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2015

MTD

MTD #Could I clarify your question. You're asking about lab in China. Our Chinese business, the first quarter was our strongest quarter of the year. We would have grown a little more the last couple of quarters, except for some tough comps on our AutoChem business. But we see no reason we can't grow high single digits in our lab business based on what I see out there. On a year-to-date basis, we're up approximately 200 basis points. Very much the lab business leading the way there with numbers actually north of that. And our industrial business is somehow being somewhat laggards to that in retail. We struggle to have global price realization in the retail business. In terms of next year, I think that we should be able to get something in the 150 basis point range. If you're wondering why a little bit less, we did make some extra moves this year, particularly driven in countries where we wanted to push through a little bit of extra pricing because of the strong dollar. For example, in places like Southeast Asia, we pushed through a little extra price increases there to try to make up for some of the currency impacts. Sure. I would describe, first of all, a bright spot would be the lab business overall. And of course, our lab business has a slightly different mix then some of the other guys. We have a little bit less healthcare, a little bit more industrial within our product portfolio. But overall, as mentioned I think pulling out the impact of some large AutoChem orders last year, we think that can be a high single-digit business in the coming quarters. If I look at other parts of the portfolio, actually retail would be an area that has been growing there. And of course that is being driven by the increasing GDP per capita increasing consumer spending. Our industrial businesses continue to be weak overall, but we do see pockets of growth there in some specific product categories where we are trying to push product categories. But probably, they're small enough it is not so helpful for us to mention. At this point. Material costs should be down, let's say somewhere in the 1% range to 1.5% range. You can multiply that number by 0.3 or 0.4 to get a sense for what kind of impact that would have on the gross profit margin. I think I'd like to give it a range, but I would certainly say high single digits. 2016 it's going to do better than that. If you look at our industrial business, we would expect, because the levels of decline are still large that it is going to take a few more quarters to stabilize that business. So, I think the beginning of the year you'll continue to see declines in our Chinese business overall. Whether we get to a flat business or modest growth business in the second half of the year I'm not quite sure yet. Definitely not materially. We have, to a certain extent, because such a high percentage of our Chinese business is Chinese manufactured products, clearly that piece will again, at least decline in the first half of the year. We have, of course, always every year a handful of products that we are transferring there, activities that we are transferring there. But I would not expect the overall percentage to move materially. Give me a second. We repurchased 390,548 shares. In terms of our industrial business overall, I think the Q3 is in line with our year-to-date numbers. We would expect to have, maybe some slowing in some of core industrial areas. But maybe some acceleration in terms of our food safety product inspection related businesses. Our lab businesses in the Americas did very well in the quarter. And we expect continued good performance in the fourth quarter as well. This year we added about 200 field resources. This ---+ typically they take a few quarters to ramp up in terms of the first quarter you have training, onboarding, and so on. And then, it takes them a few quarters to build up the pipeline. I would say, after two years they should actually be really profitable, contributing to the overall situation. We prioritize, of course, on product categories that have the highest profitability. And so they're going to certainly have above group average contribution. For next year, I expect, if things continue to go as expected in terms of market demand, to add about the same amount as we did this year. John you're on the line. No. They're very different. This is really pure water analytics. Totally different. The synergy is, with our [fountain] business that you might know. Particularly, related to TOC and conductivity measurements. These are the three measurement points that you would find ultra-pure water. For example, an application is water for injection. And when you have water for injections in pharma, you need to be USP compliant. And that's the [fate] parameters that are relevant here. No. You shouldn't read anything into it. It wasn't unusual for us at all. We have a certain strategy to expand the product portfolio, in terms of leveraging the access to the channel for Life Science applications and so on. But that is something we have been done over a couple of years. And what you've seen more recently was product launches for retail industrial, as well as for the last product introduction. No. Certainly not related to Ohl House, no. I don't. Everything is as usual. We built in some additional service growth over product growth. And maybe that would be the short answer, <UNK>.

2015_MTD

2015

SPG

SPG #Well, Europe, like I said, we are really excited on the Provence deal. We own 90% of it. That's a big project in a big market that hasn't seen a quality outlet like that. So that's good news. There's two or three others through McArthurGlen that we are making good progress in, one in Spain that we hope to start construction in 2016 on as we go through the permitting. So that's up there as well. Another one in the western part of Paris that we are making good progress on. Another one in Belgium that we're making good progress on. And in Asia, we've got two or three others that are a little more difficult to predict but we've got our second one in Malaysia that we are confident we will get started as well as Mexico City. We expect ---+ in Mexico we expect to start one next year as well. So we're making progress. Well, if they are pop-up, generally, they don't convert but more and more retailers are testing pop-ups to decide whether they want to a long-term ---+ longer-term deal. But I would say generally there is an increase this year primarily because we have a little bit more space from the bankruptcies that we've had this year. But <UNK> just to remind you, we don't include that in our occupancy. It's got to be a year in that but there will be more activity in pop-up stores for the season just because we've got a little bit more vacancy due to some of the bankruptcies. You are starting to see a little bit more of that. I think that's safe to say. In what sense. Our Galleria is such a great asset, it tends to ---+ it's kind of unambiguous number one. For a market of that size, it's kind of unambiguous number one shopping center. So it tends to weather any economic downturn generally. But I will say this. Look, we are not ---+ our retailers are not immune to a little bit of a down economy and Houston is also a big tourist market for the Mexican nationals. So there might be some slight sales retail sales impact but it will have no impact on the long-term rate asset that the Houston Galleria is as well as as you know we are doing a significant amount of transformation of that asset with the new Saks store, the new Saks wing, the new Webster's which is going to open in the next 30 days or so. We have a lot of phenomenal stuff going on there. But sure, could retail sales be marginally impacted there. Sure. But Houston Galleria tends to continue to way outperform just because it's such a great asset. <UNK>, I don't know if you want to add anything. No, I think that it's very well positioned and as <UNK> said, it has got the unique mix of anchors, restaurants and small shops in that market and it has been very enduring over cycles in the energy belt for decades. And if anything I think Houston generally has become less of a ---+ I would certainly say 20+ years ago it was more boom bust but with the medical, with the universities, the medical facilities there, it's a much more diversified economy than just oil and gas. I'm sorry. I didn't hear your first part, <UNK>. Again, I don't want to overreact. There's a little bit of softness due to the strong dollar with US tourism. You are seeing that in all sorts of businesses, the hotel business, whatever. We are dealing with it. But the fact is the international properties are actually performing very, very well. Europe sales retail sales is actually relatively impressive, the Klepierre portfolio. The sales, the outlet sales that we have with McArthurGlen are very impressive. Japan, you see that's in our 8-K. They are very impressive, up what 7% I think. Korea, a little bit ---+ I'd say the only market that's a little soft is Korea, a little bit because ---+ not SARS but whatever the last version was, MARS, MRSA, whatever and the Chinese consumer there probably going a little bit less to Korea for the time being. But I would say Mexico's sales are ---+ we've got one asset. Canada is great, Toronto is terrific, Montreal is finding its market increasing. So generally, those centers are very very ---+ we have been very pleased with those results. You mean with respect to Corio. I just want to ---+ look, they bought Corio. We don't own them so we are not integrating with them. I just wanted to distinguish that. I would say, look, they have done over the three years we've owned it, they've done a lot of transformation, selling a bunch of stuff, buying a bunch of stuff. That's pretty much past them. The big focus next year is really operationally which they through osmosis is improving their capabilities of doing that. And that's been the big focus I'd say in 2016. Now that the integration with Corio is pretty much done, the sale of the big Carrefour portfolio is done, and so I think it's going to be an operational story. But we are not operating the business, we are providing strategic input. And I think they've done a very good job of gleaning whatever nuggets of strategy we are able to impart and ignoring the ones that have no value. Because what ---+ sometimes we don't have the right strategy so they are doing a good job. But I think operationally there's I'd say they are the first to admit that they can continue to improve just like we can. And I think that's a big focus for them in the upcoming years. But we are not integrating them. They are running their business. Well, look, there's always a gap in terms of how we might do things versus how they do things there. They are not ---+ I still think there's room where they could be operationally better and that will take longer for them to achieve. But I have confidence they will get there. We will help out as much as we can. They're pretty good and they are doing a good job. Well, I think I do think perhaps the international business may offer a few more opportunities. But they are very creative folks along with our resources dedicated to it. So I wouldn't rule out domestic opportunities but I would say maybe marginally more opportunities internationally than here but I wouldn't rule out domestic opportunities as well. Sure. Yes. Yes, but we did see a little bit of softness there as well. So all of these assets buck the trend but they might have again the retail sales not the cash flow may have some short-term impact. But Sawgrass had a little bit of softness as well, not ---+ it's not immune. Okay, thank you so much and we will talk to you soon.

