarter. No additional acquisitions, dispositions, equity raises or debt transactions beyond those previously mentioned are assumed in the first quarter or full year 2018 guidance. With that, I will turn the call back over to Dan. Thanks, <UNK>. In summary, we were quite pleased with our fourth quarter results, as our well-diversified portfolio produced solid results in the second half of 2017, despite the challenging operating environment. We continue to be optimistic about the outlook for 2018 and for the future of Summit. And with that, we'll open the call to your questions. This is Dan. Clearly our strongest markets for the last quarter were our natural disaster affected areas: Fort Myers, Miami, Tampa. Fort Myers itself was up 42%, Miami was up almost 30%. So I think if you look at our fourth quarter numbers, ex the hurricanes, we were still up 3.6%. So I think you can derive some strength in those markets but also some portfolio-wide strengths as well. Yes, it's <UNK>, I'll take that one. We've been pretty consistent in saying that we need about 2.0% RevPAR growth to break-even on margins. I would characterize, given some of the cost pressures we're seeing whether it's salaries and wages or property taxes or whatever else. We probably think that's the mostly rate-driven RevPAR growth this year. Obviously, the midpoint of our pro forma guidance range is 1.5%. So I think at that level, you can expect us to be kind of break-even from a margin perspective or just slightly below. It's <UNK>, I'll jump in. I think we look at our supply growth. I think, we expect supply growth for the industry about 2.0% this year. If you look at, clearly, that's a little bit more concentrated in the major markets. If you look at the top 25 markets, we expect it to be about 50 basis points above that. I would say that our portfolio is generally in line with the top 25 markets. And our portfolio, in particular, is heavily skewed by Nashville, which is expecting larger supply growth this year. If you exclude Nashville from our numbers, we are actually 20 basis points or so below the national average and what we would expect supply to grow this year. I do think it's a fair characterization to say that there is more ---+ there is more supply growth in the select-service change. And I would also say there, there is far more demand growth in those chain scales as well. So we do think that's an offset there. So clearly 4Q came in well ahead of your expectations from a RevPAR growth perspective, but was driven predominantly by occupancy. So just curious what do you think it will take for pricing power to return. And have you seen it all any early signs in 2018 of pricing power improving. <UNK>, this is Dan. I think there are markets and submarkets that we've seen our ability to hold an increased price, but it's very much market-specific. I think we're very hopeful that the tax cuts and the economic backdrop are going to result in increased travel and as supply moderates and gets absorbed in these markets, we do expect that we'll have opportunities to grow rate. But it has been a stubborn thing for sure. But we are very optimistic that we'll start to see some strengths more broad-based and a lot of the occupancy gains, as you noted, were the result of the natural disasters. And I don't think that is our expectation for 2018. And then kind of getting back to a lot of the work you did last year on the portfolio, acquiring nearly $600 million. I think it's been closer to $750 million over the last 2 years, which kind of gives you a fresh palate for you and the team to identify those value-creation opportunities going forward and continue to outperform kind of the overall Upscale chain scale. But the 0.0% to 3.0% RevPAR growth for 2018 is below the 2-plus percent growth projected for upscale hotel. So what gives you the pause there for this year. That's a great question, <UNK>. I think, when we buy a hotel, performance is never linear. There is a time to get in and change the things you need to change, whether it is a strategy or maybe a ---+ shift in staffing. There are a lot of factors that we use to drive value. Renovation could be a year off or 18 months off. So sometimes there are performance that isn't, as I said, linear. So we got to guide, we use the best information we have, which truthfully is 6 weeks at this point and maybe a 2-week forecast. So there still are a lot of moving parts. We also have some shorter-term effects of some weather, we had some softness in New Orleans and some rate erosion in San Francisco, which are 2 of our bigger markets. So in San Francisco, specifically, we have a renovation underway, which is also a challenge to quantify. So we do feel good about the guide and it feels like, we've adequately bracketed the risk and the opportunity, we don't want that to imply our enthusiasm is dampered in any way about the great hotels we bought in the markets. We think they'll compete very well. And as the economy recovers and there is growth available in rate, we expect to garner our fair share as we have in the past. And a part of that, I think strength will come as you've seen, we've continued to gain market share in our submarkets in a competitive sense. That's fair. Would you be willing to offer some detail as to how the portfolio is trended into the kind of mid- to late-February time frame because it seems as though the industry data, you noted some of the markets with challenges, but clearly many is a top 5 market for you, and a lot of strength there from the Super Bowl, any detail you could offer at this point. Sure, maybe a little bit. In general, clearly, Minneapolis was a winner for the ---+ for January, and some of the broader-based markets, I think are ---+ you would expect to be in line with national averages, but other than commenting on some softness, weather-related in some of our markets and some of the disruption from renovations tend to not focus on any one hotel. So I wouldn't say that weather in New Orleans is in any way indicative of how the portfolio would perform for the year. But if we look back over the last couple of years, we've seen weather, on almost every conference call from almost every lodging REIT have some factor on it. And with the great number of storms last year, fires, I think it's an added risk that adds to the volatility of not just monthly, but quarterly earnings. So I don't know that I would say that there is anything specific other than a couple of things in some of our larger markets that we outlined. And then how does that 80 basis points of displacement you expect in the first quarter compare versus any displacement you have last year. I think we've very little displacement last year. For the full year, we quoted 50 basis points. I think we had 20 last year. So I think it nets to be around 30 and 40 basis points. I believe it's similar in the first quarter and then we'd bought 80 this quarter, and we quote 10 to 20 in the first quarter last year. As you think about value-creation and the leverage you can pull this year, kind of what's the biggest driver for you. And how are you thinking about that and kind of how does that play out over the next 9, 12, 18 months for you guys. Mike, there is ---+ unfortunately, the bigger drivers are a little harder to find. I think some of the capital recycling we've done in the past will be difficult to replicate in scale. But I think, at the margin, we've been very good at that, probably better and more active than anybody else in the space. So I think there is ---+ the drivers are plentiful, but all small operationally. Whether it's our revenue management team or asset management team being in the market helping to identify shifts in occupancy and making sure our hotels become ---+ remain competitive. I think some of the capital investment projects that we've done over the past and some of the new projects we've done, renovating bars and fitness centers continue to drive behavior, which is a little bit harder to quantify. So I think this is a year where a lot of the little things that we have been very proud of as a very operationally focused REIT expect to drive performance. Got it. And then just in terms of capital recycling. How would you characterize the acquisition pipeline. And then, the potential for more asset sales to reduce leverage a little bit closer to the midpoint of your target. Yes, this is <UNK>. I think that as we've talked about, we'll continue to look for assets. It is a challenging acquisition market, particularly as the debt markets have recovered, the CMBS market in particular. Sellers are out and able to finance 75% LTV, tight financing that creates a little bit of a shadow competitor. I wouldn't say that the acquisition market is that much more difficult than it was last year, and we were quite successful last year in acquiring properties. So I think we'll continue to try to find kind of the diamonds in the rough and assets that we think fit the profile that are potentially a little bit broken and give us an opportunity to create value and buy and fix it. I do think you can expect us ---+ it is a good market to sell as well. So that to the extent that, that creates more competition buying assets, it does accrue to our benefit as a seller. And I think you can expect us to ---+ any external growth to be funded largely through our capital recycling program this year. Got it. And then last one from me, just on the guidance. What are the scenarios kind of top-down, when you think about the 0.0% to 3.0% RevPAR range that need to play out to get to that low end at flat or the high end at 3.0%. I think ---+ this is Dan. I think it's just a function of demand from the corporate sector. I think the corporate travel has been slow. I think with tax reform, there has been a higher level of confidence with CEOs across the board and the expectation is that, corporate travel picks up and the leisure travel has been fickle, but active and that has shown up in occupancy across the board. So I think, corporate confidence and corporate travel would be the biggest driver of our success as a company and as an industry. Thanks, <UNK>, this is Dan. I think our mix of guest is probably fairly balanced today between both corporate and leisure. It's predominantly transient; we have a little bit of group, a little bit of government, a little bit of corporate negotiated rate. But I think kind of, in general, a 50-50 mix is probably where we would say, we stand today. As far as the Marriott and Starwood merger, I think it's been a popular topic, and I would have to say that Arne and his team have truly been delivering on their promise of using their size and scale to deliver cost savings. And at this point, it's a little hard to quantify. We're not seeing it immediately in the numbers, but we do feel strongly it will benefit us going forward and that partnership is very much appreciated. Yes. It's <UNK>. I think our view of supply is that supply probably peaks late this year or early next year. I think even as we're underwriting and acquiring assets last year, I think we're very cognizant of the markets that we're buying and what the supply, the demand-supply dynamics are in those specific markets. So we'll continue. I think, for us it means, we probably value location more than we ever have. We spend more time making sure that we own assets in the right locations that are going to be relevant this year, next year and 5 years from now. So I'm not sure that as we start to see the end of the supply pipeline or kind of light at the end of the tunnel from a supply pipeline perspective, it changes our view on how we think about acquisitions. We've tried to be very forward-thinking all along in terms of what markets and what locations we want to own assets in. <UNK>, this is Dan. Just to add a couple of comments. As it pertains to portfolios and any change in strategy, I think we've been very consistent that portfolios of great size and scale are difficult for us because of our intensive due diligence process. So kind of the one-offs and small portfolios have always been where we've found the greatest value and the greatest opportunity to create outsized growth through operational improvements or capital investment. I would say that the governor for us, as we've discussed is the range of 3.5 to 4.5x of net debt-to-EBITD<UNK> So that in itself will help guide us and continue to keep us focused on that continued belief, and we're very important stewards of investor capital. So we went through a period in ---+ where we didn't raise capital for 3 years. So we also take pride in making sure that people understand acquisitions, whether it's an individual or small portfolio or very much ---+ that capital is very precious to us, and we want to make sure those are strong adds to the portfolio. Thanks, Wes, this is Dan. We've built in pretty some good flexibility in the schedule. So at this point, we're still on target for opening middle of the year. Labor has been challenging, but not something that we haven't been able to overcome. But it does create one of the challenges that we've seen more broad-based in the market, which is construction is getting more and more challenging. So I'm not sure that many of the projects that were started 2 and 3 years ago, underwrote the type of environment we are in today. So I would say that it's less likely that that's going to be any greater focus for us. We continue to be very opportunistic, 0 or 1 is probably more in the cards for us in the development side. And we do think that there'll be opportunities over the next several years. As the supply moderates, some of the new developments would definitely be good targets, and we would have a high level of interest. Yes, this is <UNK>. I think that it will still be a headwind, but much less significant than it was last year. So I think you can assume that there will be a slight headwind, but it won't be near the impact that we saw in 2017. Bill, it's <UNK>. I would think not yet. Obviously, the move in rates has still been a relatively recent phenomenon. So I haven't seen a lot of trade. Obviously, there was a big trade in another space yesterday. But in terms of what we're looking at, I can't say that we've seen a significant move again. It's been a fairly recent thing though. Bill, it's Dan. It's hard and getting harder. I think the environment we're in is going to be a challenge, not just for Summit, but across the board. And we've got strategies in place to try to retain employees, and I think it's going to be one of the challenges that we're faced with. So I don't think it's going away, but I think if ---+ fortunately, we've only one Union hotel. So we do have some good flexibility with our operating model and working hard to shift from some of the contract labor to actual employees of management companies and managing it to the best of our abilities, but it is going to be a challenge going forward. Yes, I think if we factor in a land cost, we're still inside of $200,000 per key. Thanks, everybody. I wanted to take just a minute to publicly thank Greg <UNK> for his contributions at Summit. I truly feel blessed that Greg joined our team with the mission to help make us a best-in-class company. So from me and our Board, our entire team, the analysts and shareholders, thanks, Greg. It's been truly a pleasure. And thank you all for joining us today. We do continue to see opportunities to create value for shareholders through ---+ we've always believed is very thoughtful capital allocation in hotels, which today's guests love. Our innovative properties and operational expertise continue to deliver strong results, and we're looking forward to 2018 and beyond. So have a terrific day, and we'll talk to you again next quarter.

2018_INN

2016

DFS

DFS #Hi, <UNK>. It's <UNK>. Most of our loan fee income is driven by late fees, and they typically have a seasonal increase in the third quarter, so that's not anything in terms of new annual fee products or anything like that but more just the trend seasonality and late fees. Sure, <UNK>. The biggest factor behind our higher rewards rate is the higher ---+ is our double promotion for new accounts and that we're pleased with the economics and the lower cost per account and the greater number of new accounts that's driving. And so we've continued to aggressively offer that, and it's driving the rewards rate a little bit faster than we had even anticipated a few quarters ago. And your second part of your question was around how we think about it as marketing, and we really think about promotional rates in conjunction with what it does to cost per account and that's true with promotional APRs as well. And we are constantly testing and evaluating what gives us the lowest all-in costs and the best long-term profitability from the combination of marketing spend, promotional rewards, and promotional APRs. And I'd just underscore the overall objective of that program is to drive engagement in the target marketplace, so I think it's really important to point out that we don't have any desire to be a me-too in the very high-end rewards space. Yes, I would say there are certain offers out there that we scratch our heads about how they could possibly make anyone's potential hurdle rate, and I think one of the indicators is you go online and look at the gaming sites and there are certain card offers right now that people are saying go get this card, they've gone viral, and in my ---+ I'm not sure it's necessarily even the target market that may be responding to some of these offers. And we've seen some of this in the past and we are somewhat late cycle. People are seeing credit cards as a much more profitable product than most anything else in banking, so they are diverting resources but frankly, some of these offers I think will in the long run have to be significantly devalued because how they're used and what the interest rate is and how many people leave after the promotional time period will all drive the economics, and I would suspect that some are not sustainable. So it definitely does have an impact on the NIM. It's not the largest of the component pieces that's impacting NIM. I would say in terms of transactor attrition, it's a modest amount of it. It has been relatively consistent in terms of that contribution. Don't really want to forecast looking forward what's going to happen with transactor volume and transactor accounts. Candidly, we don't want to attrite those transactors forever. So I think there will be some element of that but really, the big drivers on the NIM expansion continues to be the card yield itself as well as that higher revolve rate, which is a component piece that you noted that really is effected by that transactor mix. But I would also say its been very effective management on the part of the Treasury team and deposits business on our funding costs, which has been really a huge contributor to that 37 basis point year-over-year increase in NIM that you see reported. I would say if you think about it, we just contributed some new accounts to our securitization trust here a couple months back, so you now have vintage data for some of those newer originations that are there, and I would say the 2015 year for us thus far looks pretty solid. The one thing I would caution you on in looking at those vintage curves though that I pointed out there is in adding new accounts to the trust, you don't add any charged-off accounts. So the numbers you're going to see there for those new accounts are going to be somewhat elevated because until we actually start taking charge-offs on those ---+ or getting recoveries on those rather, you're really looking at gross charge off numbers. The recoveries that weren't added. Right. <UNK>, did you have a follow-up question. So we have not seen any impact from that yet. I think the folks who really commented on it have traditionally sold a chunk of their portfolios. We have not in the last 10 years sold any of our portfolios, so I'd say we continue to evaluate the proposal. It's really kind of too early for us to fully understand its implications, but it's not factored into our reserve estimates nor do we currently think it's a big issue for us. You bet. Thank you, Chantel. The investor relations team will be around this evening if anyone has any follow-up questions. I hope everyone has a good night. Thanks.

2016_DFS

2015

SKX

SKX #Right now, we expect to sell the inventory in in-line channels. Even though it's just a timing issue. Our on-sales position to where we stand within our whole production field has not increased, certainly not domestically, over the last six months. So, it's a timing issue of getting it in early. I think we pushed some of our suppliers to get inventory in early because of our growth anticipated for 2016 and don't want to push out our production cycle. So it's stuff that's spoken for. We're trying to get in on a much quicker basis. So I don't anticipate any real downturn in that. It changes with all of them. They all have different metrics, and they all have their way to count. I will tell you, of all the people that have been through, which is certainly at a significantly higher one, there's no one upset with how they're selling or their sell-throughs or using it as a reason to change the showcasing of the brand in their stores. People are still very, very positive about the brand and about its potential for 2016. So we take them at their word, and we still see it selling through. And I think if you look at our stores, the fact that we didn't get an extra turn and there was a lot of some-off price activity in September and within the whole channels, but our stores still comped up over 10%, even domestically for the quarter. And I could tell you they were up over 10% for the month of September. Shows you the strength of the brand, and that will manifest itself even at the wholesale level as they clean out some other things as well go forward. It's hard to tell. I mean, we have some out there. We haven't booked really fully spring yet. I think that there's some to be had, but we're waiting to see what the mix looks like. I think overall on a worldwide basis, we'll get an increase because, like I said, we have some pricing power internationally where there was currency issues. That could change the outlook in some of those countries significantly. Going in reverse order, gross margin, I think, should be fairly equivalent to what it was in Q3. There may be some slight upside because retail still has a bigger percentage there. It has a strong quarter coming up, certainly on a worldwide basis. As far as backlogs are concerned, it's obviously higher in international than it is domestically. And it's higher in Europe than certainly places like South America and Canada so far ---+ the increases because they're coming into some price increases, and it's early in the season. But where our strength is, is significantly higher. I would also tell you that we don't really go through a backlog scenario in China since it's predominantly retail. And now that's moving into franchising model. We may move into some of that as we go forward, but that doesn't appear anywhere in here. And obviously, that would be a big driver of significant upside on the international portion of the backlogs. Yes. The amount of unsold we have and the commitment we're making to inventory hasn't changed over the last six months. Certainly, it's (inaudible) in the United States. There's some increases in inventory, obviously, in the additional store count and our additional store count around the world. And obviously, places like China that have gone at 175% and opening a significant amount of doors to have more standing inventory that they have to get ready for. And domestically, which is obviously our bigger user, has the same; and it's just come in somewhat early. And if he we'd have gotten an extra turn, it would have certainly looked the same as the top line. So I think it's a timing issue. And we don't see anything there right this minute that is of concern. From what I remember, it was pretty consistent across the quarter. The comps were better in July and September on a relative basis, although August is still the biggest month for us. It still came in at, I think, very high singles or very low double digits for the month; so it was fairly consistent. So far this month, we're seeing mid to high single digits. But remember, this is now the fourth year. This quarter starts the fourth year where the stores started to comp at the double-digit basis. And it's kind of early in the month, and our forecast right now is still for high singles for the quarter. Yes. I mean, it's anecdotal at this point; but yes. My understanding is that there were no issues with our sell-throughs or our margins from all the reports I've seen and people I've spoken to. September wasn't a great month. There was no step-up, as we've seen in the last two or three quarters to that extent. Certainly not anything of the extent that moved from July to June. So if you take the two quarters together, you could sort of even out some of that the flow. And we're in pre-lines now. We have a lot of customers rotating through. We haven't seen that many. It just started the end of last week, but those we've seen through here still make the same comments. It's a timing thing, and we don't think that holds through until the first quarter. So I don't think we've made any significant adjustments. I mean, you have to understand the order of magnitude, what we have here. As we close September, as we get into the beginning of October, we had somewhere between 1.5 million pairs and 2 million pairs on the dock that were ready for shipment. Now, in some years, we'll ship 500,00; and some years, we'll ship 1.5 million. And you're saying, in the United States, that 1.5 million is every bit of $30 million-$32 million, which we get a portion of. We got a relatively small portion this time. We will ship all of those through October and early November. As a matter of fact, we've already shipped in excess of a few million pairs in the first week-and-a-half that were here. And we still have 2 million pairs on the dock. It looks like our shipping will start to pick up and hold up as we get to the end of October and early November. At least that's what it looks like now. So we really haven't changed any production cycles for the time being. Like I said, we don't have any more uncommitted inventory in production than we had six months ago. It's higher this year than last year. That's a part of the growth. But we also have somewhat more in-house because we didn't get the extra turn this year. We're getting down into real nitty gritty now, but I'll give them to you this one time so we don't have to worry about it. Domestic is about 24%; the balance is international. And now, remember that domestic has a much bigger base. So international is up ---+ all that I would think, international is up probably somewhere between 35% and 40% in backlog. And does not include China. Absolutely. Yes. It means there's significant upside. Well, if you look at the year, the year has somewhere on the street of a 15% or so growth. I think we could grow that rate and then top of that rate. So I think it can grow significantly in the first quarter, certainly over the 15% rate. But a lot of things still have to break. I mean we're too early to commit to any of that stuff. But it certainly is possible from where we stand. Well, it's difficult to paint with such a broad brush. But it depends on the time of the year as well. You wouldn't anticipate anybody going through that philosophy as you go into back-to-school. And certainly wouldn't anticipate that going into holiday season at the end. But in months like October and like May, you can't see that because you have to clear, certainly for quarter-end, and because you to clear up and get ready for holiday. And it's not a big selling season anyway. So you would switch those things around and not bring full-price and sell off. But you certainly wouldn't continue that strategy going into holiday. Yes. But remember, fourth quarter is not historically our strongest. But they'll open it up, and we should perform well through that and set a very good stage for going into spring. Thanks. It includes flows as we and our customers anticipate them. You'd have to define for me what initial and fill-ins are. I mean, obviously, no one has tested it yet. There's some repeat business. There's some styles that they're trying to comp year on year. There's some new stuff they're testing moving in their flows to the best they can see. But it's just the beginning end. We're not out too far. I mean we haven't finished booking spring yet. Yes. It includes everything that we have out six months, which is historically our norm. For Dicks, it's not an outrageous piece. Remember, they're only testing; they're getting started. And while it's nice and we anticipate and they anticipate some great results in movement, it's not enough to move the needle. To my knowledge, no final decision has been made on the Super Bowl. The marathon is in. We will amoritize it over the life of the contract. I'm not sure what date it begins. It might just begin in spring. But that's all calculated into our marketing spend, so I don't anticipate any wild fluctuations in that. Well, right now, it's the only one we have and the only one we're talking about. There's always some conversations going on, but we're such at the early stages of Star Wars. Remember they haven't even released the new characters yet. So it's hard to tell even what it would be as we get through the end of the year into first quarter when new characters becomes available, So it seems to have a very positive vibe now. But it's very, very early in the game. It's hard to tell exactly how successful it's going to be. They're a little bit higher in domestic, simply because we haven't changed pricing there; and there's the currency differential. I think you'll see them balance and actually maybe be higher in international, certainly in our subsidiary with ---+ certainly not the distributors, but the subsidiaries, as this pricing goes through first quarter. The dollar amounts were pretty equal through August and September. Historically, September is the bigger booking month for us than August. But August came in as strong, so obviously a higher percentage increase in August. I think it meant that people are coming in earlier and getting their orders done earlier, both internationally and domestic. It turned out to be our biggest booking quarter ever. And that goes back even to some pretty wild swings we had in the Shape Up days. So without a doubt, it's been our biggest booking quarter to date. That is correct. Nothing significant. With somebody our size and what happens, there's always something that could be. But there's nothing that comes to mind right this minute, certainly. Not that I know of. We could have gotten more turns. We are certainly running better. We anticipate having 50% of our additional space done and operational by then. So I would anticipate that we would have significant growth in Europe, and a bigger portion will flow through to the operating line. Yes. That's the way we're think about it, although there certainly can be switches and changes for domestic as we get through November/December, depending on the holiday period ends. But that's the way we have it modeled right now. I think that would be a benchmark and I would tell you that I think there are certainly possibilities of upside from there.

2015_SKX

2016

DSPG

DSPG #Good morning, ladies and gentlemen. I am <UNK> <UNK>, Chief Financial Officer of DSP Group. Welcome to our first-quarter 2016 earnings conference call. On today's call, we also have with us Mr. <UNK> <UNK>, Chief Executive Officer. Before we begin, I would like to remind you that during this conference call, we will be making forward-looking statements about our financial projections for the second quarter of 2016, including by segment and full-year 2016 anticipated (inaudible) business, anticipated gross margin improvements, our ability to secure additional design wins, mass production timetables, optimism about our ULE and SparkPA technologies and general market demand for products that incorporate our technologies in the market. We assume no obligations to update these forward-looking statements. For more information about the risks and uncertainties that could affect these forward-looking statements made, please refer to the risk factors discussed in our 2016 Form 10-K and other SEC reports that we filed. Now I would like to turn the call over to <UNK> <UNK>, our Chief Executive Officer. <UNK>, the floor is yours. Hi, <UNK>, and thank you very much for the question. Regarding mobile, though, as we did see the revenues for this quarter ---+ they were ahead of what we had expected of $2 million to $3 million and came in closer to $4 million. And also, as you've indicated, the guidance suggests sequential growth. What we can say is that we don't really have a very clear picture about ---+ as to how the year will shape up. A lot of it really depends on kind of the real demand in the market and how exactly that would translate to the quarterly demand for our product. So right now, yes, we do see that already first half is kind of the high single digits. And perhaps, you know, kind of low teens today is kind of more of a target, given that we still have six months to go beyond in the first half. But I would say that right now we don't really have a very kind of clear goal. I would say that probably right now kind of low teens should be kind of the new target for the year. Yes, sure. As the ---+ we have said in our prepared comments, the cordless business did suffer a fairly deep downturn during the first quarter as a result of both some weakness in the ad market; and, on top of that, this inventory correction cycle that basically impacted both our US or DECT 6.0 revenues and also the DECT Europe and rest of the world part. As we go into the second quarter, we start to see that this correction is coming to its tail end. And we can see that ---+ and we are expecting a sequential improvement. Regarding the visibility, our visibility as not changed. It remains fairly limited. I would say that we see about eight weeks ahead. So basically we still see a ---+ up to, let's say, end of May, this end of May/early June at this point of time. And this would be kind of, let's say, our visibility. So for sure, we don't, like, today have the visibility into the end of the second quarter, not to mention anything about the second half. You know, we do have from time to time some share shifts that are happening in our favor, and sometimes not. And this year we believe and we hope that this will be in our favor. So right now we don't have the visibility, but we do believe that such an inventory cycle, which is creating such weak environment for the chipset vendors like ourselves ---+ it's doesn't happen more than, I would say, once a year. And typically, you take a longer spectrum, it happens every once in six quarters, six, seven quarters. And so we do believe that during this year and going forward, we should be more exposed to the general market demand. And we do think that this is a declining category of about 10% to 15% a year. And I would say that we would want to see our kind of back half be more related to that, and right now we don't. We believe that as the inventory depletion cycle is over, perhaps we should see some replenishment. But all in all, we should kind of stay with figures and trend lines that are kind of more resembling the market trend. So for the remainder of the year, we should not expect operating expenses to grow. So the level that we have in the second quarter should be ---+ what we had in the first and the second should also be aligned with what we should see for the remainder of the year. Yes, sure. Thank you, <UNK>. And on home gateways, what we did see ---+ we had a extraordinary successful first half last year, with $4.8 million in the first quarter, and then $4.2 million in the second quarter, and then a ---+ to a low of about $2.3 million in the third quarter. And from that, it started to gradually grow. But as we said, the change in the quarterly run rate had to do with new home gateway product launches. And right now we expect ---+ we are expecting the three new product launches to take place in the back half, meaning in the second half of this year. And with that, I believe it's like we will see a change or kind of a break from this kind of level of $2 million, $2.5 million. And this is indeed also kind of roughly the number that we expect in the second quarter of 2016. What we have found is that the operators, when they launch ---+ and we are not selling directly to the service providers or operators; we're actually selling to the ODMs or the EMSs that get engaged ---+ there seems to be quite a big buildup of inventory in order to facilitate the demand that is necessary for the product launch. And thereafter the inventory gets depleted and the quantities are lower. All in all, we look at the home gateway category as a growth driver for us ---+ as a category that should grow by about 15% to 20% a year. This is a kind of long-term view. We have been able to get this year a number of very lucrative wins, including the North American service provider that is expected to launch at the end of the third quarter a major product. And to date this is ---+ this should be our biggest design win ever in the home gateway side. And also two other Europeans bellwethers that are supposed to launch successful models in which we hope to have a much higher market share. And also complementing that with the design win that we announced today from another kind of Tier 1 service provider in Europe that, for the first time, integrates our DECT in its home gateway. So all in all, the dynamics are good. What we need to see in order to break from them the $2.5 million run rate is a new launch. It rather depends on the operator. We have seen both cases. For sure there is more of a kind of stacking in front of the launch, and then kind of gradual depletion kind of six months later. But I would say that today, kind of I would say these run rates as we see today in a way kind of represent kind of the current need on the back of some excess inventory that perhaps is somewhere in the food chain. As you can understand, we are very far away from understanding what kind of like quantities the operators or their suppliers are sitting on. So the North American ---+ this is the first time in which DECT is integrated into the home gateway. And we do hope that following that launch, there will be a way to see more and more service providers, both on the cable side as well as on the telco side, embrace DECT and high-definition voice. Because I believe that it's going to be a very important and noteworthy launch. And on the European side, two of the service providers that I've mentioned already carry DECT, but not necessarily just from DSP Group. And hence we do expect here to see growth in our market share. The third European service provider ---+ this is a new design. It did not carry our DECT in the past, but it did carry DECT of a competitor in some of its models, not across the board. Q1 revenues were all based on existing customers. These were customers that we were shipping product to in the second half of 2016. So I would say Q1 still does not include the additional Tier 1 OEMs that are supposed to launch products during the second half of ---+ sorry, the second quarter and the third quarter of this year. So we expect one already to start shipping late in the second quarter, and the second Tier 1 late in the third quarter. So then we should see an increase in the voice-over-IP revenue run rate. Yes, good question. So what we had said, and kind of our thought process, is for the IoT category to generate revenues in the area of $5 million this year, I would say kind of with the stronger numbers in the second half, and I would say flattish in the second quarter. Sure, thank you, <UNK>. So the question was on kind of the mobile engagement side. So today we are engaged both with the OEM that we are shipping to today, and it will address in more models as well as with other OEMs, both from the mobile side ---+ you know, smart with wearable, as well as in the IoT arena. We are at various levels of engagement, mainly for a new product, the D4, which is being well received by the market. And it does significantly improve the power consumption levels that are required for always-on voice functionality where, in a way, the microphone is becoming an intelligent microphone, with the ability to do processing and achieve all of that without changing or reducing the user experience from the battery. So that is continuing. We do expect that these engagements will translate to design wins. And we try to be, I would say, kind of more stingy on the details on exactly how these engagements are going, just because we are fairly new to the domain. So not necessarily the way we perceive the status is really kind of the objective way to see the status. So we try to be kind of a little bit more reserved in our comments. But I do expect that these engagements will translate to additional wins during this year, both from the existing OEM as well as with the other OEMs that we are today in various levels of engagement. Yes, sure. So on gross margins, as you saw, despite an absolute lower top line of $27.7 million, the non-GAAP gross margins did come in at 42.6. And we believe that the gross margins could continue and expand. And I think that this is also implied in our second-quarter guidance ---+ that we believe that margins should expand from here, and perhaps also we would see a sequential improvement in margins this year. So all in all, we do expect margin expansion this year to take place. And our long-term target is to be at the mid-40s range. And so I think that this year, if all goes well and the product mix does stay in the way we are forecasting, gross margin should come very close to that ---+ to kind of the mid-40s. And perhaps we will be able to continue and expand that in the next two years and get at kind of the mid-40s or, let's say, a little bit above that. In the first quarter and in every quarter, we have a certain percentage of our cost of goods which is fixed. And this is why I would say we did see that the first-quarter gross margins also implied in our prior forecast were kind of for a lower number. Because, you know, on the lower revenue base we have a fixed cost of goods, which is in a way kind of taking kind of our margins lower. And, of course, with a much higher revenue run rate, the fixed costs are a lower percent. And hence this is why we believe that the run rates during this year of margins would be at the much higher rate than the first quarter. <UNK>, thanks for the question regarding cordless visibility. As I've said, our visibility is about 6 to 8 weeks. So this is roughly kind of the level of visibility that we have. And it unfortunately has not changed in the last three years. The way we think about the market, and the way we measure, and from that kind of build what we believe is kind of the secular rate of decline is by looking at the sell-out figures, meaning kind of point-of-sale data, in the two biggest markets for these products, which includes the North America market. And there are market research companies such as NPD that survey the North American market. And in Europe, which is the other continent, there are other market research companies, like GfK, that they are surveying that end market. And we do look at the trends ---+ both the monthly trends, the quarterly trends, the yearly trends to try and see what are the year to date, the ---+ any type of comparison to kind of better understand if there is a shift that is taking place. What we can see is these markets, despite going through a secular decline, are still very much exposed to consumer confidence to the level of real estate activity. There's a pretty good correlation with new home sales in both the Europe and the US. And all of that is kind of driving the cyclical changes inside cordless. And on top of that, of course, there are the supply chain inefficiencies. And by that I mean, like, the excess inventory that from time to time is kind of funnel of growth. And then we go through these depletion and replenishment cycles. So this is kind of how we look at the domain. And if we look at the calendar year 2015, what we saw is that the US market was down by about ---+ I would say kind of the ---+ around 13% down. So 13% ---+ minus 13% down. While Europe was down by about 8%, 8% to 9%. So all in all it was kind of low teens together. For this year, we will continue and survey the market. Where there was a pretty, I'd say, disappointing fourth quarter in the US in 2015, and a better start this year. But of course this is a very dynamic marketplace, so hence I don't think that the amount of months that we have today are indicative of any change. But we are going to continue, and then ---+ so for now, as we said, we believe that that the current kind of secular decline rate that we are taking into our numbers is between 10% and 15%. As we have indicated, we have today a running engagement with additional OEMs and for additional products. I did just say as an answer to one of the questions that were asked earlier that we are kind of a little bit more stingy on exactly what the design win means and when we get there, just because we are kind of newer to this domain. We are not kind of the main SOC, as we are in all of the other product categories that we are in. And so it is kind of for us harder to say what is the real status of the design. And I would say that after we kind of finish our first year of being an active vendor in the domain, I think that, you know our ability to sell one design from the other will improve, and hopefully we'll be able to give bit more detail. But as I have said, we are today engaged with the number of OEMs on a number of products. The revenues that we've seen in the first quarter and also the second quarter are coming from this one OEM customer that we are shipping products to. But we do hope that we will expand the number of OEMs and also the number of products gradually throughout this year. Thank you all for your participation. We look forward to reporting again. Thank you.

2016_DSPG

2018

VZ

VZ #Okay, and then <UNK>, so your question kind of boils down to is it organic or is it M&A and where do we see deploying fiber. So just for everyone else on the call, we have done some M&A. XO had a fair amount of fiber and WideOpenWest had fiber that we did by M&A. But we also announced our deal with Corning, which is a multiyear deal where we are doing 12.5 million miles of fiber per year for the next 3 years. So that would tell you we are sort of tilting toward organic. And our priorities are really what can we do to get off of others' lease services to meet our 4G cell densification needs, then 5G, and then our enterprise customers. We are out in markets now obviously placing fiber, but it's a market-by-market analysis of the three factors that I just talked about. And frankly, the cities, the meetings that we're having with the cities and what access they will give us to street furniture and conduit and those sorts of things factor into the equation. So it's a bit fluid at this point. And I wouldn't tell you that if an opportunity came up to accelerate it through M&A, we would do it. But most of the fiber companies were built for different purposes. They were point-to-point enterprise sort of services and they don't fit the architecture that we're building today, which is multiuse fiber for our intelligent edge network. So I hope that's clear enough for you. But certainly leaning toward organic builds to meet Verizon needs to drive our costs down and our performance up. Thanks, Mike. So I will start off with the wireless phone question and <UNK> can get onto fiber. Look, we had a great year on the wireless performance. The net adds were very strong. As I mentioned, our smartphone net adds at 1.8 million for the year, up 34% year over year. So we really saw a significant change the day we launched unlimited back in February of last year. And from that point forward, we have competed very effectively in the marketplace. And it really allowed customers to have a similar currency to compare different carriers on and the value proposition is resonating. And despite all the noise that you hear from other people and the claims you hear from other people, the network quality matters. We saw that numerous times throughout the year. And we see that in the performance we had on net adds, whether it be the new activations coming in or the churn that we've had. So each of the last three quarters of the year, phone churn was below 0.8%. And I think that tells you how much customers enjoy being on the Verizon network. So you ask about the MSOs. We are happy with what we've seen so far. Obviously, Comcast is on and Charter has said they expect to be on later this year. And as we have said consistently, we like those agreements and we signed them in 2011 and we are happy to be doing them today and we will see how they play out. But everything we've seen so far is in line with our expectations. And we are glad to have that traffic on our network and monetizing that traffic based on what those companies are doing with those agreements. And in terms of what the competitors are doing, look, they've bundled a number of things into their services during the course of last year and our numbers have stayed very consistent. So at the end of the day, the quality of the network that the device is on is of fundamental importance. And overall, when you look at our value proposition, it continues to resonate strongly. And as I say, we are very happy with the results we had last year and starting off 2018 on the front foot. Okay, Mike, let me take where do we want to head from an infrastructure and a vision perspective. Look, I think it's very clear here whether you look at what's going on today with customers or what you are anticipating that you saw at CES and others from what's next that there is an insatiable demand for broadband. And it's not mobile and it's not fixed. Customers don't care, and I think who wins is going to be able to provide them the service that they can move seamlessly from fixed to mobile. We have been a much stronger mobile company over the years. But the way we are positioning our fiber deployment and the way we are positioning 5G, we will be able to disregard geography and deploy those broadband services at a much lower cost than we have ever seen at least during my career. Now, for us, to complete the vision, you need to be able to provide the Internet information services. And video drives an awful lot of that. And we've talked at length about taking the Oath assets to be that information source around news, sports, finance, and entertainment and lifestyle. We think that the assets that we have will provide what customers need. And you look at the applications going forward, whether it's medical and healthcare services, whether it's smart cities, whether it's education, whether it's autonomous cars and transportation systems, you are going to need that sort of seamless high-bandwidth. And we lump that under the title Humanability. So our focus is around giving all of our customers the capabilities to embrace these applications of the future that are going to make their lives so much better. So our investments, they are all about providing the assets and the platforms to deliver that. Well, <UNK>, I'll take that and then <UNK> can jump in. I guess you could accuse us of being boring, but you at least should give us credit for being consistent. We have been extremely disciplined, and then when we see an opportunity we go hard. And you saw that in 3G, you saw that in 4G, and you are going to see it and you are seeing it in 5G and placing fiber. We see a real opportunity here. We were the ones that stood up and said two years ago when everybody said we were way too early, but we've been deliberate about it. We have gone out, we have done the field trials, we have developed the ecosystem, we have worked with partners from Korea as well as the infrastructure providers. We are out there, as I said, with 200 cell sites today learning. And we are going to see what commercially happens in these three to five cities. Then we will make the decision. So to us, it's very inconsistent that just because tax reform comes through, we are all of a sudden going to draw the line at a different place or lose that discipline. What tax reform does do is gives us great flexibility that once we prove to ourselves that we can get a reasonable return on invested capital, we can accelerate very rapidly. And that gets to <UNK>'s point about we want to early on strengthen that balance sheet to give us the flexibility. But the strategy is there. We are sort of like a spring ready to expand very quickly if we need to. But we have to get through another couple of hurdles here before we make those decisions. And we are not ready to say that in January of 2018, but I certainly hope by fourth-quarter results next year we are accelerating because we've got such a great story to tell. The only other thing I would add to that, <UNK>, and I kind of come back to the comments that Hans Vestberg made earlier this month. That in our industry, the nature of the way that we spend money, having significant increases and decreases is inefficient in the way we deploy CapEx. So we are certainly looking at, given, as you say tax reform, can change some of the return math. But we will be methodical about it. And there is a lot of planning that goes into our capital spending before we get to it. And so that's why you see us making the comments we do. We certainly look forward to having the right opportunities in front of us, but you will see us do it methodically and do it in the way that creates the greatest value. Why don't I take the spectrum question. As you say, <UNK>, the inevitable question. Look, there's going to be an awful lot of noise around deployment of 5G. If you recall back when we deployed 4G, there was a big scramble for everybody to try to get 3G to look like 4G. And we called it faux G, F-A-U-X, and you are seeing some of the same stuff right now. In order to do 5G ---+ and this is right out of the standard, which we certainly agree with ---+ you need at least 100 megahertz of bandwidth to provide the latency, the reliability, the throughputs that really are the 5G promise. I can take 5G and I can put it on 10 megahertz of PCS if I want to. It won't perform like 5G. It will be the technology, but it won't have the reliability, it won't have the throughput, and it won't have the latency. So you are going to get a lot of this well, they need this or ---+ depending on whether you are selling spectrum or what you've got in your basket of spectrum today. But I wouldn't change positions with anybody out there. I have got plenty of low band spectrum. That works great for 4G. It's going to service for years to come. But in order to put all of the aspects of 5G into play, you need hundreds of megahertz of bandwidth. The only one who has that in a big way in the marketplace is us. So I will just add one other piece to that. I agree exactly what <UNK> said about 5G. And as you think about 4G network, we've always said there's three things: it's spectrum, it is the densification in the architecture, and then the technology. And I can tell you over the past few months, there's been a number of technology upgrades to the network and you are seeing that in the network performance. A number of those were deployed in the backend of the fourth quarter. So significant amount of additional capacity being added to the network as we head into 2018. Again, without having to go acquire additional spectrum. But I do expect you to ask that question on most calls going forward. It would be kind of amiss if people didn't. In terms of your question on how much we pay in backhaul fiber, that's not a number we've disclosed. We really don't break out the income statement by individual line items and we are not going to start doing that now. But I would just say as we think about fiber, we look at the most economic way of getting it, irrespective of where it shows up in the financial statements. And we will continue to do that. Thanks, <UNK>. Let me take the first one on the $10 billion number over the next 4 years that <UNK> mentioned in September. And we've talked about it a little since then. Look, every area of the business is where we are looking and we believe that there's opportunities across every area of the business. Obviously, network costs are a significant part; distribution is something we're taking a close look at. Customer care, all the back-office type activities. Essentially there is no area of the business that isn't going to get examined as part of this exercise. Because it's imperative we make sure that we are as efficient a Company as we can be as we go forward. From a timing standpoint, I can tell you we've embedded the 2018 targets for this activity in each of the business units' operating plans for the year. And I look forward to discussing the results that we achieve on this as we go forward in 2018 and into the future. And then, <UNK>, I guess my answer on the fiber competitive advantage is throughout my career, I've always believed and it's been reinforced many times that if you've got a critical component of your success, you better own it and control it. And that fits with our direct distribution. It fits with a lot of our customer service. We don't outsource sales. We certainly wouldn't outsource critical components of our network. As Hans has come in and put in our architecture for intelligent edge, owning that fiber asset is important to our financial performance as well as the performance of the network. And as we have seen time and time again, network competitive advantage drives customers, which ultimately drives financials. So you won't see us outsource much in the way of network unless someone has a huge scale advantage and we could negotiate very strong performance and very consistent financials that would go along with it. That's all the time we have for questions. Before we end the call, I'd like to turn it back over to <UNK> for some closing comments. Thanks, <UNK>. So just a couple of final points from me. I don't come on these calls very often. I like to save that for when we've got significant changes in the business. And obviously tax reform and our use of those funds was important for us to clarify. But there was a second reason for me to come on. And I have been in this industry for 30 years and I think we are breaking into one of the most exciting times that I've seen in my career. We are on the cusp of what I call the Fourth Industrial Revolution as we see smart city applications, the changes in medical, the changes in transportation and education. All of those are fueled by a strong telecommunications infrastructure. So I think this is a great time for our industry overall. Obviously, I think Verizon is the best positioned to deliver that future. We've had a long history of strong operational and financial performance. We are investing in the media platforms and the fiber assets and the network and in the new technologies to meet the needs that are coming forward. And I think, as I said, that will be a major change in the way people live, work, and play. So I'm very excited about 2018, what lies ahead for us. I look forward to sharing the results and the successes as we move forward in this year. And coming on a call next year at this time and recapping one of the best years in our history. So with that, we will close the call and we appreciate all of your time today.

2018_VZ

2016

GIII

GIII #To respond to your last comment first, we're very careful to plan our businesses and develop our businesses in order not to cannibalize existing brands and businesses. We've done that from the beginning of our licensing history in coats. And we still do ---+ and north of 50% on the women's side of the coat department at Macy's, we have 60% of the men's coat department, all with a multitude of brands that all march to a different beat. They look different, they are priced a little bit differently, and they read specific to the DNA of the brand that's being marketed. So, we are cautious about the cannibalization piece of it. We now have some of the best brands in the industry. We have Tommy Hilfiger, we have Calvin Klein, we have Karl Lagerfeld, and soon to have Donna Karan. I would say that we have the heroes of the industry. What the department stores look for today is some level of discrimination in what they market and the brands that they market. So, today, we're serving up two power brands that virtually don't exist in the United States. These brands are huge. There's nobody bigger than Karl Lagerfeld, and he had no presence in the United States. We're bringing that brand here. We will double our plan for the year. We're doing extremely well. The brand is retailing in pretty much all of the categories that we've shipped. We're going to bring Donna Karan back to reality. The brand is clearly one of the biggest American brands there is. We've been after this brand for years. We succeeded in acquiring it. We're developing a plan that's appropriate for our Company and for the retailers, in collaboration with the retailers. And we see $5 billion is a very attainable number. These are absolute giants in the industry that we're going to further their presence and improve on the product mix that's been brought out. It sounds like a staggering number. I'm not accustomed to referring to G-III as a company that can handle $5 billion in sales, but we have the tools to do it, we have the people to do it, and I think we have the financial support to do it. So, contrary to what we're presenting today, this is probably the best time for G-III. We've got just great stuff that's planned on bringing to market and with great talent doing it. <UNK>, surprisingly, our biggest concern in the outerwear segment of the Business was the off-price channel, and the fact that they had packaways and they had levels of inventory that they purchased at the end of last year opportunistically that would impact our Business. The first reads that we got were from the off-price channel, the first reorders ---+ not the first ---+ Nordstrom's anniversary sale was very good to us. They're out early. They promote their anniversary and we get really good reads, good and bad. The indicators were that it's a pretty good year for them. The off-price channels came back and bought product that ---+ we had three reorders in the last week, significant reorders, from the off-price channel in commodities that I thought we might be troubled with for the remainder of the year. So, it's good news in the off-price channel. It shows that good product does retail. The sales that we made to them were not liquidation sales. I hope nobody is listening on the off-price side of it, but we made good margin on it. So, we're off to what seems to be a fairly balanced year. But as you read from our numbers, and as you've heard, we're watching it and we're playing it conservatively. And, by the way, the reads from the department stores, it's a little bit too early to respond to that. It takes a couple weeks to get it on the floor. So, our bigger accounts at the department store level haven't provided us with the indicators that we need to really get excited. I think the department stores today are doing the appropriate thing. They are reviewing their strategy. They are eliminating door count, and most of the doors that they're eliminating are pretty much the ones that are impossible to build scale in. I believe you'll see areas of the country where there are vibrant sales available that department stores will again start to open. They are doing what most prudent people are doing. They are closing their non-performing stores. That's a good strategy for us. We help on margin assistance for these department stores. The biggest leaders for us are the stores that they're closing. So, from a margin point of view, a maintained margin point of view, we should see improvement. From scale, all I can tell you, as some of these stores are closing, our Business is growing. Our biggest account we're tracking at high-teens comp increase for the year. We did the same last year. So, it's really not linear, where, as the stores close we lose the same percentage of business. That's not the way it works. There are brands that are losing space; there are brands that are not performing. And in Macy's world, as well as any department stores, they're very, very eager to have new collaborations and new brands, and that's where we fit in. We're bringing the most powerful new brands into the industry. So that has to bode well for us. We know how to produce it, we know how to service it, and we can finance it. And there's a comfort level from the department stores that are in need of newness to play with the providers that can do it, and we're getting that interest. Our show rooms are jammed every day. Developments in new initiatives are just, for me, they're unimaginable. The desire for our participation at retail is great. So, we believe that the department stores are trying to offer greater purpose to their customers, and we're here to help them. Thank you for your question, <UNK>. <UNK>, we can't hear you. You're breaking up. Yes. Sure, <UNK>. In really both the wholesale business as well as in our outlet and retail business, last year's Q4 was not strong. We were under pressure. Weather was a significant factor. So, obviously we're up against some poor comps. Those were negative comps in the retail space, as well as pressure on margins. And the same thing is really true for our wholesale business. The only dynamic that's changed for us a little bit is that in the wholesale business we are anticipating that the outerwear season will become much more robust later in the year as we get to a more normalized winter season. And, again, in addition to that we're launching a number of new initiatives, both with Tommy in particular starting in the latter half of the year, but the Karl initiatives continue to grow later in the year, as well. All of those factors are what gives us confidence that we'll see fourth-quarter improvement at both the retail side, sales and margin, as well as in the wholesale side of our Business. In the fourth quarter, it will be ---+ I won't guide you on the numbers side of it for the moment. But in classifications we will have dresses distributed, we will have suits, we will have performance apparel, and we will have the early stages of sportswear as PVH vacates some of the space. That relates to Tommy. If your question is broader than that, on Karl Lagerfeld, we're handbags, dresses, suits, sportswear, footwear, which is trending very strong. We're fairly well exploiting all of the retail space in departments with Lagerfeld. On the margin side, <UNK>, if we look at our current business and we run our wholesale business in the high single-digit operating margins, that's done without the benefit of a significant royalty income stream, which is pure profit. And it's also significantly impacted by royalty expenses that we pay to our licensors. The absence of those two things really is what gives us confidence that the operating margin for Donna Karan should be ---+ we're comfortable in the mid-double digits and then even north of there. And in response to your marketing questions and how do we get there, we're developing a plan right now, as we speak. As you know, we don't have the keys to the business yet. Every day we're interviewing and understanding how they're marketing, advertising, and the existing staff has serviced the market that they are addressing. We're clearly going to go down another path, so there's some sensitivity there. But we've defined it; we've collaborated with our retailers. The appetite is quite significant for this brand globally. We're getting calls every day from existing partners and people that would like to partner with us for the future through licensing and through becoming customers of the brand if it's repositioned ---+ and it will be repositioned. So, we're excited by it. Do we have something that we can clearly announce as to who the participants and who the retail distribution will be. It's a little bit early for us to announce that, but you can bet that it's going to be significant in scale. We're planning for significant size, and not significant SG&A reductions off the existing base. We'll be evaluating the way they run businesses, and obviously we'll bring them in line with what we do in general. But our forecast is really based on top-line growth more than SG&A leverage, as far as the existing infrastructure. In terms of CapEx, the beauty of our plan is we're really significantly growing the wholesale channel, and that's significantly less capital intensive than if we were to be rolling out stores. So, there will be shop development that we do, similar to what we do, but nothing too dramatic in terms of the size that we think the business can get to. Let me try to recap it this way for you, <UNK>. The outerwear business we've talked about as a high single-digit decline; it was approximately a $700 million business last year. Our core non-outerwear businesses are growing very nicely, high-single digits. When you look at the balance with the new launches that we have, our growth rates are significant, up in the almost 20% level when you take the core business and the new businesses that we're launching. I think in terms of where the operating margins go for next year, obviously we're thinking about it. We've got a big season in front of us, and I think it's a little premature for us to be talking about exactly how that comes back. Clearly, this year, we've had SG&A pressure both as a result of the outerwear decline and as a result of the new launches of the business. We definitely expect that on the Karl and Tommy front, and GH Bass, as well, in terms of the additional SG&A spends we had, that we will start to leverage those much better next year. Outerwear, we're hoping for a good end of the year, and it's a little premature to say what we will do and how that performance will be as we roll into next year. In terms of retail performance for the full year, this is a challenging first half and we're hoping to bounce back pretty strongly at the back end. Our total top-line performance for the full year on these change is, really, low- to mid-single-digit declines in terms of comps for the full year. We're looking for improvement in the fourth quarter. We expect, if we see that, I think we can feel much more comfortable about seeing it prospectively, as well. But, again, a little bit early for us to be out there for next year's growth on the retail side, as well. We are. The interest ---+ as you know, DKNY is a collection business; it's shipped as a collection, it's produced as a collection, and the retail is a collection. The pads that we've created in department store are collection pads. We're very proud of approximately a 14,000 square foot pad that we occupy in Macy's. What's very interesting and why this brand is appropriate for this time is that a lot of our competition, our two biggest competitors, are either giving up space or space is being taken away from them on similar pads. So, we will be offered those pads to showcase our collection of Donna Karan. And as time goes on, we will appropriately surround it by classifications. There's a huge demand for footwear. We're in the middle of developing it, as we speak. And there's great opportunity to distribute footwear through the same cycle. We pretty much out of the box at Lord & Taylor for Karl Lagerfeld became a very important footwear vendor to them. And we believe we can duplicate that, and bring it to a different level and scale with DKNY. And that will be brought to market. The other piece is we have a built-in business globally with partners. They've been underserved with appropriate product. We're in the process of interviewing them and understanding what their needs are throughout the globe. So, that should improve literally overnight. And we're going to work on our online business and improve our outlet stores. We think, if there is an outlet business, this is the best brand for us to pursue in the outlet centers. Sure. We have approximately 100 leases that are coming due in 2017 and 2018. I think it breaks out ---+ there are 65 in 2017 and maybe another 35 in 2018. So, we're reviewing those. If we don't get deals from the developers that bring those stores to profitability, we have the opportunity to walk away. That's 25% of our fleet of stores, so that changes the profile. Our strategy with Bass is to ---+ I believe today's strategy ---+ if retail gets worse and I'm wrong, we have the ability within the next 18 months to change directions. But my desire is to continue the growth of Bass. The brand is getting great positioning in wholesale. The footwear is doing extraordinarily well, both men's and ladies, in wholesale venues. Genesco has done a great job of developing the product, pricing it appropriately, and bringing out the quality that we were hoping they would. PVH is doing well on their men's piece of the business. And the women's piece we're looking to improve. We took that on and our first delivery was not what we thought it would be. We've retooled on the design side and the pricing side, and we think it's a good business. We've also added ---+ you can't really look at Bass as a stand-alone retail business. It's wholesale, it's licensing, it's the globe. And part of outlet is to help standardize and expand on the overall brand. Wilsons is something that we look at a little closer. I'm not sure how much the world would miss Wilsons today. If we don't get better on the product side of it and find that the demand for outerwear is just beyond a four-month demand, we might consider transferring some of those pieces of real estate to Donna Karan. I guess history might do that. We've done it before. We do it consistently. We've launched Tommy Hilfiger in record time. And the level of interest, the level of orders are sensational, and it comes because great product and great people are creating that great product. So, we have them. Karl Lagerfeld, very much the same way. Retail ---+ as we add retail pieces, the staff is there to support it. In these times ---+ we used to have a difficult time years ago in attracting talent, partly because of who we were, and partly with how the industry functioned and how successful some of our competitors were. Today, I think we all have read the amount of people that have been laid off at Ralph Lauren and Michael Kors and Jones New York. There's some great talent that's looking for a home. We interview people all the time. I've never seen the level of talent that's available, and they're eager to come to G-III and build businesses. So, I'm not doing it alone. The celebrity status that four or five of us have in running the Business, it's really not the Business. The Business are these amazing people that take on a challenge and make it work. It would be great if you came and saw what we did and how we've changed over time. We're not the same Company we were years ago. We've corrected everything we need to correct for sustainability in this industry. At one point we were exclusively, as you know, <UNK>, a company that just had licenses. Today, we're well balanced with great people. And I'd say that if you polled the industry, the retailers in the industry, and asked them to line up their top resources, we hit the charts really high. So, some of those elements make me comfortable that we can do this. No, it is not. <UNK>, we've put out the short-term targets in our deck this morning. That's got us up with very strong top line, very strong operating margins. In the short run, of course, there's some expenses to get this launch and get it accurate. The value creation that we think we can add to what we paid is extreme, and will result in very good, positive returns to shareholders and a very strong IRR. I can tell you that the first group that we looked at, and most sensitive, we have 23 that are not profitable for Wilsons. We'll probably react to those very quickly. They will either ---+ I gave you the lease expiration; there are others that we're going to try to negotiate our termination on. The blend of those are about 23 that we'll respond to quickly. Some we'll just have to take a write-off on. They are just not productive stores that we believe we need to exit. The rest of it ---+ it's approximately a 50/50 split between Bass and Wilsons, and door count expirations in the period of time that I gave you. We are looking for new product to start to show us better improvement overall. I would tell you that the start of the season is where we have planned, consistent with the start of the season, but we are looking for an acceleration as we get into back-to-school and set the floors and start to see more traffic. We don't really classify ourselves as aspirational luxury. We're a little bit more affordable. Maybe we might call ourselves affordable luxury in some of our brands. So, I think that what we will get is the customer that is shopping aspirational luxury that will step down a tier, and I think we get the benefit of the trade-down or the trade-off. Thank you very much. I hope our next call is a better call. Thank you for paying attention, and have a great day.

2016_GIII

2016

ACLS

ACLS #So I think probably in the first two areas of focus, we actually have valuation units at those memory customers. Those valuations are proceeding according to plan and our customer's CapEx plans are proceeding according to plan as well. So, we have good confidence in the fact that, that initiative will actually yield some increased revenue for us particularly in the area of the Purion H. The second point in terms in non-leading edge foundry and logic market, that's an area that has been quite strong for us. I think as you know ---+ in fact our average year-over-year or our average in 2015 was about a 50% split between memory and non-leading edge foundry logic and we're continuing to see strength from that segment of the market. So while it's perhaps a little bit more difficult to predict and a bit more opportunistic, there is strength there driven by the Internet of Things and a number of other devices and so we fully expect to be able to generate revenues again from that segment. So I think we'll start to see some follow-on business as a result of our evaluation units starting in this quarter and it will continue on throughout 2016. I'm not going to give any specific timing on new evaluation units that will be placed, but that will certainly be happening in 2016 and could potentially even result in some upside for us later on in the year. So beyond as you mentioned the evals of which on a quarter-over-quarter basis when they recognize will make things a little bit choppy. We have a lot of positive initiatives both on material cost out and the labor side of things. So we're continuing to make very good improvements in terms of lowering the standard cost of the tools. I always like to say that volume is the stuff that comes easy. So we don't really bank on that. We're continuing on doing the engineering cost out, the lean initiatives, and kind of more of the heavy lifting to get there. So in terms of 2016, there is some volume built-in but a majority of our improvement will continue to come from those initiatives that are stemming from either factory, supply chain, or the engineering side of the business. As <UNK> said, we expect this year to exit somewhere in the high mid 30s and we're on track to do that based on the roadmaps that we have in place. The mix varies so much quarter-to-quarter, it's hard to really break that down. Yes, all of our evaluation units are running production. So yes, we've been qualified for a number of recipes. We continue to qualify for additional recipes and we expect that to lead to follow-on orders. They are clean POs where we recognize revenue and in the case the customer where we had the large ramp last year, that was in fact the case. We shipped many revenue tools prior to the evaluation unit closing. We actually began some initiatives in 2015 to re-enter the Japanese market. The activity there is accelerating in 2016. I think it's pretty clear if you've done business in Japan that it's more difficult doing business in Japan if you're not Japanese. So it's going to take us some additional time in 2016 to continue to establish an organization there and really get all the infrastructure in place that's required. I would say that at this point, it would not account for any significant revenue in 2016 and it's more a 2017 revenue event. <UNK>, I think that would be the best way to do it. So that's kind of an ---+ it's an annual event that happens every year. When that comes out, we've talked about that $20 million to $21 million range. So I think if you took that out and modeled around $21 million, that's the right place to be. We don't really have ---+ we're still keeping a very tight handle on expenses, things that make it [move it a] little bit of some eval costs here and there but we're not opening up the floodgates to do anything other than where we see the investment that we need from an R&D point of view we're making, but we're being very careful with expenses. Took us a long time to get back down to these levels. So, we're being very frugal right now. We have more than enough right now to run the business even [in a $100 million]. If you look at the capital investment for inventory, it turns very quickly in terms of new systems builds and one other thing, our inventory turns never look spectacular, but there is a fair amount of inventory that sits in the businesses to support the field. We have a fairly large legacy installed base but if we are ramping, if you look at our process, which [ships from Salem], we're turning inventory around pretty quick as it comes through the door. So it'd be just a quick cash hit and then it clear right out, but in terms of you look at what we have right now, we have more than enough cash to do anything we need to be doing right now in terms of the ramp. Not at this point in time. I mean there are number of topics that we continue to re-visit with our Board at our Board meetings, the reverse stock split for example was one thing that we've been talking to our Board about. Now have gotten their approval to move ahead and hopefully the shareholders will support that as well. Again, there are things that we discuss but at this point, there are no plans to do that. The Gartner numbers aren't finalized yet, but their current estimates are somewhere probably between [$950 million and $975 million]. At this point I think we all expect the TAM to be down and preliminary Gartner numbers show it probably in the [$875 million] range. We'll get more clarity from that as they continue to put out their next estimates over the next couple months. I think right now that we feel very comfortable that we can get to the 30% with the current split of business that we have between the memory and the non-leading edge foundry logic business. We've talked about how one of our goals is to penetrate a leading edge foundry logic customer this year. So for us, that would be [upsize] based on the current plans that we have. And <UNK>, one thing to keep in mind is that the memory segment is much more capital intensive for implant than the leading edge foundry. So that tends to be a sweet spot for us. I think memory is going to be very important for us. We have our foot into three of the four major memory customers and even though we have a good presence, there's significant room for improvement in terms of expanding our business based on the implant recipes that are out there. So, we have ability to gain market share at each of those customers and then I think a strong memory spend, so for example, DRAM is supposed to be ---+ have a very good year next year. I think those would be two big levers that would help us significantly and then add on top of that what we talked about in terms of continued strength out of the non-leading edge foundry and logic market and some potential upside from leading edge. All of those things will add up to allow us to get to that market share goal. Okay, so we're only providing guidance for Q1. During the quarter, as we explained, we expect to see an increasing level of activity from NAND, DRAM, and non-leading edge foundry and logic customers across the full Purion product family. Based on commentary by our larger peers and the fact that our system shipments are more heavily weighted to the end of the quarter. it's possible that the industry has begun to recover, but I guess the point I want to make is regardless of where we are in the cycle, we're very focused on capturing business at several specific projects in the memory and non-leading edge markets. I recently returned from a long trip to Asia and my takeaway is that really nothing significant has changed in terms of the timing or the spend on those projects. So I think our major assumptions are still fundamentally in place and valid. And then additionally we just ---+ we're going to react very quickly to any other pop-up opportunities that our hallmark of a non-leading edge market. So I think all the fundamentals are in place for us to continue to drive the market share gains that we've been talking about. No. No, <UNK> it could happen pretty much for any of the leading edge, ion implant likely for the leading edge foundry will be used in a material modification mode and so Purion H for example could be brought in to improve yields, improved bin splits, improve power over performance or any of those aspects of a device. So it could actually be brought in almost at any node. It wouldn't be necessarily something that you'd have to look at sub 7-nanometers for. The Purion is doing very well at 28-nanometer and older. So there's a lot of custom logic, a lot of image sensor, a lot of power device kind of technology that's on 28-nanometer in older groups and Purion has done extremely well there. Purion XE and then Purion H, we announced at a tower facility that's 200 millimeter and so there's quite a bit of activity, 28-nanometer and older for this. Yes that's definitely exactly what we're saying Dave. We're focused on very specific projects that are moving along kind of regardless of the overall cycle and one thing to keep in mind is that non-leading edge, the different memory groups with leading edge, the industry as a whole has somewhat decoupled from sort of the way that it used to run in where the type would come in, the type would go out. Right now, there's I guess a lot of eddies that are going on. So we're focused in opportunities in these two memory sites that we talked about that we feel are going forward and that's happening regardless of the many macro trend that we might normally look at. So, the goal is to gain share. Yes, absolutely right. Last year, Purion H took off as a result of one primary customer in volume that allowed us to [seed three other customers, two additional memory customers]. They have projects for this year. So the goal this year as <UNK> described in her remarks is to grow that share across those new customers and that really sets us up as memory continues to grow over the next several years we'll be tool of record at all of those memory companies as they do future big projects and that will continue to grow the volume that helps drive the business. Yes, I think they're real and we've got a strong organization in China right now and our sales folks are working with the appropriate people in China as some of the groundwork has been laid for those fabs. So, yes, they are definitely an opportunity for Axcelis. And in addition to that, I mean there are existing fabs there and we do have installed bases at those fabs and we're working to continue to expand our Purion footprint in those fabs as well. So the split in the quarter was 30% memory, 70% non-leading edge and for the full-year, it was a pretty even split. It was full-year, 49% memory, 51% foundry. We don't really have any requirements that would need brick and mortar. We have a fairly strong supply chain that also has contract manufacturers if we ever need additional capacity because I guess kind of to remind everybody we're pretty much a final assembly, integration, and test house and we can flex the supply chain for any real [steeper amps]. Within the factory, we also have additional shift capability that we could add both testing and integration to. So, we wouldn't need to use money for that and if you look at our capital, our capital spending is typically small and it's more pointed at some small facilities modification, more maintenance, and then more some test equipment we use to support manufacturing, but again our capital requirements are typically pretty small. So, I said that we weren't providing guidance for Q1, but I said based on commentary from some of our peers and the fact that our system shipments are more heavily weighted to the end of the quarter, it's possible that the industry has begun to recover. Yes, it's based on the fact that we believe that IoT is going to drive a pretty large memory build both DRAM and non-volatile, whether it's flash or flash NAND or 3D XPoint or other types and so we think that really starts to kick off in 2017 and we know multiple customers that have projects that are on the planning boards for that. Well, you probably need to talk to Micron and Intel to get exact details on that. From our view, we think it probably looks more like a DRAM process in terms of implant, but all of that is ---+ it's still in the early stages for them. No, we haven't seen any significant shift in some of the things that they're trying to do to ensure that they keep their market share. No, that would be one of the tactics that they have employed in the past. We haven't seen anything significant come-up. There's two customers that we've talked about in the past, one who's got a DRAM project, one that has a NAND project and one of those projects we expect is starting in Q1 and we'll have multiple spend cycles through the year. The second one starts later in Q2 and again is likely to have expansions through the year as they fill out the fab. So, when we refer to it, the Q1 and Q2, it's the beginning of it, not the end. I think <UNK>, you're referring to one of the pages in our presentation that had probably a short-term, mid-term long-term. And at one point, I think that's how it was stated. We believe right now based on where we are with our improvement roadmaps that we're on plan to achieve those gross margins [at the revenues the share] regardless of where they turn out to be because again, we're not really guiding full-year revenues. Like I said, we're still doing engineering cost out work. We're still running kaizens in the factory. We're still making improvements on warranty and install. So those things will all come without the volume. The volume is kind of the icing on the cake that can really get us to that greater than 40% gross margin mark. Well, the common platform helps a lot. [There is a lot of volume associated using] all of our tools. Yes, we do because of the commonality of Purion, it does help the volume too. Hi <UNK>, it's Doug. The guidance down a little bit, I think one thing to keep in mind is again the difficulty of providing guidance at these revenue levels when your tools ASP's are [3 million to 5 million], makes a little bit difficult to distinguish sort of whether it's one Purion or one legacy tool or that kind of stuff. So we see a good mix in the quarter. As <UNK> said, we're continuing to see both the memory market and the non-leading edge. So both DRAM and NAND are increasing their activity levels and we see our shipments a little bit more loaded towards the end of the quarter as well, and so I don't think it's one segment or the other. I think we are seeing activity across the Board. Our bookings in the quarter are actually a much more even split. If you recall last quarter, they were much more heavily weighted towards the non-leading edge logic foundry, but taking a look at Q4 and where we ended up, it's again back to that much more even split. So I guess, probably a couple of things, the one thing that we know is the TAM number that the industry guys estimate in January is usually different than the number that they finalize the following January for the year. So that's something to remember that they're making their best estimates. In terms of probably what's driving those estimates, there is a fair amount of activity that's been discussed on all these calls regarding leading edge, logic and foundry and the 10-nanometer move. That's going be less capital intensive for ion implant and then the DRAM projects that we're talking about are much smaller than the large DRAM project that happened last year and so that probably brings it down a little bit and the 3D NAND move, there's a lot of new wafer starts, but there's also a lot of layer conversions. Those layer conversions don't require additional implant, but they do require additional [edge] and deposition equipment. So I just want to thank you all for your continued support and we plan to be out on the road over the next couple of months and we hope to see you then. Thank you very much.

2016_ACLS

2016

REG

REG #Thank you. <UNK>, it will really depend on if we have ---+ if any other investment opportunities. We still have some equity to put to use. But to the extent that can find acquisitions or increase the size of our development pipeline, and we would think about funding that not with ---+ just not just with equity but potentially with new debt, and also potentially with property sales. And it will depend on really the capital markets at that time. Because right at this moment, there's no need for additional debt. Tremendous amount of flexibility, as both <UNK> and I indicated. Well, we own several larger community shopping centers. We have a great property in Raleigh, North Carolina, an iconic shopping center that we've owned for well over 10 years. We redeveloped an iconic property, made it iconic, in Westlake in Southern California. So community shopping centers, some of whom ---+ some of which have some lifestyle components, have been a part of our strategy long term and will continue to be. But I would still say that it's in the 20%-plus percent range today as a percentage of NOI. And it may go up some, but not substantially. As we said often, our strategy is community and neighborhood shopping centers, and will continue to be so. We don't ---+ the renewal also was the bittersweet. It was actually Barnes & Noble. So we did ---+ there is significant upside in that rent, even after. Renewal option was even a large increase. What we had underwritten was that it was going to be down for little while, while we replaced it with a better operator. Such that it was bittersweet. We kept the income at a higher rent, but now we have to wait, I believe, the renewal was for five years. So now we have to for another five years in order to replace that tenant. Beyond that, we do have ---+ so Washington Sports Club is also a short-term renewal. And we anticipate that we will have the opportunity to replace that as well at a higher rent And we have the right to terminate when we find a replacement operator. And then the other upside is really ---+ it comes from smaller spaces. And then the redevelopment of the vacant parcel. I'm a female. We don't think north, south, east, west. It actually ---+ so the front door today actually comes out to Clarendon Boulevard. So it's facing the Barnes & Noble. We could potentially reconfigure that so that that the door could face the Whole Foods and do ground-floor retail so that it is ---+ it does have Clarendon exposure. We think that there's incredible amount of upside there. It really does sit on the pin corner of the property. So Cheesecake Factory is down the other ---+ I guess that would be, it's toward DC, I know that ---+ no, it's the other way. It's opposite DC. It's down the other end. Very well could be restaurants. But I wouldn't anticipate it being a large-use restaurant like that. I would anticipate smaller, and have some outdoor seating because there is a little bit of a courtyard there. But again, we are in the really early stages. We did give ourselves some time to really explore what would be the best long-term use Throughout the project we expect to be able to add some additional excellent restaurant operators. We think that's a real opportunity there. And just to note, the parcel that's available is an old Sears, which is, as <UNK> and <UNK> indicated, is strategically located on the site. Thanks, <UNK>. We appreciate your time and interest in Regency. Thank you very much. And everybody have a great day, and the rest of the week. And if you're in hot weather, stay cool.

2016_REG

2015

TDS

TDS #Good morning. Boy, lots of things can go either way, but in terms of how we're thinking about it right now. As I said good quarter, but I would have liked to have seen more adds and kind of ---+ the model that you know all too well, growth costs money on the front end whether it be commissions, subsidies, whatever. So if we get the growth that we are targeting I expect to be right in the range on cash flow to the extent that growth turns out to be lighter, growth driven by fewer gross adds, then we could be at the top end. If we get more growth we can push that down. It's all it's all going to the growth is the single variance of what I'm looking at right now. It's just a market where, boy the consumer really is extraordinarily cautious right now, and so we're just going to continue to kind of monitor the market an when we see opportunities I want to be able to move and still be within my guidance and if things change dramatically we'll be talking to you a couple more times this year and change as we go. I'll let <UNK> talk about how we're thinking about it longer-term for the rest of the year. But I think you touched upon something there which was you can be higher if you incent it. Our approach to the marketplace is what we call relationship-based sales and our sales force is instructed and taught and trained to make sure they explore and understand the customer's needs and then get them in the right product or service. We don't push one product, rate plan, one service over another but make sure that we do a good job of understanding what those customer needs are. Yes. So <UNK> as far as the guidance is concerned, as we disclosed in our prepared comments, we were at about 39% for the quarter. <UNK> had also mentioned that percentage was affected to some degree by that special tablet promotion we were running. So depending on whether similar promotions are running the balance of the year, there would be some impact on that number, but we built the guidance around an assumption of about 45% to 50% for the balance the year. Boy. You got the subs, you got the rev, you got the cash flow, and now you want more yet. And so do I. So do I. That's my message to the organization. I would say the big question on operating ---+ on free cash flow that I want to be careful we're early into it, is really going to be driven by what changes we have to or don't have to make in the network as we move from LTE to voice over LTE. We are doing a three-market commercial test this year. It will be later this year by the time we turn that on and we need to make sure that we have a network in VoLTE world that is the same quality that we have in a CDMA world, CDMA voice world at least. And CDMA has been a wonderful, wonderful technology. To the extent that the difference between those technologies impacts capital spending for a year or two is just uncertain right now, and so more I would say later this year when we start seeing those test results which would help us kind of set the path for our capital going forward. But between now and then the focus on growing both topline and operating cash flow is what we are really centered in on. Thank you. Well, I've never seen a metric that I said was optimal. I always want more. And one of the big changes we've built over the last year. You go back was it, was it 15 months now, 18 months ago, and we had less than 40% of our customers under contracts. And between changes to our offerings, changes to EIPs, we're up to, gosh, 75% plus of our customers and now or either on EIP plans. And we're seeing really good results in terms of customer satisfaction, all of the drivers. We're seeing customers that had left us in the past coming back to us because of the network quality. So I'm optimistic that we can continue to improve on that metric. Well, I would say that that's pretty typical in our geographies. Between the northeast up in Maine and New Hampshire and the northwest out in Washington and Oregon, there's not a lot of construction projects going on in January, February and March, so first quarter is typically a little bit lighter and we are not moving off guidance. We still expect to complete all the projects we have laid out for the year. <UNK>, those are unanswerable at this time. Our ---+ our partner actually invested I think about ---+ a little bit over $300 million on a net base. $300 million ---+ almost $340 million, just to kind of get the facts out there. And we constantly are evaluating our spectrum positions. We are working with that partner right now to look at where we sit today and that's more of a market-by-market analysis than it is a general kind of across the board, and our strategy is to make sure that we have access to both high and low band spectrum so we can be prepared for carrier aggregation, which Mike would tell you we're going to be testing later this year. So once we get through that cycle later this year, I think we'll be better positioned to understand where we need it. But as a starting point I would say in most of our markets our ---+ we start with a low band 850, we have 700 in many of our markets. So right now I'm feeling pretty good about our low band position. Yes, I think I ---+ I was pretty clear with my comments and the progress that we have seen. We're very pleased with our performance so far. Cable overall in the first quarter was the organic growth in our connections of 7%. It is meeting our expectations. I'm very pleased with our BendBroadband acquisition as well. That's exceeding our expectations, and yes, we ---+ we are actively pursuing to grow that parts of our business and ---+ and are pleased with the activity in our pipeline. Yes <UNK>. This is <UNK>. You're touching upon the uncertainty that's out there for the next nine months. From a strategic standpoint, I would like to get bigger. While we are doing a great job attracting back customers that left ---+ left us over the last couple of years, mathematically we don't have them all back yet, right. And those are people that know our network, they know our service it's met their needs. We either didn't have the right products or services or disappointed them in the past. So I would like to ---+ like to get them back. I would like to improve my market share position in some of my markets, but only ---+ only at a level of spend that is still economical. Now to the extent that the US consumer continues to stay extraordinarily cautious and the switching pool shrinks, we won't have that opportunity. We, therefore, won't spend those marketing dollars and you are going to see a little bit more cash flow. But if I think about long-term I would still like it see the company grow from where it's at today and have built that into our strategies for the year and built that into our guidance. How the year plays out over the next few months. Stay tuned we'll both know. I'd just like to thank you all for joining us. If you have any follow-up questions please reach out. Thanks.

2015_TDS

2018

ODP

ODP #Good morning, and thank you for joining us. This is Rich <UNK>, and I'm here with <UNK> <UNK>, our CEO; and Joe <UNK>, our Executive Vice President and CFO. On today's call, <UNK> will provide an update on the business, including highlights of some noteworthy achievements during the quarter and progress towards our transformation. Joe will then review the company's quarterly financial results, including divisional performance as well as an update on our outlook for 2018. Following Joe's discussion, <UNK> will have some closing comments, and then we'll open the line for your questions. Before we begin, I need to inform you that certain comments made on this call include forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect the company's current expectations concerning future events and are subject to a number of factors and uncertainties that could cause actual results to differ materially. A detailed discussion of these factors and uncertainties is contained in the company's filings with the U.S. Securities and Exchange Commission. During the call, we'll use some non-GAAP financial measures as we describe business performance. The SEC filings as well as the earnings press release, presentation slides that accompany today's comments and reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are all available on our website at investor. officedepot.com. Today's call and slide presentation is being simulcast on our website and will be archived there for at least 1 year. I'll now turn the call over the Office Depot's CEO, <UNK> <UNK>. Thank you, Rich, and good morning to everyone on the phone with us today. I'm very pleased to be here with you this morning and report on the positive momentum that we are seeing in the business and a tangible evidence of the progress we are starting to deliver on our journey to transform Office Depot. As you know, one of the key pillars of our strategy is to strengthen our core operations, and we're making great progress as our first quarter results demonstrate. Our mindset is on winning every day by focusing on demand generation, reaching new customers and growing the customer base across the organization. As these initiatives continue to gain traction, we expect to build additional momentum throughout the year as we continue to fundamentally reposition Office Depot for the future. Beginning on Slide 4, I'd like to share with you some of our strong first quarter financial highlights. Total sales in the first quarter were $2.8 billion and up 6% versus the prior year. Let me say that again. Up 6% versus last year. This is a very major milestone for us as a company, and one that we haven't seen since the combination of Office Depot and OfficeMax back in 2013. The acquisition of CompuCom played a major role in this accomplishment, and the customer base we acquired is part of that transaction. However, the demand generation efforts that I referenced earlier also had a significant impact, as the BSD division reported positive sales this quarter, which is the first time this has occurred since 2012. It's the first time BSD has grown since 2012. We also increased the customer base across the organization and saw positive trends in retail, where the declines are less than we've experienced in the past. I'm extremely proud and encouraged that we are now growing again as a company. Myself and the team are committed to continue this trend in the future. In addition to strengthening the core operations, our growth strategy is also focused on creating a powerful omni-channel business services company. The first step in our transformation was the strategic acquisition of CompuCom, and we have further enhanced our services and subscription offerings in both retail and BSD throughout the year. As a result, we have enhanced our financial reporting this quarter and started to provide a breakout of product and service revenue across the business. I'm very pleased to report that total service revenue now exceeds 14% of total company revenue. This is nearly double what it was in the first quarter of 2017, and highlights the transformation that is underway. I will share some additional details in our service offerings in just a few minutes. GAAP operating income in the first quarter was $77 million, with a diluted earnings per share from continuing operations of $0.06 per share. Our adjusted operating income was $93 million with adjusted diluted earnings per share from continuing operations of $0.08 per share. While adjusted operating income was down year-over-year due to our transformation investments and other headwinds, I'm very pleased that we're able to exceed our expectations for the first quarter. Lastly, and very importantly, we were able to generate $170 million of free cash flow in the first quarter, also well ahead of our expectations. As Joe will discuss in a few minutes, this was largely driven by our intense focus on working capital management, which more than offset the investments we are making to strengthen and grow the business. Last year, and every quarter, Rich and I have discussed the importance of working capital management, and we're starting to see the fruits of these investments and the hard work our teams have put in to increase our free cash flow. I'm very proud of the team for these efforts. As a result of the strong performance in Q1 and continued confidence in our forecast, we are increasing our full year outlook of sales, our adjusted operating income and our free cash flow to reflect this momentum. I will now elaborate on a few additional highlights in the quarter that support key elements of our strategy and the strategic pivot we are making as a company. Turning to Slide 5. While we're excited by the transformational changes underway across the company, strengthening the core is paramount as it establishes the base of customers, earnings and cash flow, which we can build upon. It starts with an increased focus on the customer and how we're redefining the experience and our offerings that attract and retain high-value business customers. We find that our customer base in the BSD and CompuCom divisions are very similar. And together, these 2 B2B-focused businesses now represent nearly 60% of total sales. I want to say that again. B2B represents 60% of our total sales. This is a large shift from just a few years back when retail was the largest percentage of the company. Most importantly, these 2 businesses are now stable. The CompuCom business was essentially flat in the first quarter, while the BSD division grew sales in the period. As I said earlier, this is the first time since 2012. This is clearly a major milestone for us, as we have moved beyond the disruptions of the past, including the OfficeMax customer migration process, which was finally completed this quarter. We're seeing success in our adjacency strategy within BSD as well, especially in cleaning and breakroom, and we've made successful acquisitions of small regional office products and janitorial supply companies along the way that brought additional selling resources and customers in geographies where we had minimal presence. The business has been making steady improvements over the past several quarters, and I'm very pleased that we are now back to growth in this important piece of our business. Looking forward, we see continued momentum in these growth initiatives as well as a growing number of cross-selling opportunities with CompuCom. The 2 sales teams have now been fully trained, and are tracking hundreds of opportunities across the combined SalesForce.com customer database. The customer referrals go both ways, and we're seeing tech services opportunities in the Office Depot customer base as well as new office product opportunities in the CompuCom customer base. As I mentioned on our last call, we also have an incentive structure in place that is specifically focused on driving services revenue and cross-selling opportunities across our business. After only a few months of ownership, we've already captured several new wins and expect us to continue ramping over the balance of the year. And within the CompuCom business, we're seeing positive trends with many accounts in their existing customer base. Q1 represents the third consecutive quarter of year-over-year growth in service orders despite the first quarter being a traditionally seasonally slow quarter. Several other customers are initiating large IT projects, as they're investing back in their businesses. CompuCom is very well positioned to continue benefiting from this additional spend. We expect additional benefits this year from the continued rollout of tech services into the retail stores, and I'm very pleased to report that we're on track to deliver the cost synergies we estimated when we announced the transaction. Beyond that, we're seeing additional opportunities as we align the selling efforts across both groups. Overall, I'm very pleased that the trends in these 2 divisions have stabilized, and I'm optimistic about their prospects for the remainder of the year and beyond. This stability, combined with the demand generation initiatives that we'll talk about next, have us well positioned for growth across the enterprise. Turning to Slide 6. I want to highlight the importance of demand generation and the shift we are making towards digital marketing to more efficiently and effectively engage with customers, especially online, where they're first beginning their shopping journey. The focus on customer is key. It is a customer-first mentality that we're driving throughout the organization, and we're starting to see some very favorable trends appear. We began the shift in Q4 of 2017 towards digital and broadcast media specifically targeting small- and medium-sized businesses. With a more focused strategy, we delivered a higher ROI and improved traffic trends as well as realized growth in the new business customer acquisition. Realized growth in new business customer acquisition. These efforts are continuing to gain traction. And during the first quarter, online traffic grew 9%, loyalty enrollments were up 27% and we are capturing new customers as the rate of new business acquisition doubled in Q1 versus Q4 of 2017. We've also recently established an analytics center of excellence to streamline the tools, capabilities and people across the company for this critical function and in driving improvements in customer acquisition efficiency. As a result, we are not only driving more customers through our website, but there are more relevant customers, as online conversion was up double digits in the first quarter. By being more targeted in our efforts and moving from low ROI to higher ROI vehicles, we were able to generate a higher response rate with lower overall costs. We will continue optimizing our media mix to reach high-value businesses and expand our focus to include customer retention, while also including a services and subscription message in all of our marketing. If you remember, during our earnings call at the end of February, I indicated that we have started to activate a subscription-based customer focus across our business. This included the launch of a new ink and toner subscription offering in our stores. We are continuing to make strong progress in this area. And total subscriptions now exceed 245,000, an incredible accomplishment considering we just began operating this functionality at the beginning of the year. We are adding additional categories and functionality to make this an even more convenient service offering for our customers. And to create a sticky, reoccurring revenue streams are a key part of our strategy. Finally, we recently announced WPP as our new marketing agency. They are well regarded and proven firm in the industry that we believe can help accelerate our demand generation efforts by providing more relevant, cohesive and compelling marketing campaigns across our channels. Turning to Slide 7. By increasing our engagement with customers, we are looking to build broader relationships that are underpinned by an array of reoccurring, sticky and higher-margin services, and ultimately position Office Depot to be the preferred business services platform for a company of all sizes. I mentioned earlier that services revenue in the quarter was over $400 million, and now represents greater than 14% of our total sales. On an annualized basis, that would translate into nearly $1.6 billion in annual revenue. Approximately half of this revenue is related to the award-winning tech services that are performed in the CompuCom division. What most people don't realize is the other half of the services revenue is generated from the variety of offerings in our retail and BSD divisions. The store footprint will become even more important to us in the future as we continue the rollout of technology and other services across the network in 2018. While we have categorized these services into technology, print and marketing, administrative and workplace for simplicity, they are all part of a comprehensive suite of services that we offer customers to enable them to run and grow their business. Over time, we expect to add additional offerings to our business services platform and see this expanding to be even a larger percentage of our total revenue. Our strategy is to take a holistic approach to meeting customer needs by providing a comprehensive range of products and services under a common platform and delivering them when and where our customers need them. We realize that our businesses need to mirror the behavior of our customers and, first, engage with them wherever they are, including online, in our stores or at their office; second, provide the information they are searching for during the shopping process when they want it; third, and enable them to conveniently make the purchase either one-time or ongoing with a subscription offering. I firmly believe that this is the power of a true omni-channel platform that leverages our capabilities and delivers a consistent experience, regardless of how or where customers choose to interact with us. This includes using our websites, retail stores, dedicated sales force and supply chain to meet these customer needs. We've also recently introduced a new channel partnership with MicroCorp to provide additional feet on the street to engage with an even larger number of small- and medium-sized businesses that we could do on our own. Our management team and associates are energized by this new strategy and the power of the omni-channel business services platform. We see benefits for both our customers and shareholders as a way for Office Depot to create tremendous long-term value. I will now turn the call over to our CFO, Joe <UNK>, who can provide more details on our financial results. Joe. Thank you, <UNK>, and good morning, everyone. I'm happy to be here today to discuss with you our first quarter results. Similar to last quarter, we have provided our results on both a GAAP basis and adjusted basis from continuing operations. My comments will primarily address the performance from our continuing operations on an adjusted basis. Also, keep in mind that the total company financials include the results for the CompuCom division for the first quarter of 2018 only, as this business was not part of Office Depot in the prior year period. As <UNK> mentioned earlier, we have enhanced our financial disclosure to report the breakdown between products and services for both sales and cost of goods sold. We hope this visibility provides greater insight into our business and the progress going forward as we continue to expand and grow our business services platform. Let us turn to Slide 9. Here we have highlighted some key performance measures for the first quarter of 2018. Total company sales for the first quarter totaled $2.83 billion compared to $2.68 billion in the same period last year. The increase of 6% was driven by the addition of CompuCom's results for the first quarter in 2018 as well as positive sales growth experienced in our Business Solutions Division. With the addition of CompuCom, total service-related revenue now contributes to over 14% of the company's total net sales. We are very focused on seeing this portion of our business grow and become a larger and larger percentage of our total sales mix going forward. First quarter GAAP operating income decreased to $77 million compared to $124 million in the prior year. During the quarter, the company incurred $17 million of operating expenses related to the merger integration, acquisition-related costs and other restructuring activities. Excluding these items, our adjusted operating income in the first quarter of 2018 was $93 million compared to $148 million in the prior year period. The decline in adjusted operating income was primarily due to the negative flow-through impact from lower sales in the Retail Division and higher marketing, advertising and other growth-related investments across the enterprise as we improve demand generation and develop more sustainable revenue streams. As you can appreciate, these investments often preceed the associated revenue generation and have a short-term negative impact on margins. I also want to point out that both years include a negative impact due to the change in accounting standards starting in 2018 related to the presentation of expense related to the defined benefit pension plans. This resulted in the recognition of $2 million of expense in the first quarter of 2018 and $3 million in the first quarter of 2017. We expect similar impacts to be realized throughout this year as well. Excluding the after-tax impact from the items mentioned earlier, first quarter adjusted net income from continuing operations was $45 million or $0.08 per share compared to $88 million or $0.16 per share in the prior year. Finally, for the first quarter of 2018, cash provided by operating activities of continuing operations was $207 million. This was very strong cash flow performance during the quarter, and was a significant increase over the $88 million reported in the prior year period. The year-over-year increase of $119 million was primarily due to continued working capital improvements, largely from improved vendor payment terms and inventory reductions as well as lower incentive compensation payouts. Operating cash flow for the quarter included outflows of approximately $12 million in OfficeMax merger costs, $10 million in acquisition and integrated-related costs and $5 million in restructuring expenses. Let's now turn to Slide 10, which highlights the performance of our Business Solutions Division, or BSD. Reported sales in the quarter for BSD were $1.3 billion, an increase of 1% compared to the prior year. This is a quarterly sequential improvement of approximately 400 basis points and, as <UNK> mentioned earlier, returns the division to positive sales growth. The BSD sales improvement over the prior year was primarily driven by growth initiatives in our adjacency categories, e-commerce sales and from the acquisition of new customers, both organically and inorganically, in our contract channel. Looking at our performance by product category, BSD sales increased double digits in our furniture business and mid-single-digit in our cleaning and breakroom category versus the prior year, as our focused efforts on expanding these adjacencies continues to gain traction. These sales gains were against lower volumes in the more traditional supplies and technology categories. The BSD division reported operating income of $55 million in the first quarter of 2018 compared to $58 million in the prior year period. The slight year-over-year decline was primarily due to conversion costs associated with the customer migrations from the legacy OfficeMax platform to the new Office Depot system, which was completed this quarter. In addition, the division realized higher marketing investments in the quarter compared to the prior year as part of the company's online demand generation strategy, which mentioned earlier favorably contributed to the increased sales performance. These higher investments overshadowed the positive year-over-year success of lowering SG&A through focused cost reduction initiatives. Turning to Slide 11. Reported sales in the first quarter for the Retail Division were $1.2 billion compared to $1.4 billion in the prior year period. The decline in sales was partly due to planned store closures, which occurred within the last 12 months, and a negative impact to revenue of approximately $30 million, resulting from the adoption of the new revenue recognition standard in 2018. Comparable sales decreased 4% versus the prior year period, primarily driven by fewer transactions and lower average order values. Looking at our performance by product category. Comparable retail sales increased double digits over the prior year in our cleaning and breakroom category, as our efforts to make these products more accessible continues to win with customers. Sales of our more traditional copy and print business remained flat with the prior year, and declined in the technology, supplies and furniture categories. The Retail Division reported operating income of $72 million in the first quarter of 2018 compared to $112 million in the prior year period. This year-over-year decline was primarily driven by the negative flow-through impact from lower sales, including store closures and higher marketing and advertising investments, which more than offset lower payroll expenses and other cost reductions. During the first quarter of 2018, we closed 2 stores, bringing our total store count to 1,376 stores in the Retail Division. As previously announced, we have slowed the store closure program as retaining our retail footprint remains a critical part of our omni-channel strategy. Looking at the Slide 12. We highlight the performance of the CompuCom division. As I mentioned earlier, reported financials include the results for CompuCom in the first quarter of 2018 only, as this business was not part of Office Depot in the prior year period. However, to provide greater perspective into the year-over-year performance of this business, we have presented unaudited, adjusted historical results for the first quarter of 2017 for reference purposes only. The adjustments made to the 2017 results take into account the treatment of historical restructuring acquisition costs to more closely align with Office Depot's reporting format. Reported sales in the first quarter for the CompuCom division were $257 million, roughly flat to historical sales in the prior year period. The business experienced sales growth within the small- and medium-sized business, or SMB market, and continued the strong momentum from Q4 into the new year with high order volumes realized again. As <UNK> mentioned earlier, this was the third consecutive quarter of year-over-year growth in service orders. The CompuCom division reported operating income of $5 million in the first quarter of 2018, down slightly to the adjusted historical results from the first quarter of 2017. Q1 performance included investments to support growth initiatives, including an increase in technicians for the SMB market as well as incremental depreciation and amortization expense related to the acquisition and alignment of accounting policies. This was largely offset by lower selling, general and administrative expenses as a result of targeted cost-reduction initiatives and administrative efficiencies. Turning to the balance sheet and cash flow highlights on Slide 13. We ended the first quarter of 2018 with total liquidity of approximately $1.6 billion, consisting of $737 million of cash in continuing operations and about $900 million of availability under our asset-based lending facility. Total debt at the end of the quarter was approximately $1 billion, excluding the $770 million in nonrecourse debt related to the timber notes. For the first quarter of 2018, cash provided by operating activities of continuing operations was $207 million. As I highlighted earlier, the year-over-year increase was primarily due to continued working capital improvements. Operating cash flow for the quarter included outflows of approximately $12 million in OfficeMax merger costs, $10 million in acquisition and integration-related costs and $5 million in restructuring costs. Capital expenditures were $37 million in the first quarter of 2018. The investments reflected our commitment to continue to strengthen our core as well as invest in future growth. In corporate and capital expenditures, we generated robust free cash flow from continuing operations of $170 million during the quarter. In addition, during the first quarter of 2018, the company paid a quarterly cash dividend of $0.025 per share to shareholders on March 15 for approximately $14 million in total. We also repaid $19 million of our outstanding term loan consistent with the repayment schedule. Furthermore, as previously announced on our call last quarter, we successfully completed the sale of our business in Australia in February, and late last week closed on the sale of our business in New Zealand. The sale of both businesses will provide the company with approximately $102 million of incremental cash to continuing operations. With these 2 transactions now finalized, the company has fully completed the international divestiture plan, and can now sharpen our focus on the transformational growth opportunities in front of us. Looking at Slide 14, we provide the company's updated outlook on key financial measures for the full year 2018. As we have discussed throughout this morning, results for the first quarter of 2018 exceeded our expectations. Due to the favorable results achieved, the company is now increasing its full year outlook as follows. The sales outlook is increasing by $200 million to be approximately $10.8 billion. Adjusted operating income for the year is increasing by $10 million to be approximately $360 million. And free cash flow is increasing by $25 million to be approximately $350 million. With the strong Q1 performance and the momentum we are seeing with our key growth initiatives, we feel it's appropriate to raise our full year outlook at this time. Our teams are focused on this transformational journey, and we believe we are taking the necessary actions to position the company for long-term sustainable growth. Finally, I want to remind you, we will be hosting our 2018 Investor Day next week on May 16 at the Mandarin Oriental Hotel in New York City. A live webcast will also be available on the Office Depot Investor Relations website at investor. officedepot.com. We are very excited about this event, and having the opportunity for <UNK>'s leadership team to meet with many of you. We look forward to providing a more in-depth look into our strategy, the ways we are generating higher demand, improving our operations and deploying the significant cash we are generating. I hope to see you there. With that, I'll turn the call back over to <UNK> for his closing comments. <UNK>. Thanks, Joe. Overall, I'm extremely pleased with the performance in the first quarter, and continue to believe that we have the right long-term strategy in place. We recognize that 2018 is an important year of transition for Office Depot, and I'm encouraged by the positive trends we are realizing across the enterprise, including the stability we are seeing in our BSD and CompuCom divisions and expectations of future growth; the aggressive demand generation strategy we are employing that is benefiting all of our channels, driving significant improvements in online traffic and increasing the number of active business customers; the continued growth of our service and subscription offerings; and the strong progress we are making at driving working capital improvements and free cash flow generation. I look forward to spending much more time on our strategy, initiatives and long-term outlook when we get together next week with the rest of my leadership team at our upcoming Investor Day in New York City. I will now turn the call back over to the operator, and we can take your questions. Well, it's a combination of things, Matt. Obviously, we're very, very happy with the 1% BSD growth. It's a combination of a lot of progress in the core contract business. I'll say our online e-commerce business is doing extremely well. It's some of the highest levels we've seen before, and the acquisitions make up a small contribution to the overall business. Important, and I want to touch on that for a second, we do believe there's a buy versus build approach here. and we've done a lot of work that says the customer relationships of some of these acquisitions, we can actually speed the customer and speed to market that it's a very effective strategy for us to ---+ from a cash perspective just to roll up some of these acquisitions because we like the spaces they're in. They're in some geographies that we don't have a lot of density in. And I also think that having that retentive sticky relationship on a day-to-day basis is important, especially as we start pivoting to not just selling core products, but in selling services and other services as well. So it does make a contribution, but it's really a combination of great performance across the whole BSD team that have led to this piece. And we've seen substantial ---+ sequential improvement for the last 3 to 4 quarters. And we've said that we're going to do this, and I'm very pleased that we've done it now. And I'm very confident that we'll continue to do it going forward as well. Matt, we're not breaking out specifically the acquisitions. As <UNK> mentioned, it's ---+ they are a modest contributor. The strongest contributor really is coming from of the e-commerce initiatives we have. I'm not sure we've ---+ I mean, it was down slightly. We're not providing kind of the core ---+ we're not breaking it down to the pieces, but it was down slightly. The acquisitions contributed slightly, and the e-commerce contributed slightly for a net of a 1% positive year-over-year. I'll add some color. We've seen improvement. It's not ---+ obviously, we want everything to be growing, but it's down slightly. But the e-commerce team is doing a tremendous job. And then you couple in the acquisitions of our smaller ---+ some of our smaller marketplaces, it's made for a very successful strategy. And we think we can continue to replicate this. And it's ---+ then you have the CompuCom piece, and it's 60% of our overall business. So we think we're onto something, and our strategy of strengthening the core is going to be very valuable for us long term. Well, I think, obviously, we compete every day. We have ---+ I don't like to comment on competitors, but what we try to do here is make sure we do our job well. So obviously, it's making sure we have the right cost position, the right product breadth, the right supply chain. Our supply chain is a top 20 supply chain. We'll see you next week in New York. We'd love to expand on that more, but we're ---+ I'm very pleased with our win rate as well as the execution of Steve and the BSD team as well as, again, we're seeing tremendous success in the e-commerce business. And I love the fact that we found some of these key markets that we didn't have the density in before. But it's a combination of the strategy, and we think that we're going to continue the momentum. So we're very, very positive of where we're at. Those are the largest 2, I mean, the largest 2 that we really kind of commented on here. So you should assume that the majority of the growth coming out of the categories is from those 2. And those are very important as well because the ability to have that omni-channel approach we're taking, we're using the approach that we can ---+ in our flagship store in Austin, you can do virtual reality to design your office. We're putting more and more capabilities for our BSD sellers to sell furniture. We have expanded our assortment at both in the store as well as online as well as our BSD teams. We've added SKUs and capabilities within our supply chain to deliver cleaning and breakroom, and we've brought in some expertise. We've brought in a great cleaning and breakroom leader with years of experience, and brought that ---+ Wayne's done a fantastic job for us. And so I think it's a combination of many different levers we've pulled. And so we're going to continue ---+ I think Mark Perrotti and his team have done a great job in the furniture and the merchandising side. So we're going to double down on these categories. And we're seeing tremendous strength, but we're not ignoring their other categories as well. Again, the vision is to sell not just narrow pieces of products and sell products and services. And we think there's a number of that. The tech services piece is making progress. We think there's workplace and other type of areas we can also sell to our active customer base, which we'll go into a lot of detail next week at Investor Day, but we've got a large active customer base that we think is a huge asset for the company that we're going to leverage to sell furniture, cleaning and breakroom, a number of other services and products, too. And again, this is driving the BSD growth. We've said we're going to do it. We've done it. We're going to do it again. Knowing that our competitors are probably listening on the phone, we're obviously not going to disclose that. But it's ---+ I would encourage you to come to Investor Day. You'll see a lot of great information. And ---+ but it is a key category for us. We're a business services and product company. We sell paper. We sell ink and toner. We sell furniture. We sell cleaning and breakroom. We sell services, plus a lot of other key things to our business partners and consumers as well. I think the piece that we haven't touched on that I want to really amplify and emphasize, which I touched on my piece, is we've had dramatic improvements in our demand generation and our marketing activities. Jerri DeVard and her team have done a tremendous job. They'd come in, we're looking at ---+ we're using an analytic center of excellence, We're looking at ROI in all our mediums. We're moving from an analog, what I call analog marketing and digital marketing. And we're investing in vehicles and marketing that are driving traffic. And so it really starts at the start of the funnel. So we're driving a tremendous improvement in marketing, demand generation and traffic. That and with the merchandising improvements that Janet and her team have done, who've done a tremendous job of improving our assortment of our products. Those, coupled together with great execution by our channels, is leading to the growth you're seeing in BSD. So it's a combination of all these pieces coming together. We've been focused on it for the last year. And now we're ---+ all these pieces are coming together. And we're strengthening our core, which is our center of our strategy, and that drives customer generation. And you saw the fantastic cash generation we have as well. And we're positive, over the year, we'll continue ---+ we've brought the numbers up, that this strategy's working. Demand generation, great merchandising, great supply chain, all driving, helping our sellers and all 3 of our channels be successful. And I am confident that all the categories will see improvements from where they were historically. It's Bank of America Merrill Lynch. So in the furniture category, what kind of gross margin are you seeing in that category compared to the corporate average. And how is that margin compared to a year ago. Because you just mentioned that you're doubling down on the category. So I'm just curious what the implications would be for gross margin. Again, it's ---+ we cannot discuss this because ---+ from a competitive perspective. I will just say we're comfortable with where we're at, and we're going to continue to ---+ we think we found an important growth category for us. We are the largest seller of business chairs in the United States. A lot of people don't know that. But we think, again, the merchandising team has done a great job of finding great products for us. We have some great partnerships with suppliers that give us some exclusives. And it's really, again, going back to the demand generation, vehicle and using our online ---+ our order online, pick up in store. It's using ---+ getting that traffic in has been the key. I mean, I want to highlight again that that's been the key driver for a lot of this demand generation. And then obviously, our channels have to go execute to it. But we're not going to disclose the margins. But we're going to continue to put a lot of focus on growing furniture, growing cleaning and breakroom and growing other adjacencies. We think ---+ you'll see at Investor Day, we think there's new categories. Because of the fact we have a relationship, we want to make sure that we execute that relationship across products and services to our customers. But I'd only add is, you should assume that the desire for us to grow these categories reflects our confidence that this can be done profitably. Or we wouldn't have brought our guidance up if we didn't think we can do that. Okay, great. That answers my question. And just given the increased focus of the company on being at the forefront of technology and services, can you just talk a little bit about the smart office being what the market looks like now versus the potential growth profile, and what you think your competitive advantage is. Well, I think we're excited with the smart office. And if you look at our retail stores, Kevin Moffitt, our retail team and Janet have done a good job. We're starting to roll out our smart home, smart office and offerings with some partners in a lot of our stores as well as online. But I think it's a huge growth opportunity. Dan Stone and his CompuCom team actually just were moved into a completely smart office building that we think is world-class and leading. So Dan's team did this with the CompuCom side as a pilot, really demonstrating where the technology and capability could go. They're able to build the building faster, cheaper than any and most historical builds. For example, it's all done from an Internet of Things sensor device perspective. You have no light switches, et cetera. Everything's done from a tech perspective. Now we think that is a demonstration of where people can go in the future because green is important to us, saving energy, saving costs, making it more effective in time. You can go walk into a CompuCom conference room, your presentation automatically goes up on the screen. It saves our ---+ a customer's time. We're going to see improved emphasis of Office Depot focus on this category. We think it's very small right now, but I think it's a huge growth market for the traditional industry as well as, as we pivot to be a broader company for us going forward. And the key is we've demonstrated it. We have a building that shows it. And so we've merchandised it. And so you're going to see our furniture and our merchant teams and our retail teams and our BSD teams all focused on not just selling furniture, but how do we use AR, VR to sell it more effectively. How do we use this technology to sell it more effectively. Because we think we're not ---+ just not a office supply company anymore, we're a true service product company that can sell services and products to new categories. And I'm excited by these growth categories. These are awesome. And we've demonstrated, and we have a real building that demonstrates that why. Great. All right. I'll see you next week. Excellent. I look forward to it. Any other questions. I want to thank everyone again for joining the call this morning. I look forward to updating you with my team on the progress on our next quarterly conference call, and especially I look forward to seeing you all next week in New York on Investor Day. We've had a great quarter. I want to thank the team. And everyone, have a great day. Thank you.

2018_ODP

2015

DOV

DOV #Hi, Shannon. About $25 million. I think it's going to be dependent upon energy trends. I think we are ---+ there may be a pocket here or a customer somewhere who still has some inventory that they want to burn off but I would tell you that the destocking of inventory we think is essentially done. We saw a little bit of that in the third quarter. We expected a little bit of that to continue in the third quarter, we did see that, but I think that's behind us. I think, again, the best leading indicator that we have been sharing with you here for near-term activity in our energy business is the rig count. And you see that almost as quickly as we do. (laughter) If rig counts ---+ if we continue to get pressured in our energy fundamentals, we still believe we've got opportunities to take some cost out. Though, Shannon, I am going to be real direct here. It becomes more difficult as we go into 2016. But it will become ---+ in 2016, it will truly become a trade-offs being lowering cost and maintaining what we would define as appropriate service levels. But we do know we've got additional opportunities to tackle in 2016 if need be. I am not so sure I would agree with the other part of your statement that the bulk of our opportunities in 2016 are still within energy, <UNK>. I think we do expect our restructuring activity to be less in 2016 than they were in 2015. But the discussions we are having across the board, we have restructuring opportunities that we have identified, some of which we'll tackle here in the fourth quarter, some of which are lined up for the first half of next year, across all four segments. Hi, Jeff. I don't want to give you the individual customers, Jeff. As we talk about share gains and business wins, I will tell you what's not included in that would be any change that we would expect to see next year with our customer that we have been talking about all year long, which is Walmart, any downward change. But when you look at the business wins and the share gains that we have experienced and benefited from here in the second half of this year and look at the carryover into 2016, I would label them mostly regional retailers. And we think we are going into 2016 with about $30 million worth of incremental business from wins that we have earned this year and partly have some of the revenue in the second half of this year. But about $30 million of incremental business into 2016 for this ---+ for these new wins and share gains. 10% to 12%. And almost all of the, I would call it the hit or the down cycle in oil and gas is restricted to some of the upstream oil and gas activity that our pumps business participates in. As <UNK> said in his script or in his prepared comments, the down guide on fluids is principally oil and gas but it's not all oil and gas. We are seeing some softness in Europe and China in fluids as well. We'll see how the fourth quarter shakes up. The third quarter concerned me a little bit in China. If we were to pull out our project activity, which as most of you know can be lumpy from quarter to quarter, if we pulled out our project activity from both the third quarter of 2015 and third quarter of 2014, revenue was down in China double digits in the third quarter. Not expecting it to be down as much in the fourth quarter. In fact, October and September are telling us it won't be, but I am still being pretty cautious with respect to expectations in China here in the fourth quarter. Our business is down almost 15% in the third quarter in China. Well, we have ---+ I am not so sure I've got exact numbers that I can recall for the Middle East. I know we have ---+ goodness, more than ---+ we're participating in more than 50 tenders right now in the Middle East and Southeast Asia, as well as South America. Jeff, three years ago the number would have been eight. The change has been that significant for us. And I would say more than half, probably two-thirds of these tenders, I would describe as Middle East opportunities. And the area that has been the most significant for us in the Middle East over the last three years has been our base of activity in Oman and then the areas in the Middle East that we service from our base in Oman and that continues to be quite attractive both here in the second half as well as expectations for 2016 and 2017. Good morning, <UNK>. I will start but <UNK> is going to have to help me here. As I look at it, <UNK>, I call it some of the self-help going into 2016. I have already commented that our restructuring charges in 2016 should be less than we have incurred in 2015 and 2014. I'm not going to give you that number until we finish some work, but I think we'll be prepared to share that delta with our investors and the analysts at our dinner in December. But on the restructuring activities that we have executed on in 2015, I think the carryover that we are looking at is about $50 million, <UNK>. That's correct. I'll give you some color on that to help you with your modeling. The energy margins for the year is going to be a little bit better than 12% and this is all in. Restructuring, this is not adjusted. This is all in. A little better than 12%. I think one of the earlier questions was about the decline in revenue in the fourth quarter. In energy, it's about $25 million. Our margins in the third quarter all in were 13.5%, and we'll be about 100 bps below that in the fourth quarter. No, there wouldn't be anything unusual to call out. Good morning, Dean. For the two deals that, as I said, the two deals we expect to close this year, there would be no financing related to that. It would be cash on hand and cash flow in the fourth quarter. And just to reiterate, on the Tokheim deal, depending on where we close next year, what we said would be $300 million to $400 million in financing, most likely I view that as using CP. In 2016. I would say the run rate, as you know in earlier quarters, we talked about this current year has impacted our compensation accrual, so I would expect to see some of that come back across that corporate number into next year. So no, I would expect it to go up slightly. Good morning, <UNK>. I am not giving guidance on 2016 yet, <UNK>, so you're going to have to ---+ I'm going to preface my comment by saying we're still doing a lot of work on that. But I will tell you, at sort of the high-level assumptions we are making is that the next couple of quarters are probably going to be pretty reflective of what we're seeing here as we end the third quarter and move into the fourth quarter. I would label that as stability but at a much lower investment rate and spend rate with our customers. It's a little bit more difficult to call right now the second half of next year. We'll give you a little bit more color on that at our dinner in December. But for the first half of next year, it is without any doubt, we are not planning for any recovery beyond our current run rate in the energy market. But I would also say we are not expecting or planning for another 10% down, either. Your second question was around pricing. I would tell you that I'm not sure pricing was going to be much different. I think as we go into 2016, we would continue to see some pricing pressure, especially in the first half of 2016. I am not sure our guide would be much different than we were providing at the beginning of the year for the energy segment in total. Maybe a 3% price down pressure. And again, you're going to see it scattered around different product lines and regions where some price pressure will be greater than others. Now, I am going to preface this ---+ my response again by telling you, give us the opportunity to spend some more time on this between now and our investor dinner in December. I think this time allows us to come to grips with a little bit of what we are going to be expecting and planning for in the second half. Now, to your question about margin expansion. As we sit here today, we actually see the opportunity in all four of our segments to see margin expansion. It will be varied. But I think that we can in our core business, if you exclude the acquisition activity and aside from JK, the other two acquisitions we have announced do bring with them much lower margins than what we have as a Dover average. But in our core business for Dover, we do clearly see the opportunity for margin expansion in 2016. Do you want to add any color to that, <UNK>. The only thing I would add is it gets back to what we were talking about before. We would expect sitting here today, not as much restructuring spend; that's part of that answer. And the carryover benefits obviously are quite significant going into next year at $50 million. So that gives us some jumpstart into that discussion of margin expansion into 2016. And on top of that, we are anticipating and planning and identifying significant benefits from productivity in 2016. Yes, it was a Dover number. <UNK>, I'm going to have to ---+ I would be guessing because I don't have good recall on what the down cycle was in China by each segment. It was evident at each segment. That I can tell you, but I don't have the numbers and a good recall for each segment. Fluids and printing and ID. And it's actually not insignificant for refrigeration, either. I would characterize it more like a one-off for this year, and probably reverting back to the slightly below 30% rate, that 29% rate for 2016. Good morning. I don't like the word weapon because ---+ (laughter). We'll use it as a strategic opportunity to better service our customers. (laughter) Absolutely. I will underscore how important that question is on this JK acquisition. Oh, my goodness. So, let's see. How do I want to tackle that one, <UNK>. Help me with a response here between manufacturing, manufacturing cost, and SG&A. So for manufacturing cost, our restructuring activity, I think we are at a run rate now, an annualized run rate of $90 million or $94 million, am I right with that number. $92 million across all segments. And a significant chunk of that was not recognized for the entire year. We have about $45 million of that that is a carryover into 2016. And then below the line, below the gross margin line, we have taken out, goodness, is it close to $50 million in SG&A. $35 million in SG&A of which we would label about 18% to 20% of that as permanent. It's that permanent part of SG&A that I add to the carryover from the manufacturing cost of about $40 million that gets me to the round number of about $50 million of benefits that we'll see in 2016 as we see these projects complete the annual cycle. Thanks, Lori. This concludes our conference call. We were very happy to speak to you this morning and personally thank you for the one question and one follow-up. We got a lot more questions than we normally would. With that, we would like to thank you for your continued interest in Dover, and we look forward to speaking to you at our next earnings call. Have a good day. Thank you.

2015_DOV

2015

VRTS

VRTS #I addressed in my prepared remarks the impact on the fee rate to look to the second quarter open end fund fee rate as an appropriate base line for your models on a go forward basis. And we will continue to provide transparency because there are a couple of things that are going in different directions inside the basis points related to the change. Clearly the change from the former sub-advisor to Dorsey, Wright had a slight favorable impact but that was offset by reductions in the fee rate on the product side. So I think that those things are generally netting, so using that fee rate from this quarter as a baseline for your models, I think, is a good way to start. To for the extent there are changes going forward based on changes in the asset mix, we will continue to provide that transparency to help with your model. Sure, I mean I do believe we have had a very meaningful focus on share repurchases and again our outstanding shares that we were down 3.3% year-over-year. So we do see that and we're at the level of basically having return 102% of our net income as adjusted. So we think those are meaningful share repurchases. Again that is one of the uses of our balance sheet and we continue to consider the appropriate levels but we are at our highest levels of repurchases. But fundamentally having the balance and the strong balance sheet we have at $52, so for the cash and investments as you know is $52 per share and if you subtract debt it's still $52 per share. But with that you know the focusing on the future of the business and the growth is really a priority and we're very pleased with the fund that we seeded recently, the multi-strategy target return fund. It's just a great opportunity that the incredible expansive nature of that product required $50 million of seed. We think it's a great use of that capital. We're very optimistic about the opportunities for that fund given the success that that strategy has had outside of the US with Aviva directly not through any relationship with us. So we're very excited about that and we continue to see it as our obligation to balance returning meaningful capital to shareholders but to making sure that we're continuing to invest in sustainable long term growth throughout various market cycles so that's really where we're really focused. Thank you. I just want to thank everyone for joining us today and obviously we certainly encourage you all to call if you've any further questions. Thank you.

2015_VRTS

2016

CNSL

CNSL #Thank you, operator. And good morning, everyone. We appreciate you joining us today for our first-quarter earnings call. At the end of the prepared remarks, we will open the call up for questions. Joining me on the call today are <UNK> <UNK>, President and Chief Executive Officer, and <UNK> <UNK>, Chief Financial Officer. Please review the Safe Harbor provisions in our press release and in our SEC filings for information about forward-looking statements and related risk factors. This call may contain forward-looking statements within the meaning in the Federal Securities laws. Such forward-looking statements reflect, among other things, management's current expectations, plans and strategies, and anticipated financial results, all of which are subject to known and unknown risks, uncertainties, and factors that may cause the actual results to differ materially from those expressed or implied by these forward-looking statements. In addition, today's discussion will include certain non-GAAP financial measures. Our earnings release for this quarter's results, which has been posted to the Investor Relations section of our website, contains reconciliations of these measures to their nearest GAAP equivalent. I will now turn the call over to <UNK> to provide an overview of our first-quarter results. <UNK> will then provide a more detailed review of the financials. <UNK>. Thanks, <UNK>. And good morning, everyone. I appreciate you joining us today. I will provide some highlights for the first quarter, and touch on two transactions we've announced subsequent to the quarter. I will then turn it over to <UNK> for a more detailed review of the financials. We kicked off 2016 with a great quarter of financial and operating results. Growth in our business and broadband revenues continued to perform well, and demand remains high. We expanded our commercial product offerings, and have now rolled out a set of cloud-based solutions in all markets. Early indications are positive. We continue to execute on our strategy of extending our fiber network and maximizing commercial and carrier growth. Our results in the quarter reflect this strategy as our data and transport revenues are higher by 6.4% compared to the same period last year. Overall, our revenues were $188.8 million, a slight increase compared to last quarter. Adjusted EBITDA was at $78.6 million for the quarter, and the payout ratio was a comfortable 61.4%. Also for the quarter, we were pleased with our broadband metric results. We added 3,500 not data connections, and continued to move customers to higher speed packages. We are well positioned competitively with 89% of marketable homes capable of receiving 20 meg or higher speeds. We had another strong quarter of metro Ethernet circuit gains with year-over-year growth of nearly 20%. With respect to video, our strategy continues to be driven towards profitability and passing through content cost increases. This strategy drives lower video gross ads and increased opportunities to reallocate capital dollars to higher margin broadband services. Now let me turn to the expense side of our operations. Last year, we increased our two-year synergy target on the Enventis transaction from $14 million to $17 million. The two-year anniversary is October of this year, and we are ahead of schedule. As we finalized these synergies, we remained focused on expense control and, of course, efficiency improvement across the business. From a capital standpoint, we continue to invest with about two-thirds on success-based efforts. The first quarter spend was slightly lower due to some weather-related challenges, but we still expect to be within our guidance for the year. Turning to M&A, with our 11-state footprint and market diversity, we are at an existing scale where we can be very competitive and efficient. We still view fiber-based acquisitions as consistent with our strategic objectives, and we will pursue the right opportunities. As an example, this past April 18th, we announced the acquisition of Illinois-based Champaign Telephone company, which has an all-fiber infrastructure and serves commercial customers in the Champaign-Urbana area. The acquisition adds 275 route miles of fiber, and over 300 on-net lit buildings to our portfolio. This is an attractive tuck-in opportunity for us to expand our existing Illinois footprint into a growing market that's underpinned by education and healthcare. We're excited about the potential of this market and the opportunities to build upon the strong platform the team at Champaign Telephone has already created. And we expect to close the transaction in second or third quarter. Also consistent with our strategic focus, we recently announced the sale of our rural Northwest Iowa ILEC. The buyers are also located in the Northwest Iowa region and are well positioned to ensure that customers continue to receive advanced product and services. The ILEC produced roughly $7 million in revenue last year. This transaction is expected to close in the second half of 2016. So in summary, we started the year with a very good quarter reflecting the consistency of our results and the success in our strategy. The transactions we announced move us further down the fiber migration path, and we are excited about the opportunities they bring. With that, I'll turn the call over to <UNK> for the financial review. <UNK>. Thanks, <UNK>. Good morning, everyone. Today I'm going to review our first-quarter financial results as compared to the same quarter last year. I'll follow that by reiterating our 2016 guidance. So starting with revenues, operating revenue for the first quarter was $188.8 million, as compared to $192.6 million last year. Excluding the combined $2.3 million decline from equipment sales and service and the Enventis billing company that we sold in October, total revenues declined by $1.5 million for the quarter. Growth in our strategic revenues, which we define as commercial, carrier, and consumer broadband, were offset by declines in legacy voice revenues, network access, and subsidies. Total operating expenses exclusive of depreciation and amortization were $120.4 million, compared to $122.3 million the same quarter last year. The improvements in operating costs were primarily tied to our Enventis synergy achievement. Net interest expense for the quarter was $18.6 million, which was a $2.1 million improvement compared to the first quarter last year. As a reminder, we significantly improved our cost of debt and capital structure with the successful refinancing and redemption of our 10-7/8% senior note that we executed last June. Other income, net was $7.2 million compared to $6.4 million for last year. The first quarter of last year included a $900,000 non-cash impairment loss on an investment, Central Valley Independent Network. Cash distributions from our Verizon Wireless partnerships in the quarter were $6.8 million, which compares to $7.1 million for the first quarter of 2015. Weighing all these factors and adjusting for certain items as outlined in the table in our press release, adjusted net income was $9.5 million, and adjusted net income per share was $0.19. This compares to $10.2 million and $0.20 per share respectively for the same period last year. Adjusted EBITDA was $78.6 million in the quarter, compared to $79.7 million for the first quarter last year. Capital expenditures for the quarter were $28.7 million. And from a liquidity standpoint, we ended the quarter with approximately $24.5 million in cash and $65 million available in our revolver. For the quarter, our total net leverage ratio as calculated in our earnings release was 4.19 times. Cash available to pay dividends was $31.8 million, resulting in a dividend payout ratio of 61.4% for the quarter. Now let me reiterate the 2016 guidance we provided last quarter. Capital expenditures are expected to be in the range of $125 million to $130 million. Cash interest costs are expected to be in the range of $73 million to $75 million. And finally, cash income taxes are expected to be in the range of $1 million to $3 million. With respect to our dividend, our Board of Directors has declared the next quarterly dividend of approximately $0.39 per common share payable on August 1st, 2016 to shareholders of record on July 15th, 2016. This will represent our 44th consecutive quarterly dividend. With that, I'll now turn the call back over to <UNK> for closing remarks. Thanks, <UNK>. We started 2016 on a positive path with solid results and the announcement of a strategic fiber-based acquisition. We have continued our strategy of investing for the future and delivering a comfortable payout ratio for our shareholders. With that, I'd like to open it up for questions. Brian. Yes, thanks for the question. Let me start with the focus on bundling. We are not ---+ and you never say never ---+ but we're not focusing on marketing these services outside of our network footprint. These are all about enhancing the value and moving our sales approach to a much more consultative, business problem-solving sales strategy. And we've been very effective in transitioning that. So if you think about it and you look back through history, we've been in the cloud service business and offering that product before cloud was even a cool thing with our cloud voice product, our VoIP. And that service is really focused on unified messaging. And so when you break it down, our portfolio of cloud services includes four services, the first of which is the cloud voice offering with unified messaging, voicemail, instant messaging, things like that. And that's really a replacement for legacy PBX systems. The second is cloud compute where we host the IT systems for a business. The third is cloud WiFi, which is really a Trojan horse-like product that allows us to see all the IP devices operating inside a customer's business and help them guard against rogue cloud offerings that their employees might be using, and helps them improve productivity. And the final is data protection. And that's a service where we host the infrastructure for our customers in one of our 12 data centers. So in terms of the take rate, it's really early on in the launch. And so it's probably not worth commenting on the take rate. But I would tell you, the pipeline looks very good, and we're excited about the energy that this has injected into our sales time. Yes, it's really the latter. This is really a revenue synergy opportunity because it gives us 300 lit buildings very near where we have a significant resource pool in terms of sales engineering. So yes, they don't have the cloud portfolio that we have, although they've got a very high service experience for their customers. So it's a really good combination that allows us to extend our marketing and sales strategy. Well, actually I think we're looking at it as being slightly accretive. I mean, I think the EBITDA numbers ---+ again, thanks for the question. This is <UNK>. So we're looking at it as being slightly neutral to positive on the bottom line here, free cash flow accretion. If you think about ---+ you mentioned the revenue numbers ---+ EBITDA's largely offsetting. We think there's more growth opportunities, as <UNK> talked about, in the commercial market in Champaign. And then from a cash flow, when you factor in CapEx, we're going to have a really strong reallocation of CapEx from what we would have spent on cap [too] in Iowa and just really being able to use that CapEx better with the Champaign deployment. Let me start first with the special access piece. The order was just released on Monday, so we're still reviewing it like all of you. But when you look at, first of all, the threshold issue being there's really not much of a need for major special access reform. The marketplace is already driving lower special access. And really in our case, we're seeing it transition to our fiber-based metro Ethernet product. And so if you look through history, our special access revenues haven't been declining $3 million or $4 million per year for several years now. And we've been replacing that legacy revenue with fiber and metro Ethernet circuits. So I don't see the provisions that the FFC's worried about in any of our tariffs. So we don't see any impact or likely exposure there. And our trend has been to move those customers to an IP-based service anyway. And we think we're in front of that curve. With respect to the growth rate, there's been really no major change in our traction from a sales strategy in terms of price per meg and the pricing structure. There's a natural price compression that you continue to see across the industry. But we're replacing that. Our ARPU is continuously consistent to growing because we're replacing that revenue opportunity with add-on services like you see in the cloud examples that we've just launched. So I don't see that as a weakness in results by any stretch. I think the 6% growth is fairly robust. Well, I thank you again for joining us today. I feel really good about our strategic position, and I'm very excited about the future. We hope you'll again join us next quarter. Thanks, and have a great day.

2016_CNSL

2015

AMZN

AMZN #Yes, thanks for your question. We have not broken out specifically apparel, but we're super excited about that business. It's growing very well. We like our position in it. We think our website is very, very atune to selling online. So we're very happy with that. It is a big business for us, not only in North America but also Internationally. So you mentioned a couple other consumables categories. I will say we are very happy in our consumables and hard line categories as well. We drive a lot of repeat business with things like Prime Pantry and subscribe and Save and others. So very happy with the EGM business as a whole. Sure. Let me start with the first question on international media and EGM. I think we're seeing similar trends in both geographies, both segments that EGM growth is much ---+ is very strong. Media growth has been consistent for the last four quarters. We do like the work being done by the media teams. There's a lot of pipeline of invention, things like Prime Instant Video, Prime Music, all feed the Prime pipeline and Prime ecosystem, if you will. They work great with our devices, by the way. And they drive other non-media sales. So they're very tied together, although certainly the EGM is outpacing the media segment or excuse me, media businesses right now. On transportation costs, not a lot to add there. Again, we are ---+ we have a combination of doing our own shipping and using third party carriers. So the rate increases are staged and we see those quite frequently, nothing to add there. On the FCs and whether we would expand or build new, I think we're looking to always to get the most out of the fulfillment centers that we have. And as we need new facilities, we place them closer and closer to customers. So that can have its benefits as well. Not much more to add on that one.

2015_AMZN

2017

PEI

PEI #Thank you. Actually, <UNK>, at the two properties where we have comp traffic, that is both Cherry Hill and Moorestown, holiday traffic was up. In the case of Moorestown, up double digits. In the case of Cherry Hill, low single-digits. So the ---+ from a data perspective, traffic at those two assets were up. From a sales perspective, which I think really is a good barometer as well, we are seeing our sales continue to move in a positive direction. Even most recently through January, we are now approaching $470 per square foot in sales. And we are adding, by the way, traffic counters that will become comp as time goes on. But today, with specificity, just those two assets, and that is a positive story. No. I don't know that we did it. We didn't laid out in the book, but we assume there's $100 million of construction financing, our share, on FOP. There is an additional construction limit we have put on Woodland Mall. And the balance comes from refinancing mortgages that come due over that time period and excess proceeds from those refinancings. (Multiple speakers). Excess proceeds from mortgages as well as construction loans in two of the larger projects. Not at this point. Well thank you all very much for participating and for engaging with questions. We look forward to seeing you all at various investor conferences over the next few weeks and months. Thank you.

2017_PEI

2017

AAON

AAON #We'd like to thank you for attending our conference on this. We are cautiously quite optimistic, and the operation of the company is going very well, and the Water-Source Heat Pump is behaving just the way we wanted it to. We're being very cautious, so we don't incur any warranty costs. We're being cautious, so we don't disappoint our customers. And when we think we've got all the software debugged ---+ it's mainly a software debugging, it's not relative to the [prodish] on Water-Source Heat Pump. It's all relative to the software. We will be bringing in much more in the way of orders and shipping much more product. So everything from our standpoint that we can see is optimistic. We just hope the economy goes along the way we believe it's going. Thank you. Well, we've been in the Water-Source Heat Pump business for quite some time. But it's been a very high tonnage, very specialty units. We have been able to do the very difficult jobs that large units ---+ that we have were capable of doing in the Water-Source Heat Pump. So those unique units we have been building for some long period of time. The units we're bringing out now, you might say that we've gone from calculus down to the first or second grade ---+ only first and second grades got a huge amount of the dollar volume that's in the Water-Source Heat Pumps. And so that's ---+ it's an easier, much easier thing to deal with, but it's much more volume intensive. And so some of those units that you are seeing there reflect that. It's not so much it's reflecting the Water-Source Heat Pumps that we're talking about building now. We've just started. . Yes, see it's going to go ---+ probably the biggest one of those is going to be maybe $3,000 or $4,000. The biggest of some of that other stuff might have been $300,000. Thank you, again. We'll talk to you at the end of the next quarter.

2017_AAON

2015

CTL

CTL #We do believe there will be another program after this program is complete. We're not really sure what the program ---+ we don't know what the program will be, of course, but we think that there may be some opportunity to continue to get some funding to help serve and provide broadband service to rural America. Thank you, Sayeed. As we've called out today, we're not satisfied with our results for the quarter, and we have plans in place to correct that trajectory. But overall, I really believe we have the best portfolio of assets we've ever had at CenturyLink. Now, it's really about execution. We're taking these assets and leveraging them to drive revenue growth, EBITDA growth, and shareholder value over time. And while there certainly will be some quarterly ups and downs with some bumps in the road along the way, CenturyLink's long-term trajectory, in my view, is positive and bright as it's ever been. So thank you for joining our call today, and we will look forward to speaking with you in the weeks ahead.

2015_CTL

2015

GWW

GWW #Hello, this is <UNK> <UNK>, Senior Vice President of Communications and Investor Relations. With me is <UNK> <UNK>, Senior Director of Investor Relations. The purpose of this podcast is to provide you with additional information regarding Grainger's 2015 second-quarter results. Please also reference our 2015 second-quarter earnings release issued on July 17 in addition to other information available on our investor relations website to supplement this podcast. Before we begin, please remember that certain statements and projections of future results made in the press release and in this podcast constitute forward-looking information. These statements are based on current market conditions and competitive and regulatory expectations and involve risk and uncertainty. Please see our Form 10-K for a discussion of factors that relate to forward-looking statements. Today we reported results for the 2015 second quarter and updated our sales and earnings per share guidance for the full year. We delivered a solid quarter from an EPS standpoint and while our gross profit margin was less than we expected we were able to generate positive cost leverage as an offset. I'd like to share with you what we are seeing in the market. We remain in a soft demand environment. Deflationary commodity prices, the strength of the US dollar and the economy in Canada continue to be headwinds. Despite all of this, we continue to gain share with customers who value a broad product offering, inventory management services, technical services and fast reliable delivery. In addition, we are growing rapidly with small customers through Zoro and MonotaRO. And we remain focused on productivity to fund our growth and infrastructure investments and reduce the effect of lower gross profit margins. Last month we announced that DG Macpherson will assume the newly created role of Chief Operating Officer effective August. We expect this move will ensure tighter coordination between operating functions, business units and business models. Also last month we issued $1 billion in new 30-year debt. We using the proceeds as part of our $3 billion share buyback program announced on April 16. Before we begin the review of results, I would like to remind you that there were adjustments to reported results in the second quarters of both 2015 and 2014. In 2015, we took $0.02 per share in charges related to restructuring at Fabory and the shutdown of the Brazil business. In 2014, we recorded a $0.15 per share charge related to the transition of Fabory's employee retirement plan in Europe. During the 2015 second quarter, Grainger invested in a limited liability company established to produce clean energy. In addition to supporting the operations of this entity, we received a pro rata share of energy tax credits. Tax credits earned net of operating losses from this investment lowered the Company's effective tax rate in the 2015 second quarter and contributed approximately $0.09 per share to earnings. For the full year, energy credits are expected to result in a 1.4 percentage point reduction in the Company's effective tax rate. With that as a backdrop let's look at our results for the 2015 second quarter. Company sales for the quarter increased 1% versus the 2014 second quarter. Excluding foreign exchange and acquisitions, organic sales increased 3%. There were 64 selling days in both quarters. Report operating earnings increased 5% or 1% adjusted. Reported net earnings increased 7% and adjusted net earnings were up 3%. Reported earnings per share were $3.25 for the quarter, an increase of 11% versus the 2014 second quarter. Excluding the adjustments from both years, earnings per share were $3.27, up 6% versus the prior year. We also revised guidance for sales and earnings per share which <UNK> will cover in detail at the end of the podcast. Our 2015 guidance issued on April 16, 2015 included 1% to 4% sales growth and earnings per share of $12.25 to $12.95. We now expect 2015 sales growth of 0% to 2% and earnings per share of $12 to $12.50, which includes the benefit of the energy tax credits. Now let's walk down the operating section of the income statement in more detail. Gross profit margins in the second quarter decreased 50 basis points to 42.6% versus 43.1% in 2014 due primarily to faster growth with lower gross margin customers, lower supplier rebates tied to volume and price deflation versus cost inflation driven by foreign exchange. Operating expenses for the Company declined 3% driven by lower payroll and benefits. The Company generated $28 million of productivity savings to fund $25 million of incremental growth in infrastructure spending. Total Company operating earnings were $357 million, an increase of 5% versus the prior year. The reported operating margin was 14.1%, an increase of 50 basis points versus the prior year. The adjusted operating margin was 14.2%, an increase of 10 basis points versus the prior year. Let's now focus on performance drivers during the quarter. In doing so we will cover the following topics. First, sales by segment in the quarter in the month of June; second, operating performance by segment; third, cash generation and capital deployment; and finally, we will wrap up with a discussion of our 2015 guidance. Before we begin our sales discussion, please note that some of our businesses have a different number of selling days due to local holidays. Despite this, we use the number of selling days in the United States as the basis for our calculation of daily sales. As mentioned earlier, Company sales for the quarter increased 1%. Daily sales growth by month was as follows; up 1% in April, flat in May, and up 1% in June. Results for the quarter included 1 percentage point from acquisitions and a 3 percentage point reduction from foreign exchange. Excluding acquisitions and foreign exchange, organic sales increased 3% driven by 4 percentage points from volume partially offset by a 1 percentage point decline in price. Let's move on to sales by segment. We report two business segments, the United States and Canada. Our remaining operations are reported under other businesses. Sales in the United States which accounted for 78% of total Company revenue in the quarter increased 2%. Results for the quarter included 2 percentage points from volume and 1 percentage point from intercompany sales primarily to Zoro partially offset by a 1 percentage point decline from price. Let's review sales performance by customer and market in the United States. Government, commercial and light manufacturing were up in the mid-single digits. Retail was up in the low single digits. Heavy manufacturing and contractor were down in the low single digits. Reseller was down in the high single digits and natural resources was down in the low teens. Low oil prices continue to affect our natural resources and heavy manufacturing customers. Based on our analysis of relevant SIC codes, oil represented about a 1% drag on US sales in the quarter. Now let's turn our attention to the Canadian business. Sales in Canada represented 9% of total Company revenues. For the quarter, sales increased 2% in local currency and declined 9% in US dollars versus the prior year. The 2% sales increase consisted of 8 percentage points from the WFS acquisition and 4 points from price. This was partially offset by a 10 percentage point decline in volume. Based on our estimates, we believe the vast majority of the volume decline is attributable to direct and indirect exposure to oil and gas. On an organic basis, declines during the quarter in the commercial, oil and gas, retail, construction, heavy manufacturing, forestry and transportation customer end markets more than offset growth to customers in the government, mining, utilities and light manufacturing end markets. From a geographic standpoint, sales in Alberta were down 18% compared to all other provinces which were up 3% in aggregate. Let's conclude our discussion of sales for the quarter by looking at the other businesses which represented 13% of total Company sales. Sales for the other businesses increased 7% consisting of 21 percentage points of growth from volume and price partially offset by a 14 percentage point decline from foreign exchange. The sales increase was primarily due to the growth from the single channel online businesses of Zoro US and MonotaRO and also the business in Mexico. Earlier in the quarter we reported sales results for April and May and shared some information regarding performance in those months. Let's now take a look at June. There were 22 selling days in June of 2015 versus 21 days in the same month of 2014. Daily sales increased 1% in June versus the prior year. The daily sales increase included 1 percentage point from acquisitions and a 3 percentage point reduction from foreign exchange. Excluding acquisitions and foreign exchange, organic daily sales increased 3% driven by 4 percentage points from volume partially offset by a 1 percentage point decline from price. In the United States, June daily sales increased 3% driven by 3 percentage points from volume and 1 percentage point from intercompany sales primarily to Zoro partially offset by a 1 percentage point decline from price. June customer end market performance in the United States was as follows. Light manufacturing, government, retail and commercial were up in the mid single digits. Based on our analysis of relevant SIC codes, oil represented about a 1% drag on US sales in the month. Daily sales in Canada for June were up 1% in local currency and declined 11% in US dollars. The local currency increase was driven by 8 percentage points from the WFS acquisition and 4 percentage points from price, partially offset by an 11 percentage point decrease in volume. As a reminder, we will anniversary the WFS acquisition on September 2, 2015. In Canada on an organic basis, declines during the month in the commercial, oil and gas, retail, construction, heavy manufacturing, forestry, light manufacturing and transportation customer end markets more than offset growth to customers in the government, mining and utilities end markets. From a geographic standpoint, sales in Alberta were down 17% compared to all other providences, which were flat to the prior year in aggregate. Daily sales for our other businesses increased 6% in June consisting of 20 percentage points from volume and price partially offset by 14 percentage points decrease from foreign exchange. The daily sales increase was primarily due to strong revenue growth from Zoro US, Japan and Mexico. Sales growth in the month of July is currently trending slightly below the growth rate reported for June. Now I would like to turn the discussion over to <UNK> <UNK>.

2015_GWW

2015

NX

NX #Thank you. Good morning, and thank you for joining us for our 2015 fiscal first-quarter conference call. On the call with me this morning is <UNK> <UNK>, our Chief Financial Officer; and Marty Ketelaar, our Vice President of Treasury and Investor Relations. Revenue grew in the first quarter by 1.2%, slightly better than our expectations. When we guided toward a flat first quarter, it was with the expectation that we would see normal market growth in our spacer, screens, and accessory product lines, offset by a contraction in vinyl extrusion sales. In fact, the screens and accessory product lines performed better than anticipated, driven mainly by continued strength in the South and West. The contraction in the vinyl business was expected, as a customer utilized a competitor's extrusions for two of their new window designs. We continue to provide extrusions for the balance of their product portfolio. In addition, most customers had a reduced inventory build heading into the spring compared to last year. Going forward, this lost business has already been replaced by new business from other customers, however, because of the timing of the overlap, overall growth rate in our vinyl business, while still positive, will be below industry levels for the balance of the year. Net-net, though, we're on track for our full-year guidance of 5% to 7%, which is in line with current industry forecasts. One caveat to our revenue forecast is the translation effect of foreign currency impacting our international spacer business. If the dollar maintains its current strength against the pound and euro, our revenue growth forecast for FY15 could be negatively impacted by as much as 1.5 percentage points. Operationally, our vinyl business performed as expected in the first quarter, as the refurbishment project started to gain traction. We completed the rebuild or refurbishment of 17 lines and began work on a further 36 during the quarter. Two lines are being relocated from <UNK>tucky to Texas, to support further expansion of that facility, as our southern business continues to grow. As of January 1, all major customers have contracts that include a resin adjustor tied to CDI. This will essentially make us neutral on any future price fluctuations in resin and is consistent with our contracts with other raw materials such as [butyl] and aluminum. While there is still much work to be done in our vinyl operation, the rest of our businesses are performing well, and there is enough early evidence to give us continued confidence that our full-year EBITDA guidance of $57 million to $63 million. With respect for capital disappointments strategy, we recently completed a $75 million share buyback program, and we will evaluate the merits of a second tranche as the year unfolds. We continue to look at acquisitions within the fenestration space on an opportunistic basis, but consciously did no further work on adjacencies this quarter. Progress on how and when we deploy further capital is being carefully weighed against the timing of the recovery in our vinyl business, which remains our number one priority. I'll now asked <UNK> to cover our first quarter results in more detail. <UNK>. Thank you, <UNK>, and good morning to everyone on today's call. Consolidated first quarter net sales increased slightly more than 1% to $128 million, while first quarter EBITDA decreased $5.1 million to $2.6 million compared to the year-ago quarterly results. Revenue growth was driven by higher sales in our spacer, screens, and accessory products offset by lower sales in vinyl. The quarterly comparison of EBITDA was negatively impacted by the one-time $2.8 million warranty reserve credit from the first quarter of 2014. We also experienced margin compression on our vinyl products due to increased labor associated with the heavy investment being undertaken, and from the lingering compression associated with the price freeze and resin increases experienced in 2014. As of January 1, 2015, there are no price freezes in place, so any future increases or decreases in resin prices will be passed through. Quanex's North American fenestration sales for the last 12 months increased 3%, lower than the 6.1% growth rate reported by Ducker for the period ended December 31, as a result of the contraction in vinyl business <UNK> mentioned earlier. Excluding vinyl products, our other product sales increased by 8% over the past 12 months, outpacing Ducker's growth rate. We ended the quarter with a cash balance of $64 million and no outstanding borrowings on our revolving credit facility. The $75 million share repurchase program was completed in mid February, resulting in the repurchase of nearly 4 million shares at an average price of $18.77. Lastly, we had an unusually high tax rate this quarter. During the quarter, we reassessed an uncertain tax position that dates back to our 2008 spin resulting in an additional tax benefit generated from our first quarter loss. Absent any additional adjustments, we would expect our full-year tax rate to remain closer to 34%. I'll now turn the call back to <UNK>. Thanks, <UNK>. As I said, our number one priority continues to be restoring the operating performance of our vinyl business, and I am confident that this is on track. We are also encouraged that third-party window shipment forecast expectation for 2015 are in a realistic range of 6% to 8%. As you know, we have long said that this recovery will most likely take the form of four or five years of steady growth in the high-single digit range. We still believe this and still consider this as a positive and not a negative. Based on those forecasts and our first quarter performance, we continue to expect our FY15 to have 5% to 7% revenue growth and EBITDA of $57 million to $63 million. Four or five years from now as window shipments recover to the mid-$60 million range, EBITDA levels will grow to $115 million to $130 million on revenues of $825 million to $875 million, even without any acquisitions. The first quarter was a small step but nonetheless an important one as it reaffirms that we're on the right track to a much brighter future. We'll now be happy to take your questions. Operator. In reality, there's been no material effect to any of our input costs as a result of the drop in oil prices. The resin is tied more directly to natural gas prices than it is to oil. Having said that, resin dropped from its peak level last year by $0.03. There was a price increase put through by the resin producers, which did not stick, but prices also did not fall any further. So, they're flat now and are predicted to remain flat for the balance of this quarter and then, in fact, the forecast is they're likely to increase as demand picks up in midsummer. Yes. We have had modest price increases, I would say, pretty much across the board on all product lines, not significant, but certainly a step in the right direction. For the most part, we have not had price increases for a couple of years now. Towards the back end of last year, we put some increases through successfully. As I say, they were modest and I think in line with what's happening throughout the building products industry. I think most people are generally getting some form of price realization, including our customers. Clearly, February has been slower than we had originally anticipated, not to the point that we are concerned about it. It is clearly tied to weather. As you know, particularly in the Northeast, and to a certain extent the Midwest, weather really impacted, for the first time I think this winter, in reality. So, we've seen some softness, particularly in those regions. Absent the recent ice storms in the Southeast, the South and West have still been pretty robust, generally speaking. I think it's fair to say that, as we sit here today, we would say four months into our year, it's turning out to be pretty much as we expected, both from a demand standpoint and from an operational standpoint. We completed work on 17 in the first quarter. We started work on a further 36. Two lines are in the process of moving from <UNK>tucky to Texas to support a continued expansion of that operation. We are about where we expected to be. The intent was to get as much of this completed as we possibly could during the slow period through the winter here. And, we're on track with the original plan, pretty much across the board, A, in terms of progress and, B, in terms of some of the early results. <UNK>'s going to cover some details on this, but generally speaking, it's the comparison that hurt more than anything else. Because of the way our fiscal year overlaps the calendar year, we had two months in the prior quarter where we didn't have the resin freeze issue, and two months in this quarter where it was still in place. So, that comparison clearly hurt us. On the SG&A side, it was a positive because, during that period, we still had the residual SG&A cost of the ERP program and its associated restructuring costs. Yes, in looking at the remaining balance, we did have the $2.8 million warranty benefit that took place last year. Absent that, then, it's about, when we're looking at the vinyl products, I call it half and half between what is the resin increase freeze issue and then half with some higher labor cost as we go through and touch all these lines, that we expect to come down to more normal levels as we progress through the year. We bought ---+ it was just under 4 million shares ---+ 3,992,000 shares at $75 million. We haven't talked about it from an actual percentage level, but clearly, where we sit here in the first quarter, this would be a more difficult. When you look at how this quarter unfolded versus last quarter, last first quarter was a very strong winter quarter. It was one of our best ever, quite frankly. As we progress and we finish the projects that <UNK> talked about on the vinyl line, our labor cost should come back into line. And, we will see some improvements from some of the price increases that <UNK> talked about. So, we would expect to see some margin improvement quarter over quarter as we progress through the year. <UNK>, let me just reiterate. There were no surprises in the first quarter, operationally. We're where we expected to be ---+ in fact, actually, volumes were a little better than we anticipated ---+ and all of this has been factored into our guidance. Exactly. I think that's fair. It has the benefit on both labor costs, and repair and maintenance, as we move forward. Yes. There's a couple of reasons. One is, as you know, historically, because of the way our fiscal year unfolds, at this point in the year, it's always very difficult to predict how the year is going to unfold. By the time we get through our second quarter, at the end of May, the picture is much, much clearer. So, from a cash standpoint, we'll have much greater clarity on where the recovery in our vinyl business stands. We'll have much greater clarity on the early stages of the construction season ---+ is it going to be as predicted, stronger or weaker. And, as I said in my comments, we continue to work on some opportunities within our fenestration space. So, there's a lot of moving parts. We did not work on adjacencies primarily because that's a bigger step and there was no point in advancing that too far until we're more certain of where the vinyl business will end up and until we exhaust some other possibilities. So, a long-winded answer, I realize, but there are good reasons for us to wait, at least for another quarter, before we decide on whether there's a potential deal to be had in the fenestration space, whether there's another tranche of share buybacks, or whether we just stand pat. But, all of those are being actively discussed with our Board. So, it's not as though it's been forgotten. Yes. What was encouraging to us, is both Ducker and Hanley Wood ---+ first of all, their data points are beginning to converge. They're both in the same ZIP Code now, in terms of R&R, new construction, and both of them have, for them, conservative forecasts for 2015 ---+ one's at 6.6%; the other is at 8.1%, in terms of year-over-year growth in window shipments. Now, if you look at housing starts in some of the predictions for R&R, you would expect a much higher growth rate in window shipments. So, our belief is they're closer to the truth than some of the early prognostications, and that's in line with our thinking as well. Now, if housing starts really are going to approach 20% this year, which I know some of the early forecasts call for, and there are some people talking about a significant uplift in R&R this year, which I know they've seen in cabinets and appliances and so on. Depot and Lowe's had very strong early indications. We're still not really seeing that in windows yet. But, if that happens, we could see a stronger second half of the year than we're expecting. But, I think right now, we are confident that the prudent level of 6% to 8% for window shipments, 5% to 7% all-in for our revenue, that's where we're comfortable right now. I think the only thing we can say definitively is that we have certain customers that clearly are outperforming the market in the R&R space. We have not seen a general positive significant increase in R&R, but the reality is, as we've tried to articulate before, we truly do not know where our product ends up. We can make some educated guesses, and the very high end of our product range accounts for about 25% of our total shipments. Our view is, that primarily goes to R&R, but I also believe ---+ and this may be reflected somewhat in Home Depot's and Lowe's numbers ---+ I think the days of a complete replacement of a house full of windows, which I think historically utilized home equity loans to finance that, those days and those opportunities may be somewhat limited. We believe more and more we're going to see replacement of windows on a room-by-room basis, on a window-by-window basis, and potentially at a lower price point window, such that you would buy it in Home Depot and Lowe's, and have them maybe install it, rather than what we saw in the last boom which was this complete replacement. So, I think the market's changed, and it becomes more difficult to be able to ascertain does any component go into a window that's going to end up in R&R. Does it end up in new construction. Much more difficult to track now. It's about a third. Order of magnitude. We don't disclose or track ---+ we don't disclose, publicly, the profitability on each of our product lines for obvious reasons. No, that's correct. We expect the full year in the range of 34%. Generally, yes. First of all, let me be clear. We have never disclosed the profitability of our product lines, and we did not say, at any point in time, that our spacer business is more profitable than any other lines. Now, that said, the strategic fit of the products is simply this. Our customer base are the window assemblers and manufacturers. And, those three are three of the major components that go into window assembly. The two other major components that we do not manufacture are hardware for windows and, obviously, the glass. There is still a continued opportunity to cross-sell those products to existing customers. So, while we sell almost every single window manufacturer in the United States one component, at least, we don't necessarily sell all of them all components. So, there is a continued opportunity there that we are working on very hard with some success. It is actually easier to take our existing customer base and potentially sell them screens and accessories. And we've had some early success in that arena. Harder to convert vinyl and spacer because of the capital investment required. It is a continued opportunity for us to cross-sell, and that's why they all fit together. And, from an acquisition standpoint, we've talked in the past, a hardware business would make an awful lot of sense for us because same customer buys that hardware, just buys it from a different vendor. Thank you, everyone, for joining us today on today's call. We look forward to updating you on our second-quarter results in early June, when, as I said earlier, we'll have a much clearer picture of how the year is shaping up. I look forward to seeing many of you in person as the conference season kicks off. Thank you, and goodbye.

2015_NX

2016

WYNN

WYNN #Yes. In a word, yes. Suffolk Construction ---+ John Fish brought his old management team for their quarterly retreat and he wanted them to see what <UNK> was really like. So they had the retreat of all of his company in this hotel. They didn't even tell us they were coming, they paid retail here at the hotel. But we had a chance to talk to them and John has said 28 months of construction. So that is straight from the builder and he signed his name to it. With liquid data damages. No, as a matter of fact that one casino that is being built is being managed by the folks from Malaysia, from Genting. And I had coffee with K. T. Lin day before yesterday ---+ yesterday actually, and it is very much like Macau. It is a different market share than we are in. This thing in Boston is pure <UNK>. It is the <UNK> Las Vegas in a new form moved to Massachusetts. So naturally it is going to appeal to a different kind of customer than the stuff that is up there now. And it was designed to do so. So I don't think it affects our expectation about revenue and the opportunity there if that is your question. Well, we never know what the Street is going to do with the funky trading. And we all feel that, both as individuals and as a <UNK>, that we should be prepared to take advantage of real opportunity when it occurs. And my Board feels that way and so do I. So we just wanted to make sure that we are properly armed in case there was something strange that happened on Wall Street and the stock market dropped or our stock went to a level that we thought was grossly oversold we would jump on it. As long as the short players fool around for a buck or two that is fine. But when shorts ---+ the exchanges really don't enforce the rules of make it shorts. So it is an unconscionable manipulation of the stock that occurs. They open up every morning and the high-frequency traders and the shorts have a ball selling shares and then value buyers step in in the afternoon and they cover the shorts. It is regular casino activity. The activity on the stock markets is in my view poorly regulated and irresponsibly policed, especially with regard to short sales. And when it gets out of hand we see a lot of shorts because of China. Because we are such a clear China play we probably had a bigger percentage wouldn't you say, <UNK> <UNK>. Yes, that is right. Short interest in our shares. 14 million shares as of (multiple speakers). 14 million shares. And although I can't do nothing about it myself I take advantage of it when it gets out of line and buy shares. I mean it is fine when they drive the stock down for reasons that are irrelevant and completely disconnected from anything to do with our business operations. So the stock market has got more volatile, more stupid as a gambling game than ever before. And I look at it that way to be honest with you. I have very little respect for the integrity of the trading on the exchange in most stocks. And I have particular disdain for the fact that the SEC has failed to deal with high-frequency traders who are doing nothing more than taking advantage of inside information, a buy or a sell order, because of technology advantages. If you read Flash Boys it is all spelled out for you. And if I execute an order I will use the [IX] ---+ I'll use Brad Katsuyama if I was buying something so that I couldn't be fronted by the high-frequency traders, but there is enough a lot of that going on. The other day I was watching the stock open up and it went up on share volumes of a few thousand shares. I mean every trade was a tick up. That is not the way it should operate in an honestly or intelligently run exchange, but that is the thing. All those guys sold their dark pools and their order flow and the positioning on the floors of the servers to the HFTs. And it has made a couple guys that I am friendly with very rich because they are high-frequency traders. But I don't respect the activity. And I am severely critical of it and don't mind saying so either. Okay thanks, everybody, for joining. We will talk next quarter.

2016_WYNN

2016

GPI

GPI #Jamie, as you know, we have had a strategy to consolidate our lender base, which I think we have done a great job with and been able to leverage the opportunities with our lenders. And we haven't seen any changes sequentially or year over year. It continues to be a favorable credit market for us and our consumers. Our banks are performing very well. <UNK> and I have met with the majority of them at NADA over the last ---+ at the end of February. So as far as we can tell, the lending situation continues to remain very favorable. Thanks. I will talk to the stair-steps while <UNK> is trying to see if he can find some data on your gross profit question. The stair-step programs are everywhere across the board now, and they have even grown in the last year or so, which is not helpful to anyone when you are trying to fight this margin compression. Of course, the high inventory doesn't contribute to arresting the margin compression either. But I would say the prevalence of these stair-step programs is greater than ever and not something that most retailers are going to tell you is beneficial. <UNK>, this is <UNK>. On your question on the gross profit, as we said, the biggest change we saw was on imports. It's actually improved about $136 a unit and the offset basically in domestic was down about $100 and luxury was down about $80. Since we're obviously heavier on import, the mix among ends up favorable in total. I think it is possible that it will grow again for that exact reason. That's a very valid point. I think it's true. No, we haven't seen it in this quarter. Of course, it's also skewed toward luxury brands. Because you lease more luxury brands and a higher percent of your used vehicle sales in a luxury brand business are CPO. So some of it is brand mix as well. As we remodel and build new facilities, it generally includes capacity expansion, but it's not really a capacity issue in terms of growing our service business. And we measure our service productivity and we have some that are full up and some that are 80% or 85%, but it's quite easy to do 1.5 shifts or 2 shifts if you have more business than you can run through in a normal day. So very seldom is the physical capacity in terms of number of service bays going to put a lid on our business. It's much more a human element. And nowadays it is also a parts availability element in many of these recalls. We have work waiting to be done if we can get parts as well. Well, I am not sure I can give you a good target on SG&A, but our goal has always been, <UNK>, to get to an operating margin of 3% in the UK and we are at 2.5% now. That's the best we've ever done. So maybe if we did some math we could kind of tell you what the SG&A would be if we got to 3% operating margin. But clearly it's a couple hundred basis points lower than what we achieved at 74.5 or thereabouts this quarter. So the scale will certainly benefit us. But that's kind of how we've been looking at it is trying to get to a 3% operating margin. It's <UNK> <UNK>el. I would just add that there are a few structural impediments to get all the way to the US levels. It tends to be less of the F&I income, which is obviously, we've had 100% [margin stuff] which is really helpful. There's less of that over there for a variety of reasons. Your rent tends to be a bit more expensive and we tend to be just a little less overall kind of gross margin. But I think <UNK> is right that something in the low [70s] is probably not a bad overall target over time. <UNK>, this is <UNK> <UNK>el. The target we've set out there is that we want to try to live with our total rent adjusted leverage at kind of 4 times or less. We were under that at the end of the quarter, we were at [3.86] so there is still room on the balance sheet. As you say, the stock we thought was an incredible value in the first quarter, and we stepped up the repurchase. We've got $68 million left on the repurchase authorization. And certainly have balance sheet capacity to do all of that and then some. So let us work on that piece and then when we get through that, we will give you an update. Store throughput ---+ this is <UNK> <UNK>el. I think that gets back to the question that <UNK> <UNK> was asking. We think that there is a bit more if we're going to get to that 3% longer-term goal on operating margin, some of that's going to come out of SG&A. As for basically the volume gains, I think it just continues to be great execution by our management team there. Relative to the color on the profit impact of the energy markets, it's actually all across the board. Although our sales are only down about 1% in Houston, our profits are down almost 10%. But we have markets like Oklahoma where we are continuing to slightly grow our profit due to a strong used vehicle performance. So the profits are kind of all over the board, but probably the most pressure is on the Houston market, which is near a double-digit profit drop. I'm sorry, what was the other part of the question. Well, when you say trading down, I think these ---+ I am not sure exactly what that means, but my interpretation would be that there are some customers who maybe a year or two ago had they entered the market would have been shopping and buying new and in this situation they are buying used. That's the way I kind of see it. No, I think things are actually very consistent in both the energy markets with being sticky, and outside, it's still a good US auto market. So we're doing quite well in the Northeastern US and California and outside of the Gulf Coast in the Southeast. So I think the market is still generally strong on an absolute basis, but there's a lot of reaction to the fact that it is not growing like it has been the last four years. But I think there's still a lot of strength outside the energy markets. Let me add to that, kind of specific on the SG&A, I think we made good progress on the advertising costs. Done a good job controlling there. The areas of opportunity for us, as <UNK> alluded to, is there is a lot of ancillary costs that come with having too much inventory. And kind of the big thing that got to our flow through, normally we would have expected 40%-ish flow through, and we clearly didn't deliver that this quarter, is there's a lot of higher insurance costs that go with having that much inventory and there's a lot of additional cost right now around loaner vehicles. Because of everybody we've got to have in loaners as we are awaiting some of these parts coming in on the safety recalls. So we think there actually continues to be more opportunity to leverage SG&A as we go forward in the year, but those were kind of the two headwinds, if you will, for this quarter. <UNK>, this is <UNK> <UNK>el. Basically, we saw a similar pattern on the inventory this year as you would last year. Traditionally, you are going to build a bit of inventory in January and February as you come into the spring selling season, so day supply at the end of February 2016 was at 94-day supply. Same as we were in February of 2015. We just didn't sell down quite as much in March as we did March of last year. So some of it was I think maybe this Easter weekend shift was maybe a piece of it, and some of it is just there's been some extra supply, as <UNK> has explained. So I think that's really kind of the story on day supply. Our assumption on margins is I think we've done a good job of finding stability and we are thinking that [1750] level is the assumption that I would use for the rest of the year on new margins. I can't give you full-year cash flow, because that would imply a profit forecast, which we are not going to do. I'm happy to work with you on the CapEx piece, but overall cash flow has got to have a profitability assumption and we are not going to get into that game. Good morning. Well, the key growth metrics we gave you were same-store, which was kind of 13%-ish. It seems that it takes us quite a bit longer to integrate and improve the performance of our acquisitions in the UK. So we are continuing to get leverage from the Audi dealerships we bought several years ago. And then about 15 or 16 months ago, we bought three BMW dealerships up around the Cambridge area. And those are starting to produce much better now. So it's really harvesting some of the previous investments we made. This new acquisition is only 60 days old and it has a lot of potential and probably half the stores already perform very well, and I imagine it will take a year or two to get the other ones up to the level that we will be able to achieve. But we are basically continuing to improve the existing businesses we have had. And some of them we have had for one or two years, and they are still starting to pay dividends. This is <UNK> <UNK>el. I think those levels are kind of what I would continue to model. We will continue to focus on growing same-store revenue, but there are some structural differences, reimbursement rates on warranty, things like that just make it a bit of a different business in the UK than the US. And one thing I guess I seldom mention is we actually have four Ford businesses in the UK and they have continually performed better and better than even though most in the UK, I believe we had a record first quarter with those Ford businesses. They continue to improve also. And there's ---+ that by nature is a lower-margin business, but it's actually ended up being a very, very valuable business for our Company. This is <UNK> <UNK>. In the UK, Mark [Bridgelin] has done a marvelous job of trying to integrate some of our programs; not every product is applicable in the UK. As far as Brazil, it is certainly an area of opportunity for us, and it's something that we know we can improve on and there's measures in place to get that done with the operating team there. Oh, sure. In fact, one of the best businesses is in our markets are used pickup trucks. In fact, the biggest issue there is they are always in short supply. You don't see a lot of leases on pickup trucks. Pickup trucks don't get pumped into rental car companies. People who buy trucks keep them a long time. So the used truck business is always good and very price sensitive in Texas and Oklahoma. Well, I would say very difficult in the volume brands. But we are somewhat fortunate, our brands tend to be luxury brands and so that loyalty is good. And there's not a lot of aftermarket expertise in repairing BMWs and Land Rovers and such. And then our volume brands are more and more tending to be Toyota and Honda. And just like the US, those customers are quite loyal in terms of service, retention and brand loyalty to the dealership. So if we were selling the big four volume brands, which we are not, Fiat, Volkswagen, Ford and General Motors, I believe service retention would be a much more challenging proposition in Brazil. No, some of that is the exchange rate impact and some of that is the mix piece that <UNK> alluded to, the growth in the Ford stores. There is some margin pressure on the luxury brands. You've got a similar issue going on in the UK that you have in the US, there's oversupply. It's one of the areas where BMW and Audi have diverted some of their production that was headed for either China or Russia. So there is a piece of that, but I don't think it's as severe as what the US dollar impact would look like because of the FX impact. Thanks, everyone, for joining us today. We look forward to updating you on our second-quarter earnings call in July. Have a good day.

2016_GPI

2016

BGS

BGS #It always can change. We took, when we did Green Giant, we were, before the deal, we were around 4.5 times levered, 4.6. We took leverage up to 5.6, 5.7 on a deal the size of Green Giant. I don't think today we would look to go above that, and certainly not above six. And the preference and the longer term goal here is to stay below five and stay in the mid fours, if not below. Thank you. I think it's a combination. But when we looked at the Green Giant acquisition, we looked at that acquisition where we paid less than eight times EBITDA, and buying an asset. So we get the benefits for cash taxes relating to the asset purchase that it fit into the B&G model that kind of what we thought their EBITDA was, 60-ish percent of that EBITDA was going to turn into free cash flow. And then as a board, we would be sharing 50%, 60% of that free cash flow back to shareholders in the form of dividends. So it fit into our model. We did see, certainly more risk on a business that was somewhat mismanaged by the prior owner and was really shrinking fast. But we just saw a lot of opportunities on being able to fix that, and it's really come together and it's working. So when we look at acquisitions, we certainly want a brand, a retail-branded business that we believe in, but it has to be that cash flow model because that's the model that has worked for us and investors. And that EBITDA needs to turn into 50% to 60% free cash flow day one when we own it. And hopefully we can do the right things and grow the top line along the way, too. So the model drives the decision. Certainly the brand that we're buying drives the second part of the decision. But the cash metrics have to work, otherwise, we're not going to take a risk on that acquisition. Fair question. So it's customer-specific and we don't always know the details. But average customer take on this is about 12 SKUs. Some have taken all 15. But all the big guys seem to be in this range of right around 12 SKUs. It's a little bit here and there. Again, because in freezer it's a little different because they want to make sure the block works, so the Green Giant block versus competitors work. So they'll squeeze on the outskirts of just not pure vegetables, too. So on a couple of accounts, some of our very slower moving items we gave up for these new items. But we do know they're going to be taking a little bit from everybody to get us in the case. Well, we're hoping so. Over time, we'll see. It's not easy to grow because it's about the door space, and they don't really like to mix doors. So it's almost like if it moves, it's got to move like another whole door. So it's kind of that door is pretty much all vegetables and not something else on the door, too. So it's customer by customer. We think we're creating some things that, hopefully, longer term, can move the space that's allocated to vegetables, too. And there's certainly little, around this country, you have little players who show up in smaller ways. They certainly get squeezed in things like this. And our main competitors are also coming to the party with new items, too. So that's part of what all these stores have to figure out. It's not like we're the only people innovating in the category. I don't know that yet, as (inaudible) play. So I don't know that today. Certainly I don't believe that private label commodity products would lose its space. Basically bags of peas and corn and broccoli, I don't expect. And it truly is chain by chain on how they figure out how to do that. Certainly some chains have more ability and more space than others, just by the nature and size of their stores. But we don't know that yet. So part of this is we are not typically what you would call the category captains who reorganize the shelf space when these chains accept a new item. So I don't have enough detail. So we'll know that as these items get placed and see what's actually happened in the individual customers. Well, we want more incremental shelf space. And we're also going to be launching new innovation here in 2017, that's different than even what we're talking about today. So that's certainly the goal, to make sure we have our fair share of the shelf, and also hopefully have more innovation than our competitors. But we have very strong competitors in this category. We've done a tremendous job in this category. We want to get our fair share and grow our business. I think we're going to kind of pass on that, because we really want to do a very formal announcement of this here, because we think it's a real big deal, in mid- to late August. We actually haven't picked the official date yet. I can tell you we're not doing the Olympics. I can tell you that. But, yes, we are kind of turning up the advertising slowly in August, larger in September, and then a bigger push once ---+ because at the end of the day, as this rolls out into the customers that's taking, we want to make sure it's in the freezer sets, it's on shelf, before we really turn up the advertiser, because we don't want a consumer to see an advertisement the third week of September, and then they go to a store and they can't find it. So the majority of the spend will happen October, November, December. But we are turning it on here a little bit here in mid- to late August, and then more in September, with the big push in the fourth quarter. Well, there are formulas, yes. Yes. We're going to do a little bit of that beforehand. So there'll be a little bit of that, and then the fourth quarter will be a little bit more of the push toward the products as opposed to just the Giant. It's not going to continue. So part of the mix of the Green Giant business has been more beneficial to us than we understood when we first bought the business. So we bought a business initially that we thought on the base that we bought, we could hold to a level of $550 million in sales. Now, the business shrunk further than that. And that's why we've said that the base business, without the innovation, is somewhere between $510 million and $520 million. What we gave up, and not willingly all the time, sometimes it was just business that was being lost by the former owner, was lower margin product. A lot more of the commodity stuff, what they call the majors in these categories. It's kind of bags of peas, bags of corn. Very high trade spend, little to no gross profit margin. It gives you face presence on shelf. It gives you a bigger block. You need to sell it because consumers buy that too, in addition to all the intriguing new stuff. And that's where we kind of lost from that $550 million to the $510 million. So part of this is it's not a pullback on trade spending on the products we're selling today. It's more of a mix-down to where we're taking out, it's not because we wanted to, per se, it's kind of just what we lost in this transition, much higher trade spending businesses that on a percentage of gross sales could be 40%, 50% of the gross sales number, and really just low profits, which is helping our just pure EBITDA margin too. Now, we do want that business back. So it's important to ---+ and we're pushing to get that business back, in addition to just the innovation. Well, we're going to see it as we head through this year. Our biggest base brand that's just relatively flat year to date is Ortega, just because of the rollover timing from a recall. We expect a strong second half of the year and we expect that to continue through 2017, for example. And when we talk about growth trajectory on the base in total, we're really talking about a business model, that 1.5%, 2% growth. We're not talking about a business that's going to move the needle 3% to 5% in total. Yes. I would say that the peso, at this point in time, is clearly the more, I guess important to us, just given the size of that plant in Mexico and the amount of cost flowing through there. We're more sensitive to the movement in the peso. Obviously, it's gone the right way for us in 2016. So we are hyper-focused on making sure that we watch where that's going, that we are putting in the right programs to make sure that we sort of lock in currency at the right time to protect ourselves as we close out 2016, and we start to enter 2017 planning in the next month or so. So definitely Mexico is really the clear sort of, I guess risk item, that we focus on more so than Canada. Canada, too, of course, is a factor, and we're very conscious of that and we watch it very closely as well. But in terms of the actual swings and the volatility, that's where I spend a lot of my time, just making sure that I focus on the peso. And this year, we've been very lucky in terms of where it's gone. But we're also trying to make sure that with where it is today, that we're starting to lock in that benefit sooner rather than later. Yes. I mean, we'll look at that volume in the planning phase as we're going through it, like I said, now and the next couple months or so, and we will lock in the majority of it, I mean, 80% or so, for sure, and leaving some room for us to kind of wiggle. But we will try to lock in that 80% in the coming months. Okay. As we looked at that, we're taking a little bit of that money off the table and using it against a couple of our key brands and certainly Green Giant, too. So we're seeing that as an opportunity to help drive Green Giant even further here over the next six months. Anything else. That one I think <UNK> will get back to you on. This quarter is a much more ---+ it's a better reflection, as long as you just take into account the marketing spend that will come in the second half of the year on Green Giant of kind of a true look at where our SG&A will roll out. But we can certainly talk later about what that big change was from the first quarter to the second quarter. I just don't have that handy. Around $35 million, yes. Total, yes. Yes, right around $35 million. $33 million to $35 million, yes. Right. So we would look at Q3 being about $5 million to $6 million. Probably closer to $5 million, but it could go, depending on just the spend pattern, it could be upwards of $6 million, the rest coming in the fourth quarter. I think the answer to that is we're certainly always ---+ we're ready organizationally and balance sheet-wise, to look at things. We're a branded retail buyer. The cash flow model has to work. So and it has to be brands that we'd want to own. And that could come from frozen. That could come from dry. That can come from snacks. Or it can come from another platform altogether. So I think the most important answer there is, the organization is ready and our balance sheet's ready. When something comes along that works for us, we'd be ready to buy it. Thank you, everyone. I look forward to updating you on the progress of Green Giant innovation rollout during our third-quarter conference call. And again, thank you for your interest and your support in B&G, and have a good evening. Thank you.

2016_BGS

2015

SJI

SJI #Thanks, <UNK>. Good morning everyone. Thanks for joining us. Kicking off our discussion, year-to-date Economic Earnings totaled $55.8 million as compared with $72.8 million for the first nine months of 2014. As you would expect, the majority of the variance year-over-year is the result of a write down of our investment in and the lack of operational contribution from the energy facility at Revel, which is responsible for approximately $11 million of this $17 million variance. Other significant contributors to the variance are an increase in reserves and write-offs of uncollectable accounts in our utility; increases in post retirement benefit costs and lower contributions from investment tax credits. The benefits realized in our commodity marketing business from the Polar Vortex that occurred in early 2014 also drove some of this variance. For the third quarter, Economic Earnings reflects a loss of $5 million in 2015 as compared with a loss of $3.4 million in the prior year period. Economic Earnings per share through September 30, 2015 were $0.81 as compared with $1.10 for the first nine months of 2014. For the quarter, Economic EPS reflected a loss of $0.07 as compared with a loss of $0.05 in the prior year period. Beyond the issues I just discussed, we still saw many positive contributors, including strong utility customer growth and much improved year-over-year contributions in our wholesale business and I'll review that as I detail the results for the specific areas of our business. Starting with utility, South Jersey Gas' net income through September 30, 2015 was up 4.6% at $44.4 million as compared with $42.4 million through September 30, 2014. For the quarter, utility net income reflected a loss of $3.4 million as compared with a net income contribution of $1 million in the third quarter of 2014. As I mentioned previously, these results were produced largely by the increased write-off of uncollectible accounts. The extreme conditions experienced in the last two winters produced significantly higher customer bills, higher than many customers were there for. As noted last quarter, this resulted in increased receivables, increased aging at those receivables and ultimately increase reserves and write-offs for those receivables. Compared to the prior year periods reserves and write-offs negatively impacted year-to-date and quarterly net income by $3 million and $1.8 million respectively. We continue to educate customers on ways to reduce usage through access programs for assistance and to take advantage of different bill repayment options we offer. Additionally, the quarters saw $700,000 impact to net income from increased costs associated with post-retirement benefits and a $1.1 million impact from higher depreciation and amortization. Infrastructure investments under our accelerated programs totaled $48.8 million year-to-date and added an incremental $1.3 million to net income for the first half of 2015. The planned investments are on target to reach roughly $70 million for 2015. Our AIRP and SHARP programs are expected to add $2.5 million in incremental income for 2015 while continuing to reinforce our system for the replacement of bare steel and cast iron gas main and a replacement of low pressure gas main with high pressure main along the barrier islands. Another major infrastructure system reinforcement pending is the pipeline to provide natural gas to the former BL England electric generating station. Having received the certificate of filing from the Pinelands Commission's staff in August, we now await final approval from the New Jersey Board of Public Utilities and acceptance of BPUs determination by the Pineland Commission. We remain optimistic that we will obtain final approval for this project before year-end and that construction will commence in mid to late 2016 pending any appeals to the decision that may arise. Customer growth continues to be significant with our customers total up by nearly 6900 or 1.9% for the 12 month period ending September 30, 2015. During the same time period, customer growth added $1.9 million incremental net income as compared with the prior year period. We continue to achieve this type of growth as a result of low natural gas prices and targeted marketing efforts that maximize the reach of our infrastructure to capitalize on customer additions from those on or near existing main. Shifting gears to the non-utility; our non-utility operations contributed a total of $11.5 million in Economic Earnings year-to-date through September 30 as compared with $30.4 million in the prior year period. In the third quarter of 2015, this segment produced a loss of $1.5 million as compared with a loss of $4.4 million in the third quarter of 2014. Our non-utility business is comprised of South Jersey Energy Services and South Jersey Energy Group. Within the South Jersey Energy Services, year-to-date results really reflect the impact of the write-down at Revel with Economic Earnings of $5.4 million for the first nine months of 2015 as compared with $21.5 million for the same period in 2014. The Revel related impact was the largest contributor to the overall variance within this business line along with a reduction in the amount contributed by investment tax credits year-to-date. However, on a quarterly basis, Economic Earnings for Q3, 2015 match those of Q3, 2014 at $800,000. These levels reflect the fact that neither the third quarter of 2014 nor the third quarter of 2015 saw noteworthy contributions from the Revel facility and both quarters also featured fairly moderate summer temperatures that requires less production from our portfolio of energy production facilities. With that in mind, our CHP portfolio reflected a loss of $8.6 million for the first nine months of 2015 as compared with Economic Earnings of $2.7 million for the first nine months of 2014. For the quarter, contributions from CHP reflect a loss of under $100,000 in 2015 as compared to a loss of $2.2 million in the third quarter of 2014. Moving over to our solar activities, net income was $16.6 million for the first nine months of 2015 as compared with $21.1 million for the first nine months of 2014. For the third quarter, solar contributed $1.5 million in 2015 as compared with $3.5 million in the third quarter of 2014. Lower levels of investment tax credits produce the variance. Although that variance is largely timing, as we expect to match 2014 solar investments by year-end, based on the robust queue of solar projects we have in construction. We also remain on track for full year SREC production of 140,000 SRECs, which will continue driving improved operating performance. To that end, the quarter reflected positive performance of approximately $200,000, a result that just not reflect the full value of our solar production in the second and third quarters of 2015 due to the timing of the certification of renewable energy certificates in Massachusetts, which can take up to six months. We don't recognize income from those SRECs until after the certification process is completed. We estimated that our 2015 Economic Earnings would have benefited by approximately $1 million had all SRECs produced been certified as of 9/30. These earnings will be recognized over the next two quarters. For the first nine months of 2015. Our landfills produced a loss totaling $3.2 million as compared with a loss of $2.7 million in the prior year period. For the third quarter, these projects lost $800,000 in 2015 as compared with $400,000 in the same period in 2014. While we are just starting to see a slight uptick in performance from the sites, we are focused on improving. We also experienced some unrelated maintenance costs in the quarter. Addressing this issue is a high priority within SJI. Turning to South Jersey Energy Group; we remain very optimistic about the future of this business. Year-to-date, this area has added $6.1 million as compared to $8.8 million through September 30, 2014. What's important to note is that the current year's performance was achieved without the benefit, but the extreme volatility the region experienced throughout the first quarter of 2014. Volatility that drove the $18 million of Economic Earnings we experienced for the first quarter of 2014. In the current quarter, this area improved by nearly $3 million as compared with the third quarter of 2014, reducing its quarterly loss from $5.1 million to $2.3 million. This improvement was driven by the commencement of one fuel management contract in 2015 as well as improved performance of our marketing contracts. I also want to reaffirm our expectation that this business will exceed the $30 million of Economic Earnings that produced in 2014 or 2015. Finally, taking a look at the balance sheet, our equity to cap ratio was 41% at the end of the third quarter as compared to 43% in the third quarter of 2014. We've used our dividend reinvestment plan to issue equity totaling $9.7 million through September and we expect to further employee this resource during the fourth quarter of the year in support of our capital programs. We also maintain accumulated deferred tax benefits totaling $300 million related to our investments that we expect to realize between now and 2021 to help de-lever the balance sheet. At this time, I'll turn the call over to <UNK>. Thanks, <UNK>. Good morning, everyone. With three quarters already under our belt, 2015 has so far presented our business with a few challenges. Certainly the write-down of our energy asset at the former Revel property had a significant impact on the current year. Now however, our focus is on moving SJI forward with a strategy that will create exceptional growth, improve the quality of our earnings and strengthen our balance sheet. From customer growth and infrastructure investment in our utility to a marked improvement our commodity marketing and fuel management business lines to our investment in the pipeline to supply a repowered B. L. England generating facility and our stake in the vital PennEast pipeline, we are well positioned to deliver on our goal of achieving Economic Earnings of $150 million by 2020. Looking forward, steady contributions from recurring customer growth that far exceeds the industry average is expected to add nearly $12 million in Economic Earnings over the next five years and strong conversion effort continues to get a boost from access to an inexpensive and abundant supply of low cost natural gas. Infrastructure programs that support accelerated replacement of bare steel and cast iron mains as well as low pressure services also remain a key contributor year-over-year, driving incremental net income growth that is expected to top $18 million by 2020. In our non-utility businesses, our wholesale and retail commodity business lines are firmly positioned to drive low-risk repeatable income streams that are expected to contribute roughly 10% to 15% of Economic Earnings through 2020. Fuel supply management contract as additional claims come online will ultimately represent between 5% and 10% of our projected $150 million in 2020. And as we expand our organization to include a stake in PennEast, our 20% equity investment in this 105 mile Interstate transmission pipeline will be a boost to earnings as well as significant benefits to our customers, as some of the nation's lowest cost natural gas is delivered into our system. We also look forward to the possibility of constructing a new headquarters in Atlantic City to support organizational growth that has pushed us over 700 employees. We expect Atlantic City to remain a vital engine for economic development in Southern New Jersey and we look forward to being a central part of its resurgence. The agility and versatility of our business combined with the talent commitment of our workforce has enabled SJI to identify many opportunities that make up our strategic path forward. As a result, we expect to finish 2015 with earnings per share that meet our targeted range of $1.49 to $1.54. More importantly, we are confident on our ability to achieve our key strategic objectives, Economic Earnings of at least $150 million by 2020; strengthening our balance sheet; maintaining a low to moderate risk profile and perhaps most importantly, improving earnings quality to ensure that the foundation of our business is built on regulated, repeatable and reliable income streams. Now, I'll turn the call back to the operator for Q&A. Thank you. Before we conclude, as always, please feel free to contact Marissa Travaline, our Director overseeing Investor Relations or <UNK> <UNK>, our Treasurer for any follow-up on the items we discussed today. Marissa can be reached at 609-561-9000 extension 4227 or by email at [email protected]. <UNK> can be reached at extension 4143 or by email at [email protected]. Again thank you for joining us today.

2015_SJI

2017

TGT

TGT #<UNK>, let me talk about the pricing investments we're making. And I think, as most of you know, coming out of the data breach, we invested heavily in promotions. As we go forward, we're going back to our roots and reestablishing our everyday low price commitment. So that's going to take some time. It's starting today. We're going to make sure that we reestablish our value with the guest. There's an investment we have to make. And we also recognize we have to continue to invest in digital, to grow that channel, to continue to make sure we are accelerating market share. You're going to see us invest in 2017. As <UNK> talked about, we expect greater efficiencies over time. One, as we continue to optimize our digital performance, but importantly, as we transform our supply chain. But in the short term, we have to compete, we have to invest to make sure we're delivering the value the guest is looking for. We want to make sure we're taking market share, both in-store and online, and we think those are two very important investments in the near term that provide long-term benefits for the Company. Thank you. I will go back to what <UNK> talked about just a few minutes ago. We certainly view 2017 as year of investment. In 2018 we will continue to transition as these different initiatives begin to mature. As we get into 2019 and beyond, we certainly expect stability and a return to growth. That's the model we are looking at. We can't lay it out for you quarter-by-quarter. We want to make sure we're properly investing and accelerating these initiatives. And if there's a message I want everyone to walk away with today, these aren't new initiatives. We've been working on these for several years. Now is the time for us to go faster. This is about accelerating at the right pace for our business. But whether it's our digital channel, the work <UNK> talked about in the supply chain, the acceleration of remodeling our existing stores and reimagining that experience, or opening up these new smaller formats, we've got to step on the accelerator. And as they mature, we are going to return to growth, we're going to capture market share, and we're certainly going to see the benefits that our shareholders are looking for. <UNK>, it's a great question, and it's embedded in everything we've talked about today. The reinvestment in our stores, reimagining over the next few years hundreds and hundreds of stores. We've certainly learned in our tests in both Los Angeles, and as we've remodeled stores in Texas, that as we bring a new experience that drives traffic to our stores. As <UNK> and his team continue to roll out these new proprietary brands that are unique to Target, that drives traffic to both our stores and our site, and we've seen that with Cat & Jack, a $1 billion brand in year one, on its way to being the number one kids brand in America. So as we continue to elevate brands, those drive traffic to both our stores and our site. As we move into our new urban neighborhoods, it's striving for traffic every single day. So as we think about how this smart network comes together, brands play an important role, that in-store experience is critically important, being in the right neighborhoods. But then we also know from a digital standpoint, more and more of our guests are ordering online and conveniently coming to our stores to pick up that order. That allows us to really make sure that once they're in our store they continue to shop. All of these elements are all about driving traffic to our stores and more visits to our site, and as they mature, that certainly is going to be one of the key metrics that we will all be tracking. Let me start with price, let <UNK> talk about brands, and the <UNK> can talk about our real estate portfolio. I think you answered the question for us. As we think about the investments we're making in price, we will start with those core essential and food categories. Those trip drivers that <UNK> just referred to. We've got to make sure that we move from a promotional cadence back to our traditional every day low price and great value every time the guest shops in those core personal care, household essential, and food categories. We will certainly make sure we're revisiting price across the box, but it certainly starts with making sure we are priced right on those trip driving items that our guests depend on Target for every day. <UNK>, why don't you talk about some of the brand work. Yes, as we roll out the new brand work we're looking at guest insights about what brands and what spaces we should play in, but more importantly, what is the sweet spot on pricing for regular everyday pricing. So as we reset these brands, we are going to be defining great value every day for our guest as we introduce in every niche in the business. <UNK>, I will quickly address store portfolio. As we said, we've had a very disciplined process forever. The team has done a great job. Our pace doesn't change, we've been closing about 10 to 15 stores a year, that has been consistent year in and year out. We will continue to do that, but that's just normal course for us. We look at every store every year and say does it make sense to keep open. Today the answer is, yes. Universally generate positive cash <UNK>, on the store front, just to close that out, and I know we talked about it during our prepared remarks but our store portfolio is not mall-based. We are in some of the centers where most of the retailers are trying to migrate to. We're very fortunate that over time we built 1,800 stores that are effectively located. They are in the right neighborhoods, they are not off remotely on interstates, they are not tied to dying malls. We have an obligation to revitalize some of those stores and re-image some of the stores, but one of the things that where most confident about is we have an exceptional store portfolio. So as we invest, as we bring those stores up to the expectation our guest has from Target, we expect those to drive traffic and continue to flourish in the years to come. <UNK>, I'd start out by talking about the last couple years as being a time of very disciplined capital allocation. We've taken a very surgical approach to some of these initiatives. We've remodeled 25 stores in Los Angeles. We've been testing and learning and iterating, improving the expectation that the guest has, making sure we deliver against that. Now that we've got the feedback, we're ready to accelerate. <UNK> talked about we have opened up 32 small formats, not 300. We studied each one of those very carefully to make sure we understood how to customize them for new local neighborhoods. Now that we understand the expectation, we are ready to accelerate. From a capital standpoint, we've actually benefited from the fact that <UNK> has taken a very disciplined approach to setting priorities within technology, and we've seen phenomenal improvement in our platforms, our capabilities at a lower cost. Our approach to capital has been very disciplined. We've been testing and validating and learning. Now that the learning is complete we are ready to accelerate those investments. But we have been very disciplined. <UNK> talked about supply chain. We know the changes that we need to make, but we have been very surgical, very disciplined in putting together that playbook. Now that it's in place, we will begin to accelerate. So from a capital standpoint, we will continue to make sure we're very thorough, we test and validate, but once we've completed the learning, we will be ready to accelerate. And that's what you're seeing as we think about the next three years. Why don't I start and then I will let <UNK> talk about some of the progress we've seen on grocery. And while we didn't spend a lot of time on it today, I want to make sure it's very clear. We're very focused on improving our grocery performance. But we haven't just been standing still. We've made significant progress in procurement, in supply chain, in making sure we've improved our assortment, in making sure in those test stores in Los Angeles and Dallas we understand the changes that need to be made in the in-store experience. We're going to follow it up immediately with the right investment in pricing to make sure we are competitively priced every day in those key categories. So we've got more work to do, we're certainly not satisfied with where we are, but we have been making progress, and there's bright spots, <UNK>, that I think you can talk to. Yes, just looking at the format, fresh produce is a really good example where we've changed our supply chain, our assortment and are focused on quality and value. So investing there has really made a difference where the guest has perceived and responded to with great growth in key categories. So here we've invested in fresh, and we've gone from an organization that used to deliver multi-times a week to every single day, increasing the freshness and quality and guests are responding. Some of the tests that <UNK> talked about in LA and Dallas have really paid dividends for us. And one great example of that is our adult beverage business where we've seen great growth in 2016, and we're going to amplify that growth and accelerate in 2017. This is a business that for us was our number one growth category throughout all Target, and we see an upside of $1 billion business here that we're fast tracking on in 2017. <UNK>. Yes, so the key focus of the brand growth is really in what we talked about with <UNK>, and our key strength there is apparel, accessories, footwear and home. These are high margin and high strength areas for us. And we believe that Target has the right DNA on exclusivity and differentiation. Our guests love it, our brands, and have loved them. But we've been a little slow here in terms of the changing face of the guest. And I guess the insights showed that we could sharpen that and bring new ideas. Great proof of concept in 2016 with the launch of who, what, where, Pillowfort and, of course, Cat & Jack, that showed us where we replaced our strengths with a new focus we could create double-digit comps and guest love and trips for our store. So we've taken key areas across ---+ men's, women's, home and kids and are going to amplify our offers there and redefine. In terms of overall space, we're just utilizing our existing space and really refreshing that. One of the things we're excited about in 2017 is this combination of new brands, capital investment in the space for those brands, but also the addition of extra resources like visual merchandising. They're really going to create a new experience for the guest in-store and create real excitement. Why don't I start. I think the proof is in the results we've delivered. Outstanding results, as we've talked about with the launch of Pillowfort. The same thing has been true with Cat & Jack. This is an example of where we've gotten the value equation right. Great quality, on trend, at a great value and the guest response has been terrific. That's the same approach <UNK> is going to take with each one of those new brands, making sure we combine great quality, items that are on trend for the consumer with the right value that drives trips, but also makes sure the guest recognizes they're getting value from Target, so coming back to our brand promise. Expect more and pay less. Those elements have to work hand-in-hand with our new brands going forward. <UNK>, do you want to start with supply chain and we will finish up with guidance. Kathy, why don't I start by talking about the competitive landscape and let <UNK> talk about guidance. But to your point, we certainly see over the next three years significant market share opportunities as we see the contraction in our competitive store base. And that is going to be particularly true in the apparel and home spaces where we're strongest. But we also recognize, as you do, as many retailers are closing stores, if not exiting the business. The short-term implication is massive promotional discounts which takes consumers out of the marketplace for a period of time. So over the long haul, this is a growth story we are putting together. We think we are going to see significant market share opportunities across a number of categories. To capture that, we need to make sure we've got the right in-store experience and a very strong and easy digital experience for that guest. But in the near term, you're going to see deep discounting, you are going to see liquidation sales, which takes prices down and takes consumer trips out of the marketplace. But over time, we see significant market share opportunities. Yes, the only thing I'll add on to that, because that's where I was going to go too, is we are absolutely investing to be able to play offense. We see this as a huge opportunity for Target when you think about the playing field that's going to be available. And so we are investing to play offense. But I don't anticipate, and we don't anticipate, that to be demonstrably changing this year. This year is an investment year for us. As we set ourselves up for that great success to take the share over the next multiple years, there is going to be a ton of disruption in this space. Why don't I start by talking about food, let <UNK> add some additional color, and then give <UNK> a chance talk about our digital approach going forward. One of the things that we've talked about over the last year as it pertains to Target's food and beverage offering is the recognition that we don't have a full service grocery experience. We don't have meat and seafood counters, we don't have deli counters. We don't provide a full assortment of experiences and services that many of our full-line competitors do. But we can offer a great self-service, convenient experience. And that starts with the right quality, the right assortment, the right in-store experience, great value. We've got to make sure we are supplying those products to our guests every single day to make sure the freshness is there. So we are embracing who we are. And we want to make sure that the guest knows while they're shopping at Target there is no compromise. We've got to build trust, we've got to make sure that while they are there shopping for their baby, picking up a toy for a Saturday night birthday party, picking up something new to wear for dinner that night they have confidence in the selection and breadth of food products we offer. We are being true to who we are and we're not a full service grocer. We don't have rotisserie ovens in our stores, but we do have the right allocation of space and selection to compete and be that convenient alternative in food, and we're going to held on that going forward. We're very pleased with the response we've seen in Los Angeles in Dallas where we enhance that experience, where we improve the assortment. The reaction, as <UNK> talked about, to categories like craft beer and wine that fit in very well with the Target guest. We've got to strengthen that offering, make sure we have got great quality, the right assortment, that we've got the right experience in-store. And that we provide the right value the guest is looking for. So we will continue to build off of that going forward and make sure that while our guests are shopping Target they are also shopping our food and beverage offering. Yes, I think our space is set. We're not talking about flipping or divesting or investing in more space, it's how we utilize the space more definitively. And I think that what we've learned in these test markets is the role of fresh and convenience in creating trips and creating guest love as being very powerful. Reformatting the space and really curating the assortment is more of what we're focused on rather than wholesale changes to macro space. <UNK>, why don't you talk about where we are with digital. Sure. We've spent very little time talking about our performance in 2016. We felt great about how we exited the year, comps up 34%, making really good progress, like we've doubled the business in the last couple of years. So why don't you talk about where we are and where we're going. Look, I think, particularly in the last year the focus has been on guest experience and making our floor as a great guest experience. And while some of those investments may not have been obvious and they have pay dividends. We grew the business at almost twice the rate of the market last year. <UNK> talked about earlier how we expanded our ship from store capability which has been really, really important to as. We shipped about 1 million parcels to our guests in the two days following Cyber Monday. And that's really important because that is our cheapest route to the guest at home is shipping from our stores. And as we can expand that model, we can be closer to our guests physically, and in time, and we have the lead time during the holiday period to guests, as well. So all of those investments have improved the guest experience. We've almost doubled our guest satisfaction rating over the course of the year whilst we grew the business at twice the rate of the market. And we see that again going into this year. There will be a relentless focus on the guest experience going forward. All the work that <UNK> and his team are doing to reconfigure our supply chain will give us a lead time advantage and a cost advantage as we deliver more and more parcels to our guests doors. The work that <UNK> is doing on assortment and creating exclusive product, exclusive brand for Target that isn't available anywhere else will be vital to our online merchandising going forward. We will always look at other ways maybe of how we might expand our assortment online, but right now we've got our sites fairly firmly focused on how we can get to guests quicker, how we can execute flawlessly, and how we can bring exclusive brand and product to our guests. <UNK>, we spent a lot of time as a leadership team looking at different alternatives. There was only one path forward. That's the path we've chosen. We've got to win best to grow. We've got to reimagine our stores, we've got to enter new neighborhoods, as we're doing with these small formats. We've got to transform our supply chain. We have to build out the digital capabilities required in this environment. We have to continue to elevate our proprietary brands. And I think most importantly, we just have to embrace the realities of this new era of retailing, and make sure that we also embrace the way consumers are shopping today. We certainly debated whether there were other options. Every time we came to the table there was only one conclusion, and it's the path we've chosen to follow. We think this is the right path for our Company, the right path for our shareholders, and ultimately, it's a path back to growth and an expansion of market share. We've done our homework, we've looked at this from every different angle. This was the path we kept coming back to, it's the right path for the Company today. It will be the right path for the Company 10 years from now. <UNK>, why don't I start with the metrics, the things that we're going to be watching closest. It's going to come back to, we're going to watch the guest. How does the guest respond when we reimagine a store. How do they respond when we move into new neighborhoods. How do they respond when a new digital offerings. How do they respond as we roll out new brands. Ultimately, that guest satisfaction and that guest vote is the most important one. And when they are in our stores more frequently and visiting our site more frequently, and shopping with Target versus other retailers, we know we are winning. But we're going to clearly monitor the guest reaction as we remodel these next 100 stores in 2017, and we continue to accelerate with another 30 small formats. And as <UNK> introduces new brands throughout 2017, and <UNK> enhances our digital offering, it's going to come back to the guest reaction. And we are fighting for footsteps, we're fighting for clicks online and we're fighting for a share of mind. So for this to be a growth story, it is all about gaining market share and that starts with building greater trust, greater loyalty with our guest. So we will be watching that each and every day across these initiatives we've laid out today. Yes, <UNK>, maybe I can address the other two questions, <UNK>. This is a multi-phase, multi-year journey, and we tried to make sure we set that expectation. We are recognizing that the environment is going to be disruptive. And we've got a ton of work still to do, although, we're not we're not starting from scratch, we're going to accelerate that pace and that investment. We are not, and we guided that in our guidance, planning for anything but low-single-digit negative declines this year. And that's what we said, it's an investment year. As we move into transition and then we will get into stability where we can sustainably, consistently drive profitable growth and market share gains, and so I want to make sure we do set that expectation appropriately. On your question with regards to how the capital allocation is being spent over, that $7 billion investment over the next three years, it's really in the three areas of <UNK> talked about, the three big areas. The biggest ones being, obviously, as we reimagine our stores because they will still be central to our story. Their roles will evolve but they will be significant investments there, as well as the new stores, supply chain and digital. And that's exactly where you would expect us to be spending that money. <UNK>, why don't we come back to the shipping question. The reality is that in a digital business one of your biggest costs, biggest marginal costs is transportation, and it is cheaper for us to drive, or to deliver from our stores which are, as we said, about 10 miles from 75% of the population. So that last leg being very shorter makes it our cheapest option. The marginal cost of us getting product to the stores on the back of our existing network, that already ---+ to the distribution center is already out there ---+ is very, very low for us indeed. The additional cost on that last mile is very low. We also have, of course, order pickup which is probably our most economic fulfillment channel. Why don't we, <UNK>, you have been very patient waiting, waving your arm. Why don't we see if we can get him a microphone. <UNK>, let's try to unpack those questions. Let me start with the last one, as we've think about the role of data science and analytics. I made the comment that three years ago this was a nascent capability for us. It's now quickly become one of the strengths of the Company. We're applying that across all of our various functions. It's helping <UNK> and his merchant team make better choices. It's certainly enabling some of the work that <UNK> is leading from a supply chain standpoint. It's influencing how we lead and manage our stores. And <UNK> can talk about the important role it plays as we think about digital and the personalization of our communication. Data science is going to play an important role across all of our functions going forward to make the Company focused on the right decisions, smarter decisions, more personalized decisions. <UNK>, why don't you talk about the role that it has played just recently as we think about digital and how we are interfacing with the guest. I think, as <UNK> says, it's an important, it's a very important growing area for us. Data sciences team out in Sunnyvale we have over 40 PhDs who are doing nothing but thinking of clever ways to how we tune our supply chain and how we personalize the offer to our guests, particularly online. One recent improvement they've made is on some of the bottom recommendations that we give on our homepage. We've seen an eightfold improvement on conversion rate on that. We do note that as you make that experience more relevant to the guest that we will improve our sales online. It will improve our conversion rates. That's just one example. And I've seen a lot of examples in <UNK>'s area around how we are improving sales forecasting and our ordering algorithms which has helped the flow of stock all the way through our supply chain. Let me try to come back to your question around the consumer trends, the role of the Millennial, how that takes shape over the next three to five years. I think as we look at it today, I will start with the investment we're making in our stores. And as we've looked at the outlook, as you've done the math, while we expect this continued accelerated shift to digital, stores are still going to be very important. And pick the number three years from now, the stores represent 85% or 80% or 75% of the business. I don't know. But even if they are 75% of the business three to five years from now they are still the dominant portion. What we know every time we talk to the consumer, every time we talk to the guest, they crave experience. If they're going to shop a physical store, they want it to be a great experience. We've seen the reaction to the changes we've made with visual merchandising. Some of the things that <UNK> and his team are bringing to light every day in our stores in our apparel and home categories. We have to make sure it's a great experience. If they're using our stores as a smart pickup point, we need to make sure when they come to our stores they are greeted by phenomenal team members who can quickly find their order and invite them to shop more often. So we've got to make sure that experience is critically important in our stores. We know going forward that Millennial consumer that we serve, they are going to be digitally connected, and their shopping experiences are likely always going to start with that digital device. Then they will choose whether they want it delivered to their front door, they want to pick it up, or they just want to make sure they know where the products are placed inside of that Target store in their neighborhood. So we've got to embrace the way consumers are shopping, but we recognize when they come to a physical store they expect a great experience. When they shop online, they want it to be really easy. When they come to pick up a product at one of our 1,800 stores, we've got to make sure the product is there, we've got the right items and we invite them to enjoy the convenience that we did the shopping for them. Now they can take the next 20 minutes and explore the store and discover and enjoy the merchandise that we have to offer. So physical stores will continue to be important. But we have to reimagine that store experience. Today's Millennial shopper doesn't enjoy shopping one of our tired stores that has not been touched in 10 years. But they love the reimagined stores and they give us that feedback, as we've remodeled stores in Los Angeles and we have reimagine stores in Dallas, or as we open up new flex formats. The feedback we are receiving is sensational. And they use those flex formats, those smaller stores as places to fill in, but they're filling in two or three times a week. We are looking at it very carefully, but we know stores will be very important, but it's going to be part of our smart network where we combine the digital experience, the store experience as one and make it really easy for the guest to connect with Target any time they want, any way they want in their local neighborhoods and towns. Let's go back to pricing. Let me make sure we are really clear about what we're doing and why. We spent a lot of time looking at the changes that we had made following the breach. We were very promotional. That promotional intensity has actually continued. As we go into 2017, you're going to see us get back to our roots, get back to establishing every day low pricing in those essential categories. There will be a transition period, but it's really going back to it's always worked for us in the past, and moving away from that promotional intensity, the reliance on big promotions to making sure we give our guests the confidence and trust that every day they shop in our stores for those core essential items they're getting a great value. It's a transition, there's an investment involved in that, but it's really getting back to it's made as great going in the past and really making sure that's part of what we bring going forward. We will continue to be very disciplined. As we talked about the question about capital allocation, we're still going to be Company that will continue to innovate, innovation is very important. Innovation is alive and well at Target. But we're going to make sure we test, we learn, we validate. The innovation has to benefit our core enterprise. It has to translate to driving more traffic to our stores, more trips to our site, greater guest loyalty and engagement. Innovation will be an important part of our future. We will do it, as we've done in the past, in a very disciplined way. When things don't work we will shut them down. When we need to iterate, we will continue to iterate and learn, and when we've validated the model we will step on the accelerator, as we are right now, and we will move forward quickly. I guess we've got time for one only last question. Why don't we go over here. <UNK>. <UNK>, you want to start with stores and then I will come back and talk about pricing. Yes, just to check off really quick, cost of a remodel for a prototype, what we call a P store, $5 million, $5.5 million, a little less for lower volume stores, a little more for higher volume stores. Super Target, what do you think, <UNK>, about double. No, a little less than that. A little less than double. Store execution, I would say two things about. One, on out-of-stocks, made a lot of progress. When we talked about it last year they had improved by about 40% last year, almost another 15% improvement. We've seen significant improvement in doing what we do today. The next leap in improvements in out-of-stocks in our stores will come from fundamentally changing the supply chain, which is what we talked about today. That's on course, and we will keep working on them and we'll update you as we go forward, I guess. And, <UNK>, I will finish by talking less about price and lot more about value. We know we have to be competitively priced every day on those core essentials. But we win when we deliver a compelling value, which means a great in store experience. Which means new exciting brands, which means surrounding the guest with great team members, which means a great online experience that's easy and friction free. So it can't be just about price. It has to be about value. And value is the combination of all the things we do and historically have done so well. We've got to make sure we surround the guest with a great in-store experience. The reaction we've seen as we have brought visual merchandise to like in our stores has been fantastic. We've got to continue to build compelling brands that deliver great value for the guest. We've got to surround them with a great experience, whether they're picking up an item or checking out in our stores. And that's got to translate to how we interface with the guest online. Value is critically important. We think we're positioned in a way that's unique in the industry with our assortment, our in-store experience, our multi-category portfolio, the capabilities we've now built online and the changes we're making in-store. That's what gives us so much confidence that we are on the path back to growth. That it will take time, but there's going to be significant market share opportunities in front of us, and three years from now when we've reimagined stores, and we are in new neighborhoods, and we've rolled out new brands, and we've got it great new supply chain capability to complement what we've done from a digital standpoint, we will be sitting here talking about the new Target, a growth Company that's captured market share in this new era of retailing. So I appreciate your time and your patience today. Thanks for joining us, and we look forward to talking to you in the future. So thank you.