2015_SPG

2016

CTL

CTL #<UNK>, so the leverage targets, we're still a goal of about 3 times. But what we said is that as the business, as EBITDA declines somewhat, we were basically willing to go over 3 times if we saw that EBITDA over time was going to turn around and it could bring us back to 3 times or lower. So we will look at the proceeds from the sale of the data. At this point, we don't have any goal to reduce our leverage below 3 times. We still think that with what we've done with our debt maturities, we have plenty of liquidity and generate plenty of free cash flow, and we'll wait and see what happens with respect to the data center sale and then we'll decide from there what we do, more or less, with the $600 million to $800 million of free cash flow that we expect to have in 2016 after the payment of the dividend, as well as the free cash flow associated with the ---+ as well as the cash associated with potential sale of the data center. Regarding the broadband, first of all, we believe that we have real opportunity to take advantage of the investments we've made in recent months in GPON and Prism. We've passed now about 950,000 homes with GPON, one gig speeds to 780,000 of those homes, a 17% increase from the third quarter in terms of GPON homes passed. We grew our Prism market with GPON capabilities from 600,000 to 700,000 in the fourth quarter, and we're seeing really strong take rates where we have in GPON in these homes and businesses. That's really positive for us. We average about right now, and it's early on. We've got about 15% penetration in our GPON markets of the GPON products, and that's, as you know, we rolled out in the past year. Most of it's rolled out the past year. So we're real pleased with that, and that opportunity it gives. Also, if you look at our market share data, market share in a lot of these cities we're in is very low. We think we have upside there to go in on these businesses. And we're also attached or connecting more of the MDUs and MTUs within our markets that we believe give us a lot of opportunity where we've had very little market share there. 30%, more than 30% of our households that we serve are in MDUs. So it's a real market opportunity there, as well, that we're focused on. So those are some of the things we're doing we believe can really turn around the broadband growth. I think we will. It's a little early, but I believe we're on a path for positive adds in 2016. <UNK>, in terms of the CapEx color, basically in 2016, a little bit over the, over $2 billion or so of the capital budget will be what we call revenue enablement and support. Probably of that approximately $2 billion, basically broadband enablement and connection and capacity is about $1.2 billion or so. And then ethernet and MPLS enablements, probably about $600 million or so. So we're going to expect to continue to spend capital to bring higher and invest in the access part of our business to basically be able to, through either fiber or other technologies over time, be able to drive higher speeds for our customers. <UNK>, on the break out between wholesale and retail, we don't have that here, but we can follow up ---+ <UNK> or someone can follow up with you and get you that information. We just don't have it right here. As far as ---+ yes. As far as the broadband growth, yes, absolutely. <UNK>, we've looked at that and we're continuing to look at it some. And I guess we've not made really any final decisions. But at this point, we would prefer to stay unsecured, even if it might cost us a little bit more. Again, we can carry ---+ we can really be opportunistic with this next, with the little less than $1.2 billion that we need to raise to refinance the Embarq maturity, because again, we have about $1.6 billion availability on the credit facility. Additionally, our highest free cash flow quarter of the year is the first quarter, because basically our CapEx somewhat gets off to a little bit of a slow start. We just have more free cash flow in the first quarter. We'll probably generate over 50% of our free cash flow that we're going to generate in the first quarter, really. So we have a lot of options, and we will look at secured options. But at this point, we're not leaning in that direction. Not to say we wouldn't go there over time. Yes, certainly through the Embarq maturity, and in all likelihood, until we get much more color in terms of what's going to happen with the data center business. So I'll take the first one, <UNK>, on the depreciation. So basically, we would expect depreciation and amortization to be down somewhere between $200 million and $250 million, 2016 versus 2015. About $75 million of that decline is really a decline in the customer list amortization that we have that was really part of the purchase price adjustments related to primarily the Qwest acquisition and the Embarq acquisition, as well. The depreciation rate, the decline of the depreciation really is due to some of our assets becoming fully depreciated and retired. So basically, that decline in depreciation that did occur in 2015 is offset, to a certain degree, by the $3 billion that we expect in depreciation and the $3 billion we expect to invest in 2016 in our plan. So really about $100 million to $150 million decline really related to just the depreciation part. And <UNK>, regarding Joe Zimmel's departure, first, Joe made a lot of contributions to our Company. The 12 years he was here, we appreciated that, wish him the very best. As we state in the 8-K that we filed, really in connection with the annual review of the Board slate, the nominating governance committee recommended, and the Board ultimately concluded, that Joe should not stand for re-election at the 2016 meeting. The Board felt the change would lead to an environment with improved productivity, constructive dialogue. It was really just a Board chemistry issue is what this was. At no time has Joe raised any issue about the Company's accounting or financial reporting, either leading up to or following his resignation. Also, Joe didn't raise concerns about the Company's strategy or succession planning prior to his resignation, at least not that I'm aware of, or Board members were aware of. His principal complaint remitted to the process the Board used to reach the conclusion that he would not be included on the 2016 slate. And I think I'll just leave my comments to that. And there are a lot of details in our 8-K we filed on January 25, and you can maybe read all of that. But that really contains exactly what happened, in my view. And it concludes Joe's comments, as well. First, yes. We have that information and we use it continually. I don't have it here, as far as total overall percentages and speeds, but we have that. Marketing department, sales, we use that continuous, have to identify where we build additional capacity, how we go to market, advertising, all of that, pricing, all of that comes into play. But that's a very important part of our analysis. First of all, <UNK>, on the customers with respect to the economy, any company connected with the oil and gas business is skittish right now, obviously, for good reason. We're seeing some of that in the oil and gas sector. Fortunately, it's not a major vertical. We do have customers there, but it hasn't been a major vertical for us. Outside of that, we're not seeing a lot of concerns out there right now. We'll see what happens the next few months. We were already seeing long decision-making time frames by businesses the last year or so, so that's not a change. And we're still seeing that. But no major ---+ we're not getting major negative feedback from our customers, at this point in time, outside of the oil and gas sector. As far as the involuntary churn on internet speed, we hope we've worked through most of that through the fourth quarter. And so we're thinking those changes we made last year on the credit requirements and the higher prices, the price increases we had last week, we think we've worked through most of that. So hopefully we'll see the first quarter, that come in in the first quarter. It was that, and just folks who never paid. They just never paid. They would come in and we would skip service for three or four months and we would give them time to pay and they weren't, so we put in stiffer requirements. <UNK>, <UNK> <UNK> is here, our Chief Technology Officer. I'm going to let him address the product and systems. It's a major undertaking for us. I can tell you this, we're already seeing benefits, but it will be a continual effort over the next two years, two and a half years, really. <UNK>, you want to talk about that. And regarding the economic benefits on a joint venture on the data centers, it depends on what you mean by joint venture. There are a lot of different approaches to a joint venture. But the main thing that we would like to be able to do is continue to have a wholesale opportunity within the centers that we own today. We would like to avoid the high level of capital expenditures that's required. We think we can drive higher returns by investing those dollars in network and other areas. So that's really our view of that. And not only that, the valuations are significant right now and we think it's a good time ---+ if we're going to consider this, now's the time to do it. We think it's a good business. It is a good business. The margins are good. We're growing, have been growing this business some. So it's not we're running from, but it's just we think the ownership of the assets, we don't think we have to own those assets. So that's the really the reason we're looking at all the alternatives. So basically, we've been trying, since all the acquisitions over the years, to simplify our capital structure somewhat, and frankly, really we've looked at the potential of refinancing down at the Embarq level. It creates another public entity that we have to do public filings on and all, and we think it's not worth the effort of all of that, as well as the rate differentials is not that significant. So we've been, for the last five years or so, been working to refinance debt on Qwest Corp, at Qwest Corp, the debt that matures there, because it is still investment grade. Everything else is the parent's non-investment grade. So we've been moving everything up there, and we think that ---+ we've had really good rates and good execution over the years. As I mentioned earlier, we'll see over time if we need to go into a more secured product to get better rates. At this time, we don't think we'll need to, but we'll just monitor that over time. You know, so if you look at pretax book income, possibly somewhere in the range of maybe 45% to 55% would be the effective cash tax rate, but it's early yet and we'll have to see. That, I'm sure, will change some over the year as we get closer to 2017. But it will go up some. The benefit of bonus depreciation to us over the life of the program is a little bit over $1 billion. And we figured we got $250 million of the benefit in 2015 and probably $450 million of the benefit in 2016. So we've gotten ---+ we will have, by the end of 2016, achieved about $700 million of the little bit over $1 billion deferral that we expect to get during the life of the bonus depreciation legislation, and that assumes our CapEx stays at about the same level that it is today. So the decline in working capital was basically on October 1, maturity of debt that we paid off. So that's why working capital declined. In terms of the credit facility, I think we've said we're going to keep about $1 billion of capacity on the credit facility just for things like this, times when the markets are not where we want to issue, with the free cash flow that we'll have in 2016 beyond, beyond the dividend payment, the $600 million to $800 million. We're not opposed to keeping it on the credit facility for some time, if we need to, in order to get to a better rate and to get past the ---+ let the high yield markets heal themselves somewhat. No. We will file our K. The 26th is our target. So we'll file our K in a couple of weeks and all the pages and pages of pension and OPEB disclosure will be in there. So I really don't have that at this point in time. We do not need to make a cash contribution. We've made voluntary cash contributions of $100 million in 2015 and I think we did the same thing in 2014. We haven't made ---+ we don't need to make a decision on 2016 until September, before we file our tax return. But at this point, nothing is actually required of. Thank you, Sayeed. We discussed with you last quarter that we believe that our investments in network and adjacent businesses, along with organizational changes and cost control efforts, were beginning to take effect and produce positive results. We believe we can now clearly see that progress in our fourth quarter results, and we plan to continue to leverage and position our assets to help drive future revenue growth, EBITDA growth, and shareholder value. And although our results may not be perfectly linear in the months ahead, I am confident we're on a path to long-term growth and value creation. So thank you for joining our call today and we look forward to speaking with you in the weeks ahead.