2017_TGT

2017

MATW

MATW #Thank you, Terry. Good morning. I'm Steve <UNK>, Chief Financial Officer of Matthews. Also on the call this morning is Joe <UNK>, our company's President and CEO. Today's conference call has been scheduled for 1 hour and will be available for replay later this morning. To access the replay, dial 1 (320) 365-3844 and enter the access code 432867. The replay will be available until 11:59 p. m. December 1, 2017. We have posted on our website, which is www.matw.com, the financial ---+ the fiscal year-end earnings release and financial information we will discuss this morning. The earnings release can be found on our homepage. For the quarterly financial data, on the top of our homepage, under the Investor tab, click on Investor News, then click on Financial Reports to access the information under the section Matthews International Quarterly Reports. Before beginning the discussion, at the advice of legal counsel, I have been advised to read the following disclaimer as it pertains to forward-looking statements. Any forward-looking statements in connection with this discussion are being made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks and uncertainties that may cause the company's actual results in future periods to be materially different from management's expectations. Although the company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove correct. Factors that could cause the company's results to differ from those discussed today are set forth in the company's annual report on Form 10-K and other periodic filings with the SE<UNK> To begin the conference, I'll review the financial results. Joe will then provide general comments on our operations. Following that, we will open the discussion for questions. For the fiscal year ended September 30, 2017, the company reported earnings of $2.28 per share compared to $2.03 per share a year ago. On a non-GAAP adjusted basis, fiscal year 2017 earnings per share were $3.60 compared to $3.38 per share a year ago. In addition, the company reported record operating cash flow in fiscal 2017. Our operating cash flow for the year ended September 30, 2017, was $149.3 million compared to $140.3 million last year, representing an increase of $9 million. In summary, the significant factors in the year-over-year improvement in earnings per share included: higher sales of cemetery memorials and cremation equipment; sales growth in our U.K. and Asia Pacific brand markets; higher marking product sales for our Industrial Technologies segment; continued synergy realization from acquisition ---+ acquisitions; the benefits of ongoing productivity initiatives; and a lower consolidated effective income tax rate. Fiscal 2017 earnings also reflected a significant increase in stock compensation expense. As we noted in the first quarter, as several members of management reach retirement-eligible status, the accounting rules require accelerated expense recognition of awards versus an amortization over the stipulated vesting period. This change had an unfavorable impact of $0.07 on fiscal 2017 compared to last year. In addition, fiscal 2017 costs for the product development project in our Industrial Technologies segment were approximately $0.05 per share higher than last year. Also, changes in foreign currency rates unfavorably impacted fiscal 2017 earnings per share by $0.02 compared to last year. As a result, when adjusted for the impacts of the accelerated stock compensation expense, increased product development project costs and unfavorable currency changes, our fiscal 2017 non-GAAP earnings per share increased approximately 11%. Adjusted consolidated ---+ consolidated adjusted EBITDA for the year ended September 30, 2017, was $239 million or 15.7% of consolidated sales. For the quarter ended September 30, 2017, the company reported earnings of $0.60 per share compared to $0.74 per share a year ago. On a non-GAAP adjusted basis, earnings per share for the fiscal 2017 fourth quarter were $1.06 compared to $1.08 a year ago. In addition, the company recorded an additional $0.04 per share toward its year-to-date earnings per share related to an income tax benefit on equity compensation expense. Due to the nature of this benefit, accounting rules provide that the impact is only reflected in year-to-date earnings, but not the fourth quarter. Consistent with the results for the full fiscal year, the significant factors in the year-over-year improvement in earnings per share for the quarter included increased sales of cemetery memorials and cremation equipment; higher sales in our Asia Pacific brand markets; higher marking product sales for our Industrial Technologies segment; continued synergy realization from acquisitions; the benefits of ongoing productivity initiatives; and the lower consolidated effective income tax rate. In addition, the Industrial Technologies segment reported an increase in fulfillment sales during the fiscal 2017 fourth quarter. A reconciliation of non-GAAP earnings per share and adjusted EBITDA were provided in our press release yesterday, which has been posted to our website. A significant portion of the non-GAAP adjustments continues to include costs and other charges in connection with the integrations of acquisitions, including our ERP integration and implementation. In addition, acquisition-related costs included charges incurred in connection with our recent acquisitions, including related asset step-up expense. Other non-GAAP adjustments for the current year included costs related to cost reduction initiatives in several of the company's businesses and loss recoveries net of cost. The loss recoveries relate to the previously disclosed theft of funds that was identified 2 years ago. Consolidated sales for the quarter ended September 30, 2017, were $396.1 million compared to $377 million a year ago, representing an increase of $19.1 million or 5.1%. The improvement reflected an increase in sales of cemetery memorials and cremation equipment, higher sales of marking products and fulfillment systems for the Industrial Technologies segment and the benefit of recent acquisitions. The company's consolidated sales for the year ended September 30, 2017, were $1.52 billion compared to $1.48 billion a year ago. The growth in consolidated sales for the current fiscal year resulted primarily from an increase in sales of cemetery memorial products and cremation equipment, higher sales in the U.K. and Asia Pacific brand markets, an increase in sales of marking products and the benefit of recent acquisitions. Changes in foreign currency exchange rates had an unfavorable impact of $12.8 million on the company's current fiscal year consolidated sales compared to last year. Sales for the SGK Brand Solutions segment were $203.7 million for the current quarter compared to $193.7 million for the same quarter a year ago. Sales growth in its Asia Pacific market and the impact of recent acquisitions were partially offset by lower brand sales in North America and Europe. Sales for the SGK Brand Solutions segment for the fiscal year ended September 30, 2017, were $770.2 million compared to $756 million a year ago. Sales growth in its U.K. and Asia Pacific markets and the impact of recent acquisitions were partially offset by lower brand sales in North America and Europe. Currency exchange rate changes had an unfavorable impact of $12.1 million on the segment sales for the current year compared to last year. The SGK Brand Solutions segment reported operating profit of $5 million for the current quarter compared to $16.8 million for the same quarter a year ago. Charges related primarily to cost reduction initiatives, acquisitions and integration activity were $11.8 million for the current quarter compared to $6.3 million last year. For the year ended September 30, 2017, the SGK Brand Solutions segment reported operating profit of $24.9 million compared to $42.9 million last year. Charges related primarily to cost reduction initiatives and recent acquisitions, including asset step-up expense and acquisition integration activity, were $29.7 million for the current year compared to $25 million last year. In addition, currency exchange rate changes had an unfavorable impact of $1.3 million on the segment's fiscal 2017 operating profit compared to last fiscal year. The Memorialization segment sales for the fiscal 2017 fourth quarter were $152.3 million compared to $152.3 million for the same quarter a year ago. This segment reported higher sales of cemetery memorial products and cremation equipment in the current quarter, which were offset by lower casket sales, reflecting an estimated decline in U.S. casketed deaths. For the year ended September 30, 2017, Memorialization segment sales were $615.9 million compared to $610.1 million last year. Operating profit for the Memorialization segment for the fiscal 2017 fourth quarter was $19.9 million compared to $20.2 million for the same quarter a year ago. The results for the current quarter reflected the benefits of higher cemetery memorial and cremation equipment sales, acquisition synergies and ongoing productivity initiatives, which were offset by lower casket sales and the impact of higher commodity costs. Operating profit for the Memorialization segment for the year ended September 30, 2017, was $80.7 million compared to $68.3 million last year. The increase reflected the impact of higher sales and the benefits of acquisition synergies and ongoing productivity initiatives. Charges primarily in connection with the Aurora acquisition integration and ERP integration and implementation were $7.8 million for the current year compared to $10.4 million last year. The prior year also included the impact of inventory step-up expense. The Industrial Technologies segment reported sales of $40.1 million for the quarter ended September 30, 2017, compared to $31 million for the same quarter last year. The current quarter reflected higher sales of marking products and fulfillment systems and the benefit of recent acquisitions. For the year ended September 30, 2017, the Industrial Technologies segment reported sales of $129.5 million compared to $114.3 million last year. The Industrial Technologies segment reported operating profit of $5.1 million for the current quarter compared to $2.7 million for the same quarter last year, reflecting the benefit of higher sales. The segment's operating profit for the year ended September 30, 2017, was $7 million compared to $7.7 million last year. The benefit of higher sales were offset by an increase of approximately $2 million in costs related to the segment's product development project. In addition, the segment incurred acquisition-related charges of $945,000 for the year ended September 30, 2017, compared to $632,000 a year ago. A summary of operating results by segment, including non-GAAP adjustments for the quarter, are posted on our website for your reference. Gross margin for the quarter ended September 30, 2017, was 38.8% of sales compared to 38.9% a year ago. Gross margin for the year ended September 30, 2017, was 37.2% of sales compared to 38 ---+ 37.6% a year ago, primarily reflecting the decline in U.S. and European brand market sales. Selling and administrative expense for the current quarter was 31.2% of sales compared to 28.4% for the same quarter last year. The increase for the quarter primarily reflected higher intangible amortization expense and charges related to cost reduction initiatives in several of our businesses. Selling and administrative expense for the year ended September 30, 2017, was 29.7% of sales compared to 29.6% last year. Investment income for the fiscal 2017 fourth quarter was $920,000 compared to $601,000 a year ago. Investment income for the fiscal year ended September 30, 2017, was $2.5 million compared to $2.1 million a year ago. Investment income reflects investment performance on assets held in trust for certain of the company's benefit plans. Interest expense for the current quarter was $6.6 million compared to $6.2 million for the same quarter last year. Interest expense for the year ended September 30, 2017, was $26.4 million compared to $24.3 million last year. The increase resulted primarily from higher-average interest rates this year and additional borrowings as a result of the company's recent acquisitions. Other income net for the fiscal 2017 fourth quarter was $360,000 compared to a net expense of $692,000 a year ago. For the year ended September 30, 2017, other income net was $7.6 million compared to a net deduction of $1.3 million last year. Other income for the current fiscal year included loss recoveries net of costs of $10.7 million. Other income and deductions generally include, among other items, bank fees and the impact of currency gains or losses on certain intercompany debt. The company's consolidated effective income tax rate for the year ended September 30, 2017, was 23.2% of pretax income. This rate reflects the benefits of organization structuring, primarily in connection with the integration of recent acquisitions and certain favorable tax benefits and utilization of certain tax attributes specific to the current year. The company's consolidated effective tax rate was 30.5% for the fiscal year ended September 30, 2016. With respect to some of our balance sheet data, at September 30, 2017, the company's consolidated cash was $57.5 million compared to $55.7 million at September 30, 2016. Accounts receivable at the end of the current fiscal year were $320 million compared to $295 million at September 30, 2016. Consolidated inventories at September 30, 2017, were $171 million compared to $162 million at September 30, 2016. The increases in accounts receivable and inventories primarily related to the impact of acquisitions completed during the current fiscal year. Long-term debt at the end of the current fiscal year, including the current portion, approximated $911 million compared to $873 million at September 30, 2016. The increase primarily resulted from additional borrowings for the company's recent acquisitions. Excluding the cash used for acquisitions completed during the current fiscal year, repayments on the company's debt were approximately $70 million net. Outstanding borrowings under the company's domestic credit facility at September 30, 2017, were approximately $758 million, with remaining borrowing capacity of approximately $392 million subject to the company's net leverage ratio. This facility matures in April 2021. Additionally, as we previously disclosed, we received a claim in September 2014 seeking to draw upon a letter of credit issued by the company of GBP 8.6 million with respect to a performance guarantee on a project for a customer in Saudi Arabia. We assessed the customer's claim to be without merit and accordingly initiated an action with the court. Pursuant to this action, a court order was issued in January 2015, requiring that upon receipt by the customer, the funds were to be remitted by the customer to the court, pending resolution of the dispute between the parties. As a result, the company made payment on the draw to the financial institution for the letter of credit, and the funds were ultimately received by the customer. The customer did not remit the funds to the court as ordered. On June 14, 2016, the court ruled completely in favor of Matthews following a trial on the merits. However, as the customer has not yet honored this court order and remitted ---+ the customer has not yet honored this court order and remitted the funds. The company continues to monitor the customer's noncompliance with the court in our assessment of collectability related to this matter. Accordingly, it is possible that this matter could have an unfavorable impact on the company's future results of operations. The company had 32.1 million shares outstanding at September 30, 2017. For fiscal 2017, the company purchased approximately 212,000 shares under its share repurchase program at a cost of $14 million. At September 30, 2017, approximately 1.8 million shares remained under the current share repurchase authorization. Depreciation and amortization expense for the fiscal 2017 year was $68 million compared to $65 million a year ago. Capital expenditures for the year ended September 30, 2017, were $44.9 million compared to $41.7 million a year ago. Finally, the board yesterday declared a dividend of $0.19 per share on the company's common stock, representing an increase of 11.8%. The dividend is payable December 11, 2017, to stockholders of record November 27, 2017. This concludes the financial review, and Joe will now comment on the company's operations. Thank you, Steve. Good morning. Fiscal year 2017 was another good year for the businesses. During the year, we had record sales as a whole and in several of our segments, despite challenging environments in the markets we serve and continued negative currency translation. Over the last 3 years, it is important to note that our reported revenues and consolidated EBITDA have been negatively impacted by foreign currency translation by over $100 million and $20 million, respectively. When you consider this impact, you understand why we believe that we continue to execute well on all of our many initiatives and are proud of our achievements. In addition, as we look at our current year results and consider the impact of accelerated stock compensation expense of $0.07 and increased R&D spending of $0.05, we view our EPS as having grown over 10% over prior year, a very good result. In our Memorialization segment, despite a lower-than-expected death rate, we delivered very strong operating results, driven by good sales in our cemetery products, strong performance in our cremation products group and good synergy capture in our Funeral Home Products business. In our cremation products group, we've extended our product offering to include small municipal waste incinerators, the sale of which helped to drive good results for the year. In addition, we continue to benefit from synergy capture in Funeral Home Products, where we are successfully integrating Aurora and still have almost $10 million of synergies yet to be realized. In our brand segment, recent acquisitions helped us exceed our prior year revenues and offset a $12 million revenue impact due to currency translation. During the year, we saw strong performance from our U.K. and APAC regions, where we have expanded our product and service offerings, but we faced difficult comparisons in Europe, where slowness in our tobacco business was driven by tobacco company print retenderings and high volumes in the year before. In North America, the consumer packaged good market continue to be sluggish, as many of our clients struggle to find their top line growth. However, recent acquisitions make us comfortable with the direction of this portion of our business despite those market challenges. Our Industrial Technologies segment had a very strong quarter, with record sales and operating profits. Recent acquisitions contributed nicely to our results with strong underlying performance in our updated marking products line, good ink revenue and recovery in process control equipment sales contributing nicely to the great performance as well. As I've said several times before, we remain very optimistic about this group as we have invested significantly over the past several years in new product development and strategies to serve e-commerce warehouse operations. Despite a very good year for this group wherein they achieved record sales of almost $130 million, we are expecting this group to have another double-digit growth year in 2018, and that's before we have the benefit of the newest product that we are ---+ anxiously await. We expect to launch the new product in the latter part of 2018 and the revenues from which should begin to mitigate the development costs incurred, improve our overall operating performance. I'll remind you that this group is incurring R&D expense of about $7 million in 2017, which has depressed their operating results. But when this is added to their reported earnings, this business is generating very good operating margins. Regarding our acquisitions. We are concluding the initiatives on SGK and expect a substantial reduction in integration expenses. We are pleased with our efforts in capturing project and synergies in SGK and still see opportunity to materially improve our cost structure to fully capitalize on our ERP investment, those opportunities we realize as part of our continual effort to improve our businesses in the coming years. With regard to Aurora, we expect to achieve upwards of $10 million of additional synergies over the next 18 months as we complete this successful integration. Several recent acquisitions, including Ungricht and Equator, continue to perform well and should add nicely to fiscal 2018. In general, we're pleased with our acquisition efforts and expect to see further benefit from those companies acquired year-to-date. Looking at 2018, we are confident in our ability to achieve our goals, but we are faced with several unknowns. First, we are exploring the possibility of solidifying our balance sheet by issuing permanent debt, which more likely than not will increase our interest cost. Although we are unsure of the near-term impact of this action, we are certain that this is the right thing to do for our business long term. Second, recent efforts in restructuring business to capture tax savings, which benefited our 2017 results, may be impacted by efforts in Washington to restructure the U.S. corporate tax rates. Although we will be more likely than not to be better off next year because of our efforts or because of the tax policy changes, it is difficult for us to quantify this change at this time. Third, as I stated above, currency has been a significant headwind for the past 3 years. Our current estimates are that those headwinds should abate, but that also is uncertain. And finally, our results in 2017 were materially impacted by lower death rates and increased commodity prices. Although we are never certain of death rates, we are expecting commodities to continue to rise. Nonetheless, we remain confident of our long-term ability to create value and the opportunities before us. Therefore, we expect to deliver 2018 EPS growth which is consistent with our 2017 results. With that, let's open it up to questions. Okay. We'll try to get all those bits and pieces put together for you, Dan. Good morning anyway. The organic businesses as a whole declined modestly. Most of that decline was in North America and in Europe. We talked about the European decline. That has largely to do with the decline in tobacco business over there. Tobacco was a very good business for us from a margin standpoint. That is impacting some of the margins you're seeing in the reported earnings. We expect that to be just a cyclical thing, as they've gone out to retendering. Our largest account over there is Philip Morris. They went out to retendering of all their print. And as they did that, they put projects on hold. We expect to see that return to somewhat normal over the course of the next 12 months. That retendering is complete and we're starting to see activity on that. In particular, what we're seeing on the tobacco side of the business is an increase in many of you know these HeatSticks, which ---+ HeatSticks are basically the electronic cigarettes offered by the tobacco companies. That is increasing for us as well. We feel pretty good about the long term of our tobacco business, both in Europe and around the world. In North America, we're continuing to feel the same thing everybody else is feeling. We're seeing some declines in our revenues, some pricing pressure on our contracts. But in general, we're still seeing pretty good volumes that are coming through that allow us to support them. We have had some recent wins we think that will help offset some of those declines. But what we're really seeing is what we're seeing out in the U.K. and in APAC, where we've expanded our product offering into more of the brand execution. So going beyond the pack, if you take a look at some of the things we do, some of the clients in the U.K. and in Asia, where we're doing much broader service offerings, what you're really seeing is the decoupling of the agency work and in the agencies where typically you do the creative or you do the strategic analysis and then they would be allowed to do the execution. Brands around the world are separating those functions, allowing the large agencies to do the creative and do the strategic type of things, but at the same time allowing people like us that are more attune to operational, executional type things to execute their marketing efforts anywhere they need them. So we think that's our direction of our business, and we think that will get better over time. If we stay where we are, Dan ---+ now, Dan, actually I expect ---+ I don't expect much of an impact relative to what we reported in 2017, plus or minus. Sure. You did hear that correctly, Dan. The unknowns are a little bit bigger this year, given ---+ I mean, I anticipate ---+ we anticipate going out and making some debt permanent. We've been talking to folks for several years of the interest rate environments and so forth. So we're going to make that permanent. How that impacts is going to depend on what that actual rate may be and when that occurs. So we don't know that yet. But we do think that should be a good thing from a debtor ---+ from an equity holder standpoint as well making our balance sheet more permanent. Secondly, there are a couple of items that are still a little bit troubling out there. I mentioned to you about our tax structure and the benefits that we're seeing from those efforts internally. The team has done a great job of putting us in the position to significantly lower our tax rate going forward. We think it's only going to get better, if Washington does what they're going to do, but we don't know that for sure and what impact that has on what we've already done from a structure standpoint to be able to take advantage of that. And the last one, obviously, commodities and death rates are things that are, I would say, they are impactful on the margins, given our scale today, but those margins are greatly profitable on the fringes. We had $7 million worth of commodity cost increases in our Memorialization business this year. And to deliver the kind of results that team has done despite that is pretty admirable. And we're hoping that death rates will work towards our benefit. They did not this year. But if they do, we'll be better off. If they don't, we're expecting to see higher commodity rates. We're already seeing them. So those are the pluses and minuses. Approximately 30%, Dan. It's hard to predict the benefits of some of the attributes that were specific to this year. But I think the one thing I can report is that several years ago, we were ---+ if you recall, we were in the mid to higher 30%s with respect to a consolidated effective tax rate. And the structuring that we've done, particularly post the acquisition of SGK and some of the geographic footprint, the consolidated geographic footprint where we've been structured or been able to structure to date, has taken us down to approximately that 30% run rate. Well, let me (inaudible), one in particular. We've mentioned Equator in the past. And Equator was an acquisition occurred midyear. We see nothing but growth from them. But one of the reasons we've seen the kind of growth we've had from those folks is it's a different business model that we currently operate. It's an all-under-one-roof model, where creation all the way through execution all the way down to the photography is all done under one roof allowing for speed to market. They cut the time down for a product to go from creation to the shelf significantly, allows for a lot more flexibility and speed. And that's been very, very beneficial. We do think that's the future for a lot of our brands, not all of them, but a lot of our brands as they start looking at ways to accelerate change in an environment where they're trying to respond to changing consumer demands pretty quickly. On the other side of the table, it was Ungricht. Ungricht, as you all know, we are fairly significant ---+ we are the largest provider of gravure cylinder businesses in the European markets, and we're looking to expand that opportunity. Ungricht takes us one step further into cylindrical processes. What does that mean ---+ it's not necessarily for gravure printing purposes. It's everything around gravure printing purposes for packaging. So we now are the #1 provider of digital images and cylinders necessary to produce laminate flooring, wallpapers, textures on synthetic substrates like the vinyls that sit in your car. All those are produced with cylinders that started off as cylinders for packaging. At the end of the day it's gravure. With that acquisition, we're expanding into very similar fields, just extending the use of our products. Well, I mean, I guess, the loudest part of this is that Nelson Peltz is trying to get onto Procter & Gamble's board who suggested that the global strategy is probably not the right strategy. In this world, you need more SKUs. You need more localized SKUs. You need to respond to the local consumer a lot faster. That's music to our ears. I mean that's ---+ it really depends on what you believe. I think there's fair amount of confusion about what needs to be done right now. But the reality is, I would say, that there's ---+ it's different opinion with each customer that we have. There's a lot of perspectives out there. We've listened to a lot of folks speak about it. And as the CPGs, we believe, start to realize that brand is important and that brand will continue to be important in whatever field they may be, I think that the recovery in marketing spend as it relates to this will continue. You got it, <UNK>. You've been there long enough. Sure. Well, I mean, as you all should be aware, we've done a number of acquisitions over the last 5 years to position us in the e-commerce warehouse control software system. So basically, when you look at some of the things that brands and/or retailers are delivering to your doorstep, many of those customers are delivering it via our warehouse control software systems and the picking solutions that we have. That business continues to grow for us and is very consistent with what you're seeing in the overall space for warehouse ---+ e-commerce. We continue to invest in that. We expect that over time we might look at other acquisitions to add to that. But we're seeing very good growth in that part of our business and proud of that team and what they're doing. The ---+ I would remind you if we recall back about 2 quarters, we talked about a deferral of a $7 million project in that part of our business. That has yet to be incurred. We expect to have that revenue come through our second quarter results. So the delivery of results you see in this group is despite that $7 million deferral, which we have not lost the account. On the ---+ what I call the updated marking products line of products, they have been working for the last 5, 6 years on developing new solutions and better solutions, particularly on the controller side of the business, that offer updated and greater capabilities to control product line marking in a number of situations. That product line, as you might expect, sells at a higher price point, has more applicability outside of our traditional customer base. And so we are picking up modest share, but we're also replacing existing product that we had out there with existing accounts at a higher price point. We think that trend will continue as long as the economies we serve remain robust. And as I've said before, this business is doing well. The product development we've been referencing and the $7 million we spent in 2017 is coming to fruition. We are going to be here in beta testing here shortly. I am taking my full board to see the product in its operational state in February. So we're expecting to be rolling that out by the end of calendar '18, probably somewhere in the latter part of third quarter, beginning of fourth quarter, start to get some revenues. That will mitigate some of that expense that we're feeling and improve the results. It is proving to be everything that we expect it to be. So we're right on line in terms of timing as well as capabilities and costs. Well, we are ---+ I mean, as many may know, it's been deferred. It's now looking like a 2022 implementation. Some of our brands, some of our food product companies are moving forward with adapting it as quickly as possible despite that but I would not say it was the same expected push that we were going to feel over the course of the next 12 to 24 months. The regulations have not changed. Implementation dates have changed. I know several of our accounts have struggled with the reformulation of their product to be able to comply with what is being disclosed. That effort is still going on. So we're not expecting material change in our North American food clients as a result of this or as a result of the deferral. No. So if you think about what a cremator does, and it's pretty obvious by its description, it burns things. So what we have done is extended that capability into a larger scale from an efficiency standpoint and started to service a small municipal waste. In the U.K. today, where they ---+ where the principal part of this work is being derived right now but we think it has applications elsewhere in the world, the U.K. is moving to a waste-to-energy effort, trying to stop shipping their trash by barge to elsewhere in Europe. That's going to be burned, and it is being burned locally by these small municipalities, generating electricity and selling it back. We are working right now, the one we've referred to here is the Isle of Jersey. We're doing some work there right now on a particular incinerator. I'd say it will be delivered. We recognize that because it's a larger scale project. Some of the revenue and profits impacted our cremation equipment business this year. We expect it to continue to be. We have $25 million to $30 million worth of bids out there. It's really going to depend on the timing of when some of these projects can get financed. Right now, we are ---+ we have some competition but not significant. These are ---+ because these are smaller. There's some very large municipal waste incinerator companies out there that are significantly larger incineration equipment providers. Ours are much more tailored to that local community that's going to do that. And right now, there seems to be an initiative in the U.K. to push that along. So the pipeline's rich, let's put it that way. I would say that we have opportunities in each one of the businesses and they are at various states of activity. What we choose to do and what we want to do might be 2 different things. At the same time, we're very cautious on the allocation of our capital in this environment right now. We are ---+ as we look to [permatize] some of our debt, we want to make sure that we do what's in the right interest of the company, both short term and long term. So our appetite for larger deals is always going to be there. It will probably be done more likely than not with some equity and may not be as accretive as we would like it to be, but it's right from the capital structure standpoint. So I would tell you, Jamie, that we don't lack for opportunities to acquire. It's more about the proper allocation of capital at this time. Yes, that's always the case, right. But that's the benefit of having multiple businesses out there. Somebody might not want to sell in one business might have somebody that does in another, and that's been beneficial to us. We expect to get bigger. I mean, our internal group has fairly lofty targets for themselves both ---+ and to be honest with you, a lot of it is coming through organic growth and opportunities that we create from investments we made. But there are also existing significant sales ---+ I mean, acquisition opportunities. We've got an internal target to get this to $300 million over the next 5 years. It's at $140 million ---+ $130 million or so this year. We expect that to grow double digit this coming year as well, and I would tell you that our internal plans would replicate that for several years to come. So we'd like to get this business more balanced relative to the rest of the group. Thanks, Dave. Yes, the ---+ with respect to bronze, we're generally out several months. And so that continues to be the case. With respect to steel, that's a little bit of a different commodity and a different purchasing cadence. So we've already experienced the higher cost. We do expect, particularly on the steel side, a little bit of increase in those costs to continue. But one of the things you have to remember is the inventory cycle when it comes to caskets because the steel costs that we purchase today become part of our inventory that become ---+ that are shipped to our distribution centers before they ultimately become sales to customers and recognized. So there is a period of months that occurs before the actual purchase and reflection in our cost of sales. Well, <UNK>, you're absolutely right on your first suggestion. The R&D costs themselves, when you say are they going to fall off, actually, those R&D costs, they'll continue into this year as we continue to develop the product. But as that ---+ as we take that product to market and it becomes commercialized and we start to recognize ---+ we start to ship and we start to recognize revenue, then those R&D costs actually become part of the cost of sales because we're recognizing revenue with respect to those costs. So those will transition. Any costs related to that project will transition to cost of sales and we'll be recognizing revenues, and we'll see obviously profitability on that product. So the net impact of those costs, as we're feeling it today, will actually decline. R&D costs, yes. We actually expect a similar level of R&D costs into '18. But as we approach the end of '18 and we reach our targeted commercial launches ---+ launch dates, then, again, that's when the transition starts to happen. Okay, Terry. Thank you. Well, we appreciate the participation in our fourth quarter earnings release and conference call here this morning, and we look forward to our first quarter fiscal 2018 conference call in January 2018. Thank you, and have a good day.

2017_MATW

2016

SBH

SBH #Well, listen, first of all, it's not the sales decline in BCC. We decel-ed, in terms of going from 6% to 7% now 3%. And as you go through a transition like this, and recruit new customers to your brand, I think that's a fairly moderate impact on your core customer base. We are making changes in our marketing as well. And we have as, an example, reduced the amount of direct mailers that we send out to those customers, and shifted some of the media to other marketing mix. And we are obviously, still doing all kinds of promotional activity that's tied to seasonal events. But the reality is there's many changes affecting our customer base. Some of it is in store. Some of its through our marketing. Some of it's through our packaging and products because obviously as we change the packaging those customers might have been buying that same package for many years. And now they're going to have to adjust to a new package that looks a little bit different. But obviously creates a much more stylish look for our list customers. So the reality is, I think it's a normal transition period. And I don't think it was terribly severe in terms of the amount of transition that we've experienced, and our expectation is we'll win them back in the next couple of quarters. You bet. Yes, much less so. Because the reality is, we're not moving any of their products or changing any other products really. It's all going to be the same SKUs, just better presented and with more educational information, and good merchandising around it. So I think you'll find there's ---+ that we don't expect really any disruption associated with either brushes or combs or the hair color education center. I was in stores yesterday, saw the education center up in the stores, and it was a pretty seamless cutover. So I don't think there will be anything there. The reality is I think the overall market is pretty flat to slightly up, but it's meddling along. I don't think it's bad, but I don't think it's great. But we just needed to find our own brand in that, and our own value proposition, and recruit customers to our business. There's plenty of opportunity, given the traffic that's in the malls that we're in, to bring new people to our stores if we get our value proposition right and communicate it clearly. So I don't think it's fairly slow growth environment should affect our ability to drive our comps over time. But that's what we're seeing out there is, kind of a slow meddling environment around us. You bet. One last question. Yes. Well, first of all, the amount of investment that we're making in Brazil this year, is just really to get started, so it's not a significant piece of our investment thesis for an overall perspective. And some of the territorial targets that are out there, as history is typically indicated they are very small, and there are things that certainly don't cause any kind of headwind within our capital allocation plans or cadence that we typically have had. So overall, kind of really to get to the central theme of your question that you asked, is in terms of returns, is that our best returns is through our organic growth, and in terms of the investment in our stores. And then we make certainly, strategic investments with some of these territorial acquisitions. And entering into new markets, those have a longer tail, in terms of their investment thesis. And particularly, Brazil will have a long investment tail to it, over a number of years. So we're just now kind of getting the planning of that established and the organizational side of that established. So it doesn't have a great impact on the short-term thesis. But our overall outlook and our overall use of capital, and cadence of share repurchases is still very consistent with what we've done in the last couple of years. And we continue to look at that quarterly, with the guidance of our Board. All right. And with that, I'd like to thank everybody for joining us today. We are halfway through the fiscal year, and we remain confident that we will reach our financial and strategic goals for the year. Thank you, and I hope to see all of you soon.

2016_SBH

2017

NUE

NUE #Thanks, <UNK> Nucor reported first quarter of 2017 earnings of $1.11 per diluted share These results were in line with our guidance range given in mid-March of $1.10 to $1.15 per diluted share They represent significant improvement compared to the fourth quarter 2016 earnings of $0.50 per diluted share and first quarter of 2016 earnings of $0.27 per diluted share It is also Nucor's highest quarterly earnings since the third quarter of 2008. Earnings for the most recent quarter were highlighted by significantly improved performance for our steel mills segment, led by our sheet, bar and plate mills This segment also benefited from attractive profit contributions from our recent tubular products acquisitions Our raw materials segment also delivered very strong improvement on both a year-over-year and linked quarter basis That was despite the burden of a 5-week unplanned outage during the quarter at the Louisiana direct reduced iron facility More than offsetting that drag were performance improvements from our David J Joseph Company scrap business and our direct reduced iron facility in Trinidad The David Joseph team has done excellent work reducing the cost structure of their operations and working more closely with Nucor steel mills that benefit profitability across the enterprise In addition to their solid profit contribution, the new iron team at the DRI facility in Trinidad set a production record in the just-completed quarter A quick comment about our tax rate as it can be confusing due to the impact of profits from noncontrolling interests Excluding profits belonging to our business partners, the effective tax rate was 32.4% for the first quarter Nucor's financial position remains strong With total debt outstanding of $4.4 billion, our gross debt-to-capital ratio was 34% at the end of the first quarter Cash and short term investments total approximately $1.7 billion Nucor's strong liquidity position also includes our $1.5 billion unsecured revolving credit facility which remains undrawn The facility does not mature until April of 2021. For 2017, we estimate capital spending of approximately $550 million and depreciation and amortization of about $730 million While recent trade case decisions have begun to reduce the flood of dumped and subsidized products from foreign producers, imports continue to negatively impact the U.S steel industry overall Through the first quarter this year, imports remain at a stubbornly high 25% share of U.S Certain countries continue to brazenly break and circumvent our nation's trade laws While significant progress is being made, there is a tremendous amount of work still to be done Nucor will continue to be proactive and aggressive in pursuing effective and timely enforcement of U.S At the same time, we will also work to call attention to the issue of global steel production overcapacity That overcapacity is the result of the trade-distorting practices of some governments Earnings in the second quarter 2017 are expected to increase compared to the first quarter This further supports our previously expressed view that full year 2017 profitability could significantly exceed the level achieved for 2016. In the second quarter, our sheet mills should experience further gains in price realizations as a portion of their contract sales are priced on a lagging quarterly basis We expect our plate mills to benefit from recent trade actions that provide a more level playing field Our fabricated construction products order books indicate that the nonresidential construction markets have regained momentum in 2017. That, along with seasonal trends, will benefit the second quarter performance of our steel products segment We're also encouraged by the emergence of improving demand in other end-use markets, including energy and heavy equipment With stronger demand for iron units, our raw materials business should be solidly profitable over the balance of this year We also expect intercompany profit eliminations to have a smaller impact on earnings in the second quarter We're confident that Nucor's significant competitive advantages, highly adaptable business model and proven strategies will allow our team to continue to deliver profitable long term growth and attractive returns to Nucor's shareholders Thank you for your interest in our company <UNK>? That's a good question, <UNK> And we think about the dividend not on a quarterly basis, but on an annual basis So let's see how the rest of 2017 plays out and we'll think more about whether it's appropriate to increase the dividend or do something with other dividends or do other things to return cash to shareholders by the end of the year It's not a tremendous amount, but we're pricing – we're in March But if you think about it, we started the quarter, meaning the first quarter, in January, with much lower pricing than we finished the quarter So on average, we think the pricing will be higher We don't think it's raising dynamically from where it was at the end of March We think it's more of the average across the quarter will be better in the second quarter Look, Phil, of course, when we're in an inflationary period with the pricing with raw materials which we certainly saw from the beginning of the first quarter to the end of the first quarter, we're benefited in our cost side as we start the quarter with lower-cost inventories But by the end of the quarter, we were using much more extensive scrap and had our highest costs of the quarter And our highest profits were in March of the 3 months in the quarter So pricing moved up more than cost moved up And so although we will start the second quarter with higher cost, we're going to start the second quarter with higher prices as well by a larger amount So again, that's why we have comfort in the guidance that we expect improvement compared to the first quarter overall And it's going to be a little different by product But overall, that's our perspective And <UNK>, you mentioned hot band, but of course, also, it benefits our bar business as well with the seamless business Yes We also supply cold finish to a lot of energy applications as well

2017_NUE

2017

UTX

UTX #Thanks, <UNK> I'm on slide four, and I'll be speaking of the segments in constant currency, as we usually do And as a reminder, there's an appendix on slide 12 with additional segment data as a reference Otis sales were $3.1 billion in the quarter That was up 1% organically Excluding China, organic sales were up 4% Operating profit was down 5% at constant currency Contribution from higher service volume and productivity was more than offset by continued pricing and mix pressure in China and strategic investments in service and E&D Foreign exchange translation was a 2 point headwind to sales and earnings New equipment sales were up 1% Mid-teen growth in North America and high single-digit growth in Europe were largely offset by a 12% decline in China, where the market environment remains very challenging Service sales were up 5%, including the benefit of acquisitions Otis saw solid growth in modernization and repair, while maintenance sales were up low single digit New equipment orders were flat in the quarter, with 6% growth in North America offset by a decline of 14% in Europe on tough compares In China, Otis saw 3% orders growth, with unit orders up 7% Full-year expectations remain unchanged We continue to expect operating profit to be down $125 million to $175 million at actual currency, with slightly higher than expected pricing and mix pressure but less FX headwind Turning to slide 5, Climate, Controls & Security sales grew 7% at constant currency in the quarter Operating profit declined 1% at constant currency, and FX translation was a 1 point headwind to sales and earnings CCS sales grew 5% organically in the quarter, driven by strong North America residential HVAC sales of 11% Global commercial HVAC was up 3% And following a strong Q1, commercial refrigeration sales were up 12% And after more than a year of declines, transport refrigeration saw 3% growth Equipment orders at CCS were strong again in Q2, up 11% organically after 7% growth in Q1. And as Greg said, the orders growth was across all major product lines Transport refrigeration orders were up 38% North America residential HVAC was up 16%, and commercial refrigeration was up 9% Commercial HVAC and fire & security products were up mid-single digits In short, this was the best growth in CCS organic equipment orders since Q4 of 2014. Despite solid top line growth, operating profit declined 2% from the prior year, including the impact of FX Consistent with Q1, we saw negative impact from mix at several CCS business units Additionally, CCS added to the charge they took on a large commercial project in Q1. That charge was largely offset by positive one-time benefits, including the sale of a joint venture investment Looking ahead, we expect improvement in the second half, driven by strength in equipment orders, productivity initiatives, and lower FX headwind We continue to expect CCS operating profit to grow by $100 million to $150 million at actual FX in 2017, but likely closer to the low end of the range We now expect that CCS will see low to mid-single-digit organic sales growth for the full year Turning to Aerospace on slide 6, Pratt & Whitney sales were up 6% organically in the quarter This was driven by 30% growth in the military engines business, which benefited from higher F135 deliveries, aftermarket strength, and development revenues Commercial aftermarket sales were up 4%, with V2500 strength partially offset by lower sales at Pratt & Whitney Canada Commercial OEM sales were down 10%, with increased Geared Turbofan deliveries offset by lower shipments of V2500, GP7000, and Pratt & Whitney Canada engines The recent supplier quality escape discussed at the Paris Air Show, which was related to engines supporting the A320neo program, unfortunately impacted Airbus Q2 aircraft deliveries Pratt & Whitney worked aggressively to mitigate the impact of this temporary disruption Pratt delivered 134 GTF engines in the first half of the year, including customer deliveries and spares We continue to expect a full-year total of 350 to 400 GTF engines, as Greg mentioned earlier Operating profit of $408 million declined 10% Drop-through from increased military sales, commercial aftermarket, and favorable FX and pension was more than offset by the absence of the prior year's contract settlements and sale of legacy hardware Continued ramp-related investments and lower Pratt & Whitney Canada shipments were also headwinds in the quarter Based on first half results and anticipated increases in negative engine margin in the second half, we still see Pratt & Whitney full-year operating profit being down $150 million to $200 million, but likely closer to the $200 million end of the range Turning to slide 7, Aerospace Systems sales were down 1% organically Operating profit of $603 million was up 2% Commercial OEM sales were down 8%, driven by declines in legacy program volume that more than offset growth on new programs in the quarter Of note, the end of the Boeing 777 landing gear production at Aerospace Systems impacted commercial OEM sales in the quarter by approximately 3 points New program ales are expected to ramp more significantly in the back half of the year Commercial aftermarket was up 7%, driven by 17% growth in provisioning Parts were up 2% while repair was up 7% Military sales growth resumed in Q2 and was up 5%, with growth in both OEM and aftermarket Operating profit growth was driven by drop-through on higher commercial aftermarket and military sales, continued cost reductions, and favorable FX impact These tailwinds were partially offset by unfavorable commercial OEM volume and mix With solid first half results at Aerospace Systems, we continue to expect operating profit to be up $50 million to $100 million for the full year and likely toward the high end of the range And with that, I'll turn it back to Greg Sam, overall the Pratt large engine aftermarket is doing pretty well We're going to do more V2500 overhauls this year than we did last year There's probably demand out there for better than 900 shop visits on a worldwide basis, so that's the good news The content has also been pretty healthy there as well But the overall trajectory hasn't really changed when you think about the fleet demographics The 4000 continues to be in attrition mode We'll see fewer shop visits year over year there So overall, I think we're happy with how the aftermarket is trending this year It looks like it's going to be pretty decent rounding out the balance of the year But overall, no real change to the fundamental trajectory that we set coming into the year <UNK>, we'll see year-over-year declines on those volumes in 2017 throughout the back half and maybe some sequential improvement But as Greg just said, the long-term trend, it feels like it's yet to fully bottom So about what we expected coming into the year, maybe some modest improvement sequentially on volumes, but no major change

2017_UTX

2016

STC

STC #You know I think <UNK> it is something we watch closely. And we want to make sure we are aligned. We're definitely focused on moving forward. I think some of the noise has been, has called some of the competitive nature that we've seen the rapid increase in. In the past several months and so we're hopeful with that noise that goes away. Things get back to normal and maybe some of the competitive pressures or abnormal competitive pressures are gone going forward. Thank you. Great, that concludes this quarter's conference call thank you for joining us today and your interest in Stewart. Goodbye.

2016_STC

2018

KELYA

KELYA #Thank you, <UNK>, and good morning. Welcome to Kelly Services 2017 Fourth Quarter Conference Call. With me on today's call is <UNK> <UNK>, our CFO. Let me remind you that any comments made during this call, including the Q&A, may include forward-looking statements about our expectations for future performance. Actual results could differ materially from those suggested by our comments, and we have no obligation to update the statements made on this call. Please refer to our SEC filings for a description of the risk factors that could influence the company's actual future performance. As we walk through our results this morning, let me point out that our year-over-year comparisons are represented in nominal currency with the exception of our International Staffing segment, which is in constant currency. 2017 was a year of focus and acceleration for Kelly. We drove strong top line growth, increased our GP and operating earnings and improved our conversion rate while also making strategic investments in talent and technology that will help power our future success. Turning to Kelly's fourth quarter results. Revenue was $1.4 billion, up 9% compared to last year. And for the full year, revenue was $5.4 billion compared to $5.1 billion in 2016, excluding our APAC staffing operations. For the quarter, we achieved earnings from operations of $28 million compared to $20 million last year. And for the full year, we reported operating earnings of $83 million compared to $63 million for 2016. Kelly's fourth quarter earnings from continuing operations were $0.45 per share compared to earnings of $0.51 per share for the same period last year. For the full year, earnings were $1.81 per share compared to earnings of $3.08 per share for the same period last year. The year-over-year differences are attributable in large part to the 2016 APAC joint venture and the Tax Cuts and Jobs Act. Excluding these noncash charges, both fourth quarter and full year earnings per share were up 57% year-over-year. All told, 2017 was a year in which we sharpened our focus, accelerated investment and established strategic priorities that yielded strong results for Kelly. Now let's take a closer look at the performance of each of our business segments, starting with the Americas. Americas Staffing is comprised of commercial staffing, Kelly Educational Staffing and Professional and Technical specialties. Americas Staffing revenue increased 11% in the fourth quarter compared to the same period last year. Commercial staffing revenue increased 8% over prior year, consistent with the increase we reported in Q3 and compared to the 6% increase in Q2 and the 1% increase in Q1. Our fourth quarter growth in commercial staffing came from existing customers as well as new customer wins. Kelly Educational Staffing delivered revenue growth of 30% in the fourth quarter. This growth rate was favorably impacted by the September acquisition of Teachers On Call. Excluding Teachers On Call, KES grew 11% in the fourth quarter. Revenue in our Professional and Technical specialties increased 7% in the fourth quarter compared to prior year, with accelerated sequential and year-over-year growth in all specialties. Growth in the Americas increased as the investments we made in recruiters and sales resources during the first half of the year began to yield results in all areas. On a combined basis, total perm fees were up 40% year-over-year, with growth in both commercial and Professional and Technical specialties. For the fourth quarter, gross profit rate in the Americas Staffing was 18.9%, up 60 basis points from a year ago due to effective management of employee-related cost and higher perm fees, partially offset by changes in business mix. Expenses for the quarter were up in the Americas Staffing by 12% year-over-year, primarily the result of adding sales and recruiting resources during the first half of the year to capture increased demand as well as increases in performance-based compensation and the addition of Teachers On Call. All told, the Americas Staffing segment achieved an operating profit of $27.8 million for the ---+ in the quarter, up 27% from the previous year. For the full year 2017, the Americas delivered $83 million in operating profit, up 18% from last year, excluding restructuring. Let's now turn to our International Staffing operations outside the Americas. Revenue in International Staffing increased 17% compared to the prior year in nominal U.<UNK> dollars. On a constant currency basis, revenue increased 9% driven by growth across the regions in Europe. For ease of reference, the remainder of my comments on International Staffing will be on a constant currency basis. Fee-based income for the fourth quarter was up 10% year-over-year. The fourth quarter GP rate was 14.5%, in line with the same period last year. GP dollars increased 9% over prior year, mainly attributable to higher revenue driven by hours volume in our temp staffing business. Expenses increased 8% over the prior year. Netting everything out, International Staffing's fourth quarter operating profit was $5.6 million, up 13% year-over-year. For the full year, the segment delivered earnings from operations of $22.1 million, up 44% over last year. The 2016 full year results exclude both the 2016 restructuring expenses and the results of our APAC staffing business. Now let's turn to the results of our Global Talent Solutions, GTS reporting segment. This segment is the combination of our previously reported OCG segment plus our centrally delivered staffing operations. The GTS reporting segment reflects the 2 primary ways that large clients in this segment are buying from us: talent fulfillment and outcome-based services. I'll discuss each business' results separately, but first, let's take a look at how GTS performed as a whole in the fourth quarter. GTS revenue was up 3% year-over-year while gross profit increased 15% for the quarter. Revenue increased year-over-year in our KellyConnect, Business Process Outsourcing, Contingent Workforce Outsourcing and Recruitment Process Outsourcing practices, offset by declines in our centralized staffing and payroll practices. We are pleased with our ability to deliver double-digit GP growth and higher GP rates by exercising price discipline and exiting low-margin accounts while continuing to invest in higher-margin solutions. Now let's look at the gross profit results in each of the 2 GTS businesses. Our talent fulfillment business, which is made up of our Contingent Workforce Outsourcing, Payroll Process Outsourcing, Recruitment Process Outsourcing and centrally delivered staffing practices. Gross profit in the talent fulfillment business was up 10% year-over-year, a significant improvement from the 2% growth we reported last quarter. We continue to see nice double-digit GP increases in our CWO practice from new programs in Q4 as well as year-over-year GP growth in our RPO practice. We also had year-over-year GP increases in our centralized ---+ centrally delivered staffing and PPO practices as a result of effective management of employee-related costs. The outcome-based services business is comprised of our BPO, KellyConnect, Kelly legal managed services and advisory services practices. Gross profit for outcome-based services increased 30% year-over-year, driven primarily by continued momentum and strong results in both KellyConnect and BPO. The double-digit year-over-year GP increases in our outcome-based services are the result of both program expansions and new wins. Overall, the GTS segment gross profit rate was 20.2% for the quarter, up 210 basis points year-over-year, due largely to effective management of employee-related costs coupled with favorable practice and customer mix. Expenses in GTS were up 3% year-over-year in the fourth quarter due to headcount and salary costs related to the addition of new programs, coupled with an increase in performance-based incentive costs. These increases were partially offset by a reduction in bad debt expense year-over-year due to a significant write-off recorded in the fourth quarter of 2016. All told, GTS' fourth quarter operating profit was $25.6 million, up 75% over a year ago. This strong finish kept a solid 2017 performance for the full year. GTS had earnings from operations of $79 million excluding restructuring, a 35% increase over 2016. Now I'll turn the call over to <UNK> who will cover our quarterly and full year results for the entire company. Thank you, <UNK>. Revenue totaled $1.4 billion, up 9% compared to the fourth quarter last year. Our reported revenue was favorably impacted by 170 basis points due to foreign exchange. So on a constant currency basis, revenue growth for the fourth quarter was up 7.3%. Our Q4 performance also includes the result from our acquisition of Teachers On Call, which added about 130 basis points to our total revenue growth rate. Overall, our Q4 revenue growth rate reflects our continued strong top line performance in both Americas and International Staffing as well as modest top line performance in Global Talent Solutions. Staffing placement fees were up 31% year-over-year, with strong fee growth in Americas and International Staffing. Excluding the impact of currency, fees were up 27%. Overall, gross profit was up $35 million or 15%. Our gross profit rate for the quarter was 18.5%, up 100 basis points when compared to the first quarter of 2016. Our GP rate improvement reflects effective management of employee-related costs in our GTS and Americas Staffing businesses as well as continued [sectoral] GP rate improvement in GTS as we shift to higher-margin solutions within that segment. This was partially offset by changes in business mix in our Americas Staffing segment. SG&A expenses were up 13% year-over-year. About half of our year-over-year increase is due to higher performance-based compensation expenses in both our operating units and at corporate as a direct result of our solid improvement in both GP growth and earnings from operations. In addition, we have continued to invest in our Americas Staffing operations to capitalize on market opportunities, and we accelerated our investment in several initiatives designed to improve our technology and process automation. Earnings from operations were $28.4 million in the fourth quarter compared with 2016 earnings of $19.8 million, up 43%. For the fourth quarter, our conversion rate was up 210 basis points to 10.8% as compared to the same period of 2016. On a full year basis, earnings from operations was $83.3 million or $85.7 million excluding restructuring compared to $63.2 million or $60.7 million excluding restructuring and our APAC staffing operations in 2016. That is a 41% improvement over the period on a like-for-like basis. In addition, our conversion rate for the full year was up 160 basis points to 9% excluding restructuring costs Our performance reflects our efforts to produce higher earnings from both gross profit growth, which we achieved with a combination of top line growth and GP rate improvement and a balanced approach to expenses. Our expense control effort will continue, and we have started to redeploy some of those savings into initiatives designed to increase growth and improve efficiency in the future. Income tax expenses for the fourth quarter was $12.7 million compared to $1.8 million reported in 2016. Included in the 2017 expense is a $13.9 million noncash charge due to the revaluation of our net deferred tax assets as a result of the Tax Cuts and Jobs Act. And finally, diluted earnings per share for the fourth quarter of 2017 totaled $0.45 per share compared to $0.51 in 2016. Our 2017 earnings per share includes a $0.35 per share charge related to the Tax Cuts and Jobs Act. Now looking ahead to 2018. For the full year, we anticipate revenue to be up 5% to 6%, including the impact of FX on revenue of approximately 100 basis points. We do anticipate that revenue growth rates will slow in the early part of the year as we have exited several large staffing accounts due to price discipline and then will improve progressively as we move through the remainder of the year. We expect the gross profit rate to be up slightly on a year-over-year basis due to changes in business mix as we move to higher-margin solutions. We anticipate SG&A expense to be up 4% to 5%, which includes additional spending on our technology and efficiency initiatives. Our outlook does include the impact of the change in accounting related to revenue recognition, which we do not expect to be material. We'll also be impacted by another accounting change effective in 2018 related to the treatment of unrealized gains and losses on our equity investment in shares of PERSOL holdings. Those gains and losses will be reflected on our P&L below earnings from operations beginning in the first quarter of 2018. We'll provide further information about the impact of these accounting changes in our Form 10-K, which will be filed with the SEC later this month. Our 2018 annual income tax rate is expected to be in the low to mid-teens range, reflecting the ongoing impact of the Tax Cuts and Jobs Act. And while we'll benefit from the lower effective tax rate going forward, the cash impact of the tax law change is not expected to be material, and cash repatriation isn't planned since our global cash is already managed to minimize excess overseas balances. Accordingly, the tax law change will not affect our strategic focus or priorities. Now moving to the balance sheet. Cash totaled $33 million compared to $30 million at year-end 2016. Debt was $10 million compared to no borrowings at the end of 2016. Our increased level of debt reflects our acquisition of Teachers On Call in the third quarter of 2017. Accounts receivable was $1.3 billion and increased 13% year-over-year. Global DSO was 55 days compared to 53 days at year-end 2016. In our cash flow year-to-date, we generated $47 million of free cash flow compared to $27 million of free cash flow in 2016. The improvement reflects improving earnings from operations and a continued focus on cash flow generation even while funding additional capital expenditures. For more information on our performance, please review the fourth quarter slide deck, which is available on our website. I'll now turn it back over to <UNK> for his concluding thoughts. Thank you, <UNK>. 2017 year was a good year for Kelly. We created and carried solid momentum throughout all 4 quarters, delivering strong top line growth and profitability gains even as we invested in our future. We improved our GP rate, delivered year-over-year growth in earnings from operations and improved our conversion rate as we demonstrated gains in both volume and value drivers. Our Americas and International Staffing operations continue to execute with energy and focus. We're seeing benefits from our investments in sales and recruiting talent, and we are pleased with the growth rate we achieved in 2017. In Global Talent Solutions, we continue to invest in higher-margin solutions that align with market demands and deliver higher GP growth rates. We are pleased with the strong GP and operating earnings growth delivered by GTS in 2017. As we look with confidence at the year ahead, we are committed to investing in the talent and technology that will drive our future. We are focusing on our strengths, accelerating our investments where we know we can win and leveraging technology to connect with talent like never before. Our acquisition of Teachers On Call and decision to exit health care exemplifies our commitment to focus and grow in the solutions that can make the biggest difference now and in the future. I would like to personally thank Kelly's teams for all their great work in 2017 and for connecting companies and talented people with excellence and integrity. <UNK> and I will now be happy to answer your questions. Yes. Let me start, and then <UNK> will fill in a lot of the details. So yes, as we're saying, the first quarter will be a little bit lower growth rate, and the growth rate will increase as we go throughout the year, primarily the result of customers that we've exited because of pricing discipline as we'd look at them and we look at the profitability of those accounts. And so as we've been doing that and we accelerated that pace in the fourth quarter of this year, you'll see a little bit of growth rate come down a bit in the first quarter, and then it will accelerate throughout the year. I'll let <UNK> talk about some of the details associated with that. Yes. I mean, to follow up on what <UNK> was saying on ---+ of course, I mean, pricing discipline is good for GP and value improvement, but we know that on the pure revenue side, might be visible especially at the beginning of the year. Knowing that these customers ---+ staffing customers are ---+ usually have low margin, we don't expect a big impact on GP side, or even less on a bottom line basis. I mean, to give you an idea, the value profile of these customers, when you look at their GP margin, it's about half of the GPs that we have overall of the GP margin or GP rate we have for GTS staffing. I think the other thing to consider is our divestiture of health care that is, of course ---+ is going to push a little bit our revenue down in the first ---+ at least at the beginning of the year. Looking back at the guidance, I mean, 5% to 6% growth in revenue, if you look at 2017, we have been overall at 5.7%. We expect to continue to improve our GP rates, as we have seen for the last 3 years, because we ---+ as <UNK> was explaining, we moved more and more to more added value type of solutions. And as we have seen in 2017, we see the pure volume dynamic accelerated ---+ or accelerating over time from Q1 to Q2 and Q3 and Q4. Yes. And <UNK>, I would say we continue to see good demand in the marketplace for our services, which is giving us the confidence to be able to reevaluate our portfolio and make sure that we're doing the things that make a big difference. Yes. <UNK>, as we've talked before, we don't give forward guidance on that, but what we have said is that we see that there still is significant room for Kelly to improve, and we expect every year into the future to continue to make progress on improving that number. There's a lot of room to move based on what we see out there. As we look at the portfolio, <UNK>, we will continue to evaluate it now and into the future. So there's nothing on the horizon right now, but we continue to look at the portfolio to see what we can do. And we'll also look at the other side of the transaction as well to say, should we deploy capital to continue to invest in the things that we're really good at as we expect that we want to continue to be a significant player in the areas where we have strength. And Teachers On Call was a perfect example of that. I think it's all about focus and making sure we are more selective on where we invest. Okay. Well, thank you, <UNK>, and thank you, everyone. Thank you.

2018_KELYA

2015

PKI

PKI #It's really more of a timing headwind. It's really not ---+ as far as our ability to capture those tenders, it's really a neutral. But just as far as how quickly those tenders are issued and approved, it does get slowed by this change. It's in our guidance, but it was basically continued hiring. We have a number of positions, both on the commercial side and the R&D side we are continuing to ramp. And we had forecasted that those would ramp a little bit quicker than they did. We still expect to fill those as we move, and we have been filling some of those thus far in the second quarter. So I think that will normalize for the year. And that additional cost is in our guidance. We had contemplated a portion of the pension. We're still looking at $300 million for the year, and we still feel confident in our ability to generate that type of cash flow. So I think that the overall metric hasn't changed. As I mentioned earlier, we have some work to do around inventory. I think that's going to be helpful. I think we've got plans and leadership in place to do that. So I think nothing has really changed overall. And the pension funding itself, we really like to stay around 18% ---+ 80% on a funding basis. And that just gets us back to that comfort zone on funding. We don't have any more mandatory payments until late 2017, early 2018, but we're just trying to make sure we are conservative in our estimates around pension costs. Okay. Let me try and hit a couple of those. So it was contemplated in the original guidance. This is something we had been in discussions with, with Waters, and hopeful that we could get it concluded before Pittcon, which we were. With regard to margins, we think this is going to be probably neutral maybe a little helpful to margins. And I think the reason for that is that, as I mentioned in the prepared comments, is from a gross margin perspective, it's maybe neutral or a little lower. But of course, we can eliminate a fair amount of operating expenses associated with that. So I talked about R&D that we spend today, also software engineers that we have that are associated with ---+ we have our own chromatography software. So we think from an operating margin perspective, it could be neutral to accretive to us, largely because of the operating expenses that we can reduce as a result of not having the support both the software and the production in R&D of the product. With regard to how much incremental revenue is to us versus Waters, it's really difficult for me to comment on Waters, so I will leave the help to them. And I don't know if it's $20 million for 2015 or $20 million annualized, but again, that's I will leave that to them. I think when we look at the opportunity in 2015, and again I emphasize I think we are excited about the opportunity, we just ---+ I guess we're being somewhat cautious and trying to build on a lot of revenue upside. Now as we get into 2016, I think we are quite excited about the opportunity from the standpoint as you point, we can go upstream a little bit particularly with the UPLC, and selling more of our GC that will be tied to Empower. But I think for 2015, right now, we don't see this as a huge incremental. Well, specifically on licenses, actually that was a headwind for us in the quarter. So, as I mentioned before, certainly around gross, around mix and the other items I think were the primary drivers. And actually one other item I didn't mention was OneSource. There was a fairly significant improvement in OneSource gross margins from the first quarter last year to first quarter this year. If you look at or listen to an earlier question around have we done anything. We really try to accelerate some of the initiatives around supply chain on the gross margin side and around the indirect spend so that we can reinvest back in R&D and selling. So I think we were particularly successful in the first quarter. Hopefully that will continue through the next three quarters, but those were the key drivers. I think we feel good from a global geography. If you look at the distribution of our business, clearly we've got strength in US and Europe and China. So I think this is going to be hopefully helpful business across the globe. So I don't think I would spike out any particular region or geographic area where I think this is going to be helpful. I think <UNK> alluded to a couple things. I think we've accelerated some of our actions around trying to get after indirect costs and supply chain. But I would say generally speaking, our approach has been let's continue to stay on plan relative to our investments, particularly in the areas of growth. I think as we've talked about research in the past, I think the thing to recognize is we've got a big radiochemical business that creates a fair amount of drag. As we get into the back half of the year, we did have a nice introduction of Opera Phenix in the back half, we're going to cycle up against that now. Hopefully we will continue to grow that. And then I would say the third area I would speak on when you're talking about research is Japan. We didn't talk a lot about Japan, but clearly when I think about the first quarter, the area that was ---+ although we were in our guidance range, it was at the bottom end of the guidance range. I would probably attribute that to a weaker Japan than we had expected. We would have forecasted Japan flattish for the first half, and it was down high single digits. And so we are a little cautious about how quickly that returns. I know the budget was recently approved here in April, but again, based on what we are seeing. Also, when we sell into Japan, that's probably one of the areas where the currency change is impacting us strategically. I'd say if I was going to spike out one area where the strength of the dollar has been somewhat challenging from a strategic or competitive perspective, I would say Japan. I think we can. One of the things we will be able to ---+ hopefully if we do that, it will be because we will get the traction on the OneSource informatics and pull through of the products. I think that will be clear. And then we continue to see good traction on the new products. So our goal is to get that up to single digits, mid-single digits. But I think for purposes of guidance, we continue to forecast it in the low single digits. We did not have any extra days in the quarter. I think we communicated on our January call that we would have extra days in the third quarter this year. But, from a pricing perspective, we continue to be able to get pricing specifically on the reagent consumables side. It becomes a little tougher on the instruments side. But I think overall, it was fairly modest in the first quarter, but we continue to try to get it wherever we can. OneSource was strong in the quarter. One of the things that clearly with the restatement of this answer is you get pretty good transparency into what OneSource was doing. But I think what you would see is that OneSource on a currency-neutral basis grew mid-teens. And so, clearly, we think we are continuing to do well there. We did have a couple wins from the standpoint of Gilead and Behringer. And so I think the competition continues to be tough and challenging. But I think we continue to do well. Well that is actually the natural next step, and we've created a team that actually start to generate some efforts around the direct side, which we do think that there is opportunity. And I think on the indirect side, we looked for a $10 million-plus savings year over year. I think we are well on track for that, hopefully we can exceed that. But we've got dedicated resources, dedicated purchasing people, and I think we've got an organization that's really rallied around this because it really does allow us to reinvest back. So I would say I feel as good if not better than I did going into the year on the indirect spend side. And I think the additional opportunity, as you mentioned, is the direct side, so hopefully we will have more to talk about that in the next couple of quarters. As I mentioned in my prepared remarks, we were very pleased with Perten. We think the acquisition is going well. Perten actually grew low double digits in the first quarter. So we think they're well on track to probably exceed the model we set out there. And I think <UNK> mentioned the fact that we expect to probably do a little bit better than the $0.04 accretion that we talked about. So I think things are going well with Perten, and I think we continue to see more opportunities with the synergies between what Perten does and what PerkinElmer does. So historically, they've been a significant player within the grain area we see rolling out in the things like edible oil and a number of other areas where the combined competencies of the two companies can be quite powerful in the marketplace. I think most of it, <UNK>, was more of a comp issue. I think, obviously it's a fairly choppy market, and I think second half they are seeing some headwinds. But overall, if you look broadly at the market, it's under some pressure, but I still think we feel like we can have positive growth for the year in that business. And I think the first quarter last year, <UNK>, they were flat to down slightly. Okay. I didn't hear what you said on the third one. With regard to the informatics strategy, I agree with you. We've talked about the fact that we've got to get a cloud product with regard to our electronic notebook, and quite frankly, most of what we do. We have a product right now out with the academic customers. We're working on one that was called in process with regard to pharma, so we continue to make progress on there. And to <UNK>'s point earlier, we continue to look to hire software engineers to accelerate. That's an area where I think we clearly want to accelerate our spending from an R&D and engineering standpoint because we continue to see significant opportunities within the informatics business. I would say both to drive more of historical PerkinElmer products, but also to build out and continue to expand the core informatics capabilities and business. So we will continue to invest on that. And last question was on the tomo product. I think that's a relatively small product for us, and we really haven't been pushing that, to tell you the truth. I would say the heavy lifting we did in 2013 and part of 2014 were probably the high watermarks. But I would say we're probably at ---+ if you want to do a relative, we're probably 70% of those types of levels. It's just a different area that we're focused on, whereas in 2013 and 2014, we're really looking at strengthening the footprint and rightsizing the organization. This is really looking at spend, and given we have the flexibility now to look at it on a corporate-wide basis, we see a lot of opportunities there. I think it's opportunity that we will see over the next certainly couple or three years as we start to move, as I mentioned earlier, into the direct side as well. I think we were always challenging ourselves from the standpoint of the portfolio and whether the rightful owner of assets. My preference would be is I'd like to buy before we sell. So if we can be successful with some sizable acquisitions, I think we might look at a couple product line prunings. But quite frankly, when we look across the portfolio, we think most of the things fit pretty well. But like I said, I don't know that I want to get smaller before I get bigger. So I think on the infectious disease side or the newborn ---+ infectious disease. Right. I would say that can be a significant business for us. Depending on the timeframe, clearly north of $100 million. I think what we've got for the remainder of the year is flat, and we may be even be actually a little negative in the second quarter quite frankly. So I would say low single and then flattish in the back half. I want to correct. I don't know that we said it was slowing. We might have said it was low single, but I think for at least the data we look at says that the US birthrate is stable, but it's the 1% to 2% range. I don't know that we're seeing anything significantly slowing. If we are talking specifically in the US, I think the opportunity to grow there is to expand the menu, and we've talked about skids in the past. We continue to see that being adopted by states. I think if you look out a year or two probably the next series of tests are probably around LSD. But I would say for the next couple quarters, I think the majority of the growth in newborn is going to come probably outside the US and probably specifically within newborn. One of the areas we are actually quite excited about, as I mentioned, the fact that we got the China FDA approval of our GSP, which is our automated analyzer. And I think what that does is two things for us. One is it, first of all, allows us to take the number of tests today that are done manually and put them on automated platform. And as we continue to get approval of the assays, I think it will accelerate the ramp of the menu. Second, it starts to really differentiate us from the competition. So I think we've talked about in the past that we have 70% market share in China, and in most cases what we are competing against is local homebrews or others that are doing manual. We don't think ---+ clearly there's nobody else who has a regulated or approved automated analyzer. And again, as more and more of China moves to an automated, which we think they will in order to get higher throughput, it provides us a huge differentiated advantage and allows us to ramp screening much quicker. I think it was $29 million. But ---+ $35 million. <UNK>, I'm not aware of any significant contracts that are coming up in 2015. So in any given year, we've probably got some that ---+ I think as you know, most of these are on a three-year cycle. So there may be some small ones, but I don't think there's anything significant. I think it's $50 million or so. No. Not that I'm aware of. They will gradually go through to Q2 in the balance of the year. It's really around hiring. At any point in time we're constantly hiring, but I guess it will be a slow ramp as we continue to bring the informatics and the R&D resources on board. <UNK>, let me correct. The $50 million I gave you was the human health. For PerkinElmer it's $80 million for Japan. Sorry about that. Yes. Sure. I think on the operating margin front, we felt all along that we should have a two handle in front of our operating margin. I think we had set a goal of getting to 20% plus in 2017. I think with the volatility of currency, it makes it a bit tougher. It's still our goal, but I would say in that timeframe or maybe just slightly longer, we still see our way to doing that. And I think we have plans in place, FX aside, that will help continue to improve our margins. So I don't think there's anything structural that would keep us from hitting those types of goals. Okay. Let me take the first one, then I'll give the second one to <UNK>. So clearly there is seasonality in Perten. To your point, when we look historically the first quarter is light. Second quarter starts to pick up a little bit, but their real strong quarter is the third quarter, and it ties to the harvest season. So clearly there is some cyclicality. And that's both on the revenue side and clearly on the profitability side as well. The only difference I think on the reconciliation, and I will double check for you, <UNK>, but there's some purchase accounting adjustments in the numbers as well as the revenues that roll out to that 3%. There could be some rounding in there, but I will double check that and get back to you. I think on the product basis, that did well this quarter, and our expectations are for it to continue to do well, as you mentioned. There will be ---+ there was some patents or some royalties that rolled off in the first quarter. There will continue to be some that will create a headwind in the second quarter, and then by the third-quarter, they're gone effectively. Right. Because we anniversary the patent for expiring in the middle of last year. So if you look at just the product, I think it continues to do well, high single digits. Great. First of all, thanks for all your questions. And in closing, let me just reiterate that we feel very good about the accomplishments in the first quarter and believe we're well positioned to deliver another strong year for PerkinElmer. So thanks for joining us for the call, and have a great evening.

2015_PKI

2016

LGND

LGND #Good afternoon. Thanks for joining us for our fourth quarter earnings call. 2015 was a great year for Ligand, and the fourth quarter closed strong with substantial achievements that will continue to drive the business. Ligand is now set up for a momentous 2016, with potentially five new product approvals from partners, advancements and expansion of the licensed portfolio, and significant projected revenue growth. Now in 2015 the revenues were solid, and they were driven by higher royalty revenues. The total underlying revenue for the products from which Ligand earns revenue from exceeded $1.1 billion in 2015. That is up from about $850 million in 2014, and is in line with our expectations. Now of note, Promacta and Kyprolis again hit all time high quarterly sales in Q4 2015, in the fourth quarter Novartis reported Promacta achieved $133 million in global sales, for a total of $465 million for the calendar year 2015. Promacta continues to grow with new territories coming online under Novartis' commercial leadership, and the product label being updated with expanded uses. On January 28th, Amgen announced that Kyprolis achieved $148 million in sales for Q4, which results in total sales for Kyprolis for the year as reported by Amgen of $512 million. Notably Kyprolis realized approvals in just the second half of 2015 for use in major new territories. And for expanded uses. As investors who follow Ligand Pharmaceuticals know very well, Kyprolis is an Amgen product that uses Captisol in its formulation. We have a license agreement with Amgen, but Ligand is not involved in the commercialization or development of the product. In our view the product is early in its growth cycle, and third party analysts project Kyprolis will achieve significant revenue growth over the next few years, as the product addresses a critical medical need associated with multiple myeloma. For Q4 our total revenues came in about $3 million lower than expected, due to the timing of Captisol orders. Now as we've discussed in the past, Captisol orders can be lumpy based on timing of customer orders. The Q4 orders were lower partly due to the deferred timing of anticipated product launches, and the material required to support the commercial products, and the timing and material needed for clinical trials. We anticipate making up some or all of the Captisol revenue not realized in Q4 during 2016. Overall, in 2015 Captisol revenues were nearly $28 million, close to the same level as the record year sales for Captisol set in 2014. And of note, Captisol commercial material sales for 2015 were $17.6 million, up 20% over 2014. Now looking at some pipeline updates, in 2015 positive Phase III data was reported from Spectrum for EVOMELA and Milenta for Bacstella, Sage announced positive data for SAGE-547, enabling them to initiate Phase III trials with the drug. And of note, 2016 is teed up for multiple new products to potentially be approved and launched this year, that could generate new revenues for Ligand. Specifically, we are looking at the May action date for EVOMELA, and in the second half of the year we may see approvals for Lundbeck's Carbella, Albegen's generic Voriconazole product, and pricing in Europe for Duavee. In addition to these potential upcoming items, Zydus Cadila launched in January a biosimilar of Herceptin in India under the name Vivitra. Economic rights to this program were acquired through the acquisition of the Selexis portfolio. Now we closed the OMT acquisition in the first week of January. OMT is the innovator of OmniAb, a platform to discover humanized antibodies from three types of transgenic animals. The deal is significant for Ligand, as it bolts on another important drug discovery technology, that will enable our partners to discover novel biologics as medical treatments. It brings a large portfolio of existing partnerships, and has the potential to meaningfully extend the patent timelines and period of royalty generation from these partnered programs. The deal is expected to be immediately accretive, and has the potential to add meaningfully to our financial performance going forward. So in summary, Ligand is a unique company, offering investors a business that is balanced between strong financial performance, driven by attractive top line growth projections and disciplined spending, and on the other hand, a large and diverse portfolio of technologies and partners. With that, I'll turn it over to <UNK> <UNK> to add some more color on some of our partnered programs. Thanks <UNK>. I'm going to start off this afternoon with some additional highlights on partnered program developments, and I'll also provide updates on our progress and plans around the recently acquired OmniAb technology, and I'll also touch on our continued focus on expanding on our Captisol technology. Our partners continue to make progress and invest substantially on programs in which Ligand has downstream economic rights. Our portfolio of partnered programs is now the largest that it has ever been, with more than 140 shots-on-goal and over 85 partners. We estimate our partners will spend approximately $2 billion developing Ligand-partnered programs this year. Last month at the JPMorgan conference in San Francisco, we saw presentations from more than 30 Ligand partners, providing pipeline updates and mapping out plans for programs that leverage Ligand technology or Intellectual Property. I'll highlight just a few examples briefly. Coherus and Baxalta recently announced that a pivotal study evaluating their biosimilar of etanercept, met its primary endpoint, and that they are progressing to filing this year. Marinus announced clinical advancements for a Captisol-enabled intravenous Ganaxolone, and our partners at Viking Therapeutics continue to make great progress and announced the start of a Phase II trial of their selective androgen for patients with hip fracture. Additionally our partners with already commercialized assets that are paying us royalties continued to invest in expanding indications and geographic footprint. Promacta, for instance, is being studied in a number of ongoing trials in cancer-related and other indications, and appears to have potential well beyond the three currently approved indications. Promacta's label was also expanded recently into pediatric ITP patients down to 1-year-olds, and Novartis continues to expand geography and report market share gains and significant growth. We noted also that in this quarterly earnings cycle Novartis announced that they determined that the Promacta support and ASPIRE clinical trials would not support registration in more advanced MDS AML patients. Novartis continues development work in a number of areas, and the recent events with support in ASPIRE, two trials that were originally designed by GSK before Novartis acquired the asset last year, don't change our overall views for the potential of the medicine, which Novartis continues to describe as having 'blockbuster potential. ' I'm going to talk about our technologies now, starting with the OmniAb platform that we recently acquired. While we are still early into integrating the technology and the two new team members into Ligand, we have been very pleased with OmniAb thus far. We've owned OmniAb for about a month, but have already entered into two new licensing deals, with Emergent BioSolutions, and Tizona Therapeutics, and see potential for more deals in the future. Our experience with the technology post-acquisition as we have been dialoging further with current partners and talking to new potential partners, has clearly validated what we determined during our diligence prior to buying OMT, namely that we believe we now have a technology that is among Best-in-Class in a number of ways. OmniAb allows our partners to produce fully human antibodies in a eukaryotic system with two species, both rat and mouse, and importantly can produce naturally optimized antibodies in a bi-specific format as well. While the OmniAb and Captisol technologies are very different from one another from a technical perspective, we see some interesting business parallels between the OmniAb business and the Captisol business that we acquired five years ago. It's clear to us that Captisol has benefited greatly from being affiliated with a larger corporate platform, and a business that is laser focused on licensing and partnerships, and we feel similarly about OmniAb. We continue to focus as much as ever on expanding Captisol, and I'll say that I'm quite proud of what our team has accomplished with the Captisol technology since the time we acquired it in 2011, and put it under the broader Ligand umbrella. Since Captisol has been in Ligand's hands, we have more than doubled the number of active Captisol license partners. We've invested and increased Captisol's manufacturing capacity by more than three times, have optimized our supply chain to reduce risk, and be positioned to meet our partners' needs. We've increased visibility and targeted outreach, and have therefore seen an increase in inbound annual sample requests by more than four times what they were when we acquired the Captisol technology, and we have expanded and strengthened our IP portfolio for Captisol substantially over the last five years. We continue to focus on adding new Captisol partnerships, and we're pleased to have added two new partners recently, Gilead and XTL Biopharma. Gilead is using Captisol with GS-5734, a novel nucleotized analog, in development for the potential treatment of Ebola virus disease. And I'll add that in December, we also completed a 3-Captisol enabled product deal with RODES Incorporated. I want to note briefly as became visible on the FDA website over the last few weeks, that a PARA4 certification was filed in January with respect to Merck's NOXAFIL IV product. The PARA4 was filed by Parr. It involves one of our US patents relating to Captisol, and we will provide updates on this when it's relevant and appropriate to do so. I will note also that filings such as these are not uncommon in our industry, and those that have been following Ligand and Captisol over the last few years, will recall we had a prior challenge to an individual Captisol patent in Europe few years ago, and we resolved that favorably. Given what we know, we don't see this as material to our outlook for Captisol. I'm going to conclude with a remark about our internal pipeline, specifically our Glucagon Receptor Antagonist, or GRA program. Our R&D team continues to make significant progress towards initiation of our Phase II study this year. We are currently initiating a clinical study that we will complete in advance of the Phase II, that is comparing the oral liquid formulation that we used in our Phase I's to a more traditional solid dosage form that we plan to use in our Phase II. For those that follow the program closely, I note that we recently received acceptance for oral presentation of our full GRA clinical data set at the Endo meeting in April, and will also be presenting additional GRA date at the 16th annual Levine Riggs Diabetes Research Symposium here in southern California next month. With that, I'll turn the call over to <UNK> <UNK> to discuss the financials. Thanks <UNK>. 2015 was our third consecutive full year of profitability as we continue to see growing total revenues coupled with relatively flat cash operating expenses, providing us tremendous earnings leverage to our P&L. As highlighted in our press release, we look for 2016 to continue this trend. We expect continued strong growth from Promacta and Kyprolis royalties, higher demand for Captisol sales, robust milestone achievement by partners, and the additional contribution to revenues and earnings from our newly-acquired OMT business. Turning to the Q4 financials, I'll review a few of the metrics from our earnings release issued earlier today. Total revenues for the quarter were $21.2 million, and included royalty revenue of $11.5 million, which was an increase of 23% versus the year-ago period, and largely reflected higher Promacta and Kyprolis royalties, despite the currency headwinds we discussed previously. Captisol material sales for Q4 were $7.2 million, which was about $3 million less than our expectations for the quarter. As <UNK> mentioned, we view this as largely reflecting the timing of orders, and not indicative of any underlying trend in the Captisol business. As we have said in the past, the business is lumpy, and the timing of commercial launches and trial starts, which the Captisol business is based on are estimates. Collaborative R&D revenues were $2.4 million versus $615,000 for the year-ago period, with this increase due to the timing of achievement of milestones. Beyond the mix of revenue we're very pleased with the earnings performance for the quarter and the year, coming in at the high end of our projected estimates due to lower expenses across the rest of the P&L. Costs of goods, R&D, and G&A were all better than expected, even after considering some larger one-off items, like expenses associated with the OMT transaction. Regarding gross margins, similar to Q3 we saw higher gross margins as compared to the prior period. Q4 was driven by a favorable mix of clinical versus commercial Captisol sales, and continued realization of the benefits of the volume of Captisol we purchased in 2015, as discussed at our Analyst Day in November. As we look forward to 2016 on this particular topic, I would like to remind you that our volume and mix can shift significantly from quarter to quarter and year to year, and we do not expect Q1 2016 margins to be as high as we experienced in Q4. On the cash expense side, our Q4 R&D and G&A expenses, cash operating expenses were better than expected, and flat compared to the year-ago period. For the quarter, we reported adjusted earnings from continued operations of $14.3 million, or $0.66 per diluted share, compared to $12.5 million, or $0.60 per diluted share for the same period last year. As previously mentioned, the primary driver of the increase was higher royalties from Promacta and Kyprolis milestones, and then combine that with a decrease in expenses. On the balance sheet we generated operating cash flow of $13.7 million during the quarter, an increase from the $10.3 million of operating cash flow in the year-ago period. We ended the quarter with just over $200 million of cash and investments. However, after closing OMT and making the related cash payments, our current cash balance is approximately $100 million. As detailed in our press release, we're increasing our full year 2016 guidance slightly. We now expect full year 2016 total revenues to be between $114 million and $118 million, and adjusted earnings per diluted share to be between $3.37 and $3.42. This compares with our previous 2016 guidance for total revenues to be between $113 million and $117 million, and adjusted earnings per diluted share to be between $3.33 and $3.38. As we look forward to 2016, I wanted to provide some more detail on the P&L and financial projections. We estimate that approximately 40% of the year's revenue and adjusted earnings will be booked in the first half of 2016. And our 2016 estimates result in revenue breakdown for the year that includes about 50% of revenue coming from royalties, 25% from Captisol, and 25% coming from license and milestone payments. Of the license and milestone revenue, I wanted to note that about $10 million is tied to product approvals that we expect in 2016. Gross margins are currently expected to be at the higher end of our previously disclosed 60% to 65% range, and cash operating expenses for the year should be between $26 million and $28 million. Lastly, just a reminder that our adjusted EBITDA per diluted---+ [audio break] OMT purchase price amortization non-cash pro rata net losses of Viking Therapeutics, fair value adjustments related to Viking Therapeutics convertible note receivable, mark to market adjustments for amounts owed to licensors, and excess convert shares covered by the bond hedge. We believe that our adjusted earnings more closely aligns to cash earnings per share. With that, I'll turn the call back over to the operator and open it up for questions. Yes, thanks <UNK>. So we don't break out the details of that obviously, but some of the orders that we talked about at the end of the quarter were some of the lower margin orders, so the mix was even more favorable than expected for Q4. And the cost improvements that we talked about in November at Analyst Day, and then that we benefited from the rest of the period certainly helped as well. And the comments about 2016 really are just that we have a predicted volume for 2015, and that really is what is driving us towards the higher end of the 65%, combined with the mix shift that we predict for 2016. But obviously both the volume and the mix shift for 2016 could change. Yes, typically you're right. And I think on the royalty side you'll see that. The milestones and license fee line will probably swing that closer to an even split this year. I think that's probably fair to say, largely driven by the EVOMELA milestone in May, if that comes through, obviously. Thank you, <UNK>. Yes. Well, appreciate the comment. The portfolio is very large in our world, it hasn't happened overnight. Every year we're adding more and more, in some ways I think we're getting better and just more efficient at managing the portfolio. But bringing on new systems and the like are also important, in terms of managing the data flow, milestone calendar, et cetera. Specific to the market environment, look, there's no doubt that the market is pretty dramatically changing over the last three to six months. <UNK>rally speaking we are a participant obviously in the macro markets, and the biotech markets more specifically, but two observations. One, because of the diversity of our programming, most of our programs are funded by very deep pocketed partners. They are highly committed financially and scientifically to the programs. And because of that, that commitment of partnerships, the diversity and the breadth of the portfolio, again we are really a unique company, as it relates to the otherwise volatility that individual issuers are experiencing. The second part of this beyond the diversity and the uniqueness of Ligand's story in that sense, the second part I want to relate to your question specifically about M&A. We are disciplined in deal-making. Not everything is a fit for us. We're disciplined in what we want to add. We're disciplined, we believe, in valuation. But what is unique about this is that, if property values across the board for technologies or companies come down, that does create opportunities for us. We don't give guidance as to deal expectations. But generally the integration of OMT has gone very well. I would say we are well ahead of schedule in terms of not only on-boarding our new team members, Roland Beaulieu and Brian Lundstrom. We have already announced a couple of deals. It really has gone very well. Once again we've proven that we can acquire and integrate smoothly. And yes, we are still looking to acquire or pursue other potential transactions. Yes. So it's a good question, at least for newer investors following Ligand. The business, today we're 21 employees. We have essentially been at that head count level, and I'll say the general administrative business has been largely unchanged for the last three or four years. We're showing, we're demonstrating we can scale up the business in revenue, expansion the portfolio et cetera without increasing costs. That's unique again compared to a commercial business that has to scale up sales force, manufacturing, marketing, and the like. The R&D expenditure has been relatively constant the last few years as well. And despite that we also have been productive with new discoveries, inventions, and licensing. Specifically the two areas that are driving costs up this year in 2016, one is the diabetes program. We're advancing to Phase II trials. We're excited about this molecule. It's a large field, and we believe we've got a path towards a fairly straightforward trial. So we are funding that. Secondly as you reference, OMT. We've brought on a couple of new staff members, but also we're funding some research projects around that to support new deal-making. So aside from those two new areas of investment that may add combined maybe $5 million of expenses this year, the rest of the cost structure is relatively steady state. Yes, <UNK>, thanks for the question. We've got few programs in addition to 6972 that we invest in, in a focused manner. The way we think about R&D investment is to drive partnering. We ask ourselves what key questions will drive partnering events. And we've got a few programs where we're investing in, one is an oral G-CSF program. We continue to do focus work on that towards a potential IND. We also look at Captisol programs. And this has been an area, I'll say Captisol-enabled products because this has been an area that's been quite fruitful for us, in doing very focused R&D work to build essentially a data set to drive partnering. This past year we focused a little bit on meloxicam, turned that into a partnership with RODES. We're also looking currently at a Captisol-enabled acetaminophen, another program where we think could drive potential partnering as well. Thanks, <UNK>. Yes, <UNK>, thanks, this is <UNK> <UNK>. Thanks for the question. I'll say the OmniAb technology, as I mentioned earlier, what we learned through the diligence, really, this is a technology among Best-in-Class. It's got fantastic properties that really enable partners to find the antibodies they're looking for, and do it in an efficient way. We've already seen just post the announcement, obviously partners that we're already connected to that may have an interest in OmniAb, just by putting it under a larger platform, much like with Captisol, that at the time we brought it with a private company, probably maybe not as visible as it could be under a larger umbrella. So we do feel like that will have an influence on the potential for the technology. And as <UNK> said, continuing to focus on investing in it to expand the technology and expand deal-making. Yes, absolutely a contribution of the OMT programs, adding on those OMT partners. <UNK>rally in the antibody space, when people are going after an antibody, it's a big endeavor and they're very focused on large markets, that's one of the things we really liked about the business and the programs. And that certainly has a contribution. Thanks for the question, <UNK>. Just to clarify, that the trial is in advanced MDS patients, it was a trial that was designed by GSK, taken over by Novartis. It's worth mentioning that last year in the spring conferences, positive data was announced in the low and intermediate risk MDS population, showing improved platelets, erythrocytes, neutrophil counts. I believe the increases were as much as 64% in patients, so good high-quality data. They continue to invest in that overarching umbrella of oncology-related thrombocytopenia, which includes a number of conditions. As I said, it doesn't change our outlook for the brand, or the outlook for where Novartis is taking it. They continue to highlight it, and we're cheering them on. Yes, thanks, <UNK>. It sounds like you're asking specifically about the earnings side. But just from a math standpoint, the revenue went up by about $1 million. That's about $0.05 a share. So we dropped that to the bottom line. Sure. Yes, thanks for the question, <UNK>. So as we talked about earlier, we expect to start the Phase II trial in the second half of the year. It's going to be in the later part of the year. We're doing some lead-up work obviously leading to that Phase II trial, that is going on now. But in general, roughly it's about an even spread as you look at the spending through the year that's dedicated specifically to the GRA program. And all of that work is focused on us having the Phase II data package in 2017 as we talked about in the summer, when we received the positive Phase Ib data. Good. Well, thank you. It looks like that completes the list of questioners. Really appreciate the turnout. We can see on our digital screen here it's the highest turnout we have had in a couple of years, I believe. Maybe we'll give credit to <UNK> <UNK>, our new CFO, rounding out his year, first full annual report. In any event, we really do support appreciate your support and interest in following Ligand. We're running a Company that is exciting. I mean the data flow on our partners is gratifying to see. We're pleased with how we're managing the business from a tight financial discipline, but at the same time we believe making shrewd investments, not only in developing our own technologies, but in terms of pursuing new technologies and companies to acquire and bolt on. We'll continue to do that. We have a busy calendar of conferences coming up this spring. Next month we'll be at the ROTH Conference on the West coast. We'll be at the Deutsche Bank Conference, which is in Denver in early March. And then we will also be at the Bank of America Conference in May. Hopefully we'll overlap with some of you there. Thanks for tuning in.

2016_LGND

2017

CBU

CBU #Thank you, Lynnette. Good morning, everyone, and thank you all for joining our Q1 conference call. It was a very busy quarter for our team beginning with the February close of the Northeast Retirement Services acquisition as well as final preparations for the Merchants transaction. We also continue to make excellent progress on our DFAST efforts and are well positioned for a dry run of stress testing in the second half of this year. With respect to operating results for the quarter, it was in line with our expectations. Loan demand was mixed and impacted seasonally to a greater extent this year compared to last year. Despite that, we had modest growth in our mortgage and auto lending portfolios and the decline in commercial was related entirely to the early prepayment of a single large credit. Deposit growth was very strong and depository-related fee income was up 7% year-over-year, a very good trend. We also saw revenue growth in our wealth management, benefits and insurance businesses. All-in, it was a very good start to 2017. The NRS acquisition was completed on February 3 with no integration issues. As we discussed previously, this business is located outside of Boston and is a nationally recognized provider of plan accounting, transfer agency, fund administration and trust and retirement plan services. This business continues to grow at a double-digit pace on both the top and bottom lines, and we expect will be $0.04 to $0.06 per share accretive to GAAP earnings in 2017. But more importantly, generate $0.16 to $0.18 per share of cash accretion, which is GAAP earnings adjusted for intangible amortization. That level of cash accretion will be meaningfully additive to our future dividend capacity. Integration efforts with Merchants Bank are in full swing and both our teams are working effectively towards a close. We received approval from the OCC and are awaiting final approval from the Federal Reserve, which we are hopeful comes before month end and which will allow for a mid-May close. Merchants continues to perform extremely well with Q1 diluted earnings per share excluding acquisition expenses and securities gains growing from $0.55 per share in 2016 to $0.63 per share in 2017 and total loans growing 8.5% year-over-year. We continue to expect Merchants will deliver very strong earnings per share accretion in the last half of 2017 exclusive of acquisition expenses. The past 12 months have been very productive for our company and for our shareholders. As you may recall, we discussed frequently in 2015 and 2016 the strategic investment of excess capital. We could not be more pleased with our partnerships with NRS and Merchants. They are very high-quality organizations with strong leadership and great teams, and we expect will deliver both growth and high returns on invested capital for our shareholders. I'm not sure how we could be much better positioned than we are at the moment and very much look forward to the remainder of 2017. <UNK>. Thank you, <UNK>, and good morning, everyone. As <UNK> noted, the first quarter of 2017 was another very solid operating quarter for us and as a reminder, included a partial quarter of the activities of the NRS acquisition that we completed in early February. Reported first quarter earnings were $0.57 per share, which included $0.03 a share of acquisition expenses, but also included over $0.04 a share of impact from the new accounting for share-based transaction. I'll first cover some updated balance sheet items. Average earning assets of $7.72 billion for the first quarter were up modestly from the fourth quarter and were 1.5% higher in the first quarter of 2016. Average loans for the quarter increased just $5 million, as seasonally expected. Respective organic growth in consumer mortgages and consumer installment products were partially offset by net declines in commercial balances, the result again of some unusually large unscheduled payoffs. Quarter end investment securities were in line with year-end 2016, a result of very modest portfolio cash flow reinvestment in the quarter. Average quarterly deposits were up $87 million in the first quarter of 2017 or 1.2%, also as seasonally expected. The first quarter of 2017 was again a continuation of the favorable overall asset quality results that we have come to expect. First quarter net charge-offs of $2.0 million or 0.16% of total loans were down $0.2 million from the fourth quarter of 2016, but up from the 10 basis points of loans we reported in the first quarter of last year. Nonperforming loans, comprised of both legacy and acquired loans, ended the first quarter at $22.9 million or 0.46% of total loans, 2 basis points lower than the ratio reported at the end of December and our lowest level in 8 years. Our quarter end March 2017 reserves for loan losses represent 1.01% of our legacy loans and 0.95% of total outstanding. Based on the most recent trailing 4 quarters results, our reserves represent over 6.5 years of annualized net charge-offs. Despite several reports of macro-level industry concerns, the first quarter net charge-off ratio in our auto lending portfolio was 42 basis points of average loans, consistent with the last 6 quarters average of 41 basis points. As of March 31, our investment portfolio stood at $2.79 billion and was comprised of $245 million of U.S. agency and agency-backed mortgage obligations or 9% of the total, $579 million of municipal bonds or 21%, and $1.91 billion of U.S. Treasury securities or 68% of the total. The remaining 2% was in corporate debt securities. The portfolio contained net unrealized gains of $45 million as of quarter end compared to a net unrealized gain of $133 million at the end of March of 2016 due to the meaningful move up in market interest rates during the last 12 months. Our capital levels in the first quarter of 2017 continue to be strong. The Tier 1 leverage ratio was 10.35% at quarter end and tangible equity to net tangible assets ended March at 8.91% after the closing of the NRS transaction. Tangible book value per share was $16.22 per share at March 31 and included $68.2 million of deferred tax liabilities generated from certain acquired intangibles or $1.48 per share. Shifting to the income statement, our reported net interest margin for the first quarter was 3.65%, which was down 11 basis points from the linked fourth quarter and 2 basis points lower than the first quarter of 2016. Consistent with historical results, the second and fourth quarters each year include our semiannual dividends from the Federal Reserve Bank of approximately $600,000, which added 3 basis points of net interest margin to fourth quarter results. In addition, we recorded a limited partnership dividend of approximately $1.2 million in the fourth quarter of 2016, which also added 6 basis points to quarterly net interest margin. Proactive and disciplined management of funding costs continue to have a positive effect on margin results as total deposit costs in the quarter remained at 10 basis points. As a reminder, the first quarter of 2016 had 1 more calendar day than the first quarter of 2017 and the fourth quarter of 2016 had 2 more. First quarter banking noninterest income was down $0.5 million on a linked-quarter basis as seasonally expected. Quarterly revenues from our benefits administration, wealth management and insurance businesses of $28.5 million were up 28% from the fourth quarter principally from the NRS transaction which closed in February. First quarter 2017 operating expenses of $71.9 million, which exclude acquisition expenses of $1.7 million were 40 ---+ sorry, $4.3 million above the linked fourth quarter and included a partial quarter of operating activities from the NRS transaction, including 2 months of significantly higher intangible amortization that resulted from the acquisition. NRS operating expenses and intangible amortization represented almost 85% of the increase in core operating expenses in the first quarter of 2017 compared to last year's first quarter. Certain occupancy-related costs were seasonally higher as we expected as were first quarter payroll-related taxes. We have continued to invest in improving our infrastructure and systems, including those around the requirements of DFAST as we embrace the impending $10 billion asset size threshold. Our effective tax rate in the first quarter of 2017 was 27.4% versus 33.4% in last year's fourth quarter and reflected the previously mentioned $2.2 million reduction in income tax expense related to the change in accounting for share-based transactions. Excluding that change, the core effective income tax rate would have been approximately 33.5% for the quarter. Looking forward, we continue to expect Federal Reserve Bank's semiannual dividends in the second and fourth quarters each year. Our first quarter 2017 net charge-off results were again manageable. And although we do not see signs of asset quality headwinds on the horizon, it would be difficult to expect improvements to current asset quality results. Our core operating net interest margin has remained in a fairly narrow band over the past several quarters, a range we would expect to operate in for at least the next few quarters, excluding the impact from the planned Merchants acquisition. Tax rate management for the foreseeable future will continue to be subject to successful reinvestment of our cash flows into high-quality municipal securities, which has been a challenge at times over the past couple years. In summary, we believe we remain very well positioned from both a capital and an operational perspective for the remainder of 2017 and look forward to the incremental opportunities of the pending Merchants Bancshares transaction. I'll now turn it back over to Lynnette to open the line for any questions. I'll take a shot at that. This is generally, Matt, and in terms of the trend line, it's been very consistent. So if you look at our consumer products, what you'll find is that new loan origination in the mortgage portfolio is modestly above the blended average of the portfolio yield for first quarter 2017. The same can be said for essentially the consumer installment products, where that's led by indirect auto for us and some direct installment loans that we do at the branch level. Again, new production modestly above where the blended yield of the portfolio was in total. On the commercial side, still seeing a little bit of differential there. In other words, new production is still modestly below where the blended portfolio is to the tune of about 35 basis points. So from a practical standpoint, we're not seeing any lift that we might be getting from rate increases in the market, like increases in prime or LIBOR, probably getting diminished a little bit by the fact that new production is still going on the books at a little bit lower than the blended average. If you remember from a disclosure standpoint for us, Matt, the combination of fixed-rate securities and a proportionately larger amount of fixed-rate assets in our lending portfolio, I think we were pretty clear and pretty transparent that we were not going to get a big lift out of the first handful of Fed rate adjustments and especially at a time when the yield curve is actually flattening. So I think that's sort of the steady as she goes answer, Matt, for us for probably the next 2 to 3 to 4 quarters. A little bit of color, Merchants brings to us a lower net operating margin, really a function of where their lending portfolio is concentrated, still very good instruments. But on a net basis, with a modestly higher cost of funds than we have, they're closer to a 3%-type outcome. So post-closing, you will see some natural dilution of our net interest margin, but still very productive net interest income generation on a net basis. Sure. The ---+ I'll start with the mortgage pipeline. It's actually down a little bit compared to where it was this time last year a couple of percentage points. That's it. We continue to see activity in our markets. It's slow growth. It's 3% kind of growth levels in mortgage, which it had been for quite some time given the characteristics of our slower growth markets. So we expect we'll have continued growth, but modest in the mortgage portfolio for the remainder of 2017. In the auto lending portfolio, we had a pretty good fourth ---+ first quarter given the more difficult seasonality this year compared to last year, still quite positive. One of the things we're seeing in the auto business is that our penetration rate has gone down so the percentage of deals that we get to look at that we would say yes to is declining because of credit. So we're starting to see some credit deterioration in the auto lending business. I also think if you look at some of the macro national metrics around auto lending sales, they're starting to come down and have now for a few months. The used auto valuations are starting to soften up. They're still pretty good, but they're starting to soften up a little bit as well. So I would expect that we will have ---+ I expect we will have growth in the auto lending portfolio this year also, but likely less growth than we've experienced in the last couple of years, which has been very strong. Lastly, on the commercial book, we, right now, the pipeline is bigger than it was last year. It's ---+ we had, as I said, a single substantial credit that paid off early in the first quarter, which essentially was the entirety of the decline in the commercial book. The pipeline is very strong though and so I would expect by year-end, we will also have reasonable growth in our commercial portfolio as well. No, that's what we are seeing flow through our business. On the application front, Matt. Right. So you're seeing some erosion in some scores or a little bit more challenging from a loan-to-value standpoint than maybe we incurred for most of last year. I think I made the comment, our losses in the first quarter were very much in line with the most recent 6 quarters. And loss rates in the high 30s or low 40s for us in indirect auto still makes that a very productive asset category. So nothing that we're looking at from a delinquency trend in the base of our own portfolio that gives us any cause for concern, but we're always very obviously aware because of the high proportion of loans that we do on the used side where used car values are. So we certainly don't want to get out in front of ourselves relative to loan-to-value characteristics. So, yes. Again, remembering that we're in a marketplace that really doesn't deliver any opportunities for public transportation, so the car business kind of stayed steady as she goes. And we've not ---+ we've made no changes to our underwriting standards at all. It's just the deterioration of fresh quality applications that resulted in slightly more modest growth. We also bumped up our rates a little bit in the first quarter, so this is another data point. Well, it's interesting, Matt. As you know, in the auto portfolio, nothing is ever a nonperforming asset because they never make it to that point. So by the time something is 90 days past due, we have an actionable outcome. So the amount of auto-related loans that are in an NPA category is very de minimis. So I would come back to say, for us, when you're thinking about nonperforming loans, you're kind of focused on residential mortgage activity and commercial activity, and I think that in my comments, on the commercial activity, our nonperforming loan balances are at like 8-year low levels. Residential mortgage is still manageable for us. It's still the majority of our nonperforming assets and we certainly think we're in good, protected collateral positions in our marketplace where the price of housing really has not accelerated much. But again, it's better than it was a couple years ago, but it still takes a long time to work through a mortgage workout, whether it's a foreclosure or some other type of remediation activity. So you do find yourself kind of accumulating multiple properties. And we don't seem to move them through the system very quickly. That being said, we don't think we've got really value erosion like that in any great form. I wouldn't expect that number to move up a lot, but it's at such a low number, Matt, small changes move the number. I think ---+ I would think it's logical to say it'd be really difficult to go below the levels we're at right now because I do think that is the concern, that certain types of products are not demanding the same robust outcomes they were at the auction 2 years ago or 1 year ago. But really, for us, Matt, it really becomes episodic. It's not like we have a national business where the national trend has to dominate. It tends to be more of a regional, local trend that dominates that outcome. And honestly, if new car sales start to go down a little bit, our dealer network actually starts to see some more activity on the used side. So not necessarily a bad thing. Again, with our proportion of almost 2/3 of our activity being on the used side. All right. Let me take a shot at that. I would ---+ let's start with the NRS activity. And which is, in the first 2 months that we owned it, we recorded $1.5 million or $750,000 a month of amortization. So we are using an accelerated amortization to essentially amortize about a $61 million core customer list intangible. So I think in the first year, you would essentially see kind of a $9 million run rate. Year 2, that backs off about $800,000, Matt. So in other words, year 2 of a ---+ I think we're going to get a 10-year life. Year 2 backs off to, say, $8.2 million, year 3 backs off to, say, $7.5 million. Then you reach a point where essentially it becomes in and around $5 million a year, maybe 4, 5 years into it and that stays for the balance of the 10-year period of time because essentially you reach back to kind of the straight-line outcome. So $1.5 million in the 2 months that we owned it. So kind of take a quarterly run rate of $2.25 million for the next 3 quarters at a minimum with a modest reduction going into early 2018. In terms of core operating expenses ex-Merchants, we'll get 1 more month of NRS revenue and 1 more month of NRS expenses in the second quarter that we didn't have in the first quarter, and that's a positive outcome. This is a very productive yielding business for us. And so it's a net benefit to us, even net of the amortization. Core operating expenses for us in the first quarter were actually very, very good in terms of expense control. But I would add that if you're working off the base of core first quarter expenses, making the adjustment for NRS, reminding you that we did have winter in 2017. I know this sounds pretty hokey, but clearly it's more expensive for us to plow the driveway and heat the buildings than it is to cut the grass and turn on the air conditioning. So in the expense per share, it's probably close to that. The first quarter also absorbs a lot of payroll tax expense because you've reset all of your withholding lines. That's closing in on for us $1 million differential between, say, a first fiscal quarter and a fourth fiscal quarter. That tapers down into the second quarter, but honestly the first quarter is really the robust one. Generally, for us, the first quarter is the lowest quarter of the year in terms of activity levels for deposit service fees. Our customers tend to use their debit cards less. They tend to have less transactions that allow us to have a service fee attached to that. They typically build back up to the tune of 3% to 5% more in the second, third and fourth quarter. That all seems to be in line with what we're seeing. You're going to really start to see some blending of those numbers, though, bringing on Merchants in the middle of the second quarter. So hopefully, we'll do a decent job at the end of the second quarter kind of giving you the Merchants characteristics. If you look at Merchants results that were published earlier in the week, they're off to a great start. They really had a nice first quarter. If you pull out their acquisition expenses, as <UNK> said, they're kind of running a core early mid-60s type earnings per share outcome. And from that perspective, again, they have some seasonal expenses for themselves that are higher in the first quarter. When we put out the modeling for Merchants, we said we would get to a low 20s percent type of a cost save outcome because we had no branch overlap with them. Some of that cost save has already been realized in Merchants' numbers because they had some people that are no longer with them already even before the transaction has closed. And they've grown a little faster than maybe we would have expected. So their results are good. So I think from a perspective relative to net operating expense line, that's a safe way to start, Matt, from a modeling standpoint. And I'm certainly happy to provide more color offline if necessary. It was, Chris. So seasonally, it's not unusual for us not to have loan growth in the first quarter. Actually, 5 of the last 7 years, we haven't been able to produce net loan growth in the first quarter. And we certainly had the extent of a full year outcome, as <UNK> was mentioning. But to answer your question directly, we had good deposit growth, we actually had good deposit growth, both on the core IPC side, retail side, as well as on the municipal side, which that we expect in the first quarter. Because of where we are in the rate cycle, Chris, we chose not to have heavy reinvestment certainly to investment securities in the first quarter. Also understanding that we will be expecting to close on Merchants in the second quarter, we clearly have a much lower loan-to-deposit ratio than the Merchants people, and they have certainly generated more loan growth on a proportional basis in their balance sheet than we have. So we didn't think it was ---+ yes, it's probably cost us a little bit on the margin line and the net interest income generation to not be fully invested, but we think that will probably pay some longer-term results when rates are a little higher and we'll have the opportunity for full reinvestment as well as using some of our lower-cost funds on Merchants to fund some of the Merchants growth. So yes, it did influence the outcome. It might have actually moved the margin 1 or 2 basis points, Chris, but generally, I wouldn't put that in there as a trend. We typically have been a non-borrower on the overnight side, overnight fund side in the first fiscal quarter. And by the end of the second quarter, we tend to be neutral or a slight overnight borrower. With the Merchants transaction, I would kind of expect that to actually work through our system as well. I would see us as a modest borrower post the transaction. Yes, I think neutral is a great ---+ I would say the cap rate would be neutral because I do think we'll be challenged to replace expiring investment cash flows with amounts equivalent to where they're coming off, Chris. So I think the challenge would be more on the securities side. I think you're right. I think whether it's the next 1 or next 2 Fed rate increases on the lending side, we'll get a little bit of lift out of that. We feel confident that we can manage our deposit costs extremely conservatively just given our loan-to-deposit ratio and the markets that we participate in. So I think neutral is a good way to think about it. Merchants has about a 3% operating net interest margin. We just reported 365 so the blended combined will actually come down, kind of no way around that from a math standpoint. But I don't think that we think that the Merchants margin is under attack either. I think it's at a level that's probably pretty sustainable for them and they probably actually have more positive inflection given a more proportionate commercial lending instruments as we do on a proportional basis. I think that's it for us. Thank you all for joining our Q1 conference call, and we will talk again next quarter. Thank you.

2017_CBU

2016

CSX

CSX #I guess the only directional comment that I would say is it looks like by the end of this year over a five-year period, we will have lost about $2 billion of coal revenue, and this year alone probably in excess of $0.5 billion. So based on what we are seeing right now, we think next year's decline will be significantly less than that. But beyond that, I really do think I want to stick with what I said earlier which is that we will have an update for you when we do the fourth-quarter earnings call both on a domestic side and on the export side. Because I think we will be in a much better position as we are in the process of gathering our information from the utilities the 40 to 50 utilities that we serve and I think that is the best way to give you guidance is to take the input that we get from them so that it is a lot more accurate than trying to speculate at this point. I think that is probably directional what I'm trying to say. I think that clearly the fact that natural gas prices have come up is helpful. It is still not at $3.50. Inventory levels are still above what they should be and we only have about 1 million tons or so that probably will come out next year in terms of plant closures. So that number is getting a lot smaller. But nevertheless, I think as we look at the crystal ball right now, it is probably a safe place to be. But as I said, a cold winter, natural gas prices move up above that $3.50 mark and that picture can change very rapidly. We have historically given you the break down into two categories that we have merchandise and intermodal combined and all in. I think we will stay at that level. Pricing is a critical part for us in order to continue to reinvest in the business and especially in intermodal since we put so much of our commercial capital toward intermodal. So being able to have the traffic at contributory levels, continue to push prices is a critical part of that strategy and we are getting positive pricing. Exactly where it is I think we will keep those buckets that we have in place today. Sure. So this is <UNK> again. We have seen the shift for an extended period of time that we see more of our international car coming in on the East Coast ports. We have not seen a significant change in the amount of volume coming in since the Panama Canal got widened. What we are seeing that there are some bigger vessels coming in but generally it is not necessarily adding capacity. They are reconfiguring the strengths, there are fewer vessels and we are also seeing some realignment with vessels that before came through the Suez Canal that is now coming through the Panama Canal instead. But so there is not significant change but the pattern has been there for a long time and we do expect that pattern to continue that we will see more and more of our volume come through the East Coast ports. I think on the inflation side, we have been in a little bit of a muted environment here in the last couple of years. When you start thinking about the inflation more broadly as well as GDP and IDP potentially going up, there could be a little bit of pressure on the upside. There is a little bit of a nuance in the second half of the year for labor and fringe inflation that you are picking up on which is wage accruals that came up starting in the middle of the year. So there is that in there rather than a sort of core external inflation run rate that is out there. But I think what you are hearing from us is regardless of what inflation is, we are going to do our level best to more than offset that with productivity. So I think having something in that 150, 175 range for inflation next year is probably a good starting place and we will offset that with productivity. It really is a supply and demand picture so if you have ELDs and other regulatory constraints put pressure on the supply side, clearly additional growth in the economy is also helpful and if you remove one or two of those, it is going to prolong the period where we see this excess capacity. So we are obviously following this very closely and hoping for an economy that picks up more than we currently expect, I think would be very helpful both in terms of our volume initiatives but also in terms of pricing. Thank you. We will see you all next month, next quarter.

2016_CSX

2017

LTC

LTC #It's something that our operators do talk about. That's something very cognizant on their radar screen, but they've been able to manage through changes in labor. And not to say what could happen going forward, but it's something that people are being very proactive about. They are trying to focus on reducing turnover cost and labor turnover to try to proactively manage that, so it's something that's definitely on the minds of our operating companies in our portfolio. I think it's always been challenging getting nurses. I mean, there's been talk ---+ I don't have a specific percentage, but it's something that as the economy increases and inflationary pressures are out there, it's something that's definitely something to be focused on. And this is one of the reasons why we underwrite to a 1.5 times coverage, because we feel on the skilled nursing portfolio, there's ebbs and flows and we want to make sure we have adequate security in our investments, and we think the 1.5 times coverage ratio on an underwriting basis provides for the ebbs and flows of the cash flow. The total debt piece is about 1.94 times on total debt, so we felt it to be very strong. Substantial equity had been invested in this portfolio and occupancy was very strong, in the low 90% range. So it seemed to be a very strong covered investment, and that's what got our interest was the security of this investment. Again, it was a unique opportunity. It was well secured and something that we had an opportunity to invest in on an off-market basis. And an operator we know. Correct. We haven't really gotten that far into it. We started hearing about the interest in independent living probably a couple of months ago. We generally, of course, were aware of independent living; it's not in our current wheelhouse, so we don't pay much attention to it. I think ---+ I don't believe that we're going to approach it like we did memory care, where we're going to look for a new company to incubate and that sort of thing. I'd like to work with some of our current operators to see if we can add independent-living components to assets that they are currently working with. We would look at doing independent acquisitions if they come across our desk. We'll let people know we're looking at independent. So in terms of the metrics, I can't say I would quote anything that LTC would underwrite right at the moment, but I think it's an area that we might be very interested in looking at. The return risk isn't going to be increased, I don't believe. The mezz, if you look at mezz as a more risky investment, it's currently going to be capped at $50 million and we'll reassess it when we get there. But we'll be underwriting at the same percentages. What we are adjusting for is if it's needed that we won't have specific increases in rent every year at 2.5%, so it's not that the rent is any more risky, it's the upside that might be a little more ---+ or a little less assured. However, the upside has an upside, where our 2.5% doesn't have an upside, other than the 2.5%. So I don't consider that LTC is going out on a limb, being risky. Relative to the additional investments that we'd be willing to make in a triple net lease, as <UNK> said, we've always done that, but some people who don't have triple net leases or haven't worked with us before I think would like to see something written in the lease that says we are committed to doing something like that. So I don't think that increases our risk at all. I think it just makes it clear that LTC is investing alongside the operator for the buildings and the operations. And we're not going to put the money in for free. It will be at a return for the additional investment. So I really don't see us becoming a more risky company. Thank you. We are not going to restructure our current leases. They all cover very well, so I think it would be more on leases going forward. So that's not maintenance CapEx because we're getting a return on it. Compared to commercial buildings or apartments that have recurring maintenance CapEx, we don't have that. Every CapEx dollar we put in gets a return on it. (multiple speakers) would be the same going forward. <UNK>'s just ---+ there's really not a change in strategy. It's just more than memorializing that in a document, in the lease document, versus negotiating it when the operator comes and asks if we want to participate in doing a renovation or an expansion. Absolutely. We're definitely seeing that. As I have been working closely with Doug Korey on our mezzanine financing program, obviously we interact a lot with banks in regard to those discussions and we're definitely seeing a pullback in the lending environment for construction projects. The percentages that are made available as far as loan to construction cost has gone down, so we're definitely seeing that. I think that's a positive for the industry to hopefully moderate some of the development that's taking place just as we go through the cycles. So we're seeing the same thing in the seniors' housing space. Absolutely. As options to seek construction financing become a little bit more limited, yes, I think it does. In discussions with operating companies, it gives us a seat at the table and allows us to be creative with them and flexible, so I think it does give us an opportunity to look at providing additional capital. We have not. Of the $50 million, I'd say 50% of that is skilled and 50% is AL, and about 50% represents development for that $50 million. And if you're talking about just a broader swath of what we are seeing in the market, I think deal flow has definitely come down. As I mentioned, there's a number of largest skilled nursing transactions we've seen, but more of what we've seen is just larger deals that just are not a strategic fit for our portfolio. That was just the one-time lease incentives that we gave during the quarter related to extensions, modifications, and leased-up properties. No. I guess to start at the last item, regarding lease coverage, where it ends, we have looked at trending on our portfolio on more recent quarters, and we're trending still, as we mentioned last quarter, in the 1.5 times range in our skilled portfolio. But the one unknown as we go into fourth quarter and there are adjustments that operators push through in the financials, that would be the one caveat going into fourth quarter, that that's typically the quarter in which you see adjustments happen. But barring any of those adjustments that are unexpected or large one-time adjustments, we continue to see that we're trending in a 1.5 times range for skilled nursing. You know, on the cap rate, we're probably in the 9% range on lease rates is where we have talked about. For the right opportunity to put something into an existing master lease, possibly a little bit below that, but that's where we're targeting right now for skilled nursing. On the private-pay side, we did put an offer in on a portfolio of private-pay properties earlier, towards the end of the quarter at a 7% rate, which we've been told that the winning bid was a sub-7% rate, but we don't know where that will end up. So we're somewhere in that 7% to 7.5% on the private-pay side. I don't see that happening. What we're looking at on the asset sale side is a moderated pace of selective assets. There's no large transactions we're looking at on selling assets, so I would not see us being a net seller. And in terms of deal flow, I remind everyone we sat at the same place this time last year with a very slow first quarter, not much in the pipeline, and we ended up doing $142 million of investments in 2016. So, I wouldn't read that much into the first-quarter sluggishness. I think after the transition of the Trump administration, there seems to be some type of understanding of where that's headed, where interest rates are headed. I think, then, people understand where the transaction market is and you'll hopefully see some deal flow following them. We haven't been approached on doing that, so, as I said in the past, we're open to almost anything in terms of the structure, other than RIDEA, but we haven't been approached, <UNK>. I'd be more than happy to talk to anybody about an opportunity in that area. I have no closing remarks, other than to thank you for your time and we look forward to talking to you about our first quarter. Have a great day.

2017_LTC

2016

DSW

DSW #This is <UNK>. What I would say is, we took the opportunity with our expense initiative to look at all dollars going out of the business, that included capital dollars. And one of the things that we found was that demand management on, when we ---+ when a store might call in, and ask for a carpet refresh or something like that, demand management is an area we've got lots of improvement in. And we think that there is an opportunity there to be a little more judicious with the dollars going out, and not necessarily having to respond with 100% kind of SWAT team with every type of request. So that's a big piece of where that's coming from. <UNK>, I would tell you, I think the other opportunity we have is, in the past three years we have invested a lot in our IT space for tools and technology. And as a team, as we step back and look at how effectively we're using the tools that have been built, we're not optimizing the things that have been built. And so, as an organization, we keep talking about focus, focus, focus. Let's leverage the things that have been built. Let's see that they're driving the kind of value that we wanted, before we start moving on to building the next thing. So whether that be in the omni space, whether that be in the digital space, there are some things there, where we know we can be more effective with the tools we've already built, before we start marching toward what's next. So that's a big chunk of what was that pullback in capital. I'm sorry, <UNK>, you cut out in the middle of that question. I couldn't, are you asking how much would be digital versus store. Is that what. Yes, we ---+ <UNK>, we don't get into that detail. We'll tell you again, out of the gate, we're happy with the results we have seen, but we don't want to share that kind of information at this point. For the second quarter, merch margin was down in the low single-digits, driven primarily with a decrease in IMU. But a big piece of the IMU was related to Ebuys operating at a very different model than ours does. So organic or anything not Ebuys was much more modest, but merch margin came in, in the low single-digits. Yes. So <UNK>, we mentioned this last quarter too, that we're actually, we're happy with the results we're getting. What we want to do is to build an experience in those stores, that can display the breadth of assortment that Designer Shoe Warehouse offers to the customer. And we're working to solve that through some new fixturing and other things. The piece of data that I'm really excited about is that, our team shared with us yesterday some of the results of ---+ we call it [charts in]. But the ability for those stores to act as a fulfillment center in that local market. And we're seeing double-digit percents of their total sales coming from digital demand meaning ---+ and orders being placed in that small market, and it's being fulfilled by that store. So again, it's just one more reason why we believe there is something there. We're going to continue to work on it, until we can nail it, and it actually either looks like Designer Shoe Warehouse in a small market, or it's got a different banner, or whatever it might be. There is an opportunity for us to be in those markets. We've got to figure it out, and we're working on that. Hi, <UNK>. The breakout of the $25 million really was across three different kind of buckets I would call it. So we had reorganizational alignments, where we looked across the business and tried to find where there were opportunities to increase efficiency in the way we work. So we're seeing roughly around half of that $25 million coming from that organizational realignment. The other two buckets, about evenly split are amongst how we buy things, non-merchandise for resale items, but services and products that we use here and in our stores. Buying that better and more strategically, trying to leverage scale, trying to make sure that we are always bidding things out in a strategic way. So, better buying. And then some infrastructure changes that either just are changing, because we've evolved the model, or we are looking at how we operate certain parts of the business. So amongst that, it's kind of how we break it out. From a timing standpoint, we aren't prepared to talk about 2017 at this point. What I would say is, it's probably going to come across pretty evenly, again given half of it was organizational realignment. That's a pretty even across the year save. So again, we're not ready to talk about 2017's guidance, but I think it's fair to say, it should be relatively even across there. Was there a last ---+ oh, and then to answer your question about, are we reinvesting the $25 million. Right now again, we are not commenting on 2017, but I think you'll see the vast bulk of this materialize in SG&A savings in 2017, not looking for reinvestment. And so, thanks everyone for your interest and support of DSW, and we look forward to reporting progress on the third quarter earnings call. Thank you.

2016_DSW

2016

WEN

WEN #Thanks, <UNK>. So we've provided this a couple of times in the past. So if you think about ---+ by the time we fast-forward to 2017, within our P&L you'll see $170 million of gross rental income across all elements that have generated and about $90 million of net rental income. What we have said for the second quarter ---+ our net effect on royalties, franchise fees, netting out rental income, rental expense in this whole lot year-over-year helped us with $11 million. So on the top line, the revenue side, so rental income was up $19 million year-over-year; but then you need to take into account in other operating expense, basically, the rental expenses ---+ you can net it off. The net impact is $11 million, as we have disclosed in the ---+. And those are deltas or absolutes within the quarter. So you will have to annualize that on our step up towards that ultimate number. You know, as Todd said previously, there's a lot of levers we're going to pull to get to this margin target. We have, obviously ---+ as we are finishing system optimization, we are kind of refocusing ourselves in terms of what's the next big thing we're going after. And obviously EBITDA margin of 38% to 40% is one of our key Company goals going forward for 2020. Do we have an internal revenue forecast for it. Yes, absolutely. Do we ---+ going to play with all of the components that Todd talked about, from rental income over SRS growth, restaurant development, international growth, and the like. Yes. Is it a little bit too early to talk for us. Do we feel ---+ are we feeling confident that 38% to 40% is the right target range for us. Absolutely. And that's reason why we kind of put it out. We are happy with the progress, where about 70% of our system is converted to all-Aloha. We are obviously on track to finish most of it by the end of the year, and we can't wait to have one point-of-sale system, because obviously for us as franchisor, we can give obviously much better ---+ get much better insights and analytics and help the whole system with findings and the likes. It is conversational ordering, so it does help the register operator to try to create a better customer experience because of that. It makes it easier to train as we have turnover in the restaurant. And most importantly, that does become the platform, when we get all of this ---+ the whole system ---+ on a common point-of-sale at the end of this year, to really go full bore on mobile order and mobile pay. Definitely first time we put this number out. You have us heard ---+ talked previously about an EBITDA margin of 35%-plus. We're basically fine-tuning a little bit what 35%-plus actually means. And we think 38% to 40% is the right target for us. As I said previously, it's a little bit too early for us to give kind of component-level guidance on how we get to it. So it's a little bit to a later date, when the time is right for us to do this. Think about early of next year. Some gut and some science along the way. So there's a lot of gut feel on what we're seeing and what we're hearing anecdotally in the restaurants. We do get a lot of customer feedback to make sure that we are appropriately priced across our whole menu. And the great news is, as you think about what we talked about on our brand health metric, worth what you pay, we're making great progress on that front. But that's really generated on the heels of the 4 for $4. And what we need to do is make sure that the customer feels that our core and LTO items are appropriately priced for the value that we are providing. And that's not just what you put into the food, but that's what you create as a total customer experience to make sure they feel good, that it's worth what they pay. Hi, <UNK>. Thanks for the question. No, we are very happy with the progress, as you know. We are now at about 26% of our system Image Activated. That compares to 24% at the end of the first quarter, so we're making steady progress. We are actually seeing a little bit more lift than what we previously contemplated. We previously said, like, well, 5%, there and thereabouts. We are actually seeing lifts more in the 6% range, which, obviously, from return point of view for our investors ---+ for our franchisees is much better from a return point of view. So <UNK>, so we're seeing the 5% to 6%s on the refresh option. To the lower investment option, which is about $300,000, that 5% to 6% is stronger, as GP said, than we had earlier anticipated. If we are doing a full reimage, we're still seeing those lifts of high single-digit to low double-digit. And if you look back after all of these classes on the sustainability, we do see great sustainability. So what we've done is brought in lapsed and new customers, created a new higher AUV base. And we continue to see those restaurants then grow in line with the rest of the system. So we have won their hearts and minds, and we continue to bring them back. And we've got enough long track record now going back to 2011, so we've got a lot of data on that. We'll provide more guidance as a subset of our complete guidance when we set up 2017. But if you look out at the beef markets and the recent performance, all the fundamentals look good. Input costs are down and continue to look like they'll be down for a little bit of time. The herds have been building. So it does look like, especially on the beef side, that we could start to be in a little more stable environment, notwithstanding some drought or something that's unforeseen at this point in time.

2016_WEN

2016

EBIX

EBIX #Thank you. Welcome everyone to Ebix, Inc. 's 2016 first-quarter earnings conference call. Joining me to discuss the quarter is Ebix's Chairman, President and CEO <UNK> <UNK> and Ebix's EVP and CFO <UNK> <UNK>. Following our remarks we will open up the call for your questions. Now let me quickly cover the Safe Harbor. Some of the statements that we make today are forward-looking including among others statements regarding Ebix future investments, our long-term growth and innovation, the expected performance of our businesses and our use of cash. These statements involve a number of risks and uncertainties that might cause actual results to differ materially from those projected in the forward-looking statements. Please note that these forward-looking statements reflect our opinions only as of the date of this presentation and we undertake no obligation to revise or publicly release the results of any revisions to these forward-looking statements in light of new information or future events. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements made today as contained in our SEC filings which list a more detailed description of the risk factors that may affect our results. Our press release announcing the Q1 2016 results was issued earlier this morning. The audio of this investor call is also being webcast live on the web on www.Ebix.com/webcast. You can look at Ebix's financials beyond what has been provided in this release on our website www.Ebix.com. The audio and the text transcript of this call will be available also on the investor homepage of the Ebix website after 4 p. m. Eastern Time today. Let's start by discussing results announced today. We are clearly excited by the momentum we have generated in our business both in terms of top line and operating margins. Revenue in Q1 2016 increased 11% from a year ago to $71.1 million. On a constant currency basis, Ebix's Q1 2016 revenue increased 14% year over year to $72.8 million as compared to $63.8 million in Q1 of 2015. Also on a constant currency basis, sequentially the revenue increased 2% to $71.4 million as compared to $70.2 million in Q4 2015. In Q1 2016 our exchange revenue continued to be the largest channel for Ebix, accounting for 70% of the Company's revenues. The year-over-year revenues increased as a result of revenue growth from life, annuity, underwriting, CRM, reinsurance, RCS and health e-commerce services in addition to revenue growth generated from the Company's 2015 acquisition of PB Systems partially offset by the drop in revenue from Australia, Brazil, New Zealand and Singapore, a result of the strengthening US dollar and decrease in revenues from the Company's pharmaceutical, health content and PMC carrier backend operations. Reinsurance exchange revenue grew 166%, underwriting exchange revenues grew 33%, annuity exchange revenues grew 11% year over year in Q1 of 2016 while life exchange revenues grew 10% in the same year-over-year period. RCS revenues were up 38% because of the acquisitions of PB Systems business in 2015. Ebix's presence in the life and annuity sector is presently annualized at approximately $117 million based on the Q1 2016 run rate. The year-over-year international revenues in Q1 of 2016 were impacted negatively by the $1.7 million because of the strengthening of the US dollar. In spite of Australia reporting one of its strongest top-line revenue performances ever in local currency its revenues year over year were down by approximately $0.9 million since the US dollar has appreciated 8% year over year as compared to the Australian dollar impacting Australian revenues adversely. The Company's health content revenues were down 13% year over year, affected by increased price competition in the sector and a decision of the Company to scale down its life sciences division as part of its focus on increased margins resulting in the life sciences group revenues being 40% lower year over year. I will now turn the call over to Bob. Thank you, <UNK>. Thanks to all on the call for your continued interest in and support of Ebix. At the outlet, let me say that we are very pleased with the Company's first-quarter 2016 financial results, operating performance and look forward to the rest of the year. Q1 2016 diluted earnings per share increased 30% to $0.67 as compared to $0.51 in the first quarter of 2015. For purposes of the Q1 2016 EPS calculation, there was an average of 33.3 million diluted shares outstanding during the quarter compared to 36 million shares in Q1 2015 and 33.9 million at the end of the year Q4 2015. As of today, the Company expects the diluted share count for Q2 2016 to be approximately 33 million shares. Q1 2016 operating margins rose to 35% as compared to 32% in Q1 2015. Operating income for the first quarter of 2016 rose 21% to $24.8 million as compared to $20.1 million in Q1 2015. We are pleased with the fact that the Company continues to deliver attractive top-line growth, cash flows and operating profits, resulting in robust revenue growth from the combined effect of our expanding operations and the businesses we've acquired, the consistent generation of cash flows from our ongoing operating activities and sustainable operating margins at 35% to 40% range. The Ebix consulting group had operating margins of approximately 24% which is consistent with this type of business while Ebix' other businesses generated strong margins of 37% which cumulatively in the aggregate resulted in a 35% operating margin for the Company for our first quarter of 2016. Cash provided by our operating activities rose $10.5 million in Q1 2016 compared to the use of cash from operations in the amount of $7.3 million a year ago in Q1 2015, wherein in Q1 2015 operating cash flows were negatively impacted by the one-time cash payment of $20.5 million as previously announced for the resolution of the IRS audit for the Company's income tax returns 2008 through 2013 and Q1 2016. Operating cash flows were negatively impacted by tax payments of around $7 million which included $6 million of advanced MAT minimum to alternative tax payments in connection with our operation in India. Cash, cash equivalents and short-term cash deposit balances were in the aggregate $71.3 million at the end of the quarter at March 31, 2016, up by some $13 million as compared to year-end 2015 just three months ago. In regards to initiatives targeted at enhancing shareholder value, Ebix utilized $17.2 million of cash in the first quarter while repurchasing 466,000 shares of our common stock for $14.8 million and paying $2.4 million for our quarterly dividend. The Company also used an additional $1 million for the continued buildout of our headquarters office campus facility in John's Creek, Georgia and the buildout of our new facilities in India in support of our expanding product development operations in that country. Subsequent to the quarter March 31 and through the current through May 6, 2016 currently the Company has repurchased an additional 217,487 shares of stock for cash consideration in the aggregate of $9.1 million. With these additional share repurchases to date the Company has now repurchased approximately [0.5 million] shares of its common stock for an aggregate amount of $138.8 million at an average price of $23.60 since August 1, 2014 when the Company had announced that the Board of Directors' decision to repurchase the stock consistently over the next few years. We expect to continue the share buyback utilizing our operating cash flow from the business as market and business conditions warrant. After spending a cumulative $18.2 million on share buybacks, dividends and CapEx during the quarter, as of March 31, 2016 the Company still had access to approximately $85 million of readily available cash from our financing facility with a syndicated bank group combined with our cash on hand to actively support continued organic and accretive growth of the Company, to expand our existing operations as needed to meet the demand for our products and services. Furthermore, our balance sheet is healthy and our Company's financial position remains strong and solid with a current ratio of 3.23 our working capital, short-term liquidity position of $96.2 million, a debt leverage ratio of 2.14, net debt to equity ratio of only 0.54 as of the end of the quarter at March 31. We currently anticipate that the Company will pay its next quarterly cash dividend of $0.075 per common share to be payable on or about June 15 to shareholders of record on or about May 31, 2016. Finally, the Company's Form 10-Q will be filed this coming afternoon on Tuesday, May 10. I will now pass the call on to Rob. Thanks, Bob. Good morning. Now that Bob and <UNK> have already discussed the quarter in numerical terms I will focus my talk on the qualitative aspects of the business and the aspirational goals that we have today for Ebix. I'm pleased with the Q1 2016 results and the fact that these results are close to the aspirational goal that I set for Ebix one year back. While announcing the revenues of $63.8 million during Q1 of 2015 investor call I talked about and aspirational run rate of $75 million revenues in the first quarter of 2016. I'm pleased that we got pretty close to that goal with the Ebix Q1 2016 revenues being $72.8 million on a constant currency basis. We did that while announcing large deals and having a large deal pipeline like never before. Q1 2016 EBITDA plus stock-based compensation added up to $28.5 million approximately that if annualized translates to approximately $114 million. I'm pleased with that trend of reporting EBITDA consistently higher than $25 million in order. Our Q1 2016 diluted EPS of $0.67 is a record number for the Company. Between our accretive acquisitions, new deal pipeline and our stock buybacks we are hopeful that we can keep it moving in the right direction. <UNK> talked about the fact of foreign exchange on our Q1 2016 results. Over the last three years the US dollar has kept strengthening and that has obviously not helped Ebix. It's reassuring that in spite of that our results have continued to improve. In recent times, we announced a number of large deals in India and London that along with the strong momentum in a number of areas has helped Q1 results. During his talk <UNK> talked about the drivers behind this top-line growth in the first-quarter 2016. The area of life exchanges had been a consistent growth driver of top line through the year 2015. That trend has continued in the first quarter of 2016 with many large players like Nationwide Insurance, Desjardins, and Merrill Lynch deciding to deploy our enterprise life exchange platform. We expect to continue on the momentum that we have built in this area as we are in the midst of many such deals at present. We signed new contracts with clients in the first quarter of 2016 in every facet of our business including RCS, broker systems, health, e-commerce and health content exchanges, underwriting exchanges and new day exchanges backend systems consulting contracts, etc. Our Q4 2015 results included a $2.5 million revenue bounce in the area of continuing education for health. That increase in the fourth quarter is traditional every year as the doctors tend to claim tax deductibility on continuing education. And accordingly the fourth quarter tends to be strong in terms of revenues. In the first quarter of 2016, we had to make up for that $2.5 million revenue drop from Q4 2015 in continuing education. I'm pleased that not only did we make up for that drop but sequentially the revenue increased 2% to $71.4 million as compared to $70.2 million in Q4 of 2015 on a constant currency basis. It means that in the first-quarter 2016 we reported new revenues adding up to $3.7 million as compared to fourth quarter of 2015. Our deal pipeline is strong with Ebix being a contender for many transformational deals. I'd prefer not to provide any details about these prospective deals at this time for competitive reasons. While there are no guarantees that any of these deals will come through, yet if secured these deals with make our previously announced large deals look rather small in comparison. We are putting in our best efforts to secure these contracts and will announce them formally if and when any of these deals are closed. We have a number of strategic opportunities ahead of us. Let me talk about a few here. The London exchange deal will create a competitive dynamic across the world in countries like Dubai, Bermuda, United States and Singapore. With this exchange London has set their efficiency, contract certainty, errors and omissions, audit trails and collaboration benchmarks for the insurance industry that none of these countries can compete with. As the only player worldwide who has the expertise, functionality and technology expertise in terms of building such enterprise subscription exchanges Ebix is uniquely positioned for quite a few possibilities in these world markets. Our intent is to be a key player, helping London's Marketing Association and Lloyd's, LME and Lloyd's, in project POM, the London modernization program, and work closely with them to make the initiative a huge success. We expect many new opportunities to emerge out of that close coordination driven by Ebix PBL exchange being at the center of project POM. As Lloyd's and the London insurance markets drive paper out of the process Ebix intends to be a key player helping them make that transformation. We are looking at the area of health PPA as a strategic area to target. This niche BPO industry traditionally has low margins and is labor intensive. With our recent JV with IHC we have now established world-class backend health processing operations in India that allows us to potentially buy our partner with US-based TPAs and take their backend processing operations to India and in the process create a recurring revenue line and bottom line for Ebix. We are looking to enter two new areas of business through acquisitions. The area of hospital management systems has intrigued us for long as we believe that it is a missing spoke in the health wheel for us. A SaaS-based on-demand hospital system service could provide us an even stronger end-to-end solution for the health market. We intend to make the right acquisition in this area to inherit a strong system. Another area that we are looking at deeply is the area of on-demand e-learning as it is a natural progression from the A. D. A. M. line of content education based products and services that we have today. The area has rich possibilities in terms of recurring revenues and operating margins. There are some very interesting and large possibilities in this area and we intend to pursue acquisitions as a means of getting there. Our acquisition pipeline is strong and we have many prospective targets at various stages of discussions. We'll keep you updated as and when and if we acquire any of these target companies. For now we will not discuss their associated geographies for competitive reasons. We like to pay for companies in cash rather than using the Ebix stock as an instrument. We're a committed buyer of our own stock as evidenced by the approximately 5.9 million shares repurchased by the Company for $138.8 million since August 1, 2014 when we announced the Ebix Board's decision to repurchase its own stock consistently over the next few years. Since January 1, 2016, the Company has repurchased 683,487 shares of Ebix stock for $23.9 million. Thus given a choice we don't intend to be using our stock to make acquisitions unless it is very strategic and important for us to do so. If we do not have all the cash acquired to fund the acquisition then we will look to the banks to fund the acquisition. However, the key requirement for us is to find that low interest rate as we are not willing to risk our fiscal successes by taking a high risk debt instrument. We are very encouraged by the support provided by our lead bankers in expanding the banking syndicate to address larger bank lines for Ebix. Again we'll keep you informed in this direction. That brings me to the two topics that investors have kept quizzing me about: one, a new aspirational goals for Ebix and two, the possibility of a stock split. As regards the aspirational goal for Ebix I would like the Company to aspire to be at an annualized revenue run rate of $350 million by the first quarter of 2017. I would like to get there while keeping our operating margin percentages intact. Let me emphasize that this by no means is guidance for the future but an aspiration that we will strive for. This goal will be aided by all the growth initiative that I discussed as also by our acquisition strategy. Now let me talk about the topic of stock split. We're a firm believer in increasing our stock liquidity and also a believer in the fundamentals of our Company. We have done two 3 for 1 stock splits in the past with successful result both qualitatively and quantitatively. Thus, the possibility of a stock split cannot be ruled out. More on that later. That brings me to the end of my talk. I will now hand it over to the operator to open it up for questions. Thank you. <UNK>, that's a great question incidentally. The competitive dynamic is huge. So basically what it means is that London now has a huge edge over countries like Dubai and Singapore and US and so on. Let's put it this way, that we are at advanced discussion stage with a few of these countries. Again we would like to see a few of these deals happen this year. Again the size of the deals will vary upon the size of the country. So I think that's just hold onto that discussion for now and see where we end up there. So I would be disappointed if we haven't gotten success in this year on that front. Well, first of all, the hospital management system and e-learning are very specific areas. We are going to enter specific geographies first rather than target the whole world with these two systems. So our intent is to attack certain geographies where the competition is going is different. So I can't really go into details right now simply because then I would have to talk about that particular geography and I don't think that it would be fair at this time for me to be able to talk about it. But to give you a simpler answer is that we're not looking at the whole landscape initially when we target these two areas. We're going to be looking at specific geographies because we think in those geographies there is a huge opportunity and that's what we are first going to focus on and then slowly as we normally do we will roll it out across the world. But initially our competition is going to be limited to that particular geography, that particular country. Well mainly we went through the normal process of when you move something offshore we are going to take a bit of time to get it set up in the right fashion. I think we've done quite well with moving that knowledge base over with trying to ---+ we've actually created backend sales operations out of India to support our US operations and so on. So we have moved various levels out there. So we feel our deal pipeline is quite strong. I think when you bring the price element down in terms of your cost of building those products you get a little bit more price competitive. And that's what we wanted to do to ensure that we are competitive and in the process we don't give up on our margins. So that we could do it with respect to India. So we are in the midst of large deals, quite a big chunk of deals. We've also been creating end-to-end straight-through processing products in the content arena. So our goal now is we're targeting at times addressing providing an end-to-end kind of a solution from a perspective of health and wellness, a perspective of providing a solution whereby you can integrate health e-commerce with health content and provide everything ranging from consumer knowledge, consumer education, patient education, doctor education, monitoring of hospitals by a government, governments providing that education and so on. And telemedicine inserted all that in between. So when you look at that end-to-end solutions that gives us a little bit of an edge. So there has been a process for us to do all of that, creating that integration, creating that product set. So we feel good about it. We made some key hires in this area, in the area of health content which has really helped us. So we feel good about it now. So <UNK>, I really don't focus on gross margins. That's a simple honest answer to you simply because gross margins are a factor of what industry we're targeting. It depends on if you're in a consulting industry it's going to be very different from anything related to an exchange. So coming back to it, our focus always is the operating margins. So in terms of operating margins, what I would like to do ---+ I've already defined an aspirational goal ---+ I'd like to get there with 35% kind of operating margins intact. If we are keeping that kind of margin number and we have grown our revenue that substantially that I talked about I would be happy and that's going to be our aspirational goal. <UNK>, our deal pipeline is extremely strong right now in terms of especially the large and the so-called transformational deals. What has really happened over the last one and a half years is that we have really opened up the large deals. We're really a player in that market. So there are two kinds of deals one is deals that are in the range of ---+ you sign a three- or five-year contract which virtually is in the $50 million, $60 million range. There is another range of contracts where you could do $100 million deal a year. That in my definition is clearly a transformational deal and if it's more than $100 million then even better. But having said that, we have quite a good pipeline of such deals. So in such deals what are you trying to do. You are trying to provide end-to-end solutions and we're trying to make sure that as we provide this we won't know the recurring revenue line. That's our key. We are looking for recurring revenue line. We are looking for a decent operating margins and that's been our key. So when I'm not at liberty to talk more than that right now simply because I would be revealing what those deals are and where they are and which geography and so on. And that will hurt us at this point because we are at various stages of discussions on each of these deals and I feel if and when we are able to get these deals done we're absolutely going to announce them. Yes, this is Bob, we expect our DSOs to improve significantly in the second quarter. We're already seeing in the early part of second quarter significant improvement in cash collections. So we think that this is just a temporary phenomenon and we will get back into mid to low 60s very quickly. So <UNK>, to answer your question on the ---+ was it related to, so to give you a simple example, in the quarter, in the first quarter we also signed some deals where basically the way our payment terms were linked we haven't collected the money yet, some of the larger deals. So that's partly what has pushed the DSO a bit. Great, since we don't have any more questions I'm going to close the call. And thanks everyone and we look forward to speaking to you on the second-quarter investor call. Thank you. And with that we will end the call.

2016_EBIX

2016

RRGB

RRGB #I mean, would say that our relative performance generally improved as we moved through the quarter, but it was volatile. I mean, I think overall, when you look at the industry trends and our absolute performance, it was, it was pretty volatile as we moved through the quarter. And my personal conclusion is, is the consumer continues to remain skittish, and very careful about how they're spending their money. And whether it's going more towards rent or healthcare costs or savings, whatever it is, you're continuing to see them focus on value. Which means we've got to be giving ---+ continue to give a great experience on the operating front, make sure we've got Ramen burger, and really great products that resonate with them coming in. Yes. And I just want to reinforce what <UNK> is saying, on the operating front, that is so much a part of the value. It's not just the price you pay. And we have traditionally, and continue to want to reinforce that we provide a unique experience for families and kids, now for adults in the bar. And with Carin on board, we're really looking forward to reinvigorating our work to make sure that we stay a unique dining experience for those guests. Thank you, Hannah. We appreciate everybody's attention this morning, and look forward to talking to you here in the next quarter. Have a great day.

2016_RRGB

2016

CMG

CMG #Sure, <UNK>. Thanks for the question. So, this chorizo that <UNK> speaks of is really delicious. It's a chicken and pork spicy sausage. We cook this on our plancha. It has lots of little crispy bits, so it has nice spice and really good texture, and as <UNK> said, very, very popular with the customers that had it in a couple of our test markets. When we think about adding something to Chipotle we are very, very mindful of our overall efficiencies, efficiencies in the kitchen, efficiencies in cook time, efficiencies in throughput, and ease of ordering for the customer. Chorizo fits into this system really, really well in that we have space for it on the main line, and it doesn't detract from throughput. It's also very easy to rotate onto the plancha to grill between chicken and steak. The cook time and the method of grilling isn't much different from the chicken and steak already on the plancha. So, operationally, I would say it's quite easy to execute. But I think it's very exciting in that it does add a new flavor and texture to the meat offerings, and it pairs well with our existing offerings, our salsas and guacamole and cheese and what have you. So, again, very popular and I'm excited see how this works. I think, generally, the changes have gone very, very well. I won't say all of them have been met with immediate approval. An example of that is we went over to a lettuce that was pre-shredded at a central kitchen in order to be able to be absolutely certain that all of the interventions were in place to make certain that that was food safe. And that lettuce I think people found to be a degradation in quality of the stuff that was cut in the restaurants by our teams who, when our restaurants teams do it, they are able to cut it to the exact size they want. They are able to really make sure that the presentation is exactly what they want, and they can assure the quality of the lettuce. This was a product which is really just completely prepared in central kitchens. So what we've been able to do, and what we will be rolling out soon, we've been able to find a way to have this made completely safe by interventions in a central kitchen, but yet still have the entire head of lettuce brought to the restaurant, and give our crews in the restaurant the latitude to be able to cut that properly and assure the quality of that again. So, we've just been tasting that the last few days in a few of our restaurants here in Denver, and it's delicious. It's wonderful. So we are going to be moving back to a lettuce that I think everyone else is very satisfied with. The rest of the changes have been met very positively. The soup eating of the steak is delicious. We've actually had a reduction in the number of customer complaints. With steak, there's always been over time some complaints, because steak contains naturally some chewy bits and whatnot because we use real steak. And with the sous vide, the technique has allowed us to break down some of those aspects of the steak through kind of a long breathing process in the sous vide process which makes the steak juicier and more tender and more delicious. So actually, we are very, very pleased with how that's going, and our customers seem to be very pleased as well. The blanching of the ingredients has had ---+ essentially has had no effect whatsoever on the eating quality of ingredients, but it's a wonderful step to ensure, again, food safety and the elimination of potential harmful pathogens or what have you. So, our crews in the restaurants have done an awesome job implementing that new procedure and have found it quite easy, and they are very proud of it because it makes them ---+ it gives them an even higher level of confidence in the food we are serving. And again, no degradation whatsoever in what our customers are receiving. So we are feeling really, really good about the quality of our food in the restaurants and I think it is actually better than ever, I think, subject to that one change in lettuce. We felt that the bell peppers we were bringing in presliced from a central kitchen were good, but maybe not quite as good as the ones cut in our restaurants. So what we've been able to do is go back to blanching the bell peppers such that they can be cut by a knife by the skilled hands of our folks in the restaurant and, again, have brought that back to the level of quality it was before but, again, with the blanching to assure food safety of that ingredient. So, we are very proud of everything we've done. We think that the intent focus on our food that's been caused by looking at every single ingredient, it's caused our teams in the restaurants to also look at every single ingredient very, very critically and make certain that everything is as good as it can be. So I think our food is more delicious than ever, with that one sort of asterisk that the lettuce was I think not as good for a time, but we are returning that to where it was, and I think we are very, very proud of where our food stands now. Thanks for asking. I think the short answer is, no, we are not preparing for a slowdown of our development, and I think you'll find that we will be able to achieve very easily the guidance that we have given in terms of number of restaurant openings. But we do have a very strong pipeline coming in from our real estate teams who have been doing an excellent job finding a lot of terrific sites. But the reason for my comments was that, as we've had a slowdown of sales overall that you are all aware of and the numbers that <UNK> spoke about with a slowdown of nationwide sales as a result of what happened in late 2015, so too has that slowdown affected our new store openings. But it's not ---+ it's affected them disproportionately. What I mean is that most of our new restaurant openings have still held the same percentage that they historically have held versus our trailing 12-month sales of our existing stores. But the exception is that, in the new markets and developing markets, in those markets, there's been I think even more softening of their sales than there has been nationally, say. So the delta between a new store opening in a developing or new market has been slightly greater than when compared to the rest of our restaurant average daily sales. So the delta of new and developing markets is a little bit bigger than the delta between proven and established markets. And so that percentage of all of our newer store openings though is quite low. It's about 13% of our new store openings are in new markets or developing markets. And because those sales have been correspondingly a little more soft than the rest of openings, we're going to be taking just a much closer look at those and be more nitpicking as to which ones we do deals on. So, it's going to be a very slight effect in terms of number of openings, and we have such a strong pipeline that we don't think it's going to affect the overall numbers that we've shared with you that we plan to open, but it's going to give us I think the ability to be a little more discerning on a few of our locations and just make sure that any ones for which the development cost is perhaps a little bit high or the rent structure isn't quite advantageous, we might walk away from some of those deals that we might have pursued a year ago today for example just to be responsible with our investments. I had mentioned it would be in the 3% to 4% range. Now, keep in mind our sales during the second and third quarters are higher, so you're talking about a 3% to 4% figure on top of higher sales. So, it will be meaningfully reduced, and what you'll see is the reduction is going to be in the promo. We hit promo, as you know, very, very heavy. We gave away about 6 million entrees during the first quarter, and we did that intentionally. We wanted to hit that really hard. We wanted to signal that the event was over. We signaled that within a week or two after the CDC called their investigation over. And so we did that intentionally. Going forward, as <UNK> mentioned, we're going to be transitioning to more BOGOs, which have a lesser impact on our promo line. Offsetting that, we are actually going spend more on advertising during the second quarter for sure, probably third quarter. But overall, I would expect that to be in the 3% to 4% range. Now, that's still higher than historical because if you look at second quarter and third quarter of last year, I think that's right around double or a little more than double what we did as a percentage of sales last year. Listen, we are not locked to a number at all. That just happens to be the number based on the next wave of the strategy. We're moving into more brand advertising, moving into more of the BOGOs. That just happens to be the number. We are prepared to do what we need to do to continue to invite customers in, to continue to give them a great experience. And so if we needed to invest more, if we thought that would be a good investment, we would certainly make it, but right now, we think it's going to be in that 3% to 4% range. That's correct. Yes, it is because we saw early March was down 22%. Then we had the news coming out of Boston. Our sales spiked up to ---+ or spiked down to a ---+ down 27% for a couple of weeks near the end of the month. And you've got a lot of choppiness with Easter this year at the end of March, and then you compare it to Easter last year and early April, but we are starting to see recovery back into that kind of low to mid 20% range at the end of March. Our sales dollars, we moved from the end of March to April, got better. They improved by in that 3% to 4% range, but we are comparing to seasonal sales that in the past and last year kind of followed the pattern of increasing more like 6% to 7% range. So our dollars moved up from March to April, from late March which, is in that low to mid 20% range. Our dollars from that range moved up in April but, because of the tougher comparison, our comps did retrench a little bit and they moved back to 26%. Now, in the last week, we've seen a number of days in a row, it's not a pattern yet, but we've seen a number of days in a row that have gotten back into that mid to low 20% range. And so we're hoping that maybe seasonality just is showing up a little bit late where we're going to get that bump. We do know that there was some cold and some wet weather throughout parts of the country early in April. So we will see whether we're going to get this up or not. But our comps did get worse but our sales dollars did continue to move up from March to April. I would not ---+ listen, it's so hard to predict because I gave almost excruciating detail about the sales during the quarter and then in April just to give you an idea of how volatile it is, how tough it is for us to see is there recovery taking hold and then it gets interrupted by the news out of Boston. So I wanted to give you as much detail as possible. So with all that volatility, it's hard to predict. But I would not expect a loss in the second quarter. I would expect, because we have fewer of the one-time costs, because I would expect to see some recovery, because second quarter is seasonally a better quarter for us compared to the first quarter, I would not expect to see a loss in the second quarter. Sure. Now you're going to ask me what EPS is going to be in the second quarter, aren't you. I wouldn't say we have. I know there's inefficiencies in there. We are really not going to go hard after them. When you look at labor, for example, labor is worth I think 850 basis points. Of that, 600 of that is deleveraged because of sales. So the most important thing we can do is get our sales back. Another 100 basis points is due to the very heavy promo that we did in the first quarter. So we had a lot of people visiting, a lot of people dining at Chipotle, but they didn't pay for all or part of their meal. We have to staff the restaurants, so there's about 100 basis points of that. And then there's another I think it's 150 to 200 basis points or so of what I will call inflation. It's stuff that we did last year. We had merit increases for our managers and crew. We rolled out or introduced an education program, college education or education, but usually college education. We started to pay sick pay and then we enhanced our vacation pay. So, those are all inflationary things that were in that kind of 150 to 200 basis points range. So those are the big pieces. Underneath all that is are there some efficiencies. Sure, but maybe that's 100 basis points or so. We don't want to go out and squeeze labor right now and drive those efficiencies at a time when what's most important is for us to have a fully staffed team, to have the four pillars in place, have a team that feels ready to greet customers when they come in and hopefully at an accelerated rate. So I wouldn't want to go after 100 basis points on the labor line when what's most important is to have a great experience and let's encourage the sales to happen.

2016_CMG

2016

UEIC

UEIC #Thank you, <UNK>, and thank you all for joining us today. For the first quarter 2016, we reported record net sales of $151.5 million reflecting 14% growth over the same quarter last year. We also reported EPS of $0.50 per share also a first-quarter record for UEI and reflecting a 9% growth over the first quarter of 2015. UEI\ Thank you, <UNK>. As a reminder, our results for the first quarter of 2016 as well as the same period in 2015 will reference adjusted pro forma metrics. First-quarter 2016 net sales were $151.5 million, an increase of 14% compared to $132.7 million for the first quarter of 2015. Business category net sales were $141.5 million compared to $121.5 million in the prior year. This increase represents the continued transition of customers from the lower end platforms to the higher end platforms including features such as 2-way RF technology and voice control. Consumer category net sales were $10 million compared to $11.2 million. Gross profit was $38.9 million or 25.6% of sales compared to a gross margin of 28.4% in the first quarter 2015. The largest impact to our gross margin rate is the result of a decrease in royalty revenue primarily in the mobile space relating to a significant brand name. This created a difficult comp in the first quarter. However, the year-over-year impact of royalties for the remaining quarters of 2016 is minimal. Also affecting our gross margin rate is the fact that a higher percentage of our sales were made to large customers who received favorable pricing because of higher volumes. As mentioned on our earnings call in February, we expect our gross margin rate to improve throughout 2016 as the previously discussed mix impact diminishes as the year progresses. Total operating expenses were $29.5 million compared to $28.6 million in the first quarter 2015. Breaking down our operating expenses, R&D expense was $5.1 million, an increase of approximately 17% compared to $4.3 million in the first quarter 2015 as we continued to develop technology that enhance the user experience in both the home entertainment and home security channels. SG&A expenses were relatively flat at $24.4 million compared to $24.2 million. Operating income was $9.4 million compared to $9.1 million in the first quarter 2015. The effective tax rate was 25.7% compared to 21.1%. Net income for the first quarter of 2016 was $7.3 million or $0.50 per diluted share compared to $7.4 million or $0.46 per diluted share in the first quarter of 2015. Next, I will review our cash flow and balance sheet at March 31, 2016. We ended the quarter with cash and cash equivalents of $56.1 million compared to $53 million at December 31, 2015. During the first quarter, we repurchased approximately 33,000 shares for $1.7 million representing an average price of approximately $52 per share. We have approximately 375,000 shares remaining on our share buyback program. Depending upon market conditions, we may buy back our shares over the next two months. DSOs were approximately 66 days at March 31, 2016 compared to 64 days the year prior. Net inventory turns were approximately 3.8 turns at March 31, 2016 compared to 4 turns the year prior. Now turning to our guidance. In the second quarter of 2016 we expect net sales to range between $167 million and $175 million compared to $147.6 million in the second quarter of 2015. EPS for the second quarter is expected to range from $0.71 to $0.81 compared to $0.67 in the second quarter of 2015. As a result of the continued adoption of higher end platforms by domestic and international customers as well as the recent customer wins in the home security market, we expect our earnings growth to accelerate in the second half of 2016. I would now like to turn the call back to <UNK>. Thanks, <UNK>. The trend toward easier setup and intuitive control of devices and services in your home plays right into UEI's core strengths. For years we have redefined what a remote control is and what it is capable of doing. The home is beginning to transform with a series of cloud connected two-way devices that will bring entertainment and services not available before. We are leading the industry in creating the products and embedded technologies that make these new options easier to set up and use than ever before. As I stated earlier, we have already elevated the state-of-the-art in the industry with our latest product and technology solutions but we are far from finished. We are excited to play such a key role in the exciting evolution of home entertainment, home safety and home security and we believe the best is yet to come. Stay tuned. I would like to now open it up for questions. Operator. Yes, Comcast would actually be less than half of that I believe on the dataset we looked at. First of all. Second of all, a lot of the names still haven't allowed us to go public. I guess the only one I could name that is public is Cox. Cox is using a version of the X1 platform so that is the only one at this point that I can recognize publicly. But together the operators that we have currently which is a few, total almost 10% of the market. We have 10% more that are closed and will roll out later this year and into 2017. No, I would say it is, many of the wins we have and there's over 10 of them that we haven't announced yet, many of them are outside the US. I would say that it is mostly in the higher ARPU markets. We have a lot of wins in Europe, there are some in Asia-Pacific region as well but clearly the US is a key market because of the high ARPU here. So we think that this is a market where in the next few years this could become 100% of the market whereas other markets may move to 50% or more percent. But it will take a long time for them to get to 100%. I liken it to the advent of universal remotes, <UNK>, where when they first came out the markets that grew first were North America, then in Western Europe and major markets in the US Pacific region but it has spread from there to nearly 100% now. So the advanced remotes will probably follow the same path. They will be more prominent in North America, Western Europe and major markets of Asia-Pacific. Then we will grow from there. The important thing though is that we are winning a lot of customers here. I mentioned this before, I kind of want to put some numbers around it so people could get an idea of how this trend is progressing. And it looks like right now UEI technology will be powering these next-generation platforms ever the next couple of years with 20% of the companies' representing 20% of the world subscribers. The US market by the way is (multiple speakers) North America rather is between 110 and 115 million subs. So the ones we've closed are about the size of the entire US market or equal to that size. I think the ones we won were in Europe and a handful in the Asia-Pacific region. Yes, I was probably a little aggressive on the forecast in terms of sales. The earnings came right in at the midpoint at $0.50. It was a little bit in Latin America. Right now Latin America is in a tough environment. So Brazil and Argentina are struggling a little bit compared to our forecast. It was really small things. We had a retailer go bankrupt in Australia. That hurt the consumer business a little bit. Europe fell short a little bit about $1 million. But we thought we would grow 15% to 21% on the top line and we came in at 14% so I was a little bit short on the bottom end of the range but by 1 percentage point but again for the earnings, we came in at $0.50 right in the middle. And as <UNK> just outlined, the year looks really good. The number of customers that we have that we launched obviously we came out of the chute with one large customer, very large customer and we added three additional in Q4. And as <UNK> just mentioned, we got 10 additional that we are in different stages with will get launched in 2016 and a few in 2017. The year is really shaping up well so I am excited about it. Yes, we talked about this before where the comp for Q1 over Q1 was difficult because the royalty that we received in Q1 of 2015 were still significant and it related to a mobile device manufacturer with a large brand name. I can't say the name but that went away so that was a hole in Q1 which made the comp difficult from a gross margin rate. Now as the year progresses, as I just mentioned, we came on the chute with a large customer with the higher end platform that because of the volumes that they purchase, the gross margin rate is lower than our company average. But as these smaller customers adopt, the rate will be not as favorable which should put upward pressure on our margin which is good. The other part that is going to help the margin rate is the home security channel which yields a higher gross margin than our company average as well. So second half of the year we should ramp nicely in that category as we recently issued a press release stating one of the wins that we had. So I expect the back half the gross margin rate will increase and the earnings will accelerate in the back half of the year. Yes, I would say this that there was a major player who had this as a feature and has now dropped it. So the overall volume is tougher but we have had a number of wins with smaller providers so it will be interesting to see how it unfolds as the next five to 10 years ago but one of the major companies in the industry dropped the feature so that is what caused our royalty to surge in Q1 of last year and have it be absent this year. We understand the latest model does not have the feature. Yes, Interlogix may not be the only company we work with. They will be providing their third-party product provided by us. There are others we could work within that industry and then of course as I outlined in the prepared remarks, there is ---+ our traditional customer base some of whom have already announced that they are in this market or are moving into it provides a huge opportunity because they are all putting in place an architecture within your home that would allow them to add this service relatively easily. But the thing that they will need to do it are the products similar to what we make which are the sensing products. Just like in video, they need to control products. In safety and security, they need to provide sensing products, window sensors, door sensors, motion sensors, the keypad to control it, all of which are quite frankly similar in nature to the remotes that we make on the video side. So we think that is also obviously a huge opportunity. The Interlogix win though gives us volume and a big win in the traditional market which we have told people don't overlook that either. There are growth opportunities there as well. So after six months or more of being involved with Ecolink, we have made a lot of progress as far as market development is concerned. And as I said earlier and we did in the press release on Comcast, XFINITY home, what they will also be working with us on these products as well. I'm not going to give the numbers but if you look at the Q1 and Q2 sequentially, then Q3 and Q4 is going to accelerate even more than that. As I mentioned, I think the driver behind it is going to be the most margin rate because as more customers are coming onboard, that is going to put upward pressure on the gross margin rate as well as the sales into the home security channel. So it has played out well and the one thing I am pretty confident on is that the growth rate will accelerate from an EPS level. Correct. Yes, Comcast was 26% and DIRECTV was 11%. No, compared to last year, we had a tax refund coming in Q1 so that is why year-over-year it is a little higher but for the full-year I still think they come in around 22% give or take a little bit. It is just more of a timing thing. But full-year I think it will be in the 22% range. Well, the products will start shipping now but we will ramp as the year goes on because there are in some cases a qualification process that some of the products will still have to go through. So it will ramp as the year progresses. Well, as the products get qualified, we will become the only supplier of the product. But I think the earlier question is how material is this. I guess it depends on what we mean by material. I don't know that we have in our forecast any specific security customer becoming a 10% customer of UEI in the short term because with annual sales in excess of $600 million, it is unlikely that any of these customers will become a 10% customer this year. However, we do expect significant growth in this business over a relatively small number annualized from last year, a number as we said when we purchased Ecolink that was below $10 million. We expect a significant growth and an enormous growth rate over that level of sales from the prior year. But we are gaining traction in this business and it will have some significant growth this year. No, ADT could buy from others. This is a deal with Interlogix. So we are utilizing their ---+ I think it is about 60 sales representatives nationwide to sell this to obviously the channel that actually comes out to your house to install and they provide service so they are competitors. Oh no. There is a lot of things that we are working on as are our customers because they are ---+ some of them, the world's leading home entertainment companies are focused on bringing in ever better user experience and ever better entertainment experience to your home. Many of them, if not most of them have shared some of their plans with us and we are working on next-generation products to make ---+ and technologies to be embedded into their products, their converters, set-top boxes, TVs, etc. , to make the experience even better, which is the core focus of UEI. We are seeing a lot of traction as we announced on the call. You've probably seen the reviews of the Samsung product. But we think that there is still more innovation in this area to come. I think that the rollout however just of the ones we are doing now provide a significant impetus for growth because these companies who represent 20% of the world's subscribers, it will take some time months and years, to fully turn over their subscriber base to these new technologies. This isn't something that they do in a month. It will take time which provides growth over a multiyear period. Then you focus on the next 20% which we are not done there yet either with other customers that are going to see what is going on with the leaders in the industry and say we want to have this as well. Again, as I said earlier, it does remind me of many decades ago the advent and popularity of the universal remote itself. It comes out. The leaders implement it, others see it and slowly but surely it becomes the de facto standard. I think that is what is becoming of these cloud connected two-way platforms that allow things like QuickSet to occur. Because it is difficult to argue that things like QuickSet aren't what people want. To be able to plug-in your TV in the simplest instance and have it automatically be recognized and the remote automatically set up. It is kind of difficult for people to argue no, that is not what people want. So I think these products at reasonable cost which is what we have, we can implement this technology reasonably, I think it is beginning to take hold which is why we are winning the leaders in the industry 10%, companies representing 10% of the subscribers have also closed on 10% more and we don't think it stops there. So there is multi-years we think of rollout, of wins and rollout that are in front of us. Sure. Yes, I mean I think they see the success and how aggressively Comcast has rolled this out and that is all public knowledge now. We don't like to talk about specific customers but it is very public what is going on at Comcast and I think that not just here in the US either, I think other companies worldwide are aware of what is going on here, have seen the platform, have seen how great it is. And have seen how integrated the remote control experience has become to the overall home entertainment experience and how it can make it better. So yes, I think this is a good example of how things can be and I think the Samsung TV, the one that I mentioned on call is another example of how great things can be. So it does affect the others in the industry, other potential customers of ours or current customers who have debated whether or not to upgrade to this type of technology sometimes are pushed to action by seeing what others are doing. Sure, we don't like to talk specifically about the growth rate of any specific customer but I suppose that we have announced that we are involved with the X1 and are making what we refer to as the XR 11, are working on successor products. We are also working on other products for the XFINITY home platform rolled out to the Comcast subscriber base. The warrant agreement does call for predefined milestones that go as high as $170 million a year to receive the full or the last tranche of warrants. We are not going to give a forecast for the customer but I think if you look at the types of numbers that are in the warrant agreement, it might give you an idea of what they may be contemplating, how deep this relationship could go as far as an ongoing multiyear agreement. It was three two-year agreements for a total of six years with very similar sales milestones in it. So we won't venture to forecast for Comcast. If they would like to release a forecast they can. But I do think the intent of the agreement is to have us deepen the partnership over a six-year timeframe. Yes, I am not going to give a specific number but I think back half of the year we will get to a more normalized rate of 27+. It could be above that as well. I think we said in Q4 we were higher than that so I think it is not a stretch to think that we will approximate that this year. We are not providing forward guidance for Q3 and Q4. Year-over-year earnings growth should ---+ we expect it according to our forecast to improve as the year progresses. As the year progresses. This quarter it was 9. We gave guidance for Q2 which as you pointed out (multiple speakers) 15. So that is the numeric guidance we are providing. Okay, thank you for joining us today and for your continued interest in the Company. We will be participating in the 17th Annual B. Riley Investor Conference on May 25 in Hollywood; the Robert W. Baird Global Consumer Technology and Services Conference on June 7 in New York City; and the Citi 2016 Small and Mid-Cap conference on June 9 also in New York the same week. We hope to see you at one or all of these events. Thanks for being on the call today and talk to you next quarter. Goodbye.

2016_UEIC

2017

GLW

GLW #Thank you, <UNK> and good morning As we noted in today's release, our fourth quarter core results reflect the sequential and year-over-year improvement we expected and we're very pleased with our strong operating performance Net income and earnings were both up significantly Looking ahead, we see year-over-year growth in the first quarter in sales, net income and EPS Before I get into the details of our performance and results, I wanted to briefly note that the primary difference between our GAAP and core results for the fourth quarter is, again, a non-cash mark-to-market adjustment As we have discussed previously, GAAP accounting requires earnings translation head contracts, settling in future periods, to be marked-to-market and recorded at their current value in the current quarter, even though those contracts will not be settled in the current quarter During the fourth quarter, the yen weakened which resulted in a GAAP gain of $1.1 billion, when we marked the contracts to market, as required by GAAP To be clear, this mark-to-market accounting has no impact on our cash flow We remain very pleased with the results of our hedging program and the economic certainty it delivers Since its inception, we have received cash totaling $1.3 billion under our hedge contracts These proceeds offset much of the yen-related decline in display's earnings Hedging our earnings and cash flow through 2022 substantially mitigates risk from a weakening yen For the investors who have additional questions on the mechanics of the contracts, please refer to the tutorial on FX hedge accounting on the digital media disclosure section of our investor relations website And as always, <UNK> and her team are available after the call Note that for the full year, marking those contracts to market resulted in a non-cash loss of $409 million The more significant difference between GAAP and core results for the full year was the $2.7 billion benefit from the strategic realignment of Dow Corning, that was completed in the second quarter As <UNK> noted, this transaction provided tremendous value for our shareholders Turning to fourth quarter core results, sales grew 6% year over year and net income was $534 million, up 24% year-over-year Adjusting for the former Dow Corning silicones business equity earnings which no longer contribute to our results, net income grew 36% year over year Fourth quarter EPS was $0.50, up 47% These positive year-over-year results were primarily due to rapid adoption of Gorilla Glass 5 and record Gorilla Glass volume which produced higher sales and a profit boost from its premium price; sales growth and higher profitability in optical communications; and LCD glass volume growth and moderate pricing We delivered a 43% gross margin, as expected which was up 140 basis points from last year SG&A was 14% of sales, at $350 million RD&E was 7% of sales at $173 million, benefiting from the proceeds of a joint development agreement with a display customer Total gross equity earnings were $112 million, driven primarily by our equity earnings from Hemlock which is seasonally strongest in Q4. Our effective tax rate for the quarter was 17% Turning briefly to the balance sheet, adjusted operating cash flow for the year was $2.75 billion and we ended the year with $5.3 billion of cash, approximately 40% of which is in the U.S Now let's look at the detailed segment results and the outlook for each business, beginning with display technologies The fourth quarter display market and our results were strong and in line with guidance Sales were $904 million and net income was $276 million Industry dynamics played out, as we said they would, in October The fourth quarter is the strongest season at retail Based on preliminary data, premium retail area growth year over year was robust, particularly in North America and China Our customers, the panel makers, kept their utilizations high to meet this demand Our fourth quarter glass volume tracked with the market and was up low teens year-over-year Sequentially, our volume was down slightly Supply chain inventory exited the year at a healthy level and panel makers' inventories remain lean Fourth quarter LCD glass price declined moderately sequentially, in fact, more moderately than Q3. For the full year, glass demand grew in the mid-single-digits As we predicted, growth was driven primarily by average TV screen size which grew more than 1.5 inches Our volume for the full year grew mid-single digits, in line with the glass market Now, looking into 2017, we expect the retail market, as measured in square feet of glass, to be up mid-single digits, driven primarily by demand for larger screen size TVs Let me walk you through the details First, TV units at retail are expected to be flat, or possibly up 1% This has a small contribution to glass market area growth Second, TV screen size should grow about 1.5 inches, consistent with the trend of the last three years This will contribute 4% to 5% to end market glass area growth in 2017. Third, we think IT will be flat, with larger screen sizes offset by lower units We do not expect IT and other smaller form factors to contribute to glass market growth And fourth, the value chain enters the year with healthy inventory levels and we think inventory will again be healthy at year-end 2017, expanding during the first half to prepare for a seasonally-strong second half, when inventory will contract Taken together, we expect our demand to be up mid-single digits in 2017, in line with the overall market Specifically for the first quarter, we expect the glass market and our volume to be up mid-teens over last year's first quarter This is down mid-single digits sequentially, driven by two fewer production days in the quarter and a reduction in panel maker capacity As context, late in Q4, Korean panel makers began to take down some lines, to convert the flexible OLED manufacturing for smart phones New fabs are coming online over the course of 2017. Therefore, panel capacity will increase throughout the year When one panel maker reduces production in one fab, other panel makers will need to produce more to meet retail demand We expect to maintain our worldwide share position, due to our broad and diversified customer base We believe the full-year 2017 glass price declines will be more moderate than 2016. In fact, we may see the smallest declines in the last five years, as the profitability of our competitors remains low and supply/demand remains in balance At this point, we already have more than 90% of our 2017 volume under contract For Q1, we expect the sequential LCD glass price declines also to be moderate and very similar to the decline in the first quarter of 2016 which was the best for our first quarter in the past five years Keep in mind, Q1 is typically the quarter with the largest decline for the year, as annual supply agreements are finalized Let's move to optical communications, where we're very pleased with the results, as fourth quarter sales rose 11% and NPAT rose 85% over last year The increased sales of our solution products and improved manufacturing performance contributed to the higher year-over-year sales and profitability North America carrier network business provided the fourth quarter growth highlight, as demand for our fiber-to-the-home solutions remained strong Turning to 2017, we're preparing to leverage the strong opportunities we see within the existing telecom market These include fiber market demand exceeding market supply; key industry leaders in telecom investing in optical solutions, particularly as they look to the next generations of network capabilities; and, finally, industry consolidations that favor some of our strong business partners These are organizations that have turned to Corning's optical communications business many times for help in solving their cost and network capacity challenges As a result, we expect low teens growth for full-year 2017 sales The increase will largely be the result of a continuation of the growth trends we saw in the second half of 2016. In the first quarter, we expect year-over-year growth of at least 25% As a reminder, a software implementation issue constrained sales in the first half of 2016. In environmental, fourth quarter sales were down slightly, in line with our expectations For this business, it's a tale of two end markets, in very different places The light duty automotive market grew mid-single digits for the year Our auto sales were a record, up 11% for the year, driven by winning additional business The heavy duty diesel market is in a different place, particularly in North America, where truck builds were down 30% year on year and our sales were down Net income for the fourth quarter declined in line with our expectations For the first quarter, we expect to report sales consistent to down slightly versus Q1 of last year For 2017 overall, we expect full-year sales to be consistent to up slightly from 2016. We expect continued sales growth in the auto market and lower heavy duty volume In 2017, we're making select capacity and engineering investments for the new GPF business, to prepare us to support customer commitments and you will see both cost on our P&L and capital expenditures in the near term As we've mentioned, we're excited about the GPF platform wins we have secured and expect sales to begin during the second half of the year Let's move to specialty materials, where we were very pleased with the performance Fourth quarter sales rose 22% over last year, ahead of our expectations, led by record Gorilla Glass volume Net income was up 48% year over year During the quarter, we saw rapid adoption of Gorilla Glass 5, as OEMs used it on more devices, a testament to our market leadership As <UNK> noted, our innovative products also can command a premium price We began to feel the benefit of Gorilla Glass 5 pricing in the fourth quarter and expect it to positively impact our financial performance in 2017. Our growth prospects remain strong in this market The newly-introduced Gorilla Glass 5 and Gorilla Glass SR+ provide added value for consumers in terms of durability and we're working on even more innovations to increase our sales in the mobile consumer electronics market In the first quarter, we're expecting specialty materials sales to grow in the high teens year over year, as our OEM customers continue to use Gorilla Glass on more devices Keep in mind, the supply chain in this market is driven by the timing of new product launches, not calendar years We're highly confident that our specialty materials business will grow in 2017. The only question is how big that growth will be which will depend on the timing and extent of customers employing Gorilla Glass 5 and other Corning innovations We will certainly keep you posted as the year progresses In Life Sciences, fourth quarter sales were up year over year and net income growth outpaced that of sales For full-year 2017 and the first quarter, we expect low single-digit growth year over year, ahead of forecasted market growth rates As for our innovation program in pharmaceutical packaging, we continue to make progress and look forward to sharing milestones as we can Now, let's turn to a few more details on our first quarter outlook As <UNK> noted, for the first quarter, we expect year-over-year growth in sales, net income and EPS We expect our first quarter gross margin will be in the range of 42% to 43% and SG&A and RD&E spending should be approximately 14% and 9% of sales respectively We expect other income, other expense to be a net expense of approximately $40 million and we expect first quarter total gross equity earnings to be approximately $15 million Those details should help you understand our view of the first quarter, but we wanted to provide a few insights regarding the full year as well First, we presently believe full-year equity earnings will be approximately $150 million, predominantly from Hemlock Semiconductors You may recall that we're receiving Hemlock's equity earnings on a pretax basis, since we closed the realignment of Dow Corning We've put a schedule in the appendix to the slides for this call, that will walk you through the comparison Further, we expect our effective tax rate for full-year 2017 and the first quarter will be approximately 17% to 18% Recall from our strategy and capital allocation framework that we plan on investing $10 billion from 2016 to 2019 in growth and sustained leadership which included capital spending We said the pace of CapEx would be dependent on customer demand We anticipate investing a total of about $1.5 billion in 2017 which is up from 2016. This is driven by expansions related to four growth opportunities in our market access platforms First, to support the double-digit growth of optical communications Second, to support the success of our innovations in mobile consumer electronics Third, to continue work on the gen 10.5 glass manufacturing facility, adjacent to BOE and display You may recall this project exceeds our target of obtaining $2 of every $3 from others, when we invest in new melting capacity And, fourth, to add capacity for the new gas particulate filter business in automotive Now, finally, I wanted to comment on our plans to return at least $12.5 billion to shareholders under our strategy and capital allocation framework Through year-end 2016, essentially the first year under the framework, we returned $6 billion In February 2016, the Board increased the cash dividend by 12.5% Our repurchase activity included $2.5 billion spent on repurchases, to offset the EPS impact from the loss of the silicone's equity earnings from Dow Corning In 2017, as we did in 2016, we planned to continue repurchasing opportunistically, reflecting our view that Corning remains undervalued For your modeling purposes, we anticipate spending approximately $2 billion over the course of the year for repurchases, or roughly what we spent in 2016, excluding the spending to offset the loss of the silicone's equity earnings Of course, the timing and amount of repurchase activities always depends on a variety of factors In addition, we expect the Board to approve an increase of at least 10% per share in the annual dividend rate, in line with the framework Let me close by saying that we're very pleased with the strong fourth quarter results and our positive momentum coming into 2017. Overall, we feel very good about our progress against our framework and the rich set of opportunities ahead of us With that, let's move to Q&A Let me start on the optical question We definitely had good growth in the fourth quarter It was higher than what we expected We did see the data center demand pick up in the fourth quarter It was higher than Q3 and it was also higher than last year I think what's important to remember about data center demand is it will be lumpy, because of the project nature of the business But over time, we definitely expect this to be a strong driver of growth And as we look out into next year, for our full year, we think our growth will be in the mid-teens A lot of that, of course, driven by fiber of the home and carriers But we do expect some growth in the hyperscale data ---+ enterprise in general, including hyperscale data centers Now, for the first quarter, we said the growth would be greater than 25% I think you can think about that, roughly half of that coming from the issues we had last year and half of it being the strong market that we have Because overall, we think the market in the mid-teens gives you a sense that ---+ our growth in the mid-teens gives you the sense that the market, we expect to grow greater than 10% I think that right now fiber supply is very tight Why don't I start with the telecom question, <UNK> I think from an overall standpoint, we did see the growth in the fourth quarter and that was on a year-over-year basis, also versus Q3. But I think one thing that we learned in the process of talking about hyperscale growth is, because of the lumpy nature of it and the timing It just doesn't make sense to think about it on a quarter in, quarter out basis I think it's more important to think about it on an annual basis and it's part of our mid-teens or low teens growth that we expect in 2017. And then, <UNK>, on your last question on IT and screen sizes, I think at the end of the day, we don't expect it to have a big impact on the market We agree, I think, IT is stronger than it has been over the last couple of years But we still think that, you know, the units themselves, relatively flat, screen size relatively flat So we just don't see it as a big contributor Of course, we could be wrong about that It may be a little bit of a positive contributor, but I think we would still end up in that range of mid-single digits in terms of the glass market Clearly, Gorilla Glass 5 adoption was strong in the fourth quarter I'm not going to give you the percentage of what it was, but it was strong in the fourth quarter and we expect it to continue to accelerate as we go into 2017 and that's positive, both in terms of the volume itself and of the premium price And that premium price clearly had a positive impact on our profitability in Q4. And it will continue to have an impact on our profitability in 2017. Sure I think on the overall growth standpoint, it's always hard for us to know exactly the impact of the software implementation issue that we had But I think if you were to adjust for that, you would still see growth in the double digits And that same applies to acquisitions The bottom line here is that we think that our position in this market and where we play in this market and the part of the market that is most important to us is growing very rapidly and we think it's seen a double-digit growth In terms to fiber-to-the-home, clearly North America is a place where we see lots of fiber to the home growth The payment was with a customer and I'm not going to disclose what development work we were doing with that customer And I'm also not going to disclose how much it is But I think, you think relative to what your expectations were and the difference that explains most of it So the answer to your second question is correct That is the way that we expect it to play out In terms of price declines and the amount of volume we have under contract, usually as we enter into the year, we have a high percentage under contract So 90%, I think, was important for everybody to remember, that's the way this business works And then relative to price declines more moderate, somewhere in the 10% range is how that would work out I think that when we entered into our exchange contracts originally in 2014, we said they would be for three years and that we would stay at a constant rate of 99% We have hedged about 70% of our exposure from 2016 to 2022 at about a $1.06 rate, but we're not ready to talk about the constant rate for 2018 yet, in part because we're looking at either other opportunities for us to hedge and we're also looking at different ways that we might hedge, as opposed to the FX contracts that we're using today So I think when we made the FX rate change previously, we did it towards the end of the year And I think that's probably the timing when you would expect us to talk about it again, or maybe even at the beginning of 2018.

2017_GLW

2017

RAVN

RAVN #Thanks, <UNK>, and good morning, everybody. Before we begin, I want to let you know that we're changing the focus of these calls this morning to a longer term view. And yesterday, we released our first quarter earnings report and you've had an opportunity, hopefully, to look that over. And we're not going to step through the press release like we have in the past and like many companies do. We're going to focus our comments on a little longer view, and hopefully give you a little more color into where we see our business heading, and a little bit more depth on how we've accomplished what we have accomplished. Now over the last couple of years, we have endured many challenges. We made a lot of adjustments, what we feel were prudent adjustments. We've kept our overall strategy intact and now we're starting to see the returns on all that. And I want to start with our Raven business model, and that's really our strategy and this has been intact for a couple of decades now. And I think it's important that you, as shareholders, have a good understanding of the Raven strategy that we have been executing and that we intend to execute going forward. This has proven successful in all circumstances and it really starts with our intentional selection of diverse market segments, segments that we believe we can win in, that offer strong profitability, growth opportunities. And those markets today in ATD are the agricultural sprayer control systems; for Engineered Films, includes our reinforced multilayer high-value film solutions to selected end markets; and for Aerostar, our focus is on high-altitude balloon platforms. Those are our core markets, and the Raven strategy has been guided by carefully selecting those markets, as I've said, and then also having a willingness over time to move in and out of certain markets as we determine that the opportunities are strong or less so. The second important element of our strategy is that we intentionally differentiate ourselves from our competitors on quality, service and innovation. And we make long-term investments to separate ourselves from those competitors on quality. We introduce high-quality products, we deliver exceptional service, better we believe than our competitors, and we are focused on innovation as the long-term driver of our success. Thirdly, we manage a pipeline of growth initiatives that includes research and development investments, again, focusing on our cores. It includes strategic acquisitions along the way, and really it also seeks to expand our markets that we serve geographically in particular. We drive continuous improvement. We've been committed to this for over a couple of decades now. It takes the form of value engineering, process improvements and other initiatives. And it's those efforts that allow us to continue to expand our profit margins and uphold the strong margins that we do. We maintain a strong balance sheet, and this is a something that's been core to Raven for a long time and we're fiscally conservative. Having a strong balance sheet gives us flexibility to make the investments that we feel are prudent at the time when those come available, but it also gives us the resiliency during difficult market cycles. And when you serve the ag and the energy and defense markets, you will have cycles where those markets are favorable and less so. And then finally, we uphold our corporate social responsibility by being a good corporate citizen. And that's the Raven business model that describes how we compete and how we select the markets that we serve. Next, I want to talk a little bit about the drivers for our recent performance. And as I've said and you saw in our press release, we made good progress, we believe, in the fourth quarter of last year and we continued that progress through the first quarter this year. And in ATD, I can really link our performance to the innovation, our steady R&D investments that we made over the last couple of years have resulted in Hawkeye and the Raven Rate Control Module. And those 2 combined to deliver $11 million in growth last year and are a significant part of the growth in Q1. And it's that diligence and commitment to innovation and investing in R&D, even when our market segments in ag were difficult, that is providing that growth opportunity now. Secondly, in ATD, I linked our success to our service. We've been very active in our channel, providing more training, and proactive interaction with our end customers. And our customers continuously tell us that it's that service that they receive from us that sets us apart from our competition, and that's a performance driver for ATD. And then finally, over the last 1.5 years, 2 years, we've doubled down on our commitment to our core. We've focused on sprayer control systems and various products that enhance that control system to truly separate ourselves from competitors in that marketplace. An example of that is our chemical injection technology that we've been ---+ we designed many years ago and we've refined it over the years, and now the market conditions are right to offer good growth with that product line and we saw that in Q1. And <UNK>, I'd like to ask you to touch on EFD at this point, and share with the listeners your perspective on the long-term growth drivers for EFD. I'd be happy to do that. As we step back and look, we are very pleased with EFD's strong performance in the first quarter. The division benefited greatly from the rebound in the geomembrane market. But importantly, and more importantly, the rebound of the geomembrane market was not the sole driver of growth. The industrial market was also up significantly year-over-year, growing over 50% versus the first quarter of last year. The new production line that we put in place about 18 months ago is really driving growth in market share gains in the industrial market. Construction and ag were also up for us in the first quarter, so we saw all of our markets served within EFD growing year-over-year. The division's superior product performance and service and focus on specialty solutions are driving market share gains. Additionally, the division has continued to drive profitability improvements. They're focused on expense discipline; value engineering and pricing discipline are really having a positive impact on the financial performance of the division. In the first quarter, EFD achieved a 20% division profit margin, so the profitability is very strong within EFD in the first quarter. EFD's weathered the downturn in the geomembrane market very well, and we are well positioned for growth in the future in this marketplace. In support of this, we increased our investment in EFD's geomembrane strategy in the first quarter with an investment in a new facility in Pleasanton, Texas, that'll allow us to expand our geographic footprint serving the geomembrane market, and we're excited for the growth opportunities that, that investment will allow us to make. All in all, a very strong quarter for EFD. Dan. Thanks, <UNK>. And I want to touch on Aerostar, and it's really simple with Aerostar. The drivers for performance improvement, our focus in costs and expense discipline. And Aerostar has benefited ---+ and we're starting to see it in Q1 with a nice profit contribution Aerostar made by focusing. And that has generated new customers for our stratospheric balloon opportunities and good growth and good performance on those strato balloon opportunities. And our cost structure has continued to be monitored and held tight, and that has allowed us to start to generate profit, which is a great change for Aerostar and for the company. I want to talk about our capital allocation model and give you a little bit of insight on that going forward at this point. Just as ---+ at a high level, we do invest in research and development, we invest in capital expansions and we occasionally make acquisitions. And those are important as we consider how we allocate capital. We also are committed to returning cash to our shareholders. As you've seen, last year, we returned over $25 million to our shareholders via our dividend and then an additional share repurchase. And in the prior year, we returned about $50 million to our shareholders. So we are committed to both. First, to growing the business by allocating capital wisely. And secondly, returning cash to our shareholders. And <UNK>, if you could provide a little more detail on that overall capital allocation model, I think our shareholders would appreciate that. Sure. We are in a very strong and enviable position today. We've got a lot of flexibility. As I step back and take a look at the business, we've got $50 million in cash on the balance sheet. And the profitability improvements that we're driving through all 3 divisions, coupled with our intense focus on net working capital efficiencies is resulting in strong free cash flow generation. On top of that, we have an unused $125 million revolving credit facility at our disposal. So we have a lot of options, and I think our first priority is to focus in on acquisitions and driving acquisitional growth within ATD and EFD. At the same time, we're going to continue to invest in our R&D efforts to drive the development of new product offerings. We've seen a lot of success in the new product introductions over the last 12 months, particularly within ATD but also within EFD, and the Aero, on their stratospheric balloon platform. At the same time, we're going to continue to return capital to shareholders through our dividend policy and also being opportunistic with share repurchases. Over the long term, we're targeting a payout ratio of 30% to 40% on our dividend on prior year earnings. And with the growth in earnings that we've seen up to this point and expect in the future, we expect to grow back into that range in time. And with respect to repurchase activity, I think we're going to be opportunistic here in fiscal year '18. We have $13 million remaining on authorization and we expect to be active with that in the fiscal year. Dan. Thanks. Let's shift to the full year outlook. And before we open up the call for questions, I would like to touch on not only this year as I see it, but beyond that. As you know, we don't give much numeric guidance, historically, so I won't be sharing a lot of that with you this morning. But I will say that we're off to a great start and the rest of the year we expect to be good, but more challenging than our first quarter. Our comparison quarters are going to become more challenging in Q3 and Q4 as we anniversary the improvement that we saw in our energy market late in last year as well as we anniversaried the introduction of Hawkeye in ATD. There's a lot of time left in the year for things to go well or otherwise. But we certainly have regained our momentum, that's clear. As we approach our historical noncontract manufacturing revenue peak of $330 million, growth will become more difficult. And what I mean by that is there's really a couple ways to look at the Raven revenue peak. One is in FY13, we generated $406 million of revenue. The other is to understand that we intentionally got out of contract manufacturing following that, and we ran off about $75 million in revenue as we exited contract manufacturing. So the $330 million is a good mark as you think about what's our core revenue peak. And I believe that this year, we'll approach that revenue peak. But more important than that, we have good growth, and the only reason that we're getting that now is the focus that we've had over the last year. We've focused on margin expansion and those efforts improved our operating return on sales after-tax margin to 7.5% last year. And for the trailing 12 months, we're running at a 9.5% return on sales after-tax for the company. Now that's a nice improvement, and we'll continue to work on that, and I believe that we can do better. We're committed to spending on our R&D and investing aggressively in R&D on our cores. We've seen the returns that we can get as we focus more on our core business and you'll see more of that going forward. We're intent to find good acquisitions that complement our strategy for ATD and EFD, and we're carefully considering several right now in our pipeline. And as we are successful with those, we'll share that with you. And in summary, one of the lessons that I've learned over the last couple of years is just the tremendous strength of the Raven business model. And I started my comments by sharing with you and reminding you our ---+ the Raven business model and how we compete and our strategy, and it's been successful over many, many years. And I just want to ---+ I want you to know that we're committed to that winning business model. We've got a great team in place to execute on it and that gives me great confidence in our future. And with that, I'd like to turn the call back to the operator and open it up for questions. Sure. Go ahead, <UNK>. Yes. So we started up the facility here in April in Pleasanton, Texas, and revenues from that ramp will grow. I think we did about $100,000 in the first month, and we'd expect that to continue to ramp as we go through the year. It's going to help us serve the Eagle Ford basin in Texas and it's an area that we have not serviced before. So we do see that as incremental growth for EFD. But stepping back, we saw the geomembrane market rebound quite nicely for us in the first quarter, growing over 200% versus the first quarter of last year. As I mentioned in my comments, Industrial was up about 57% in the first quarter. Construction was also up on increased construction activity and market share gains. And Agriculture was up mid-single digits. Yes, Flexitanks is one of the big drivers for our industrial growth in the first quarter. We've seen some market share gains in that market for us. And our investment in the industrial capabilities of the organization is driving that. Thanks, <UNK>. Good question. I wouldn't say that we're more committed to films than we ever have been. I think the balance remains the same. And we know that our Applied Technology division has tremendous potential and has a strong, strong influence on the performance of this company. And we're committed to spending the majority of our R&D efforts on ATD this year. We're also committed to looking for strategic acquisition, and we're actively engaging in that now, that can assist us both in our product strategy and also in our distribution strategy internationally. So we're no less focused on ATD than we ever have been. But we are opportunistic, too. That's been a characteristic of Raven over the long term. And when there is opportunity for growth in the core part of our business like we see with films, we're going to aggressively invest in that, too, and that's what you've seen over the last year. <UNK>, this is <UNK>. Most of our international revenues are driven in the first quarter from ATD. And within ATD in the first quarter, we had about 75% of our revenues generated in the U.S., 25% internationally. And that's been pretty consistent over time. And as we look to grow internationally, we would expect that mix to change slightly, but it's still sticking in that 75-25 range. And longer term for the full company, we're pursuing 12% to 15% international sales. We're not quite there yet, but that's our goal that we have in the 3- to 5-year range, and we'll continue as we grow. We think we've got stronger opportunities in certain international markets for ATD. And so that's why you're seeing so much effort there and emphasis. So they certainly help and we see that, for example, in Canada; a lot of our OEM sales that go on self-propelled sprayers built in the U.S. go into Canada. So you may see a rise or a fall in our international sales component based on the content that's either going in on a new machine ---+ take Hawkeye for example. We have strong sales of Hawkeye continuing into Canada. A lot of those machines ---+ those units are going in on OEM machine. Whereas in the prior year, those were being sold in the aftermarket in Canada after ---+ during the first year launch. That's one example where certainly our OEM relationships assist and sometimes mask our overall international sales because we count those as originating in the U.S. if that's where they're sold. Sure, I'm not going to be as bullish as you probably want me to be on ag. I'll tell you a few data points though, <UNK>. Our underlying ---+ if we take out our successes with new products in Q1 in ATD, what we consider our underlying business performed at about a 6% growth rate year-on-year. So we're happy with that, actually. To be able to grow 6% without the benefit of our new products in a market that we believe is still generally very difficult, we count that as a strong performance. But the reason for the exceptional performance is our new products that we've introduced. As far as the ag cycle, I would also remind you all that the farmers spending money is sort of the root of the ag market. But for us, we sell a lot of our products, that again are mostly on self-propelled sprayers, to custom applicators and these are ag businesses. And as those machines get years on them, they need to be replaced. So those cycles are eventually inevitable because people will still fertilize and spray their crops with herbicide. So I wouldn't say that this year I am at all counting on a ag recovery, no matter what other people might be saying in the marketplace. But beyond that, one of the lessons that we've learned is that we can do better to manage our business more for mid-cycle conditions. And that's a broad statement, I know, but we sort of tested the highs and the lows in terms of what corn prices at $7 can do and corn prices below $3. And we'll continue now to manage our ATD business for more of a mid-cycle condition, which we're not at yet. But the ag market will continue to perform below mid-cycle, in my opinion, for the next year, and then we'll see after that. Thanks, <UNK>. Well, we touched on our capital allocation strategy, so I would guide you back to those comments and our overall business model. And those are the things that are going to permit whatever growth we can realize. As far as the comments, as we press the peak of our prior revenue, we will return to our expectation for a 10% long-term year-on-year annual revenue growth. We believe that Raven has proven over the last several decades that executing on our business model, which guides us to profitable market segments with growth, that differentiates ourselves from our competition on quality and service, that both invests prudently in the growth of our core divisions and returns cash to shareholders and maintains a solid balance sheet, we believe that, that combination historically has generated 10% annual growth and will in the future. Yes, <UNK>. So in the first quarter, we traditionally have a large sale to NASA of a super pressure balloon that typically falls in the fourth quarter of the year, and that delivery got pushed out to the first quarter of this year. So there is some lumpiness in the first quarter from that. That's a very large sale to NAS<UNK> In addition, as we indicated on last quarter's announcement, we did solidify a new contract with a new customer on the stratospheric side. And that began in the first quarter of this year and contributed to the first quarter growth versus the prior year. So we had those 2 benefiting the first quarter. On top of that, we saw growth in Google as well. So the stratospheric balloon business for Aerostar is performing very, very well and had a very strong quarter in the first quarter and that's what's driving the revenue growth. And on top of that, as we look back over the last 12 months, we have done a very good job, and the division has done a very good job, in managing their cost structure down, given the challenging conditions that existed over the previous 24 months. So the combination of the revenue gains on the stratospheric side and expense reductions contributed to the improved financial profitability in the first quarter. I'll make some comments, <UNK>, on our longer term, and we're really avoiding these calls being model building exercises. So the CapEx, we expect to spend $10 million or $12 million in CapEx this year. So what we spent in the Q1 versus that is what you'll see throughout the year. We believe that that's what's necessary to support the growth initiatives that we have that depend on our CapEx investments for this year and next year. As far as R&D and the selling expense, we're going to continue to invest R&D at a similar rate as what we did in Q1, and the same for selling expenses. So those are not going to flex on a short-term basis with revenue performance that follows the annual seasonality of our business. Okay, thank you, operator. And thank you all for your questions. And welcome, <UNK>. We appreciate having you on the call today. And we look forward to sharing more on our long-term outlook and our progress on the year when we give you a call again in August. Thank you.