2016_CTL

2015

MPWR

MPWR #Good day, ladies and gentlemen, and welcome to the Monolithic Power Systems, Inc. Q3 2015 earnings conference call. (Operator Instructions) As a reminder, this conference is being recorded. I would like to introduce your host for today's conference, Ms. <UNK> <UNK>, Chief Financial Officer. Ma'am, please begin. Yes, thank you. My first question on your Consumer business. I know the high-value segment has become a larger and larger percentage of that business. Could you give us a ballpark on where you are with the high-value as percentage of the Consumer bucket. It's more than one-third of our Consumer revenue, approaching 40%, I would say in the third quarter. Yes, the applications, <UNK>, the application is a variety of internet things, okay. If it's related to internet, and also some wearable stuff in sports cameras and that kind of things. And we see a lot more activity in recent years. Very good. And the strength you're seeing in Server storage, it sounds like that's primarily SSD-related. So when we think about the opportunity you have in the server market, especially on things like core power, that hasn't even started, right ---+ just yet, right. The core power, we have a few customers from last year. We start to ramp, and the bulk of a core power ramp would be end of the next year, the early 2017s. Okay, very good. And <UNK>, I think you mentioned that distribution inventories were down again this quarter. Could you maybe add some color there. How low can they possibly go and what types of visibility discussions are you having with some of your end customers at this point. Sure. As we have done in the past, anytime we hear any suggestions of macro weakness, we typically hold inventory in the channel, and that's what we have done now for two quarters in a row. And as you are aware, if we continuously keep it down there's sometimes panic of shortage. So we'll continue to watch inventory in the channel and manage it as low as we can without generating any panic. Hey, guys, this is actually <UNK> on Ross' behalf. Congrats on the great results as well. I want to ask you about the coms market. I know that it was mentioned that softness in the traditional gateway market happened in 3Q. But if you extrapolate a little bit further on that, just to get a better idea of how long the weakness is expected to persist and could catalyze its rebounding. Most of the traditional market is ---+ the traditional gateway market is something that's got lower gross margins. So it's not a market that we pursue aggressively. So if the demand is lower, we just let it play out. We are more strategically focused on other markets which have higher gross margin profile. Duly noted. And the OpEx plans, it was mentioned last quarter that there's a little bit of a step-up given the ramp in the fourth foundry. I just wanted to calibrate that for the fourth quarter. Should we still expect ---+ or heading into 2016, rather, should we still expect a little bit of elevated OpEx heading into 1Q or has something occurred to change that. No. One of the things you would have noticed is we have reduced our OpEx a little bit this quarter on the fourth foundry, and you will see that spill over into the first half of next year. So we continue to invest in our fourth foundry. Excellent. Thanks very much. Great. Thanks a lot. And my congratulations on pretty good results in a pretty tough environment. I was hoping you could comment a little bit on how you think about seasonality going into the first calendar quarter. I mean, you have a very nice guide here, which to me looks better than seasonal. So does that mean we should be a little bit more cautious on the March quarter before you got some big ramps next year. At this point we don't give guidance for Q1. So we tend to look at ---+ seasonally we are typically down 5% to 10%. Then it's a question of how much growth do we have to offset it, and more importantly what's the macro. So at this point I can't give any color on Q1. I think the growth will be accelerating, and if not 2016, will be in 2017. And we are really targeting more than 20% growth. And you see the results, just the recent result, this is at the beginning. And since last couple of years we released the right product to the right customers. And the result in two or three ---+ in a couple of years, in about two or three years since last year's, and that will really accelerate MPS growth. The motion-controlled products we'll release in the first half of next year. And this is the product, not the same as what we do before. And before we always have a fixed products, and you have a design wins and once when the product is ready. And now is all ---+ is a solution-based, and a lot of them is based on the FPGAs. And even before we have a product ready and we could engage with a lot of those customers. And so we have a lot of tremendous design activity going on now. Thank you very much. Could you give us some idea as to how your R&D expenses might trend over the next few quarters and what your highest priorities will be in terms of new projects that you're investing in. So in terms of R&D as well as sales and marketing, we will continue to invest, because everything that we do in terms of resources we bring onboard next year actually sets us up even better for growth a year or two out. So we will continue to do that. But we expect at the end of the day there will be leverage to the bottom line. Places where we will spend on R&D, one is going to be the fourth foundry to bring up the foundry. The second is going to be on differentiated products which are targeting at different markets, some of which we have discussed in the past, some of which we will be discussing over the next year or two. Overall the R&D growth, okay, and expenses of growth will be much less than in the revenue growth. And you see our history. Hi, guys. Let me echo my congratulations. Wanted to come back, <UNK>, looking at the breakout by end market. The Compute was up nicely and teleco down to the lowest level in probably five or six quarters. Just trying to get a sense on the Compute side, do you think that SSD strength continues, or was there sort of some one-time business that you were able to take advantage of in the quarter. And then similarly on teleco, I know that the teleco market has been fairly weak, especially in some of the wireless com structure, but some of your peers have started to say they are starting to see some uptick in com infrastructure. Wondering if you're seeing any pickup there. Sure. When we look at Computing, in storage, SSD storage, we had a new design win that started ramping up for us in Q3 and that was part of the growth. In Q4 as far as storage is concerned, I see two things playing out. We typically sell our SSD products both to enterprise as well as high-end client. And there's usually seasonal weakness in both Q4 and Q1 on the high-end PC side of it. The second I think overall there is some softness in both HDD and SSD, particularly as we go into Q4. In terms of our Communications, a lot of the weakness that we are seeing there has been in our gateway business. These are things like modems, routers, line cards that are sold to the home and the home office. There's also a little bit of weakness, I would say, in the networking and telecom side of the business. And there it's a mix of wired markets as well as wireless. So we are seeing a little bit, but I would say more of the weakness is in the gateway side of the house. And then just for two follow-on questions. Can you give us any sense what percent gateways might be of the overall com bucket. And then if you take a step back looking out at the broader business across all end markets, obviously the economy seemed to take a little bit of a breather over the summer. We saw a lot of the analog mixed signal group indicating order softness. To the extent that you saw that slowdown late summer, would you say things have stabilized now, or order lead times fairly short and difficult to predict. A couple of your peers have said they think we're through the worst of it. Wondering if you might be able to make a similar comment. In terms of the order momentum, we typically quote six to eight weeks lead time to our customers, except for a few new products which might have a slightly longer one. And we have not seen any change from that standpoint. I mean, we ---+ I guess we are in so many different markets that we never feel comfortable quite calling the macro. We depend upon our larger, more stable competitors to call the macro for us. So if I were to say markets where we have seen some weakness, I would say it's in the traditional gateway business for the home, home office. I would also say there's some in storage. Beyond that, I couldn't really comment about the macro. That's the beauty of the MPS, we are in a position, we don't know. Everything is a good opportunity for MPS. Sure. Our typical range is about 30 days to 45 days of inventory, and we