2017_RAVN

2017

MDC

MDC #Thank you. In 2017, we're celebrating 40 years in the homebuilding industry. We have delivered more than 190,000 homes since we started in 1977. As we recognize this anniversary, we are pleased to announced a strong start to the year with first quarter net income reaching $22.2 million or $0.43 per share, which was more than double the level from the same quarter a year ago. The robust income growth was driven by a 43% improvement in the top line results of our homebuilding operations based on increased home deliveries. This allowed us to achieve significant gains in operating leverage as well as 350 basis points of improvement to our last 12-month return on equity. Throughout much of the past 3 years, we saw a downward trend in our backlog conversion rate because of our increased focus on build-to-order production model and decreased labor availability. However, in the first quarter, we saw backlog conversions improve year-over-year for the first time in 11 quarters. Though we continue to battle elevated cycle times in many markets, this achievement is a promising sign as we look forward to the rest of 2017. As our company grows, our balance sheet remains a top priority. We continue to operate with a unique combination of low leverage, carefully managed exposure to homebuilding assets and liquidity of nearly $1 billion. Just last month, we were pleased to see the strength of our financial position publicly recognized by Standard & Poor's, which upgraded our rating outlook. With both our operating results and our financial position showing signs of strength, we continue to have the confidence to reward shareholders with a strong dividend, unsurpassed in the industry in both yield and consistency of payment. Our new affordable product offering continues to be well received by buyers. The Seasons series is targeted towards a first-time homebuyer who has often been priced out of the current market and is steadily becoming a more significant part of our unit orders and closing volume. We believe that part of the appeal of the Seasons series is that we provide the buyer with personalization opportunities that are often not available at this relatively low price. Based in part on our more affordable offerings and a solid macroeconomic environment, the 2017 spring selling season has started off strong. We continue to experience growth in our monthly sales absorption pace, which reached a 10-year high in the 2017 first quarter. The improved demand across most of our markets has given us confidence to reinvest capital into new homebuilding projects. This is evidenced by a sizable year-over-year increase in the number of new lots we acquired and approved in the first quarter. We believe that the industry remains poised for continued market strength as the spring selling season draws to a close in the second quarter. Some uncertainties remain, such as the impact of potential policy changes adopted by the new administration. However, given our financial ---+ our strong financial performance in the first quarter, we remain optimistic for the top and bottom line growth for 2017's full year. I want to thank our employees, board members, trades and financial partners, both past and present, for what they have done to make M. D. C. a successful homebuilder over the past 40 years. I will now turn the call over to Bob <UNK> for more specific financial highlights of the 2017 first quarter. Bob. Thank you, <UNK>. Our home sale revenues increased 43% from the prior year to $563 million, primarily due to a 38% increase in closings. We achieved our highest number of first quarter closings in 10 years, with the improvement mostly explained by a 24% increase in our beginning backlog. Also, our first quarter backlog conversion rate was up year-over-year from 39% to 44%. The increase was driven primarily by the stabilization of our overall construction cycle time, led by year-over-year improvements in Colorado and California, which together comprised half of our beginning backlog. However, the improvements in these 2 markets were offset by higher construction cycle times in other markets. The year-over-year increase in our conversion rate was the first we have seen in 11 quarters, and it exceeded our expectations. While this is encouraging, cycle times continue to be at elevated levels in many of our large markets. As a result, we believe there is risk for volatility in our backlog conversion rate. So as we look forward to the second quarter, we believe a reasonable goal for our backlog conversion rate is 40%, just shy of the rate we experienced in the second quarter of 2016. Our average selling price for the quarter of $449,000 was up a modest 3% year-over-year. The increase would have been more significant with our Seasons product, which comprised about 5% of closings during the first quarter of 2017. In the same quarter of last year, we did not close any Seasons homes. Our gross margin from home sales percentage was down year-over-year from 16.3% to 15.9%. The 2017 first quarter included $4.9 million of inventory impairment while our 2016 first quarter included $3 million of expense to adjust our warranty accrual. The $4.9 million of impairment we took during the quarter related to 2 assets, one each in Southern California and South Florida. We were pleased to see improved operating leverage for the quarter as our SG&A rate fell by 250 basis points from 14.3% to 11.8%, due in large part to our significant year-over-year increase in home sale revenues. Our total dollar SG&A expense was up for the quarter, driven by a $6 million increase in commissions and a $3.1 million increase in marketing. These increases were primarily due to the growth in our closings unit volume and home sale revenues. The dollar value of our orders increased 3% year-over-year to $750 million. The increase was almost entirely due to a 3% increase year-over-year in the number of units, which was driven by an 8% increase in our absorption rate to 3.5. This was our highest first quarter absorption rate since 2006. Our Seasons collection accounted for roughly 8% of total orders for the quarter, up 300 basis points sequentially and 600 basis points year-over-year. The rollout of this product continues to be a key focus for the company. However, as I noted last quarter, the increase in unit volume will be gradual as many of the communities we have recently purchased for the Seasons product need to be completed through development activities and community setup procedures during the coming quarters. We ended the year with an estimated sales value for our homes in backlog of $1.59 billion, which was up 11% year-over-year. The increase was mostly the result of an 8% increase in the number of units in backlog to 3,324 homes. While we are optimistic about the backlog driving a year-over-year increase in closings for the second quarter, our optimism is somewhat tempered by risks with regard to our cycle times, which remained elevated in many of our markets across the country. Our cancellation rate was flat year-over-year at 18% for both the 2017 and 2016 first quarters. As a percentage of beginning backlog, our cancellation rate was down 200 basis points year-over-year to 13%. Active subdivision count decreased to 160 at the end of the 2017 first quarter from 169 a year ago. To end the quarter, we had roughly 14 fewer subdivisions in the category we call "soon to be active" than in the "soon to be inactive" category. In other words, we continue to be a little heavier on subdivisions that are on the verge of sellout relative to those that are just opening. That tells us that our active subdivisions\ Yes. The East Coast and particularly in the Mid-Atlantic, that's one area we talked about as not having seen as good returns as we would have liked to have seen over the past couple of years, and that's really the reason why we haven't invested as much in that particular area. It's still ---+ the Mid-Atlantic region is still an area that we're committed to, and we continue to look for opportunities in that market to invest in. Well, we always try to look for communities that have finished lots. We do that across product spectrums, and to the extent that we find those, that might accelerate what we're able to do. But development inherently is a tricky thing. We try to predict how it's going to go. It doesn't always work out as we want it to. So that's why we don't put too fine a point on exactly where the level of Seasons activity will be in the future. I think what I would say for our gross margins is we've seen stability over the last 8 quarters. There's really only been 70 basis points separating the high from the low. I made a similar type of disclosure last quarter. I think what you saw in the first quarter, we don't really have much kind of expense, if you will, sitting in ---+ rolling through our gross profit margins. In other words, there are some other builders who run expense through their cost of goods sold regardless of what closings are rolling through. Most of our expenses is directly tied to the closings. So I don't know that you get as much of kind of a seasonal bump for us, as you referred to. So for us, when we look at 20 basis points sequentially or 10 basis points year-over-year, it's really a nonevent, and really the name of the game for us is stable gross profit margins. It was 2 assets actually. The smaller impairment was an asset in South Florida, and the other asset was in our Southern California market. And those assets, both of them, I don't know if I know the exact year. But I think the Florida one was probably right around 2012. The California one was probably right around 2013. So it's a couple of years old. And of course, for us, being a shorter land supply builder, we're always buying land at somewhat real time. The first question, I guess, on community count. I know that you'd indicated last quarter that you expected it to be down slightly year-over-year in the first half of '17. And if I heard you correctly, it may be down a little bit more in the second quarter than you had previously thought. But can you give us any thoughts on the back half of the year and how we should be thinking kind of, of an exit rate. Yes. I mean, it's tough to predict what's going to happen in the second half of the year, so we're always cautious about what we say on it. But given where we've talked about being for the first half of the year, I think it's reasonable for us to have a goal to get back to where we were to start the year by the end of the year. So that's where we're focused on. Certainly, if we see, as we did in the first quarter, increased absorption rates, you can still do more with less, and that was the case in the first quarter. And that's really what's most important to us, is the efficiency of the subdivisions that we do have. Okay. Yes, that's helpful, Bob. And then, I guess, the second question would be on order ASP. It looks like it was down a little bit sequentially and year-over-year. Just curious how much of that maybe is attributable to mix from the Seasons brand. Yes. I think, given that 8% of our orders were attributable to Seasons, I believe that was up 300 basis points sequentially and 600 basis points year-over-year, so there certainly was an impact. I don't know if I have the exact number, but I think it could have been as much as, say, $10,000, the difference between the 2, if you didn't have Seasons in the equation. I mean, there's always a risk. I think we like the position that we're in right now simply because we do have new product that we've put online. We've got to focus on that new product that seems to be performing well. So that works in our favor, but it's really hard for us to predict exactly what happens in the second quarter or really any period of time with regard to orders. Absorptions. Absorptions were flat year-over-year. 1. 5, that sounds like a pretty low figure. But we talked about a 2- to 3-year supply of land, so 2.8 is well within that range and something we're very comfortable with. I think the impact of the state NOLs was roughly 420 basis points, somewhere right in there, and the impact of the lack of energy credits was about 85 basis points. So collectively, you've got 400 ---+ or 500 basis points worth of downward pressure there, kind of rising ---+ increasing it from what was 30% to over 38%. So I think you would expect that delta to come out to some degree for the state NOLs. We're still, of course, not going to have ---+ well, it remains to be seen what happens with the energy credit. Unless the federal government does something about that, we're not going to see that benefit come back online for us. Yes. I think we had a couple of things that happened during the first quarter. First of all, the increases that we do ---+ the annual increases in salaries come across in part in the first quarter, so you've got some of that rolling through there. We also had a contribution to our foundation that rolled through that number as well. I think what you saw in the first quarter, that's ---+ it's probably as good a run rate as any going forward that you could look at right now. There is risk to that obviously. To the extent that we have to change accruals, you could see that number increase or decrease. And we also have ---+ you mentioned the stock option expense. We do have something called performance share units. And the way we expense those, without getting too technical, it's really a quarter-by-quarter assessment as to where you're at and the probability of those actually vesting, and that could cause some volatility in the number as well. But I can't peg you to a number because it's really something that depends on where we're at, at the end of each quarter. Yes. That's a lot of questions. I'll try to make sure I get them all. First of all, we're not really tweaking our build-to-order policy for Seasons. In fact, we think it's one of the distinguishing characteristics in our first-time product versus some of our competition, is the fact that we do still allow customization to some degree in our Seasons product. So we think that's something that's special and something that we're going to continue to have. So that's one. In terms of gross profit margins, I think we're seeing roughly the same gross profit margins on Seasons versus other product. It kind of depends where it is. In cases where you're building it where previously you built larger product, that might be different because the lots weren't actually purchased for the Seasons, but the benefit you get is increased velocity. So there's that factor. As far as the cycle times go, it is significantly better, as you might expect, especially in Colorado. In Colorado, you typically build a basement, but for Seasons, you don't build a basement. So looking at ---+ and order of magnitude, you're probably talking about 30% lower cycle times for Seasons versus more traditional product in Colorado. In other markets, it's not quite as dramatic of an improvement, but Colorado is one of the bigger places where we've built it thus far. Of the 160 that we had at the end of the quarter, roughly 6% was Seasons. Yes. I think we don't always think about working capital the same way other companies might think about it. Really, kind of capital and cash flow surrounds inventory levels. We did purchase a little bit more inventory this quarter than we did a year ago, in fact, quite a bit more this quarter than a year ago. And we would expect, if business remains strong, that we'll continue to increase our inventories so that we can make possible growth, top line, for our company in the future. So that's really what's going to hinge on our capital concerns, is the inventories. It's really not ---+ it's hard to predict exactly when the timing of the cash flows occur because you have delays in developments or you have delays in ---+ even if we're not doing the development, we may see that one of our sellers is delayed in delivering lots because they haven't been able to do the development as quickly as they would like to. So there ---+ it's really a timing game, but we see the trajectory overall of investment in inventory going up, unless we see a substantial change in the market. Great. Thank you very much to everyone for being on the call, and we look forward to having you again on our second quarter earnings conference call.

2017_MDC

2016

SLB

SLB #So in terms of the charge that we've taken, this is basically catching up and finalizing the resizing of the Company, which has now been dropping in activity levels over the past seven quarters. So this charge is linked to a number of things that we have been executing in the second quarter and should bring the Company into the shape where we are well-positioned to navigate the bottom of the market and also well-positioned to start growing again going forward. So we put a lot of details and scrutiny into any impairment charge that we take and we have done so as well in the charge for Q2, which is sizable. But we believe this is prudent, this is right and it's justified to do what we've done and that's why we did it. Now in terms of the outlook, like I said, we are at the bottom, but we are not expecting an immediate and sharp recovery. If you look at North America versus international, some of the moving parts going into Q3, North America still has significant overcapacity at this stage in terms of services and the low barrier to entry is also going to continue to be a major headwind. So we expect modest increase in land activity, but this is going to be partially offset by lower offshore work. We are significantly down in Alaska, in Eastern Canada, as well as in the Gulf of Mexico. We expect some improvement in pricing, but it's going to be way short of the level required to break even in Q3. So we don't expect any major positive earnings improvement from North America in Q3, but it shouldn't get much worse either. So fairly stable earnings for North America in the third quarter. And fairly similar in international markets. There's less overcapacity there due to the higher barrier of entry and it's also quite a narrowing competitive landscape. So in principle, it should be easier to recover some of the temporary pricing concessions that we have made, which in most cases in the international market is also time bound or linked to oil price. But given the limited increase in activity we see for Q3, again, we don't expect any significant positive sequential earnings contribution from international, so overall we expect flattish EPS in Q3. Well, if you talk about efficiencies, are you talking about their current cost per barrel because that is to a large extent driven by very low service pricing. And I think there's no company in North America that is able to continue for a long period of time to operate at these pricing levels. But if you talk about the technical performance of how efficient we drill and how efficient we frac, I agree with you there is a handful of companies that can do that and I think that number is shrinking and unless there is some pricing recovery and some ways to create more financially viable contracts for even this limited number of companies, that number is going to shrink further, yes. Okay, so we see that there are a number of questions still remaining and we are going to extend the call another 5 to 10 minutes. Operator, please can you give us the next question. So, we've started this dialogue and this engagement first of all internally with our senior management team during the second quarter. This is not a surprising playbook. At some stage when you do approach bottom, this is the shift that you need to make, but we have I would say done this in a concerted fashion during the second quarter. We have had very good discussions with the senior management team and laid out plans for how we are going to now shift the focus and how we navigate the next phase. And as I said earlier on, the understanding of the viability and state of the industry value chain in each of the 80 countries we operate in is extremely important to make sure that you are optimally positioned to capture the market in the countries which we believe are going to see a sustainable increase in activity where we can also generate sustainable earnings going forward. So we spent a lot of time internally with the team to lay out these plans and put this methodology in place, so we are in good shape there. We are already in the execution mode of it. And in terms of the engagement with the customers, it has started. It is still at a fairly low frequency, but that is now what we will do much more widespread as we enter the third quarter here. But obviously a lot of these discussions are going to be challenging. There is not a lot of surplus in any situation, but we believe that the temporary concessions we have made, at least part of that will need to be returned to us. But in return for that, we are very open to engage in different types of collaborations where we, through better management of the interface and better commercial alignment, can together drive unnecessary costs out of the system so that we can make more of the industry value chain viable in many countries around the world. That's certainly the objective. Absolutely. Both of those are aspects that we believe will generate total value that then can be shared between the supplier and the E&P companies. And also back to what we talked about earlier in the call all around the integration offering that we have and that we continue to invest into. Well, I think the narrowing competitive environment has some impact on this, and also I think if you look at margin performance over the past 18 months in the international market in between several of the large players, some of these players are already in the red, in which case their room to take on contracts which they might feel is challenging is very, very limited. So the position we have in terms of strength, both in footprint scale, local knowledge, as well as the overall contract portfolio we have allows us to be quite competitive in these tenders. And I think very importantly as well as to look at the difference between the contract portfolio and maybe the immediate revenue translation of these contracts. In the international market, it's very important to have the contracts, and we have a range of contracts today that we have won with very little activity in them, but they have potential for significant increases in activity in terms of rig additions and so forth going forward. So what is very important over the past year, which we have a lot of focus on, has been the tender win rate and then having the contracts and then being able to translate that into revenue in the coming one to two years. For that particular application, it is being rolled out on the legacy fleet. These are measurements that we are currently recording and we have been for quite a while. And it's just one example of what we can do by being able to first organize our data in a way where it's accessible and then building the right analytic applications on top of it and then providing that to our field operations. So over the past 18 months or so, we have been undertaking a massive reorganization of the entire database we have and the data we record on a daily basis from our operations into a cutting-edge data lake, which is then accessible for these type of applications. And we've also established a new applications group, which then has the ability to build these analytics and tap into the data lake and provide this type of information for our operations. So the example you refer to in pressure pumping is one. We have a multitude of similar type of applications being built and which are going to be deployed in the near future with a similar type of impact on the operation, and this is all part of the transformation program that we've been talking about for several years. If I could just add, this is a big part of the Cameron integration as well. So in Cameron, we really didn't progress the ability to collect data on our equipment and what we are doing is tapping into the expertise here with Schlumberger, and in fact more than half of our 30 integrated technology programs are around this theme of controls and predictive maintenance and reliability. Correct. So <UNK>, as you mentioned, we performed well in the second quarter despite some exceptional payments and the transformation program is helping us quite a bit. It's on the CapEx side, on some of the cost elements, collection of receivables. The transformation program is across the board on most of our activity and processes. So we are looking forward to not consume as much cash in the upturn because, first, we do have excess equipment and we don't think the CapEx is going to turn around in a major way. And, yes, the transformation program will continue to contribute as it contributed in the downturn. So, <UNK>, just one clarification. So you asked me about the savings. So the savings we quoted was for all the test fleets we had in South Texas. It was not just one fleet. Sorry, did I get the concern you have, or the answer that you are looking for. Inventory is a big part of it as well, yes. That's what I meant by managing the material and supplies as well. So just to clarify, so I'm saying that obviously our international business and the state of that and the state of the international industry value chain is in much better shape than what the North America value chain is, in which case the basis for sustainable earnings growth at this stage is much higher and better internationally. Now, in North America, I think you've got to separate the industry view from just how Schlumberger navigates in the system. I think there are some questions and challenges to be asked, right. How is the industry in the next upcoming cycle going to be able to operate where the entire value chain ends up being cash flow and profit positive as we enter into a complete new cycle. That was not the case in the previous cycle and I don't think we can go on for many cycles in a similar type of fashion. Now, there is a part of North America land, which is viable even at lower prices, but how big that is and how much you can step up from the core acreage I think is to be seen. Now how we operate in that, we are aiming to be very competitive on efficiency and in addition to that continue to bring new technology into play, which can help our customers and drive our production per well. And we have a very good offering already in place for that, so we will continue to operate the way we have been with a focus in both these dimensions. But I think at this stage, if you look at the state of the industry value chain, I can't tell you that we are going to get back to previous peak margins in North America or North America land because at this stage I just don't see how that can be funded in the entire value chain. Good question. So look, we always said that we will be opportunistic on our buyback and we use excess cash, or remaining cash normally after the business needs to return it through buybacks. The $11.6 billion that we have in cash obviously do reflect excess cash, but excess cash should not be looked at on one given period. We have to project several quarters in advance. And during the quarter, there were major cash movements in relation to the Cameron acquisition, the cash we pay to the shareholders, we bought back some of the debt of Cameron, so we took a decision to slow down the buyback, sit back, reassess our need of cash, given all the opportunities we have in front of us and we will go back into the market. We are always in the market. Our policy will continue to be in the market, but it is not going to be evenly spread going forward. It is an exceptional period during the quarter due to the acquisition and basically a reassessment of how we are going to use the cash. But buyback will always be a part of our plan. All right. Thank you. So before we close this morning, I would like to summarize the four most important points that we've discussed. First, we believe that we have reached the bottom of the cycle and that E&P investments now have to increase in order for the industry to meet the growing supply deficit. As E&P investments start growing, a large part will initially have to be consumed on supplier industry price increases in order for capacity and capabilities to be available and for operating standards to be met. Second, most basins around the world are today at unprecedented low levels of activity and we expect to see a broad-based increase in investments going forward funded by higher oil prices. The magnitude and sustainability of the investment increase will however be a function of the financial viability of the entire oil industry value chain in each basin and country which will vary significantly. Third, our deep local knowledge, the breadth and depth of our technology offering, together with our geographical scale, will clearly set us apart and further enable us to deliver differentiated financial results going forward. And fourth, the shortfall in profits and cash flow throughout the entire industry value chain can only be permanently addressed by a dramatic step change in industry performance, including intrinsic quality and efficiency, technology system innovations and more aligned and collaborative business models. And Schlumberger is, and will remain at the absolute forefront of this industry transformation. That concludes today's call. Thank you for participating.

2016_SLB

2018

FSP

FSP #Good morning, and welcome to the Franklin Street Properties Fourth Quarter and Full Year 2017 Earnings Call. With me this morning are <UNK> <UNK>, our Chief Executive Officer; <UNK> <UNK>, our Chief Financial Officer; Jeff <UNK>, our President and Chief Investment Officer; and <UNK> <UNK>, President of FSP Property Management. Also with me this morning are Toby Daley, Senior Vice President and Regional Director of Atlanta and Houston; Will Friend, Senior Vice President and Regional Director of Denver and Minneapolis; and Patty McMullen, Senior Vice President and Regional Director of Dallas. Before I turn the call over to <UNK> <UNK>, I must read the following statement. Please note that various remarks that we may make about future expectations, plans and prospects for the company may constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the Risk Factors section of our annual report on Form 10-K for the year ended December 31, 2017, which is on file with the SEC. In addition, these forward-looking statements represent the company's expectations only as of today, February 14, 2018. While the company may elect to update these forward-looking statements, it specifically disclaims any obligation to do so. Any forward-looking statement should not be relied upon as representing the company's estimates or views as of any date subsequent to today. At times during this call, we may refer to funds from operations or FFO. A reconciliation of FFO to GAAP net income is contained in yesterday's press release, which is available in the Investor Relations section of our website at www.fspreit.com. Now I'll turn the call over to <UNK> <UNK>. <UNK>. Thank you, <UNK>, and good morning, everyone. On today's call, I'll begin with a brief overview of our fourth quarter and year-end results. And afterwards, our CEO, <UNK> <UNK>, will discuss our performance in more detail and provide some of his remarks. <UNK> <UNK>, our President of Asset ---+ the Asset Management team will then discuss recent leasing activities. And then Jeff <UNK>, our President and CIO, will discuss our investment and disposition activities. After that, we'll be happy to take questions. As a reminder, our comments today will refer to our earnings release supplemental package and 10-K, which were filed with the SEC last night and, as <UNK> mentioned, can be found on our website. We reported funds from operations, or FFO, of $26.3 million or $0.25 per share for the fourth quarter of 2017 and $111.4 million or $1.04 per share for the full year ended December 31, '17. Compared to the full year of 2016, FFO was about $5.1 million higher and a $0.01 per share higher based on our weighted average share this year. Turning to our balance sheet. At December 31, 2017, we had just over $1 billion of unsecured debt outstanding, and our debt service coverage ratio was about 3.9x. From a liquidity standpoint, we had $522 million available on our revolver and about $10 million in cash on our balance sheet or total liquidity of about $532 million at year-end. During the fourth quarter, we recast our bank debt and completed our inaugural issuance of a private placement of debt. We also had our investment-grade rating reaffirmed during Q4. The debt transactions we completed addressed near-term maturities and created a better debt stack for FSP. With the debt stack more termed out, we believe we have aligned our capital structure with the more long-term value-add properties that we have on our 5 core markets. With that, I'll turn the call over to <UNK>. <UNK>. Thank you, <UNK>, and welcome, everyone, to Franklin Street Properties Fourth Quarter Full Year 2017 Earnings Call. As <UNK> said, for the fourth quarter of 2017, FSP's funds from operations, or FFO, totaled approximately $26.3 million or $0.25 per share. For the full year 2017, FSP's FFO totaled approximately $111.4 million or $1.04 per share. During the fourth quarter of 2017, FSP took advantage of a flattening yield curve and lengthened the average maturity of its debt stack as the Federal Reserve continued to move up shorter-term interest rates. In the process, the company fixed interest rates on over 78% of its total debt, while increasing its line of credit availability to about $522 million at December 31, 2017, from $220 million at December 31, 2016, a year-over-year increase of over $300 million in liquidity. These actions culminated with the closing of our first-ever private placement of senior notes on December 20, 2017, and moved our weighted average debt maturity to approximately 4.5 years from 2.6 years. We estimate the weighted average interest rate on our debt will increase to 3.7% for 2018 from a weighted average interest rate of approximately 3% in 2017, and that assumes the effect of the one fed fund rate increase in December, which has already happened and then 3 anticipated fed fund rate increases in 2018. As we began 2018, our fixed-rate debt as a percentage of total debt is 78%, which is up from a weighted average of 59% in 2017. While this balance sheet action and anticipated fed fund increases will result in an estimated increased borrowing cost of about $7 million in 2018, it provides better matching of longer-term fixed cost capital characteristics with the longer-lived office assets we now own. At the same time, this action helps to reduce rising interest rate risk and other potential capital market disruptions. Over the past several years, our portfolio transition efforts have resulted in positioning a significant portion of our office properties square footage into more urban and infill locations, resulting in about 78% of our portfolio now being located within our 5 core markets of Atlanta, Dallas, Denver, Houston and Minneapolis. As of year-end 2017, the company's portfolio of 34 office properties totaling approximately 9.8 million square feet was 89.7% leased, up from 88.7% leased as of the end of the third quarter of 2017. FSP leased more square footage in the last 2 quarters of 2017 than in any 6-month period in its history. As 2018 begins, we are continuing to see the increased leasing momentum we experienced in the third and fourth quarters of 2017 and consequently are optimistic about the potential for improved occupancy during the course of the year. The energy-sensitive markets of Houston and Denver that have struggled over the last few years now appear to be stabilizing. When combined with broader value-add opportunities at many of our recently acquired urban-infill properties, we believe this trend should contribute to more positive leasing outcomes in 2018 and 2019. The transition of FSP's property portfolio from a suburban to a primarily urban orientation has generally resulted in higher leasing costs per square foot in exchange for longer leases and higher rents. With the anticipation of continued strong leasing of vacant space during 2018, we believe our net operating income, or NOI, from existing properties will continue to increase. While we can't be sure what our leasing volume and leasing costs will be in 2018 and in 2019, our objective is to reach 92% to 94% stabilized occupancy in our property portfolio. FSP is in a stronger financial position with more readily available liquidity than ever before to help it reach that objective. At this time, we are initiating our full year FFO guidance for 2018, which is estimated to be in the range of $0.96 to $1 per basic diluted share. Compared to our 2017 FFO per share, we estimate an approximately $0.07 per share reduction will be a result of projected rising interest rates in the fourth quarter reset of our debt stack toward a higher percentage of longer-term fixed-rate debt and an additional approximately $0.02 per share reduction is a result of the sale of our East Baltimore property in the fourth quarter, the proceeds of which have not been reinvested in any new properties. With those comments, let me turn the call over now to <UNK> <UNK>, President of our Property Management Company, to give some updates on leasing and the property portfolio. <UNK>. Thank you, <UNK>. Good morning, everyone. At the end of the fourth quarter, the FSP portfolio was 89.7% leased, which represents a 1% increase compared to the 88.7% leased at the end of the third quarter. As of year-end 2016, the portfolio was 89.3% leased. As expected, the portfolio lease occupancy improved during 2017. As forecasted, the surge in leasing momentum that we experienced in the third quarter carried over into the fourth quarter. The total leasing activity for the year finished at the high end of our projections at 1.47 million square feet with nearly 1 million square feet executed in the second half of 2017. The 6 months and 12 months of total leasing represent new highs for FSP. During 2017, the best-performing core markets for FSP were Dallas, Denver and Minneapolis. Denver, our largest core market, improved over the past 12 months from 87% leased to approximately 90% leased with 4 straight quarters of increasing leased occupancy. Our Denver portfolio is now in a 3-year high for leased occupancy. Dallas continued to be the hottest core market jumping from 90% to 96% leased during the year. Minneapolis also improved significantly from 79% leased to approximately 90% leased. This excludes the redevelopment of 801 Marquette. There's still quite a bit of upside remaining in our core portfolio, especially in Houston at 76% leased, Atlanta at 84% leased and in Minneapolis. We expect 3 of the 5 core markets to be in a range of 90% to 95% leased within the next 6 to 9 months. As we look out farther for the next 2 years in calendar 2018 and into calendar 2019, we expect more net absorption from a higher percentage of new leasing, which is expected to drive the total portfolio occupancy to 92% and above. With that, I will turn it over to Jeff <UNK>. Thank you, <UNK>. Good morning, everyone. Our focus at FSP is on long-term property NOI growth and value creation for our shareholders. FSP's property portfolio has continued its evolution and is now almost 80% located within our target markets. As <UNK> <UNK> noted, FSP saw strong leasing trends during the second half of 2017, and we are optimistic that this can continue. As we look forward, our primary efforts will be focused on leasing and tapping into potential upside in our vacancies and primarily within our target markets. On the disposition and asset recycling front, as part of our 5 target market urban-infill strategy, FSP has selectively explored potential dispositions of non-core properties when pricing and value maximization makes sense to do so. During calendar year 2017, FSP disposed of 3 non-core assets totaling approximately $48.1 million with 120 East Baltimore Street having been sold during the fourth quarter on October 20 for $31.6 million in net proceeds. Since 2014, we have sold properties or had mortgages repaid to us of approximately $230 million. While we do not provide specific disposition guidance for competitive marketing reasons, there is the potential for a couple of situations that we're exploring for the second half of 2018. And if price discovery were to be positive and we will keep the market posted over the coming quarters with any appropriate updates. And the expectation here at FSP would be to use any disposition proceeds received to pay down debt and to work to reinvest into new investments. On the acquisition and new investment front, FSP favors infill and urban properties within our targeted 5 markets that possess the ability to credibly have value added over the short to intermediate term. The acquisition's environment is highly competitive in our target markets. And while it is difficult to find credible value-creation opportunities, our 5 market focus is providing insights into opportunities that are both off and on market. With respect to any potential new investments, FSP would intend upon any such activity by utilizing the proceeds of any potential dispositions. We are not seeking to acquire for any increase in indebtedness. With that, I'd like to thank you for listening to our earnings conference call today and at this time turn it over to Q&A. Operator. Dave, sure. They're spread out. There isn't a spike in any of the quarters. They'll be fairly evenly spread out over the first 3 quarters of the year. As you would expect, because so much of the leasing happened in the second half of the year, there'll be, on average, a 4- or 5-month lag of the commencement dates. So you'll see a pretty evenly spread out commencement over the first half of the year. Yes, absolutely. So we have roughly 10.6% of the total portfolio expiring in 2018. There are 3 significant tenants expiring. The IRS with approximately 180,000 square feet has been engaged, and we expect them to renew, might be a slight downsizing. Burger King, 212,000 square feet or so, may hold over for a number of months. But they will eventually depart, either late in the year or early next year. That property Blue Lagoon in Miami is very well positioned. It will likely be multi-tenanted, but we're very excited about that property. Fannie Mae, 123,000 square feet or so, will depart early at Addison Circle in Dallas. We've already gotten a jump-start on that pre-leasing and we have great activity, might even have a lease or 2 signed before the Fannie Mae lease expires and as the Circle in Dallas have been ---+ continue to be very strong performers. So once you subtract those 3 tenants, our exposures down to about 5.3% and barring any surprises, we expect to renew approximately 60% to 70% of those tenants, which reduces our exposure further to about 2% of the portfolio. So we're feeling pretty good about that. And if our wave of surge of leasing continues, which we expect it to do, we think we'll be in great shape by midyear. We don't expect meaningful FFO in calendar 2018, but we're still holding out hope that we'll get a commencement in Q4, the lion's share that will slip into 2019. Yes, Dave. The FSP Board of Directors makes the decision on the amount of dividends to be paid each quarter and has not yet decided the dividend level for next quarter. But I can assure you, that along with all other factors that entered into their calculus for dividend levels, the CapEx associated with our anticipated increased level of leasing in 2018 and 2019 are being very focused on. The answer is what I've given, <UNK>, and it's the answer that I want to stay with. Well, I think ---+ I'm not sure how you calculate the TEV, <UNK>, but we work within covenants that have a sort of bank-defined leverage gap and we didn't come close to that. And that was talked out of using their definition at 60%, so the covenants worked out quite well. We have a bank group of 11 banks in total, and we worked really hard with them in October and prior to that to put those deals together and brought in a couple of big banks, too. So our group is pretty excited. Yes. Good morning, <UNK>. It's <UNK> <UNK>. The ---+ neither one of the Burger King and Fannie Mae situations require significant repositioning of the property. Both buildings are late '90s or approximately 2000 vintage buildings in great shape and were built to accommodate multiple tenants. Addison Circle has been multi-tenanted from the get-go and so there won't be any significant capital there other than reworking those floors for either single or multiple occupants. And then Blue Lagoon has been a single-tenant building, and so there'll be some modifications required but nothing significant. Thank you all for tuning into the conference call, earnings call. We look forward to next quarter. Thank you.

2018_FSP

2016

FCPT

FCPT #Thank you, Andrew. Joining me on the call today is <UNK> <UNK>, our Chief Executive Officer. Let me get the required language out of the way. During the course of this call we will make forward-looking statements, which are based on beliefs and assumptions made by information currently available to us. Our actual results will be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control or ability to predict. Our assumptions are not a guarantee of future performance and some will prove to be inaccurate. For a more detailed description of some potential risks, please refer to our SEC filings, which can be found on the Investor Relations section of our website. All of the information presented on this call is current as of today, May 9. In addition, reconciliation to non-GAAP financial measures presented on this call such as FFO and AFFO can be found in the Company's supplemental report, which can be obtained also on the Investor Relations section of our website. With that, I turn the call over to <UNK>. Thank you, <UNK>. And thank you for joining the call today. The existing portfolio performed as planned during the quarter, notably Darden was upgraded by all three rating agencies recently and is now rated BBB flat, BBB flat and Ba3. Our focus in the first quarter of the year was refining our investment strategy and building out our investment team. We made significant progress on both fronts. One acquisition team member on-boarded recently and a second is joining in a few weeks. We are exceptionally pleased with the individuals we are bringing on. Josh, who is with us today, joined us a few weeks ago from Goldman Sachs' Investment Banking Real Estate team and before that, Harvard. Patrick, the individual who is joining in a few weeks, was the primary mid-level Investment Banker at JP <UNK> who worked on the spinoff transaction. He knows Four Corners inside and out and we have had a great working relationship for a year and a half. While we have not closed any acquisitions to date, we have been very active in building a pipeline and screening deals. We have a number of properties under a letter of intent to purchase and still more under negotiation. We will announce acquisitions, even individual property purchases, soon after they close. For competitive reasons, we'd prefer not to do so before that. All of these transactions will be very consistent to the strategy we have laid out in our investor presentation and in numerous investor meetings. The market for single tenant net lease remains competitive, but we are seeing some sensible investments. Obviously as our cost of capital has improved, we are seeing more transactions that are quality credit and real estate, and are accretive to our long-term cost of capital. Let me now turn it over to <UNK> for a few comments on the first-quarter financial results. Thank you, <UNK>. I have a couple of comments on the results. First, cash rental income without rent leveling on our existing rental portfolio of 418 properties leased to Darden was $23.7 million for the quarter. I remind everybody that rents will increase annually by 1.5% for all 418 properties, each November starting this year. Second, in accordance with GAAP, the weighted average share calculation reflects the incremental 17.1 million shares that we issued to shareholders as part of the earnings and profits distribution in March, as if they had been outstanding for the entire first quarter. Total common shares outstanding are now 59.8 million shares, including the 17.1 million shares distributed. Third, as we have discussed before, we had a non-cash $80 million gain from the reversal of a deferred tax liability now that we are operating as a REIT and have completed our pre-REIT earnings and profit distribution. The gain was backed out in our reported funds from operation, in line with NAREIT guidance. With respect to our cash G&A expenses, we continue to feel comfortable with approximately a $10 million target for 2016 G&A expenses, after excluding non-cash stock compensation. As outlined in our earnings release, our results were higher than this run rate in the first quarter given one-time costs related to launching operations and reporting for the Company, including the special distribution and other expenses like our 2015 audit fee, which while expected couldn't be expensed until 2016 when the services were provided. On interest expense, I would point out that we recognized $380,000 in non-cash interest expense that was principally due to the portion of the mark-to-market losses on our hedging instruments deemed ineffective, and resulting from the flattening of the short-term forward curve rate in the first quarter. We adjust for these type of non-cash gains and losses when computing our cash AFFO earnings. On a related note, our coverage ratios remained strong with cash interest coverage of 6 times, and net debt to cash EBITDA at quarter end of 4.9 times. While our current low leverage will increase as we begin to draw on our four-year $350 million revolver to initially finance acquisitions, our philosophy remains to maintain a ratio of less than six times debt to EBITDA. Finally, a reminder to everyone that we are not providing guidance on acquisition levels or FFO and AFFO for the year, which is highly dependent on acquisition levels. However, we are reconfirming our belief that our current portfolio will produce approximately $1.18 in AFFO per share, consistent with prior 8-K filings. With that, let me turn it back to Andrew to open up the lines for Q&A. Sure. Great question, R. J. Without getting too specific on our current pipeline for competitive reasons, I don't view a transaction closed until it's closed. We're looking at one acquisition where a franchisee is selling his business and real estate to another franchisee, and we're stepping in coterminous with the closing of the business sale, that was an off-market transaction. We're seeing some individual properties that have been marketed where trade buyers have fallen out of contract and we are coming in at pricing that isn't as attractive but has a higher level [of surety] of close. And these are primarily QSR, nationally known QSR brands. Sure. Well I'll take the last question first, investment committee includes four out of the five Board members. We've had a couple of investment committee meetings. As far as screening, we've just built a simple module to screen properties quickly on criteria related to credit. That's things like rent to sales, the guarantor's financials and real estate, things like location and reuse potential. So nothing overly complex but just taking the time to make sure that our initial investments are sensible and on message. Thanks, R. J. Thanks, <UNK>. Perhaps by the end of the year, but for now we are pretty focused on on-boarding these folks effectively and I think we're pretty good for now. I'm not going to get into the size of the pipeline but I would say that our pricing is in the mid 6s to low 7s. And that's a cash divided by the purchase price. And as far as brands, these are nationally known brands that have decade long histories. Yes, I think it's clear that Texas is a relatively challenging operating environment and I think it's clear that San Antonio is outperforming meaningfully more oil dependent areas of Texas. We try to keep it simple. Very simply, it's as required by GAAP. Because of the size of the distribution we had to deem it as if it was a stock split and that requires us to count the shares as outstanding for the entire quarter, which is quite frankly the right way to look at it anyway. One, OP units is a meaningful driver, another was a franchisee that I have a relationship with going back several months. Others are simply fully marketed properties, so it's all across-the-board. We're a much smaller company than our competitors and so individual transactions, even if they're not very significant, will have a more ---+ a larger impact and so we sort of take transactions from all different angles. Many properties, there is a broker involved and we think that's fine. Just there can be different levels of how much of our property is marketed. You know, I would look at it a different way, which is we have a pretty specific understanding of how much we can acquire within our stated leverage limits. And given that, we wanted to make sure that we had a very sensible investment strategy and was well organized. And if that took us a couple extra months to do that, to bring on the right people so we can diligence assets effectively, then we were willing to spend that time. Now we've brought some folks on board, we're training them, so clearly the second half of the year given our cost of capital and the market being constant, I think you'll see more activity. Beginning of November, November 1. Thanks. I have no comment in that regard. Operator, next question. Thank you, everyone. Look forward to any follow-up questions that you may have. Thank you. Thanks, everyone.

2016_FCPT

2017

PVH

PVH #Sure. Well I guess I would say a couple of things, <UNK>. The department store sector in North America, in the United States in particular, it is very important to us and it is a highly profitable channel and those retailers are great strategic partners as we work together. But I think it is pretty clear that over the last seven years we have done a lot to significantly diversify our business model. Today 50% of our revenues are outside the United States. I think that is larger than just about every other major US apparel maker. I think it is critical as we go forward to continue to fuel that growth and we are seeing that growth in Europe and Asia really accelerating as we have made the investments over the last two years to really grow that business. And those businesses are by far our highest operating margin businesses. So, from that point of view it is critical. We have done a lot over the last four years to grow our digital sales base as well in North America but also around the world. So I think when I look at us competitively against our major ---+ the major players in the US market, I think we are significantly more diversified both from a sales and an earnings point of view geographically with 50% of our sales occurring outside the US and more than 50%, probably close to 60% of our profits outside the US. So, I would just say that I have heard this sense as well that because ---+ I think because we have such strong partnerships with (multiple speakers) retailers here in the United States that I think that there is a sense that we're overly dependent on that channel. It is critical and it is important to us, but I really feel strongly that we have done a tremendous amount to diversify our business model with our own retail, our digital platform and the international investments that we have been making as we go forward. There is no single retailer that represents close to 10% of our sales from that perspective. And I think overall when I look at the valuations as the CEO I do get frustrated. When I consider where we are trading as a price to earnings ratio against some of the competitive set, I tend to agree with you, I think it is just a misalignment at this point. Okay, but we don't get into all of that. But you are pretty close [game]; I don't think the number is that far off. So I think that is a reasonable perspective when you look at it. Sure. I guess I would just take a step back. More from a more micro and maybe more focusing on the short-term is, as you would expect, as we are looking out at the US retail landscape, the US market continues to be our most challenged market. And because of that we are planning that business conservatively and based on current trends that we're seeing in the market today. So, we are not looking for huge improvements in the second half of the year. We would hope that as things stabilize that we will actually see those. But from a planning point of view and a projecting point of view to the Street, we have really taken that third and fourth quarter and we have assumed that the trends we are seeing right now will just continue as we work through some of the malaise we see in North America. The growth for us, and I tried to cover it in my opening comments is really happening internationally. The big opportunity for us, and we have touched on in Europe, is the Calvin Klein brand. Just basically given the fact that it is about 30% the size of the Tommy Hilfiger business in Europe, that gives us the opportunity in Europe to really go after that business. We are seeing it materialize both in our retail comps and we are also seeing it materialize in our order books that I have tried to lay out for you. And there is really a significant amount of white space in Europe when you think about our sportswear businesses. We haven't launched women's yet in a meaningful way. Men's is in the early stages from a growth point of view. And the three categories that are really driving the growth today from just a size point of view are jeans, underwear and accessories. So clearly men's sportswear, men's tailored, the whole women's opportunity is all ahead of us there. Then when you move to Asia, that has been a significant area of growth for us. I think that will only continue. China does not show any slowdown in performance both for the Tommy brand and the Calvin brand. And I think there an expansion of our retail footprint and an expansion of our offering by product category will continue to drive strong top-line and bottom-line growth throughout Asia. And the last point I would make about our international business is it would be disingenuous [to] me to say I am not ---+ that we are not pleasantly surprised with the strength of the Tommy Hilfiger business. I mean, when you have a business as big as that is, that clearly in sportswear is the market leader throughout Europe. To be putting up in the first and second half of the year high-single-digit, low-double-digit growth on the wholesale side of the business I just think talks about the momentum that the brand has, the strength of the brand in that market, and the opportunities for that to continue as we move forward. Sure. I think as ---+ there is always pockets, but right now I would say is I think the retailers have done a very good job, in the department store sector in particular, about keeping inventories clean. We came out at the fourth quarter; I think they reacted strongly to some of the softer sales trends both from a tightening open to buy dollars and moving inventory out in the fourth quarter. So I think ---+ and the fact that I think that Easter is actually later this year, three weeks, it is a big timing shift, I think will position us well. So inventories and carryovers have really been cleaned up as we go forward. The other pressure that is coming from that sector is significant pressure is being put on inventory turn. So inventory open to buy dollars have been constricted. Whatever they are planning, be it flat sales or slightly negative comp sales, the buy plan is even lower than that. So I think that bodes well for gross margins as we go through the first quarter into the second quarter this year. And I think even the way they are projected to buy third and fourth quarter has been very tight as well given the trends that are in the business. I think competitively you have heard a number of our key partners talk about the strength of our business in their stores and their channel of distribution, particularly the Tommy Hilfiger business across the board, [Terry] has spoken a number of times and [Jeff] about the strength of the Tommy Hilfiger business at Macy's, that is our key account in North America. So we are clearly gaining square footage, we are gaining market share in numerous categories as we go forward. So I think competitively our business is much healthier than most of our competitive set as we move forward. And we know about the momentum behind the Calvin Klein brand, it just continues. So that brand has just been an unbelievably strong performer. With the buzz and the excitement around Raf Simons and what we have seen in the collection area from the orders and excitement about the placement of our collection product, I think the momentum we have seen in the Calvin Klein brand could accelerate as we go into the second half of the year. We are really excited about it. And as <UNK> talked about, we are not ---+ the other advantage I have, given our strong performances, we are not cutting back on investments. We are continuing to spend our marketing dollars. We are not under that kind of pressure that some of our competitive sets are that are really talking about pulling back their expenses, restructuring things that maybe are not as efficient and really hitting the marketing dollars. We have not backed off at all. We continue to spend as a percentage of sale at least as high as we did last year. And I think our voice in the marketing area, given that, as best I can tell, competitively most of the key brands have cut back, I think we are going to have a louder voice as we move forward. So I am enthusiastic and optimistic about how we will perform against our plans. As a backdrop, given the strength both in Calvin and Tommy, I think that is where the focus will continue to be. I think there continues to be some licensing buybacks that we would be excited to make, some of that always has to be done ---+ depends on the timing. Some of it with the timing of our licensees. But I think that is what you will in the short-term, the next six, nine months, that is what you probably see more of from us as we go forward. The True acquisition, there are some product categories where we have market leadership. And when you think about intimates, men's underwear, the dress furnishings areas, those are areas from a classification point of view that are very profitable businesses. And if there are opportunities from a digital point of view where we can make investments, gain expertise, because it is very expensive and challenging to go out and get the talent that is necessary. Sometimes it is easier and more efficient to buy that talent like we did with the True acquisition. I think in those areas you will also see us continuing to make those investments as we go forward, which will be strategic for the businesses, the brands and our businesses as we go forward. So I think that will be the focal point. And then finally, with the backdrop on the tax situation, be it the deductibility of interest and a number of things. We have a very strong balance sheet, but it is hard for a management group to sit back and really try to plan for any ---+ a major acquisition given the uncertainty around the capital structure and what the tax position is going to be here in the United States. So that does give us a little bit of pause. We are hoping over the next three to six months that that whole situation will become more clear. And hopefully we will be able to have more clarity in our decisions going forward. On a reported basis that would be correct. So, <UNK>, look, from our perspective there is two things going on. You are absolutely right; mix is a piece of it. Our international businesses have higher gross margins, also higher operating expense. But they are growing at a faster rate, so you are absolutely right. But when you outperform your models and when you perform your business you do have higher gross margins, you don't take the markdowns you plan, goods move out at higher AURs. So at this point the models ---+ the margin guidance reflects our models. Outperformance would definitely lead to some opportunity for upside. Yes, I think, <UNK>, when we look at the business and where we see the opportunity, look, there is always some sales opportunity. But we do see in the business models that we lay out that the opportunity really is gross margin expansion and then leveraging the SG&A on top of that. So I think it is ---+ that is how we are thinking about it, particularly in North America where I think ---+ chasing sales by buying more inventory upfront is a fool's errand right now. I think there is this opportunity if we outperform at retail that it really will show itself on the gross margin line. Well, I think as ---+ Li & Fung has been a great partner for us. Strategically we are changing the relationship from a buying commission basis to a strategic partnership putting the businesses together. We believe they can bring to us some real value added services from a speed efficiency model. And I think they are looking at their business model as it changes. It does a couple of things for us long-term, not in the short-term. Long-term it gives us the opportunity to reduce some of our buying commissions as we go forward as we are taking more direct control of the business jointly. And then secondarily, it is really from a speed point of view the initiative ---+ the ability for us to really take advantage of speed to market, quicker reaction time. From that point of view it is all very positive. So again, I think that changing relationship will be good for both companies. <UNK>, I just want to make sure I understand the question. To take businesses that are operating in house and potentially license them outside. I think that the women's issue there was the big one, particularly with Tommy. G-III is a great partner with amazing operating expertise in the women's side of the business. I think that opportunity is significant for them to really take the Tommy business and grow it in a similar way in the way ---+ the way they've grown our Calvin Klein business. But as I look at the other categories, no, I don't see big opportunities to take businesses out and outsource them at this point in time, that was the big opportunity. Well, I guess look, I don't want to give ---+ we give a lot of breakout of the businesses and the brands and I don't want to micro it down to it. I guess I would ---+ to give you a sense of scale, the Calvin business is three times the size of the Tommy business in China. And as we look at those businesses, we believe we can double the size of both businesses in China over the next five years. And the China business model for us is our highest operating income business as a percentage of sales. So the more growth there net of some of the investments we have to make to scale up. But as we look at that business scaling up over the next three years, we see the profitability in that business continuing to grow. Yes, look I think it is twofold, one is the revenue increase on the Tommy side is a driver. The gross margins is clearly the biggest component. We are seeing improvement in expansion in gross margin both businesses, but Tommy very healthy. And then lastly, as you said, the investments in Calvin Klein for the first three quarters are going to be a little bit of a drag. So I think, <UNK>, I think you laid it out just right. I think the big driver of the Tommy expansion is the international business is significantly more profitable as a percentage of sales than the North America business. As that growth accelerates and we are planning our US business relatively flat, that will drive profitability. The other piece I guess just to add on is obviously the royalty income from G-III where we are taking about a $100 million annual basis in women's that was marginally profitable and replacing that ---+ eliminating $100 million in sales and replacing that with a normal royalty rate for that business, that just also enhances the overall profitability of the segment. So, we haven't guided towards free cash flow, but last year's free cash flow was about $700 million. And when you think about CapEx this year, I guess when you ---+ we have got about $400 million of CapEx, but the way to think about that is we have shifted about $65 million to $70 million from 2016 into 2017, just projects that didn't get paid and didn't get done in 2016, moved into 2017. And then two other call outs in terms of an increase in CapEx. One is we are moving our Tommy offices in New York, new facility; there is some significant CapEx there. And two is we are making some nice investments on the digital side of the business. When you add that all up it comes out to about $400 million. Just a reminder, $250 million in debt paid down and then we talked about stock buyback between $200 million to $250 million. Yes, look, I think everybody has got a sense that the Tommy business is a $2 billion business and I called out that Calvin was about 30% of that. That gives you a pretty ---+ if you could do the math that will give you a pretty good idea of how big the Calvin business is and the opportunity for growth that we see there. The margins are healthy, they are close to 10% and they are probably 300 to 400 basis points lower than Tommy just given the scale of the business. And we would expect that over time that they would equate to the Tommy business. Sure. Look, I guess the nice thing about our retail portfolio, with the exception of a few flagship stores; it is what I would describe as a very liquid portfolio, meaning that renewals come up every ---+ some two years, some three to four years. In the A centers we have much longer leases and those you wouldn't be looking to get out of. I guess a couple of the things that we are looking at is we have had what I would call some real megastores in some key centers that have been ---+ that are highly profitable, continue to be highly profitable, but the general square footage and the footprint as we go forward for stores we are opening in general across the globe, not just in North America ---+ using digital technology the stores can be smaller and more efficient from that point of view. So, we are looking at the footprints, we are looking as open new stores and as leases come due does it make sense to downsize some of the portfolio ---+ the store size as it goes forward. With the exception of some of our flagship stores which are really marketing drivers, not business drivers, we don't have stores that are four wall losses, particularly ---+ specifically in Calvin and Tommy. So we don't have that burden that we really need to deal with. Our retail stores and our store contributions are very, very healthy, they've been challenge given what has happened with the strength of the dollar and some of the international tourism. But even after that these stores are wildly profitable for us. So we monitor them, we stay on top of it, we have great flexibility there. But I think if you were modeling that business moving forward, I think I wouldn't be planning it for significant growth over the next two years. Well, <UNK>, I think brick-and-mortar in general is under pressure. But I think in ---+ one of the benefits that exists in Europe, and one in Asia even to a greater extent, is the level of retail square footage on a per capita basis is just significantly lower, 50% lower than it is in the United States. So I think some of the challenges with ---+ the challenges that we are facing brick-and-mortar in the United States has to do with there is too many stores. I don't believe that issue to the level that it exists in the United States exists in Europe or in Asia. So that is point 1. Point 2 is the retail landscape, particularly on the department store side and specialty multi-brand stores; it is just much more fragmented than in the United States. The United States has gone through a tremendous consolidation in the department store sector, where Europe has had minimal consolidation. There is no pan-European department store; it is really regional department stores, most times country specific but sometimes regionally specific. So from that perspective it is ---+ our top 20 retailers in Europe represent about 30% of the business. Our top 10 retailers in the United States represent 90% of the business, just to give you a frame of reference. So I think that is a dynamic that changes. I think traffic trends are healthier obviously there. I think the currency situation, particularly in the UK, is very favorable and they are benefiting from a significant amount of European tourism into the UK as well as Asia and US tourism into the UK. And I can say the same thing about Continental Europe where we are seeing from the credit card data that we look at every month that ---+ particularly Chinese stores given the euro's lack of strength, is also a place that there is a lot of tourism going on and a lot of shopping going on. So we're really benefiting from that. I also think when you look at it we are clearly outperforming our peer set. We are gaining market share in department stores, we are gaining square footage growth in department stores. And as much as I think a number of competitors have talked about that their European businesses are healthy, I don't think anybody is putting up the kind of wholesale order book increases that Calvin and Tommy are. Operator, we would like to take one last question so we can get back to work (laughter). That is a really broad question that I don't think has really been answered yet. Just trying to understand all of that ---+ and one thing you are concerned ---+ as a retailer or wholesaler the one thing that I do get concerned about is that there has always been a significant amount of impulse shopping that the consumer does when they are in store and in the hot zone where they purchase. And if traffic is down I am not sure the impulse nature of online is as significant as it is in a brick-and-mortar store where you are able to romance the consumer more. So I think that is a challenge. I think some of it has to do with we need to be better ---+ and by we I mean us and our partners, need to be better about making the online shopping experience not only efficient and effective, but we also ---+ we are in the fashion industry and we need to romance that consumer much more than we do today. I think some players do it well and some players don't do it at all, it is just like buying a bar of soap. So we really need to make that experience much better. No, but there is no general change. I would say to the usual remodeling and rehab, nothing out of the ordinary at all this year. Well, thank you, everyone. Thank you for joining us for the call. Thank you for your support and we will speak to you in May. Take care. Bye-bye.

2017_PVH

2017

ESE

ESE #Thanks, <UNK>. And good afternoon. Before I turn it over to <UNK> for his financial commentary, I'll provide an update on the status of the integration and operating performance of our most recent acquisitions. Starting with technical packaging, both Fremont and Plastique continue to perform ahead of our original financial expectations. We continue to see several meaningful opportunities to grow these businesses, and expand our medical, pharma and fiber pack product offerings both domestic and internationally. The management teams in place when we acquired both companies have proven very capable. Coming from a relatively small private company environment, I've been really impressed with the way the teams adapted their skill set so quickly into a public company world which you can appreciate is not an easy task. As a result, we've been able to promote several key managers in the positions of increased responsibility. With Westland, we not only acquired an outstanding company and a meaningful contributor to the protection of the US naval fleet, but also a solid management team, who are deep on talent and solidly committed to our business and our success. This has allowed the integration to go smoothly and efficiently. I'm pleased to see Westland outperform expectations in Q1 and I anticipate continued solid performance over the balance of the year. Wrapping up on the Westland, I had the opportunity to spend time with our President and I'm impressed that not only with his product knowledge and industry expertise, but with the deep relationships he's established across our customer base. I'm certain these factors will allow Westland to increase it's product contributions over time, as we continue to develop new products and highly engineered applications to meet our customers increasing requirements. Lastly, with Mayday we not only acquired a unique set of high end process skills, covering a broad range of products and applications, but also a very energetic, and knowledgeable management team. The production work flow demands are very dynamic as they change frequently, with short notice delivery schedules. This requires a management mindset that's both agile, yet highly processed focused given the tight tolerances and demanding specs that leave no margin for error. Our Mayday team is strong, experienced and well positioned to take on any challenges thrown their way. The integration has gone smoothly and is on schedule. And I'm pleased to report that our Texas teammates seem excited to be a part of ESCO, as they see the growth opportunities in front of them. So to wrap up, it's always been my strongly-held belief that to be successful with M&A, you not only have to find the right company but more importantly, you have to find the right management teams to lead the organization and take your strategic investment and vision and make it a reality. I think we've accomplished those objectives with all of our new partners. Now, I'll turn it over to <UNK> for a few financial highlights before providing you with some operational commentary. Thanks, <UNK>. At the start of the year, we laid out our detailed guidance for Q1 as well as for the full year and noted that our quarterly earnings profile was back end loaded similar to years' past. Our Q1 EPS was projected to be in the range of $0.35 to $0.40 a share on a GAAP basis and additionally we indicated our GAAP earnings were impacted by some non-cash purchase accounting charges related to our recent acquisitions. We described and quantified these incremental charges related to the inventory step-up of Mayday, as well as additional or incremental non-cash depreciation and amortization charges that were expected to be incurred as a result of our recent M&A actions. As noted in the release, we delivered Q1 GAAP EPS of $0.41 a share, which beat the top end of the expected range, despite some timing related sales head wind at Test and VACCO. We were able to beat the top end of our earnings targets as Doble's Q1 sales and earnings came in well ahead of plan. Coupled with the continued strength of our commercial aerospace platform, which once again delivered outstanding results. Westland and Mayday's contributions were better than expected in Q1, as they delivered a combined $13 million in sales, with EBIT margins well above their earlier commitments. Mayday's inventory step-up charge recorded in Q1 was approximately $1 million. And as we noted in the financial tables within the release, depreciation and amortization increased $1.7 million in Q1 compared to the comparable prior-year quarter. So on an EBITDA basis, we increased our Q1 contribution significantly despite incurring a $1 million inventory step-up charge of Mayday. We're confident that the timing related shortfalls in Q1 at Test and VACCO will not impact our outlook for the year. And as confidence is validated by the significant level of Test orders booked in Q1, that we expect to convert to sales over the remainder of the year, as well as VACCO's legacy space and Navy business in backlog, that is scheduled for completion in the next few months. A few other Q1 highlights include the strength of our entered orders, especially as I noted in Test, which reported a 1.66 book to bill. I'm also pleased to report that each of our operating segments delivered positive book to bill, which increased our backlog by $37 million or 11% since the start of the year. Additionally, we beat our cash flow forecast in Q1, as we delivered $16 million of net cash provided by operating activities, and ended the quarter with net debt of approximately $128 million, and a very reasonable leverage ratio of approximately 1.5. Given our solid start to the year, our EPS and EBITDA outlook for the balance of 2017 remains consistent with the expectations communicated earlier. We continue to expect 2017's EBITDA to increase between 21% and 23%, and be in the range of $122 million to $124 million compared to the 2016's adjusted EBITDA of $101 million. So given today's outlook, we remain well positioned to achieve our financial goals as we continue to see meaningful sales, EBIT and EBITDA growth across each of our business segments in 2017 and in the longer term, we expect to exceed the growth rates of our defined peer group and the broader industrial market in total. Our Q2 EPS guidance is projected to be in the range of $0.37 to $0.42 a share on a GAAP basis. And as a reminder, this includes the remaining balance of Mayday's inventory step-up charge, and the quarterly impact of incremental depreciation and amortization as we communicated previously. So I'll be happy to address any specific financial questions when we get to the Q&A and I'll turn it back over to <UNK>. Thanks, <UNK>. I'm pleased with our quarter one results from a lot of perspectives. Mainly because of the way we exceed our earnings commitment, despite the sales head wind at Test and VACCO. Exceptional performances were delivered by Doble, and our aerospace businesses more than offset the timing issues noted. I firmly believe our Q1 results once again validated one of our major benefits of maintaining our multi-segment business platform. Given our diversity of end markets, we can usually manage around various operational stress points, given that we have several alternative paths to achieve success. In Q1 I believe we did what we do best. I'm proud that our collective management teams came together to deliver operating results, which again exceeded our internal expectations, despite the noted challenges. Since <UNK> covered the financial details in his commentary, I'll focus my comments on the balance of 2017. Looking at the business today and the opportunities and challenges in front of us, I remain confident that all of our businesses are in solid financial condition, with known and quantifiable growth opportunities and we're well positioned to deliver commitments in 2017 and the out years. As I've regularly commented during our earnings calls, we are not immune to economic head winds, many industrial markets are facing today. With that said, I firmly believe the breadth and the diversity of our end markets and the specific niches that we operate in, continue to provide us with a protection to mitigate this pressure as is evidenced in Q1. I'll provide a few brief comments on individual businesses. In filtration we continue to expect the segment to deliver solid results in sales growth, EBIT and EBITDA contributions and cash flows during 2017. We remain well positioned on several fronts, including the continued upcycle in commercial aerospace, contributions from Westland and Mayday, growing opportunities in space, on the SLS program and unparalleled technology on Navy submarine and surface ships, which are critical to our national security. Our technical packaging groups outlook is solid, as we have meaningful scale and market leadership positions across several growth markets and geographies. We're well positioned in the global markets to provide highly engineered products to customers in the medical, pharmaceutical and consumer markets. Given this positive outlook, we are making additional investments in this business, by adding a medical clean room in the UK, and by expanding the manufacturing plant in Poland to capitalize on its lower manufacturing costs and adding additional capacity for fiber packaging. I remain confident the opportunities we are seeing globally set us up nicely today and in the out years. Moving on to Doble, we are seeing some easing of the spending constraints within the electric, utility capital budgets, and we set our growth expectations around these opportunities. We continue to see additional upside opportunities in our software and service applications, which can help mitigate any slower than expected budgetary spending. During Q1, we saw solid performance from our new products, such as the M Series, DoblePRIME and DUC, coupled with the strength of our software offerings, I remain enthusiastic about Doble's future. At Test while Q1 sales performance was below plan, due to the timing of orders from one of our key customers our real disappointment was that the temporarily lower sales masked the real impact of the cost savings we implemented last year. As the year progresses and a strong backlog converts to meaningful, quarterly sales increases, we expect to deliver our EBIT margin commitments established earlier. As I noted in my opening comments, I'm really pleased with our recent M&A activity and while we've been busy completing and integrating these deals, we're not done. Acquisitions remain a key component of our ability to meet our longer term growth targets and we continue to evaluate several exciting opportunities. We certainly have the balance sheet capacity to do more M&A, and we have the management bandwidth to handle this additional growth within our current operating infrastructure. But we will continue to be disciplined in our approach and not lose focus on improvement in our returns. Wrapping up, I'm pleased with Q1 results and I remain confident that our outlook for 2017 remains solid. As you know, in business you never get to declare victory, so as we move forward throughout the year, our focus remains constant. Continue to improve our operational performance, and to execute our growth opportunities both organic and through acquisitions because this is how we'll increase shareholder value. I'll now be glad to answer any questions you have. Yes. Okay. So that was a really long question. If I don't answer the whole thing come back and we'll try to clean it up. Things are going well at Doble, specifically some of the new products. As you know, most of the products at Doble are very long-live products. Once we implement them, get into the field, they'll be there for a long time. The key products I specifically talked about with the M product, which is a product we introduced probably in the last, you know, 18 months. It's replacing some of our other products. Although not one for one, but that is really off to a strong start. I'd say the sales for that product have been a little bit above what we thought they were going to be and that is a product that's going to go be in the field for quite some time. It also is a product that's going to go into our lease pool, which as you know is a very good part of our business, because you have some predictability in it. Also, on the software side, as you mentioned, whether it be arms or some of the things we've got through ENOSERV, that's been going well. The arms is a long sales cycle. But we are starting to get some good traction there. But this ENOSERV is a business we bought in Tulsa, a software business. It has been a real success. We don't talk a lot about it, it's a fairly small business. As I say, it's really exceeded expectation and given us another product to take to the market. And then with the DUC system, the Doble Universal Controller, we have two pretty significant sales in the first quarter on that product. And we see that accelerating as we go forward. So I would say that, you know, Doble is really doing well. And that's a traditional products that we continue to sell, that's gone well. We've got new product introductions in the early stages, I would say. And then we really emphasize the service side, particularly internationally. What we're finding is getting some of those customers, having them understand the services, us doing some work for them, like we're doing with Saudi, gets us engrained with the engineers, helping them understand our capability and our capacity and then what we're able to do then is take that and turn those into hardware sales as well. So whether that be at Saudi or some other place in the Middle East where we're starting to see success or South Africa, we're really kind of leading with the services and then able to follow up with the hardware sales. You know, it's been a real success story. We're in the third year of the contract with them. In addition to the service side, we have sold a decent amount of hardware. I don't think this is a contract that's going to just come up to, you know, end of the year and stop. I think they really see the value of what we're providing and I think there's going to be a long return opportunity for us, a longer-term relationship that's not defined at this point. There have been conversations about that, but it's really too early to tell. But I would say the customer has been exceptionally appreciative of what we've been able to do. And I think we've gotten them a long way. You know, that is, there's a lot of work to be done there if they choose to go forward. I'm pretty sure they'll be working with us, they've been very happy with the support they've gotten from the team. As far as the margins it's really two things. The business Plastique that we bought in Europe, their first quarter is always pretty soft, because their big quarter is kind of the second, well, from the second half of the second quarter and the third quarter. So, theirs is a pretty seasonal business, we knew that. So this quarter is always soft. So that's part of it. The other piece of it is the KAZ product, the thermoscan thermometer covers, you know, was a pretty mild flu season last year. They had a good bit of inventory left, so they pulled back on the production of that product in the first quarter. Now it's back up at full production, as of January. We're selling about $1 million a month there. But that was pretty significantly cut back in the first quarter. So those are really the two thing that impacted. I don't have a concern about the margins for the year. It's just that this first quarter, probably the first half of the second quarter is soft as a result, primarily the timing of the Plastique. And then as far as investment, yes, when we made the acquisition, the plan always was to make the investment there, because the plant they have in Poland, it's a good plant, but it's not big enough for the work we have in the pipeline. So we want to get that in place, so that, you know, as that business comes in, we're able to fulfill it. And we've already gotten a good bit of the work, a good bit of the orders that are going to fill those new machines in the factory. The other thing that I mentioned was the medical clean room in the UK. One of the primary reasons we wanted to have the operation in Europe, was because we weren't able to effectively service the medical clients out of the US, just because of the shipping costs. And so what we committed to do was to set up a clean room, facilitize that with the same equipment that we use in our US based business so that we'd be able to service those customers. And so we're in the process of doing that. I think all of those investments will be completed by the middle of the summer and we'll be up and running in both of those locations and able to support those customers. And hey, <UNK>, let me put a couple of numbers around what <UNK> was saying relative to the seasonality. So in Q1 you'll notice in the release I called out Plastiqe did about $7 million in revenue and their annual run rate is about 36. So, if you're looking at annualizing that seven, obviously that's 28. So you can see when you're running it at that lower volume, you're getting stuck with a lot of overhead, because there's a lot of manufacturing. And then on the KAZ business, it tends to be about $900,000 a month. So, you know, say somewhere between $2.5 million or so would be the impact of that. And that's almost a fully automated process. So when that business is not coming through, there's a lot of overhead sitting on those machines that aren't being put through. So those are the two ---+ that's the math around <UNK>'s commentary. You got it. It won't. I'll let <UNK> talk about the magnitude. I don't think we'll be fully recovered in the second quarter. I think it's going to be really the third and fourth quarter before we're able to get those pulled through, primarily because of the timing of the orders and customer acceptance of some of the VACCO product. <UNK>, numbers around that on the VACCO side, relative to our November conversation, VACCO is about $2.7 million or $2.8 million light on the revenue and the Test business with the order profile was about $2 million to $2.2 million. So, together it's about $5 million. So, I'll try to get the numbers right. We have $6 million to $8 million of content on the submarine. On a typical submarine. So if those build rates go up, you'll see that type of pull-through. That's at VACCO. We have additional at Westland. So two of them together, somewhere between $8 million and $10 million a ship set. You can see if they do increase production it will have a pretty significant impact. Those are both fairly profitable businesses. Sure. So as I mentioned at the start of the discussion, the integration, I wouldn't say it's completed. But we're very far down the road. These three acquisitions have probably been three of the most easily integrated that we've had. I wasn't just talking about the management team to make them feel good, people have really jumped on board with these things. We also used some internal resources to help with the integration. We're fortunate to have finance person to put it in at Mayday for a while after we made that transition. And also we have a transition service agreement with the prior owners. So it's been a very easy transition and I'd say we're almost complete there. So we are certainly back out and looking for additional acquisitions. There are several things out there that we see of interest. I'd say the valuations have not been crazy. I'd say they've been and I think you've seen from what we've bought more recently, we've been able to get three quality companies for a reasonable, a multiple and we see that continuing, at least the things we're looking at now. So the activity over the past 18 months have been very good for us, we're happy we're able to get four things done over the past 18 months. And, you know, our hope is to continue to do that. I think you'll see us continue to do the type of acquisitions that we've done over the past 18 months. I think the size that (inaudible) approach of those businesses are what we really do well. So we'll continue to remain disciplined and look for opportunities like those. I think they're good opportunities out there. I think that's pretty spot on, you know, when we gave the guidance range of the EBITDA, you know, we said kind of a 123, 124 kind of number. And so if you use that as the peg and put the revenue projections we're talking about, I think on a consolidated basis, you can get a little north of 18. And then on an operations basis, and I don't mean backing stuff out, just not counting the corporate costs and that sort of thing, it's, yes, it's pretty close to 22. Yes. I'd start with the operational side and then <UNK> can do the M&A side, because I think obviously as long as we keep buying stuff at less than what we're trading for, I think it adds value. But, you know, while we're doing well with the integration of these businesses, there's still some inefficiency because we have a lot of corporate people involved and there just not out at the subsidiaries doing their own thing yet. Once they get going through our processes and integrate those, where they're doing it, I think there's a little bit an upside in the longer term relative to that. Plus I think what I'm seeing from the numbers is when you look at these smaller companies like a Mayday and Westland that were stand alone in private equity, no offense to private equity, but I think customers have a feel for private equity that, you know, we going to do business with the same folks five years from now. I thinking about part of a bigger company is where that enthusiasm is the folks on our side at Westland and Mayday talked to me, they're excited to be part of a big company, because now when they're talking to customers, they know that the stake in the ground is put there. And it's going to be a part of ESCO and will not be flipped six months from now or a year from now. Both of those thing will bode well in the longer term from what we have. And <UNK>'s comments on the M&A, we're not going to buy fixer-uppers. Yes, follow up a little bit. And the companies we bought certainly were not and I would say previous owners did a nice job of investing in the business and making sure that they had what they needed. Having said that, obviously being a part of a larger company, we can make larger investments. I would say, particularly in the sales and marketing side, where maybe they couldn't put enough people out in the field. We have a lot of people in the field already. I think we can capitalize on the fact that we have maybe broader customer relationships, we have some thoughts on other markets we can get into. And I think just having that is probably our biggest opportunity. I think we'll get more on the growth of these businesses and we will, you know, just doing a better manufacturing. Because we're doing a pretty good job. I think we can add some things there, just because any time you have a larger business, or often you have a larger business, there's more expertise within the organizations to help. But we don't buy fixer-uppers and we're not going to in the future. That's not who we are. We don't have the bandwidth to go fix businesses. We certainly can help manage businesses. But that's not what we're planning to do. Thank you, <UNK>. Okay. Well, thanks, everybody, for your questions and comments today. Look forward to talking to you at the next call.

2017_ESE

2015

LPNT

LPNT #So, <UNK>, as we look at some of the pieces or look at the different components of margins, we have not historically reported EBITDA on a same-store basis. As you know, we have been evaluating a number of things in our reporting. It's something we are considering as we go through the end of this year. So, we did give a number of data points that I think help point to directionally how we are performing in those metrics. So, walking some of those including salary, wage and benefit, first we talked about reform. In that $13 million, the incremental piece year-over-year is about $5 million to EBITDA so it is about a 50 basis point benefit. Partially offsetting reform, we had about a 20 basis point headwind from year-over-year meaningful use declines. And then, in operations and specifically to salary, wage, and benefits that you mentioned, we were up slightly 10 basis points in the SWB line. If you looked at it sequentially, it is very consistent, and a lot of that has to do with some of the hospitals that we have acquired rolling into same-store now and working through that progression of margins that I just described with A. J. We look at the same-store supply costs that I mentioned, down 20 basis points, and we look at the same-store other operating expenses down 60 basis points. The total of all of those you can get to a very favorable effect in same-store that's about 80 basis points. So, we have created a very strong engine through these acquisitions that are now rolling into our same-store results year-over-year, and so we will be evaluating the presentation of that as we look through to the remaining quarters in the year. The only thing I will add to <UNK>'s comment, specifically to salary and benefits. The new hospitals rolling in is clearly a driver. It gives us opportunities over time to continue to integrate those hospitals in, but also the continued physician employment. Bringing on new physicians into the organization or aligning with physicians that are already in the market, that their salary costs are rolling into that number. Very strategic decisions that we are making, and we will continue to do that when appropriate. <UNK>, we don't comment on specific pieces within our discount group, our commercial group. We have historically seen price increases of 4% to 6%. We see those that ---+ we see contracts that renew throughout the year. As we look at and evaluate pricing adjusted for some of the lower acuity ED volumes, we are seeing pricing consistent with the guidance range that we had talked about, overall up 2% to 2.5%. And, pricing in that commercial bucket that is very consistent with historical trends including the negotiations that were completed in the first quarter and contracts that were extended and renewed in the first quarter. As we look at the finalization of some of the fee schedules on the Medicare side, very consistent with what our expectations were. <UNK>, as we look at the quarter and evaluate the quarter, our results were very consistent with our expectations. I think as you look at our consolidated EBITDA margin, there is a fairly significant weight that is put on that as a function of the $0.25 billion in revenue that is in our new store operations that are in a mid-single-digit range. But, as I walk through on the same-store metrics, being up close to 80 basis points on a period-to-period basis for the quarters is very consistent with what we were trying to accomplish from an operational perspective. <UNK>, let me give a little more detail to make sure that I was clear in how I described the impact of reform. So, the $13 million that I described is the total impact of reform that we experienced in the first quarter of 2015 as compared to really the fourth quarter of 2013. So, it is the impact from our self-pay that is now secured coverage under either Medicaid or insurance exchange products from the beginning of reform. When I talked about the $5 million incremental benefit, that benefit is the incremental that we saw from the first quarter of 2014 to the first quarter of 2015. And, if you recall, the first quarter of 2014, we were at the high end of what we had expected to see, but we were about $8 million in benefit from reform that first quarter of last year which then we saw sequentially improve in the second, third, and fourth quarter. And so, sequentially from the fourth quarter, we are at a very small amount, but not to the degree that we were up from the first quarter of 2014 and the first quarter of 2015. Now, in terms of your comment about Pennsylvania, that is exactly right. We have not included the impact of Pennsylvania in that $13 million number, and we've done that to make sure we remain consistent in how we've described the impact on a same-store basis. If we were to peel back what we believe we have seen in Pennsylvania, it's about a $2 million to $3 million annual benefit associated with reform there. And, we're working to make that benefit more significant as we work through enrollment opportunities, et cetera. As we sit here right now, that's correct. That's right. Yes. <UNK> just to be clear, too, as we've talked about our quarterly benefit from reform of about $10 million to $15 million, and we provided a range like that because you really can't predict ---+ are you going to have an exchange patient that comes in or Medicaid volumes and the rest of it. Inside of that $10 million to $15 million a quarter is about $3 million to $5 million coming from the exchange. And so, the impact of the exchange because of the smaller number of patients in our markets that have been exchange eligible, it has not been as impactful as perhaps it is in a more urban environment. Now, we are hopeful that, that exchange benefit will have grown because our enrollment experience as we went through year-end and the quarter was very solid. And, the receptivity to our outbound calls was materially different than it was going into 2014 with all of the issues around Obamacare, the issues with the website, et cetera. It's still early in the year there. I think our reform estimates have been very consistent with what our experience has been, but we remain optimistic that we could see some more out of that. Yes. We're in the process of rolling out a national quality program with Duke. That we have developed alongside Duke. It is an outgrowth of our experience as a partner in the partnership for patients, the hospital engagement network that we've talked about in the past. As you remember, LifePoint was the top performing hen in that partnership of patients, and so what we're doing is were taking that experience and we are spreading it out across the country with our partner, Duke. So, they bring a great deal of data analytics, they bring a great deal of help to us that we have the ability then to put into all of our hospitals. It's an exciting opportunity for us, and one that we will be working hard on to just further deepen the culture of safety that we have created in LifePoint. Yes. This is more focused operations, is the way I think about it. This is what we are calling out as being important within our hospitals to work on in order to reduce variation, if you will. In order to bring more standardized processes and procedures across the hospitals in order to be able to care for patients the same way every time. So, it's a lot about that. No. There hasn't been anything noticeable, <UNK>, on reduction of services or driving in patient, outpatient. We do think it is just industry trends and practice patterns. For the quarter, we did experience significant growth as you can see in the press release in outpatient surgical volumes. Roughly 20% of our surgeries are inpatient. 80% are outpatient. Across the outpatient, every product line saw growth during the course of the quarter. It has been a while since we've seen consistently across every service line that kind of growth, but that's what we did experience in the quarter primarily driven from really strong general surgical volumes happening throughout the country. There is always some end-market-type transactions that we're looking at, and those obviously are centered around outpatient practices whether they are oncology practices or ASEs in some markets. You will not see us build a greenfield ASE. We have plenty of capacity inside of our hospitals, but where there are ASEs in communities or communities that are close [to ours], we want to stretch out our borders a little bit more. We will go and put those stakes in the ground. There is no significant [cash flow] investments that aren't contemplated in our guidance for CapEx for this year. <UNK>, consistent with our past practice, you should expect us to update guidance at the end of the second quarter. We've always believed it's too early at the end of the first quarter to start making extrapolations or changes, particularly when we are as consistent with our results as we were here in the first quarter. No. So, very consistent in terms of the core operations as we look at and evaluate net revenue per AA, you have reform that provided an impact as we look at it year-over-year. So, you've got $5 million in there that relates to that, and then we have the low acuity ED volume activity which is ---+ it's a core part of the growth. I think that we are hopeful that it is very reflective of all the operational things that we have done. There has been a lot there in terms of length of stay, left without treatment, and the time between arrival and medical screening exam that have moved remarkably well as a function of the initiatives that are there. But, it has had a dilutive effect on the overall revenue per adjusted admission. There are no other pieces. And, remember as we purport the same-store piece, it backs out the divestitures from the base year and from the current period so that it provides an accurate comparison between the two periods. Yes. If you look ---+ we will disclose here later today when we file the 10-Q, net revenue per equivalent admission on a consolidated basis and on a same-hospital basis, and you'll see that they are very consistent with one another. So, it just depends on the particular hospital and the service lines that are being offered there, and it also depends on the degree to which outpatient services are being provided relative to inpatient services in the particular community. But, as you'll see between our new-store and same-store operations, there is not a meaningful difference in the total on a revenue per equivalent admission between continuing ops and between same-store. So, they are fairly consistent. We finished the first quarter of 2015 with one-day stays at 15.1% of total, and when we look at it first quarter of 2014, they were 16.2% of total. So, that's down 110 basis points on that metric. So, <UNK>, in terms of the magnitude, I will start at the back and work forward. In the first quarter, gross, it's about $65 million. So, the net number that we recognized is about $28 million, and so really everything in between in that 56% that we deemed uncollectible is opportunity. There are a number of strategies that we are working hard on around point-of-sale collections, around our reimbursement strategies that should help us on that front. In terms of where do we get to on that front, I think that is to some degree a slow progress, but it's one that we are focused on through the remainder of 2015. The absolute number in the first quarter is always higher because you've got January 1 renewals of folks' deductibles. So, as an absolute dollar amount, it won't be as big as we move into the second quarter, the third quarter, and the fourth quarter. And then, if we separate for a second from point-of-sale collections and look at it in the metric I shared, which is as a percent of the net collectible revenue we booked, it's down at 2.3%. And then, importantly, when we look at our overall revenue per AA up in a 2% without the impact of reform, shows that we are still after bad debt compounding the increases that we've seen historically. So, even though we are seeing more shifted to the patient level, we're still able to capture at the top end in our rate negotiations some of what we lose at the bottom with the patient. So, there is more we can do. We're working hard to try to get that done, but as you can see in our overall revenue per adjusted admit numbers, we're still comfortable with our ability to compound increases like we have seen in the past. <UNK>, last year we began to deploy standardized technology and practices in our hospitals, and we currently have almost every hospital with the exception of just a couple of the new hospitals have come in on this technology platform. We're seeing increases in upfront cash collections. Part of that, clearly in the quarter, is driven from volume, but even when you carve out the volume increases that we experienced primarily for the ED, we're seeing increased dollars being collected at point of service, at registration. And, as <UNK> pointed out, there is still room to continue to improve that. So, very specific strategies deployed in our hospitals to get at your question. I don't have the absolute percentage drop, but I can give me something that I think shooting from a memory number. Our self-pay admits in the fourth quarter of 2013 were over 8%. So, over 8% of total, and now they are at 3.8%. And, our ED visits were north of 22%, and now they are 14.1%. Now, we've only got eight of our states that have expanded. At nine now with Indiana that went live February 1, but our presence in Indiana is limited to one hospital in Scottsburg until we complete this Jeffersonville transaction. So, the numbers have a long ways to come down, but it is going to require additional expansion to get there. So, part of it has to do with the improvements in our day sales outstanding. So, as we look at our accounts receivable in the period, there is some accounts receivable that we acquired as a function of transactions. But then, we have also improved the collection cycle, and we've completed our transitions to Parallon which had us hung up in transition with some of our days. So, you look at it from year-end, we're down from 56 or more days on a consolidated basis to under 55 so that has freed up a little bit of cash. And then, just the overall operations growing and the dollar amounts that are being contributed from the incremental acquisitions we completed in the second half of last year. I think also our tax teams have done a really good job. Our effective tax rate came in at under 38%. We've always talked about 38.5% being a good effective tax rate to use. We'll give more color on expectations when we provide guidance in the second quarter, but our guys are doing a real good job on the state tax planning side. No, it is very consistent. So, the trends that we saw in the first quarter are very consistent with the trends that we saw through the course of last year. Our continued physician recruiting, filling out the service lines, executing our strategic plans, that's what has driven the growth versus significant changes in service offerings or elective versus non-elective procedures. Let me just add to that I think it also is important that we are making investments in our hospitals that are typically impacting the outpatient side of business. So, that's where people want to come. We are intentionally making those investments which is impacting that, and coincidentally, it's typically our highest margin business. Absolutely, we are making investments in areas that we expect will allow people to stay close to home for care. And, we will continue to do that. Gearing the response around rate and as you defined it, we definitely saw benefit in rate year-over-year from reform. And frankly, from the first quarter of 2014 to the first quarter of 2015, a lot of that did have to do with some of the acuity experience and the increased enrollment that we saw sequentially through the year, last year. The sequential impact from the fourth quarter of 2014 to the first quarter of 2015 was not as much, but there is a clear $5 million benefit year-over-year that went into our rate benefit. As we have worked on the health insurance exchange side from a contracting perspective and gotten perspective on the renewals of these participating ---+ our participation in these different products, they are consistent with our experience last year which is consistent with our commercial reimbursement overall. So, we are not seeing any dilution as a function of participating in the exchange products so as patients enroll from another commercial plan, we have not seen an adverse effect from it. And, as self-pay patients have enrolled in those products, we've seen a positive effect which is reflected in that impact of reform number. As we look at the overall rate side of things in the ED piece that you mentioned, the dilutive effect there is just a function of the weighted average, in averaging in incremental volumes at significantly lower rates for that lower acuity piece. That's just a good [bolt] to what was a soft flu season last year and is a more normal flu season as we look at this year. And so, it disguises a bit the commercial reimbursement rates which is what I've provided. The update in the absence of that, that we would have seen 2.5% overall net revenue per equivalent in admit. Both. It's reflective of level one, two, three-type ED visits, which are lower reimbursed, so you are picking up the volume at a lower price point. Great. Thank you, Operator. We are very pleased to have reported a solid start to the year. Our focus on the strategic priorities we have shared with you is unwavering. They are delivering high quality patient care and service and growing both organically and through acquisition, continuously improving our operating efficiency and developing high performing talent. We are confident that our success in these priorities is what has and will continue to allow us to deliver long-term shareholder value. We thank you for joining the call today, and we thank you for your interest in LifePoint Hospitals. We will see you out on the road and on the next call.

2015_LPNT

2015

ROCK

ROCK #Thanks, <UNK>. Good morning, everyone, and thank you for joining us on our call today. We started the year out on a strong footing. Net sales increased 5% year-over-year, which reflected continued strong demand for our postal storage products as well as strength for our roofing-related products, while demand from our industrial and transportation infrastructure markets remained weak. On the bottom line, adjusted earnings per diluted share grew to $0.06, a significant improvement over the loss of $0.05 per share in Q1 last year. In addition to volume leverage, our operational improvement initiatives are gaining traction and have had a positive effect on our Q1 profitability. We are encouraged by these results, but we know this is just the very beginning of what we intend to accomplish in future years. Many of you participated in our first-ever investor day a little over a month ago, and at that event we detailed our strategy to achieve best-in-class, sustainable value creation over the long term. After <UNK> reviews our first-quarter financial results in more detail, I will discuss how we plan to leverage the four elements of our strategy to take our results from where we are today to deliver the type of shareholder returns we know we can achieve. So with that I will turn the call over to <UNK>. Thanks, <UNK>, and good morning. I will start by talking about slide 4, entitled consolidated results, and the increases on both the top line and bottom line. First-quarter revenues benefited from the higher unit volume and pricing, to a lesser degree, while the effects of a stronger US dollar reduced revenues 200 basis points. On the bottom line adjusted operating income and adjusted EPS both improved. The higher contribution of higher volume helped profitability as well as margin improvement actions taken during 2014, including a facility closure and sales channel adjustments, plus improved price management. Concerning adjusted diluted EPS, this quarter also had an additional benefit from non-operating other income, where we reported $3 million of net gains on derivative contracts from hedges of foreign currencies and select raw material purchases related to transactions within our residential products segment. Of the $0.11 increase in adjusted EPS compared to last year, $0.06 were discrete to the first quarter 2015, representing the non-operating income with the net gains from derivative contracts. And I describe these net gains worth $0.06 as discrete to the first quarter based on a scenario that the prices of the underlying hedged currencies in metals do not change after March 31, 2015, in which case there would be no further gain or loss in subsequent quarters. Nonetheless, with or without the derivative benefit, we had a good improvement in earnings this quarter compared to last year, driven by controllable internal operational initiatives. Next I will talk about each of our two reporting segments starting with slide 5, Residential Products. End-market demand from residential housing markets continued to be favorable, complemented by the continuing secular growth in the sales of postal and parcel storage products, which were up substantially following two successive years of plus 20% organic growth. The primary driver for this demand is postal authority initiatives, which are transitioning from mail delivered door-to-door to being delivered through centralized mail receptacles. Also contributing to the segment's revenue growth was higher sales of roofing-related ventilation accessory products, which in part benefited from efficiencies achieved in the distribution of these products. Turning to slide 6, Residential Products segment P&L performance. I just described the strong increase in revenues resulting from unit volume growth. The adjusted operating income increased nicely with margin expansion of 220 basis points, led by operating leverage. This significant growth in earnings also included operational improvement and manufacturing efficiencies and tighter management of price and raw material margins. This is the same segment where margin improvement actions in 2014 took longer than expected. Now in 1Q 2015 we are benefiting from those 2014 actions, such as the facility closure. The margin improvement of 5.2% does not include any portion of the $3 million gain on derivative contracts reported in the P&L's non-operating other income. Approximately half of that $3 million gain related to settled transactions in the first quarter of 2015 and that settled portion of the gain would equate to an additional 140 basis points for this segment's adjusted operating margin. Now turning to slide 7, our Industrial & Infrastructure Products segment highlights. As expected, first-quarter revenues decreased affected by important headwinds. The effect of low oil prices has lessened spending on the production of oil and rig counts are down substantially. And, as you know, oil service companies have slashed spending. This segment historically has derived 15% to 20% of its revenues from the oil and gas end-markets. Additionally, weaker currencies in Canada and Europe, where this segment has operations, have translated into fewer US dollars of revenue. Low oil prices and the strong US dollar are expected to have continuing effects on this segment's order rates and revenues for the balance of this year. Concerning this segment's revenue exposure to the U.S. transportation market, the current U.S. transportation funding runs out in 24 days and new order rates thus far have been shorter in duration and smaller in terms of dollar size. Despite the uncertainty of future government funding, this segment's backlog increased this quarter, boosted by orders for roadway sealants for maintenance projects, plus a noteworthy project that will use isolation bearings for a non-traditional application in offshore oil production. We believe our ability to win projects and grow backlog in this market environment is a result of our innovative engineering and responsive manufacturing and fulfillment expertise. And we are bullish about the long-term opportunities in this market. Turning to slide 8, the Industrial & Infrastructure Products segment's specific P&L performance. Of the 10% drop in revenue, the majority was volume-related, but further affected by a 3 percentage point decrease from weaker currencies in its international subsidiaries. Regarding adjusted operating income, the segment's management team did a fine job limiting the margin compression to less than 1% effect and revenue dropped 10 percentage points. The mitigating actions were improved manufacturing efficiencies and tighter management of price and raw material margin. Now on slide 9, our outlook for 2015. In 2015 compared to 2014 we expect market conditions in residential housing to continue its slow and gradual improvement, with industrial and transportation infrastructure markets being unfavorable to 2014 with a net effect of 2015 consolidated revenues being equivalent to 2014. Stated differently, we expect higher residential product revenues this year and being offset by lower Industrial & Infrastructure segment revenues. Our previous guidance for 2015 consolidated revenues assumed our Industrial & Infrastructure Products segment would produce full-year 2015 revenue equivalent to 2014. Now we expect that segment's 2015 revenues to be unfavorable by mid-single digits on lower order rates from energy-related industrial markets continuing to be affected by the price of oil, as well as affected by the stronger U.S. dollar. Regarding the Residential Products segment revenue, growth in 2015 will again be led by higher volume for postal products following two successive years of 20%-plus organic growth. Full-year 2015 sales growth for postal products we expect to be around 10% to 14%, with the highest favorable comparisons being in the first and second quarters of 2015. Apart from our revenue expectations and on the operational side of the Company, we have internal controllable initiatives targeted to improve earnings this year. These include the continued focus on managing prices and material margin, additional consolidation, and any earlier-than-expected results from the simplification 80/20 program launched in Q4 2014. Now on slide 10, our outlook for 2015. We are reaffirming guidance of adjusted earnings per share. Following the end market color I just described, we continue to expect profitability in 2015 to increase compared to last year, even as consolidated revenues remain equivalent to last year. We will have the incremental benefit of cost actions we completed last year in overhead staffing, sales channel adjustments, and a facility closure. We also should benefit from 2015 productivity initiatives, such as improving efficiencies in our postal production, and improving results from price management. All of these controllable actions lead to an adjusted earnings per share for 2015 in the range of $0.55 to $0.65. And for those of you running models, we expect our unallocated corporate expense will approximate 2% of consolidated sales and our income tax rate should approximate 37.5%. Concerning cash flows in 2015, CapEx spending is targeted to be $16 million, which is approximately $3 million below depreciation expense and $10 million below the combined depreciation and amortization expense. Additionally, we also received in the first quarter of 2015 cash proceeds of $25 million on the sale of one of our facilities. Now I will turn the call back to <UNK> for key aspects of our growth plans summarized on slide 11. Thank you, <UNK>. As I mentioned at the outset of our call, at our recent investor day we outlined our strategy to deliver best-in-class sustainable value creation for our shareholders for the long term. This value-generating strategy has four key elements including operational improvement, portfolio management, product innovation, and acquisitions as a strategic accelerator. Through this strategy, we are leading a transformational change in our portfolio and our financial results. Our goals are to double our revenue, quadruple our earnings, grow our market capitalization to $1 billion, and achieve best-in-class shareholder return. In achieving this vision, we expect to become more relevant in the capital markets once again. I would like to spend some time today to review this strategy and provide more details than we have offered on our past calls. Let's start with operational excellence. At the heart of our operational excellence initiative is simplifying the business, which leads to enhancing our margin profile. As <UNK> cited in his remarks, we have taken recent measures to align our cost structure to market demand, consolidating facilities and improving operational efficiencies. Of course, the earnings improvement in our Q1 results was just the beginning. We are well along in implementing our operational priorities and focused on those aspects that can generate the highest benefits in the future. The foundation of our operational improvement efforts will be based on the proven 80/20 simplification process. In a quadrant analysis of most businesses, one finds that 25% of the customers make up 89% of the revenue and 150% of the profitability. We are refocusing our customer efforts on those who bring in the vast majority of our revenue and profit, at the same time we're treating our other customers differently, but fairly, in order to raise their sales and margin profile. Likewise, 25% of the Company's products are responsible for 89% of the revenue, so we are similarly focusing our resources on those high-volume products that provide us the greatest return. We started the process in the fourth quarter of 2014 with a comprehensive data analysis and we are now well into the implementation phase. We have the teams in place to further evaluate the opportunities and to act on our 80/20 initiatives with actions such as price improvements and overhead reductions which will benefit the income statement. We believe that over the first three years we will drive 200 to 300 basis points of operating margin improvement from the 80/20 process. Over five years, we expect to achieve an incremental benefit of $25 million in pretax income, or $0.50 a share. There are also corresponding benefits to the balance sheet as operational assets are reduced relating to inventories, property, and plant and equipment. In year one we expect to reduce our SKUs by more than 3,000 items and our inventory by $12 million with the financial benefit beginning to occur in the back end of 2015. The second aspect of our strategy is portfolio management, which is a natural byproduct of the 80/20 initiative. We spent considerable amount of time reviewing our portfolio in terms of best use of our financial and human capital and achieving greater shareholder returns. And using the 80/20 process, we will be able to validate our initial thinking on our portfolio by the end of the year and begin to make the necessary refinements in 2016 and beyond. Product innovation is our third strategic element. Innovation is about allocating new and existing resources on opportunities to drive the type of sustainable returns we want to see. We are focused only on those products and technologies that have relevance to the end user and can be differentiated from our competition. We have a great opportunity to do this in that our customer base is business-to-business and those customers typically have a vested stake in engaging with you to develop a customized solution. Our focus on innovation will be centered on three areas: postal products, residential air management, and infrastructure. In postal products we're excited about the growing demand for centralized mail and parcel delivery systems. At our investor day we demonstrated our innovative ExpressLocker product, which has been a tremendous success thus far. We're making further progress in expanding our share in this rapidly changing market. In ventilation, our products today are focused primarily on the roof. Going forward we want to be focused on the whole house from an air management perspective, where we believe we have significant advantages and expertise. We plan to capitalize on the trend towards sealing up the envelope of the house in order to ultimately drive a zero carbon footprint home. In the infrastructure space, 33% of the bridges in the continental United States are either structurally deficient or functionally obsolete. We have the reputation and the engineered solutions to own the bridge and help bring this infrastructure up to code. The final element of our strategy is acquisitions. We are focused on making strategic acquisitions in six key areas, three of which are existing platforms and three are new. The existing platforms include the same areas where we will be developing innovative products organically: postal and parcel solutions, infrastructure, and air management. The new platforms include water management, renewable energy, and outdoor living. The water management space also offers good growth opportunities, such as providing solutions for the current decaying infrastructure or harvesting rainwater or graywater management on the residential side. These are nice adjacencies to our current bar grating capabilities and our water dispersion platform. Within renewable energy, solar and racking enclosures is still a very fragmented $2.1 billion market space with about 90 racking companies in the U.S. alone, so there are a good number of possibilities. In outdoor living we see two opportunities to explore. The first capitalizes on the trend towards converting flat roofs on high-rise buildings or commercial buildings into green roofs. In 2013 alone there was about 5 million square feet of roofing space that was converted in the United States, a 25% increase over the previous year. On the residential side we are capitalizing on the trend of people extending their living space out into their backyards. What these growth platforms all have in common, existing and new, is that they are all large, high-growth markets that are technology-rich and offer higher returns on our investments than what we've experienced in the past. We are seeking to spend $80 to $150 million this year on acquisitions, and the quality of our pipeline is improving all six of those end markets. Our strategic focus ---+ operational improvement, portfolio management, product innovation, and acquisitions ---+ is the lens that we look through to make every single operational and strategic decision at Gibraltar. We are very confident that we have put the right team in place to make those thoughtful decisions to execute on this strategy and achieve our goals of 2015 and for the long term. At this point we will open the call for any questions you may have. To your first question, <UNK>, we did ---+ the downturn in the end-markets relative to the oil and gas wasn't a surprise to us, though in the fourth quarter the management team began to reflect on deal strategies, operational strategies I guess that they could ---+. Their mandate, like everybody, was to protect their operating income and, despite the downturn in revenue, try to resize and position their businesses operationally to protect the bottom line. They had done a lot of that thinking late in the fourth quarter. And as they saw the trend continue, they were able to kind of execute on those initiatives to properly resize their facilities and the size of their staffing to accommodate the downturn. To be quite honest, they did a very nice job, so we are quite pleased with it. We don't expect to see another step down in end-market activity in that. We think we are running across the bottom of the trough and they've done some nice work from a price management perspective. The historical purchases that they had made at higher prices and raw materials that flow through the system and their pricing strategies I think are going to allow them to not only protect that number, but certainly give them a little bit more room to maneuver if they get another unplanned event in terms of end-market activity. Well, it's hard to predict out that far, <UNK>, but the trends continued to be meaningful degrees. Yes, they could have a favorable bearing on this segment's performance. That improvement is contrary to some of the other benchmarks. The one like you have mentioned came from sales programs that this segment implemented in 2014 and had increased customer base and penetration of its sales into that. It's now carrying over more fully in the first quarter that really weren't fully in place in the first quarter of 2014. So there is actually a market share gain that is coming through on this first quarter. I think the first half would be probably plus 20% of this year compared to the comparable period last year and the back half of the year is probably closer to 9%, 10% growth compared to the second half of 2014. Thank you, operator, and thank you, everyone, for joining us today. Between now and our next call we will be presenting Gibraltar at KeyBanc's Industrial Conference on May 28 in Boston as well as the CJS Securities New Ideas Summer Conference on July 14 in White Plains, New York. We hope to see you all there. Thank you again.

2015_ROCK

2018

CBU

CBU #Thank you, Lauren. Good morning, everyone, and thank you all for joining our Q1 conference call. As you heard in Lauren's introduction, I'm being joined today by Joe <UNK>, our Senior Vice President of Finance, and not Scott Kingsley, our CFO. Scott is having knee surgery today, so Joe will be pinch hitting for him and providing the financial commentary. We really couldn't be more pleased with first quarter results. EPS, excluding acquisition expenses, is up 30% over 2017 or $0.18 per share, due primarily to the strategic deployment of capital last year with the NRS and Merchants Bancshares transaction. We also benefited from a slightly lower effective tax rate that contributed $0.03 of the $0.18 improvement. Our fee-based businesses also had a tremendous quarter with revenues up 30% on organic linked-quarter growth and improved margin as well. Operating expenses were in line with our expectations as was the asset quality, with the exception of additional $1 million charge-off related to the single credit we discussed last quarter. The loan book was down for the quarter, as seasonally expected. But it was good to see the ever so slightly positive commercial growth despite $38 million in unscheduled pay-downs, nearly half of which related to a single relationship where the underlying business was sold. At quarter-end, both our mortgage and commercial pipelines were up 19% and 27%, respectively, over year-end. And loan growth is positive for the month as of yesterday. Deposit inflows were robust at the end of the quarter, with total deposit funding costs remaining at exactly 10 basis points again for the seventh consecutive quarter. We have significant earnings momentum that we need to support the balance sheet growth, a focus for us for the remainder of the year. We expect our operating and credit costs to be stable, our fee businesses to grow and our funding costs to increase only modestly. In summary, we're off to an exceptional start to 2018. Joe. Thank you, <UNK>, and good morning, everyone. As <UNK> noted, the first quarter of 2018 was another very solid operating quarter for us. We set a new record for quarterly operating earnings, maintained our deposit beta at 0 and recorded a solid increase in noninterest income. I'll start off with a few comments about our balance sheet. We closed the first quarter of 2018 with just slightly less than $11 billion in total assets. This is up slightly from $10.75 billion in total assets at the end of the fourth quarter of 2017. Other than a small insurance agency tuck-in transaction, we did not consummate any significant acquisitions during the first quarter of 2018. Average earning assets for the first quarter of 2018 were $9.4 billion, which was flat to the linked quarter of 2017 ---+ fourth quarter of 2017. Although total earning assets did not change significantly between the linked quarters, we experienced a slight change in the composition of earning assets during the quarter, including a $56 million increase in average cash and cash equivalents, a $12 million decrease in average investment securities outstanding and a $37 million decrease in average loans outstanding. Ending loans at March 31, 2018, were down $29.7 million from year-end 2017. Business loans were up slightly for the quarter in spite of $38 million of unscheduled payoffs during the quarter, while the consumer portfolios were down as seasonally anticipated. Switching to the annual quarter comparison. Total assets, average earning assets, average loans outstanding were all up by 20% or more between the first quarter of 2017 and the first quarter of 2018, due primarily to our acquisition of Merchants Bancshares in the second quarter of 2017. The transaction resulted in the acquisition of $2 billion of assets, $1.49 billion of loans, $370 million of investment securities as well as $1.45 billion in deposits. As of March 31, 2018, our investment portfolio stood at $3.03 billion. It was comprised of $589 million of U.S. agency and agency-backed mortgage obligations or 19% of the total, $510 million of municipal bonds or 17% of the total and $1.89 billion of U.S. Treasury securities or 62% of the total. The remaining 2% was corporate and other debt securities. The net unrealized gains/losses in the portfolio left from a net gain in December 2017 to a net loss in March 2018 due to an increase in market interest rates during the quarter. More specifically, the portfolio contained net unrealized losses of $18 million at March 31, 2018, compared to net unrealized gains of $24 million at December 31, 2017. The effective duration of the portfolio remains slightly less than 4 years. Average deposit balances were up $1.3 billion between the first quarter of 2017 and the first quarter of 2018, also reflective of the Merchants transaction and continued success in core deposit gathering. We ended the quarter with $405 million of borrowings, of which $282 million were collateralized customer repurchase agreements, which act like and are priced much more like interest-bearing checking deposits rather than wholesale borrowings. As such, with the exception of our $123 million of highly efficient and regulatory capital added to trust preferred obligations, our March 31 balance sheet was virtually ---+ had virtually no debt ---+ external debt. Our asset quality remained strong. At the end of the first quarter 2018, nonperforming loans, comprised of both legacy and acquired loans, totaled $29.7 million or 0.48% of total loans. This is 4 basis points higher than the ratio reported at the end of the linked fourth quarter 2017 and 2 basis points higher than the ratio reported at the end of the first quarter of 2017. Our reserve for loan losses represents 0.77% of total loans outstanding and 0.97% on legacy loans outstanding. Our reserves remain adequate and exceed the most recent trailing 4 quarters of charge-offs by multiple of 4. We reported $3.8 million in the provision for loan losses during the first quarter of 2018. This was $1.9 million higher than the first quarter of 2017 and $1.7 million lower than the fourth quarter of 2017. The amount for loan losses to nonperforming loans was 162% at March 31, 2018. This compares to 173% at the end of the fourth quarter and 206% at the end of the first quarter of 2017. We recorded net charge-offs of $3.2 million or 21 basis points annualized on loan portfolio during the quarter. This includes an additional $1.1 million charge-down on a single commercial credit relationship we provided commentary on during the fourth quarter earnings call. An additional $800,000 of specifically impaired reserves remained allocated to this relationship. By comparison, we reported net charge-offs of $2 million or 16 basis points annualized during the first quarter of 2017. The net charge-off ratio in our consumer indirect installment loan portfolio for the first quarter of 2018 was 46 basis points. This compares to 42 basis points during the first quarter of 2017. We reported annualized net charge-offs on the residential mortgage and home equity loan portfolios of 3 and 5 basis points, respectively. Our capital levels in the first quarter of 2018 continue to be very strong. The Tier 1 leverage ratio was 10.19% at the end of the quarter, which is over 2x the well capitalized regulatory standard. Tangible equity and the net tangible assets ended the quarter at a solid 8.42%. This is down slightly from the end of the fourth quarter's 8.61%. Tangible equity, which is the numerator, was unchanged at $859 million. As flows in the company became (inaudible), it was offset by a decrease in accumulated other comprehensive income. This was largely attributable to the decrease in the market value of the available-for-sale securities portfolio ---+ investment securities portfolio due to higher market interest rates as noted earlier. Tangible assets, the denominator, increased $225 million between the end of the fourth quarter of 2017 and the end of the first quarter of 2018. And the net inflow of customer deposits was invested over (inaudible) bonds. Shifting to the income statement. Net interest margin for the first quarter of 2018 was 3.71%. This compares to 3.65% in the first quarter of 2017, an increase of 6 basis points between the comparable quarters. The average yield on earning assets was up 8 basis points between the periods, while interest-bearing liabilities increased 4 basis points. The comparative results were impacted by the inclusion of the Merchants' asset liability portfolios during the second quarter of 2017 as well as the reduction in tax equivalent yield gross up on the company's nontaxable municipal securities and loan portfolios, due to a decrease in federal corporate tax rate between the periods. On a linked-quarter basis, net interest margin increased 3 basis points from 3.74% in the fourth quarter of 2017 to 3.71% in the first quarter of 2018. The previously mentioned change in the tax equivalent yield on nontaxable municipal securities loans negatively impacted reported margin by approximately 4 basis points. In addition, the fourth quarter 2017 net interest margin was favorably impacted by 3 basis points due to the receipt of the Federal Reserve Bank's semiannual dividend. It should be noted that our proactive and disciplined management of funding costs continue to have a positive effect on margin results. In spite of 625 basis point increases in the target debt funds rate since the fourth quarter of 2015 as well as the general increase in market interest rates, our cost of deposits has remained between 10 and 11 basis points for 9 consecutive quarters. We reported $57.5 million in noninterest income during the first quarter of 2018. This represents a $13.2 million or 29.7% increase over the first quarter of 2017 and $3.6 million or 6.6% increase on a linked-quarter basis. Noninterest revenues in all 3 of the company's operating segments: banking, benefit plans administration, and All Other, which include revenues from our wealth management and insurance divisions, are up on an annual quarter and linked-quarter basis. Noninterest income from our banking sources increased $1.1 million or 5.7% on a linked-quarter basis from $19.3 million in the fourth quarter of 2017 to $20.4 million in the first quarter of 2018. These results are reflective of several initiatives to expand customer service offerings and increase deposit service fees, including our electronic banking rep fees. Noninterest revenues are up $4.5 million or 28.7% in the banking segment on a comparative annual quarter basis, due to both Merchants acquisition and several fee improvement initiatives. In addition, we reported increases in noninterest income in our benefits administration and wealth management and insurance division on a linked-quarter and annual quarter basis. During the first quarter of 2018, we recorded $37.1 million of revenues in these businesses. This compares to $34.6 million during the fourth quarter of 2017, an increase of $2.4 million or 7% on a linked-quarter basis. On an annual quarter basis, revenues are up $8.6 million or 30%. The revenue increases in these segments are due to a combination of factors, including the NRS acquisition, the Merchants transaction, 4 small insurance agency tuck-in acquisitions completed since the beginning of 2017 as well as organic growth. Consistent with full year 2017 results, noninterest income represents about 40% of the company's total operating revenues. We reported $86.3 million of total operating expenses during the first quarter of 2018. This compares to total operating expenses, excluding acquisition expenses, of $86.1 million during the fourth quarter of 2017. Although total operating expenses were relatively flat on a linked-quarter basis, there were significant variances amongst several components of operating expenses. Similar to prior year's first quarter activities, we incurred higher levels of salaries expense for merit-based wage increases and incentives, reported increase in statutory payroll taxes and incurred higher occupancy expenses largely due to facilities (inaudible) heating and winter maintenance activities. Adversely, we reported decreases in marketing-related expenses and certain professional services on a linked-quarter basis. On an annual quarter comparative basis, operating expenses, excluding acquisition expenses, increased $14.5 million or 20.2%, due largely to increase in salaries and benefits expense and occupancy expense related to the NRS and Merchants transactions. We believe the first quarter operating expenses are a fairly reasonable proxy for our core operating expense run rate for the balance of the year. Our effective tax rate in the first quarter of 2018 was 23% versus 27.4% in the first quarter of 2017. The net reduction in the effective tax rate between the periods is primarily due to passage of the Tax Cuts and Jobs Act signed into law in the fourth quarter of 2017, which lowered corporate tax rates from 35% to 21%. For the next few quarters, we anticipate net interest margin to be similar to the first quarter 2018 results. The comparatively modest organic growth opportunities in the markets for new loans as well as competitive conditions are likely to limit our ability to immediately and fully pass along recent increases in the national market interest rates to borrowers. In addition, although we will continue to take a measured approach with respect to deposit pricing, retention (inaudible). It is unlikely that we'll be able to maintain a 0 deposit beta during the remaining 3 quarters of 2018. We also expect to continue to receive the Federal Reserve Bank's semiannual dividend in the second and fourth quarters of each year, but anticipate a significant reduction in the historic dividend rate due to our status as an institution with total assets of greater than $10 billion. From an asset quality perspective, we do not see any major headwinds on the horizon. We continue to expect a net reduction from Durbin mandated impacts on debit interchange revenues beginning in July of 2018 of approximately $12 million to $13 million annually or an estimated $6 million to $6.5 million in the second half of 2018. However, we do expect to continue to organically grow our nonbanking segments during the balance of 2018 that may modestly offset a portion of the Durbin impact. And finally, although winter-like weather has come around a bit longer in the Northeast than we hoped, we're beginning to experience a pickup in our residential mortgage application volume and consumer and direct loan originations, and the business loan pipeline remains solid. In summary, we believe ---+ we remain very well positioned from both a capital and operational perspective for the remainder of 2018 and beyond. As <UNK> mentioned, look forward to continue to execute on future organic improvement opportunities. I'll now turn it back to Lauren to open the line for questions. Good question. I was referring principally to loan growth, Alex. We've ---+ the last trailing, whatever, it's been 3 quarters or something, we haven't had growth. I think we had net outflows. As I commented last quarter, we've seen in the last several quarters an unusual level of pay-down activity and did not happen again in the first quarter, $38 million, including one credit that was, I think, $18 million where the business was sold. So the underlying pipelines are strong. The underlying market opportunities are not bad. So we'll continue to execute on that. I'm not worried about where the remainder of the year is going to be at all. I think as I said, our ---+ at the end of the year, our commercial pipeline was $240 million. Right now, it sits at $305 million at the end of the first quarter. So it's really not for a lack of effort engagement in the markets nor a shortage of market opportunities. It's really the impact that these significant unscheduled pay-downs. The mortgage pipeline is picking up. It was $80 million at the end of the year. It's now $100 million. Our market is usually pretty stable. It's relatively easy to predict where the kind of mortgage production is going to be. The increase in rates in the mortgage market hasn't seemed to have really tapped demand in any real degree that we've been able to measure. So I think we'll be fine on the mortgage side, and it's always a tough first quarter on the mortgage side for obvious reasons for us. So I think we'll have a pretty good year in mortgage. Indirect, we're already up. In indirect, kind of the car selling season has started. As we've talked about previously, we have some level traded off volume for rate, because the spreads, the returns on that business just got below what our expected threshold needs to be. So we may trade off a little bit of volume for rate, but we would expect to see, in any event, some growth in that net portfolio as we enter the busy season for mortgages. The other ---+ I guess ---+ and I didn't sort of mean this in my comment when I referred to balance sheet growth. But if you look at the yield curve right now, it's pretty flat from 5% to 10%. And our portfolio yield is trended down. I think this quarter, it was 2.60-something percent or 2.50%, which has trended down generally as rates have fallen over the last several years. We're now at the point where high-quality MBS, the spreads are getting to the point they're better than the 10-year. So I mean, I think right now, we, for the last several years, have generally let our mortgage investment portfolio run off a little bit, just not reinvesting cash flow, which is one of the reasons we have a fairly high fed funds sold position currently. But the interest rate ---+ recent interest rate moves suggest there may be an opportunity for us to redeploy some of those cash flows that are running off from the investment portfolio back into the same portfolio at above 3% as opposed to in fed funds sold at half of that. So I didn't really mean that. But I was referring in my comments to loan growth, but just sort of comments relative to where the ---+ where we see the securities market right now as well. I would say, the nonbanking business revenues are generally less seasonal than banking. I think the deposits fee revenue is going to be somewhat seasonal. They're typically lower in the first quarter. And summertime, they are better than in kind of end of the year Christmas season, they're a little bit better again. So there's same seasonality in that. The nonbanking businesses, particularly the benefits business and the wealth management businesses really are not seasonable at all. The insurance business is. But that's the smaller component of our nonbanking businesses. So it doesn't move the needle as much. That has to be more volatile, not really seasonal. It's just a function of when premiums are written. And you got the contingency commissions from the carriers that can then ---+ in the second quarter. So that tends to be a little bit more varied throughout the year, Alex. But it's really not seasonal as much as it's just a variability and the timing of revenues there. But again, the smaller ---+ that's a smaller component, really wouldn't move the needle at all. So I would expect that by the end of the year, the run rate on our nonbanking businesses will be greater than they are right now. Yes. This is Joe. I'll take that question. Our basic core margin, when we sort of take away the impact of the purchase loan accretion and the FRB dividend, is in that mid-3.60s-percent range, 3.65%, 3.66%. When you factor in the purchase loan accretion, we tend to get up a little bit over the 3.70% level. And I think that's indicative of at least the future course. With that said, there's some color maybe I could offer relative to some of the asset portfolio, which as <UNK> mentioned, the investment securities opportunities are a little bit better today than they were in the last few quarters with the 10-year hitting 3% and the 5-year just slightly less than that and some mortgage backed security opportunities. So even though it's a relatively big shift, so to speak, to move, at least the new rates are better than the existing book yields. Relative to the loan portfolios, we've begun to sort of witness some increases in the new rates of new loans going on relative to what has been running off, although marginally. And we will continue to have some competitive challenges with the fully pass along some of the increase in the market rates to more borrowers. But we have seen a slight uptick in the consumer and the mortgage portfolios. But again, that's a big shift to turn around relative to the existing portfolios and adding marginal business. And we're also, in an overnight, say our funds position have been where most of the first quarter. And actually with an uptick in the fed funds rate, that gives us some marginal opportunity just from a cash and overnight position. So we think the 3.70% range all-in is fair, but there are some of the opportunities we have. Conversely, our deposit beta has remained at 0. We expect continued challenges over the next few quarters. It's going to be difficult to maintain that at 0. So they potentially could offset some of the uptick that we're going to potentially see on the asset portfolios. I think 1/2 to 1/3 is a reasonable expectation for that dividend. That was sort of a situation where ---+ which contributed to our second and fourth quarter margin run rate. That ---+ the effect of that dividend is going to be much reduced going forward, because it now becomes a more nominal part of the total margin equation. So all-in, that's expected to contribute about effectively on an annualized basis about 1 basis point to the total margin. Fair question. My ideal preference would to be use it for growth of our business, loan growth primarily, organic growth opportunities, whatever they might be. Like we're speaking of capital, so that means principally lending and potentially investment securities. But clearly, an incremental dollar of excess capital, I'd rather put to work in credit. We ---+ because of our low growth markets, we accumulate, even after a dividend, which is about half of our earnings, we still accumulate capital at a fairly rapid pace, certainly in excess of what we need to capitalize organic growth. So historically and I think necessarily, for us strategically, we have all these looked at, high-value M&A opportunities in the banking space as well as the nonbanking space to grow those nonbanking fee-based businesses through M&A. And I think that, that will be a strategy that will ---+ that we will continue. I think certainly if you look at the run rate of our business in terms of GAAP earnings and the adjusted earnings that we include in the back of the press release, which we look at as a proxy for cash-based earnings, again, up over 30% in terms of the run rate over last year. So we are accumulating capital right now at a pace that we haven't hereto foreseen. So it will be incumbent upon us to continue to assess most effective and beneficial ways to deploy that capital for the benefit of shareholders. Clearly, the most profitable thing you can do is reinvesting in your own business. I would say, secondarily, investing in other people's businesses. And then, lastly, I would say, by next year, I don't think our shareholders expect us to deploy capital in a way that creates greater earnings, a greater dividend capacity. So buying back shares, although I understand why some companies do that, I don't think our shareholders expect us to do that. I think that's the way to optimize returns over time either. So I think this strategy will continue as it has for the recent past. I would say on the banking side, it's pretty similar to how it's been for post-credit crisis in the last 8 years, 9 years. It's best off for saying in terms of the pace for us, we're also reasonably constrained in terms of our geography. We are not ---+ it's not our strategy to go substantially out of market. So that, in some respects, constrains our focus on New England, Upstate New York, Pennsylvania, New Jersey, Ohio. So I would say the opportunities are similar. We continue to have dialogue with other institutions that we think would be high-value partners for us. We continue to get inbound opportunities for consideration as well. And so the pace really is similar, I would say, to where it had been on the banking side. On the nonbanking side, that's an area where the private equity has become much more engaged. And with the trillion dollars of liquidity uninvested by private equity ---+ participation by strategic buyers in the nonbanking space is going to get more difficult and more excessive. I think our strategy there has been to seek out opportunities. We have ---+ our benefits business is a national business. We've got great leadership. I think we've got some visibility in the ---+ in that market nationally. And so if there are opportunities, we usually ---+ we get to look at those. There's also those similar to the banking, where we engage someone else because of a ---+ what we perceive as a high-value partner. So we'll continue to be active in both of those spaces. I think on the banking side, the price expectations of sellers has gotten high. In many instances, too high, at least for the way we approach M&A. And I would say the same on the nonbank space. Because of the active engagement of the private equity, we have different models and different pricing capacity than the strategic buyer. But we'll continue to be engaged in both of those spaces. Just want to follow up on some of the loan commentary that you've made. I appreciate the color there. Wondering if we could just tone down a little bit into your Merchants footprint. We talked a little bit last quarter about the dynamics there, the intended runoff and rebuilding of that pipeline. Just curious if we could get an update on your outlook going forward. Sure. We had a tough first quarter in the Merchants markets mainly because of the early pay-downs, the one single large pay-down I referred in Merchants. There was a handful of others as well. So the majority of those off-schedule pay-downs were in the Merchants marketplace. Continues to be puts and takes. We're slowly rebuilding the pipeline there. We're getting some really high-quality looks and opportunities, but we're still facing the fact that when we got those folks onboard, there was virtually no pipeline. But we're getting back there. It's building. We're getting opportunities. We have, over the course of last, what it's been, 10 months, 9 months, a bit more front-off than what we hoped. But I think it's moderated. Other than the nonscheduled payoffs this quarter, which came primarily again from the Merchants marketplace, I think we're doing a better job there and we're building the pipeline. Great. And then my last question, just a follow-up to the M&A discussion. Given the growth dynamics as well as your very clear funding advantage, would you characterize your appetite for depository M&A as more biased towards something that would be a bit more of a growth opportunity for you. I think our focus, as it relates to M&A, first is high-quality franchises that we think have the opportunity to grow earnings and dividend capacity in a sustainable fashion. That's kind of ---+ that's the first lesson. So we are principally looking for deposit franchises, credit franchises. Although certainly, Merchants was extremely attractive because of the high-quality commercial credit franchise that they had and the fact that their markets, particularly in Chittenden County, were more economically dynamic than the average of the remainder of our markets. The challenge in looking at some institutions is it relates to the deposit franchise, because we have a very high-quality, long-duration, low-cost, stable funding base. And we look at other institutions, and they have a different model. We've always invested a great deal of management and leadership time and effort into our retail banking franchise for this exact reason. And other banks have different models, where the focus on the credit side and they just raise rates to the point where they need to fund the loan growth. And so that's a different model for us. So it's ---+ it gets to be a challenge when we're looking at another institution that has 60 basis points of funding cost and the dilution to our deposit base gets to be a challenge. But we typically ---+ because we're having very high-quality, low-cost, stable, long-duration funding base, we typically don't seek that necessarily in a partner. Again, it's a function of the overall quality and reliability that we would have the confidence that we would have in that franchise to integrate well with us, integrate well with our business model, integrate well with our culture, and ultimately, have the ability to generate growing earnings and dividend capacity into the future. One of the things we've done, as you know, over the years, we've acquired a fair number of branches in branch transactions from mostly larger banks. In the last 10 years, we've probably done 6 of them. Frankly, we would ---+ that's something we would continue to look at, despite the fact that we don't need the deposit funding. And there would be, at this juncture, a reasonable challenge about how you invest the whole liquidity, particularly to franchise with lower growth. But those branch transactions ---+ you're buying customer relationships, so ---+ which are really valuable. The kind of the tax structure of those transactions is very favorable. There's a lot of other banks. So despite the fact that we don't need more good core funding, although we can always use as much as of them yet, we would still look at ---+ we would look at retail franchises in the event that some of the big banks would be interested in disposing. And I know some have over the years, BMA, Key, Citizens. I heard discussions of ---+ I think Wells Fargo has already started some dispositions. So we would look at that as well. Thank you, Lauren. That's it. Thank you all for joining the call, and we look forward to speaking to you again after the second quarter. Thank you.

2018_CBU

2018

EXPO

EXPO #Thank you. Thank you for joining us today. Following my discussion of the first quarter 2018 results, Rich will provide a more detailed review of our financial performance and business outlook. Then <UNK> will provide her thoughts and closing remarks, after which we will open the call to your questions. Exponent continued its strong momentum from 2017 into the first quarter of 2018. We delivered strong financial results, while positioning the company for long-term success. We grew first quarter net revenues by 13% and expanded our EBITDA margin by 260 basis points to 26% of net revenues as compared to the same period last year. Our first quarter results benefited from positive market trends across several industries, practices and geographies as well as the ongoing large human factors project, which we began discussing in the first quarter of 2017. We are seeing good demand for interdisciplinary advice related to battery technology from several industries, including consumer products, automotive, medical device and energy. We are being retained for both reactive and proactive services. We've been engaged to support clients with product recalls and litigation in addition to providing technology assessments and design consulting. Our battery expertise, located in North America, Asia and Europe, has been invaluable to clients as their products are manufactured and sold around the globe. We continue to be called upon by clients in the automotive industry to analyze their most significant product recall issues. These engagements are leveraging our multidisciplinary team and our Phoenix Test and Engineering Center. We are also seeing growth opportunities to support the development and deployment of electric and automated vehicles. The large human factors project for a client in the consumer products industry continued at a high rate in the first quarter, representing between 7% and 8% of net revenues as compared to approximately 5% in the first quarter last year. This project will step down to between 4% and 5% of net revenues in the second quarter and is expected to increase again during the third quarter. We are very pleased that this client is signing significant value in the data that we are delivering. Additionally, we've been engaged to perform human factors assessments by automotive companies, appliance manufacturers, consumer electronics companies, medical device firms and video game developers, including work in augmented reality. These capabilities are a source of strength and future opportunity for Exponent. Exponent's engineering and other scientific segment grew 13% year-over-year and represented approximately 79% of the company's first quarter net revenues. During the quarter, this segment had notable performances in its human factors, vehicle engineering, electrical engineering and polymer science practices. We continued to see strong demand for our services related to product recalls, including assignments from the consumer products and automotive industries. Proactive services continued to expand as companies seek Exponent's interdisciplinary advice throughout the product life cycle. Exponent's environmental and health segment grew 10% year-over-year and represented approximately 21% of the company's first quarter net revenues. Exponent's scientists were engaged in human health and environmental assessments and advised clients with regulatory issues around the world. Exponent's chemical regulation and food safety practice expanded its proactive services as society remains concerned about chemicals affecting ecosystems and human health. Consultants from this segment also continue to support the large human factors project. We paid $6.7 million in dividends in the first quarter and today announced a regular quarterly dividend payment of $0.26 per share. We believe that our regular quarterly dividend payments demonstrates our confidence in the model long term and our commitment to build shareholder value. As we announced in December, on May 31, we will promote Dr. <UNK> <UNK>, our current President, to the role of CEO and President. As Chairman, I look forward to supporting <UNK> as I'm certain that she is the right person to lead our firm into the future. Before I turn the call over to Rich, I would like to say that it's been an honor and privilege to serve as Chief Executive of this great company, which is committed to excellence. I would like to take this opportunity to thank you, our shareholders, for your loyalty and support, the entire Exponent staff for their continued dedication and our clients for the trust they put in our ability to deliver sound scientific advice. Thanks, <UNK>. Let me start by saying that all comparisons will be on a year-over-year basis unless otherwise specified. For the first quarter of 2018, total revenues were up 15% to $96.5 million. Revenues before reimbursements or net revenues, as I will refer to them from hereon, were up 13% to $90.7 million. Net income increased 23% to $20.3 million or $0.75 per diluted share as compared to $16.6 million or $0.61 per diluted share. In 2016, Exponent adopted a new accounting standard for the classification of tax adjustments associated with share-based awards. The first quarter tax benefit from gains realized upon the issuance of share-based awards was $3.9 million or $0.14 per share in 2018 as compared to $6 million or $0.22 per share in 2017. As a reminder, our net income also benefited from the new tax legislation, which reduced our consolidated tax rate, which I will discuss later. EBITDA for the quarter increased 25% to $23.5 million. For the first quarter, billable hours increased 11.2% to 329,000. For the first quarter, utilization was 76.6% as compared to 74.2% in the same period last year and approximately flat with the fourth quarter after adjusting for vacations and holidays. The large human factors project was approximately 7.5% of net revenues in the first quarter as compared to approximately 5% in the same period last year. This project was step down to approximately 4% to 5% of revenues in the second quarter. Based on current discussions, we are ---+ we expect an increase in the third quarter and then for this project to step down again in the fourth quarter. Based on this level of activity and the seasonal increase in vacations we expect in the second quarter, utilization will be down 2 to 3 percentage points for ---+ from the first quarter. For the full year of 2018, we expect utilization to be down by approximately 1 to 1.5 percentage points from last year's 74.7%. Technical full-time equivalent employees in the quarter were 825, up 7.6% from the same period last year. For the remainder of 2018, we expect quarterly sequential headcount growth to be approximately 1%. The realized rate increase was approximately 1.5% in the first quarter. For the remainder of 2018, we expect the realized rate increase to be approximately 2%. For the first quarter, EBITDA margin was 25.9%, an increase of 260 basis points. As a result of the strong first quarter profitability, we are improving our margin expectations by 50 basis points. For the full year 2018, the EBITDA margin is now expected to be down 50 to 100 basis points from 2017, primarily related to the anticipated decline in utilization. For the quarter, compensation expense, after adjusting for gains and losses in deferred compensation, increased by 10.3%. Included in total compensation expense is a loss in deferred compensation of $300,000 as compared to a gain of $1.9 million. As a reminder, gains and losses in deferred compensation are offset miscellaneous income and has no impact on the bottom line. 2018 salary increases are effective April 1. The rise in salaries will be approximately the same as the realized bill rate increase. Stock-based compensation expense was $6.3 million in the quarter as compared to $5.7 million in 2017. We expect stock-based compensation to be $3.5 million to $3.8 million in each of the remaining quarters of the year. Other operating expenses increased approximately 3.8% to $7.5 million in the first quarter. Included in other operating expenses is depreciation expense of $1.6 million. For the remainder of 2018, other operating expenses are expected to be in the range of $7.6 million to $8.2 million per quarter. G&A expenses decreased approximately 4.3% to $4 million in the first quarter. For the first quarter of 2017, G&A expenses were higher due to our managers' meeting and 50th anniversary marketing expenses. For the remainder of 2018, G&A expenses are expected to be in the range of $4.6 million to $5 million per quarter. I will expand on our Q1 taxes and our expectations for the remainder of 2018. We realized a $3.9 million tax benefit from share-based awards in the quarter. As a reminder, these shares are granted annually in <UNK>h as part of our compensation program and released 4 years later. Therefore, the tax benefit is primarily a first quarter event for Exponent. Inclusive of the tax benefit, Exponent's consolidated tax rate was 9.4% in the quarter compared to 4.8% for the same period last year. Prior to the enactment of the new tax legislation, we had already expected tax ---+ the tax benefit from share-based awards to be down as compared to 2017. But it was further reduced by the lower federal tax rate. For the ---+ for comparison purposes, exclusive of the tax benefit for share-based awards, our tax rate would have been 26.8% in the first quarter of 2018 as compared to 39.4% in the same period last year. We expect our consolidated tax rate to be approximately 26% to 27% during the remainder of the year and our full year tax rate to be approximately 22% to 23%, which is 10 basis points lower than it would have been as a result of the new tax legislation. This lower tax rate will generate an additional $8 million to $9 million of net income. Moving to our cash flows. Operating cash flows were $3.7 million for the quarter, which is lower than other quarters as a result of paying out annual bonuses. Capital expenditures were $6.8 million, of which $5.2 million was used for the purchase of land in the Boston area for the construction of a new facility, which we have previously discussed. We distributed $6.7 million to shareholders through dividend payments in the first quarter. And today, we announced a quarterly dividend payment of $0.26 for the second quarter of 2018. After dividends and annual bonuses, we ended the quarter with $179 million of cash and short-term investments. We have $45 million authorized and available for repurchases under our current repurchase program. As we look forward, our outlook reflects positive momentum in the business as well as the expected deceleration of the ongoing human factors assessment project in 2018. We are improving our expectations for the full year 2018. We now expect revenues before reimbursements to grow in the mid- to high single digits and EBITDA margin to decline by approximately 50 to 100 basis points as compared to 2017. I will now turn the call over to Dr. <UNK> <UNK>. Thank you, Rich. As our results indicate, Exponent is experiencing increased demand for its services as products and processes become more complex. Clients are seeking integrated solutions for their most challenging safety, health, environmental and reliability issues. Exponent's multidisciplinary capabilities and geographic reach have created a differentiated market offering. Over the last 50-plus years, Exponent has hired and developed some of the brightest engineers and scientists. We continued to broaden and deepen our capabilities by hiring the top Ph. D. students from the best universities as well as attracting recognized experts from industry, government and consulting firms. This combination of new Ph. s and mature experts allows us to leverage our experience and also remain as a cutting edge of technology. Interdisciplinary teams are critical as we provide innovative solutions and are recognized as providing high value. As I spend time with a broader set of clients and our internal industry teams, I see more and more opportunities for growth. We work with over 2,000 clients per year, which provides us with tremendous opportunities for cross-selling. I am working with our industry and client teams to capitalize on these opportunities. We are focused on positioning the company for long-term success, delivering strong financial results and creating value for our stakeholders. I am excited to lead Exponent as we engage the brightest scientists and engineers to empower clients with solutions for a safe, healthy, sustainable and technologically complex world. I also want to take a moment to thank <UNK> for his tremendous leadership over the last 9 years and look forward to working with him in the years to come. Thank you for joining today's call. Operator, we are ready for questions. So yes, so let me talk about Asia and Europe with regard to that. So in Asia ---+ the primary opportunity we've had in Asia is that so much of what we ---+ in consumer products and consumer electronics in ---+ that we use in the United States are manufactured in Asia. The companies that are selling the products are ---+ and designing the products are American companies, primarily, at least most of what we do is. And we've been expanding that certainly rapidly. It's still fairly small, but we think there's huge opportunity there. Our offices ---+ we could get additional offices, and they can grow substantially because we're still pretty much in our infancy in what we do over there. Today, it's a very small percentage of the company, but it's a very fast growing part of the company. I think when I look at Europe, it's a little different. I think that you know that we've had a very solid and growing part of our business in Europe that's been focused on the regulatory environment around chemicals, the food and chemical practice that we talk about. The ---+ more than half of that is located in ---+ primarily in the U.K., a little bit on the Continental Europe and that continues to be a double-digit grower for us. But what's ---+ what we're doing more recently is bringing our engineering services to Europe. And I think that gives a lot of opportunity. For many years, we didn't think that opportunity was so great because we always thought about litigation as being ---+ the reactive services as being stronger in America. But the reality is, as we get into the new product development, things around consumer products, consumer electronics, medical devices, all of these kinds of products, it turns out that our clients are very interested in help in Europe and Asia as well as here in United States. And so we see that as a great opportunity to expand our engineering into Europe. So we've always had a little bit of difficult time addressing our overall ---+ how big the market is that we're in. In part because our business has always been about creating new services that really didn't exist before we were there or existed in a very different way. I've talked in the past about how, on the reactive side, how clients used to use university professors before companies like Exponent or formerly Failure Analysis Associates were created. I think we're seeing the same kind of thing. With the kind of quality of expertise we have to provide to some of the new industries, things involving consumer electronics and data products and so forth where we have a level of expertise given the quality of our staff that can assist major companies in a whole range of areas. So expanding that more globally and getting out of the United States is a very big, we think, a very big opportunity for the firm. Yes, so I would say that from the standpoint of kind of how far along we are on that, I would describe it as we are in our infancy with these efforts. Consumer electronics is an area where we are probably the furthest along, although we're still very much in the beginning of this process. But I do believe it's difficult to quantify at this time because there is a lot of increasing demand in that marketplace. We believe we're doing a better job of capturing that demand and executing with regard to our offerings because of the sort of industry-team approach that we're using. However, as we ---+ what we're learning is that for each industry where we deploy this, things are different, and there's not a one size fits all. So I think what we're doing here is a learning process and one where we can take the best practices from, let's say, the consumer electronics side, apply those into, let's say, the medical device, I must say, the utilities side. And we are in the process of doing that. I feel as though we are learning a great deal from that process, and we are continuing to identify the ---+ really focus on identifying what the trends are in those industries and translating those trends into development of capabilities and actionable marketing opportunities for us. So I am excited about that and do believe that it will ---+ we will be having an impact on the business. Tough to ---+ very tough to quantify at this point. Yes, so this initiative really is not exclusively but I would say, primarily oriented toward our proactive services. Now bear in mind that part of the process here is, of course, that we leverage our reactive experience to build that proactive work. So in terms of the client relationship, there certainly is an involvement of the reactive side. But this is really a tool that we see primarily driving the proactive side of the business. It's a side of the business where we need to be very intentional and proactive with regard to understanding those industry trends and identifying what those service offerings look like. And it is very different, I believe, from the way we have historically gone to market on the reactive side. So it's very much a focus to try to drive that proactive side of the business. Yes, so we don't feel that we are capacity limited to respond to a client request. I think that's one of the hallmarks of the company is that we are very responsive. If a client comes along with something, we clearly respond. Over time, obviously, you have to add more people, but we are a very responsive company. And I sometimes do like to say that, while the work week might be theoretically 40 hours, it's typically not for consultants, it's longer than that, but it's certainly not 168 hours. There are 168 hours in a week. So in a short-term period, we can always spike up. I think with regard to the likelihood of large projects, there are several things at play here. We know over the last 9 years that I've been leading the company that, more quarters or not, we've had a large project, but we don't always have them. I think there were some things that make large projects more likely, like the fact that issues around products going wrong in terms of how quickly you have to respond because of social media and everything, much faster than it used to be in the past. The large companies are getting bigger, so their problems are bigger. The number of ---+ the amount of product they have out there is huge. So when you're responding in a reactive way, I think that that tends to drive bigger things. The fact that the company, we, Exponent, has become more and more interdisciplinary, and we have more and more capability. I think means that we can tackle broader issues. And then finally, I think some of the reputation aspect of it, companies are really spending more on making sure they design their products, and the interaction between their customers and their products are really evaluated very carefully ahead of time. And I think that leads to a lot of human factors opportunities, for example. So I think all of those bode for more larger projects. At the same time, you have to balance that. The company is getting bigger. So the projects have to get quite a bit bigger to continue to be at 5% of the firm. But we certainly feel that we have a very special client base involving very high-performing companies that have the ---+ sometimes have the needs and the abilities to engage us on large projects. So we think large projects will continue to be something that is important to us for a long time to come. It's just we may get many more 1%, 2%, 3% revenue projects than we get right now, the more on/off 5% of revenue project. So I think what we've done ---+ and Tim, just to give you kind of an idea about exactly kind of where we are on this. We have contracts through much of the second quarter. And so we have a pretty good idea that it will be in that 4% to 5% that we have indicated. Of course, sometimes we have a contract and based on the data people are getting, they might stall or delay something or things can change, but we've got really pretty good visibility on what it is in the second quarter. In the discussions with the clients, we know that they have plans to ramp this up in the third quarter, not third quarter going forward forever, but in the third quarter, they are looking to get quite a lot of data, which is why we think it will fall back again in the fourth quarter. So our ---+ the outlook we're giving in third and fourth quarter is sort of based on our understanding of the discussions we've had with the client, which have been extensive, but they're not contracts. Yes, and as far as scale, I would say that, at this point in time, probably don't expect it to be quite as much as in the first quarter. Something relative to what we did at ---+ the third quarter was very strong last year on this study work, and it will be somewhere in between this 4% or 5% and really the 7% or 8% that <UNK> was talking about in there. And as we look out to beyond that, I think our feeling is that this particular area that ---+ or particular project that we're working on, we know eventually it will step down and eventually tail off. We think there are other ---+ many other opportunities out there for this client and the broader consumer products industry. But we do expect that there will be a step down. Is that going to be 3%, 4% or 5%. We're not certain at this point in time. I think there's a very good chance it won't run to a close in next year. But I don't think it will be in the 5% area. I think it may be a large project but not in the 3% to 5% where we've typically called out projects that are at least that size that may fall below that. So it's absolutely an opportunity. I mean, not commenting on any particular event, but recently there has been very high-profile incidents involving driver-assistance technologies, involving autonomous vehicles, and that is driving a lot of conversation in the client community. It's driving conversation with the regulators, and it's driving conversation across all of those stakeholders. And we are finding ---+ we are part of those conversations. I mean, we're finding that it is raising questions around how the ---+ how policy should be rolled out. What are the implications with regard to the safety driver. What are the implications with regard to our clients\xe2\x80\x99 ability to test their vehicles on public roadways. And what are the ways in which the manufacturer community is going to be able to prove out the safety of their technologies. And these questions all fall extremely well within our real house in terms of our interdisciplinary capabilities. We have the regulatory piece of that in terms of expertise. We have the sensor-related expertise. We have the accident reconstruction-related expertise, et cetera. And so, yes, I mean, as a general proposition, these kinds of events, while incredibly unfortunate, do drive activity that is helpful to our business. So I think it has a lot to do with the broader market. If you take away ---+ if you do the comparison of what the big project was ---+ a large project was in the first quarter of 2018 versus the first quarter of 2017, I think Rich mentioned that was a 2.5% difference in the size of that project. And the growth rate ---+ the growth was a little shy of 13%. So I think you can see that we feel really quite good about the underlying business. The underlying business is, I think, growing well. And I think we have, certainly, a degree of confidence around the momentum we have there. Yes, just a follow-up on that. I know sometimes we almost talk too much about the big project, but actually, really, this quarter, the story is not the big project, it is a part of the story, but it's not the focus of the story. Yes. Look, our expectation coming into the first quarter was that, first of all, the first quarter last year ---+ if you were to compare the 4 quarters was, on a relative basis, was the weakest of the 4 quarters that we had. So with the momentum that we had coming through the back half of last year, our expectation was, as we entered 2018, was that the first quarter was going to be, on a year-over-year basis comparison, be our strongest quarter. We expected that to be high single to low double digit, sort of high ---+ that range up in there. We clearly ended up with the large human factors project being a couple of percent larger than we had expected coming into the quarter. We thought it would be ---+ for the year, we knew it was going to be stepping down, but we knew the first quarter there, even, was going to be a little bit stronger. So we had some of that built-in. We did get a fair share of the beat on expectations out of the large project, and we ended up carrying good momentum on the underlying business through there. So it was shared relative to what we had going on between the large projects and the underlying business. Yes, a large part of the margin is driven by the utilization. You can go and add a bunch of staff ---+ huge amount of staff and not have them utilized and get your revenue number but kill your margins there. So what we've indicated is that we think that the margins will be down that 50 to 100 basis points, that will be driven out of the fact that we believe that we're going to have 1% to 1.5% decline in our utilization that would play out there. So that ---+ we did end up with a little over cost like what you saw in the first quarter here because we had a managers' meeting last year. We will end up having a principals' meeting in the ---+ in between the third and fourth quarter of this year, which will rise those quarters a little bit but not as much as the managers' meeting we had a year ago in the first and second quarter. So those are playing a few, call it, 10 basis points of swinger into it, but it really is driven out of that utilization expectation that it will be down 1 to 1.5 percentage points. Let me ---+ I'll just start off briefly and then maybe <UNK> or <UNK> want to add on. But I don't see any projects today that are going to fuel that 4% or 5% of revenues in a quarter in the near term. I don't see that changing. I see lots of other positives going on in the organization. I think what we had going on in the first quarter here on a year-over-year basis, the ---+ you're observant that there are a lot of activity going on in the world still in the reactive side. And we're seeing that in our business. Our reactive business was growing in line with the proactive business. So pretty robustly. And that is quite diverse. It's everything from natural disasters that are leading to floods and fires. It is construction issues on bridge collapses and buildings and other things that are around the world. We've got automobile accidents. It's across-the-board that we continue to see these activities. The products and processes out there are continuing to get more and more complex, which drives many challenges to reliability and really the question of what happens. So those questions, just like 50 years ago when ---+ plus years ago that this firm was founded, still remain out there, what happened. And we think those will continue and become more complex as technology continues to get more complex over time. So I think that what is driving that really is the desire for these clients to manage these events in the best possible way. I mean, one of the things that really drives this particular part of our business is the desire for these clients to manage very well the potential damage to their reputations that arises as a consequence of these recalls. And I think that by engaging us earlier in that process, we are able to engage and get to the bottom of issues in terms of the root cause of those technically. And then also be able to advise these clients, once the root cause is sort of ferreted out, assist them with the process of advising them through the process, with regard ---+ we have ---+ as a company, we have an outstanding reputation with the various regulatory authorities. So you talk about the National Highway Traffic Safety Administration, you talk about the Consumer Product Safety Commission, we are known within those entities very positively, and we are sought out by the client community for those kinds of relationships but also because of the technical skill that we bring to the root cause analysis. So I think that those 2 things plus the clients' desire to manage their reputation as best they can in an age of 24-hour news cycles and social media, those are the things that drive them to us. No, I think actually what happened is, these things have clearly hit the C-suite, but the C-suite is changing the culture of those firms. And I think it's pretty well understood up and down the organization that these issues need to be addressed and pretty comprehensively. We've also come through a series of very big events. You can think about the Samsung Note 7 recall, you can think about GM ignition switch. There's a variety of things that got huge publicity in this country, not just in social media but in Congress and so on. And I think that there's been some cultural shift in the way in which, as <UNK> described, companies want to deal with us. Yes. Well, I mean, I think ---+ I certainly think that when new infrastructure is being built, it leads to a fair amount of work for us because, while we don't design them, new infrastructure projects or large ones invariably have their own problems, failures in them. They certainly have delays and cost overruns, and so we very much get involved in that. The reality is that for all that is said about deteriorating infrastructure, deteriorating infrastructure is actually not really killing very many people, and I know it's kind of cruel to say it, but that's sort of the reality. So it's much more a ---+ just a general potholes and various roads having limited capability with regard to much load they can carry. So while this infrastructure is deteriorating, we don't get a lot of work out of that deterioration. We get work when there is really a replacement project. And yes, I would say the one area that we have seen work on some infrastructure is really in the gas distribution area that's going on, but not ---+ all of those are not necessarily related to an aging infrastructure but has to do with an increased level of construction activity and other activities that are around ---+ that are much closer to where we had thought we could bury pipelines and have those structures over time.

2018_EXPO

2018

EXTN

EXTN #Good morning, and welcome to Exterran Corporation's First Quarter 2018 Conference Call. With me today is Exterran's President and CEO, <UNK> <UNK>. Before we begin, I wanted to share with you that after 2 years, Greg Rosenstein, our VP of IR, has left us to take a position as a CFO of a company in New Orleans. I want to recognize Greg and thank you for his contributions. During this conference call, we may make statements regarding future expectations about the company's business, management's plan for future operations or similar matters. These statements are considered forward-looking statements within the meaning of the U.S. securities laws and speak only as of the date of this call. The company's actual results could differ materially due to several important factors, including the risk factors and other trends and uncertainties described in the company's filings with the Securities and Exchange Commission. Management may refer to non-GAAP financial measures during this call. In accordance with Regulation G, the company provides a reconciliation of these measures in its earnings press release issued yesterday and available on the company's website. With that, I will now turn the call over to <UNK>. Thanks, Dave. Good morning, everyone. Exterran had another solid quarter on many fronts, with EBITDA as adjusted of $51 million on revenue of $350 million, higher product bookings and ECO wins and continued margin rate expansion in our product sales segment. We noted on our last call that we felt the fourth quarter bookings number was trendatory, as customer orders paused following a strong order flow during the first 9 months of 2017. Our Q1 bookings were $193 million, a 71% increase from the fourth quarter, in line with our expectations for the start of the year. We continued to experience robust demand for midstream infrastructure in North America, which benefits our product sales business, and ultimately, our service business as we expand into the region. During the quarter, we received our first process [and treating] AMS part sales in North America as we focus on developing our capabilities to enter this market. The Permian basin, Marcellus and Utica, and SCOOP/STACK continues to remain very strong markets for both compression and processing and treating demand. The DJ basin also remains active with continued discussions of new projects, both Greenfield and expansions of existing assets. In recent weeks, we've also seen inquiries increase in the Eagle Ford, Bakken and Nebraska. The dynamics and drivers in each of these basins are different and we're tailoring our solutions to our customers in each location on a specific basis. In the Marcellus, growth is clearly driven by incremental gas and NGLs. Customers are adding capacity and need new cryo trains to process these incremental flow. With our product philosophy of modular and scalable plants, we're well positioned to satisfy the demand of our customers by delivering additional trains as they see this incremental growth unfold. In addition, we see the petrochemical capacity being added, leading to the need for additional processing equipment that we're able to design and deliver to the scale required to support their needs. In the Permian, the story continues to be all about liquids. However, there's a large amount of associated gas that customers have coming off their wells. This allows us to position additional processing trains and compression to produce and transport this gas. The announcement of new pipeline capacity is enabling customers to continue drilling and generate additional supply, which thereby affords us an opportunity to provide more equipment to enable them to monetize their output. In the Middle East and Africa region, customers continue to drive investment in both oil and gas projects. We are seeing a resurgence of demand for oil processing capacity, and that is typically coupled with associated gas volumes and the need for produced water treatment solutions. Countries such as Kuwait, Oman, Iraq and others have announced additional discoveries and the need for new projects that are well suited to our capabilities. We are well-positioned, our customers are moving forward with projects to rapidly monetize new gas discoveries, while renewing their activities in oil with smaller and faster-to-market concepts. Our ability to offer customers a complete design build, own, operate and maintain solution with an in-region execution from our newly purposed Hamriyah facility is a competitive differentiator. Latin America feels like we're at the beginning of a midstream up cycle. We've talked extensively in the past about Argentina, Bolivia and Brazil as the centers of new gas initiatives driven not by economics but by fundamental demand for the benefits that natural gas brings to growing nations. The inbound inquiries continued to be strong globally and we are anticipating a very strong second quarter for contract operations and product orders. In our contract operations segment, we recently signed another contract in our Middle East and Africa region, this one for over $60 million of revenue to build, own and operate and maintain a cryo plant that will go into service within 2 years. Inclusive of the project awards we announced on our last earnings calls, we have now signed over $100 million in contract operation projects over the past 6 months. We continue to win businesses at a steady pace and anticipate more project wins from our long-term project pipeline as the year progresses. Last quarter, I talked about 3 fronts of execution we continue to focus the entire organization around: first, delivering the projects that we have in backlog; second, positioning to win with efficiency, cost and speed; and then third, scaling our operations and our capabilities in the Middle East. I'm pleased with the progress we continue to make in all 3 areas. We're making good progress from the previously announced projects across our engineering, manufacturing and on-site construction teams. We recently achieved a milestone of over 1 million safe man hours on the site on one of these projects in a very harsh environment. Our regional operating teams, along with our global supply organization, continues to make excellent progress, positioning the company to take on more complex projects locally, delivering sharp productivity and faster cycle times. Our continued margin expansion efforts in our product segment will continue through 2018 and beyond. At the same time, in our newly purposed Middle East facility, we've logged over 300,000 manufacturing hours in our Hamriyah shop during the first quarter and delivered product directly to our customer sites within the region, improving cycle time, while saving significant transportation costs by not shipping product out of the U.S. Our Middle East facility has quickly become a key competitive advantage for Exterran, for both compression and P&T product lines, providing the full service offering from application and configuration to detailed design, manufacturing and service support. All of these are signals of our efforts on operational effectiveness paying off, and I'm looking forward to seeing continued improvements in all of these areas. In our aftermarket service segment, our results were in line with our expectations but lower sequentially due to anticipated seasonal factors in Latin America. It does not detract from the progress we're making in winning new projects and expanding into new markets. We are seeing continued commercial success and are further developing capabilities to deliver expertise to our customers with a high degree of responsiveness. After Dave discusses our first quarter financial results, I'll provide some additional commentary on our outlook. I'll now turn the call back over to Dave. Thanks, <UNK>. As I discussed our segment results, I will again make comparisons to sequential quarterly performance. So starting with the contract operations segment, revenue increased 1% to $96 million, while gross margin was flat at $61 million, resulting in gross margin percentage of 63%. In the aftermarket services segment, revenue was 14% lower at $26 million, while gross margin of $7 million decreased 7% from the prior quarter. This resulted in a gross margin percentage of 28%, up 200 basis points. As <UNK> mentioned, we traditionally see a slight reduction in Q1 in South America due to summer holidays, resulting in decline in repair, maintenance and overhaul projects as well as in transactional part sales. Compared to the same period in 2017, however, AMS revenue was up 17% and gross margin was up 26%. Revenue in the product sales segment was $228 million or 7% higher, while gross margin improved 11% to $27 million, resulting in a gross margin percentage of 12%, up 40 basis points from Q4 and up 330 basis points from a year ago. It was a strong quarter for compression. In fact, net revenue from compression orders was at its highest in terms of dollars since the second quarter of 2015. Revenue for processing and treating orders were also higher sequentially, once again reflecting solid conversion and execution of our backlog. The product revenue split was 93% from North America and 7% from international markets. <UNK> noted the improvement in product sales bookings to $193 million. Our product sales backlog was $427 million at the end of Q1 as compared to $461 million at the end of 2017. SG&A expenses were flat at $44 million, as we continued to manage costs while investing in revenue-producing initiatives such as new product development. We also implemented a new revenue recognition accounting standard, ASC 606, in Q1. The impact was not material to revenue or gross margin. However, you will see some changes on the balance sheet, and most notably the capitalization of contract obtainment and fulfillment costs, including demobilization and sales commission cost and the recording other related liabilities associated with contracts within our contract operations segment. Also as part of the adoption of 606, you will find enhanced disclosures in our filings regarding backlog. For the first time, you will find reported backlog for our contract operations segment. The backlog we are reporting is $1.2 billion. It's important to understand the definition of backlog. Our backlog is an estimate of the amount of revenues expected to be realized in future periods based on executed contracts and does not include any assumption for renewals, no matter how likely that is to occur. Additionally, month-to-month contracts or similar [constructs], if any, would be included in the backlog at 1 months' worth of value and the backlog will also exclude certain other variable consideration elements. Further details surrounding the adoption of this revenue standard will be included in the Form 10-Q, which will be filed today after the market close. Shifting gears a bit. On April 17, 2018, the company entered into a definitive agreement for the sale of our North America production equipment manufacturing facility and associated inventory to Titan Production Equipment Acquisition, LLC, an affiliate of Castle Harlan, Inc. The sale will not have a material financial impact to the company and allows us to accelerate our growth strategy by focusing as a systems and process company for oil, gas, water and power. The company will continue to manufacture production equipment outside of North America. We will continue to offer our customers complete solutions and gas gathering, processing, treating and compression as well as we will continue offering production equipment in North America through Titan. As you may recall, we mentioned several times last year on our quarterly call that we were undertaking a strategic review of the company's product and service offerings. The PEQ transaction concludes the product line rationalization efforts, as we've now completed multiple transactions, including the sale of the Belleli CPE business and the PEQ services business and the exit of the Belleli EPC business, which has all occurred over the past 2.5 years. We feel that we're now positioned ---+ well-positioned to offer the products and services to maximize the value we can provide to our customers across oil, gas, water and power applications while providing our investors solid returns. Turning to capital expenditures. In the first quarter, total CapEx was $49 million, driven primarily by investing in growth products in our contract operations segment. Looking at the balance sheet, total debt at the end of the first quarter was $387 million, with undrawn and available credit of $561 million. Our leverage ratio, which is debt-to-adjusted EBITDA as defined in our credit agreement, was 1.8x at the end of Q1 as compared to 1.7x at the end of 2017. Our long-term debt less cash or net debt stood at $369 million, up from $319 million at the end of 2017 and the increase was a result of the investment in growth CapEx. We're well-positioned with adequate capital to take advantage of the pipeline of opportunities we've been discussing. And we continue to make progress with respect to working capital. In fact, working capital as a percent of sales improved again and is 1,000 basis points improvement versus a year ago Q1. I'll turn now to the outlook we have for Q2. In contract operations, Q2 revenue should be in the low $90 million range, with a gross margin percentage flat to slightly lower than Q1. Lower compression capacity requirements in Latin America in Q2 will temporarily decrease revenue for the quarter. However, we expect to return to a run rate in line with our slightly-higher-than-Q1 levels as we enter the second half of the year. For our aftermarket services business, revenue will improve in Q2, going into the mid to high 20s, as Latin America activity will improve, and the gross margin will be slightly lower than Q1. In our product sales segment, revenue should be flat to Q1 levels, with continued gross margin expansion due to our focus on productivity and cost-out initiatives. [SG&A] should be between $45 million and $47 million, slightly higher sequentially due to the incremental investments and new product initiatives. Depreciation in the second quarter should be in the low 30s and interest expense should be approximately $9 million. I will add, we are maintaining our full year forecast for CapEx and cash taxes as provided in our Q4 call. I'll turn the call back over to <UNK>. Thanks, Dave. So as we noted on our last call, 2018 will be a year of investment for Exterran as we execute our growth plan. Investment will come in the form of capital expenditures and new product development initiatives. We will continue to be good stewards of capital as we maintain our focus on working capital and invest it in high-return projects and product lines. The sale of the production equipment assets is a great example of this focus. The global markets continue to feel cooperative and receptive of our approach and maintain an appetite for midstream equipment and new ideas to efficiently process the increasing amounts of gas production. During our last earnings call, I talked about Exterran's strategic growth plan and positioning our company more towards a systems and process company. As part of these efforts to provide differentiated value propositions to our customers, we have created a team dedicated to product development and R&D, looking at both organic and inorganic ways to grow the company. We believe this will be additive to our regional growth strategy as well as deliver optimized and efficient plants to our contract operations. The concept of integrating various products to offer a comprehensive and optimized solution is being seen favorable with our customers. We are currently working on a few pilots that is demonstrating this value. Additionally, we have invested R&D resources to enhance our water processing business. We are seeing a lot of interest from customers, both in the Middle East and in North America, where produced water disposal is becoming a major problem. We have seeded several of our patented deoiling technology with various companies in both continents, and have had very positive results. We will update you on progress in the next earnings call. Over the last few months, I've traveled extensively to all 4 of our regions and have come away excited and optimistic with the feedback from our customers. As we look at their investment plans, worked early with them on pre-feed and feed studies, we believe we are well-positioned to support them in meeting their objectives. Our global footprint is a strong enabler in driving those relationships. With that, I'll now turn the call back over to the operator for questions. Thanks. Yes. So first of all, we continue to see very strong demand in contract operations. The pipeline is ---+ continues to be robust. I did highlight in the script and also in the earnings release that we have already seen in the second quarter a very strong demand that's resulted in some orders for us, both on product and on ECO. And so we feel very good how that's starting to convert into real orders that we can work on. The countries that was continuing to see strength, we've talked about them before, we're seeing, in the Middle East, continued strength in Oman, in Kuwait and recently in Iraq. We've seen in Latin America, the countries that we're already operating in along with Bolivia and some real green shoots in Brazil, again. And so the pipeline is strong. Some of these projects, by definition, take a little longer to close. I think we're well-positioned. We've read publicly, recently, a number of projects that have been talked about in the press from our customers. And so we hope to see continued wins here in the second and third and fourth quarter. The projects that we referred to, yet ---+ second half of '18, we'll see startup of those projects more towards the fourth quarter. The ones that we booked prior to, they're on-track. And as I mentioned, we're successfully building out those facilities, as we speak, at our customer location. And then, the recent wins that we've just announced this quarter are towards the back-end of '19, and probably fourth quarter, early first quarter of 2020. So depending on the application and product specs, some of these facilities get up and running earlier, others take a little longer. But that's the current framework of what we see right now. Yes, sure. So on the compression side, things have really started off the year very strong. Our demand, right now, that we're seeing on inbound inquiries reflected what we saw in the first quarter and the fourth quarter with regards to inbounds across most of the basins. I mentioned in my pre-remarks that we have continued to see strength in the Permian and the Marcellus. We're starting to see a few new regions coming through. And I think one of the correlations that we're seeing clearly is, a lot of the installed processing capacity that we've put in or we're putting in today, each one of those facilities have quite a large demand of horsepower and compression that's required to feed the gas. And so we've seen ---+ we're just kind of working on this, this morning. I think about 650,000-horsepower inquiries inbound in the first quarter between North America and the rest of the world, which is quite high compared to some of the run rates we've seen previously. So there's still a very strong demand in the heavier horsepower. We're clearly positioned to benefit from that activity, with the work that we've done, really focusing on manufacturing facilities, ready to take that volume. And so now it's just a question of, clearly the customers making that choice between rental and owning that asset. And hopefully, that will play into Exterran's hands. And so very confident about the market and, certainly for the foreseeable future, we continue to see a significant demand on compression. On the water treatment side, it's a business that Exterran's owned for a while and had relative success in large-scale order projects. We took a little bit of a different approach a little while ago and started to produce some technology through some patented deoiling technology to help our customers really to enhance the work that we're seeing that's taking place today in the shale play. We've integrated some of the mechanical and the chemical treatments into this core technology that we have, to really tackle the challenges that we're seeing every day from our customers, which is this produced water problem that we're seeing across the board. And so this technology, it's portable. We've built a number of these units, all of these units are currently in the market being used. They're capable of handling up to 30,000 barrels a day, processing water in some pretty spectacular time frame. And we've started conversations with several customers on the technology solution and how we can integrate that into some of the major players in North America and also overseas. And so, it's an area we've invested in quite a bit, and I think it's in the early innings of hopefully a great segment that we can talk about in the future as being a real key component of Exterran's success. And I think it has both the opportunity on a product sale and also on a contract operations, and so we're testing this concept as we speak and hope to give you more updates later in the year. Okay. This is Dave, I'll step up for the operator, as they have a fire alarm going off in their building. (Operator Instructions) All right, I think <UNK> <UNK> from Wells. So <UNK>, a couple things. First of all, it really wasn't a material value. We issue our Q this evening. You'll see a little bit of a disclosure in there in terms of the value. It really was one of our smallest product lines in terms of revenue. We've seen a continued demand in a product that really doesn't fit what we intend to do with Exterran, which is really to build a processing system. It really generates service revenue from the product development that we're building. And so we saw that it as an opportunity to take a great business and allow someone else to run with it that can fit their needs. And so it allows us to focus the organization in a better way. We sold a facility that's more than capable of meeting the aspirations of what the buyer wants to do. But it really didn't fit the place in which we want ---+ where we want to take the company. And so, there was no surprises, generally. We've been [looking on a deck] for while in terms of the portfolio, and as Dave mentioned, we sold the CPE business. We took care of the PEQ service business last year. We've ran down EPC. And so really what we're left is a portfolio that can generate revenue, not just the time you ship the product, but also through the life cycle. And so that's ultimately where we're heading. And so it was really nothing more than that. And maybe, I'll add, <UNK>, just to frame the financial side of it. As <UNK> mentioned in our Q, because of the enhanced disclosures around ---+ from 606, you'll see the sales in the first quarter run under $9 million for the business. And again, it doesn't mean, because we sold the business we lose those sales. Again, we sold Titan, the manufacturing facility, some equipment and inventory. They're still going to be a partner to us and serving our customers in North America that need PEQ products. We're still able to manufacture and sell those products internationally. So it may have very little impact on the P&L. Again, the assets in their hand, we felt was something they wanted to focus on, some better use of those assets. And it also doesn't change anything regarding compression and processing and treating. I know some of the merger-type magazine articles seem to carry a little bit further, but it's really only a PEQ discussion, selling them the facility and inventory. Purely strategic, and a great team from Exterran moved in to Titan, so they'll do great. Revolver balance was ---+ it's around $660 million, $670 million, off hand. Oh, outstandings. Yes, total long-term debt was $387 million in total, so minus the $375 million of note, so $13 million. (Operator Instructions) I'll hand it back over to <UNK>. Okay. Well, that concludes the remarks of today, and thanks, everyone, for dialing in. And I appreciate the interest and look forward to updating you at the end of the quarter. Thank you.

2018_EXTN

2016

MPW

MPW #Morning, <UNK>. Just to clarify, we've got $125 million of term notes due this year. The first tranche ---+ and it's about 50/50 ---+ the first tranche is July, and then the second one is October, as you point out. We've got those hedged and have had them hedged for a number of years. So we won't try to break that match for what would probably cost us money. We'll just go ahead and pay those off. We have two bond issues maturing in [2024] that become eligible for call over the next coming months. And you're right that we absolutely are looking at that. We'll continue to look at that, as to whether it's beneficial to go ahead and refinance those, call them in. And under market conditions now, if we could draw a circle around today, it looks like it would be somewhat advantageous for us to do that. Although we've made no commitments to do any refinancing, it's certainly something that, as you would expect, we're considering. Six and three-eighths, that's right. And you're absolutely right ---+ not only is our liquidity improved, but the overall market conditions are substantially improved. And as we all know, that could change by this afternoon. But your point is absolutely correct. With respect to the ERs ---+ and all of those are Adeptus ---+ there is no geographic differentiation. Those yields range between ---+ pretty much our overall range in this case, between 9% and 10% plus, depending on when we committed under ---+ we've got three tranches, a total of $0.5 billion. And so as those come on line, depending on which tranche they were in, it falls into those. And again, those are cash yields. On the rehab hospital for Ernest ---+ and again, we have never given specific cap rates ---+ but this goes into the Ernest master lease. And once again, if you take our range that we have given of between 8% and 10%, this one falls right in the middle of that. Yes, they are locked in. Once again, depending on which of the three Adeptus tranches, they are locked in. <UNK>, from a development-acquisition standpoint, we will continue to do the vast, vast majority of our new investments from an acquisition standpoint versus a development standpoint. From the standpoint of what we like to see on the rental increases, as you know, all of it is a part of the negotiation, so that when you push here, you have to push somewhere else or give somewhere else. From our general feeling, we like to see the rental increases tied at some inflation number. We'd like to get that as unlimited as possible, but roughly half the portfolio ends up having some type of collar on that. <UNK>, let me address those ---+ the last part of that question and make sure I understood it correctly. So if I don't answer it the way you asked it, please correct me. But the valuations today are every bit as strong as they were last year in the beginning of the summer. There was a very short time period, beginning at the end of summer and running through probably last fall, where it seemed that the entire world was kind of on a wait-and-see situation with what was going to happen with the Fed and interest rates and the economy as a whole. That certainly seems to have subsided some, and we're very comfortable with where the valuations are. From our standpoint, certainly from a disposition standpoint, we have always thought that our portfolio was much more valuable than the market had given us credit for, and we're very happy to be able to show some of that and prove some of that with some of this disposition activity that we have. From the standpoint of the rating agencies and getting to be investment grade ---+ that certainly is valuable, but it's not as valuable as it used to be in the old days, with interest rates being as low as they are. There isn't that much difference these days. We certainly would very much like to be at investment grade. But as I have always said, we won't run this Company with just the goal of trying to meet the various aspects or trying to get to investment grade. There are obviously some of the items in what the rating agencies would like to see that are the same goals as ours. One of those was increasing in our size, which therefore improves our diversification overall. As I've said, we've grown; we've almost doubled in size in the last three years. And very, very importantly to us, and I think to the credit-rating agencies, is that by doing that, we've pushed down our exposure to our properties so that our largest property only represents 2% of our portfolio. That's outstanding diversification from that standpoint. One of the headwinds that we will always face is just the hospital healthcare market in general. When you look at the overall outlook of the credit-rating agencies on hospitals as a whole ---+ which include all the government-run hospitals, which certainly are not our market ---+ it's a negative outlook. But then when you look at the specific tenants that they cover that are ours, which represent about 60%, 65% of our total revenue, the vast majority of those outlooks are from a positive standpoint. So I think our continued performance, the continued incredible performance of our existing portfolio and their EBITDAR coverages ---+ I think that the opportunity for us to get moved up to investment-grade rating by all the agencies is certainly one that's a reasonable expectation. <UNK>, we will continue, certainly as far out as I can see, as being primarily fee-simple owners and straight real estate investors. Obviously, part of our original model, and it continues to be, that we will make selective investments, like we did with Capella, like we did with Ernest. But I think you're referring to a different type of instrument that some of our other, particularly larger healthcare peers, have done. And that is not our target market. <UNK>, let me start with the LTACHs, and let me remind all of us that the patient criteria [bill], which pretty much started all of this whole discussion, was supported and very much encouraged by the industry. So there actually is a definition of what constitutes an LTACH patient. We support that. We think that ---+ I have always said ---+ as you may recall, I got my start in the physical-rehabilitation business. What we did back in the early 1980s versus what they do today is very different. We always have supported pushing things out to the lowest-cost provider. As technology continues to improve, you'll see that continue to evolve. We have always said as a part of that, that we pick the very best operators that are able to adjust with the times and adjust with the changes. And as I stated just a little while ago, in response to someone's question about the LTACH reimbursement, we have been extremely pleased with how well our operators have made adjustments. We think they're all way ahead of schedule with where we thought they would be with making those adjustments. We don't have any plans to make any additional LTACH investments at this point. We, like the rest of the market, are kind of in a wait-and-see from the overall standpoint. We believe, as does the American Hospital Association, and as does CMS, that the LTACHs actually provide a good service and a good benefit for society as a whole. But I think that we probably have another 12 to 18 months for all of us to see exactly where this shakes out. But we're very positive on where it's going at this particular point. From the rehab standpoint, we continue to be very bullish on the rehab market, as I think most people do. And again, we very much support pushing patients out to the lowest-cost provider and not having them in a place of higher cost, and therefore higher reimbursement, if they don't need to be. Again, our operators have been very good at making those adjustments and moving with the times. And we continue to be very bullish on the whole (inaudible) sector. Yes, but just to clarify ---+ we don't see any additional growth from people that we're not already doing business with. It doesn't mean that we may get an opportunity that we think is a really good one. But we think that the opportunities we have with our existing rehab providers is enough to keep us comfortable in that particular market. We announce ATM activities with the filing of the appropriate 10-Q. Thanks, <UNK>. Thank you, operator. And again, thank all of you for listening today and for your interest. And I greatly appreciate all of the questions. If you have any additional questions throughout the day or throughout the week, please don't hesitate to call any of us here at MPT. Thank you very much.

2016_MPW

2017

LYV

LYV #And, also, just to add to that. We kind of get a little US centric here. We've been very effective on a global basis, of moving faster than the historic Ticketmaster that we inherited did here. So, in the UK, Australia, all across Europe, where we have launched a secondary platform, we are number one, close to number one, I mean, StubHub really is only strong in America. They are obviously expanding. But we, on a global basis, we're seeing great success as we're either a leader, or an early entrant into a lot of the markets. So, we see on a global basis we will continue to have market share growth on that segment. A lot of that is part of the deferred revenue at year end. So, they've sold for future shows as well, so the reason why we say we don't repatriate is we use for their events, and pay artists, et cetera. I'm sorry. Yes, it is going to be primarily deferred, sponsorship, all kinds of things. We don't have more granularity to give you on that. But generally, our cash is going to tick up with the deferred revenue. Yes. I would say, where I think StubHub has always had market leadership in the US, I think we've obviously grown strong and taken market share from the independents in the US. Outside of America, Viagogo and others have been out there, and we would be the one taking market share from most of the independents in different countries. No, we haven't seen that. We have a strong 2016 in Europe, obviously and international. And, we're off in February to a strong on-sale, right now across Europe. We don't see any slowdown in any countries, right now. We see very robust planned and on-sale, so far. That's all, <UNK>. (laughter) We've been talking for the last couple years about an API open allocated market. We've been very clear that the rest of the world has always been allocation, and Ticketmaster does very well in those markets. We've got a strong market leadership, generally at a lower cost per ticket. We've seen over the years, that eventually we always had kind of stated that we thought that multiple ---+ more distribution points were going to be a reality in the business for clients. While we were very aggressive over the last three years of building an API to help clients and artists, et cetera, have opportunity like StubHub ---+ or Spotify, Bandsintown, Groupons, and others. We believe that the smartest strategy for Ticketmaster as a software platform, has always been to solve its clients' needs to provide great platform software, provide a great marketplace, and provide the flexibility to use partner sites to help augment its sales. Because, as you know, when you have as many customers as we do, you're the hottest team in the NBA, you're not that worried about partner sites. You're not really worried about Amazon if your U2 sold a million tickets in an hour. But if you're a team or an artist, that's like most of the business, needs to sell a few extra tickets, you are always going to be looking for incremental distribution points. So we've always believed that being open API driven, letting our clients have opportunity to power other retail sites is a smart strategy for Ticketmaster, and we've been doing that over the last couple of years now ---+ finding partner sites to augment sales. Yes. We see them as retail partner, absolutely. On the CapEx question, think about it from a new tools or new clients, versus other things. So if we are adding technology to our mobile product, or adding functionality to TM+, those things would be revenue generating. If we get a new client where we have to add hardware or make some changes, that's going to be revenue generating. Other things, like your question on CapEx related to cloud ---+ moving to the cloud, or just replacing hardware, et cetera would generally be maintenance. Yes. If we're adding new technology and new tools to it, absolutely.

2017_LYV

2017

VLO

VLO #Thanks, <UNK> and good morning everyone The fourth quarter and the full year 2016 were good for Valero as we achieved our best performance ever in the areas of personnel and process safety, plant reliability, and environmental stewardship We are very proud of our team’s exceptional execution, which we believe is imperative in our business and critical during the low margin environment like we saw for most of the year In the fourth quarter, we continued to see good domestic demand supported by low prices and solid export volumes due primarily to demand strength in Latin America While we saw seasonal declines in available margin in some regions, margins in the Gulf Coast region remained healthy and distillate margins in all regions were bolstered by a return to more normal weather patterns in North America and Europe We also saw attractive heavy sour discounts relative to Brent A persistent headwind again this quarter was the exorbitant price of RINs We spent $217 million in the fourth quarter to meet our biofuel blending obligations At this level, this is a significant issue for us so we continue to work it aggressively with regulators Our efforts are focused on moving the point of obligation because we believe this will level the playing field among refiners and retailers, but more importantly, it will improve the penetration of renewable fuels, lower RIN speculation, and reduce RIN fraud However, based on current rules, we expect costs in 2017 to be similar to the $750 million amount we incurred last year Given significance of this cost to our company, this issue continues to have our full attention Turning to our refining segment, we initiated turnarounds at our Port Arthur and Ardmore refineries in the third quarter Both events carried over into and were completed in the fourth quarter Our employees and contractors worked hard to safely complete these events We believe distinctive operating performance is highly correlated to capturing more of the margin available in the market In our ethanol business, we also ran very well and saw strong margins in the fourth quarter due to high gasoline demand in the U.S , strong pull from export markets, and low corn prices Also in the fourth quarter, we invested over $600 million to sustain and grow our business Construction continued on our $450 million Diamond Pipeline project, which we believe is on track for completion at the end of this year, and we continue to work on our $300 million Houston alkylation unit, which we expect to be mechanically complete in the first half of 2019. We also have additional growth investment opportunities under development around octane enhancement, cogeneration, and feedstock flexibility And finally, regarding cash return to stockholders, we delivered a payout ratio of 142% of our 2016 adjusted net income, which was 78% higher than our payout ratio for 2015 and well above our target for 2016. Further demonstrating our belief in Valero’s earnings power, last week our Board of Directors approved a 17% increase in the regular quarterly dividend to $0.70 per share or $2.80 annually So <UNK>, with that, I will hand the call back over to you Good morning <UNK> Yes, you bet We will give you a point of view What I would like to do is let <UNK> <UNK> answer that question <UNK> has recently taken the position as the individual responsible for our public policy and strategic planning group, so we brought him back from London to take on this job And it’s interesting we put the two functions together, strategic planning and public policy, because in our view you really can’t bifurcate the two anymore They are going to be very intertwined So <UNK>, you want to go ahead and share your point of view? Hi <UNK> <UNK> and we have talked about this before, we set the 75% target because it’s easy to see and cash flow can move around, obviously And <UNK> is right, looking at net income in a low-margin environment, we set an expectation and we consider it to be kind of the floor It’s our commitment to our shareholders to the extent we can do more and it’s the best use for the cash, we will go ahead and continue to buyback shares I think the move we made with the dividend this quarter clearly reflects our comfort level and our Board’s comfort level with the earnings capability of the company in a down market And so obviously, if you look at a $2.80 dividend, it’s going to continue to be a more significant component of the 75% payout ratio We are very comfortable with that But we will continue to buyback shares and the guys will do it in the way they have done it in the past, to some extent ratably and to some extent opportunistically Yes I mean it’s – and I will let <UNK> and <UNK> and <UNK> can – we can all speak to this But obviously, you are going to optimize your crude slate The big question around this whole border adjustment is how are the markets going to react to it and frankly, we have read everyone of the sell side reports on this and then consulting reports, as <UNK> mentioned and it’s got a lot of moving parts Some people look at it on a static basis Some have looked at it when you take into consideration the markets adjusting and some have taken into consideration the currency adjustment also So right now, there is a skeleton out there that they are trying to put flesh on and we don’t know exactly what it’s going to look like But I think it’s fair to say that we are going to continue to optimize our operation And if you recall, <UNK>, I don’t remember how long ago, but we are running over 1 million barrels a day of light sweet crude and there has been times when we have run 600,000 or 700,000 barrels a day of light sweet crude So, <UNK>, we have got the flexibility in the system <UNK>, you want to talk at all about the markets and Hi, <UNK> Yes, it’s a great question, <UNK> <UNK>, you want to share your thoughts? The yield obviously is a function of the stock price And we can’t control the stock price What we can control is how we reward the shareholders of the company and how confident we feel about our ability to produce cash flows, free cash flows within the company, that we try to manage, right and we do it through a capital allocation framework that <UNK> mentioned earlier The dividend and our maintenance CapEx is non-discretionary in our minds and it will continue to be So making commitments to our shareholder returns through the dividend is something that we don’t take lightly and we modeled extensively The buybacks and the growth projects, organic capital projects and acquisitions are areas that we consider to be competing for the use of free cash flow And we look at the timing on our project development activities We look at the return on our projects that <UNK> and his team are developing and that <UNK> and Martin have and we compared it to the value of buying back shares And so we make the decisions accordingly to provide the highest returns for the shareholder I would tell you, I wouldn’t – I would be lying to you if I told you that we look at the absolute yield and say that is what determines our decision around the dividend policy It’s more how do we feel about the cash flows that we can produce within the system <UNK> thanks Glad to hear Okay, fair enough <UNK>, you want to take the crack in our RIN? But yes, I guess <UNK>, we started the year like $0.95 per RIN and now it’s like at $0.50. So we have made the point all along that this is a market that we believe is right for manipulation and the fact that you have had this movement in it, it sure is based on fundamentals Well, I certainly think Torrance coming back online has impacted the market here in the prompt market As I mentioned, we saw some weaker demand with RIN on the West Coast But overall, LA is moving to summer grade expect today, which you pull butane out of the pool, which directionally tightens it [ph], next month, the bay will go to summer grade gasoline So all of those things should directionally help demand and bring supply and demand back into balance But <UNK>, you are not suggesting that its Valero, it’s going to make the run cut? I mean <UNK>, we are the lowest cash operating cost guys in the business and we don’t have any strong interest in balancing the market ourselves Good morning, <UNK> <UNK>, you want to speak to this? No, we don’t want to do that But <UNK>, you are right, I mean, what <UNK> said is exactly right and it was characterized earlier The Lyondell refinery is a nice opportunity, but they chose not to sell it And we are just not seeing a lot of refining assets that are for sale that would add any value to Valero’s portfolio So from an acquisition perspective, what do you focus on? You focus on the opportunities in logistics and other areas where you could improve the earnings capability of the company by improving your logistics, your feeds in, your products out, and then potentially upgrading your stream So we are not in a position – we don’t believe we are in a position where we have got to go do a deal to balance on our portfolio We will look at this a little differently and then we continue to seek ways to try to improve the quality of the portfolio we have got in place Hi, <UNK> That was an incredibly clever way to ask three questions That was good The need to get it back, I don’t think we have a sense of need to get it back Would it be nice to have access to it? And <UNK> and the team are looking at the repatriation implications of the border tax adjustment You always want to have your cash totally accessible to you So, it will be great to get it back But I would tell you that this – let’s just assume that we are able to bring it back and bring it back in good shape The question is that what do you do with it? You reinvest it in the business? I don’t see us changing our approach to capital if we had the cash back, okay I mean, I don’t think <UNK> is going to say gee whiz, now I can do a whole bunch more, because we are not holding back on things that we are doing today So it will be wonderful to have access to it without paying any tax on it That’s not likely But I don’t think it changes anything we are doing, <UNK> <UNK>, you want to? Yes, I mean we have all adjusted to this Really, the frustrating thing from our perspective is the negative effect it has by shifting the value of doing business from us to the guidance capturing the RIN And so obviously, it would be beneficial to Valero if the point of obligation moved, which would reduce our burden And frankly, we believe it would take a lot of the speculation and the manipulation opportunities out of that RIN market and it should lower the price of RINs Now, the RVOs will have a factor on that and so on But from a refiner, from an independent refiner’s perspective, it will be positive Hi, <UNK> Yes, do you see our ships loading, <UNK>? <UNK>, you want to? And then <UNK>, the tail on that was tax rate changes In interest rates, I mean it just – it provides an investor different option, right But you still have the benefits of everything that you have today with an MLP ownership position And you are right, we don’t know enough yet about the infrastructure projects that are being talked about, at the Federal level right now, what the implications of those are But any time you get projects like this taking place, they tend to drive distillate demand, of course it would drive gasoline demands also But – then there is the other things, petrochemical feeds, asphalt, things like that So we are actually encouraged by the outlook and by the focus on the infrastructure within the U.S So we will just see how it all plays out <UNK>, you should never ask us that question when you got a guy who is responsible for the MLP in the room But to answer your question, honestly, no, we haven’t talked about an equity stake in Keystone That maybe true, but that does not mean that we would be the guy That’s right <UNK>, you want to? We couldn’t answer that question But – and I think <UNK> answered it properly It’s – we sure don’t want to signal our timing on our buying, but we look at what we view to be the earnings capability of this company And if the returns on the buybacks are better than the returns on the growth CapEx project, then we are going to buyback shares We said for years that we are not going to hoard cash, to the extent that we produce free cash flow We will continue to look at the buybacks <UNK>, where have you been? Okay <UNK> did talk to that earlier Just want to give him the likelihood and then we can talk, <UNK> or we can talk about the other components of that question And then <UNK> as far as well – <UNK>, it comes down to how are the markets going to react to this, right And we have read all of the reports and we have read the consultants reports Something is going to be good for refining, something that may not be as good for refining And we talked earlier about the fact that we can adjust for the crude slate But <UNK>, the markets are going to react The interesting thing was, I guess at Port Arthur, you were able to increase overall run rates, throughput rates, because we were running the lighter slate So <UNK>, we will be able to flex the system to deal with it I guess the question is how to – how do the global crude markets respond to the duty, do they price to continue to push their barrels into the market or do they find a different home And I think <UNK> has made the comment in several of the meetings that we have had that the natural home for a lot of the heavy sour crudes tends to be in the U.S Gulf Coast refining system So I don’t know if that changes in any material way Look that is certainly what we have read also, okay And I think your friends at Goldman did a report here recently that I have gotten to study, but I thought okay, maybe they moved up and then they move back down, something rise, the market suggest to it So <UNK>, the interesting thing is because this is kind of a topic du jour, right But none of us – they got the skeleton out there and the House seems very committed to this today But they don’t have the flesh on the bones There is lots of conversations that are taking place around do you have carve-outs, don’t you have carve-outs and so on I think what I have encouraged our investor base to do is just let’s be patient, not over-reactive and let’s just see how it shakes out We will adjust to maximize the value to the company, but I don’t think anybody knows enough yet to really understand what the full implications are And then when we have seen changes like this, the markets tend to respond So here again, we don’t have a great deal of concern and consternation around us right now We are just trying to understand it better

2017_VLO

2016

SBH

SBH #Okay so you got a break it down. Because your KPIs are different based upon what you're looking at. If you look at your CRM activities such as our direct mail, you're looking at response rates. If you're looking at your digital CRM, you're looking at email open rates. But then also visit rates in purchases that are made. So those have very concrete metrics that are very ---+ same with your digital spend it really comes down to how many people actually engage with the digital spend you're doing there. As well as what shows up in store. And you track that as long as you have a BCC card, or as long as they flow through the e-commerce site. And then some of your other stuff such as your social media influencer's, you have to really look at impressions and things like that. You can't really look at, do they turnaround by the store, because the many customers you don't have any data on them to track whether they showed up in your store. But you're looking at do they actually engage with those posts. And are those social media influencer's recommending your brand to a broader audience of people, and as a result are you getting more impressions. Sure. I think the answer is it will be different. So your loyalty customer, your BCC customer, and even your list customer tends to be quite responsive to some of the promotional activity you may put out through your emails. So the net result is that could turn traffic fairly quickly. If you get the promotional strategy right. For the social influencer's, and for your digital marketing spend, it tends to be a slower build. It's more of a grassroots build through social media where people are recommending your brands, or recommending trying certain products to carry in your stores. And that takes longer to build. So there is a mix of short-term activity and longer term activity that you're working on at the same time. On our e-commerce side, we're really targeting faster growth rates in e-commerce. We've radically improve the website we offer. We're making it much more user-friendly. We have seen terrific improvements in traffic. We haven't seen the corresponding improvements in conversion yet. It's up, it's positive, but it's not positive to the level we want. And our team continues to think about how we make the site more usable. As well as how do we link that toward our digital advertising and social media activity to draw more traffic and better conversion through the site. I think ---+ I don't think so. I think we have a constant stream or promotional activity that we're trying to tailor to our user group. To basically bring them to the store and inspire them to come. I have seen the calendar for the first half of the year I would say it's a normal calendar. You bet. <UNK> that such a broad base question because there are so many different things we changed. Obviously we did a lot of merchandising resets that affected. And some of those are significantly up. So as an example cosmetics, multicultural, those categories are significantly performing significantly better than previous years. Nails I think is going through an overall seismic change in the category as the extended wear products cannibalize some of the gel products. So even though we're seeing good transactions there. The reality is sales have been down. It's a very big question. I think what we're excited about overall is that we're past a lot of the disruptive activity. So as I mentioned earlier, the migration of our CRM platform, the upgrades of so many categories, the upgrade of so many stores, the changeover in the packaging, what we felt was necessary to establish our brands as salon quality brand. All of that is behind us now. Which allows us to focus much more on in store execution. We're actually cascading out of selling model to all associates every single store in the country right now. And we see that as a real positive it will help us with the UPT. And as you get UPT up, that gives us a little bit of time to work on using our social media and advocacy based model to drive traffic over time. I think it was more brick-and-mortar. I think that's right. You're seeing obviously a significant investment in online channels. That being said, is not penetrating much into the pro side. But I do think that online channels are pushing fairly largely into the retail side. And we expect that to continue which is one of the reasons why we're investing so heavily in our own e-com platform right now and really upgrading that. So my reference was really on the brick-and-mortar side. II don't see much in terms of a difference as to how our major competitors are playing the game. And let's be clear, on the Sally side, the major competitors are mass competitors, and we treat those customers up in the salon quality solutions from mass. I don't see much change there. Obviously this competitors a relatively slow growth, they are upgrading the categories to some extent, but most of them had already done that. And then what I would say in the BSG side, we have one primary competitive there, salon centric, I don't see a big difference there. Or much change in strategy there. And then finally, there's the e-com side, and there I think we have to continue to upper game to compete in that world. We do. We don't disclose the growth rate specifically, but around 1.5% of sales and they are growing double digits much higher than our store level. No. We're not changing that at all. We continue to be comfortable with the range we're in. Thank you. I would say a little bit. Our total price increases that we took across the whole business was well under 1%. So I don't think it's a huge leverage point, it contributes to some extent, but not a great deal. They have trended better, but I think it's important to note that those were also some of our let's call it worst looking stores. In many cases we went to markets and to store bases where we knew we had a problem in terms of aging store base. So it's not surprising that those stores would get the most out of that investment. Is not clear to me some of the newer stores and the newer markets would get as much benefit from that. Thank you very much for that. Thank you very much. I'd like to thank all of you for the questions today and for your continued support of Sally. And I look forward to seeing you in the marketplace soon. We will be out there in New York this week and coming weeks as well. Thanks again. And enjoy Thanksgiving.

2016_SBH

2016

EDR

EDR #You're welcome. Yes, so, look, we monitor virtually everything that comes to market, and there are a couple of large portfolios out there that we are aware of. But we're going to remain disciplined buyers of assets. And so, when there are opportunities, such as the assets that we just purchased, where we believe there is upside in it and in times when our cost of capital is appropriate or whatever, we may occasionally buy some assets. But what I want you to hear loud and clear is we're going to remain disciplined through the process. We think that has bode well and has helped why the Company's stock is where it's at today. No, I think more realistically there may be some asset or assets within portfolios that we would be interested in. Great. Thank you for your time, and we look forward to seeing many of you at our Investor Day in New York on May 17th. And, of course, at the NAREIT investors conference in June. Thank you for your time.

2016_EDR

2017

GPC

GPC #Thank you I will take comps first and then let <UNK> address your first question. As we are identifying and defining comps, <UNK>, we're excluding new stores, new branches. [Where] branches closed over the past 12 months and we're also excluding acquisitions. You specifically asked about FX in the quarter for the non-automotive. There was virtually no FX impact in the quarter, it was just negligible. And the acquisition impact in the quarter ---+ it was around 2% for automotive and it was around 4% for industrial. And it was around 11% for office and then electrical was 1%, so in total they were about 4%. That is a great question, <UNK>. I will say that we have a robust acquisition pipeline and really across all four of our businesses and as I think I mentioned earlier, in all of our geographical regions. I think what we're seeing is that in some parts of our business, when we do an acquisition and I'll point out one that we did in industrial with the acquisition of Braas in Q3 of last year. What that brings us is additional players in that space. When they see that GPC is, one, that we are inquisitive and two, that we are a good partner. We have more and more some of these folks coming to us as opposed to us tracking them down. We feel good about our prospects for 2017. I'll mention ---+ we did mention earlier, we did 19 acquisitions last year. I don't know that will be at that level of activity but we certainly expect to be to be active again in 2017. You bet <UNK>. No. What we're seeing is has been fairly typical in recent years <UNK>, the pricing across the marketplace is rational. We're not seeing ---+ and our supplier partners are partnering with us as they always have. We're not seeing any significant shifts there either. I would say its probably premature. It's early to have discussions with suppliers about what changes they are going to be making and what changes we will be making. I think we're all taking a bit of wait and see, to see what ultimately happens. I think, as we think about this, what amount is going to be borne by the supplier and what amount borne by us, what amount passes on to the customer. I think in theory, a lot of this is probably going to end up being passed along to the consumer and in terms of inflation and what we see in the cost of products. But we have not started ---+ again it is early to be having discussions with what changes may happen in the supply chain. But know, that we will work with our suppliers and hopefully come up with the best solution that we can. Thank you <UNK> We want to thank you for your participation in the call today. As always, we thank you for your support of Genuine Parts Company and we look forward to reporting to you in Q1. Thank you.

2017_GPC

2016

LAMR

LAMR #So certainly being up 6.6% in the third gives us a lot of confidence as we lay in our plans for next year's digital deployment. This year, we wanted to see how it played out. We are going to come in at probably ---+ not counting the new Clear Channel boards, probably somewhere around 110-ish. So a little lighter than our usual buildout. I would anticipate that we will accelerate that going into 2017. I do not have a number for you yet. But all the trend lines indicating that we should be more aggressive next year than we were this year. Traditionally, I've said that 30% of our market's total revenue's coming from digital seems to be about where it is shaking out. We have some markets that are more than that. And we have a number of markets that are below that. If you look at our whole footprint, we are at about 20%. So give or take $300 million on give or take $1.5 billion, this also tells me that we've got some running room. But those are guesstimates. We still have a lot to learn about digital. I would point out that UK's experience in the UK, digital billing for out of home has surpassed 50%, which is quite a number. But, anyway, that is where we are. I think we still have runway even if it tops out at 30%, we are 20% so we have got lots of running room and the platform is growing. Sure. I think it's a tad lighter on the new builds. But the most pleasant surprise, <UNK>, has been what it costs us on the maintenance CapEx side as we retire early generation digitals. Certainly the cost has come down. But more importantly, the performance has been enhanced. We are experiencing a much longer life from these units than we had anticipated when we first started deploying digital some 10, 12 years ago. So it's a combination of costs coming down, useful life being prolonged, and really just a much more efficient unit that is coming in from all of our vendors, really, at a price point that has been pleasant to watch. Yes. Well thank you, Chantel, and thank you, all, for being on the call. We will get together next year and put a wrap on 2016. Thanks.

2016_LAMR

2017

AMPH

AMPH #Thank you, operator. Good afternoon, and welcome to Amphastar\xa0Pharmaceuticals' third quarter earnings call. My name is <UNK> <UNK>, President of Amphastar. I'm joined today with my colleague, Bill <UNK>, CFO of Amphastar. We appreciate you joining us on the call today and look forward to speaking with you and answering any questions you may have. I will now turn the call over to our CFO, Bill <UNK>, to discuss the third quarter financials. Thank you, <UNK>. Sales for the third quarter decreased 10% to $57.9 million from $64.2 million in the previous year's period. Sales of enoxaparin declined to $6.5 million from $15.4 million due to both lower volumes and lower average selling prices. Please remember that enoxaparin volumes were high in the third quarter of last year because we recognized our final shipments to activists for the retail market in that quarter. Those shipments covered almost all of our retail sales for both the third and the fourth quarter of last year. Naloxone, which was our biggest selling product in this quarter of 2017, saw sales increase to $12.7 million from $12.4 million on the higher unit volumes at lower average selling prices. As we've previously disclosed, we had to discontinue our epinephrine vial product in the second quarter. This lead to a decrease of our epinephrine sales to $2 million from $5.3 million in the third quarter of 2016. Our other finished pharmaceutical products had volume increases due to competitor shortages, which led to an increase of sales of ---+ to $14.2 million from $9 million in the comparable quarter last year. Sales of insulin declined to $3.5 million from $5.2 million as we had no shipments to MannKind in the current quarter. Cost of revenues increased to $37.3 million from $36.6 million. Gross margins declined to 36% of revenues from 43% of revenues in the previous year's period, primarily due to lower margins for enoxaparin and the discontinuation of epinephrine vials. Selling, distribution and marketing expenses increased to $1.8 million from $1.3 million in the previous year's period. General and administrative spending increased to $11.7 million from $10.8 million, primarily due to increased legal expenses related to the patent trial against Momenta and Sandoz. Research and development expenditures increased slightly to $10 million from $9.7 million on increased expenditures for APIs and materials. The company reported a profitable quarter with net income of approximately $175,000, which rounds to $0.00 per share compared to last year's third quarter net income of $3.9 million or $0.08 per share. The company reported an adjusted net income of $3.5 million or $0.07 per share compared to adjusted net income of $6.6 million or $0.14 per share in the third quarter of last year. Adjusted earnings exclude amortization and noncash equity compensation. On September 30, 2017, the company had approximately $73.6 million of cash, cash equivalents, short-term investments and restricted short-term investments. In the third quarter, cash flow from operations was approximately $2.5 million and was positive for the 14th quarter in a row. I will now turn the call back over to <UNK>. Thanks, Bill. We had a very good third quarter in which we received 2 FDA approvals. On September 19, we received approval of our ANDA for sodium bicarbonate, which was one of our unapproved commercial products on the FDA drug shortage list. Then on September 25, we received approval of our ANDA for Neostigmine Methylsulfate. We're especially proud of the Neostigmine approval as it was approved by FDA in the first review cycle. We plan on launching Neostigmine in December. According to IMS Health data, U.S. brand in generic sales of Neostigmine were approximately $163 million for the 12 months ended September 30, 2017. Our wholly owned subsidiary, Amphastar Nanjing Pharmaceuticals, or ANP, was inspected by FDA in October and received 0 483s. As we previously have discussed, ANP is important for our vertical integration strategy. We have a pending ANDA supplement to use ANP as an alternative heparin source as well as DMFs for 2 ANDAs that we currently have on file with the agency. With respect to the pre-GDUFA ANDA, for which we have been expecting approval, we have received a new target action date for the fourth quarter. And there are no outstanding questions from the FD<UNK> We remain confident that we will receive FDA approval this year. Next regarding Primatene Mist, we continue to have positive communications with the agency. Based on these communications, we plan to perform one more small human factor study and have already submitted our protocol for FDA feedback. Given the speed at which FDA has been handling this matter, we expect to receive the agency's comments to perform the study and resubmit our NDA in the first half of 2018. Finally, with respect to our intranasal naloxone NDA, we have formulated a plan to respond to the CRL and have a meeting scheduled with the FDA for later this month to discuss the plan. With that update, I will now turn the call over to the operator to begin Q&<UNK> Yes. Sure. So it really is nothing new. It's to clarify the previous work that was done. On the last call, I talked about that we had submitted a risk analysis with some additional data. And based on that, we have slightly revised the label. And so in our discussions with the FDA, they suggested that we perform one more small study with these minor tweaks to the label. But we really are confident that at this point, the label is about as easy as it can be to understand, and this study should be very fast. And essentially, we feel, over the last year, we've had very much increased communication on this product candidate with the FD<UNK> And so again, it's been a long haul, but we do feel that this study should take care of it. And we are planning to resubmit the NDA in the first half of next year. Sure. So with respect to the intranasal naloxone, there were several issues in the CRL, including both the device and the volume. So we have addressed those issues internally. We've come up with a plan that we believe will be very acceptable to the FD<UNK> I mean, we're essentially agreeing with what they stated in the CRL and have put together a plan to address those issues. So we actually have a meeting this month with the FDA to discuss that plan and then move forward with that program. So with respect to epinephrine, what we previously disclosed was that we had 4 of our 7 unapproved products filed with the FD<UNK> One of those has now been approved, which was sodium bicarbonate. So there are 3 on file. We have not said whether or not the epinephrine vial is one of those 3 that are on file with the agency. But we have said, we are committed to bringing back the epinephrine vial. We continue to sell the prefilled syringe, which is on drug shortage. But the epinephrine vial, we have not publicly disclosed whether that's currently on file, but we will be bringing it back. Important question. So we have 3 shots on goal in the fourth quarter. One of those is the pre-GDUFA product. So we do have a new target action date, fourth quarter. And as I said, there's no outstanding questions with the FD<UNK> So we are confident that, that will be approved in the fourth quarter. And in addition to that target date, we have 2 GDUFA dates in the fourth quarter as well. Correct. All good questions. So let me start with ---+ in terms of more filings this year, we actually are not going to file any more this year. We had intended to, but there was some external supply issues that delayed us slightly. So those will be pushed to next year. Conservatively, we're looking to file 4 applications next year, and one of those will be respiratory. Well, there are several big ones in there. And you are correct that on the inhalation side, there are some significant ones. So it's not just one. There are several products that are very big. Yes. There is probably 3 that are more than $1 billion. And ---+ but most of these are over $100 million, almost all of them. Sure. So we do think it can expand the market for us. We've taken a look at the CRL in detail, and we think that the comments from the FDA are reasonable and will actually make the product better. So we're looking to do that. And we think there's also an opportunity for discussion about having an actual OTC approval as well. However, that's still to come. But the overall prescription market does continue to expand. We see more and more states arming their first responders with the product. It's, at this point, been elevated to a national emergency. And clearly, there is currently one FDA-approved product intranasal. That's Adapt's. And we think there is a lot of room in this market, especially given that ---+ at the current moment, we are the least expensive. So we continue to see the units go up, but we think with an improved product that's FDA approved, we can see further expansion. And I'd say just to expand on that, I think where the new product would have more penetration is the retail. Because right now, we have a very little of the retail market. And I think that's a market that's expanding the fastest right now. That's right. And that does tie into the OTC comment, where many of ---+ even the prescription products have standing orders. So it's sort of behind the counter and easier to get than your typical prescription. And so they're already sort of in that quasi OTC. So Bill's point on retail is, there's opportunity there. Sure. So again, it's ---+ all comes down to the fact that this is OTC, and they just want to be very, very sure that people can understand the label and use it appropriately. The most important critical step, which we will be monitoring in the human factor study, which is very easy to achieve is shaking. And we've made some changes to the label, as I said earlier, and have made it crystal clear, you need to shake this. The other 2 things that are a little more difficult and that's where we're fine-tuning for this last study, were issues of cleaning it and priming it, getting it ready for use. However, we do have data that shows that those 2 other factors are not as critical as the shaking. And so FDA has agreed that those would be review issues after looking at our risk analysis, but we will still score those for purposes of the human factor study. But they ultimately may be determined to be less important once they review our bench studies. Yes. So I mean, that is critical. The other 2, still they want to tease out the cleaning and the priming. But we believe that once they start to review the application after being resubmitted, they will see the bench data that will put less emphasis on to those 2 factors. And in the past, we have been ---+ we're very much a science-based company. And we have used a statistical model, which may have just complicated things. So now this study will be more straightforward and essentially qualitative in nature. So we're confident. This is ---+ obviously, we've gone through several rounds of these human factor studies. And we've discussed with our outside vendor, the most recent communications with FDA, and they feel confident as well. So hopefully, this will be the last study. I know we've said that before, but we are ---+ really believe that the communication has been enhanced. So we feel we have a better understanding of what exactly they want in this last study. So let me start with the sodium bicarbonate. That's a product, where we're already selling products. So there is no new revenue that come from that product. And for the first 9 months of the year, we had about $7 million in sales of that product. So that's just an ongoing thing. It's a little bit hard to say on the Neostigmine because we are the fourth generic to come in. So while it was a relatively large market when we filed it, it's always hard to be the fourth player in these markets. So that remains to be seen. So while we think it will be incremental, I'm not going to say it's going to fundamentally change the earnings outlook of the company next year. And then with respect to Primatene, we believe ---+ we'll need to have this discussion with FD<UNK> But in terms of the review period because we're really down to one issue on this human factor study, and they've already reviewed a lot of our data, we do believe it should be a 2-month review. But that is out of our control and we have not gotten any confirmation as to what the review period would be after resubmission. So it could be 6 months, but we're hopeful that it will be a 2-month review. And in terms of the marketing, it's the same marketing plan. It has been off the market for a long time, but it still has name recognition. Prior to the last PDUFA date, we had engaged a marketing company that had done some market research. And it showed that the name recognition was very strong, especially among baby boomers. And the retailers are constantly checking in with us and excited by it because it does generate foot traffic for them. So they're very supportive of the product as well. Yes. Even one of the retailers had a meeting this week with us just to discuss the plan. They remain committed to asking about it and putting it on the shelf as soon as they can. And very supportive. I think I had mentioned on a previous call prior to the last PDUFA date, one of the retailers was looking and putting it in actually 3 sections of the store. So it is important for the retailers. So I'll start with the litigation, a good question. So first, we've been briefing, and the briefing actually was completed on October 25, a very precise issue regarding the inequitable conduct before the USP. So that was one of our equitable defenses. It's not regarding the invalidity. So that delayed the process. The briefing ended on October 25. So at this point, I'm predicting any time around Thanksgiving, but you never know with the court. But I believe we could see at any time, end of the year, early next year, a final judgment. That's the next step, they enter final judgment. We have not moved on the bond. We've been very conservative. We're waiting for the final judgment. Once the final judgment comes in, then we will move on the bond and also proceed with our antitrust case. Yes. On the gross margins, the trend should be relatively flat compared to the third quarter. The Neostigmine revenues that we will get, and we believe we should have a smaller amount of revenues in December, will be at a higher gross margin. But the rest of the business should be pretty much the same as it was in the third quarter. Sure. So we did spend about $7.5 million in the buyback program in the quarter. So that was very active. And in general, we buy the stock plan. We believe it's lower than it will be in the future and buy less of it when it rises. So overall for most of the quarter, the stock was relatively low. So we did ---+ very active in the buyback. The other thing that changes the cash levels that we're still ---+ we still have some very large capital expenditures in both China and in France. So those are also drivers of the cash change. Sure. So first of all, we are always more focused on the R&D and our internal growth than we are on BD activities. But over the last couple of quarters, we've looked at a couple of things that we found very attractive and bid at rates that we thought were very reasonable and we did not get those things because we were not the high bidder. But then there's been probably even more things that have come our way that we have said that, that we would just pass on even though that there are somewhat ---+ there is some sort of synergies with our businesses. But we ---+ we're really focused on things that, I'd say, are easily digestible. So they're reasonably sized or ---+ either individual products or groups of products as opposed to companies. So that's where our focus has been. And no, we remain committed to look for those things and to evaluate those things when they come by. But as of now, we haven't seen the prices that those things are trading for come down significantly. And I think the expectations are still relatively high for the valuations that people are willing to dispose of assets. Yes. Good point. So I do believe that issue was clarified. It was an important point that we made in our in-person meeting and had a very good discussion where we talked about the fact that currently there's nebulizers on the market up through the OTC monograph, and of course, Primatene has gone through clinical trials and is much more consistent in delivering the epinephrine dosages. So I think we got a lot of clarity in our meetings over the last 6 months. And they made it clear that they want to get this to market, and they just want to make sure that it's right because it is a controversial product in both the company and the FDA want to dot every I and cross every T. But we did receive clarity on that. And the indication is for intermittent asthma, albeit that some people may try to use it that have perhaps more severe asthma. So thus the need to just be extra cautious and do another study. Thank you very much, operator. This concludes our call for the day. Hope everybody has a great day and a good evening. Thank you.

2017_AMPH

2017

NOV

NOV #Thank you. Terrific. Chanelle, thank you. I want to thank everybody for joining us this morning, and we look forward to updating you on our next call in April. Thanks very much.