typically prefer to hold in the upper half of that. So we have not seen any particular push from distributors to hold less. This has been more something that we have actively managed, and we have done in prior years as well. Whenever we start seeing signs of a macro weakness, we start managing the inventory and the channel to the best we can so that the days come down, and that's what you see played out for the second time. Add onto that, in terms of the inventory, the internal inventories that we hold, we are now at about 147 days. Internal model is about 135 days to 155 days. And we expect in the next few quarters will be more around 150 days for all the reasons that <UNK> talked about, particularly the new products, as well as inventory needed to support our strategic customers. So when we look out into 2016, I would expect to see growth in Computing, Consumer and Industrial market. Communications I'm guessing is going to be mostly flat. And all the revenue drivers are essentially all the different drivers we have talked about in the past. I continue to believe that Industrial is going to see strong growth next year with automotive markets leading the way, but you would also expect to see growth in smart meters, in security, in power sources. In Consumer we expect to see the newer high-value markets continue to grow. And in the Computing section it would be SSD servers as well as high-end (technical difficulties), and our module business would also continue to grow. And AC/DC, which is distributed among all these markets would also be growing next year. So we expect to see multiple areas of growth. Okay, Thank you, <UNK>. Hey, thanks. <UNK>, you mentioned strong design win momentum for E-motion. Can you talk a little about the number design wins, or quantify the number of design wins you guys have so far. I know it's a new product and it's early days, but just to give a sense of maybe what that equates to in terms of dollars of backlog, or any kind of color around that you could give. Yes, so far as you know, we talk about, we have a separate chip now ---+ okay. And a real E-motion chip that we are going to release next years. And those we use ---+ now use a programmable third-party product, and that's FPGAs to do the feasibility study for our customers' systems. And so it's hard to quantify the dollar and the dollar in a sense, in it, but the sense of portion of it, we have a ---+ we generate revenues, and I don't know what is the revenue numbers now. It's not small. Well, small means, okay ---+ it's still not small means it's still some millions, okay. And for the entire next year's. That's a very sensitive (laughter) ---+ it is a sensitive question, and let me answer in that way. Our long-term shareholder, everything what we do is affect us three, four years out. So for the long-term investors, and that's have the same kind of a length. And so then our Company's goals is perfectly lined up with our investors. But other long term is shorter than three or four years, like one to two years, then it's not quite aligned with it. So the Company we put ---+ we published the models and we are going to grow the OpEx in a slightly less than half of a revenue growth, which is to me doesn't quite make sense, and but we brought our shareholders interests. Thanks. Hey, guys. Congrats on the great results. Couple questions. On the auto side, <UNK> and <UNK>, can you remind us how much is the contribution as part of Industrial. And also with the recent controversy on Volkswagen, does that have any impact. I know you guys are very small of this overall market, but would love to hear some feedback on that, because we get questions by clients on that. We are very small and second, we are not in the engines, okay. (Multiple speakers) It doesn't really affect on us, okay, in terms of automotive. We are more into lighting, infotaintment, and more the lightings, all kinds of lightings. You have a security ---+ okay, you have lightings and illuminations, and also the dashboards. And we have ---+ the other one is the camera side. So we have a lot of design activities, and it really doesn't affect. What is the contribution, <UNK>, of auto to the overall Industrial. I would say among the four growth drivers in Industrial, it is the biggest. I mean, we have seen it be one quarter, like we did last year. The two years prior to that, it was each two quarters. Before that, it has been three. Again, we ---+ when it comes to macro weaknesses and stuff, we don't feel comfortable. I can look at it afterwards and say what we saw. I want to emphasize again that the gateway business is low margin, and we just play it opportunistically. So we don't spend time doing any soul-searching in the space. They are, I think they do some current sensing. The current sensing, and I don't know if you refer that one. I know there's a product release and there's a current integrated with a current sensing. The current sensing of the moto driver, we released it two years ago. Our sensing is the same thing, the rotor of the models, and that's the same thing as the technology. So it's entirely different. So the E-motion product we're talking is much more advanced than the products that you were just talking about. Thank you. I think it's a combination, right. I mean, we have multiple growth drivers, we are playing in different markets. Some markets, we are growing market share. So as a result of all that, we have actually continued to see growth. I mean, that is the key reason why we were focusing so much on diversification. It helps us at a time like this. Yes, we see weakness in a few markets, but we kind of see growth in a whole lot of other markets. And that's, I think, what's really helping us at times like this. It really showcases the strength of the diversification model. Yes. Well, <UNK>, I'm (inaudible) and I'll give you a longer stories. Four years ago we set up this model, two years ago we ---+ and four years ago we are changing ---+ we change our focus, and then we start to knocking on the door for these new customers. And two years ago, we were in the door. And two years later, we have a lot more product. And what I see is why we are ---+ why we are now in a grow 15%, 18% a year, why not faster. And all the products that we release in the last couple of years, it will indicate in 2017 and 2018 we'll grow faster. So this is at the beginning. So we actually had a positive effect to interest income line from foreign currency. This is more on payments to subsidiaries. There's a foreign exchange difference, and it turned out to be positive. So typically when we give guidance, we guide it to a $0 of gain or loss because we don't know until each quarter plays out whether it's a gain or a loss. We have had quarters of loss and we have had quarters of gain. So what we guide to is specifically the pure interest income portion of it. You're welcome. I think you will see the seasonality play out in the gateway portion of Communication. You will see some seasonal impact on the SSD for the high-end computing, Consumer, of course. Industrial I think will relatively have less of a seasonal play, and that's the best I can describe at this point. As you know, with such a distributed revenue base, we are actually dependent on the resales reports we get to actually pinpoint which markets we sell into. Lighting has ---+ is one of those markets where we haven't seen seasonality play in before in the fourth quarter. And it's a market where we continue to do well because we play in the high end of the market with very good dimming solutions. And so we continue to see that play out. So what we are seeing is mostly revenue that we got from design wins that we got about four years ago. And since then, every year we have increased the pace of our design wins here. We started with infotainment and then we have gone onto safety and ---+ Lighting. Lighting and a whole bunch of other products. So like <UNK> said, we are not under the hood, thankfully, at this point. But we are seeing on an annual basis there are more and more design wins. So when we look at revenues for automotive, we're increasingly confident that we will see higher revenues each year looking at next year ---+. Actually, we have in Analyst Days, that we have a slide, and we have a couple of slides. And now I think it will ---+ is online, right. And you can look at our product and our design cycles. Four years ago we start to knocking on doors and with existing product. And again, then two years ago we are in the door and we engage with all these auto customers, and we design specifically for automotive. These products will be ---+ since two years ago will be four years later, which is 2016/2017, and 2016/2017 we are getting to productions. So these are very predictable and very sustainable revenues. Okay. Thank you. I'd like to thank you all for joining us on this call, and look forward to talking to you again at our next earnings call in February. Thank you and have a nice day. Bye-bye.

2015_MPWR

2016

TSS

TSS #Well, as you may know, <UNK>, the CFPB has indicated there was going to be a slight delay and pushed out towards the end of the first quarter. And really beyond that, that's all we know. We continue to work and move forward as if the proposed rules are going to be very, very similar to the final rule. We will certainly let you know a lot more about that as we get these final rules published. Hey, <UNK>. It's exactly the right math. Hey, <UNK>, I'll make a first shot at that and <UNK> can certainly add to it. As I indicated ---+ we indicated in the press release that upon closing of the transaction, <UNK> will become Senior Executive Vice President of TSYS and President of our Combined Merchant Segment reporting directly to me. Thank you. Sure, <UNK>, this is <UNK>. I think as it relates to the margin for the fourth quarter, obviously the compensation picture is one of those. Obviously this deconversion that I had talked about in the third quarter, obviously kind of is playing in there as well. Among some other things, that's at play there. As I commented on the expected margin picture for 2016 for North America, we expect margin to improve and so this isn't like some turn in the margin profile of the business. We do expect to have a kind of an improving margin picture on a whole basis for 2016 in the first half of the year, with a little bit more depression on the second half of the year. But when you look at it on a yearly basis, it is an improving picture than what it is for 2015. So, <UNK>, yes, I would point you back to what we've said on that in the past is as a data point of when NetSpend was a separate public company, they reported that overdraft represented 7% of their revenue for GPR cards. And then you'd obviously have to add in several percentage points on top of that 7% to be able to account for pay card overdraft to get to a picture of what overdraft revenue looks like in the NetSpend revenue stream. So that would be from a revenue standpoint. Obviously there's also some other costs related to compliance that would need to factor in, but those would be the two comments I would point to around that. So this is <UNK>. Clearly had we decided not to make those investments in the fourth quarter, the margin profile for the fourth quarter would have been very commensurate with the margin for the third quarter. So, yes, those marketing investments were the central driver between the margin drop between the third quarter and the fourth quarter. As I said about our margin expanding on a year-over-year basis between 2015 and 2016 for NetSpend, obviously there is a higher expense base that's already now built into the 2015 numbers related to that higher level of marketing spend. We'll continue to look at that as we progress in 2016. We expect, as I said, the margin to expand in 2016. But I also said if an opportunity presents itself like it did this year in the latter part of 2016 for us to invest for future growth in this business, we may make that decision. I think I would point out that that's one of the benefits of having strong businesses altogether inside of TSYS is we're able to make decisions around progrowth things that on one specific segment might depress a segment margin, but on the overall basis we're still very large and strong. And so that's exactly the situation that we had with NetSpend. I had commented on this in the earlier part of the year that we might make those investment decisions and certainly we did here in the latter part of the third quarter and in the fourth quarter. It's actually a blend of both. It's a blend of the organic growth of the installed base as well as the impact of the two deconversions that we've talked about before from the prepaid processing side with Rush and Green Dot. Nothing of any significance. That is correct. Sure, <UNK>. We will obviously move TransFirst over to our revenue convention and so we'll be working on that over the time between the signing and close. I'll point out, though, that under our conventions, you will expect to see the TransFirst margins to be right in line with our adjusted EBITDA margin overall. So our Merchant segment overall margins will be very similar on kind of a go-forward basis. It's just roughly the same as our EBITDA margin overall. 10%. I'll take the first question. IPOS rollout is going to be consistent with the MV rollout. So right now our mobile solution has had strong account production growth. It's a small percentage of our total revenue, given the size of TransFirst and the volume. I would say it's a smaller percentage of total revenue with more expansion both on the tablet-based solution and the mobile as we transition a lot of the merchants from non-EMV capable devices to a more robust solution. Let me ask, George, were you making reference more to the integrated side when you said IPOS. Talking about the integrated ISC channels. As I said earlier, that was closer to the 29%, 30% of the revenue of TransFirst. George, as it relates to the EBITDA piece, I think if you look there, I think it's in the low 150s would be the numbers there for the ending 2015. So it is in that tighter band, so it's more like what we saw in 2015 than in prior years where you saw that step up throughout the year. But as I said, we do kind of expect a higher margin profile in the first half of the year relative to the second half of the year, which is this lasting effect of the deconversion of the prepaid processing that is impacting the second half of the year. It is in this kind of tighter band range just like we had in 2015. So as it relates to the blended interest rate, I think about a 50 basis point to 100 basis point kind of increase from our blended rate today as it relates to the structure. We will come back as it relates to our overall guidance and give specifics around the structure. Sure. So on that $25 million number, if you kind of look at that on a combined cost base, it's a little over 3% of the combined cost base of the two Merchant businesses. And I think it's important to point out that this is a growth-based acquisition. It is not an acquisition where it's around making the financials work due to expense cuts. The TransFirst historical organic growth model is a double-digit organic growth model. What we now have in our Merchant business also is primed for very strong organic growth. And so in putting these businesses together, we want to make sure we are maximizing the organic growth capabilities while also obviously taking the expense synergies that are available to take. As it relates to platform, there is platform synergies today because the TransFirst business is already using predominately our front-end platform. So it isn't like typical acquisitions sometimes where you have two different platforms and you are kind of shutting down one platform to get a lion's share of the synergy, but instead one we're trying to make sure we maximize the efficiencies while not trying to hurt the revenue growth trajectory. And so this is the synergies on the surface might look relatively smaller compared to maybe some other things you compare it against, but when you put it in the framework, it's one that feels very right. Obviously there's some upside. As we dig into this and there's some upside we'll obviously take that upside, but this is very comfortable with what we've done the work with to support the growth profiles of the business. Yes, so I think if you look at the free cash flow generation of us, as well as the strong free cash flow generation of the TransFirst business which has very similar free cash flow generation characteristics to our business, you see about 75 basis points of deleveraging turn each year. And so over the first two years, that puts us back into that mid-2 range of overall leverage. So just shy of, call it, one turn of leverage in the first year. 2. 5 times debt to EBITDA. So that kind of takes the 3.9 times down to the more, call it, mid-2 range. You know, Steve, I think what would be probably most helpful is to ---+ obviously TransFirst has filed an S1 out there as part of their IPO process, and so kind of go to that to look for a guide as it relates to that. And I think we've also kind of said as it relates to what we're expecting from an adjusted EBITDA margin, and given some of the EBITDA numbers, you can probably get into the right ZIP Code as it relates to the revenue ---+ the net revenue on a relatively go-forward basis. Yes, Steve, I think what we'll do obviously is when we come back out with guidance and have the exact kind of timing around close, we'll come back and give the specific guidance and what the impact is relative to the guidance we provided today on a standalone basis. Absolutely, but it also has the headwind that <UNK> has talked about with the proposed rules that could be kicking in late fourth quarter. Sure, <UNK>, we do. We clearly have our models around our investment spend and we're constantly kind of testing that on a real-time basis as we are making that investment to make sure we are seeing a commensurate return. A perfect example of that is the way where we started at the beginning of the year with our revenue expectations and how we have outperformed that and as we continue to invest in the business throughout the year, we got more confidence around investing more to be able to grab some share there. So I will say that the earlier comment that <UNK> made, we do not in that revenue growth for this year have any impact related to the CFPB. And so this is all just on kind of a pure organic growth basis. Like we started last year, we started with a revenue growth picture of NetSpend that got better throughout the year and, obviously, that is something that we would like to be able to see in 2016 as well. So, <UNK>, this is <UNK>. When we came out and talked about those two deconversions, we roughly sized those at being just shy of 2% of overall Company revenue. And so that gives you kind of a guide as to the overall kind of sizing. But clearly there is timing, there is different things that play there, but that gives you an overall sizing as to what those two businesses are from a size standpoint. It is not, <UNK>. I was incorrect, thinking that some of those items would be kicking in in late fourth quarter, but I was corrected real quick. No. We will wait and get the final rule out end of first quarter. No, it is not included in our 2016 numbers. Let me take the first part of that, <UNK>, and I'm sure <UNK> can add to it. Geographically, when we look at the geographical disbursement of their business, it's not too dissimilar from what you find when you look at the geographical disbursement of our business on our direct business. The states that you find contributing the most are typically the same top five or six states. Number one, number two, I think <UNK> touched on this in his prepared remarks, that there are some overlaps. There are also some complementary areas of his business. But I think one of the things we find strengthening to us that he is very strong on the FI side, and as you know we are very strong on the FI side of the issuing. So we see that as a complement. We both are in the IST business. Ours began approximately a year ago on a de novo basis. As we've indicated, earlier <UNK>'s business is pushing 30% of his revenues in that space. I think over the next 60 to 90 days we obviously will have to take some real quality time to understand all of our go-to-market dynamics as we look at our sales force, his sales force, his partners and our partners. And I think we can shed a lot more light on that at our first-quarter call. <UNK>, do you want to add to that. Sure, thanks, <UNK>. <UNK>, I think when you think about the combined growth strategy, it's really a two-pronged approach and I think it will include long-term, both US and international. But it's really the first prong is we need to sell more. We need to expand our partner-centric model allowing more sustainable and predictable growth. I think the second portion of that strong and selling more is leveraging multi-channel solutions for all merchants and really extending the products in a holistic way for all that TSYS has to offer. The second prong is really about losing less, leveraging great operating excellence. And really what <UNK> was touching on with the integrate division, continue to change the mix of our business to more integrated and high-growth verticals really will change the business over time long-term, both, again, US and, again, long-term internationally as well. <UNK>, the 654 number that I mentioned in my prepared remarks for North America ending the fourth quarter is total accounts on file, so it includes of the accounts we have, of course, on file at the end of the fourth quarter. I think <UNK> made a very good point earlier that, I think for at least 2016, the number that I would pay particular attention to is the traditional accounts on file, which will exclude, as <UNK> indicated, our prepaid government services and commercial card single use. I believe that number was around $415 million, so that's probably the number that would be more relevant throughout the rest of this year as it relates to those two deconversions. Does that make sense. Okay. Thank you. We obviously baked in what we are expecting from a currency standpoint that's baked into the guidance like we typically do at the start of the year. So nothing I'd call out there. It's more kind of a blended outlook of our rates with what we are expecting from a blended output kind of standpoint. That's how we typically do it, not just on a spot basis but more on a blended outlook of what we're expecting throughout the year. So that's what it's based on. No. As it relates to what potential kind of headwinds that could ---+ I think you could see maybe a half of maybe 1% of headwinds that could be coming in on a total revenue basis of potential there. But that would be kind of the only kind of topical level range I would provide you. That's right, <UNK>, there is nothing in the guidance relative to the deal, so the higher cost of financing obviously will be referenced when we come out with the new guidance that has all the effects of the deal in it. Without kind of providing a detailed reconciliation of each of the ins and outs, there are a lot of moving parts. Obviously, as I talked about, we had compensation impact as it relates to team member compensation. We actually had a higher percentage of managed services in the fourth quarter which has a lower margin to it. We had this impact of the deconversion of the prepaid. We had some deferred B of A conversion costs in the fourth quarter that played an impact, so there's a lot of moving pieces there. I was calling out the topical ones, but I think the key point, <UNK>, on this is it's not a trend, it's not something that we're highlighting that has dramatically shifted in the overall margin of the business. And as I said, this is a business that we have pretty good insight into as it relates to what the margin profile looks like from a longer-term point. And I had pointed to the margin level for the year. We knew it was going to be in kind of a tighter band for the year. And like I said, we are expecting that margin profile to expand in 2016. Sure, Tim. I made a comment that I think an overall blended interest rate of an increase of 50 to 100 basis points is probably the right range to be thinking about what that future interest kind of cost all in would look like. So that's the comment I'd made earlier around the potential future interest in. And, like I said, when we come back out with guidance on the deal, we will give complete clarity on structure, blended increase of interest rate and factor all that in relative to the accretion of the deal. So I'll start off and maybe <UNK> can layer on any comments he might have, but I think it's a very relevant question, kind of relative to the sizing of that. When we came up with the synergies amounts, those were what we felt were the relevant expense synergies to still allow for the growth profiles of the business without starving the investments in those two businesses, which will be the one combined business. So it's not one of those situations where we are providing a trade-off where you're having to not invest on the growth side because you've got some higher synergy number to try to kind of make deal economics. That's one of the beauties of this transaction is the high accretive nature of the transaction without having to have a very high synergy number that can then cost you on the growth side because you're having to chase the synergies on the expense side and starve the growth profiles. So with that kind of being the overall wrapper, that's the machination of how we got to those relevant amounts. But in general, I'd say obviously we'll be investing in the higher growth side of the business, which <UNK> has done in his business and we've been doing in our business around the integrated side, the e-commerce side, and those differentiated distribution capabilities in high-growth verticals. And, <UNK>, I don't know if you have anything to add on that I think you're dead right. I think as we start thinking about where growth is coming from, again, we need to continue to build the partner-centric model and get more sustainable and predicted growth. Obviously in the integrated channels is a big area of growth for us, but I wouldn't classify substituting the synergy savings as an investment. This transaction, because of the like-kind clients and other business units, really affords us a benefit to kind of cross-sell and get introductions across the Company here. I think it's longer-term, but it's really unique to be one of the few Companies that have a long-term potential to leverage issuing, acquiring and prepaid in one location with like-kind clients, so we'll be taking advantage of that.