2017_NOV

2017

MGM

MGM #Yes. Yes. To be clear, yes every quarter will be up. I think, as <UNK> said in his opening address, we have a Board meeting coming up in March, and that is obviously one of the big topics for us to go through at that time, and we will certainly have more clarity around that time. It's all those challenges that you have in any complex property. We are creating some very unique first-time installations here, and we're going to get them right and we need to get them right and we're just going to put the time and effort in to get it. We are pretty comfortable that the market conditions are suiting us at the back of the year. We think it is just the right thing to do. <UNK>, you want to take that first. Yes, <UNK> <UNK>, <UNK>. The budget increase is, we're going to give guidance from 3.1% to 3.3%, how we have been looking at it. But there is some cushion in that. It's the way we have to trend up on the $100 million increments. That is new guidance. Obviously the complexity, time does cost some funding. We still think we will be better off in the long run. We have every assurance, we're not going to give a specific date yet because we do ultimately want to continue detail with our contracts and would like to meet with the government around the process of licensing and approvals, before we can peg a date specific. That being said, we will be definitely be open in our mind in the fourth quarter. The idea of contingency into 2018, while always something we will consider, is something we're not contemplating right now. Yes, just to help on that, there is no chance we're going to need to have any discussion with the government about the land concession, because we are opening at this year. Sometime in the middle of the second half. Secondly, the delta increase is far less than, <UNK>, what you had mentioned. So $130 million in total. If you recall, that's about 11% of total cost increase over the last ---+ what, Dan. Three years. The cost has only gone up about 11% in the three-year period, which most of the guys over there would have loved to have had. So yes, we're comfortable with this budget. There is a little bit of increase because of the time of when we are opening this, but we're willing to take that increase, because of the time, because we want to make sure it's a good product when it does open this year. Do you know. It carries a little bit of a benefit obviously with the shift but let us get you the right number there. The big driver obviously is Con/Agg in March. The revPAR number in March is going to be enormous. We didn't. We should have. They want to hit it, <UNK> or Dan. Or do you want me to. What I would add also, <UNK> is there were a few projects that were capital in nature but expense type projects cleaning up like the Marina at Beau Rivage that had to get done in the fourth quarter. Even with those increases, as I've mentioned, our total expense per occupied room is only up 0.004%. And just a couple of things to clean up some things that were asked. Easter will be less than 1% the calendar shift. So the 7% RevPAR guidance Easter shift will be less than 1% of that. Flow-through was asked a couple of times, and to be clear, we're comfortable with the concept. We do believe margins are going to grow including in the current quarter, we expect flow-through to be up I think it was <UNK> asked, about 50%. We feel comfortable about that. In terms of PGP, <UNK> talked about that. I don't want to leave anyone with the impression that once we are done with that $400 million program, we are done, because we haven't implemented all the plans that we had identified even in the initial program. And as I said earlier, we have laid down the architecture for further initiatives, further ideas, which is we are confident for margins to continue to grow, even when we cycle through that program. And the cadence of RevPAR, we look like we're going to be up all year, even with the tough comp in the third quarter, we will be up, and certainly up nicely here in the first quarter. Up nicely in the second quarter, and in the fourth quarter, will be the strongest of the four quarters, and first quarter being the strongest probably of all. Third quarter being the toughest, but still up. <UNK>, do you want to add anything to this. Okay, well I know you have some other questions. Thank you all for joining us today. We have taken more than your allotted time, and we look forward to chatting with you soon. Take care.

2017_MGM

2016

IDA

IDA #Thank you, <UNK>. And I want to take just a moment and thank a long-time voice that opened these calls, Larry Spencer, who's here with us today and who will be with us for a few more months. But <UNK> has now taken over as our lead introduction for this call, and I just want to acknowledge and welcome him to this process and thank Larry for his many, many years that he took care of us. And with that, we had a good second quarter that exceeded our expectations, thanks in part to favorable weather during the last few days of June. Above-normal temperatures in the last week of June drove irrigation and air-conditioning loads higher than expected, but the second-quarter financial results were still less than the prior year. As a reminder, last year the Company recorded the highest second-quarter energy sales on record, as an early start to the irrigation season combined with a June heat wave in our service area to dramatically benefit sales in 2015. Looking ahead, our forward estimates include only normal weather expectations. On slide 5 you'll see a reconciliation of the change of net income from second quarter 2015 to second quarter 2016. Overall, net income was $9.9 million less than in the same period last year. Customer growth in our service area increased operating income by $2.7 million in the second quarter. However, decreased usage per customer lowered operating income by $9 million compared with the second quarter of 2015. The application of the Idaho Fixed Cost Adjustment mechanism, or FCA, decreased revenues by $5.9 million in the second quarter and needs more explanation. Last year the Idaho Public Utilities Commission modified the FCA mechanism to use actual sales rather than weather-normalized sales. According to the Idaho Commission's order in the second quarter of last year, the change became effective January 1, 2015. The first-quarter impact of the change resulted in a $7.4 million positive income adjustment recorded in the second-quarter 2015 financial results. Comparing only the FCA impacts attributable to the second quarter 2015 to the FCA impacts in this year's second quarter, there would have been a $1.5 million increase in FCA revenues. Other increases in operating revenue were primarily related to two factors. First, a $1.5 million revenue benefit in the second quarter of 2016 was due to higher average rates charged per kilowatt-hour based on levels of irrigation usage. The second factor was an approximately $2 million adjustment which lowered revenues in last year's second quarter per the methodology change ordered by the Idaho Commission regarding the power cost adjustment mechanism. Overall, Idaho Power's second-quarter operating income decreased $9.4 million year over year. The decrease in income tax expense was largely a result of lower pre-tax income. Also, Idaho Power did not book any additional ADITC amortization this quarter, leaving $500,000 recorded for the six months ended June 30, 2016. Additional ADITC amortization is recorded based on the expected Idaho Power return on year-end equity in the Idaho jurisdictions. I will discuss this in greater detail in a moment. Moving now to slide 6, we show IDACORP's operating cash flows for the first six months of 2016 and 2015, along with the liquidity positions as of June 30. Cash flow from operations for the first six months of 2016 was $137.9 million, a decrease of $33.1 million from the same period in 2015. This was primarily driven by timing of and decreases in working capital, lower net income, timing of distributions from an equity method investment, and changes in regulatory assets and liabilities. IDACORP and Idaho Power currently have in place credit facilities of $100 million and $300 million, respectively, to meet short-term liquidity and operating requirements. The liquidity available under the credit facilities is shown on the bottom of slide 6. Although we do not plan to issue equity during the remainder of 2016, we are currently evaluating the renewal of our continuous equity program, which expired in May. Turning to slide 7, with the exception of tightening the hydroelectric generation range, each of the financial and operating metrics listed on this slide remain the same, as presented on April 28, the date we reported first-quarter 2016 results. Through the first six months of this year, based on our estimate of return on year-end equity in the Idaho jurisdictions for 2016, we have recorded $500,000 of additional ADITC amortization. This is included in the income tax reconciliation table in Note 2 of the financial statements in the Form 10-Q filed earlier today. As of June 30, we estimated that Idaho Power will record approximately $1 million of additional ADITC amortization for the full year 2016. I want to acknowledge that $1 million is at the low end of our stated zero to $5 million range, but with some below-normal temperatures in the early part of July and planning based on normal weather for the remainder of the year, the possibility of additional use of these credits still exists. With that said, our efforts have been targeted on preserving credits, and we will continue to be diligent in managing costs and growing revenues with the goal to preserve all credits for future years. I will add that this week's temperatures, at least in Boise, have returned to triple digits. Finally, as discussed in the Liquidity and Capital Resources section of the Form 10-Q, the early redemption of first mortgage bonds due April 2019 resulted in Idaho Power paying a make-whole premium of $14 million to the holders of the bonds. The redeemed 10-year 6.15% bonds were replaced with 30-year 4.05% bonds, resulting in a significant improvement in both tenor and rate. The net tax benefit of the make-whole premium is $5.6 million, which was recorded in this year's second quarter. This benefit has been taken into consideration in reaffirming the earnings per share guidance range for 2016, along with our active management of costs. I will now turn the presentation over to <UNK>. Thanks, <UNK>, and good afternoon. As you have already heard and read, this quarter's results are fairly straightforward. We have continued to focus on Idaho Power's core business of providing reliable, responsible, fair-priced energy services. We continued to see customer growth in the second quarter. Based on this and recognition of our service area in several publications and reports such as the one shown on slide 8, we continue our optimism about customer and economic growth prospects. We are seeing companies enter into and expand in various locations throughout the service area. One recent example is Great Western Malting, which is the oldest malting company in the western United States. Located in eastern Idaho, Great Western broke ground on a $75 million expansion to its existing malting plant last summer and is expected to be completed in 2017. Economic development officials in Pocatello say this expansion will have more than a $300 million economic impact on the region. The organic nutrition company, Clif Bar, opened its 275,000-square-foot bakery in Twin Falls in late May of this year. Another production line at the plant is already in the works to go online in 2017. As we have highlighted previously, southern Idaho has secured a record-setting seven major agricultural-related projects since 2012. According to a recent report by the Southern Idaho Economic Development Organization, these projects have generated 5,000 new direct and indirect jobs with a combined investment of over $770 million. It is not just the agricultural sector that is driving growth. Recently, two California-based manufacturing companies elected to relocate to our service area, bringing with them over 100 new jobs. For the 12 months ended June 30, 2016, Idaho Power's customer growth rate was 1.8%. Employment statistics remain strong. Preliminary data from the Idaho Department of Labor as of June 2016 shows unemployment in the service area was 3.9% compared to 4.9% nationally. Compared with last year's second quarter, employment in our service area increased approximately 2.3%, now exceeding 485,000 employed. Also as of June 2016, Moody's Analytics forecasted growth in gross area product in our service area of 5.1% and 4.8% for 2016 and 2017, respectively. We have seen significant empirical evidence of robust growth in our service area in the last few years, and certainly during the last quarter, and we believe the growth prospects in our service area in the future remain positive. Moving now to some of Idaho Power's 2016 initiatives, capital expenditures continue to be on target for the year. We expect an on-time and on-budget completion of the Selective Catalytic Reduction equipment, or SCRs, at Unit 4 of the Jim Bridger Plant in Wyoming during the fourth quarter. Additionally, there are two major upcoming milestones for the Boardman-to-Hemingway transmission line project. The Bureau of Land Management's schedule provides for the issuance of a Final Environmental Impact Statement in the third quarter of this year and a Record of Decision late this year. We recently kicked off our 2017 integrated resource planning process, which is our 20-year look at resources and demand, and expect to file this document next summer. The Company continues to actively manage costs, targeting opportunities to optimize business practices for the benefit of our customers and our shareowners. We are focused on cost recovery and earning a reasonable return, as demonstrated by careful consideration of potential rate impacts and regulatory approvals related to Idaho Power joining the Western Energy Imbalance Market in 2018 and the timing of other large capital projects. We continue to assess the need to file a general rate case in Idaho and Oregon in 2017 or 2018. As a reminder, our settlement stipulation that provides for amortization of additional ADITC and customer sharing is designed to continue beyond a potential general rate case in these years. The mechanism is in place through December 2019 or whenever we exhaust the $45 million of additional ADITC amortization available for use. Turning now to slide 9, many of you know 2016 marks Idaho Power's 100th year of operations. In commemoration of the centennial, Chairman of the Board Robert Tinstman and I, as well as other members of the management team, have been invited to ring the closing bell at the New York Stock Exchange on August 1. It is certainly a fitting way to mark the principal contribution of IDACORP's and Idaho Power shareowners through the past century. We hope that you will view the closing bell ceremonies when the New York Stock Exchange closes this coming Monday afternoon. Finally, looking forward to the rest of the year, slide 10 shows the projected August-to-October weather outlook. As you can tell from the map, the entire country is expected to see above-normal temperatures over the next three months. For the Idaho Power service area, current projections suggest there is at least a 50% chance of above-normal temperatures. Regulatory mechanisms, such as the Fixed Cost Adjustment applicable to residential and small commercial customers and the annual power cost adjustment, mitigate the impacts of weather. As you are aware, these mechanisms allow us to share both the risks and the rewards of weather-related conditions with our customers. Now <UNK> and I and others in the room today will be happy to answer any questions you may have. <UNK>, this is <UNK>. One of the things that we will continue to look at is balancing how well we continue to manage our spend on the O&M side, how we continue to see customer growth that continues to come along, as we mentioned and I talked a fair amount about, as we're seeing a fair amount of growth. And so basically balancing those items and to determine whether or not, when we run the forecast, whether it's deemed necessary that we need to go in and ask for a change in price. So we'll continue to look at that. We'll look at our level of capital spend also. And it's a lot of those factors that we will consider in trying to determine when that is. And as I noted, right now we're looking, really, at into 2017, as at least the more likely period that we might consider filing. But remember, our process takes seven months to happen. So it takes a little while to make anything happen. If we wanted something to go in as early as 2018, we would have to file something by June 1 of 2017. And so think about that timeframe. But right now, we're just continuing to evaluate and look at where our numbers line up. <UNK>, I don't think we have a number that we've published on those, but it's clear that that's one of the items, as <UNK> mentioned, that we have to manage through, is that as we close more plants, we do pick up depreciation. And so the challenge for us is that the combination of what we get through the growth, new sales, and what we're able to manage just overall from the cost standpoint, those add up to offsetting the known cost increases, because there are some that come. I guess the one thing I would add is I think we\ So the FCA was $1.5 million. Remember, in my script, if you listen to that when it comes back, quarter to quarter, FCA actually helped us slightly. Because remember, it's focused on certain parts of the equation and not all parts. So most of our lift, I would say, was irrigation related, and irrigation doesn't get moderated, helped or moderated, by the FCA. For the full month, I think our other revenues were actually down slightly. I think we said a $1.5 million benefit. So not a lot of impact, truthfully. I'd say the others were pretty close to normal. We have to go through a GRC on that, <UNK>. Thank you, Kaylee, and thanks, all of you, for participating in our call this afternoon. We appreciate your continued interest in our Company and hope you have a great rest of the day. Thank you.

2016_IDA

2017

SFBS

SFBS #Anybody have anything else. That will wrap us up. Thank everybody for joining our call and we appreciate your participation and interest in ServisFirst Bank. Thank you.

2017_SFBS

2017

REGN

REGN #Thank you, Len, and a very good morning to everyone who has joined us today On the call today, I would like to focus on our ongoing clinical development program for dupilumab, review some important data on the long-term use of EYLEA, share some updates on our immuno-oncology program, as well as the progress of the rest of our pipeline I'd like to begin with the approval of Dupixent, our IL-4/IL-13 blocker for the treatment of moderate to severe atopic dermatitis in adult patients whose disease is not adequately controlled with topical prescription therapies or when those therapies are not advisable This approval is the culmination of a scientific quest that has been decades in the making While Bob <UNK> will address the ongoing launch of Dupixent in greater detail, I would like to focus on the progress that we are making in the clinic with dupilumab in various other indications Asthma is an important late-stage opportunity where we are investigating in the use of dupilumab Despite the recent approval of drugs from the IL-5 inhibitor class in what has been characterized as the allergic patient population, we believe there is an unmet medical need for these patients for a drug that can markedly improve lung function, as well as provide further protection against exacerbations In addition, there is a need for drugs that will show efficacy in a wider patient population across all allergic classifications Based on results from our Phase 2B pivotal study in asthma, where we showed robust improvements in both lung function as measured by FEV1 and reductions in exacerbations, in all patients regardless of their allergic classification, we believe that dupilumab has the potential, if approved, to fill these needs Our second pivotal study in the adult asthma indication, the LIBERTY ASTHMA QUEST study in patients with uncontrolled persistent asthma is fully enrolled and we continue to expect top line data later this year We believe these data have the potential to confirm the broad efficacy we observed in the first pivotal study If these data are positive, we expect to complete a regulatory submission in the United States in the fourth quarter of this year We also recently started enrolling patients in the Phase 3 study of dupilumab in pediatric asthma patients between the ages of 6 and 11 years in the second quarter of 2017. We're also evaluating dupilumab in pediatric atopic dermatitis, where there is a high unmet need, and we were again granted breakthrough status by the FDA Positive data from the open label Phase 2A trial in patients 6 to 17 years old with moderate to severe atopic dermatitis were recently presented at the American Academy of Dermatology Conference in March The safety and efficacy data from this trial were very encouraging We have initiated a Phase 3 study of dupilumab in adolescents between the ages of 12 to 17. We expect to initiate in the second quarter of 2017 a second Phase 3 trial in pediatric patients between the ages of 6 and 11 years We're also investigating dupilumab in a third clinical setting, which is the treatment of patients with nasal polyps Following up on earlier positive data from our Phase 2 study in this population, we now have two separate Phase 3 studies that are currently enrolling patients As Len mentioned, we recently obtained positive results in a Phase 2 proof-of-concept study of dupilumab in a fourth important clinical setting, which is in patients with active moderate to severe eosinophilic esophagitis, a chronic inflammation of the esophagus and one of the major causes of dysphasia or difficulty in swallowing In this Phase 2 study, we observed clinically meaningful efficacy for dupilumab, as well as profound histologic and endoscopic improvement, together with a safety profile consistent with our previous clinical experience Detailed data from this study will be presented in an upcoming medical conference While eosinophilic esophagitis can be debilitating in adults, it is especially concerning in the pediatric population, where it can be a cause of failure to thrive, and this could potentially be an area of future clinical investigation for dupilumab It is believed that eosinophilic esophagitis can be a manifestation of food allergies, further supporting the rationale of exploring the efficacy of dupilumab in patients suffering from severe specific food allergies In the second half of 2017, we intend to initiate a Phase 2 study of dupilumab in patients with specific food allergy The positive data for dupilumab across the four allergic or atopic conditions we have investigated to date – that is atopic dermatitis, asthma, nasal polyps, and now eosinophilic esophagitis – is consistent with our long-standing hypothesis that these allergic conditions reflect the same fundamental disease process triggered by overactivity of the IL-4/IL-13 axis This unifying hypothesis suggests that the differences between these conditions largely reflects how overactivity of IL-4/IL-13 pathway manifests differently in different tissues For example, overactivity of IL-4 and IL-13 in the skin triggers atopic dermatitis In the lower airway, it results in asthma In the upper GI tract, it results in eosinophilic esophagitis Unfortunately for many patients, IL-4/IL-13-driven allergies can manifest in multiple sites at the same time Since dupilumab inhibits the key driver of this pathway in all these settings, we believe that it can represent a mechanism-based approach to treat the root cause of these allergic conditions rather than each individual indication on a separate basis This represents a fundamentally new way to think of, group and treat diseases previously and otherwise thought of as disparate and requiring distinct therapies – that is mechanism-based treatment directed not by a disease organ-specific manifestations, but by the disease's fundamental cause and mechanism We're also encouraged by the safety profile that we have observed thus far for dupilumab in these settings I'd like to remind you that the current regulatory framework does not allow for a mechanism-based approach to treatment, but rather an indication-based approach We are very interested in discussing this type of mechanism-based approach for treating allergic or atopic disease with the regulatory authorities while we continue to pursue more conventional approval strategies Turning now to Kevzara, our IL-6 receptor antibody for rheumatoid arthritis As Len mentioned, we anticipate a regulatory decision in the United States, where we've been granted an FDA action date of May 22. In April of 2017, the European Medicines Agency's Committee for Medicinal Products for Human Use or CHMP adopted a positive opinion for Kevzara for the treatment of moderate to severe RA in adults We expect a potential approval in Europe for Kevzara in the second quarter of 2017. We have also made regulatory submissions for Kevzara in Japan Beyond RA, we are currently enrolling patients in the Phase 2 clinical study of sarilumab for the treatment of polyarticular-course juvenile idiopathic arthritis We're also considering investigating the use of sarilumab in other indications Turning to our other late-stage programs, I'd like to begin with EYLEA As Len mentioned, we are committed to maintaining our leadership position in bringing important advances to patients with retinal diseases To that end, we are conducting two Phase 2 studies of EYLEA in combination with nesvacumab, our antibody to Ang2, one in diabetic macular edema or DME and another in neovascular age-related macular degeneration or wet AMD Both studies are fully enrolled, and we will evaluate efficacy and safety at 36 weeks, which we expect in the second half of this year In addition, we are also investing in EYLEA as a monotherapy in a Phase 3 study in patients with non-proliferative diabetic retinopathy without diabetic macular edema This study, called PANORAMA, continues to enroll patients I'd like to spend a few moments focusing on findings from the long-term follow-up of our Phase 3 VIEW 1 study of EYLEA in patients with wet AMD, which were recently published in Ophthalmology Retina As background, existing long-term data with other anti-VEGF agents, most notably from the government-sponsored CATT study, have shown that early visual gains obtained with anti-VEGF agents were not maintained over time In fact, by the fifth year, patient had lost, on average, over three letters compared to their original baseline Over 20% of patients have progressed to become legally blind by year five It had been postulated that this loss of vision is due to inexorable progression of the disease process itself over time, even in the face of anti-VEGF treatment Others had raised the theory that the anti-VEGF agents themselves contribute to geographic atrophy over time and thus to the subsequent vision loss In marked contrast to the CATT study, long-term follow-up data from the VIEW 1 study, where patients who were treated with fixed interval EYLEA dosing and received EYLEA on average every 12 weeks in year 2 and every 8 weeks in year 3 and 4 showed that the vision gains observed at the end of the first year were on average largely maintained at 4 years These long-term results provide the first evidence that long-term treatment with anti-VEGF agents can maintain vision gains in patients with wet AMD We think these are very important findings for the field This data support our longstanding view that regular fixed interval dosing regimens result in substantially better visual outcomes compared to PRN or treat-and-extend dosing regimens, which over time result in suboptimal visual acuity benefits and even in substantial visual loss We think this is probably true regardless of the anti-VEGF agent being utilized Although we saw that more than 50% – about 50% of the patients in the second year exploratory treatment phase of our long-term trial received fixed corollary treatment and maintained their vision we are more comfortable that the every two-months regimen is likely to maintain vision over the long term based on larger and long-term experience With regards to convenience-based regimens such as PRN and treat-and-extend approaches, we think they are lacking in convincing and long-term evidence for their ability to maintain vision over the long-term With regards to this point, we think that doctors should be strongly cautioning their patients that choosing convenience-based dosing has a high risk of causing permanent vision loss for their patients We think it is important that retinal specialists and public health officials begin to recognize the potential public health crisis that may be resulting from irregular dosing regimens that do not follow the FDA-recommended usage guidelines and that the loss of vision that these protocols may be causing may be needlessly occurring in thousands of patients, leaving many irrevocably legally blind Moving on to Praluent, our PCSK9 inhibitor antibody for lowering LDL cholesterol We are pleased to announce that Praluent was recently approved in a 300-milligram once monthly dosing regimen We expect to report top line data from the 18,000 patient ODYSSEY Outcomes study in the first quarter of 2018. Positive outcome data reported with PCSK9 inhibitors further supports the hypothesis that lowering LDL cholesterol with the PCSK9 inhibitor can reduce cardiovascular risk We look forward to sharing data from our study in early 2018. In addition to our efforts with Praluent and cardiovascular disease, we are also developing evinacumab, our antibody to Angptl-3 for the treatment of homozygous familial hypercholesterolemia or homozygous FH In March of 2017, we announced that the FDA granted evinacumab Breakthrough Designation Status Just a few weeks ago, we presented a positive data from a Phase 2 proof of concept study of evinacumab in patients with homozygous FH This data showed that patients who normally don't respond well to statins or to PCSK9 experienced an average reduction of 50% in their LDL cholesterol following two subcutaneous injections of evinacumab with an acceptable safety profile Our immuno-oncology portfolio continues to progress Our potentially pivotal study of Regeneron 2810, our PD-1 antibody, continues to enroll patients in the cutaneous squamous cell carcinoma study We look forward to presenting data from our expansion on in cutaneous squamous cell carcinoma patients from our Phase 1 trial at an all-abstract session at the American Society of Clinical Oncology, or ASCO, in June We also expect to initiate clinical studies in non-small cell lung cancer and basal cell carcinoma in 2017. Our second checkpoint inhibitor, REGN3767, an antibody to LAG-3 is also currently in clinical development where we are studying it both in the mono-therapy setting and in combination with our PD1 antibody As a reminder, we expect additional IO targets to enter development over the next several years Additionally, our bispecific CD20xCD3 antibody is also currently being studied in the clinic, as well as in mono-therapy and in combination with our PD-1 antibody Determining the optimal dosage level with these therapies that are activating the immune system is very important as witnessed by some of the toxicities demonstrated in other drug classes such as the CAR-Ts While the process has been slow, we believe we are nearing dose selection Also in late-stage development is suptavumab, also known as REGN2222, which is an antibody in development for respiratory syncytial virus, or RSV Our Phase 3 study has finished enrolling patients, and we expect to report top line data from this study in the second half of the year We're also advancing our Phase 2 program for fasinumab, our nerve growth factor antibody for pain Development in other parts of our early-stage pipeline continues to advance REGN2477, our Activin A antibody is in clinical development for the treatment of the rare disease Fibrodysplasia Ossificans Progressiva, or FOP We expect to begin a Phase 2 trial in this indication in the second half of 2017. We are also studying REGN2477 in combination with trevogrumab, our antibody to GFD8, in a Phase 1 trial which is fully enrolled Finally, we also initiated Phase 1 multiple ascending dose trial in asthma with REGN3500, our antibody interleukin-33 for inflammatory diseases, in the first quarter of 2017. I think it's important to remind you that all of these programs and all the antibodies in our pipeline are entirely developed and discovered in-house Before I turn the call over to Bob, I want to take a moment to share my excitement about the first group of Regeneron Science Talent Search winners who were announced in March Our sponsorship of this storied high school science competition underscores our commitment to fostering the next generation of scientific leaders After meeting these promising high school students, we feel encouraged that our future is in good hands With that, let me turn the call over to Bob <UNK> Yeah A lot of questions in there First, we did actually comment on the CD20 by CD3 biospecific that it's moving along, that basically we've spent a lot of time because as obviously, you've all noticed that there have been concerns with similar types of agents, as well as the CAR-T approaches in terms of really getting the right dose and avoiding very dangerous toxicity So, we've been very careful about dose selection in that program, and we're hoping very close to be – to the point where we can initiate larger trials In terms of our C5 antibody, I don't know how much we've said publicly about it, but I guess we've said that we will be in the clinic with it this year and I'm sorry I didn't make any references That was just an oversight on my part In terms of our Outcomes study, I have to say there are so many differences between our design and the four-year design that I think it's almost impossible to try to model it and figure out are the results going to be substantially different I think that the four-year data pretty strongly show that its results are very consistent with the sort of benefits that, when obtained in terms of cardiovascular outcomes with the proportional LDL lowering, and that's pretty much exactly what we hope to show, that we're pretty much on the same sort of curve as the statins and now the first results that are coming out of the PCSK9 class You are absolutely right that a lot of these allergic diseases, it's not only atopic dermatitis, but eosinophilic esophagitis and so forth and so on, unfortunately, afflict the very young There's a very deliberate process that we work with with regulatory authorities to progress to the youngest in our population because we all feel that we have to be very careful, and we're working very closely with the FDA to follow along those guidelines to be able to bring this treatment down the line to the youngest of patients who really need it But as you said, there is a very important unmet need in these populations for all sorts of allergic diseases Yeah About PD-1 and PD-L1 levels and so forth, I don't think there is actually that much of a controversy I think that all the data shows that in most cases a higher PDL expression correlates with better responses The controversy I think that you're referring to has to do with the fact that the first line lung study from Merck with KEYTRUDA was very impressively positive whereas the very similar population studied with the BMS drug was not And this did not really seem to be dependent on the PDL levels People are really working hard to understand why the Bristol drug showed very disappointing results in that study Our goal is to show that our drug is very effective in the various lung cancer indications and we're designing, we hope and we believe robust studies to demonstrate that And we are, I believe, going to be announcing that we're going to be – when we initiate these studies in the very, very near future Well, as you know, the power of the study is more dependent on events rather than numbers of patients that actually enrolled We feel, though, there's always concerns, we feel that we're adequately powered, and we're hoping that the study will meet its expectations Yeah I think it will be a very long time before one has the long-term data with a new agent to be able to say whether or not it could possibly not only cause initial visual gains but maintain them, which is, I think, more important over the four- and five-year time intervals Right now, we have the only such study that shows that, and the only such data I think that the field has been going in the wrong direction focusing on convenience, okay, as opposed to focusing on vision We all know, we all cherish our vision There's nothing more important than maintaining our vision, and we think that there's been an over-focus on convenience as opposed to on bringing back – these drugs have the ability to give back vision, and we have now shown that there's at least one drug with one regimen or an assorted regimen that has the ability to maintain this over the long term And I think that we all have to focus on that and less on trying to save an injection or two per year, which is at most what all of these non-medicine-based approaches have been doing I think this is really important for the field, and we hope, as Bob says, that doctors can be educated about this and stop experimenting on their patients and instead follow the FDA guidelines

2017_REGN

2017

GEF

GEF #A couple things. You'll recall that in the past, I've said that when we kicked off transformation, at the time I had stated I thought the attainment of our margin objectives was going to be the more difficult. Then as time has passed and we've had the significant impacts of currency shifts as well as divestitures ---+ more revenue than we probably contemplated at that time as we analyzed our unit, I've shifted to say that the SG&A commitment is the more difficult one. That said, we still do believe that we will achieve our transformation commitment on a run rate basis coming out of this year. It's going to be really difficult. We've got a lot of plans. It's going to take really strong execution and we can't have surprises occur. Some of that may happen. But, I feel comfortable that we have a good plan to achieve that objective coming out of this year. If we should fall short of some ---+ we have more opportunity going forward as I've indicated in the past related to things that we will be able to capitalize on, relative to our ERP system implementation that will be completed in the latter half of 2018. Leveraging that will give us more opportunity and I hope over the longer period of time 2018, 2019, that we would be able to challenge ourselves to get more in the 9.5% range over time. We will try to put more color and more specifics around that in June. I feel good and commenting on this quarter, we had a couple of things in there. We have some ---+ we true-up our incentives beginning second quarter. Used to be even the third, but we are trying to get to the point where we can accelerate that and adjust every quarter. So we are little high on incentive accruals and some of that had to do with the special payout related to better things than we accrued for at year-end but nothing material. So, it influenced things a little bit in this quarter and we also had some professional fees related to remediation of our material weaknesses that trailed in and caused a little bit of bump in expenses. But, we expect all of that to mitigate over the year and get us back to where we expect it to be for SG&A for this year. And then as I've said, we do have plans to have us coming out of the year on a run rate basis a that 10% below commitment, but it's going to take a lot of work. I'm sorry. What we've basically got built-in right now, just on pure OCC, is about $145 a ton across all of our space. <UNK>, we continue to make progress on that goal. We are not as far along as I would expect us to be relative to our first quarter results for the reasons I already mentioned. We remain confident in our ability to achieve the objectives that we laid out last spring. In terms of electronic fund transfers, and the movement of accounts, we are making good progress. I'd like to see that be accelerated from where we are and that's one of the focus areas that we have to help us achieve the flat or better for the year. I'll take the second one, first comment on it and I think <UNK> will add a few things, maybe on both, but particularly on FPS. With respect to the administration's proposals, <UNK>, it still is pretty much still too early to tell on specific benefits. I think as we indicated previously, anything that would result in a reduction in the US corporate tax rate is a positive factor for us. So, we look forward to seeing that happen. If it does, that would be beneficial to us. Relative to FPS, we believe that we will achieve the transformation run rate commitments coming out of 2017. We are pleased, very pleased, I'd say, with the job that Hari and his team are doing on executing more rapidly the plan that we laid out at the beginning of their transformation process. And, in terms of it being and investable business, as with everything, we always are assessing our portfolios. I would say, clearly, it's improving performance has us viewing that in a more favorable light. Yes, we will talk more specifically about it in June and what its longer-term opportunities are. But, they are obviously showing significant improvement on their margin mix management and we talked in the past that by 2020 timeframe, we would expect their margins to be north of 20% and they're making really nice progress on that. We want to see that continue and also improving their operating cost. Good progress, still monitoring it closely but encouraged by the progress. <UNK>, do you have anything. No. We're very pleased with the pace of change going on and from a growth standpoint, <UNK>, we have pretty significant upside just in organic growth with our existing footprint. We have to demonstrate we have the ability to do that, first. Then just to reference to some of the potential policies in the administration, one big one is the border tax and does that have an impact on supply chain. We have very minimal exposure in our supply chain that would not be material risk to our Company if some of those policies play out. I'm sorry, it was not clear enough. What I was really speaking to is gross margin on product sales, where we expect it to be north of 20%. But, there is obviously, also opportunities to drive up further SG&A cost and drive that bottom line operating profit, which not any different than our other businesses. We expect that to be 10% or above when they get to that 2020 timeframe. Thanks a lot, Suzanne. That concludes our call for today. The replay of this question-and-answer session will be available later on, on our website and www.investor.Greif.com. We really appreciate your interest and participation this morning. Thanks a lot and have a good remainder to your day.

2017_GEF

2015

DGII

DGII #Yes, that's a great question, <UNK>. That's ---+ we are really trying to affect that curve. We are trying to make that decline much softer than that 10%, 15%. And I don't know, <UNK>, if you want to add some color, but we are really, <UNK>, trying to make sure we don't accept fate, if you will. We alter that curve. To be fair, the correct quarter's results, the most recent results, we haven't yet had the benefit of some of the innovation investments, those are coming here. So, that was more a good hustle and good execution than it was, in particular, the result of a specific R&D investment. Yes, I think that's fair, <UNK>. Especially as you think about the business interruption we had that was 50 basis points of margin. We obviously don't expect that to repeat. And then I think if you think about the growth products having a more dominant part of the mix in Q4, that would be the right way to think about it. You know, <UNK>, I would continue to model it at that $4.5 million to $5 million. I think that's a safe assumption through Q4 and maybe Q1. Yes, long-term, we think that services business can grow. But the products business, we can see outsized gain, and it's a little bit more repeatable if we can use some of those services to help our product business. We don't plan on doing that as a habit, but there was a great opportunity that we wanted to pursue in this particular example. Yes, I think as we ---+ again, we'll be taking a closer look at 2016, but yes, I think if you model it with some mild degradation, that again is the right way to be thinking about it for 2016. And I think your point is well-taken. And in particular, the SKU streamlining process. One of the benefits we will get is higher volumes on fewer SKUs. And we do expect that to somewhat offset the mix of margins that you're describing. We do think we'll get some scalability from that. Yes, you know what's interesting, one of the ---+ I guess, one of the advantages, we do have these six key verticals. And so, we have a relatively even distribution across the verticals. It does change depending upon the product line. An area of strength recently, the medical has been a good strong area for us. An area of weakness, probably no surprise, has been some of our oil and gas customers and channels have been a little bit softer. Thank you. Yes. Great question, <UNK>. I think there's a couple things going on that I mentioned in my comments as well. The first is for our internal sales group, having them more focused on a certain set of products really improves their competitive stance. They know their competition better, they know their target customers better, they know how to price their products. We are also ---+ what I didn't mention ---+ we are also really biasing them towards larger opportunities where we can, quite frankly, get the return on investment with that direct sales force. Now complementing that direct sales effort, we are being as assertive in the channel. We've broadened relationships with Digikey, with Mauser, with Arrow. We are looking at others to broaden the relationship, to have the ---+ really the weight of their large marketing and distribution capabilities, and take advantage for them of a really nice broad portfolio that Digi offers. That helps us, if you will, cover the points that our direct sales force really can't as economically reach. And then it really complements our existing channels, which are more specialty-oriented, either geography or product lines. They offer a lot of value-add on top of the products, so they are still a key element of our success. But we are starting to see better win rates because of that, <UNK>. Because they know of their domains, they know the products, they know who they are competing against, they're better able to paint their targets and bring them across the finish line. So, <UNK>, I think with the restructuring Etherios with Etherios, we are looking at trying to return to those 30-plus-percent margins. And so we obviously demonstrated something a little bit shy of that this quarter. But as you think about modeling going forward, that mid-30% range is where you should be. And especially revenues a little bit softer this quarter than previous quarters. So you get closer to that $5 million quarterly run rate, the margins will come along with those. So, on occasion, if we do see impacts on FX, we will, of course, correct on pricing. I don't think we've got anything that we are currently considering from a pricing perspective. I think, as we move into 2016 and think about the exchange rates, at least what we are kind of thinking about from a planning perspective, I don't know that we're going to see or really believe that there's going to be these large jumps continuing. Great. Thank you, Danielle. In conclusion, our focus and discipline are driving improved results for our customers and our shareholders. We have more work to do, and I am excited about the Digi team and our ability to deliver. Digi is at the center of an exciting Internet of Things ecosystem as a leading provider of machine connectivity, products and services. Thank you, everyone, for joining our call today.

2015_DGII

2016

AWR

AWR #Ladies and gentlemen, thank you for standing by. Welcome to the American States Water Company conference call discussing the Company's first quarter 2016 results. This call is being recorded. If you would like to listen to the replay of this call, it will begin this afternoon at approximately 5 PM Eastern Time, and run through Thursday, May 12, 2016, on the Company's website, www.aswater.com. The slides that the Company will be referring to are also available on the website. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. (Operator Instructions). This call will be limited to an hour. Presenting today from American States Water Company is <UNK> <UNK>, President and Chief Executive Officer; and <UNK> <UNK>, Chief Financial Officer. As a reminder certain matters discussed during this conference call may be forward-looking statements intended to qualify for the Safe Harbor from liability established by the Private Securities Litigation Reform Act of 1995. Please review a description of the Company's risks and uncertainties in our most recent Form 10-K and Form 10-Q on file with the Securities and Exchange Commission. In addition, this conference call will include a discussion of certain measures that are not prepared in accordance with Generally Accepted Accounting Principles or GAAP in the United States and constitute non-GAAP financial measures under SEC rules. These non-GAAP financial measures are derived from consolidated financial information but are not presented in our financial statements that are prepared in accordance with GAAP. For more details please refer to the press release. At this time I will turn the call over to <UNK> <UNK>, Chief Financial Officer, of American States Water Company. Thank you, Carrie. Welcome, everyone, and thank you for joining us today. During today's call I will review the Company's financial results for the first quarter and <UNK> will discuss liquidity and capital resources, Golden State Water's pending rate case, California drought-related matters and our contracted services business segment at American States Utility Services or ASUS. I'll begin with an overview of our financial results. For the first quarter, diluted earnings were $0.28 per share compared to $0.32 per share for the same period in 2015. Of the $0.28 per share earnings for the first quarter $0.22 was from our water segment and our electric and contracted services segments each contributed $0.03. Net income for the quarter was $10.2 million compared to $12.1 million for the first quarter last year. I'll discuss major items that impacted our revenues and expenses for the quarter. In the first quarter of 2016, water revenues decreased by $5.2 million to $66.3 million as compared to the same period in 2015. As of today, golden State Water has not received a decision on its pending water (inaudible) rate case which will set new rates for 2016 through 2018. The revenue requirements for 2016 once the CPUC issues a final decision on the current GRC are expected to be lower than the 2015 adopted level ---+ levels. Major items impact ---+ impacting the decrease in revenue requirements for 2016 includes a significant increase in supply costs caused by lower consumption, much lower depreciation expense resulting from an updated depreciation study filed with the rate case and decreases in other operating expenses due to the Company's improvement in operation efficiency. As a result of anticipated reduction in the 2016 revenue level we adjusted our water revenue downward by $5.8 million for the three months ended March 31, 2016 with corresponding decreases to supply costs, depreciation, and other operating expenses to reflect or settle the position with the CPUC Office of Ratepayer Advocates. The adjustments to 2016 recorded water revenue also reflects Golden State Water's position on litigated capital budget and compensation-related issues in the pending GRC. These adjustments did not have a significant impact to pre-tax operating income for the first quarter of 2016 as the overall reduction in the water gross margin is mostly offset by the lower depreciation and other operating expenses. Partially offsetting this decrease in water revenue were rate increases generated from our (inaudible) for capital projects approved by the CPUC in 2015. Revenue from electric operations for the quarter were $10.6 million as compared to $11 million for the same period in 2015. The decrease was primarily due to the termination in July 2015 of a supply surcharge to recover previously incurred energy costs. The decrease in revenues from this surcharge totaled approximately $700,000 for the quarter and was offset by a corresponding decrease in supply cost resulting in no impact to pre-tax operating costs. The decrease in electric revenue was partially offset by CPUC approved fourth quarter ---+ fourth year rate increases for 2016 and rate increases generated from advice letters for capital projects approved by the CPUC during 2015. Revenues for our Contracted Services business ASUS decreased $1.8 million to $16.6 million for the quarter. The decrease in revenue was due to lower construction work in the first quarter of this year driven largely by the timing of engineering and bidding activities. Construction activity is expected to increase during the remainder of 2016 as compared to the first quarter of 2016. The decrease in construction work was partially offset by increase in management fee revenues as a result of successful resolutions on prior redeterminations received during the third quarter of 2015. As mentioned previously, for the first quarter of 2016 the water segment's gross margin was adjusted for both lower revenue and lower supply costs in our stipulated position in the pending water rate case. Our water and electric supply costs were $17.6 million, a decrease of $4.4 million for the first quarter of 2016. Any changes in supply costs for both the water and electric segments as compared to the adopted supply costs are tracked in balancing accounts which will be recovered from or refunded to our customers in the future. Other operation expenses increased by $806,000 for the first quarter of 2016 due primarily to outside service costs at electric segment in response to power outages caused by severe winter storms experienced in January. In addition, there was an increase in conservation and draw related costs in higher wages. Administrative and general expenses for the first quarter of 2016 were $20.8 million as compared to $19.5 million for the same period in 2015. The increase was mainly due to higher legal and outside service costs at the water segment incurred out of condemnation matters during this first quarter. Depreciation and amortization expense decreased by $757,000 due primarily to the reduction in composite rate stipulated in the pending water GRC resulting from updated depreciation study. As discussed earlier, the lower depreciation has also been reflected in the lower water revenue. The decrease was partially offset by an increase at both the water and the electric segments due to additions to utility plant during 2015. Maintenance expense increased by $593,000 due to a higher level of maintenance performed in 2016 at our water segment. ASUS' construction expense decreased by $1.3 million to $8.7 million during the first quarter of 2016 as compared to the same period in 2015 due primarily to a reduction in construction activity as mentioned previously. Again, we expect the construction activity will increase during the remainder of 2016 as compared to the first quarter of 2016. Interest expense increased to $5.6 million for the first quarter of 2016 as compared to $5.2 million for same period in 2015. This was due largely to capitalized interest recorded at water segment in Q1 of 2015 resulting from the approval of an additional allowance of our funds used during construction from advice letter filings. There was no similar filing during the first quarter of 2016. Income tax expense decreased by 1 point ---+ $2.1 million to $5.8 million driven by a decrease in pre-tax income and a lower overall effective income tax rate. This slide shows the EPS bridge by business segment comparing the first quarter of this year with the first quarter of 2015. For more details please refer to the press release. With that I'll turn the call over to <UNK>. Thank you, <UNK>. I appreciate everyone joining us today. Moving on to liquidity and capital resources. Net cash provided by operating activities for the quarter decreased by $10.9 million to $27.6 million as compared to the first quarter of 2015. The decrease in operating cash flow was primarily due to a reduction in cash generated by contracted services due to the timing of billing and cash receipts for construction work at military bases during the three months ended March 31, 2016. There was also a decrease in customer water usage for Golden State Water increasing the Water Revenue Adjustment Mechanism or WRAM regulatory assets. We implemented surcharges in March to recover our net WRAM balances for 2015. In addition, tax payments during the three months ended March 31, 2015 were lower due in large part to the implementation of the tax repair regulation. Regarding Golden State Water's capital expenditures, we are pleased with our first quarter spending of $29 million on Company-funded capital work. Our water and electric utilities continue to invest to maintain and improve the reliability of our system. Our capital investment program is a critical factor in delivering consistent, high-quality service to our customers. We are on track to invest $85 million to $95 million in capital projects during 2016, which may change somewhat once a decision is issued by the CPUC on the pending water rate case. In addition, Standard & Poor's rating services recently affirmed an A plus credit rating on both American States Water Company and Golden State Water Company. S&P also affirmed the stable rating outlook on both companies. We were pleased with the affirmations as these ratings are some of the highest in the US water utility industry. While we continue to produce solid financial results, the first quarter performance was impacted by higher outside services and legal costs at our water segment incurred to defend ourselves against condemnation-related actions and lower construction activity at our Contracted Services segment. However, we do expect construction activity at ASUS to increase during the next few quarters. In addition, we still await a CPUC decision on our water rate case for years 2016 through 2018. As we discussed in previous quarters, we filed our general rate case in mid-2014 for all of our water regions and the general office. The application will determine rates charged to customers for the years 2016, 2017, and 2018. Golden State Water has settled with the CPUC's Office of Ratepayer Advocates and nearly all of the Company's operating expenses as well as the consumption levels used to calculate rates for 2016 through 2018 which reflect the State mandated conservation targets. The primary litigated issues relate to our capital budget requests and compensation for managerial level employees. We're not certain when in 2016 the final decision will be issued. Once issued rates will be retroactive to January 1, 2016. As <UNK> mentioned earlier, adopted revenues for 2016 are expected to be lower than the 2015 adopted levels. As you may know, a big part of the utility's revenue requirement is the recovery of projected expenses. Our projected expenses for 2016 in the rate case were lower than the 2015 adopted expense levels. In particular, there was a decrease in supply costs resulting from lower consumption projected, lower depreciation expense resulting from a new study, and a decrease in other operating expenses in the 2016 through 2018 rate case cycle due to our cost control efforts and improvement in operation efficiency. Because of the Company's efforts we were able to propose significant increases in our capital investment with little to no effect on rates. As a reminder we have also received approval by the CPUC to defer our electric general rate case and the cost of capital proceeding by one additional year. Both will now be filed in 2017. In regard to the drought situation in California in February the State Water Resources Control Board extended the governor of California's executive order imposing mandatory restriction through October 31st, 2016. In addition, the State Board amended the required reductions allowing limited allowances for warmer climate regions, increased population growth as well as credit for certain drought resilient water supply investment. Currently all but one of our water systems has met the revised conservation standards. Based on our drought response actions and customers' conservation efforts to date we do not believe we will be subject to the State Board's penalties for failure to implement a water shortage contingency plan. Golden State Water has been authorized by the CPUC to track incremental drought-related costs incurred in a memorandum account for possible future recovery. We are in the process of preparing to file for recovery of drought-related items of approximately $1.3 million incurred mostly in 2015. Incremental drought-related costs are being expensed until recovery is approved by the CPUC. Lastly, as of April 26 of this year the US drought monitor estimates 70% ---+ 74% of California in the rank of severe drought. This is drought ---+ this is down from 86% reported at the end of February. Increased rainfall and higher snowpack levels over the last few months have helped the drought situation. Turning to our contracted services business at ASUS, construction activity in the first quarter of the year was lower due largely to the timing of engineering and bidding activity on both renewal and replacement and new capital upgrade work. We believe construction activity will pick up during the next few quarters. We are still projecting an EPS contribution from ASUS of $0.28 to $0.32 per share for 2016 as discussed with you during our year-end call. We continue to work closely with the US Government on outstanding price redeterminations. We expect the fourth quarter price redetermination for Fort Bliss to be finalized in the second quarter of 2016 and the third price redetermination for Fort Bragg to be finalized during the third quarter of 2016. Filings for these price redetermination requests for equitable adjustment and contract modifications awarded for new projects provide ASUS with additional revenues and margin and the opportunity to consistently generate positive earnings. We also continue to work closely with the US Government for contract modifications relating to potential capital upgrade work as deemed necessary for improvement of the water and wastewater infrastructure at the military bases. In addition, we are actively engaged in new proposals and expect the US Government to release additional bases for bidding over the next several years. We remain optimistic about the future of our contracted services business. Finally, I'd like to turn our attention to dividends. On Monday of this week, our Board of Directors approved a second quarter dividend of $0.224 per share on the common shares of the Company. Dividends on the common shares will be payable on June 1 to shareholders of record at the close of business on May 18. American States Water Company has paid dividends every year since 1931, increasing the dividends received by shareholders each calendar year for 61 consecutive years. We are among less than a handful of companies on the New York Stock Exchange that can boast of such a level of dividend increases. For the five years ended December 31, 2015, our calendar year dividend has grown at a compound annual growth rate of about 11%. Given American States' current low payout ratio compared to our peers and our earnings growth prospects, there is room to grow the dividend in the future. I'd like to thank you for your interest in American States Water and we'll now turn the call over to the operator for questions. (Operator Instructions) We will begin with <UNK> <UNK> of Wells Fargo. Please go ahead. Hey. Good morning, <UNK> and <UNK>. I guess on the West Coast it's still morning, but I know, <UNK>, in your prepared ASUS remarks you didn't seem to indicate this was the case. However your main competitor indicated they expect a slowdown on construction projects during the remainder of the year due to military budget constraints. Is this anything that you are seeing or expecting. It is not. You know our projects are funded. The slowdown in the first quarter was largely due to the fact that we had to do the engineering and the bidding on the work that we have lined up. So no, we're expecting to really get the construction activity going here in the last three quarters of the year. You know, we haven't seen that. I will tell you we have a lot of projects in front of the government for the upcoming year. We've done our ---+ what I think is a really good job of scoping out a lot of projects and getting that in front of the decision makers at the military. So far, we haven't got the indication that we're going to see a slowdown. You know more about that than I do but our sense is that that may come out before ours does and so we don't want to get everyone's sort of hopes up. And so I understand the ALJs are a bit understaffed at this point and so they're being challenged to do a lot of decisions so we're trying to be patient with them. I mean, were there any projects in there that were kind of unusual or different than the spend that you've been, I guess, undertaking the past few years or was it all similar type of spend. But it's not unusual to have significant differences between the Company and ORA's position. It is true. The rate case we experienced before. So we feel that we made a good showing of the need for the project and provide the solid support as <UNK> mentioned, so we'll see. Hopefully judge will see that. Just for the calendar year 2016. Yes, yes. Just trying to get an idea of ---+ I mean, I think you said you're going to be filing for a little over $1 million of recovery from previous expenses and our understanding is those, I guess, get turned around pretty quickly, kind of like a 90-day period. So how that would ---+ if that's going to offset whatever your drought expenses would be this year. I think ---+ I definitely expect it to offset whatever drought expenses we have this year because our ---+ Thanks, <UNK>. Thank you. Yes. I just wanted to close today by thanking everyone for their continued interest in American States Water and wish everybody a good day.

2016_AWR

2017

HCN

HCN #Thank you, Mercedes and good morning, everyone I will now review our quarterly results with an emphasis in our senior housing business and focus on some geographic detail that many of you have recently asked about Our overall same-store NOI increased 2.1% year-over-year The triple net portfolio continues to produce stable and reliable performance Our senior housing triple net segment grew 3.2% and the long-term post-acute portfolio grew 3.4% Growth remains healthy and payments remain secured Same-store NOI for outpatient medical portfolio grew 2.4%; all three of this business segments are in line with our expectations that we describe to you in the year end call in February As a reminder, we don't include fee-related income in our same-store metrics We think this provides more accurate picture of underlying performance Our senior housing operating segment reported growth of 0.9% above our initial budget for the quarter The headline results are partly lower due to leap year effect, sales in 2016 which benefited those operators that bill residents on a part DM basis adjusting for one extra days of NOI in Q1 of 2016; on a comparable basis, Q1 '17 shows same-store NOI grew 1.9% despite a 90 basis points decline in sure occupancy, revenue increased by 2.3% due to a 4.1% increase in RevPAR on a leap year adjusted basis Strong pricing power is the hallmark of Class A real estate and long-term value preservation Operating expenses increased 3% for shop; adjusting for the leap year, same-store expenses were up 3.5% Labor expense remains elevated but the growth rate is down from recent highs 2016 UK living wage growth is still impacting Q1 numbers but we expect overall operating expense to moderate in rest of the year in UK Overall, senior housing demand supply remains largely healthy with the pockets of imbalance due to heightened deliveries in certain markets We have seen overall industry occupancy drop as new deliveries lease up It is important to understand that move outs in the quarter was elevated due to a heightened and prolonged flu season Much has been written about this topic with a focus on overall population data from CDC If you look at 65 plus segment of the population as we do; outpatient visits due to flu increased 70% from last year and was 35.5% higher than the epic 2017 flu season The hospitalization rate in this segment almost quadrupled from last year but was 50% lower than 2015. While debt due to flu is almost up 4x over last year, it is a lot lower than 2015. How do the stats translate into our business; quality operators learned valuable lesson in 2015 and were much better prepared to deal with a bad flu season this year These precautions have led to many more temporary resident bans to protect our resident population Say for example, what we observe in the New York metro region While we saw strong demand that manifested in 5% plus RevPAR growth in New York MSA, admissions banned in a handful of our communities contributed to an occupancy decline of 2,280 basis points resulting at flattish NOI growth in this market which usually ranks amongst our top markets quarter-after-quarter in NOI growth We think this admissions bans will prove beneficial to rest of the year's results as they have held to protect our resident population, providing us a base to build upon as we enter the traditional moving season in late Q2 into Q3. These markets ---+ in markets where we did not experience this occupancy headwinds, we continue ---+ our continued strong pricing power manifested into strong NOI growth in markets like D , Southern California, Toronto and London Our core market versus non-core market performance spread narrowed this quarter relative to last year Other markets remain relatively flat but core market growth has receded from mid-single digit growth due to flu situations in New York and New England We expect core market growth to pick up in the second half as we build back occupancy It is important to note that we also observed an interesting divergence in our IL versus AL performance from last year While same-store NOI growth in our IL communities was higher than that of AL communities primarily due to lower expense growth in IL we observed higher occupancy decline in IL versus AL While one quarter does not make a trend, we will continue to keep close eye on this topic In conclusion, our operating metrics were as expected in Q1 with the exception of [indiscernible] portfolio which outperforms our initial expectations We're excited about the year and at the prospect of our operating performance We believe our operating portfolio provides significant total return or unlevered IRR opportunity driven by three levers; occupancy upside, rate growth and normalized expense trends We believe our sustained rate growth in the face of new supply exhibits not only the quality of real estate that we own but also the value propositions senior living provides for its growing need based resident population While regency [ph] buyers may dominate the mindshare in very short-term, we are confident our assets class in general and Welltower in particular offers a unique opportunity to medium and long-term investors This is particularly interesting as investors think about comparing our portfolio to many core group asset class with mid-90% occupancy level at the time when the economy is essentially at full employment We hope as our growth rate starts to reaccelerate in the second half of the year relative to the first half and shows resilient growth in next couple of years; the public markets will share the enthusiasm that we encounter every day from world's most astute private investors With that, I'll pass it over to <UNK> <UNK>, our CFO <UNK>? It's <UNK>, I will just add that if you look at ---+ you know, if your question is specifically about we filling the void for the construction lending, as you know we're not a lender, we have no ambition to be a lender but we do think that finally the construction cost are going us As Mercedes said, with LIBOR also on the spread; so that's something very interesting, we observe the cost are going up, recently we heard from a big bang that one of the constructional loans which was priced at LIBOR plus 300, they could not syndicate it So we're pretty excited about what is ---+ the industry is going, you know, there probably have been too much development that should not have happened but were they excited where the industry is going and we will find opportunities like we have seen in New York where its core development and we'll continue to pursue those <UNK>, it's <UNK> So if you think about expenses, roughly half of the expenses are fixed and half of the expenses are floating, right So only that portion of the expenses which you have floating labor cost and others are food, that will only be impacted but if you have a fixed expense category, that will not be impacted On the revenue basis obviously, we're only ---+ remember, we're only looking at the 29th day of February last year, and if you charge on a per DM basis, you have a revenue So if you charge on a monthly basis, you have no difference So it is only impacted some operators that charge on a per DM basis on the revenue side and on the expense side it's only impact the cost of the expense category Yes, because where do you see the most impact at higher there as to entry market like Boston and New York, that's why the rates are much higher So when you get that operator in those ---+ in New England and New York market, where you have one higher extra grade, that impacts the overall report than if you just compare to our overall portfolio, it's not just those markets For example, I told you ---+ New York report was 5% So you have one day of change in New York where you have an operator who charges on a per DM basis you have a much bigger impact Yes, it's a market mix issue <UNK>, that's a very good question So as we mentioned Genesys had some purchase options and is that to echo as [indiscernible] from our portfolio that expired on March 31 and we're pretty excited because their purchase options were priced at a certain cap rate and the cap rates on those assets have come down significantly from there when we exercised those when we struck that deal So what happened because of this Genesys credit as you know has significantly improved in last nine months, so ---+ and that happened obviously a month ago, we are currently negotiating three term sheets with various buyers, so we're hopeful that you will see further reduction in Genesys concentration as we go to through this year but more to come on that, stay tuned It's in the negotiation phase, too early to comment but definitely as I said, stay tuned, there will be more to come on this topic Rich, that's a very good question So if you think about when we said last year, last call about flattish occupancy, we talked about the entire year, not Q1. So Q1 ---+ if you think about, as I mentioned in my prepared remarks; Q1 same-store NOI growth for the shop portfolio is actually higher, not lower So what is the difference? First thing is the revenue growth ---+ it is underwhelming as you said for sure but if you look at the revenue growth, it's actually higher than most peers I believe So we've got slightly lower occupancy but we got much better rates, and we are ---+ we have no desire to decrease same-store idea guidance for the year, we do not change the guidance quarter to quarter on different segments but I think we're trying to tell you we are more excited, not less, about that particular business and as we throw ---+ think about the entire year Vikram, I think that's a great question As I said, one quarter does not make a trend, I will tell you that not only the occupancy was better in AL but also the revenue growth was better in AL So do we have ---+ does that mean that we have a better preference for AL versus IL today? The answer is no We have preference for best quality real estate in the best market run by best operator, and that wherever we find that opportunity, whether it's IL versus AL, we do not think about that any differently; it depends on that particular asset in the particular sub-market run by the particular operator and we think about a lot of ---+ sort of supply ways coming As you know, as marked into [indiscernible] as we have for IL today, and we love independent living as a business, absolutely love it It is a relatively more cyclical business and we have to think about that as we ---+ you know, in particular time in the economy which is essentially at full employment, so we do think about that And the other point I would tell you is, despite all of the talk of the supply, our AL portfolio is in very, very good markets and they are need-based products; so obviously the care component of it, we cannot overemphasize that what's the importance of operators in this business So we're seeing some ---+ starting to see some differentiation but it's too early to comment Tayo, it's <UNK> Your definition of soon may not exactly match with our definition of soon you talked about We talked about you know emphasize on medium to long-term, that's questions number one But I will give you some numbers where I want you to focus on ---+ focus on not the whole industry, but our portfolio So, if you go back and calculate quarter-after-quarter, we give you a three-mile, five-mile sort of radius and how it impacts our portfolio right? Let's just talk about a broader picture 5-mile In Q3 of 2015, our total NOI that was impacted by supply was $83 million That was the total It peaked in Q2 of 2016 at about $90 million and today that is $73 million So, I'm talking about just our portfolio You saw a spike up and now it's coming down So, you know we can sit here and talk about the NIC data and how that all relates to the whole industry Obviously, you know we share enthusiasm for our sector, but we are particularly talking about how our portfolio which we think will do better And I thought we have always been very selective So, we're not ---+ you know particularly selective now We have always been selective and that's not changed So, Chad I think you have two question, one is not ---+ quarter OpEx was actually pretty favorable It's pretty inline to what we expected So, I'm not sure you know what are you thinking behind that question It's pretty inline what would be expected is the same issues we have faced Labor remains and issue, however we expect as we said, we're seeing it moderating and U.K has an impact as John Goodey talked about So that sort of one thing I yelled, there was no specific, we saw a favorable revenue trend in AL versus IAL, but we saw a favorable expense trend in IAL versus AL and that's what drove the NOI difference in those two property types You will see improvement in shop as we sort of discussed here Outpatient medical has been relatively very steady performer It continues to produce a very favorable and predicable growth for us I mean quarter-to-quarter things change, but we don't see massive change in that portfolio <UNK>, its <UNK> So, as you know we do not update our guidance on a quarterly basis for different segments of the business, but you heard me right, that 0.9% which we reported as the growth is comparable to 1.5% to 3% So, Tim, I think cleared that and we are more excited about that segment of the business because of the first quarter beat that we had relative to our expectations And it's driven by Tim Lordan said, it's driven by what we see in the rate trend as well as the expense trends It was, if you think about on a country basis, it was largely in line with our expectations and we expect U.S to perform as we look through rest of the year Again, I would recommend to you one thing obviously we're excited about our U.S portfolio, we think that performance will get better, but as we want you to think about our whole portfolio, not just parts of the portfolio because different parts of our portfolio came together purely because our strategic allocation, capital allocation decision is right So different points in the cycle, you will see different countries will react differently IL and AL will react differently, but that's how we think about our capital allocation as a portfolio rather than one particular product type or one particular country That's right <UNK>

2017_HCN

2016

NBR

NBR #Sure, let me just maybe elaborate a little bit on the Lower 48. In general, I will tell you we are still cautious about the Lower 48. We expect sequential deterioration in our rig count and daily margins in the second quarter. Still, given what's happened with OPEC, inventory levels, global production, we are not prepared to call the bottom to the rig count. Our own rig count has been relatively stable over the past month or so, so we think that is a sign that the rate of decline may have peaked. With respect to your specific comment, we have had discussions with several major operators about what plans can be made for a potential upturn of activity in the second half. People want to know what the contingency plans are, we are talking to them about contingency plans, how fast things can be reactivated, et cetera. So there are a number of operators have contacted us about that. But I want to say, this does remind us, if you go back to the last summer, we had ---+ commented the same thing. And actually we took those comments to the point where we actually start doing stuff. That's why we got out in front of ourselves, a bit of a head fake there. We are going to be a little more guarded here. But those discussions have occurred with several operators. Second half, third, fourth quarter, like middle of third quarter, fourth quarter, kind of discussions. Obviously with the ramp-up on both sides, they have some ramping up to do. We have some ramping up to do. They want to know how fast and how many rigs, et cetera, would be possible. That sort of thing. Denny, do you have that information in front of you. I should have it. By the end of the year, I think we should have about ---+ exit the year with 15 rigs on term contract right now, basically. It's kind of a stairstep ---+ pretty even stairstep down for the rest of the year. The end of Q1 was 33, basically. Yes, it's pretty good. More day rate, I would say, from a rollover. We talked earlier about Colombia. As far as we know, Colombia is going to the back to a more normal [level], so there will be increase in Colombia. And then there are several projects in the Middle East that are basically on deferred status right now that we could see coming back. Kuwait, Saudi, maybe some other places. There's plenty of projects, they just need to get reactivated. And a similar comment in Algeria, I would think as well. Something in the range of 5%. We focus on the earlier maturities and picked up from those. Obviously the pricing on those bonds has now come up quite materially and they are all trading around [99], even over [100]. We have stopped those purchases at this point. There is no negotiations ongoing right now, nothing really substantial, there's nothing ongoing. This was really an activity at the beginning of the year when the customers wanted to basically extend the discount that we gave in 2015. That really was at the beginning of the year. There's nothing really significant ongoing right now. Including workover rigs which would be about half of that, that could be about right. As <UNK> said in his remarks, he gave a number for the drilling rigs, declined drilling rigs, the balance would be workover rigs, which really don't contribute much. So when I said 10 to 12 rigs were vulnerable, I didn't mean that those dropped on April 1 by any means. Some of them may not drop at all. But I was just saying, based on the clients and the type of contracts and what those clients are doing currently to reduce costs, that's where we see the exposure. In the Middle East, as you know, the gas projects all require rigs that don't exist in the marketplace. By definition they are kind of new rigs, so all 3,000 horsepower rigs with huge BOPs and at a price level of rigs that don't exist today. Same thing's true in Kuwait. In Colombia, as you know, we relocated X rigs down there, which are new state-of-the-art walking X rigs. I think they were really happy with the performance on those rigs. In fact, we've had some initial really good success with them. I think, over time, there will be an interest in more of that kind of technology. In the short-term, I don't see a big shift right now. <UNK>, actually I can't. What I can say is the following. First of all, in terms of just looking at the Company from a macro point of view, right now, as far as I understand, they're probably number two in hydraulic horsepower, in the active market today. They're number one actually in cased-hole wireline, which is amazing to me. They are number two in workover and number one in fluid hauling. The overall position of the Company is truly ---+ it's built well. I have said publicly that I don't think putting any additional equity into the existing capital structure and the current capital structure doesn't suit the business. In particular, for all the pressure pumpers out there, I think this period of time, it's really kind of destabilizing for these guys because it is forcing them to defer maintenance and everything, so when a ramp-up occurs, everyone's going to need a lot of capital for the ramp-up, et cetera. I think whatever happens here with C&J, it needs to have a restructured balance sheet. What role we can play in that is open and we will just take it as we see it. Sure. On the M800, which we recently announced, we are hoping to get one of those active in the marketplace during this quarter, at the end of the quarter, maybe. And I think the rig is targeted, as part of the market of the X rig, it's not there. In other words, one to four wells, fast moving, and it has more racking capacity, hydraulic horsepower and it will move in two days. Compare it to any other rig out in the marketplace today, on all those metrics which are important to an operator, I think it will surpass any of them. And it's our first step in a long line of creating a platform for integrated services on the rig for things that are logical for a drilling contractor to take responsibility for, like we've articulated our vision. There's some things that service ---+ third-party services done on a rig, like rig instrumentation that are third-party services today from other companies in the marketplace. That will be incorporated in the rig directional drilling. We are looking not to just do directional drilling but to actually change the way it's done by building it into the rig and trying to downsize the numbers of bodies that you have on the rig, not just from downsizing bodies but from doing it better by automating the process itself. So there's a bunch of these initiatives. We're starting to show them to the operators and see if we can get some interest in it. There are several other services around the rig that, again, third parties do that we're targeting as well. So we have a full-scale effort now out to do this and this is there ---+ we think we can grow. We will be measuring it by dollars per rig of extra services. That's where we go. Over time we'd like that to be meaningful ---+ a meaningful number. The M800 rig, we just finished this one. We have two more M800s in process, and the all-in cost is ---+ the all-in cost of the rig compared to the X rig is not really any more expensive. Actually it's going to be a little less. The cost of these ones in the pipeline are actually significantly less because we have a lot of components in the pipeline from previous new-build plans. It will be not a big increase in our CapEx to complete them. So we want to get a couple of them into the market and show customers the value proposition and build it and be prepared for the up cycle. That's the strategy here. That's what we're doing for the rest of the year. And we have shifted a lot of our manufacturing of the rigs overseas to certain low-cost environments. That has allowed us to keep the M800 at a cost that matches the PACE-X and even a little bit lower than that. So that's the good news. The other thing that <UNK> was mentioning was on the M800, we do have our new control system which automatically provides the instrumentation that <UNK> was talking about and integration with the bottom-hole assembly. A lot of exciting things in that rig. I think the customer interest has been about as high as I've seen it in any of our rig categories. We are very excited about it. This is Denny. We are getting close to the one-hour limit. Let's take one more question please. I think it was more the timing issue, the effectiveness of the issue. In the Colombia, just managing that process, we put a lot of effort into it. I think the result we achieved was a good result. But it just took a toll that was unexpected by the time we actually got it done. Both were more timing issues than disappointment. The only other miss, I would say, is the planning on some of those ---+ the 657 which was part and parcel ---+ that's inherent in the business we are in where these things just don't always line up perfectly. Unfortunately, that didn't line up perfectly. Again, we are really happy that we actually got a jackup signed to Saudi Aramco in January which compared ---+ you survey the other people out there, you know how hard it is to get that, which is a sign of their confidence in us that they were able to do that. But, again, just navigating, fitting it into the well program the right way and coordinating with the shipyard, et cetera, I think we fell a little short of where I wanted to be. Like you said, this is one of the first times in quite a while that that's happened. So everyone knows we have to really focus and try to do better. So the message is pretty clear here. On that, I'd like to have a crystal ball for the second half. I really can't get into the specifics because the visibility does remain limited. It is, obviously, as you know, very dependent on price of oil and we're going to be really working aggressively to maintain our market position everywhere. We think that things could maybe by the end of the third quarter, you'll start to see something improve. Again, it's so macro dependent right now. I think anybody would just be guessing. Mike, with that, I'll have you close out the call. We just want to thank everybody for participating. If we didn't get to your question, just feel free to call us or email us. We will get back to you as soon as possible.

2016_NBR

2017

CI

CI #Good morning, everyone, and thank you for joining our call today In today's call, I'll briefly review highlights from our 2016 financial results as we close the year with solid momentum I'll then address how we are strategically positioning for the long-term success as we drive innovation and further strengthen our capabilities to deliver value for our customers, clients, partners and ultimately you, our shareholders, all while a variety of dynamic forces continue to evolve our markets I'll also offer some thoughts on our expectations for 2017, which include strong momentum across our businesses, attractive ongoing free cash flow generation, and an exceptionally strong capital position, all of which provide opportunity for considerable value creation in 2017 as well as over the long-term <UNK> will then address our fourth quarter and full year 2016 financial performance results in more detail as well as provide the specifics for our outlook for 2017 before we take your questions After Q&A, I'll wrap up our call with a few closing remarks Let's dive into some highlights for the full year For 2016, consolidated revenues increased 5% to $39.7 billion, as we continue to focus on our mission to improve the health, well being and sense-of-security of the people we serve We reported adjusted income from operations for 2016 of $2.1 billion, or $8.10 per share, reflecting strong performance in our Commercial employer and Global Supplemental Benefits businesses As you know, we also focused on addressing challenges that emerged in the first half of the year in our historically well performing Group Disability and Life and Seniors businesses, where we drove notable progress in the second half of 2016. Specifically, within the second half, we gained traction in Group Disability and experienced a more stable claims environment in our Life book of business Within our Seniors business, we made progress with our remediation efforts and are in the latter stages of the audit response work relative to the Medicare Advantage offerings We are highly focused on emerging with an even stronger Seniors business and portfolio of solutions that is well-positioned for sustained growth Overall, we delivered on our revised expectations for the full year of 2016 financial results and concluded the year with positive momentum as we enter 2017. Turning now to how we are effectively positioning our business for the future In the United States, once again, we have a new administration advocating for health care reform and we expect the U.S regulatory and legislative environment to be dynamic That said, the core issues that have pressured health care markets more broadly and have recently challenged the U.S Individual exchange marketplace in particular arise from the same market forces and pressures that pressure the status quo health care systems both in the United States as well as across the globe More specifically, aging populations, eroding health status and the rise of chronic conditions all pose challenges for health care consumers individually as well as society at large These forces in turn contribute to increasing demand for greater access to health care services and sense of security offerings that are both affordable and of high quality Additionally, we see acceleration and demand for programs that offer more personalized solutions and are designed for local marketplaces Our proven differentiated strategy of Go Deep, Go Global and Go Individual is directly responsive to these forces, and enables us to anticipate and address these needs Our proven strategy is delivering value as we help the people we serve maintain and improve their health as well as access high-quality affordable care when needed We enable this through a combination of solutions and partnerships to better connect individuals and health care professionals resulting in improved health and well-being and better value for our customers For example, on the demand side, we're incentivizing, engaging and supporting the individuals we serve to drive healthy actions and behavior On the supply side, we're deepening collaboration with health care professionals and supply chain partners with leading-edge strategic alliances, incentive programs and value-based arrangements as well as effective information sharing and targeted point-of-care resources Importantly, these efforts are resulting in greater rewards for higher-performing health care providers and better value for our customers With an eye toward delivering sustained value, we've also continued to invest in innovative tools and capabilities over the past few years in order to better anticipate and meet the emerging needs of customers, clients and health care partners Now I'd like to briefly highlight a few examples of new innovative solutions we're delivering in the marketplace We recently launched a set of powerful solutions that exemplify our approach in bringing personalized, affordable and integrated solutions to the local markets On the demand side, starting with the needs of our customers, this year more than 1 million Cigna customers have access to One Guide, a multi-modal service experience powered by analytics that proactively engage consumers to stay healthy, eliminate surprises and save money One Guide combines the convenience of a smart integrated digital app with the expertise and empathy of human touch This differentiated solution provides access to guided consultation via the phone, web, mobile app or chat We are driving stronger customer engagement in health outcomes by harnessing predictive analytics, the customer insights to deliver real-time notifications to our customers and our customer service representatives in an omni-channel environment This highly personalized and specific data empowers the individual at the right moment as it is tailored to their health status and engagement preferences Together, these capabilities help our customers make informed decisions, reduce health expenses and further strengthen their connection with their doctors We're also driving enhancements in affordability and quality on the supply side with continued investments in value-based care Today, we have nearly 250 collaborative arrangements across large physician and specialty practices spanning 31 states We also partner in incentive payment models with a growing number of hospital systems and are forming partnerships in the form of delivery system alliances These value-based arrangements, including the one we most recently announced in California last month, will enable greater emphasis on preventative care and improved quality and value by closely aligning clinical teams including nurse care coordinators, case managers and health coaches, and further integrating them in the health care delivery system to create a more seamless experience for our customers and a more coordinated health care system A final example, which brings the demand and supply side together and demonstrates how we are innovating for our customers, clients and provider partners, is the recent launch of Cigna's SureFit solution This innovative new solution heightens collaboration between local physician networks and hospital groups to help drive efficiency and create a more personalized experience for our customers This program empowers customers to create an optimized network configuration and benefit design to best meet their own personalized needs Our clients receive substantial savings, thanks to the lower total cost of care as well as embedded behavioral, pharmacy and population health solutions that are fully integrated into our offerings All this is coupled with a higher level of personalization and customer support that is enabling an easier, more efficient administrative experience for our customers Each of these solutions demonstrates the best value comes from engaging, incentivizing and supporting individuals, incenting and enabling healthcare professionals with shared resources and value-based rewards, all delivered through highly localized, integrated solutions Now as we step into 2017, we expect to deliver continued value for our customers and clients and, as a result, our shareholders Within our Global Health Care segment, we expect to grow in the range of 300,000 to 500,000 total medical customers for the year This will be driven by strong retention and customer growth in each of our employer segments; more specifically, national accounts, middle-market, select and international, as well as an increase of 100,000 customers in our U.S Individual customer base This will be offset somewhat by an expected reduction in the number of senior segment customers by 50,000 in 2017. Overall, we see an attractive year ahead Our outlook implies an 11% to 17% EPS growth rate which does not include the impact of any capital deployment <UNK> will provide more specifics on our guidance in a few moments Our outlook for an attractive 2017 is further strengthened by our current capital position As you know, we view capital management as an important priority and responsibility for our shareholders In total, depending on the mix of share repurchase, dividends and M&A, we would expect to have between $7 billion to $14 billion of deployable capital in 2017. It's important to emphasize here that we have a disciplined approach and a strong track record of deploying capital and avoid having surplus capital sit idle for any length of time Looking broadly ahead, it is also important to remind you that we remain committed to achieving our long-term EPS growth rate of 10% to 13% on average through a combination of strong organic earnings growth and capital deployment opportunities Before I turn the call over to <UNK>, I'd like to emphasize a few important points from my comments We concluded 2016 with momentum, driven by strong results in our Commercial Healthcare business and Global Supplemental Benefits business, as well as improving results in our Group Disability and Life segment Our well-positioned, diverse growing portfolio of businesses is delivering innovative solutions that meet the needs of markets around the world Our talented global team is excited to step into 2017, poised for attractive growth and the opportunity for significant value creation for our customers, clients and you, our shareholders And with that, I'd like to turn the call over to <UNK> Relative to your first question just briefly, obviously, we await the court's decision And from a governance standpoint, we thought we took the appropriate step by issuing the K, and the language of the K is quite clear Relative to your second question, what we thought was most important is to make sure that our investors understand the breadth of capital available for deployment And our intention would be to create additional clarity in terms of the use of that to the extent there is a Plan B scenario that would be executed versus a consummation of the deal So transparency relative to the tremendous capital that is, <UNK> and I both noted range between $7 billion and $14 billion Stay tuned for more pending the insights relative to the court's decision <UNK>, it's <UNK> First, let me give you a little bit of color relative to the positioning we took for 2017 and then try to provide you some color in terms of the enrollment As you know from prior conversations, we viewed that the marketplace 2014, 2015 and 2016 specifically we call version 1.0. We viewed that it would be a relatively choppy ride in the implementation of all the new attributes of the program; that the marketplace in total would be smaller than projected and unprofitable overall We chose to participate in that marketplace on a very focused basis, initially in five states, not expecting to make money but expecting to learn And broadly speaking, those goals were achieved Relative to 2017, as we were operating in 2016, our expectation was that we would move from – specifically from seven states in 2016 to 10 states in 2017. We assessed the markets and based on the formula we thought we needed to have to work in terms of benefit flexibility, but very importantly, network configuration with collaborative accountable care relationships that were acceptable to the state that we were going to operate in, we actually exited three states and entered three states resulting in seven states that we are in for 2017. The net result is we expect to grow as I noted by about 100,000 lives, those 100,000 lives will be highly biased toward our preferred offerings which are heavily oriented around the Collaborative Accountable Care relationships and the aligned models Relative to initial measures and metrics, obviously we need to get through the quarter and see how the lives mature As you get through the quarter, those lives will atrophy off a little bit in terms of the final manifestation of the lives we have But they're generally in line with our initial expectations as we start the year <UNK>, important point Again, we assess the market year-in, year-out, and as I noted, we made some very different moves in 2017 than we initially anticipated with those three exits versus just three entrances We'll have a lot of decisions to make as we get through the spring of the year, and we'll assess our participation in the marketplace in totality with a fresh set of eyes based upon the rules, regulations and design for that marketplace that, as we sit here right now, is fragile at best So we will fully assess whether we will participate, where, and how as we get through the spring cycle Josh, on your first point, again, we believe the language is quite clear and appropriate from a governance standpoint, and I would direct you back both to that language and if you so choose, the contract, which is filed and public Specifically from the capital deployment standpoint, as <UNK> noted, we have excellent flexibility, and I think that's the right way of attributing it To the extent we do not have a transaction to finalize here, we will aggressively evaluate and conclude upon all options that are available to us from a capital deployment standpoint But there are no impediments that we see relative to capital deployment, and all alternatives are available to us And we would intend to create high visibility if we're in that environment as promptly as possible Josh, important you picked up the 5 correctly, but it's 50,000. So stepping back, the growth was – is projected to be 300,000 to 500,000, so that's where you're ramping against the 500,000 number in terms of cumulative growth of lives That growth is driven by very strong performance in all of our employer segments; national, middle, select, international, driven by strong retention, good expansion of relationships as well as targeting new business adds where our engagement in incentive-based programs, our collaboratives, our alternative funding and our sustained strong track record of low medical cost trend is indeed paying off Specific to your question on Seniors, again, we project for 2017 for the year to have a net reduction of 50,000 lives or about 10% of the starting point as a result of not being in the active open enrollment period Let me start Just big-picture, we're very pleased and proud to have multiple years of posting very low medical cost trend relative to industry norms And as you noted, we ended the full year 2016 a bit below our outlook of 4% to 5% I'd remind you we started 2016 with an outlook of 4.5% to 5.5%, but in 2016, we lowered that by about 50 basis points So the way we think about it is for 2017, we're planning at the same level that we planned at for 2016. We planned at 2016 at 4.5% to 5.5% We're planning 2017 at 4.5% to 5.5% Admittedly, it's a tick up from where we ended 2016, a modest uptick We're viewing in terms of in our projection some uptick in utilization, some uptick in pharmacy, but no macro driver to call out that is changing the inflection point Sure I apologize if I wasn't clear before So our learnings to-date, if we step back, we've participated in this market since its inception keeping our revenue in the 2%, 3%, maybe 4% range We've expected each of the years that we would lose money We keep that in a manageable corridor and we sought to try to learn in terms of what are the successful recipes here to deliver the right value for customers and create a sustainable solution to be able to do so with health care partners as well as for our shareholders Our conclusion is within the current rule set, the only viable way to make this work is to have a well-coordinated, highly aligned, value-based care arrangement with the health care professionals that is the underbelly or foundation of the offering Additionally, we've been able to successfully expand relationships with our Collaborative Accountable Care partners or delivery system alliances being physician groups or hospitals across multiple lines of business; Commercial, Medicare Advantage, Commercial Individual, et cetera So in these three markets that you identified, we both had market conditions in terms of benefit alignment as well as delivery system partners that we were able to put together and believe in our chosen geographies – very importantly, not state-wide – in our chosen targeted geographies around those delivery system alternatives, we have a good value proposition that we are proud to bring to market with our health care partners That's what drove us into those specific markets And you may think about those, <UNK>, as sub-markets within North Carolina, sub-markets within Illinois, et cetera, built around those collaborative relationships <UNK>, it's <UNK> Obviously as you referenced, came out last night Our team is going through it rather thoroughly I'd say a couple big-picture comments The first, excluding the Stars implication, our view is that our rate implication is similar to that of the industry Secondly, including the proposed reduction to our Stars in 2018, our revenue impact would be a bit lower than that of the industry or less positive than that of the industry Third, as you know, we do not agree with or accept that Stars conclusion because we're of the view that our clinical outcomes, our service outcomes and our overall program outcomes are far superior than the conclusion that's being drawn And in the current state, we're working with CMS literally as we speak to try to gain a shared understanding of the results we're delivering and arrive at a different outcome for 2018. But big picture overall, revenue impact to us, in line with the industry Say for the proposed adjustment to our Stars, including that the revenue impact for us would be less We're working with CMS directly on that And to the extent we're not successful, we have a variety of other levers to be able to manage for 2018 that we would deal with down the road in terms of talking about our benefit positioning Let me just give you some color and then try to give you direction going forward First, your basic rule of thumb I think should be that the higher the average case size historically for the industry, the lower the penetration rate The lower the average case size, the higher the penetration rate Second rule of thumb is, as you're dealing with consumer-directed offerings, you'll have a higher average penetration rate versus non-consumer-directed offerings, the case size being similar because the individual is the aggregator and you're trying to get an overall aggregated proposition For us, we've continued to make very good progress relative to both penetrating, using I think your orientation, our multiple blocks of business whether it's in our existing relationships or new business relationships We see tremendous ability to further grow our specialty profile, both in the existing portfolio as well as in our new business portfolio And the final comment I would make is, our view is that the industry historically looked at this as an opportunity to cross sell, then moved in an environment of beginning to bundle and now is just exploring the way to truly integrate And a lot of what we've been successful at is truly integrating the programs, be they clinical, service and outcome programs So larger versus smaller, penetration rates move, consumer directed versus non-consumer directed, penetration rates move For us, we have opportunity both in our captive book as well as in new business going forward and we're excited about that The M&A posture looking forward, first, relative to the marketplace, we view that over time that the Medicaid marketplace will continue to need to adopt more innovative solutions, whether they're active management, sub-program design, et cetera, care coordination program acceleration, and we think that that will over time create more opportunities both for the marketplace to grow and to bring innovative solutions as well as for ourselves So I wouldn't limit it to duals I would orient around programs where there is more active management, care coordination, value-based alignment, incentive-based programs, whether they be broad or narrowly focused We see opportunities that we can bring value creation to the table, and over time, we think this marketplace will continue to evolve more in that direction Well, <UNK>, it's <UNK> We haven't given you the exact numbers The way we've described it is, and we've been consistent here, 2014, 2015, 2016, we expected not to make money, be it on an allocated or fully allocated basis, et cetera At the end of the day, it is not a profitable block of business It has been manageable For 2017, we would expect to improve our profile somewhat, but it would still not be profitable I think your big picture assumption, one way or the other, this book improves It either improves fundamentally or it improves because it's no longer a sustainable offering for us and we choose not to participate in that marketplace On a final note, for us, we've been really clear This is not our number-one or number-two driver of our inflection point with the great outlook we have of earnings growth next year It'll be a modest improvement off of its current baseline loss results Good morning, <UNK> First of all, to capital deployment, as <UNK> noted, our priorities remain ensuring that we support our existing business needs Second, we look at strategic M&A And third, we look at opportunities to return excess capital to the shareholders As we sit here today, our M&A priorities remain, and they've been consistent in terms of expanding our global footprint, expanding our U.S seniors capabilities, expanding our retail base capabilities, opportunities for tuck-ins and opportunities to continue to expand our services for evolving state-based risk programs I would not read into anything in terms of – you never say never in terms of large versus small All deals stand on their own, and we would expect to be quite disciplined in terms of our approach going forward in terms of looking for on-strategy M&A opportunities and ensuring that they are value creative for shareholders as well as that we can create value for customers And then with the tremendous capital balances we have in front of us, we recognize the significant responsibility that it is And as I noted in my prepared remarks, we have a track record of not letting that capital lie idle for any elongated length of time <UNK>, it's <UNK> Real important question A couple points First, big-picture, I'm extraordinarily proud of our team 40,000 plus colleagues around the world who wake up every day to do everything humanly possible to support our customers, our clients and work with our partners And while we've had some challenges, which I will step up to in a moment, broadly speaking our customers, clients and partners have been buffered from that So the value proposition we are delivering remains strong And a way to evidence that is as you look at our 2017 growth trajectory, the ability to have outstanding retention once again with strong new business adds and expansion of relationships and delivering a tremendous, for example, medical cost trend once again, I think reinforces the value we're delivering No doubt, when you have an environment where you'll have a disruptive overhang that now lapses 18 months, where we talk in our organization around keeping our eye focused on the marketplace, you always have a – kind of a small tension that builds over time And while our team, I think, has done an outstanding job trying to keep that overhang distraction out of the way, indisputably that's going to creep into the organization, no matter how we communicate, align and try to stay focused But again, our customers and clients have been well supported Two different storylines relative to Seniors and the group business, neither of which we have time to get into in detail; regulatory and self-inflicted wounds that we own, and we are rapidly remediating them And I think the bright spot here is that we delivered strong results for our clients and customers, and we're going to step in to 2018 and deliver an outstanding result for our clients and customers as well as our shareholders <UNK>, we do not see it as a change We see the market evolving, so let me be clear If you go back to when we rolled out our Go Deep, Go Global, Go Individual strategy and laid out our M&A priorities all the way back some seven years ago, we put as a lower priority traditional Medicaid relative to the alternatives We, all the way back then, had a view that the marketplace would evolve over time to more active management And we thought the duals marketplace would be the first marketplace that evolved So I would ask you not to read into my comments either way; rather, our organization is open-minded relative to targeted opportunities where we could create value And where we see the opportunity to create value is by working collaboratively with health care professionals, with incentives, information, and care resources to provide better quality outcomes for individuals And as states grapple with their budget challenges with a growing Medicaid population and growing health burden, we think programs will evolve and change and that will create opportunities Those will be localized opportunities We do not see it as the nation's profile will change overnight There'll be localized opportunities that we want to be open-minded to and to be in a position to explore from a growth opportunity and value creation opportunity Two sides, but let's go to the first dimension Indisputably as a country, we have an aging population, eroding health status and continued growth in chronic disease Continuing to finance the access to care through traditional programs that simply attempt to, for example, push rates lower as a means of balancing budgets is running out of steam, period Secondly, there are bright spots around the country of more innovative programs that state officials are driving to try to get more engagement of individuals and better value creation with health care professionals That is resulting in changes in the delivery system, and there's a lot of bright spots around the country where delivery systems, be they physician groups, multispecialty groups, integrated hospital systems are aggressively exploring how they could do more value-based care All those forces are changing I wouldn't limit it to any one All those forces are changing But at the cornerstone is an increasing demand and need for care to be delivered and coordinated and the need to explore new solutions Yeah, Dave, first by way of just framing, right, we know the stats Seniors continue to age into Medicare Seniors who are looking at alternatives view Medicare Advantage quite favorably It's not Cigna-specific at all; just Medicare Advantage Medicare Advantage on average serves seniors with lower average income than fee-for-service, so they're high-value buyers Medicare Advantage as an industry generates superior clinical outcomes through care coordination, and very importantly, the more innovative health care professionals appreciate the Medicare Advantage program as an opportunity to better coordinate care Specific to Cigna, given that we have 85% of all of our Medicare Advantage lives in value-based programs, that creates both an opportunity in the future and it was a challenge going through the audit And at the end of the day, the complexity is all those partnered relationships and the information flows, et cetera, that were needed to get through the audit process were challenging We've built, to your term, a chassis now; a series of enhancements, that will put us in a much better position going forward not only to continue to serve the population where we're delivering very strong service and clinical outcomes today, but coordinate the information necessary in the evolving regulatory environment and continue to grow that chassis So we believe it will be a very effective growth chassis for years to come for individual MA purchasers who want to be in aligned incentive-based programs with value-based care providers So we're excited about the growth chassis over the long-term <UNK>, I tip my hat to you I think you got about seven or eight questions in there Let me attempt to be responsive to a bunch of quite important points First, specific to our results, for 2017, the growth of 300,000 to 500,000 customers represents growth in national accounts, middle-market, select and international driven by very strong retention in all of those segments; good expansion of relationships and good targeted new business adds where our clinical capabilities, our incentive-based programs are hunting quite well Specific to repeal and replace, and I appreciate you using that language, because I think repeal and replace is being used as language that is relatively broad sweeping, so as you very well know, the ACA had an impact, based on the way you asked your question, on the employer market, on the MA market, on the Medicaid market, as well as on the Individual market And what we see happening today versus eight years ago is that there's a need for a change unequivocally, but there's also a lot of bright spots that have evolved over the last eight years For example, in the employer market, there's way more adoption today of incentives, engagement and value-based care programs MA has further evolved even more broadly adopting value-based care programs As I noted in a prior comment, there are states that are changing Medicaid programs and evolving them to be more incentive or engagement based as we go forward As it relates to the individual program, as noted by several people's questions, the marketplace is still unsustainable And there's a lot of pressure to put a series of transparent changes in place for 2018 in the near future because organizations will have to make determinations in the spring of this year As it relates to our growth priorities, they remain We will grow our employer block of business in the United States and we see attractive growth opportunities in our targeted geographies, in our targeted segments with our capabilities We see seniors continuing to be a growth chassis for us We see broadening our specialty portfolio continuing to be a growth chassis We have a sustained track record of growing our productivity management solutions out of our group portfolio And then our international chassis continues to provide an exciting growth opportunity So we're fortunate not to be dependent upon any one submarket We're rather well-positioned from that standpoint <UNK>, it's <UNK> I'd put that in the too soon to tell I understand the headline that you're referencing I can't go into the kind of details of the subcomponents there, but I understand the point you're referencing Our team is combing through that quite thoroughly literally as we speak and I would say stay tuned for more Obviously a lot of moving parts in there and you identify actually one of the moving parts, which I think is trying to resequence some of the disconnects we've seen in some of the program designs Longer-term outlook, obviously, if you look at our outlook for 2017, we've got, let's say, a 5% headwind in there for currency potential impacts So it's a little less than that in the 2017 outlook, but over the longer-term that's a trajectory we'd expect to deliver Michael, it's <UNK> I'll ask <UNK> to reiterate the risk corridor receivable in a moment We've not quantified the Individual submarket's losses We've continued to say that 2014, 2015, 2016 have been loss profiles for that smaller book of business I'll remind you that we've run it in 2%, 3% of our aggregate revenue over time and I think our view is that as we look to the industry level margins, we're in the ballpark, or lack thereof margins, we're in the ballpark of that result, but we haven't given you the details on it <UNK>, would you remind them of the write-off? Thank you To conclude our call, I'd like to just underscore some key points from our discussion We concluded the year with positive operating momentum as we enter 2017 with an expected attractive outlook to our growth profile We reported strong revenue and earnings performance in our Global Health Care and Global Supplemental Benefits businesses, and noted improvements in the latter half of the year with the challenges we confronted earlier in the year in our Group Disability and Life business We remain committed to achieving our average annual EPS growth rate of 10% to 13% over the long-term We are confident in our ability to deliver on our attractive 2017 outlook of 12% to 18% earnings growth, further strengthened by our meaningful capital position and exceptional flexibility I'd once again like to thank my colleagues around the world who embody our mission and execute our strategy every day for the benefit of our customers, our clients and our partners And I also want to thank you, our shareholders, for joining our call today and for your continued interest in Cigna

2017_CI

2017

INVA

INVA #Good afternoon, everyone, and thank you for joining us. With me on the call today is <UNK> <UNK>, our Chief Executive Officer. On today's call, <UNK> will review the highlights from the quarter and full year 2016, and I will review our financial results. Following our comments, we will open up the call for questions. Earlier today, Innoviva issued a press release announcing recent corporate developments and financial results for the fourth quarter and full year 2016. A copy of the press release can be found on our website. Before we get started, we would like to remind you that this conference call contains forward-looking statements regarding future events and the future performance of Innoviva. Forward-looking statements include anticipated results and other statements regarding Innoviva's goals, plans, objectives, expectations, strategies, and beliefs. These statements are based upon information available to the Company today, and Innoviva assumes no obligation to update these statements as circumstances change. Future events and actual results could differ materially from those projected in the Company's forward-looking statements. Additional information concerning factors that could cause results to differ materially from our forward-looking statements are described in greater details in the Company's press release and the Company's filings with the SEC. Additionally, adjusted EBITDA and adjusted earnings per share, two non-GAAP financial measures, will be discussed on this conference call. A reconciliation to the most directly comparable GAAP financial measure can also be found in our press release. I would now like to turn the call over to our Chief Executive Officer, <UNK> <UNK>. Thank you, Eric, and good afternoon, everybody. Innoviva had a very strong performance in 2016, with record revenues, operating profits, and cash generation. In 2014, management and the board initiated a strategic plan and subsequent restructuring to create a better-positioned entity with dramatically reduced operating expenses and a strategic imperative to work successfully with GSK to improve the commercialization of our portfolio. We believe that the successful execution of these actions would fast-track the Company on a path to increased profitability and cash flow to drive superior shareholder value. Based upon our strong 2016 results, it's clear that to date, we have been successful in both components of this endeavor. For example, the effectiveness of the cost focus restructuring can be seen when comparing operating expenses from Q1 2014, our last full quarter as a combined company, to Q4 2016. During this timeframe, operating expenses are down over 90% to $6 million in Q4 of 2016, compared to $66.2 million in Q1 of 2014. This firm footing has enabled us to return significant capital to shareholders. We continued returning capital to investors in Q4 with the repurchase of approximately $16.6 million of common stock and convertible notes. Since launching our capital return program in the fourth quarter of 2015, we have returned a total of $118 million to investors and reduced total shares outstanding by more than 8%. In 2016, total capital return to investors was greater than 150% of the net cash provided by operating activities as shown on our financial statements. Today, we also announced our 2017 capital return plan, which will be primarily focused on the redemption of our 9% 2029 royalty notes and which is projected to return up to $150 million to our investors. Our 2017 capital return plan also maintains the Company's flexibility to make opportunistic purchases of common stock and convertible notes based upon market conditions. Turning to our collaboration with GSK, I am pleased to say that we also made significant improvements in the commercialization of RELVAR/BREO ELLIPTA and ANORO ELLIPTA. In the US, both products significantly outperformed the market for the fourth quarter and full year 2016 in prescription volume growth and market share gains to reach new all-time highs. According to the most recent weekly data compiled by IMS, TRx market share for BREO exceeded 13.8%, a share increase of 2.1 percentage points since the end of Q3, and ANORO exceeded 10.7%. According to IMS, BREO Q4 TRx volumes reached more than 895,000 prescriptions in the quarter, an increase of 19% over Q3. Additionally, the most recent data also shows that BREO new-to-brand market share increased to 21.3% overall and to 38.4% for pulmonologists. This represents share increases since the end of Q3 of 3.4% and 5.9% respectively. As a result, BREO is now the class leader with respiratory specialists in new-to-brand share, accounting for more than one-third of all new LABA/ICS prescriptions written by specialists in the US. As a reminder, we continue to believe that new-to-brand market share and specialist adoption rates remain important lead indicators of the future performance potential for our brands. ANORO momentum increased in the fourth quarter, with market share gains in both TRx and NBRx. For the week ending January 27, ANORO new-to-brand market share increased to 18.1% overall and to 20.7% for pulmonologists. We believe the productive collaboration between GSK and Innoviva commercial teams has contributed significantly to achieving these gains, and we remain optimistic in our work building ANORO and BREO into leading global respiratory franchises. As we've mentioned on prior calls, market share metrics remain the primary focus of our analytic efforts, as they focus on the underlying demand for our products. In contrast, reported net sales by GSK have historically experienced quarter-over-quarter volatility relative to underlying prescriptions due to a number of factors, such as normal slower summer, stronger winter seasonality, changes in channel inventory levels, asthma/COPD customer mix, accounting reserve true-ups, and couponing levels. During the fourth quarter, reported net sales in the US outpaced prescription growth, which we believe is likely due to traditional increases in year-end channel inventory. For 2016, net sales for RELVAR/BREO were $273 million in Q4 and $857 million for the full year. During the fourth quarter, RELVAR/BREO reported $157.6 million in net sales from the US and $115.3 million outside the US. These sales were driven by higher global prescription volumes and market shares, and includes the impact of typically strong winter seasonality and some inventory build in the US during the fourth quarter that was in line with what GSK traditionally sees at year-end. For ANORO, total 2016 net sales were approximately $275 million. During the fourth quarter, ANORA net sales were $90.7 million, an increase of 28% compared to the third quarter of 2016, driven by higher prescription volumes and market share. With strong underlying demand trends, favorable 2017 reimbursement status, and improved effectiveness of the collaboration sales and marketing efforts, we remain optimistic about the potential for both products. Finally, I would like to highlight some changes to our board that we recently announced, including the addition of two new independent directors, Barbara Duncan and Pat Lepore. The addition of Barbara and Pat brings the number of independent directors on our board to six out of a total seven board members. And finally, as part of the board's ongoing governance planning processes, we recently appointed James Tyree to be Vice Chairman of the board. Now I will turn the call back to Eric to review our fourth quarter and full year 2016 financial results. Eric. Thanks, <UNK>. We had a very strong fourth quarter of 2016, with total royalties earned of $46.8 million, an 80% increase over the fourth quarter of 2015, offset by $3.5 million of net non-cash amortization expense. Royalty revenues earned included $41 million for BREO and $5.8 million for ANORO. As <UNK> mentioned earlier, quarterly net sales of BREO and ANORO reported by GSK do not directly track prescription volume changes during the same time period due to a variety of non-demand factors. Therefore, we typically analyze longer time periods when gauging revenue performance. Looking at the prior 10 quarters, on average, our royalties earned have now grown at a quarterly compound rate of approximately 32%, which reinforces our continued confidence in the Company's prospects for 2017. Total operating expenses in the fourth quarter of 2016 were $6 million compared to $5.5 million in the fourth quarter of 2015. I am pleased to report that full-year 2016 operating expenses, excluding non-cash stock-based compensation accruals, were $16.3 million, which is well below our 2016 guidance of $18 million to $20 million. For 2017, we are providing guidance for OPEX composed of R&D and G&A cost before stock-based compensation accruals of a range of between $18 million and $20 million. During the fourth quarter of 2016, we repurchased approximately $12.5 million of common stock, bringing our total repurchases under the program since Q4 2015 to $103.7 million at an average price of $10.50 per share, or 7% below the VWAP for that period of $11.30 per share. As <UNK> mentioned earlier, during the fourth quarter of 2016, we also repurchased in the open marked $4.1 million face value of our convertible subordinated notes due 2023, for a net cash consideration of $3.3 million, representing approximately a 20% gain. In addition to stock and notes repurchases, we also made a principal repayment of $3.6 million on our non-recourse notes during the fourth quarter, and increased our reserve for principal repayment to be made during the first quarter of 2017 to $7.8 million, resulting from the strong royalties earned during the fourth quarter of 2016. We continued to generate growing cash flow from our operations in the fourth quarter of 2016. Income from operations reached $37.7 million compared to $17.3 million in the fourth quarter of 2015, and adjusted EBITDA was $43.7 million in the fourth quarter of 2016 compared to $22.4 million in the fourth quarter of 2015. On a 12-months rolling basis, we've now generated approximately $134 million in adjusted EBITDA. For the fourth quarter of 2016, our adjusted earnings per share was $0.26 per share, up significantly compared to adjusted earnings per share of $0.08 per share in the fourth quarter of 2015. Cash, cash equivalents, short-term investments, and marketable securities totaled $150.4 million as of December 31, 2016, and we had $46.8 million of royalty receivables from GSK at the end of the fourth quarter, which we believe puts us in a strong liquidity position for 2017. And now I'd like to turn the call over to <UNK> for some closing comments. Thank you, Eric. In summary, we're pleased with the performance of Innoviva through the fourth quarter of 2016, and believe that our ongoing gains in prescription volumes, market share, and significantly improved commercial effectiveness for both products during 2016 bode well for our future prospects. As a result, we remain optimistic about the long-term potential of our respiratory portfolio. Our primary focus in 2017 will be the optimization of the commercial success and global rollout of BREO and ANORO, as we believe that both products have significant future commercial potential. There are many exciting developments happening here at Innoviva, and we remain confident in the future prospects for the Company. Now I'd like to ask the conference facilitator to open the call for questions. Thanks, <UNK>. This is Eric. Thanks for the question. So I'll address the first one and I think <UNK> will cover the second one. So on the capital return plan, I can't really say exactly how much we will ultimately do in terms of early redemption of royalty notes, but that will be our main focus. And as we said, we're keeping some flexibility to potentially do share buyback, but the real focus is really on reducing the size of that debt. That's going to be the main focus. And the second part of your question there, <UNK>, with regard to the inventory, we don't have a specific number we're going to be able to offer up today. What I would say is it was described to us by GSK as very typical, very in line with what they normally do. As you're aware, this happened in 2015 in Q4 and prior to that. It's a very typical pattern. So you frequently hear us talk about looking over multiple quarters when you're trying to assess trends and all of that, and what we see are these consistent trends, right. You typically have little higher prescription volumes during the winter. You're in cold and flu season, so you'll see upticks in that there. You typically see a little bit of year-end channel inventory. This is your classic management practice by a lot of the wholesalers as they're anticipating a price increase next year. That seems to happen every year. So I would describe all of this as being very typical, but unfortunately what I can't do is give you a specific number. The only final thing I would say is, you know, of course we're selling a lot more product right now, so it's probably a little bit larger absolute number than last year, but as a percentage, again, GSK said it's very similar to what we've seen in the past. So, sorry I couldn't be much more specific than that, but hopefully you get a sense that these are just very typical, traditional, repeating-type patterns as far as we're aware. Sure. So I'll try to kind of (inaudible) all of those there. With regard to the capital structure, I think our thoughts on that are pretty well articulated in where we're focusing our capital returns here. There are a couple things to think about with these notes as you look at them and think about why we may or may not be focusing on them. One, of course, is they're non-recourse, as we've talked about a lot, and that's a nice feature in them. The downside, of course, is today, that 9% coupon is a little more expensive than perhaps you would want ideally. It was a great deal when we put these notes in place when we had, essentially, no revenues. The second piece of that 9% is there is, as you know, a fair amount of tax uncertainty looking forward here with some of the tax discussions that are going on. One possibility that is being discussed, and I know it's been discussed pretty broadly in the conversation (inaudible), is the reduction of interest as a tax deduction. And in that example, Eric and I had been thinking about these notes on an after-tax basis being much cheaper than 9%. If that goes away, of course, the notes would get a little more expensive. So there is kind of the top-level thinking. Again, we're really focusing this year on those 9% notes. If there are some market dislocations that present exceptional opportunities, then of course we would potentially look at other vehicles, other shares or something else. But that's really the primary focus for this year. And forgive me. The second part of your question was. Oh, the GSK transition. So, you know, we were probably a little more apprehensive of some of the changes that were happening two years ago to the people who were running the franchises. There were some that were good like, for example, the head of the US going away, who we didn't have terrifically high opinions of at that point in time, and a few others. And subsequent to that, they put some terrific people in those spots. So, you know, the head of the US now is terrific, the marketing folks in the US are terrific, et cetera, and those are really the key people that are out there. At the very top level, my guess is there will be very, very few adverse changes at all. In fact, I have optimism these guys are going to be pretty thoughtful. I haven't personally met Emma yet. I have heard terrific things about her. And I would just say that the people we're dealing with, the people that are on the ground in the various regions, are the ones who are going to make or break these products, and they are terrific. The US marketing team, you've heard me say lots of great things about them, and that team really performs quite well. And again, as you know, prior to some of those transitions, so two and a half, three years ago, you definitely didn't hear me saying good things about that. But those teams are intact and in good shape, so my best guess is we're going to go through this with little to no hiccups whatsoever. Appreciate it, <UNK>. Thank you. Yeah, thanks for the question and thanks for the congrats. You know, of course, we're very pleased with where things have gone and that the strategies we put in place and the restructurings really have borne fruit the way we hoped they would, so we're very pleased on that front. You know, with regard to gross-to-net and pricing next year, Andrew made a comment, not at this call but in the last one, that he wasn't expecting anything particularly dramatic to happen this year, and that's generally what we've been talking about as well. We haven't been specific and said it's going up or down. So I tend to look at net rather than gross-to-net. Gross-to-net very well could expand if, for example, GSK took a gross price increase during the period. But the net price is really what we focus on, and again, we're not expecting anything dramatic out there. Obviously, with regard to the potential for disruptions, there's the possibility this year of having AB generics coming in. That could be a catalyst one way or another. We'll have to wait and see. But right now, we don't have any plans or expectations for anything dramatic happening with prices. Well, there are certain stories around both of those. You know, our general view, and of course when you make a general view, you can immediately find a hundred exceptions to it. But as a rule, you're going to find more stickiness with primary care doctors and following traditional, well-known therapeutic paths and categories. As a result, we're not surprised that we've had a little more uptake initially in the community with BREO, for example. We had a little faster initial uptake among specialists with ANORO because they got the benefits of the product. As you look forward, it's going to be quite interesting to see how these continue to develop because as you're aware, there were some recent changes in the GOLD guidelines, and the GOLD guidelines are putting a little more emphasis on LAMA/LABAs. It wouldn't surprise me if you saw not a lot of change at the primary care doctors going forward, but you would see more adoption by the specialists there. I think the last thing I would offer is, is there has been quite a bit of acceleration in the new-to-brand scripts you're seeing on BREO. My guess is a lot has to do with some combination of formularies and awareness out there. The product's been out for a few years. The marketing efforts around this are really quite good. The recent materials that are out there and the recent focus of the US BREO salesforce, I think, has just really been clicking in. So we'll have to see how all these things continue to move going forward. I guess as the top-level comment, we're pleased with where we are. We have higher aspirations in this and we'll have to see how this continues to roll out. But again, both products are performing well, GSK is performing well, particularly in the US, and I think we're feeling pretty good. Thanks, <UNK>. Appreciate it. Thank you very much, Operator, and thanks everyone for participating to the call. Have a good day.