2016_TSS

2016

KIRK

KIRK #The share count reduction was the result of the share repurchase program that we executed late last year. Yes. We went through that authorization at the end of FY15. The brick and mortar comp tracked very closely to the traffic decline, which was about a down 7%. It's a little bit different results there. We saw ---+ we obviously had a nice gain on the e-commerce side, and so most categories were up. We saw particular strength in furniture, textiles, decorative accessories in the second quarter. We saw the same weakness in art. So I think a lot of the concepts we discussed around the assortment apply to the web as well. Thank you. Thank you everybody for being on the call. Before I sign off, I do want to say one thing to our fellow employees down in the Louisiana area, they are dealing with a lot of struggle right now with the flooding. We have a lot of team members down there who are going through some tough times. We want to call out that and tell them that we're thinking about them and praying for them. I just wanted to get that out there. And the last thing I would say is we look forward to talking to you in the coming quarters about the progress we're making on all of these initiatives we talked about today. So thank you for joining the call today.

2016_KIRK

2016

INTC

INTC #So, that's actually a great question, <UNK>. So, for Q4, the decline, or the decrease in ASP was mostly driven by the much higher growth rate in the networking, as you mentioned, and the fact that the percentage of Atom in networking tends to be a bit higher. If you look at networking as a whole, the ASPs in networking tend to be lower than, say, cloud or enterprise. However, if you look at Q4's networking ASP ---+ so, if you took out just that ASP, and you compared that ASP relative to prior quarters, it was actually up as an average. So, it has a lower average selling price, but that average selling price is increasing as more people buy ---+ and as NFV and SDN take off, more people tend to buy up to core, because they're really searching for that performance. We do hope and expect this trend to continue into 2016, as we gain share in networking. The relative strength ---+ so, then if you take a look at the cloud space and the enterprise space, we expect those to continue on the trends you've seen over the last few years. We don't expect any major shifts there, but we have very strategic plans to continue to grow in the networking, storage, and especially around the telco and networking space, as SDN and NFV really take hold. And you will see a slightly lower ASP from there, but we expect the ASP to continue to increase in that space as we bring more functionality. Does that answer your question. <UNK>e. And a great question. I know there's a lot of moving parts here. Let me just focus in on the depreciation change for a second, and I actually try to be very transparent. In the CFO commentary that was released, you'll see some of this written out, so you can always refer back to it. But the change in depreciation, you're right, in total, is about $1.5 billion. But only about half of that is flowing through COGS, and impacting gross margin in 2016. And that's where you get to the 1 point shift. That really is the primary difference. There's a few other moving parts, but nothing that's material. That's the thing that changed from 62% gross margin forecast that we had in November to 63% gross margin forecast that we have today. The rest of the change in depreciation ---+ about a quarter of it will flow through OpEx, because remember, all of the spending we do for research and development facilities actually flows through our research and development line, so you see a little bit of a benefit there. And then you have some of it that goes into inventory, and then ships out over time. I'd articulate that what we're seeing ---+ we have a cautious stance as we start the year. There's a couple of things that feed into that. Units were a little weaker for us in the client segment in Q4. As we worked our way through the <UNK>tmas selling season, what we saw is the sell-through all the way to the end customer was a little less than we thought. We made up for that with a rich mix, so that's why we ended up with a pretty good result. But a little ---+ we're watching that carefully. And then, our team on the ground in China has gotten fairly cautious about what's going on in China right now. And as you know, that's the largest PC market. So, we're just a little cautious on the growth rates there. In terms of from here, I think <UNK> said it well. We're expecting ---+ this is the environment as we work our way through 2016. So, against the backdrop of a somewhat weak macroeconomic environment, we expect the year to play out normally from here. I'm not going to speak ---+ they have not ---+ they didn't release results for 2015, and so I'm really not able to talk about their results for 2015. I can tell you from our perspective, we didn't see anything that was surprising, in terms of what we've seen about their business levels. We actually expect some revenue growth as we go from 2015 to 2016. I'll give you in total what we expect for Altera. It's a little north of $1.6 billion in terms of revenue. Its gross margin, that as <UNK> was saying, is a little higher than the corporate average, so it gives us a slight mix. But because it's a relatively small business against the backdrop of Intel, it's not a big shift in our gross margin. And then we're expecting spending that's at a run rate of a couple hundred million dollars a quarter. In addition to all of that, there will be a bunch of one-time acquisition deal-related costs. There's amortization of acquisition-related intangibles. You'll see all those in the GAAP number. I've excluded them from the non-GAAP numbers I just gave you. No, I think that's actually part of our DNA, is we're pretty rigorous about trying to weed and feed where we invest, and where we disinvest. As you referred to in the investor meeting, I showed an up and down arrow chart, and the magnitude of those shifts was on the order of $1 billion for some of the big movers, as we added investments in some areas, and subtracted investments in others. I'll also say there's a point at which we expect that we get more and more leverage in businesses like the Data Center, as well. I think there's lots of opportunities for us to bring down spending as a percent of revenue, as we go forward. Add anything to that. No. Go ahead. <UNK>e. So, we believe that 2015 ended with, I'd just call it, very healthy inventories. In fact, one of the things we saw was a slight decrease in inventory levels as we exited the fourth quarter. And if you take a look at what we had originally projected, and what would have been more an industry norm, would have been a slight increase in inventories. We expect those healthy inventory levels to extend through 2016; there's no sign that anybody's adding inventory, or not moving off a cautious position on inventory. And that's what's been built into our forecast, as well. To the question on internal inventory levels, I'd just say we ended Q4 with a little more inventory than I was expecting, and a little higher than I'd like. Two drivers there: We saw, as I said, a little bit weaker units was made up for us in rich mix. But a little bit weaker units and we saw yields get better on 14-nanometer, and the combination of that left me with a little more inventory leaving Q4 than I'd like. You'll see it ---+ if you look on a dollar basis, it will go up in Q1 as a result of Altera. So, Altera will cause the inventory levels to go up some. But when you look at it from a business standpoint, I think we'll work through the inventory we have. And when we get into the back half of the year, we'll bring inventory levels down. <UNK>e. I'll take the accounting question, and then I'll have <UNK> give you his insight and philosophy on the whole integration. On the reportable segments ---+ so actually, I do plan to give you full visibility into Altera. It's a relatively small business for us. It doesn't hit the SEC reporting requirement. So, it doesn't come across that threshold. But we just feel strongly that, based on transparency, and the size of the acquisition, we want to give you transparency. So, you will see that in our financials going forward. I'll let <UNK> answer the integration question. From an integration standpoint, I think what you see ---+ what you've seen we've done with McAfee is we've integrated it into Intel Security, and you saw the great results that we showed in the fourth quarter. Those are somewhat an example of what happens as you integrate, and you really get the focus on the business on a much higher level. Same thing for Altera; we plan to fully integrate it. It's going to look like a business group, no different than, say, CCG, that does PCs and modems, phones, or DCG that does data center. It's called PSG, Programmable Solutions Group. It reports directly to me, and it will be fully integrated. The sales force at the beginning, because the sales tends to be a bit more technical, and a bit more like a field sales engineering-type role, we're keeping it separate. But that's something we're going to continue to evaluate. But the organization, the engineering ---+ already in the first two weeks, we've had ---+ really for me, I'm really pleased with the level of integration and help that we've done to get products and road maps focused and integrated into our internal systems. So, you should expect it to be fully integrated. Thanks, <UNK>. Operator, I think we have time for two more questions. Let's see, I think we've got Broadwell Xeon; it's going to launch in the first half here of 2016. So, that will be the first of the 14-nanometer, or the next 14-nanometer in 2016 is that E5 on Broadwell. The rest of them, we haven't put any other dates out there yet ---+ Skylake SKUs and so forth. There will be some pretty significant costs. It's in the gross margin recon, associated with the startup of the factory in China. And we'll be in production in the back half of the year, but we're just ramping production. I think if you were just looking at a six-month time period, you'd say it's negative, and you can see it in the gross margin. It's a slight negative on the gross margin. It doesn't change the fact that we make these investments, and then we get this, what I would say, tremendous long-term benefit out of making that investment. So, that doesn't ---+ I don't want you to take from that, that we're somehow less bullish on the transformational capabilities of what the team has managed to pull off at 3D XPoint, because we're actually quite bullish on that. Yes. We said that ---+ this is <UNK>, by the way, not <UNK> ---+ that 10-nanometers would be closer to that 2.5 years than the 2 years; that we would continue to strive to get back on 2 years. Some of that was how, as we [still define] 7-nanometers, what the complexity of the technology looks like, whether EUV is ready or not. Absolutely, we're pushing to get back on that two-year cadence. I would just add, please don't take the accounting of the depreciable life to be somehow a signal that we're letting our foot off the gas on process technology cadence and process technology leadership. That's the heartbeat of the Company, and we're driving it; we're driving it hard. The accounting just is looking at how long that equipment is economically viable in our factories, and it's pretty clearly five years, as we go forward. It's absolutely still the target. That has not changed one bit. It's a little early in the year to talk about progress. We have ---+ I'd tell you that we have a large percentage of that $800 million already, I'll call it, planned out. In other words, we have projects. We know what we need to do, introduce products, align which SKUs are coming, and move products onto that. So, I'd say a large percentage of that is well planned through the year, but it's throughout the year. So, I can't tell you ---+ I've already got $200 million of it, or something like that, not here in the second, third week of the year. 7360 ---+ it's out. It's sampling. The customers are going through their validations now at the systems, where they are building up systems and out testing them on networks, and so forth. And as far as the launches of those systems and the announcements, those are always up to our customers, and we don't make sure that we're the ones announcing that. And then, what we've told you is that what's even as important is that we're on a yearly cadence now of our modem technology, and we're very confident on that as well, for the next set of modems that comes out after the 7360. Thanks, Tim. All right. Thank you all for joining us today. Sabrina, you can please go ahead and wrap up the call.

2016_INTC

2017

RGLD

RGLD #<UNK>, thanks for the question. And we generally would like to own more of everything that we have. We like our investments significantly. And so given the opportunity, we'd be looking at that, at all of our assets. We can't comment specifically with regard to anything we might do at Rainy River or any other New Gold asset. But I think you can understand that we look at some of these things as opportunities and not as negatives. Absolutely. You've got it right. Good morning, <UNK>. <UNK>, as you know, Bill <UNK> comes from a banking background, and we literally look for Bill to help us with our security aspects of our transactions. Let me turn that question to Bill. How are you. Yes, so the obligations under the stream agreement are unsecured with respect to the Rainy River assets. That ranks us pari passu with the banks and the notes with respect to those assets. Once they are in production, there will be a collection account that is established, and our share of proceeds from gold and silver sales will go into that collection account and we'll have a first lien on that account. No, we don't ---+ we're not like a project finance bank that would have a sort of failure to achieve completion by such and such a date. That really has never been part of the contracts that we've executed. There are no other financial covenants in that contract. Thanks, <UNK>. Good morning, <UNK>. <UNK>, I think let's talk about the dividend first. We always have said that we want to pay a growing, sustainable dividend. We never have and I don't necessarily think we would do a special dividend of any sort. So I think kind of steady expectations of what we've done in the past would be a good reflection of what we likely will do in the future. We're very much interested in continuing to grow our business. We have a nice piece of growth already in place between 2017, 2018, and 2019, with the likes of the assets we talked about. Rainy River coming in in 2017, late 2017 now, Cortez Crossroads in 2018, and then Pyrite Leach at Penasquito in 2019. There's growth that's already bought and paid for in the portfolio. Nonetheless, we'd like to continue to add to that. So that would be a priority for us. Then also servicing our debt and moving into a net cash position is certainly a priority for us. So I hope that kind of answers the potential use of cash flow. But with regard to Ilovitza, we're continuing to evaluate that on a daily basis. I look at it more as an option rather than a commitment. And we'll just see how that project develops and if we decide to continue to support the project, we will certainly let you know what that issue is or how that unfolds. But today, the status of the project hasn't changed much from our standpoint. Thanks, <UNK>. Well, operator, this is a very straightforward and solid quarter, so it doesn't surprise me there's not a tremendous amount of questions. Very pleased how the Company performed and how the assets performed, and we look forward to continuing to update you as our Company progresses and continues to grow into the future. Thank you very much for joining the call today.

2017_RGLD

2017

BKE

BKE #Thank you. Good morning, everyone. Thank you for joining the call. Our May 18, 2017, press release reported that net income for the 13-week first quarter that ended April 29, 2017, was $16.3 million or $0.34 per share on a diluted basis. That is compared to net income of $23.1 million or $0.48 per share on a diluted basis for the prior year 13-week first quarter that ended April 30, 2016. Our net sales for the 13-week first quarter decreased 12.8% to $212.3 million compared to net sales of $243.5 million for the prior year 13-week first quarter. Comparable store sales for the quarter were down 12.7% in comparison to the same 13-week period in the prior year, and our online sales decreased 7.2% to $21.8 million. Gross margin for the quarter was 38.5%, down approximately 40 basis points from 38.9% for the first quarter last year. The decrease was driven primarily by deleveraged occupancy, buying and distribution expenses resulting from the comparable store sales decline, which had about a 300 basis point impact. That was partially offset by a 70 basis point improvement in merchandise margins for the quarter. Furthermore, gross margin benefited approximately 200 basis points as a result of the fiscal 2016 sunset of our old Primo Card loyalty program. And under that program, the rewards were recorded as a cost of goods sold at the time of redemption. Selling expense was 22.1% of net sales for the first quarter of fiscal 2017, and that compared to 19.5% of net sales for the first quarter of fiscal 2016, with increases as a percentage of net sales in store payroll, online marketing and fulfillment, health insurance and certain other selling expenses. This was partially offset by a reduction in expense related to the incentive bonus accrual. General and administrative expenses for the quarter were 4.6% of net sales, and that compared to 4.4% of net sales for the first quarter of fiscal 2016, with increases as a percentage of net sales across several general and administrative expense categories. Our operating margin for the quarter was 11.8% compared to 15% for the first quarter of fiscal 2016. Other income for the quarter was $0.9 million compared to $0.4 million for the first quarter of fiscal 2016. Income tax expense as a percentage of pretax net income was 37.3% for the first quarter of both fiscal 2017 and fiscal 2016, bringing our first quarter net income to $16.3 million for fiscal 2017 versus $23.1 million for fiscal 2016. Our press release also includes a balance sheet as of April 29, 2017. The balance sheet includes the following: inventory of $119.4 million, which was down approximately 14% from inventory of $138.8 million as of April 30, 2016; and total cash and investments of $276.7 million, which compares to $264.6 million at the end of fiscal 2016 and $223.9 million as of April 30, 2016. As of the end of the quarter, inventory on a comparable store basis was down approximately 13.5% compared to the same time a year ago, while total markdown inventory was down compared to the same time a year ago. We also ended the quarter with $164.9 million in fixed assets, net of accumulated depreciation. Our capital expenditures for the quarter were $3.9 million, and depreciation expense was $7.9 million. Capital spending for the quarter is broken down as follows: $3.5 million for new store construction, store remodels and store technology upgrades; and $0.4 million for capital spending at the corporate headquarters and distribution center. We still expect our fiscal 2017 capital expenditures to be in the range of $25 million to $30 million, which includes primarily new store and store remodeling projects and certain IT investments. For the quarter, UPTs increased approximately 3.5%. The average transaction value decreased approximately 3.5%, and the average unit retail decreased approximately 6.5%. Buckle ended the quarter with 462 retail stores in 44 states compared to 468 stores in 44 states at the end of the first quarter of fiscal 2016. Additionally, our total square footage was 2.367 million square feet as of the end of the quarter, and that compared to 2.383 million square feet at the same time a year ago. And at this time, I'd like to turn the call over to Tom <UNK>, our Vice President of Finance, Treasurer and Corporate Controller. Good morning, and thanks for being with us this morning. I'd like to start by highlighting the performance from our various merchandise categories for the quarter. Men's merchandise sales for the quarter were down approximately 11%. Our average denim price points decreased from $95.85 in the first quarter of fiscal 2016 to $90.65 in the first quarter of fiscal 2017. For the quarter, our men's business was approximately 47% of net sales compared to 45.5% last year, and our average men's price points decreased approximately 5.5% from $56.10 to $53.10. Women's merchandise sales for the quarter were down approximately 16%, and our average denim price points decreased from $93.95 in the first quarter of fiscal 2016 to $85.50 in the first quarter of fiscal 2017. For the quarter, our women's business was approximately 53% of net sales compared to 54.5% last year, and our average women's price points decreased approximately 9% from $50.20 to $45.60. For the quarter, combined accessories sales were down approximately 13% and combined footwear sales were down approximately 16%. These 2 categories accounted for approximately 8.5% and 6.5%, respectively, of first quarter net sales, which compares to 8% and 6.5% for each in the first quarter last year. Average accessory price points were down approximately 4%, and average footwear price points were down approximately 9% for the quarter. For the quarter, denim accounted for approximately 42% of sales, and tops accounted for approximately 30%, which compares to 43.5% and 28% for each in the first quarter last year. Our private-label business was up just slightly as a percentage of sales for the quarter and represented approximately 34% of sales. During the quarter, we didn't open any new stores but did complete 2 full remodels and closed 5 stores. As of the end of the quarter, 390 of our 462 stores were in our newest format. For the full year fiscal 2017, we still anticipate opening 2 new stores, which includes 1 for back-to-school and 1 for holiday, and we also still anticipate completing 7 full remodels in total, which includes 3 that have already moved back into their remodeled space in May and 2 additional for back-to-school. And with that, we'll welcome your questions. Thank you, <UNK>. <UNK>, this is <UNK>. While we continue to look at new ways to market the online and make improvements there, I think some of the decline is due to the retail prices being down an average of 6.5%, I believe, for the company. And that had some effect. We've also reduced probably some of the markdown in denim, which, sometimes, when we need to clear certain denim, that sells well online. So I think a combination of those factors have made the difference there and that ---+ we'll continue to work on growing that business. <UNK>, we don't give forward guidance, so I'll pass on that one. Thank you. Well, we've taken the approach to really focus on the buy now, wear now, and the teams have done a very good job, both the merchandising teams and the store teams, getting behind the new product. As you see, we not only have lower price points in the store but less inventory. And so I think we're managing the business. The teams are doing a very nice job of managing the business. And so we're just trying to maximize the retail and develop continued long-term guests as we go forward. In the second quarter, I don't foresee much of a change as far as retail prices and such, but we have had a nice response to the new product and our approach, which has made the growth in total sales a little more challenging, but we think that's smart business and will play well in the future. <UNK>, do you want to take any of those questions. Sure. On the selling expense, you're right, <UNK>. The biggest portion of selling expense would be our payroll expense at the store, and kind of like <UNK> talked about, the product and the people side also. We want to make sure that we're investing for the future, looking at the long-term view. So we have continued to invest in our team, both our store managers and the leadership on the sales floor, making sure that we are able to attract and retain the top talented people. So we have invested more in payroll. We feel like that, that is the best decision for the long term. Also, you mentioned, I think, marketing was one of the categories, too. And given the current retail environment, we're just continuing to try and make sure that we are staying on top of whether it's social media or other types of marketing and making sure that we're not falling behind in that regard. So I think we're still ---+ we still try and be very smart with how we spend our dollars, but we want to make sure we're investing in the right areas for the long-term growth of the company. <UNK>, I just wanted to say congratulations and good luck in your retirement. Thank you, <UNK>. And just a couple of questions. Can you just remind me when you start lapping, on a calendar basis, the denim price declines that are hitting you so hard and also the loyalty program. <UNK> and Tom, do you want to take the loyalty program. Yes. I mean, there's kind of 2 components of the change in the loyalty. We had a new program that we launched a year ago in the first quarter. And so really, we're apples to apples on that for the whole quarter. In the first quarter, it created a little bit of disruption in April a year ago, so we called that out in the April sales release. So that's apples to apples. And then we also were winding down our old Primo Card program through most of last year and have expired that program. So we saw a positive to gross margin in the first quarter that we called out. That was about 200 basis points. And we'll continue to see an impact through the rest of the year but at a lower level and kind of step down as we move through the year. And <UNK>, on the denim pricing, I'd see the decline in, percentage-wise, in price probably consistent through second quarter, and then we'll review in third quarter. We'll probably see some improvement in the pricing, but we'll analyze that better for the next call. And do you have anything where you see like average prices starting to go up at this point right now throughout the store. As we get into fall, I think we'll see an improvement there. We will not be overlapping so many of the tall boots, the leather boots that we had over the last 2 years. And as I mentioned, the denim pricing level might improve some. So I think we'll see some progress there. But we cover a lot of lifestyles, and we have a lot of different price points, and we're staying focused on the buy now and wear now and what the guests are looking for. So it's kind of a fluid process with our merchandising and buying toward that price point. Okay. And then you didn't mention any store closures planned for this year. Do you have any planned for the year. I think most of what we'll do is finish for this year. We continue to review everything, and we'll look at it again for next year. But at this point, I think we've made our changes. If there are no further questions, again, we'd like to thank everyone for joining the call today. We appreciate your time. And this will conclude the call.

2017_BKE

2017

KLXI

KLXI #Good morning, everyone. Thank you.

2017_KLXI

2018

KEM

KEM #Okay. Well, thank you for attending the call today, and look forward to your continued support of our company. And we really are looking forward to a great fiscal '19. So thank you very much, and have a great day. Thank you.