2017_INVA

2016

DF

DF #Yes, <UNK>; I'm not going to speculate on what Walmart may or may not do. I think the thing that we've got to stay focused on is what drives Dean Foods. They have announced that they are going to build the plant in Fort Wayne, Indiana; and the last time we checked, they have not broke ground on that yet. But assuming that they go through with that, we're very confident that we're going to be able to take the costs out, that it will have minimal to no impact to our financials for Dean Foods. And if they decide that they want to go further, we're putting contingency plans together that we believe will continue to minimize the impact of that to our portfolio. What they do from a retail perspective and if they started pricing war, I just ---+ I think everybody learned a lot from 2010; and our margin over milk would tell us that that's probably not something that many retailers would be interested in doing again. History, I think, has suggested that when milk prices are low, there is a higher likelihood that the retail trade is going to heat up the retail price. Over the last several quarters we've obviously been in a very, very low milk price environment for raw milk costs, so it would've been a great opportunity had retailers wanted to go back and revisit that 2010/2011 period of time when there was a retail price war going on. And as you saw from margin over milk over the last several quarters, there's really been no evidence of that. So we certainly don't see retailers headed in that direction, and that's during a period of time when it would have been conducive for them, perhaps, to consider that. Well, I'll start with, first and foremost, I worry less about the contract of what we do with shrink as I do about the actual shrink itself. Our focus has been on: How do we reduce the amount of shrink that we have in our system. And I can tell you that the supply chain is doing a really nice job of getting at shrink and reducing the amount of shrink that we have in our system. So I feel much better in this environment than I would have two or three years ago. Secondly, much of our private-label business is all based on the contracts, and shrink is built into those contracts. But I think from a brand perspective we would expect to maintain our premium pricing, and shrink should not have an impact on that. So, is there anything you'd add to that, <UNK>. I guess, <UNK>, the only other thing I'd add is just the perspective around our expectations for the cost of the raw milk. I mean, <UNK>, last time, we really spent a lot of time talking about the headwind that shrink caused in some of those private-label contracts. Raw milk costs were also around $24 a hundredweight. So while we do see some inflationary pressures in the back half of this year, certainly our milk forecasts wouldn't dare go to those kinds of levels again in the relatively short term. So while there could be some shrink headwind, just the absolute magnitude of the raw milk costs would suggest it will be dramatically less than what we experienced in 2014. Sure. Well, I think you're seeing it now. I think you are starting to see ---+ with the 144 assets that have come off the road in the first half of this year, and 240-some-odd assets since last year at this time. So I think the work that the logistics team is doing around frequency, the work that they are doing around route optimization, and I am extremely proud of the work that the logistics team is putting forward right now, and I would expect that to continue through the rest of this year. So I'm very happy with the cost reductions right now. And I think we're still in the early innings of our logistics cost reductions, so there's still a lot of room to go. But that team is doing a great job of getting at it. Well, third inning. I'll go between the two, yes. I think it's still early. Great. Thanks, <UNK>. When I think about the category as a whole, I think you're just seeing the same turnaround that we saw in butter to some degree, as the saturated fats became less of an issue. We're seeing it in our whole milk volume versus skim milk volume. So we're seeing whole milk ---+ and I'm going to quote some numbers that may not be totally accurate ---+ but last quarter was up 5% whole milk and skim milk was down about 11%. So I think we're seeing a lot of the good work that we've been doing on the DairyPure brand and the messaging behind that, the 8 grams of proteins and all the nutrition that comes with milk, and then the work that MilkPEP is doing I think is truly helping the category. So is it going to flatten out. I hope not. I hope it continues to go. The flavored milk category has continued to improve every quarter for the last four or five quarters. So I'm hoping we see that on conventional milk as well, and so I'm hoping that we'll actually see a category that may see some growth here over the next few quarters. As far as how long will the DairyPure message last, boy, that's a wide-open question. We're going to continue to go to the consumer, talking about the health benefits, the localness of our product, the freshness of our product. I don't think there's anybody else that can replicate that on a national basis, only because we're the only national footprint out there. But I'm sure there's others who will follow that as time goes. But as far as when that happens, I would hate to speculate on when that will be. And <UNK>, I think the really positive part about volume as well as that even if the category does flatten out ---+ and look, the trajectory would suggest something better than flat. We've gone from down 360 basis points in the dark days of Q14 ---+ I think that was that was Q3 of 2014 it was down 3.6% to plus 10 bps now. So pretty dramatic improvement over a short period of time. But to your point, even if it does flatten out, remember that we've done a lot of heavy lifting to create an algorithm here that works, even if the category is down 1% or 1.5%. So I'm sort of treating where we are today, without any further progress, as very good news and potential upside; and then if it does continue to extrapolate forward from there, then the benefits only continue to accrue. Well, I think as you look at the main reasoning behind is ---+ it's all margin related. So when we get into RFPs and the margins get below what we consider to be below our expectations, we'll exit the RFP or we'll let the business go. So I think as we look forward, as we said in our prepared remarks, we expect that to get a lot better in the third quarter. We expect to be down somewhere around 1%, which is a dramatic improvement from where we've been in the past. And then as we enter the fourth quarter we actually expect to possibly see some growth. So that I think is the best thing I can tell you. We don't plan on losing additional RFPs, but I think at the same time if they don't meet our expectations we will step away from it so we don't get degradation of our margin. The bulk of what we've lost, that we've talked about on this call and for the past couple of calls, we've actually lost in Q4 last year. So there haven't been ---+ there may be some churn, but the material losses we will overlap here in Q4 of this year. That's one the contributing factors, too, when <UNK> talked in the prepared remarks on the forward outlook, about volume growth becoming positive in Q4. One of the drivers of that is the fact that it will be lapping some of the more material losses in private-label from 2014. Well, I think it goes back to ---+ I would expect the trends that we've seen on our G&A to continue. And that's still in an environment where we're investing in additional research and development activities. We're investing more in our consumer research group. We've invested in much of our sales organization and starting to build some capabilities around our warehouse and ESL capabilities. So I'm very pleased with where we're at from a G&A perspective in an environment where we're continuing to invest in the business and build capabilities. Of course, we don't break our guidance down into the specific pieces of cost elements. But rest assured that productivity across all elements of cost remain a key focus in the third quarter and beyond. Yes. I think that's a great question, <UNK>. Our work says that, other than a couple of quarters in 2014 ---+ I'll say Q2 and Q3 2014 ---+ finding a correlation between the health of a category and the price of raw milk or the retail price of milk ---+ and fairly close relationship between those two ---+ it's really not there. Which intuitively kind of makes sense, right. It's such a staple product that mom or dad is going to get a gallon of milk even if milk prices are a little higher than they are used to. They are still going to buy milk. And if milk prices are pretty cheap, they are probably not going to get two and put one in the pantry. The exception to that was Q2 and Q3 2014, when we finally broke through a price barrier where the category became elastic, and you saw dramatic demand destruction and downward pressure on the category. So to your point, if ---+ when ---+ maybe sometime out in the very distant future, we get back to $24 per hundredweight raw milk costs, we've got to adapt our model for that probably relatively short episodic period to adapt to what would be pressure on the category. But that's certainly not our forecast for raw milk prices over the balance of 2016. I think the more modest increases that we're expecting to see will keep us within a band where you see limited increases on shelf and probably no discernible impact on the category. I think the positive tailwinds blowing behind the category right now ---+ <UNK> mentioned a few of them: birthrates and cereal growth and a few other things, plus the work that <UNK> talked about that we're doing through DairyPure and the work that MilkPEP is doing. I think those positive tailwinds far outweigh will be a very, very modest increase in prices. We have not broken out that at the profit line, no. A think we're going to continue to see it improve. I think the one thing that I often caution people around is being careful on any given quarter as to what that price gap is. Because ultimately the retailer will decide what that price gap is. Many retailers, depending on whatever they are running promotionally or marketing-wise may take that number up or down. But our expectation is that we're going to continue to expand that. We'll continue to work towards somewhere in the 30% range over time. I think it's the same thing that we've done in the past. So I think it's a continuation of the work that's being done currently in logistics, where any routes that were dedicated and were set up to go to those ---+ to Walmart will be taken off the road and the asset will be eliminated. I think the production assets that currently produce the 95 million gallons, at some point we will have to look at our asset base and figure out what we have to do to shut down some of the capacity that supported that. We will also look at the G&A around that and what supported that volume, and we'll reduce accordingly. So that's why in my mind I'm very confident that our plants will be able to offset that without an issue, other than the issue of the people within our organization who will be impacted by that, which I don't take lightly by any stretch. I'll touch on it and then let <UNK> take it from there. But if you look at the normal seasonality of premiums on cream, they are always higher during the summer. So we will see higher cream costs during the summer, when there's obviously more demand for cream, and around the holidays. So, I think it's one where it doesn't always go directly in line. But if you look at the fundamentals of the market and you see butter at 90% more than the international market, I just struggle with the fundamentals of why we're seeing the increases that we are. But we are seeing it, and it's real, and we have to react to it accordingly. But the Class II cream and butter fat is one that we'll continue to deal with as cheese and butter prices stay high. We included it in today's remarks just to remind everyone. I think Class I of course has been a tailwind, has been down year-over-year now for 18 months, give or take. We just wanted to remind folks that Class I isn't the ---+ it's a main, the main cost input driver for us; but Class II is important and even more important in the summertime when ice cream volume picks up. So the fact that it's up year-over-year in the second and third quarter, we thought was worth highlighting for folks, to make sure that that headwind is captured in people's modeling purposes as well. We haven't broken it down. I think it's about 1%, 1.5% maybe. About 1% I think. A little lower in the fourth quarter as ice cream volume drops off toward the end of the year. Well, it's in line with where we want it currently. We have ---+ as we talked during the prepared remarks, there's certain promotions and different things that we're doing currently in the marketplace. But it is not where we want it to be. We want to continue to expand. I would like to see that closer to 30% as we go forward. But again, part of that will be determined by the retailer and what they decide they want the gap within their cost structure to be. So I would hope that we'll see it continue to expand. I think we'll continue to support it in a way that will hopefully help retailers understand and decide that they can do that as well. It's kind of a complicated algorithm with more inputs than just the cost of Class I milk. We're also measuring the gap against ACV gains and against velocity. So we're trying to engineer that performance over time and not take it in too big of chunks. I wouldn't expect to see a lot more spend. I think we'll continue to support it at the levels that we have. Then when we introduce new extensions to DairyPure, we may up it a little bit during those periods of time just to introduce it to the marketplace. But I think the current spending is probably the spending that we would expect going forward. We continue to be pleased with the Friendly's acquisition. I think any time you can pick up such a valuable asset as we have and be able to do it at the multiples that we talked about on the call, I'm very, very pleased. I think we don't see any change to what we had originally projected, so I think the number that we gave before is still a solid number. It may work around that $0.06 a little bit, higher or lower, but we haven't seen anything within the business that would tell us that that change was wrong or needed to be changed. As far as the synergies, it's all the things that you would expect, right. There's distribution opportunities, there are sourcing opportunities, there are revenue opportunities, there are back-office opportunities. All of those will be included in the overall synergies as we start to execute against that. The thing I would remind you, Ken, is that really our focus for the rest of this year is integrating that business and trying not to do anything until we get through the season that may disrupt it at all. So really focusing on integrating, getting the IT systems in, getting them into our IT systems, getting out of some of the contracts and service contracts that they are providing to us through the transition. And then the synergies will really begin in 2017. Yes, let me first correct that there were no non-competes with WhiteWave. So we didn't have any non-competes. The non-competes that we had were really on the Morningstar business or the Saputo business, and that was really around manufacturing, ESL, and some of the other things that we did with Morningstar. Are those categories attractive. Yes, there are some of those categories that are very attractive. I think for us it's a matter of prioritization of our innovation pipeline and which of those choices in sequencing did we want to take on, and how much do we want to throw at the organization at any point in time. So as we look to our pipeline of innovation, there's a lot of things that we can do within the portfolio we have today that doesn't get us as far out as plant-based. But we are definitely looking at plant-based as an alternative for our pipeline. Great. Thank you, Karen, and thank you all again for joining us on the call this morning. We appreciate your continued interest in Dean Foods, and everybody have a great day. Thank you.

2016_DF

2016

GPS

GPS #<UNK>, that is a question we could probably spend the day talking about, so I thank you for asking it. Surely you are aware, obviously, since we have spent a lot of time talking about the back-end work we're doing on supply chain. And that is work that is, again, a journey not a destination. I see significant scaling of that, as we go forward in the businesses, period over period. But again, it is a journey that we're on at the end of the day. If I look at it from the other areas, let's go to CRM for a second. It's one I'm really passionate about. I just announced a position in the Company of a Chief Customer Officer, where we are taking a wide variety of disparate connections that we have with our customer, and stitching them together organizationally, and beginning to really build the capability to have a much more consistent, deep, and holistic view of our customers as individuals. The core of that, as you might imagine, is our credit card, which are our best customers. It is a program that we only have in the United States, which is part of why I go to structural strength. It's a very strong program here for us in the United States, and it represents a significant portion of our business. And I'm not of a mind that an organizational change brings about meaningful change, but we have had bits and pieces of the customer again, in a number of places in the Company, and I have just broken those walls down and brought it together. If I think about what our best practices are, broadly, we are well behind that. I think we are actually in a pretty good space from where our best practices are in the apparel industry, and I am looking to accelerate that significantly there, also. Again, credit card is the core, web browsing history, obviously all your tender history, loyalty program, multi-tender loyalty program all coming together in one place. And that is one example. Again, I'm not going to tell you that's a lights-on moment in Q3 or Q4, or something like that. We live in a world today where we spent a great deal of money on marketing, which is something else that I have signaled to you before, and a lot of that money is spent in very traditional ways. We are now increasingly enabling the capability to be much more one-on-one in our communication, targeted and personalized in our communication, and that is a pivot away from some of the traditional vehicles that we have seen to a much deeper form of communication through CRM. I had my Board this week, and I explained to them that one of the places where this will manifest itself is, I think windows today are much less relevant than they have historically been, and you will see this going forward, that we are actually skinnying down our windows treatment in Gap, as an example, on the belief that if you haven't won at the digital interface on the front end, your windows in the mall store are probably not going to make a difference at the end of the day. So this is work that is underway, and again, I am happy of course, as always, to talk to you separately, but it is work that we are enthusiastic about, where we believe we really truly have some structural advantages. It's a really good question. It's a place where we have had strength, and we continue to have strength, and we see it obviously as everybody does, I think. A long-term progressive shift of the consumer moving in that direction. Let me go straight to mobile for a second, but let do view what I call the leaky bucket. If you think about a business moving from stores, to a desktop or laptop, to mobile, stores for the industry, conversion of traffic into stores, whether it's in the mid-20s to the high 30s or something like that. If you go down to a desktop or laptop experience, where someone is buying, that traffic converts somewhere in the low single digits for most people out there. And then if you go to a mobile experience, a lot of people out there today are seeing conversion off of mobile traffic as a fractional single-digit. And so the work that we're doing is very much about addressing that migration of traffic, and making sure that the opportunity for us to monetize that traffic as it moves remains there at the end of the day. If I go straight to mobile, a big part of mobile is making sure that people have an incredibly easy shopping experience and checkout experience on a mobile device, that the content is relevant, so that means a responsive website, which we are largely towards achieving right now. And then obviously content and the digital experience that shows up on a screen that is 2.5 by 5 inches at the end of the day. So that is something where we are very focused. For us, overall, our traffic has grown, and it has grown with digital. If I were a retailer out there who was looking at this and was seeing my traffic being directly substituted from my stores, to a desktop to a laptop, to a mobile device, I would really start to worry about that bucket leaking out of the business. And so we're committed to making sure where our customer is, and our customer today, and increasingly is on a mobile device, which means a great mobile shopping brand and e-commerce experience. I would like to thank everyone for joining us on the call today. As a reminder, the press release, which is available on GapInc.com contains a full recap of our first-quarter results, as well as the forward-looking guidance included in our prepared remarks. As always, the investor relations team will be available after the call for further questions. Thank you.

2016_GPS

2015

IIIN

IIIN #Good day, ladies and gentlemen, and welcome to the Insteel Industries' third-quarter 2015 conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. (Operator Instructions) As a reminder, today's conference is being recorded. I would like to introduce for this conference call Mr. <UNK> <UNK>, Insteel President and CEO. You may begin. Thank you, <UNK> As we reported earlier this morning, Insteel's net earnings for the third quarter of fiscal 2015 were $5.4 million or $0.29 a share compared with $5.8 million or $0.31 a diluted share a year ago. On a pro forma basis, however, excluding the nonrecurring charges and gains that were noted in today's release, our net earnings for the quarter rose to the highest level since 2008, increasing to $6 million or $0.32 a share from $5.3 million or $0.28 a share a year ago. The improved results were achieved in spite of the record rainfall and flooding that occurred in the central region of the US during the quarter, particularly in our largest market, Texas, which brought construction activity and customer operations to a standstill for extended periods. The NOAA reported that average rainfall in Texas for the April to June period reached an all-time high of 17 inches, almost double the historical average. And the total for the contiguous US was the second wettest on record at 11 inches or almost 30% above average. We expect the resulting deferral of shipments will have a favorable impact on future business levels and potentially extend our busy season later into the year. Net sales for the quarter rose 3.3% from last year on a 5.1% increase in shipments, driven by the additional business provided by the ASW acquisition, partially offset by a 1.7% reduction in average selling prices. On a comparable basis, however, adjusting prior-year shipments to include ASW's preacquisition volume, shipments for the quarter were down 8.8% year-over-year, largely due to the adverse weather. Shipments were up 19.1% sequentially from the second quarter, driven by the usual seasonal factors, as compared to a 25.2% increase between the same periods a year ago, again reflecting the weather-related impact. Gross profit for the quarter benefited from widening spreads, as the drop-off in raw material costs exceeded the decrease in average selling prices, and gross margins improved each month within the quarter, rising to a high point in June. We expect this favorable trend will continue during our fourth quarter, as lower-cost inventory is consumed, reflecting further reductions in wire rod costs, assuming that selling prices for our products remain flat or decline to a lesser extent. With our inventory valued on a FIFO basis, the raw material costs reflected in cost of sales are largely associated with purchases made in the previous quarter, since we are typically carrying the equivalent of around three months of shipments. Our inventory position at the end of the third quarter represented 91 days of shipments on a forward-looking basis, calculated off of our Q4 forecasts. Unit conversion costs for Q3 improved sequentially from the second quarter, but were higher than the prior year, as a result of the lower-than-expected production volume, together with higher medical and Workers' Compensation insurance costs. Looking ahead to our fourth quarter, we expect to make further progress in reducing our conversion costs, assuming that operating volumes increase to anticipated levels. SG&A expense for the quarter was up $0.2 million from a year ago, due to increases in health insurance costs and amortization expense associated with acquired intangible assets, together with the relative changes in the cash surrender value of life insurance policies. We recorded an additional $0.3 million of restructuring charges during the quarter for closure and equipment relocation costs associated with the March shutdown of our Newnan, Georgia PC strand facility. And, at this time, we expect to incur $0.2 million of additional closure-related costs. We are currently in the process of relocating the strand-related equipment to other facilities and will be selling the real estate. Other expense for the current-year quarter includes the $0.7 million charge associated with the settlement of a customer dispute, net of the $0.1 million gain from insurance recoveries related to the Gallatin fire, while other income for the prior-year quarter includes a $0.8 million gain also related to the Gallatin insurance claim. Our effective income tax rate for the quarter rose slightly to 34.7% from 34.4% in the prior year, primarily due to changes in permanent book versus tax differences. In May, we completed an amendment to our existing $100 million revolving credit facility that extended the maturity date to 2020, and reduced the applicable LIBOR margins and unused fee. As a result of our strong cash flow for the period, we ended the quarter with $11.4 million of cash on-hand and no borrowings outstanding, providing us with plenty of liquidity to meet our funding needs and pursue additional growth opportunities. As we move into our fourth fiscal quarter, we expect a recovery in nonresidential construction will regain momentum following the increment weather of the past two quarters, and benefit from the pent-up demand resulting from the related shipment delays. Although the leading indicators for our end markets have shown some signs of softening in the recent months, the outlook remains positive. After dropping into negative territory in April, the Architectural Billings Index rebounded to 51.9 in May, and has remained above the 50 growth threshold for 12 of the previous 14 months. The Index for the Institutional sector, which has recently been the strongest performing segment, rose to 55.2 in May, its 12th straight monthly increase following a string of negative readings that ran from late-2013 to mid-2014. The Dodge Momentum Index, another leading indicator for nonresidential building construction, has moderated through the first half of the year, with the June prior-three-month average up 5.4% from the same period last year. In its latest report, Dodge data and analytics indicated that the recent softening was likely related to the economic weakness in the first quarter, and that real estate market fundamentals remain favorable, and should support a pickup in commercial building activity later this year. The outlook for infrastructure construction continues to be unclear in view of the upcoming expiration of the stopgap federal highway funding bill at the end of this month. There appears to be growing support for a repatriation proposal that would impose a tax on offshore corporate earnings, and use the proceeds to cover the estimated $90 billion to $100 billion that would be required to fund a six-year bill. Considering there are only 15 days left in the month, it appears that another short-term extension will be enacted, along the lines of the bill that was passed yesterday in the House, to provide additional time to arrive at a longer-term funding solution. Under this bill, federal transportation spending would be extended another five months, and the $8.1 billion of additional funding that would be required would be provided by various tax compliance measures, and the two-year extension of a TSA fee increase. On a positive note, the ongoing delays and uncertainty at the federal level have spurred a number of states to step up their efforts to generate additional funding on their own to meet their infrastructure requirements through fuel tax increases, new or increased fees, private public partnerships, and bond financings. I will now turn the call back over to <UNK> Thank you, <UNK>. During the third quarter, demand for our reinforcing products benefited from favorable seasonal influences, partially offset by adverse weather conditions in some regions of the country, which delayed construction projects and unfavorably affected production schedules at some of our customers, particularly in the central part of the country. Normalizing for these conditions, demand for our products reflects the continuing recovery in construction markets. Capacity utilization for the quarter was 54% compared with 58% last year. Macro indicators, as well as customer sentiment, indicate continued growth, as we look ahead to the next few quarters. During the Q2 earnings call, we mentioned the prospect for expanding spreads resulting from declining prices for metallic units and steel wire rod, together with the potential for stable selling prices resulting from the cyclical recovery in construction markets and the usual seasonal upturn. Our Q3 results reflect some benefit from this confluence of market conditions, although weaker-than-expected demand contributed to more competitive pricing activity than we had initially anticipated. Based on current conditions, we expect our fourth-quarter financial performance to be favorably impacted by a continuation of these trends. As we've mentioned previously, however, it's difficult to forecast our selling prices and volume with a high degree of precision, given the dynamic nature of our markets, short order lead-times, and minimal backlog. Looking ahead, there does not appear to be a significant catalyst on the horizon for recovery in the metallics markets, which implies that our raw material pricing may fluctuate within a reasonably narrow range, resulting in a rather long and flat bottom. China continues to exert enormous influence on the world market, depressing prices throughout the supply chain. We expect that the pending permanent closure of a domestic wire rod production facility will contribute to some strengthening of the market for our raw materials. We had anticipated this mill closure, and believe we are well-positioned to transition our requirements to other suppliers without negatively impacting our customers or our financial performance. As we reported in Q2, we proceeded with the closure of the Newnan, Georgia PC strand plant that was acquired in August 2014 as part of the ASW transaction. Following the cessation of manufacturing activities in March, the remaining inventory was shipped during Q3, and customer requirements were shifted to other Insteel facilities. We are in the process of relocating the production equipment from Newnan, and plan to ramp up production rates significantly at the Houston, Texas PC strand facility that was also part of the ASW transaction. We've begun to realize cost reductions that are expected to amount to approximately $3 million per year. Turning to CapEx, we initially expected that capital outlays would range between $11 million and $13 million for fiscal 2015. Factoring in timing issues for various projects that are underway or anticipated, we now estimate that CapEx will come in at less than $11 million, as changes in project timelines have pushed certain expenditures into 2016. The new, high-volume standard welded wire reinforcing production line at our Pennsylvania facility replaces obsolete technology, and provides increased capacity to produce certain SKUs for which we've been routinely short on capacity. The line is now staffed for two operating shifts per day. And we plan to ramp up the third shift as operator training and technical considerations allow. We expect this line to be fully operational during the current quarter. We are also commissioning a new wire production line at our Florida welded wire reinforcing facility that is expected to be fully functional during the current quarter. The new line rounds out capacity and allows for reduced operating costs. Finally, as we mentioned previously, we plan to expand the manufacturing capabilities of our Houston PC strand facility with funding requirements falling primarily into 2016. We have completed a considerable amount of engineering and design work, and have navigated most of the permitting requirements for the project. Other capital outlays will be focused on maintaining our facilities, lowering our operating costs, and improving our information technology infrastructure. We'll provide an overview of our expectations for 2016 CapEx during our fourth-quarter call in October. To summarize, we believe the recovery in nonresidential construction markets will continue to gain traction through 2015. In addition, we expect to benefit from enhanced spreads and margins, assuming that selling prices for our reinforcing products remain relatively stable, which appears likely, considering that seasonal and cyclical trends should drive capacity utilization levels higher across our industry. Consistent with prior periods, we'll continue to focus on achieving further improvements in the effectiveness of our manufacturing operations, and identifying additional opportunities to broaden our product offering and growth through acquisition. This concludes our prepared remarks. And we'll now take your questions. Kevin, would you please explain the procedure for asking questions. (Operator Instructions) <UNK> <UNK>, Sidoti. Yes, so I guess to start, I mean, you cited weather as a drag. I was hoping if you could comment on how monthly sales progressed throughout the quarter. And then just maybe comment on the month of July. I know we are only two weeks in, but what are you seeing so far in terms of order flow. Well, I think the normal seasonal upturn is in play, <UNK>. Certainly, the weather conditions that we referred to in the release and in the call affected the momentum during Q3. But I don't think that ---+ certainly, there is no carryover of that into Q4, and we would expect for volumes to be about as expected going forward. So, if you are wondering whether there is a continuing lag, there is not. The bulk of the weather-related impacts seems to be in the month of May and then through the early part of June. Okay, thanks. And then, secondly, I guess your comment just regarding the increased traction. I mean, is that optimism on your part or your customers. Or are you seeing increased order flow or pipeline, expected shipments hitting their books. I just want to be able to (multiple speakers) ---+. Well, I think most of our expectations are driven by the macro projections that we read for the industry, as well as the anecdotal sentiments expressed to us by our customers. We really aren't tapped into any other sort of proprietary information loop. Sure, okay. AND I guess just building on that, <UNK> , I mean you've been in the business a long time, and just given the estimates out there, you know we all look at the same macro data ---+ just given the estimates for non-res, I mean, does this feel like a single ---+ a high-single-digit construction recovery here. I mean, what's your take on that. Yes, I think you can make that case, <UNK>, that all along, we've ---+ or up until the last quarter or two, we've referred to this recovery as somewhat subdued. There's certainly been no breakout from the downturn. It's been sort of plodding and steady. But I think the mid to high-single-digits is a reasonable characterization of where we are. Okay, good. And then lastly ---+ I mean, you generate nice free cash flow. And <UNK>, you talked about eliminating your debt in the quarter, and ---+ what's your latest thinking on potential M&A opportunities in the space. Are you seeing any financially distressed companies out there. Or, I mean, what's the strategy behind it (multiple speakers) ---+. No, I think the time where you would've expected to see a lot of distress has passed, that ---+ we're not seeing that. We are continually looking for acquisition opportunities, and believe that we are very well-positioned to effectively assimilate additional acquisitions. And you can rest assured that it's near the top of our priority list. Okay, great. I'll hop back in queue. Yes, I suspect that's exactly what we'll see, <UNK>. I can tell you that I am unaware of any project that has been permanently canceled because of weather consideration. So, what we will see is a little more frenzy on ---+ during our normal up-season. We'll see a little more frenzy on the part of customers to complete more work. And it is likely to go further into the fall than typical. So ---+ but I don't think this thing has affected ---+ or the adverse weather situation ---+ has affected overall consumption of our products at all. Correct. Which also means we may not necessarily get the benefit on ASP's, per se, either because we're not dealing with a situation where we are going to increase capacity, say, 10 points. (multiple speakers) ---+ emphatically, yes. Yes. No, I think that's fair to say. Well, I would expect that we'll see fluctuations, <UNK>, but I think worldwide, the overall pressure from the Chinese in our industry today, it's coming in the form of extremely low-priced steel billets that are being shipped around the world to re-rollers, and are making a lot of wire rod available at very low costs for many countries. And I don't see a catalyst for that changing in the near-term. So I think that we'll see some ---+ we'll continue to see some volatility, but in a relatively narrow $10 to $30 per ton range, rather than some of these huge swings that we've seen over time in the $50 to $100 range. I think it's difficult to say at the federal level, because there's still a high degree of uncertainty. It seems that with this repatriation approach that they are targeting to generate enough funds to maintain the spending at current levels. And then you have the President's proposal, which reflects a substantial increase. I don't know that we have clarity on that. But we would agree that we have seen some upside at the state level, where it's gotten to the point where they can no longer defer their needs, and they are moving ahead on other fronts through increases in the fuel tax and other revenue-generating measures. So I think you are likely to see that trend continue going forward. I think that jousting always is going on, but I am unaware of any significant change in that circumstance. Well, I'm certainly aware of the sentiment. And I would tell you that when we have seen those kinds of shenanigans, it mainly takes the form of road paving with asphalt, because it can be done quickly and it's visible to voters. I can tell you it will have no impact on our business one way or the other. That's exactly right. Thank you. Okay. Well, thank you for your time today. We appreciate your interest in the Company, and look forward to talking with you next quarter.

2015_IIIN

2015

VMC

VMC #<UNK>, it's <UNK>. Our view is pretty straightforward. We think there's substantial runway left. As you'll recall from our investor day, and we laid this out on a cash gross profit basis on investor day, but as we continue to move forward in the recovery, continue to move back toward normal levels of demand with the kind of pricing environment we expect, we should be able to continue converting that incremental revenue at about 60%, and doing that through this period of time gets us to a cash gross profit number that instead of being a little bit less than $6.00 this quarter would be a little bit above $8.00. So substantial room left. I'd remind people that as an entire construction complex, more and more people are appropriately focused on earning fair returns on capital, and earning these kind of incremental margins is consistent with that view. So we're very, very focused on it. And we don't see anything, from where we sit, that should limit our progress on that dimension in the near term. Hello, <UNK>, it's <UNK>. While I appreciate the effort, we're not going to give guidance for 2016 on this call. But I would just reiterate what we've said which is, as we sit here today in early November, the core trends that we see in terms of demand recovery and the pricing environment, we see continuing into the fourth quarter and into 2016. So we don't see a significant shift in overall trajectory, but we're not prepared at this time to give specific guidance. Thanks. I think we've got some watch points. I'm not seeing deceleration anywhere. The watch points, as I mentioned earlier, one was non-res, just because of some of the leading indicators. As I said earlier, we're not seeing that on the ground, what we're bidding and what we're shipping. But we see that, we watch it. I think our folks, in talking to, are very confident. The other place to watch is, as we talked about earlier, is to watch Texas, with the reduction in exploration drilling and the impact on jobs. While we've not seen anything impact yet, it's been an odd year in Texas, where it was the rain in the first half of the year back loaded the year. So if there is a drop-off, it would be masked. And some places we're watching. But other than that, I think we're pretty confident. This isn't a direct answer to your question, but I would remind folks on this, as <UNK> was saying, on both price and volume there is, of course, as there always is, a lot of variability across our portfolio geographically. So if you were to look at the rates of volume growth to the rates of price growth, they're pretty well dispersed around the average. And so we have, of course, as we get a little more clarity on our 2016 plans, we're going to have some geographies that are certainly slower growth than others and some that are faster growth than others, and we'll have to incorporate all of that into our guidance for next year. I don't know that I could put a pattern to it, but we have seen a number of our customers run into bottlenecks which impacted third quarter shipments and will impact fourth quarter shipments. Now that volume is not going away. It will be shipped. So whether that's in ready mix business, it's trucks and drivers, it's finishers. In the asphalt business, it's crews and lay-down machines, and they're not going to ramp up ---+ they'll ramp up a little bit, but not that we're going to add, just have it slow down. I think what is key to what we saw in the third quarter, and see happening at the end of this year versus last year, is the sense of urgency by our customers. When I say that, last year if they got delayed, they just put it off for the next week or until the weather got right, whereas this year, we're seeing contractors work on Saturdays and Sundays. We're seeing a lot more sense of urgency of getting these jobs done, which is very good news for us because that means they have backlogs now that they've got to get this work done so they can get onto their other work, which really signals, from a macro perspective, that there's more work out there, and we continue to see the steady growth. I think that, as we said earlier, usually the places where we are further along in the cycle, we see better pricing. So we saw better pricing in Texas and in a number of places where the cycle is further along. And as we go into next year, I think that pattern, that trend tends to hold true that the places where the cycle is a little more mature, you have a little more confidence in momentum and pricing. Stan, this is <UNK>. One thing I'd continue to underscore for those on the call, is just as with volume, and I'll highlight both, but if you look at pricing by our, we call them general manager areas, if the average for the Company was around 8% for the quarter, we have ---+ and I'm just looking at the numbers we have in front of me, we have some that are 14%, 12%, 12%, 11%, 9%, and we do have a couple that are 3%, 2%, negative 1%, negative 3%. So there's a lot of dispersion based on local market factors, and in a single quarter, mix of business and other things. The same is true on the volume side of the business. If the average volume is roughly 7.5%, then you've got some that are up 20%, 19%, 13%, 11%, 10%, 10%, but you also have a couple, as we highlighted, that are nearly, like Illinois, nearly down 10%. And so again, any single quarter view is going to have that kind of dispersion amongst our geographic businesses, and therefore all the more reason to make sure you also take these trailing 12-month or longer term views of the business. That's really hard to put a number around. You know it's happening. You can see it happening, when you talk to your customers and in the different markets, it's pretty widespread. But to put a number on that's pretty tough. Thank you. I think it's primarily ---+ this is <UNK> ---+ primarily a one-time issue. And you saw some, if you will, elevated above recent trend costs and relating to other income and expense, and a lot of that had to do with some one-time environmental charges, including some settlement of past liabilities. So I would think most of that is one-time. Southeast. Let me had add to that, that wasn't the demand was off. Demand was poor. It just wasn't as good as they had hoped it would be. And <UNK>, we've talked about it a lot. There are going to be, as we continue to transition our crews and our scheduling levels, like many in the industry, from operating most of our plants with shared crews to having fully staffed plants again, there's going to be a little ---+ the transition is not going to go perfectly. The key for us is to monitor it, manage it, correct it, and to stay on top of it. But there are going to be some things like this as we transition from such historically low shipment levels back to something that's more normal, particularly given that we've been operating in some of these markets with shared crews across two or three plants. Just changing that staffing model is not going to be frictionless. Well, thank you very much for your interest in Vulcan. As you can tell, we will finish 2015 strong, and we're very excited about what lies ahead of us for 2016. We look forward to talking to you next quarter. Thank you.

2015_VMC

2015

MSFT

MSFT #Why don't you go first. Yes, I'll go first. The data architecture that underlies what's happening in the enterprise underneath applications is going through a dramatic change. That said, the relational database itself remains still a very strong component, but not the only component anymore, both on premise and off premise. What we want to make sure, as a Company, is to cover all of that landscape with a very rich data platform. So if you look at what we're doing, the length and breadth of our ambition, as well as our delivery today, everything from what SQL itself is doing, we have now all in memory workloads for OLTP, BI, data warehousing, built in. We have the ability to now tier even the database with the cloud. This is all the things that are coming in SQL 2016 and we're excited about that. When it comes to the cloud itself, we have a PaaS service for SQL, which is very unique in terms of SQL Azure. We have now the Data Lake service for basically petabyte, exabyte scale data management. We have higher-level data services like Azure ML, which is about advanced analytics, a category we didn't even participate in the past, so we've entered that category. Revolution R fits into that. So we have a very rich story, and this is not even talking about some of the other end user BI capabilities, like Power BI. So we have a very rich vision and execution on what is an expanding data platform opportunity, and it's nice to see us innovate on the new services, while we also, in what is still the big market, which is the relational database market, claim a leadership position. And <UNK>, on the total bookings number, the reason we moved to commercial bookings is it's a far more comparable number to look at, period-to-period. Total bookings, because of the volatility, frankly, in consumer businesses in times like the holiday period, it can make it far more volatile than usually what many of you have been asking for, which is the continuity and health of the overall commercial business. If you want to get to total bookings, you just add back in all the consumer revenue is technically how you would do it, but I do think the more helpful KPI for us in terms of bookings is the commercial one. The way to think about that, how I look at ---+ the way I would generally say it is you could look at each of the KPI as we get. So the Office commercial business grew 5%, it was negative 8%, there's some transition earning back off the balance sheet. The total cloud is 70%. When we start to get to this point, and the percentage we already have in the cloud, it is really an offset. And that's probably, frankly, been true a little bit longer than we've talked about technically in terms of what goes off and what comes on, given we've now got, as <UNK> said, 60 million users and more than that in terms of [SQL]. That can technically, <UNK>, be interesting in certain quarters of the year where we have very heavy expirations. And so it just depends year-over-year ---+ that's why the commercial is slightly harder to do it on because there's some volatility in the ins-and-outs based on seasonality. I want to make this simple, and unfortunately it's just slightly complicated. Because so much of our installed base was already on an annuity contract, it makes this transition mathematically hard. What you're asking is specifically for our transactional component, when the old transactional component has gone, but that's a component of the number not the total. So it's why it's technically difficult to answer the question you're specifically asking, <UNK>. But the way I would think about it is, we are moving such a substantive piece of our EA business, and with our annuity mix all up in commercial, up to 86%, we're feeling very good about our ability to transition people at LTV and grow the business overall at a very high level. Thanks, everyone. Thank you, everyone.

2015_MSFT

2015

MAS

MAS #The improvement is a combination of some favorable mix that we've seen in KraftMaid growing. We certainly are performing better on the operational side and getting over some of the inefficiencies of ERP. We've also taken some cost out. So it's a combination of the usual suspects with regards to the improvement. With regards to Joe Gross ---+ he's not a bond guy, he's Joe, and I'm [Bill] ---+ he's been with Masco for quite a number of years. He came from our tool business, and then was moved into President of our rough plumbing business. And all along the way, he's done a tremendous job. He does have significant turnaround experience. As I mentioned, he's worked in private equity for a good portion of his career. So he brings a very good perspective in this business, and as I said, you will get a chance to meet him to talk to him, to have Q&A, et cetera at the investor conference. <UNK>, with respect to your incremental margin question on cabinetry, yes, we do expect that there should be $25 million tailwind from just a lack of the incremental expenses that we incurred in 2014 that will benefit 2015. So above and beyond that, in terms of just the volume benefit, we should expect about a 30% drop down on our contribution margin on incremental volume in the segment. So that's how to think about profit growth in 2015 and beyond in our cabinet business. As it relates to FX, right now all of our debt is US-based. But to your point, given the attractive rate environment that we are seeing over in Europe, as we have upcoming maturities, and we have a significant maturity that's coming up in 2016. If the rate environment stays similar to what it is now, we would definitely consider taking a look at [peer-ops] doing some Euro-based financing for that refinancing activity later next year. Yes, I think I'm going to stay away from giving a number. Our outlook has not changed. We feel the same way about these businesses now as we did coming into the quarter and continue to feel good about the outlook for 2015. As I talked about last quarter, our intention was to adjust our promotional strategy and pricing in cabinets. We got more aggressive than the market would bear, as we talked about in past, and we made some adjustments to that. We are competitive in terms of where we are in our strategy right now, and we saw good results from it. We are committed to driving this business to profitability, and we are seeing some nice signs, as Joe and the new team start to get traction. Yes, we continue to work on working capital, <UNK>. And it is highlighted just great outcome that the team from operations, finance, and supply-chain execute upon. We do incentivize all of our employees across the enterprise on working capital performance, so there is incentive to continue to improve that. So there is a variety of things that we are working on. Principally, in our own inventories we think there's an opportunity to continue to improve. That said, I think, given that we are at record low levels of working capital, the improvement from here will be slightly incremental. Don't expect major step change improvement from working capital going forward. Endless Pools was a small acquisition for us. It was about $25 million. In terms of how it fits into the overall strategy, we are focused on bolt-on's rather than, per se, another leg, another platform for us. We view plumbing and paint North American and global, so in that space is where our target is. We are targeting in the range of $200 million to $300 million as the kind of acquisitions that we are looking on. So Endless Pools is small, but it is consistent in that it is in plumbing. It is where we see the potential to leverage either our technologies or our access to markets. And that's what ---+ we've brought onboard a new VP of strategy and business development, and his role is to help manage our pipeline. And we are working with our teams to do that. So while it is small, it is quite consistent with what we are looking at in terms of our ongoing acquisitions. Correct. You're not going to hear from every one of our general managers, but, clearly, you're going to have people talking to about every segment. We are going to go through and put the business leaders in front to talk about their growth strategies. We are going to talk about specific actions, as well as performance milestones. And we are going to talk about expectations. Well, Cardell was purchased some time ago. And really what we are focused on is trying to give our customers what they need to drive foot traffic and to be profitable for them and for us to be profitable. So our strategy is a combination of market penetration with the strongest brand that we have, as well as getting our house in order with regards to performance and cost. Well, there is always opportunity to accelerate or decelerate the share repurchase activity based on where we see the share price go. As I mentioned in my remarks, we did reaffirm the fact that we would purchase between $400 million and $500 million worth of shares this year. And so we will continue to evaluate opportunities to accelerate repurchases based on where the share price is. Volume was up just a little bit, <UNK>. Pretty good volume in that we saw as a result of the mix of ---+ so KraftMaid really led the volume charge in Q1. As <UNK> mentioned earlier, both at the retail as well at our dealers, so that initiative has gone very well. So we are very pleased with the volume growth at KraftMaid. Yes, it was down slightly year over year.

2015_MAS

2018

BGFV

BGFV #Thank you, operator. Good afternoon, everyone. Welcome to our 2017 Fourth Quarter Conference Call. Today, we will review our financial results for the fourth quarter and full year of fiscal 2017 and provide general updates on our business as well as provide guidance for the first quarter. At the end of our remarks, we will open the call for questions. I will now turn the call over to <UNK> to read our safe harbor statement. Thanks, Steve. Except for statements of historical fact, any remarks that we may make about our future expectations, plans and prospects constitute forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results in current and future periods to differ materially from forecasted results. These risks and uncertainties include those more fully described in our annual reports on Form 10-K, our quarterly reports on Form 10-Q and our other filings with the Securities and Exchange Commission. We undertake no obligation to revise or update any forward-looking statements that may be made from time to time by us or on our behalf. Thank you, <UNK>. Our fourth quarter results and first quarter outlook, reflect an extraordinarily challenging winter selling season for our business. While much of the country has endured often extreme winter weather conditions over the past few months, our Western U.S. market has experienced significantly warmer-than-normal weather and one of the driest periods of record. These conditions have severely impacted winter recreation and substantially reduced demand for winter-related products in our market. First, I'll comment on the fourth quarter. Our fourth quarter net sales were $242.9 million compared to $266.3 million for the fourth quarter of fiscal 2016. Same-store sales decreased 9.4% from the fourth quarter of 2016 when same-store sales increased 3.1% from the prior year. We comped down in the low mid-single-digit range in October and comped down in the low single-digit range in November, which included positive same-store sales over the Black Friday weekend. Sales in December were impacted by extraordinarily warm and dry weather conditions across our market, which led to a nearly 50% decline in sales of cold weather and snow-related products in December and overall comps in the negative low double-digit range for the month. Additionally, the quarter was significantly impacted by continued soft sales of firearm-related products. We experienced a high single digit decrease in the number of customer transactions and low single digit decrease in our average sale during the fourth quarter versus the prior year period. This was the first year-over-year quarterly decline in our average ticket in over 3 years and resulted from the reduced demand for higher ticket winter-related and firearm-related products during the quarter. From a product category standpoint, each of our major merchandise category was significantly affected by the lack of winter weather, with our apparel category down in the low double-digit range, our hardgoods category, which also reflects the weakness in firearm-related products, down in the high single-digit range, and our footwear category down in the mid-single-digit range. Our merchandise margins for the quarter decreased 126 basis points compared to the fourth quarter of fiscal 2016 when merchandise margins increased by 68 basis points over the prior year period. The decrease primarily reflects the sales mix shift away from higher margin winter product category as well as an increase in our promotional activities in an effort to drive traffic and sales. Additionally, we were comping against favorable opportunistic buys during the prior year, that were associated with the competitor closures that occurred during 2016. Now commenting on store activity. During the fourth quarter, we opened 3 stores, including 1 as part of a relocation, ending the year with 435 stores in operation. We opened a new market for Yucaipa, California and La Grande, Oregon and also opened a new store in Fairfield, California as part of a relocation. In the first quarter of 2018, we will not open or close any stores. Our current plans for the 2018 full year have us opening approximately 8 stores and closing approximately 3 stores. Now turning to current trends. As mentioned, the unfavorable winter weather conditions in our market have continued to impact winter product sales comparisons in the first quarter, particularly during January, given how well our winter business performed last year. As a reminder, last year January was our strongest month of the quarter, comping up solidly in the double-digit range on the strength of our outstanding winter product sales driven by highly favorable winter weather conditions. This January, same-store sales decreased in the high teens as sales of winter products remained very soft. Our sales trends have improved each week throughout February as other nonwinter products have become more significant to our overall sales mix. We finally did see the arrival of favorable winter weather in our markets over the past week and our winter product categories have responded very well. It would have been nice to have had some winter weather earlier in the season, but we're certainly happy to have it now. Having said that, it's a bit of a double-edged sword at this point in the season, as the winter business does come at some expense to our spring categories. As we sit here today, we are currently comping down low double-digits for the first quarter to date. And as a reminder, sales for our March period last year were strong, up high single digits, as we enjoyed favorable weather conditions in our markets with snow in the mountains and dry ball fields. But while we continue to face tough comparisons to last year, we believe our merchandise assortment is well positioned for the spring selling season and early rates are encouraging, with strength across a number of nonwinter product categories. Overall, we believe that our inventories are in very good shape, virtually the entire increase in our inventory over the prior year can be attributed to winter-related products. We have been through difficult winters before, and we know how to efficiently transition the products to next season and buy around it as appropriate. Fortunately, the products that we will carry over is not fashion and should play well next year, and we see little risk for significant markdowns associated with it. As we move beyond this challenging winter season, we remain focused on providing our customers with the value, selection, service and convenience that are the hallmarks of Big 5 Sporting Goods. Now I will turn the call over to <UNK>, who will provide more information about the quarter as well as speak to our balance sheet, cash flows and provide first quarter guidance. Thanks, Steve. Our gross profit margin for the fiscal 2017 fourth quarter was 30.0% of sales versus 32.8% of sales for the fourth quarter of fiscal 2016. The decrease in gross margin for the period, primarily reflects the 126 basis point decline in merchandise margins that Steve mentioned and higher store occupancy and distribution expense as a percentage of sales. Our selling and administrative expense as a percentage of sales was 33.3% in the fourth quarter versus 28.2% in the fourth quarter of fiscal 2016. Overall, SG&A expense increased $5.6 million year-over-year due primarily to higher employee labor and benefit-related expense as well as noncash impairment charges of $4.4 million to write-down of goodwill and $0.6 million related to 3 underperforming stores. Now looking at our bottom line. Our operating results were in line with the revised guidance we provided in January. For the quarter, we reported a net loss of $13.0 million or $0.62 per share, reflecting after-tax charges totaling $10.9 million or $0.52 per share, comprised of $0.26 per share to revalue existing net deferred tax assets as a result of enactment of the Tax Cuts and Jobs Act in December 2017, $0.21 per share for goodwill impairment, $0.02 per share for asset impairment related to 3 underperforming stores and $0.03 per share to establish the deferred tax asset valuation allowance. This compares to net income in the fourth quarter of fiscal 2016 of $7.7 million or $0.35 per diluted share, including a favorable $0.02 per diluted share for a tax benefit related to share-based compensation. Briefly reviewing our full year fiscal 2017 results. Net sales were $1.01 billion compared to $1.02 billion in fiscal 2016. Same-store sales decreased 1.2% in fiscal 2017 versus the comparable period last year. Net income for the full year was $1.1 million or $0.05 per diluted share, reflecting after-tax charges in the fourth quarter totaling $10.9 million or $0.52 per diluted share, as I've previously discussed. This compares to fiscal 2016 net income of $16.9 million or $0.77 per diluted share, including $0.05 per diluted share of charges for store closing cost and the net write-off of deferred tax assets related to share-based compensation. Our effective tax rate for fiscal 2017 was abnormal due to the impact of a new tax legislation, reporting a noncash, nondeductible provision for goodwill impairment and recording a deferred tax asset valuation allowance. Our effective tax rate for fiscal 2018 is expected to be approximately 20%. Turning to the balance sheet. Our chain-wide inventory was $313.9 million at the end of fiscal 2017, up 6.7% from the prior year. On a per store basis, merchandise inventory was up 5.6% versus the prior year, reflecting an increase in winter products as a result of our warm and dry winter. As Steve mentioned, we are comfortable reintroducing any winter product carryover next season. We also feel good about our inventory heading into spring. Looking at our capital spending. Our CapEx, excluding noncash acquisition, totaled $16.5 million for fiscal 2017, primarily representing investment in store-related remodeling and new stores, IT systems and our distribution center. We currently expect capital expenditures for fiscal 2018, excluding noncash acquisition of approximately $18 million to $22 million. This reflects continued investment in store-related remodeling, new stores and IT systems as well as the purchase of a property adjacent to our corporate headquarters, that we currently use as a parking area. From a cash flow perspective, our operating cash flow was a negative $4.4 million in fiscal 2017 compared to a positive $73.7 million last year. The decrease in operating cash flow primarily reflects increased funding of merchandise inventory purchases, reduced accrued expenses, primarily for income taxes, increased prepaid expenses, mainly for income taxes, and rent to accelerate our deduction under the new tax law, and lower net income in fiscal 2017. For the fourth quarter, we paid our quarterly cash dividend of $0.15 per share, and we continued to repurchase shares. Pursuant to our share repurchase program, we repurchased 118,609 shares of our common stock for a total expenditure of $0.8 million during the fourth quarter. In fiscal 2017, we repurchased 795,718 shares for a total expenditure of $7.7 million. As of December 31, we had $15.7 million available for future repurchases under our $25 million share repurchase program. Like we have in the past, we will continue to evaluate the best use of our cash, whether it's for reinvesting in the company, dividends, stock buyback or paying down debt. Our long-term revolving credit borrowings at the end of the year were $45 million, which is up ---+ which was up from $10 million at the end of fiscal 2016 but below our average year-end borrowings over the past 5 years. Our higher debt levels compared to the prior year primarily reflect higher inventory levels and the timing of payment. Now I'll spend a minute on our guidance. For the fiscal 2018 first quarter, we expect same-store sales to be in the negative high single-digit range and loss per share to be in the range of $0.06 to $0.14. First quarter guidance reflects an anticipated small negative impact as a result of the calendar shift of the Easter holiday, during which our stores are closed, out of the second quarter of fiscal 2017 and into the first quarter of fiscal 2018. For comparative purposes in the first quarter of fiscal 2017, same-store sales increased 7.9% and earnings per diluted share were $0.24. Operator, we're now ready to turn the call back to you for questions and answers. Well, we're certainly experiencing wage pressure. As an example in California, they previously approved a $2 increase in the state's minimum wage from $8 to $10. The increase was rolled out in 2 separate increments, with the first dollar increase effective July 1, '14 and the second in January '16. And then recently approved another $5 increase in the state's minimum wage from $10 to $15. And this increase is being rolled out in increments through 2022. In '17, there was an increase of $0.50 and then effective January 1,'18, there was another $0.50 increase in minimum wage. And then that increase is again for '19 through 2022, $1 a year. So there's certainly ---+ and it's not just California, it's really throughout many of our states that are being impacted and the effect is certainly pretty significant on our business. It represents an increase of about, well, $600,000 to $700,000 per quarter in our store employee wages year-over-year. In terms of the tax savings that we might get, if you're referring to the tax rate savings here on the federal side, going from a 35% to 21%, some of that benefit of that tax savings is going to go toward investing in the business. We've stepped up our CapEx in 2018 or expected to in 2018 to approximately $18 million to $22 million from $16.5 million in 2017. And beyond these plans, we will continue to evaluate the best use of our cash at any point in time, whether it's for investing further in the business, new stores, remodeling, inventory, those kinds of things, paying dividends, repurchasing stock, or paying down our debt, just like we always do. Sure. I think we've faced perhaps greater-than-normal rate of competitive openings this year. As Dick's came in and took, as we anticipated, a number of the former Sports Authority locations in our markets. So yes, we're probably facing about the 25 Dick's openings, I think, 15, 16 of them are related to Sports Authority. So yes, that certainly has some impact on the business. We will and believe that we will be cycling a number of these openings and far more openings that we'll be facing over the course of the year. So we think, as the year plays out, we will be operating in a more rational competitive environment. Well, there's certainly variances amongst the various states. California, certainly, felt the ---+ probably the greatest impact from the weather, from a geography standpoint, that we faced. All states were impacted. We now have a number of states performing positively outside of winter products in the first quarter. But all in all, California also felt a little more impact from the firearm sales due to the state-specific legislation that was passed at the end of 2016. It does. Our baseball business has performed reasonably well for us so far in Q1, and certainly, we, like I think others in the industry are benefiting from a change in bat regulations, so really pertaining to youth league. So we're certainly seeing a pick up in the baseball bat business. All right. We thank you for being on the call today, and we look forward to speaking to you in our next call. Have a great afternoon.

2018_BGFV

2017

HCI

HCI #Diluted share count for the quarter was 9,152; for the year, it was 10 ---+ or 9.152 million. For the year, it was 10.873 million. Yes. That has a little bit of everything in there; no one major item accounted for the increase. On behalf of the entire Management Team, I would like to express our appreciation for the continued support we receive from our shareholders, employees, agents and most importantly, our policyholders. We look forward to updating you on our progress in the near future.

2017_HCI

2017

TYL

TYL #Thank you, Claire, and welcome to our first quarter 2017 earnings call. With me on the call today are <UNK> <UNK>, our President; and <UNK> <UNK>, our Chief Financial Officer. First I'd like for <UNK> to give the safe harbor statement. Next, I'll have some preliminary comments. <UNK> will review the details of our first quarter results and 2017 guidance. Then, I'll have some final comments, and we'll take your questions. <UNK>. Thanks, <UNK>. During the course of this conference call, management may make statements that provide information other than historical information, that may include projections concerning the company's future prospects, revenues, expenses and profits. Such statements are considered forward-looking statements under the safe harbor provision of the Private Securities Litigation Reform Act of 1995 and are subject to certain risks and uncertainties, which could cause actual results to differ materially from these projections. We would refer you to our Form 10-K and other SEC filings for more information on those risks. Please note that all growth comparisons we make on the call today will relate to the corresponding period of last year unless we specify otherwise. <UNK>. Thank you. We're pleased with our first quarter results, which provided a solid start to 2017. Total GAAP revenue growth was 11%, all of which was organic, and non-GAAP revenue growth was 8%. Recurring revenues from maintenance and subscriptions led the way with mid-teens growth and comprised almost 64% of total revenues. We're also pleased that we were able to expand our non-GAAP operating margin by 70 basis points, even as we invested at a high level in product development, all of which was expensed. Bookings for the quarter were quite robust with a 25% increase over last year's first quarter to $186 million. We continue to be encouraged by the progress we've made with our New World Public Safety solutions. Run rates are improving, and we signed as many new-named clients for New World Public Safety in the first quarter of 2017 as we did through August of last year. Our Public Safety development projects are well underway and on schedule, with the first half of new features targeted for release later this spring. We're confident that these investments will improve our competitive position in public safety, while significantly expanding our addressable market. Our largest deal for the quarter was with the State of New York's Department of Taxation and Finance, and the New York State Office of Information Technology Services for our iasWorld computer-assisted mass appraisal solution valued at over $20 million. We also continued to see an increase in the number of new multi-suite arrangements. The number of multi-suite contracts signed in the first quarter was more than double the number signed in last year's first quarter, including SaaS contracts with Anoka County, Minnesota for our iasWorld, Munis and Eagle Recorder solutions; New Kent County and schools in Virginia for our Munis and EnerGov solutions; and Murfreesboro, Tennessee for our Munis Financials and Incode Municipal Court solutions. We also signed multi-suite contracts in Clayton County, Georgia for our Munis and iasWorld solutions; in Orleans Parish, Louisiana for our New World Public Safety, New World ERP and software solutions. Notable new contracts for our Munis ERP solutions included license arrangements with Cobb County, Georgia; Clearwater, Florida; the Lee County, Florida Sheriff's Office; and SaaS arrangements with Athens County, Ohio and Cleveland County, Oklahoma. For our iasWorld Appraisal & Tax solution in addition to the New York State contract, other notable contracts included a SaaS arrangement with Crow Wing County, Minnesota, and a license contract with Butler County, Pennsylvania. We also signed significant ---+ a significant agreement with Chandler Unified School District, Arizona's third-largest district, for our Infinite Visions solutions. Finally, significant contracts for our New World Public Safety solutions included Ulster County, New York; Berkeley, California; Muskingum County, Ohio; and Scranton, Pennsylvania. Now I'd like for <UNK> to provide more detail on the results for the quarter and update our annual guidance for 2017. Thanks, <UNK>. Yesterday, Tyler Technologies reported its results for the first quarter ended March 31, 2017. I'm going to provide some additional data on the quarter's performance and update our guidance for 2017, and then <UNK> will have some additional comments. In our earnings release, we've included non-GAAP measures that we believe facilitate understanding of our results and comparisons with peers in the software industry. These measures exclude write-downs of acquisition-related deferred revenue and acquired leases, share-based compensation expense, the employer portion of payroll taxes on employee stock on transactions and amortization of acquired intangibles. A reconciliation of GAAP to non-GAAP measures is provided in our earnings release. GAAP revenues for the first quarter were $199.5 million, up 11.3%, all of which was organic. On a non-GAAP basis, revenues were $199.9 million, up 8%. Software license and royalty revenues increased 8.1%. Subscription revenues increased 17.6%. We added 92 new subscription-based arrangements and converted 17 existing on-premises clients, representing approximately $25.8 million in total contract value. In Q1 of last year, we added 65 new subscription-based arrangements and had 11 on-premises conversions, representing approximately $28.5 million in total contract value. SaaS clients represented approximately 45% of our software contracts in the quarter compared to 34% in the prior year quarter. SaaS contract value comprised 29% of the total new software contract value signed this quarter compared to 43% in Q1 last year. The value weighted average term of new SaaS contracts this quarter was 5.3 years compared to 6.3 years in last year's first quarter. Transaction-based revenues from e-filing and online payments, which are included in subscriptions, increased 16% to $13.8 million from $11.9 million last year. That amount includes e-filing revenue of $10.4 million this quarter, up 17.3% over last year. Cash flow from operations increased 16.6% to $48.2 million. Free cash flow, which is calculated as cash from operations less capital expenditures, was $28.4 million compared to $24.6 million in last year's first quarter. Excluding real estate costs, free cash flow was $36.2 million. Our CapEx for the quarter of $19.8 million included $4.9 million related to the expansion of our Yarmouth, Maine office facility and $2.9 million for our new ---+ for a new office facility in Latham, New York. In Q1, we repurchased approximately 42,000 shares of our common stock for an aggregate purchase price of $6.2 million or an average price of $147.30 per share. We ended the quarter with a total of $97.2 million in cash and investments and no outstanding debt. Day sales outstandings in accounts receivable were 74 days at March 31, 2017, compared to 69 days at March 31, 2016. Our backlog at the end of the quarter was $939.2 million, up 16.1%. Software-related backlog, which excludes backlog from appraisal services contracts was $904.6 million, an 18.5% increase. Backlog included $218.8 million of maintenance compared to $191.7 million a year ago. Subscription backlog was $368.2 million compared to $250.9 million last year and includes approximately $108 million related to fixed fee e-filing contracts. Our bookings for the quarter, which are calculated from the change in backlog plus non-GAAP revenues, were approximately $186 million, an increase of 24.8% from Q1 of 2016. For the trailing 12 months, bookings were approximately $917 million, a 32.3% increase over the prior period. Note that we have posted a spreadsheet detailing our quarterly bookings calculations on the Investor Relations section of our website at www.tylertech.com/investors, under the Financials and Annual Report tab. We signed 36 new contracts in the first quarter that included software licenses greater than $100,000 and those contracts had an average license of $707,000, compared to 30 new contracts with an average license value of $323,000 in the first quarter of 2016. Our guidance for the full year of 2017 is substantially unchanged from our previous guidance. We currently expect 2017 GAAP revenues will be between $844 million and $854 million, and non-GAAP revenues will be between $845 million and $855 million. We expect 2017 GAAP diluted EPS will be approximately $3.26 to $3.34 and may vary significantly due to the impact of stock option exercises on the GAAP effective tax rate under ASU 2016-09. We expect 2017 non-GAAP diluted EPS will be approximately $3.83 to $3.91. We expect that as in most years, earnings will be stronger in the second half of the year than in the first half, with the greatest sequential increase in earnings coming from the second quarter to the third quarter. For the year, estimated pretax noncash share-based compensation expense is expected to be approximately $37 million. We expect R&D expense for the year will be approximately $48 million to $50 million. Fully diluted shares for the year are expected to be between 39 million and 40 million shares. GAAP earnings per share assumes an estimated annual effective tax rate of 20% after discrete tax items and includes approximately $29 million of discrete tax benefits related to share-based compensation. We estimate the non-GAAP annual effective tax rate for 2017 to be approximately 35.5%. Beginning in 2017, Tyler is adjusting its non-GAAP financial income using a tax rate equal to Tyler's annual estimated tax rate on non-GAAP income. This rate is based on Tyler's estimated annual GAAP income tax forecast adjusted to account for items excluded from GAAP income in calculating Tyler's non-GAAP income as well as significant nonrecurring tax adjustments. The non-GAAP tax rate used in future periods will be reviewed annually to determine whether it remains appropriate in consideration of factors, including Tyler's periodic effective tax rate calculated in accordance with GAAP, changes resulting from tax legislation, changes in the geographic mix of revenue, and expenses and other factors deemed significant. We expect our total capital expenditures will be approximately $53 million to $55 million for the year, including approximately $24 million related to real estate. Approximately $16 million of our 2017 CapEx is related to our cloud business, which includes hosted SaaS solutions and e-filing, including assets to accommodate future growth. Total depreciation and amortization is expected to be approximately $50 million, including approximately $35 million of amortization of acquired intangibles. Now I'd like to turn the call back over to <UNK> for his further comments. Thank you, <UNK>. Our strong first quarter bookings reflect both an active (inaudible) software market and our strong competitive position within that market. As we noted earlier, first quarter bookings rose almost 25% over last year. Bookings included the $20 million New York State Tax Appraisal software deal as well as 2 other license contracts and 1 SaaS contract, each valued at more than $5 million. We're also off to a good start with new business in Q2, as we signed a $36 million contract in early April with Cook County, Illinois, for our Odyssey Court Case Management Software along with our Brazos, electronic citation solutions. With the Cook County contract, which is the largest software contract in the company's history, 7 of the 10 largest counties in the country are now Odyssey clients. As <UNK> detailed, our guidance for the full year is substantially unchanged from what we issued in February. We're also pleased that we expanded our non-GAAP operating margin as well as cash from operations, even as we invest at a very high level in research and development with an increase of 16.5%. We believe these investments will lead to increased win rates and could significantly expand our public safety addressable market, and we expect these initiatives will begin to affect decisions by prospects in the coming quarters. Finally, we're looking forward to hosting 5,000 Tyler clients at Connect 2017, our annual user conference, being held May 7 through the 10th in San Antonio. At the conference, which will be our largest ever by a wide margin, we will also host investors and analysts at a session on Monday, May 8 from 11:30 a. m. to 2:30 p. Central Time. In the investors' session, we will provide an update on our product development efforts as well as a deeper dive on our connected community strategy, including Tyler Alliance and TYLER NEXUS initiatives. If you're interested in attending Connect, please contact <UNK> <UNK> for more information. A live and archived webcast of the investors' session and the accompanying slide deck will also be posted to our Investor Relations section of our website. Now Claire, we'll take questions. Sure, Charlie. I will take the general market question and let <UNK> comment on the international business. The broader market probably was modestly more robust through the first quarter over the last few months than what we've seen previously. So it's healthy as it's been now, kind of since the recovery. But I would say the uptick in backlog is a result more of slightly more robust market and consistent competitive performance. <UNK>, I'll let you comment on the Australian business. Yes, sure. Charlie, this is <UNK> <UNK>. Overall, Australia, as you know, we've got the Northern Territory contract and that implementation is going real well. We're expecting the first go-live for the first module to be in Q4. And our expectation is that Northern Territory will add other product suites, as the implementation unfolds. I think overall, our strategy in international is, we're going to take a very deliberate approach. We have a long-term view, sort of like we do everything we do at Tyler. I think international opportunities could provide some meaningful revenues down the road, but I caution about expecting any significant revenues certainly in the near term. Not really anything new. It's kind of performing where it is. But ---+ no, nothing significant going on there. Yes, that's a good question and it's an important part of our business now. And the answer is, definitely both. Probably the earliest impact will be to improve our competitive position and our win rates in the market that they have traditionally addressed. But as we mentioned in our comments, we're clearly focused as well on significantly expanding the addressable market. I would characterize their experience historically as kind of the below the top, say, 20% of the market, not that they didn't participate there from time-to-time, but maybe from 20% ---+ 20 percentile down to 60 percentile was where their solutions were most competitive. And we're doing ---+ this project clearly has focus on moving up and down to some degree with the product and strengthening the position in geography, where maybe traditionally, they weren't as strong. So it is a long-term project and ---+ but when I say long term, it's not as if all the results are way down the road. They will be incrementally achieved over time. Again, the earliest improvement should be in win rates in the traditional markets. But clearly over the next, say 2, 3, years, we have an eye on expanding the addressable market that they participate in. And then the third part really is also when we talk about NEXUS and Alliance and these Tyler initiatives is to also leverage and take advantage of the fact that we're a very strong leader on the court side of the business and in other parts of the market that are very related to Public Safety. So you could kind of look at it as those 3 different things: improving the traditional market, expanding the addressable market and leveraging the Tyler relationships and the presence we already have in the marketplace with other products. Sure. We're still working through that. We're well under way with the implementation. We expect to implement it at the beginning of 2018 and do the full retrospect of adoption, so that 2016 and 2017 will also be restated and conformed to 606. We have expanded the disclosure regarding the impact in our 10-Q as well. So I'd refer people to that as well for more details and that will continue to expand as we move through the year. I think on the traditional license deals, the biggest impact is likely to be to accelerate revenue recognition somewhat from the way we do it today, where it won't be tied as much to billings and milestones for part of that license that the license would be fully recognized from the softwares delivered, so that would accelerate a bit of revenue. On the SaaS business, don't expect a significant change there. Percentage of completion basis, there may be also some segmentation of those contracts that would potentially accelerate part of the revenue recognition, still working through what that impact will be. And then lastly, the commissions expense and ---+ which we defer over the ---+ basically, the implementation period today. There's some indication that, that would likely be amortized over a longer period of time. That's still a little unclear about the practical application of that, and we're still working through that. I appreciate that the bookings were very strong. They were not guiding up. Some of the deals are very long term. As you know, larger deals tend to extend over years, rather than quarters. We're encouraged by the bookings. We're encouraged by the competitive position we're in and by the market activity. But the divisions reporting ---+ weren't reporting color that would cause us to raise guidance at this point in time. But in the long term, it's a positive leading indicator and these development efforts that we have and a lot of different projects we have going on in Tyler are clearly focused on getting the growth rate back to where it's been over the last 10 years or more, and we expect to see that. But again, at this point, there wasn't enough strength to raise guidance. I guess the answer is kind of both there. And, obviously, it will add heads over time as they do more business they'll need more resources to deliver on that business. But the core R&D, the way I would look at it is, kind of a need list that we've put together when we did the deal. We rolled a lot of that forward. So I would say we're ---+ we kind of have our R&D headcount 2 or 3 years ahead of where it would have been, and we would expect that it's crested to some degree, but I caution that. Obviously, if there are very sound investments to be made, we will make them. But yes, we would expect that R&D spend and headcount would now grow at a considerably lower rate than their overall revenue growth rate and, therefore, margins will expand within that division. They were higher when we bought it. This is a conscious decision to make an investment and become a leader in a broader segment of the market than they have participated in historically. And we think that's the right thing to do with this investment. No. We still expect that we have opportunity in gross margin, although our guidance has not really changed from the beginning of the year that we expect that on the gross margin line that we'll be flat to down slightly for the year and the ---+ on the operating margin, we'll be flat to up slightly. But the long-term thesis is still the same that we expect that if we're in this low double-digit growth environment, that we would expect to average somewhere around 100 basis points a year of gross margin improvement and potentially, a little better than that on the operating line. And we expect that, that model holds true on an average basis over a longer period of time. Yes, I'd say some of it is investment in ---+ additional investments in some of the product development, a lot of it is on the R&D line, but some of it is in the cost of sales line and some of the investments we're making, particularly in New World, as <UNK> mentioned, their margin profile was significantly above our blended margin profile and we ratcheted that back a bit with other investments, not just product development investments but investments in their organization to organizationally support growth. And ---+ so some of those in the operating expense line pulled that down a bit. Yes, we can. Probably more win rates. And obviously, there hasn't been a lot of delivery yet, but I think the Tyler story, genuine commitment to this product line, it's been 1.5 years now, they can see the headcount additions and the story we're telling out there. So it's just a little more energy around it. I would also say that these commitments, some of these heads, a lot of them are R&D, but some of them are quality as well. And open support tickets and defects and all of those things have dramatically improved since the acquisition and that's helped on the (inaudible) side of the business as well. We hope so, and we hope that Tyler plays a big role in causing it to be a consistent trend. Kind of getting away from the quarter and taking a step back and looking at the bigger picture, really in the last 15 years, as you know, we've acquired, we've built products, and we've made ---+ we're in a position where we have a number of individual products that are in very strong leadership positions in this marketplace. But to this point, the level of integration in incremental value add across our different products hasn't been that significant. And we haven't missed that opportunity. We've recognized the significant effort to become a leader in those different areas. We're now really transitioning into---+ when we're talking about Alliance and NEXUS, that you'll hear us talk more about as we go forward---+ we're entering into the chapter where these products grow much more aggressively together. They kind of Tylerize, if you want to look at it that way, and then we add an incremental level of value that otherwise isn't available. Because there really isn't another company that has such a broad range of products. And that's a big part of what Tyler's focused on in the coming years. Also upgrading, which might have been just suite applications tucked in, into leadership application, that's a lot of where this R&D spend goes and that will even broaden the addressable market more. So that instead of just selling a core case management system or a core financial system, that we have those ancillary products around it that add to the size of the deal, allow us to go back and sell into these. So it's really a big part of our comprehensive strategy over the next chapter of the business. It was through August, so it's 8 months. But some of it's a soft comp. Right after the acquisition, some softness there both in the market and our competitive position at the time. But it's encouraging, obviously, to see that change rather dramatically. In terms of sustainability, we're encouraged by this as we've said. We're excited about it. We think that having a strong Public Safety application as part of our whole Alliance integrated community, criminal justice area is a big deal for Tyler over the long run. It will be a long process. To grow into the addressable market that we believe is out there for us and to get to the win rates that we're looking at, could be a 4-year process, say. And so I don't want people to be ---+ set the bar too high. I think we will see incremental results really in quarters not far down the road. But, again, achieving all of that is a long-term process. Well, long term we do, as we've been discussing, want to add this value across different apps and make it in any jurisdiction's interest to add Tyler applications when they're already a customer. I think in this case, other than kind of brand awareness and reputation and the leadership position that we ---+ we don't have to start off explaining who Tyler is. But other than that, I'd call these independent deals. I don't know if I'd call it delay, but you can add a step in the process. And we've been incredibly fortunate that, especially with courts, we really haven't had any projects that [cut off the rail] to much of a degree. And I would call that atypical. In the software industry, most companies, even if they perform at an exceptional level, be the challenging implementations, very complex and it's not at all unusual, that even very well-performing companies will have challenging sites that they have to address. And so we like not having any. We've had a long run, in all honesty where we haven't had any. And we've got a few sites that have some challenges, and we feel we are performing well on those sites, but the challenges exist. And we're there as a partner to address those. So again, I wouldn't call them full-blown delays. But sure, they ask about it, we respond. And so it adds a step in the process, and it may cause some delay, but not like they put the project on the back burner. In terms of it being something they ought to be aware of and take their implementations seriously. Yes, that is true. Maine, [I'm in Maine] as many of you know, and close to that project, and they were already a site that was doing their share of due diligence, very thorough process. But they are aware of this, and I think it probably does draw some incremental focus by making sure that they've taken every step they can to be committed to the project, executive sponsorship and fully staffed. And so ---+ I think most of the sites do this anyways, but sure, it adds some incremental focus to it. Sure. I can talk about that. We've talked about growth in the mid-teens in e-filing this year, in that we expect that growth rate in e-filing to pick up somewhat in 2018, 2019. We have pretty long visibility on some of these projects that are either already committed to us, as a number of California counties are, but won't start e-filing until the underlying case management system is live and other places that are doing e-filing on a permissive basis that will move to mandatory at some point and increase the volume and the revenues. Sometimes these timelines are a bit fuzzy. But the general expectation is for mid-teens growth in e-filing this year. And we do have an acceleration in California, as we move through this year and the second half. But most of the growth in California, which is obviously a big market, where we have a big presence, comes in 2018, 2019 and beyond. Illinois is a state that we signed a statewide agreement last year. That has some growth this year, but significant growth next year. The timing of Cook County joining that project, which is obviously the biggest county in the state, is unclear at this point and we'll certainly be encouraging that ---+ to move as quickly as it can. Maine has an e-filing agreement that really will be an 2018 event, I'm sorry, 2018 and 2019 event. So there are a number of those that will come online, but we have solid growth this year, but expect that to accelerate over the next couple of years. And we've talked about that coming close to doubling from the rate we exited 2016 at to the rate over the next, say, 3 to 5 years in the annual run rate to effectively double with that growth. It's a whole range of things. Again, the product releases have not yet really contributed other than enthusiasm and, I think, credibility in the commitments that we're making that there is just more momentum around it in terms of where we're going and the deliverables that will come. I think as I mentioned earlier, that ---+ our existing customer base and the referenceability has improved. You've seen the investments Tyler is making. You've seen ---+ there are results there, in terms of quality and responsiveness, and that's very helpful. And then I think, the guys [around] the unit would tell you, the sales execution itself. The messaging, the messaging within the division and around that product strategy, the messaging of the more comprehensive Tyler approach to criminal justice, and even right down to product presentations, which I think has been partly collaborating with the other Tyler divisions and sharing our own best practices. So it's a range of different things that are all operating at a higher level. Sure. The multi-suites will normally be within the criminal justice area or within what we usually refer to as the enterprise side of the business. But there will be those and are those that cross the 2, but generally within those. The biggest change in purchasing practices is it\ I think it's kind of a first-half, second-half thing. So I think the first half ---+ and we talked about that a little bit in the comments on the guidance. I'd say the first couple of quarters look more similar to each other and then there is a step-up in the second half of the year in terms of the earnings R&D does step-up; it's not at its peak level yet, so we're still adding heads there. So that ---+ a number of those come on in Q2. So I think that puts a little pressure on Q2. We do expect revenue growth to accelerate in the second half of the year and earnings to grow with that. So it's really kind of a first-half, second-half thing. So I'd expect to see first half look ---+ second quarter look more similar to Q1 and then there to be a nice bump in the second half of the year. Sure. We are ---+ from an R&D standpoint, we have Tyler-wide projects underway. We have oversight from the team that Jeff Green is leading to make sure everybody is implementing as much Tyler types of technology they can and adding levels of integration. The integration of the sales force that happens over a long period of time, the integration of all these organizations. We now have 2 groups, right. So we have criminal justice group with Courts & Justice and Public Safety and all that related applications, and then we have the enterprise group. And the leadership in those areas came up through those divisions and they think comprehensively. They see the whole market as a single market and they drive those sales forces that way. That said, you will always have some distinct Tyler sales channels. The skills involved in selling the State of New York an appraisal system and the skills involved in selling a criminal justice system versus a financial system are different. So where through acquisitions, we probably have acquired 30 sales channels over the years, we really get down to maybe 3 or 4 different skill sets. So that's a tremendous amount of integration, but it really will be skills dependent and what the domain expertise needs to be in those different marketplaces. But you take what was the Munis sales channel on the enterprise side now. They are selling all kinds of different applications from acquisitions and organic builds that we've done over the last 10 years. I'd say it's more of the latter, the timing. For this specific year, the timing has fallen with 2 large deals in the first half of the year. I'd say the pipeline has a good ---+ the longer-term pipeline has a good mix and an increasing mix of larger deals, and we've continued, obviously, to build our presence there, particularly in the courts and the property tax areas. But continuing to win larger deals in the ERP side and moving in that direction in Public Safety. But as we look at the pipeline for this year, I'd say these are the 2 biggest deals of the year have happened in the first half. I think over the long run, we expect it to continue to shift more towards Saa<UNK> When you look at the number of SaaS deals, I would say there is a large number of relatively small SaaS deals that have happened in the last couple of quarters, particularly with the new product we have at Versatrans, on the school business transportation side, doing a lot of SaaS business, but with relatively small individual deal sizes. And I think that if you look at the number of SaaS deals that skews it a bit. But we expect that we'll continue to see this gradual shift, but certainly it bounces around a lot from quarter-to-quarter. I'm wondering if you can highlight how long you think it will take the investments in NWS before you see stronger win rates that I think are the premise for those investments. And also when do think you will be able to move upstream with a stronger product and compete for larger jurisdictions. I think we've seen it, right. The first quarter we said win rates were better and as many deals as through August of last year and really that's not on tangible improvements on the product other than maybe quality. It's more on the momentum and the enthusiasm around, I think, the whole combination of the companies. We will have some deliveries this spring. I think that will be important for those that maybe like the messaging. But want to see some deliverables and results. That will initially, I think, probably only impact the market [they've] traditionally been strong in. I think it's reasonable to think that maybe a year from now, maybe a little sooner, you will see more deals on the high end of that historical range and maybe some deals that start to creep up that ladder a little bit. There certainly have been some encouraging exchanges between the channel and the marketplace and people have been enthused by what they see us doing. So we'd be pleased if the balance of this year, we continue to see some incremental improvement in the traditional market, and we'd be pleased if, say, a year out, we start to see some more deals on the high end of the traditional size and start to see some deals upside that range, and we think that's reasonable. Great. And then my follow up. If you look at the courts and criminal justice market, clearly you've dominated that for many years. Are there any new entrants in the market. Or is your competitive position really unchanged. Basically, I'm wondering is anyone making significant investment to try to compete with you in any of these markets. Not really. There are still fragmented segments of the market out there. And some of them make a cost-related decision ---+ but this really doesn't (inaudible) is really a [product across] Tyler, which is ---+ we look at every loss, and we have losses. I think some people think our rate, we win almost everything. We don't. We certainly have losses in all segments of our business. What we really look carefully for is when there are trends. When we're having a number of losses for whatever reason. Somebody's got a release that jumped over ours. Somebody's got a better value proposition. And really across the company, there are no consistent themes on the losses that we're experiencing. There are all kind of very fragmented one-off types of losses. I guess, there's 2 parts to that answer. We are never just aggressively looking to do a deal. We're always opportunistic, and I'd say our general impression of the market right now, like a lot of ---+ like the value of a lot of assets these days, are that they're pretty richly valued. So that's part of the focus you're seeing on the organic investment, that certain things we think would be important to add to our offering are just very richly valued in the marketplace, and we feel an organic build that's done on the same platforms as our other products and comes out of the box Tylerized, if you will, makes sense. The second part of the answer would be, we are doing a lot of research, and we have a number of folks, senior folks involved in really doing, what we call, comprehensive (inaudible) study, which is looking at every segment of the market where something contiguous could expand our addressable market and to the extent that can be acquired at a reasonable valuation, we'll be aggressive in those areas. So a little bit of a long-winded answer. In the current climate, again, we're doing a lot of research to see what we really think would qualify as the best investment for us. But the lack of a lot of M&A since New World is really just a function of the valuations in the marketplace. Okay. Thank you, Claire. And thank you, everybody, for joining us on the call today and your interest and your questions. If you do have any further questions, feel free to reach out to <UNK>, <UNK> or myself. Have a great day.

2017_TYL

2016

GRMN

GRMN #Well in terms of our outlook for the seGment we guided to 10% growth which is still our outlook there. I think there's various product categories that are up and down for the year, so that's in general where we see things. And could you repeat your second question, please. Well I think it's really in product roadmap and the products that we have in the market, so the newer products should help us stabilize our gross margin. Our running line now is getting fully populated with wrist-based heart rate which is helping as well. So we feel like those things will contribute to stabilization. Well, we think that the margin levels in Fitness should be somewhere in the low to mid 50s so that's about where we're targeting. So actually there was little impact of FX on a quarter-over-quarter basis. When you look at the euro of last quarter 2015 versus Q1 of 2016, and then also you had Taiwan dollar impacting that a little bit gross margin. So as it relates for the full year, we're basically, if we stay somewhere [we're at] we're probably anticipating little impact. No. We don't anticipate any impact relating to those regulations on our tax rate. I think year-over-year, <UNK>, as I mentioned our product line is extremely strong this year. We had products early in Q1. Our comparable last year of Q1 of 2015 was quite a bit easier than what it will be in Q2. So all of those factors led to some early growth in Marine for this year. No, we don't think so. In Marine I mentioned there's a product mix factor there, so that's very understandable. I think Outdoor fluctuates up and down, so really no change there. Aviation is pretty steady. And Automotive has been pretty steady as well. Okay, thanks, <UNK>. Kind of hitting from the top there terms of our rebranding of the PND products. Yes indeed, we are rebranding intentionally, and we felt like Nuvi has served us well over the years, but also probably doesn't recognize some of the great new features that have been brought into the product line over the years, and in particular you mentioned that the safety features we have, we have lane departure warnings, we have camera features in the product with collision warnings. So we felt like it was time to recast the Nuvi line into something else. In terms of infotainment, those sales that we referred to were system sales that are done on a [cord install] basis with automotive carmakers in APac and also the Middle East. And then finally on Fitness, vivofit 3 has really started shifting now so I would say Q2 impact, not a Q1 impact. At this point it's limited. This is one of the reasons why we keep healthy levels of safety stock and at this point, we're working through that, but at this moment we don't have any material impact. Yes, so maybe to clarify on that. We went through a two-step process in getting to wrist heart rate. The first step was with a third-party solution, with our Forerunner 225, and then we transitioned to a Garmin solution after that on our Forerunner 235 and our Fenix3 HR. In terms of margin structure, certainly the wrist-based heart rate products are lower structure margin than our chest-based. But at the same time, our Elevate technology is much higher margin structure than when we were using a third party, so it is improving from where we were in that interim step, but not necessarily compared to the chest-based solutions of the past. I think those markets are fairly niched and retailers don't carry a lot of inventory, so the sellthrough has been fairly robust. There's been a lot of spring promotions around the some of the Marine products and it's been doing very well in channels like Bass Pro and Cabelas. I think we're actually seeing very good results in the European region. In terms of the market development there, Europe is probably behind that of the US, so there's a growing market there and players are establishing themselves including Garmin. We've also seen strong uptake of wearables in APac including both Fitness based wearables as well as Outdoor based wearables. Yes, definitely the US is still growing, no question about that, but it's a more mature market than those other regions. Well I think two things in Outdoor that really drove the growth was Fenix line and also dog products. Those are the two major drivers. There was some incremental contribution by golf but the other two were really the major contributors. Fenix has been strong in recent quarters, and over 2015 we're going to now start to comp against those strong results in Q2, Q3, and Q4 with Fenix. So we're going to have to navigate that in terms of comparables, but so for the product has been very strong, especially since we've added wrist-based heart rate to it. I think we still see challenges in Aviation like we noted in the remarks. Some of the underlying factors that have slowed the market recently are still there. But for us, new platforms have been a big driver of the success, and we're seeing some incremental increase in revenue in the retrofit side too, especially in ADS-B products. I think we're looking for strong growth really in both of those categories and that's what we experienced in Q1. That's been what we've been experiencing, yes. I think theoretically the size of those markets is really driven by population and especially population that's interested in health and fitness. I would say generally Europe should match the profile pretty well. I think in APac of course there's a lot of populations but maybe not yet the kind of lifestyle or health focus like what you have in the US and Europe markets. So nevertheless I think there's still good uptick of Fitness products in APac. I think they're very interested in running products as well as fitness and multisport products.

2016_GRMN

2016

CNK

CNK #Yes, I think your assessment is exactly correct. Last year there was ---+ it was a top tough comp last year. There was a lot of product that played really well to the market place. Again, Star Wars, while big in Latin America, the sci-fi type films don't translate as well across LatAm as do more action and family-oriented films, particularly animation. In the fourth quarter, our attendance per screen was down, but really when you look on the whole of the year, attendance per screen was up a little over 4%. It was very content-driven. When you look at what we're already seeing the beginning of this year in January and February in Brazil, the box office has been booming, and it's largely again been content-driven. They've had phenomenal success with DeadPool, and they had a local film called the 10 Commandments which has been I think the second-highest box office ever in Brazil, or second-highest attended film ever in the history of Brazil since tracking. It's a long-winded answer. The short answer is yes, it's what you said, it's been content-oriented. I'm not necessarily saying that. I was just saying that it is content-driven. For the full year last year, attendance per screen was up 4.4%. That's on top of 2014, when attendance per screen was up 4% year over year. First quarter to date has been terrific in Brazil from an industry standpoint, just with the strength of some of the content that's been out there. We'll see how the full quarter plays out international relative to domestic, but so far things look really good. I would say it's not necessarily our cautiousness. We are very diligent in regards to how we evaluate each and every investment. But the developer, the development pipeline in Brazil specifically has slowed down a little bit. It doesn't mean it's not going to continue into the future. I think that's probably the single-most important factor as we look of why we're looking at 6% instead of 7%. I think it's really important to note that doing 70 or 75 additional screens in 2016 in Latin America is a very positive move forward, considering the head winds that have taken place in that market place. I would read this ---+ I would read the continued growth we're having there in a very positive light, considering the negative feedback that's been in the media back here in the US. It was one of the reasons that <UNK> and I wanted to go down there and see and meet with developers, as well as visiting all our theaters and our offices. I think that's fair. Obviously we don't know the exact pipeline of what our competitors are doing, but we do know what potential projects are out there. We're continuing to get our fair share, and in some cases more than our fair share of the products that we want. Sometimes there's projects out there that quite frankly we choose not to do, because we they don't meet our hurdle rate. We're happy to say no thank you in those cases. I appreciate the question, <UNK>. I would take hesitance with the word permanently. Really, truly it's product flow. It just depends on what kind of movies work as well today. Who would've called DeadPool, a movie which quite frankly I think the reported production costs on that from Universal was about $58 million, was going to come out and likely do north of $350 million in the domestic box office. It doesn't have to be a big, expensive movie, it just has to be a movie that works. You wouldn't have been calling that a big tent pole movie with a production cost of $58 million. The good thing about the 2016 lineup is we do think there will be a more equal related movies in the various buckets of performance. We're likely not to have the mega blockbusters of $500-million and $600-million performers, but we are going to have more movies in that $150-million to $250-million range, which helps two things. One it spreads the audience out; it creates more successful movies for our suppliers; and three, it releases the pressure a little bit on film rental, because you're not hitting the highest tiers on the scales. I would just add to that briefly. I think a lot of what the big studios have done, you've seen that. It's a dynamic of what they've been choosing to produce, because the larger-type films tend to feed well from a brand building into the rest of their ecosystem, whether it's theme parks or consumer products or elsewhere. At the same time now, I think there's other studios out there that have recognized there's an opportunity in that mid-tier space. You have other companies like STX and some former heads of studios who are coming in and developing product in that area, which we're optimistic will help bring back a lot of the content that may have been in lesser volume over the last couple of years. I would say nothing ---+ no change, because we very much are on the outlook for potential M&A, both domestically and internationally. The deals that are to be looked at, we absolutely usually get a very good early look at them. But we're, we're pretty disciplined in our approach. I think it has paid off well for our stockholders, and we're going to continue to. Nothing on the specific horizon, but very much on our radar. There wasn't a egg effect on the box office in Brazil before, with the World Cup. Relative to the Olympics, the studios and the distributors tend to want to line their product up in situations to where it's not going to be directly competitive. We don't think it's going to have either an adverse or a positive effect, necessarily, on the box office. We haven't seen any significant M&A increase in Latin America, based on the economic situation. It's because the business is still a very healthy growing business. Admissions are up in Latin America. We haven't seen any spikes in that area. I would just say a lot of the top circuits down there tend to be owned ---+ that are family-owned ---+ tend to be owned by families that are in the billions of net worth, so they're less impacted by some of the short-term dynamics in the market place. It becomes other factors that will tend to drive their decisions to bring their circuit to market. <UNK>, I think we will be able to; but literally as I noted, we just began the roll-out of this. When I say just began, I mean on February 16 in two markets. We're at the very early stages of it. We will roll it out through all of our markets throughout the remainder of this quarter and into the second quarter. We're way too early to have the ability to determine anything, given that we've just started in two markets with the roll-out coming. There's no question about that. We send out 4 million to 5 million e-mails each and every week, and have over 4 million unique users on our Cinemark app. Significant amount of the promotional material that goes out is definitely tied to concession sales, concession offers. Yes, we do see a significant redemption in those various offerings, those very offerings. But relative to the new loyalty program, which we just announced today, it's too early to determine that. We have ongoing loyalty programs in a number of our Latin America markets. The re-seatng analysis, we look at obviously very specifically to the specific DMA and the theaters in the market place. Also we look to do theaters that have a high occupancy, and ---+ excuse me, a high-capacity with not necessarily a high occupancy. It's a very good way to reposition that theater because, you're going to lose 55% to 60% of the seats. You want to make sure you don't have a theater that is highly utilized, otherwise you might run out of seats. Then we look to say in the market place, what do the demographics look like there, and what do we think ---+ what's the competition look like there. Has anybody else reclined in that market place. To date, we've been very happy with the results, because they are exceeding our investment hurdle rates. It really doesn't. I've been in the movie business one way or another for over 30 years. You just don't know what's going to take place. The best example of that is what just happened two weeks ago with DeadPool. No one in the industry was calling that movie to do what it did. There were three or four movies like that last year. We look at the lineup, and we think the lineup is very strong for the remainder of 2016. The one thing that I really do like about it is it's more balanced, both across studio providers, and more balanced relative to not just two or three mega-megahits. Then when we look at the 2017 lineup and the 2018 lineup, really truly in my experience we've never had this level of look-forward transparency to what the studios and distributors have announced. We're optimistic for 2016, and also very optimistic for 2017 and 2018, with what's already on the books. It's pretty positive. Then as I noted in the prepared comments, too, there's always that little added bonus with the international market place, because you get those local titles that you don't necessarily always see coming. The only other quick thing I'll add is we think it's important to look at the business more on a longer-term cycle. It's hard to always look quarter to quarter, year to year because of the ebbs and flows of the product content. That was a good line, wasn't it. What was the first question again. We don't have any concern there. Netflix is a great service. It's a great in-home service. They've had other movies. Netflix is very much a television network. Not unlike what HBO and Showtime have done for years, they have some original product that goes out there. It's not playing in the theaters, it's playing on Netflix. We hope they have great success with it, but I don't see it as an issue relative to the theatrical business. It's not one really that we talk about. The second question was ---+ Oh yes, 3-D. Okay, 3-D we feel like we really are the leaders here. We've put a big emphasis on putting more light in the screen than any other theater chain. We think 3-D has got a great 2016 coming. There are a lot of movies coming in 3-D. Our philosophy is to make sure that the consumer has the ability to choose a 3-D offering or a 2-D offering of that particular movie. But we continue to be bullish on 3-D, and support the effort very much with highlight levels and quality in our theaters. I think <UNK> will take the other ---+ I will just say with you last question just about our performance over the years, we attribute that highly to our intense focus on driving attendance, that philosophy that cuts through our pricing focus, our CapEx investment. We spend more than our peers on maintaining our core circuit, which we believe that's fundamental to keep people coming back. We also are supplementing our circuit where it makes sense with a lot of these enhanced concepts, repositionings, as we've obviously talking about when it makes sense. All that becomes additive, but it all stems back to a philosophy on high-quality experience, attendance driven, and maintaining your core circuit, as well as the new builds and organic efforts that you're doing. You bet. <UNK>, the short answer to that is that they're very comparable as it relates to a return on investment on EBITDA margin. That's how we evaluate the investments go-forward. Yes, very similar. Thanks. Thank you very much for joining us this morning. We look forward to speaking with you again following our first quarter. Thanks again. Thanks, everyone.

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