2018_KEM

2018

MKSI

MKSI #Thank you, good morning, everyone. I am <UNK> <UNK>, Chief Financial Officer, and I'm joined this morning by <UNK> <UNK>, our Chief Executive Officer and President, and <UNK> <UNK>, our Chief Operating Officer. Thank you for joining our earnings conference call. Yesterday, after market close, we released our financial results for the first quarter of 2018 as well as our April 2018 operating model. We reclassified certain historical data for our service revenue to conform to typical industry practices. Beginning in 2018, we will now include revenue from the aftermarket sale of spare parts and service revenue, which had previously been recorded as product revenue. Our financial schedules, schedules of reclassified service revenue, and revenue by end market in the April 2018 operating model will be posted to our website, www.mksinst.com. As a reminder, the various remarks that we make about expectations, plans and prospects for MKS comprise forward-looking statements. Actual results may differ materially as a result of various important factors, including those discussed in yesterday's press release and in our annual report on Form 10-K for the year ended December 31, 2017 that's on file with the SEC. These statements represent the Company's expectations only as of today and should not be relied upon as representing the Company's estimates or views as of any date subsequent to today. And the Company disclaims any obligation to update these statements. Today's call also includes non-GAAP adjusted financial measures. Reconciliations to GAAP measures are contained in yesterday's earnings release. Now I will turn the call over to <UNK>. Thanks <UNK>. Good morning, everyone, and thank you for joining us today. I will start with our results for the first quarter of 2018 followed by several business highlights. Then I will turn the call over to <UNK> <UNK> who will share additional details on our customers and markets. <UNK> will then provide further information on our financial results, our second-quarter 2018 guidance and our updated operating model before we open the call for your questions. First quarter revenue was $554 million, above the high-end of our guidance, and an increase of 27% from a year ago. This marks the seventh consecutive quarterly record for revenue. We also set a new quarterly record for non-GAAP net earnings totaling $114 million or $2.07 per share. We achieved record revenue in the first quarter for both our semiconductor and advanced market segments. Revenue for the semiconductor market was $313 million. Revenue for advanced markets was $241 million and is now approaching a $1 billion annualized run rate. Furthermore we have evolved our business model over the last five years, achieving a more balanced revenue split between semiconductor and advanced markets, which is now 57% and 43%, respectively, even with a significant expansion of our semiconductor business. Our growing exposure to these exciting advanced markets presents a unique opportunity for MKS as well as diversifying our customer base. As we study these broad market trends it is clear that the innovation in photonics and laser processing will lead to new markets and opportunities that can only be imagined today. As we did in the semiconductor market over the last 50 years, we will drive that same innovation with our Light and Motion Division. This is a tremendous strategic opportunity to create value and accelerate growth. We've made substantial improvements in terms of integrating legacy Newport businesses. Historically each business unit operated independently; it did not leverage the investments across the combined company. Over the past two years we've addressed this fundamental issue by bringing the business units together with a keen focus on identifying customer opportunities that could be served across multiple product categories. We've also integrated the sales team presenting a unified approach to customers in helping them better utilize the entire breadth of capabilities and advantages of our integrated portfolio. As we move into 2018 we will explore additional sales channel strategies to operate more efficiently and drive growth. It is very clear that after owning Newport for less than two years this is a great asset that has benefited from the influence of the MKS business processes. Our Light and Motion Division continues to perform extremely well driven by growth in our industrial market segment as well as building OEM businesses with our semiconductor customers. Turning now to market outlook, we expect to see double-digit growth in WFE for the semiconductor business for 2018, which is a more positive outlook from our last earnings call. Given our position in the market today, we anticipate we will outpace WFE growth with sustained strength driven by robust demand for data storage and data processing applications. We also anticipate significant growth in advanced markets, especially those segments driven by increasing applications in laser manufacturing. I am extremely pleased with our first-quarter performance and confident our strategic strategies have positioned us for market outperformance in 2018 and beyond. Now I will turn the call over to <UNK>. Thanks, <UNK>. As we have discussed in the past, our Power Solutions business continues to be a highlight, enabling us to deliver unparalleled technical capabilities to customers. The increasingly complex challenges for etching and deposition processes are driven by the requirements for advanced logic and DRAM and the challenging vertical structures for BNAND. Our strategy is to invest early in key technologies and product platforms that we believe will be transformative, knowing that design wins will lead to longer-term revenue. The strategic investments we made in dielectric etch beginning three years ago have led to key design wins which are now paying off with significant orders. More recently, investments in conductor etch and deposition are starting to generate design wins, which we expect to fuel future revenue growth and continued share gain. In the first quarter we had design wins in both conductor etch and deposition applications for V-NAND with a large North American OEM. First-quarter revenue for our Power Solutions business was the highest ever, up 17% from an already strong fourth quarter. We are pleased to report that, according to industry analysts, our Power Solutions market share has increased 230 basis points in 2017. Turning now to our advanced markets. As we have discussed in the past, the need for faster, more precise manufacturing techniques requires unprecedented innovations in laser processing capabilities. Demanding applications such as cutting, scribing and marking are enabled not only by ultrafast pulse lasers but also by the ability to control the laser beam through precise beam profiling and power measurement. MKS' capabilities in ultrafast lasers, laser power measurement, laser beam profiling, motion control and beam delivery optics uniquely positions us to provide comprehensive solutions that surround the work piece. This is analogous to how our vacuum instruments and controllers surround the process chamber. We are the industry leaders in laser beam profiling and power measurement and our first-quarter revenue grew 23% sequentially. We received orders for laser beam profiling systems in Germany. The first order was for an automotive transmission laser welding application. The second order was for the additive manufacturing of complex metal components. The customer chose our new BeamWatch system, which is the industry's first noncontact monitoring system that shows the changes in size, location and energy distribution of the laser beam in real time. Finally, our core laser business had another strong quarter. In Japan we won an order for a wafer dicing application using our new picosecond laser. We also won orders for [thin] scribing, glass drilling and die attach film cutting applications using the ultraviolet nanosecond lasers. In 2017 our laser business grew 23% and this growth has accelerated in the first quarter of 2018 where revenue is 62% higher than a year ago. We project that the opportunities for laser materials processing will approach $4.5 billion by the year 2022, offering another large and growing market that diversifies MKS' revenue profile. At this point I would like to turn the call over to <UNK>. Thanks, <UNK>. I will cover the first-quarter financial results, our Q2 2018 guidance and then our updated April 2018 operating model. Revenue for the quarter was $554 million, an increase of 8% sequentially and an increase of 27% compared to the first quarter of 2017. The increase in revenue was broad-based, particularly strong to the latter part of the quarter. Sales to the semiconductor market remained very strong and we achieved a new record of $313 million in the first quarter. Sales to our advanced markets, which comprise 43% of our total revenue, increased 6% sequentially and also achieved a new record of $241 million. The Light and Motion Division achieved a new quarterly record for both revenue and non-GAAP operating income, which were $206 million and $54 million respectively. During the quarter in which we acquired Newport in 2016, the pro forma revenue and operating income were $151 million and $16 million respectively. In the past seven quarters, quarterly revenue has increased over 35% and non-GAAP operating income has increased by almost 240%. As a result we more than doubled the operating margin of the Light and Motion Division from 10.6% in the second quarter of 2016 to 26.2% in the first quarter of 2018. As <UNK> has mentioned, this acquisition has also substantially increased our percentage of revenue from advanced markets in that timeframe, providing additional growth opportunities. GAAP and non-GAAP gross margin were 47.4% and non-GAAP operating expenses were $117.8 million for the quarter. Due to strong financial performance levels we expect variable incentive compensation expense to be higher than expected. In the first quarter higher incentive compensation had a 30 basis point impact on gross margin and an approximately $5 million increase in operating expenses. Non-GAAP operating margin was 26.2%, which was within our expected operating model range even with higher incentive compensation expense. GAAP and non-GAAP interest expense was $5.4 million and $3.6 million, respectively, and interest income was $1.1 million for the quarter. The non-GAAP tax rate was 19.5% and the GAAP tax rate was 17% largely due to the benefit of tax deductions related to stock compensation. During the quarter we incurred restructuring charges of $1.2 million primarily related to further streamlining the consolidation of certain administrative functions. GAAP net income was $105 million or $1.90 per share and non-GAAP net earnings were $114 million or $2.07 per share. At the end of the first quarter we had cash and short-term investments of $542 million, which approximately 40% was in the US and 60% in our international operations. During the quarter we made another voluntary prepayment on our term loan and have now completed over $430 million in payments in the last 24 months since loan origination. As of March 31 our term loan balance was $348 million; our net cash position increased $44 million; we ended the quarter with net cash of over $195 million. Furthermore, on April 11, we completed the fourth repricing of our term loan which reduced the interest rate spread by an additional 25 basis points to LIBOR plus 175 basis points, which equates to a non-GAAP interest rate of 3.25%. The impact of these recent actions will reduce our non-GAAP interest costs by almost $3 million per year. The cumulative effect of both voluntary debt prepayments and four interest rate repricings have reduced our annualized non-GAAP interest costs by more than 70% in the last 24 months. Free cash flow for the quarter was $63 million. In terms of working capital, days sales outstanding increased slightly to 56 days at the end of the first quarter compared to 53 days at the end of the fourth quarter due primarily to the timing of revenue in the quarter. Inventory turns were consistent with the fourth quarter and with 3.2. We continue to provide a balanced approach to capital deployment and during the quarter we paid a cash dividend of $9.8 million or $0.18 per share. Turning to Q2 2018 guidance, we continue to see strong growth in our end markets. We estimate that our sales in the second quarter could range from $550 million to $590 million and gross margin could range from 47% to 48% reflecting expected product mix. Non-GAAP operating expenses could range from $113 million to $119 million, R&D expenses could range from $36 million to $38 million, and SG&A expenses could range from $77 million to $81 million. Non-GAAP interest expense is estimated to be approximately $3 million and our non-GAAP tax rate could be approximately 19.5%. Given these assumptions second-quarter non-GAAP net earnings could range from $116 million to $131 million or $2.09 to $2.36 per share. In the second quarter amortization of intangible assets is expected to be approximately $11 million. GAAP interest expense estimated to be approximately $3.4 million. And GAAP net income expected to range from $106 million to $121 million, or $1.91 to $2.18 per share on approximately 55.4 million shares outstanding. Finally, yesterday we published an April 2018 operating model which is an update to our January model reflecting higher illustrative annualized revenue levels and the impact of our fourth term loan repricing and voluntary debt prepayment in the quarter. At an illustrative level of $2.3 billion, we estimate that non-GAAP gross margin could be 48% and non-GAAP operating margin could be 28%. Projected non-GAAP tax rate of 19%, our illustrative model shows potential non-GAAP EPS of $9.31. This represents an additional 9% accretion from our January 2018 model published last quarter, an improvement of over [16]% from the published model a year ago. Lastly, as a reminder, operating expenses in the first half of this year are higher than anticipated due to variable compensation. The April operating model reflects more normalized incentive compensation. That concludes the prepared remarks and we'll now open the call for questions. Yes, I think we expect to see slight improvement in both, pretty consistent and solid revenue for both of those markets. So I think the midpoint is somewhere around 3% higher or so than what we just achieved. So we can see this consistent with both markets. Well, I'll go back to the same question that was asked last year, and the same thing was supposed about the second half of 2017 and that didn't turn out to be the case. And I've been in the industry long enough to know that the forecast is wrong, get fast. That's what we tell our operations team. But we see WFE as being strong in terms of somewhere 6% to 12% up. The fundamentals are intact as far as storage, computing and networking, strong V-NAND and DRAM. We have multiple OEMs. The mix [of this] changes. Demand can vary quarter to quarter. Our Korean business appears to be still very strong. We read all of the commentary about the end customers like SK Hynix investing in DRAM and 3-D, Micron with its Singapore fab, spending at TSMC and Samsung. So it appears to be positive, but I am from Missouri. I certainly make sure we operate the Company with a foot on the brake and a foot on the gas. But from what we see it still appears to be pretty consistent business but we will see. Like I said, last year was projected to turn over and it didn't and we'll see what happens. But so far we feel pretty comfortable with where we are. And we also feel very comfortable about the just external demand for the chips which drive the demand for the equipment. Well the research market segment of that business, if you look at it, if you pile it in with non-semi, has the same tendency to be seasonal. We typically don't really see a lot of seasonality in that business. I think Newport used to say their first quarter used to be kind of a difficult one for them, although they did very well. So I don't know, <UNK>, if you or <UNK> have any other commentary, but we don't really note any seasonality of the business. Yes, and I think, <UNK>, some of the areas of the advanced markets that were resourced and focused on are the industrial applications. And that is what is driving a large part of the growth. <UNK>, could you repeat the question because it kind of got muted towards the second half of what you are saying. So <UNK> the Newport business brought in for semi the lithography inspection large OEMs and they've grown just similarly, as you would expect, as the vacuum type OEMs. And so, the design wins that were awarded years ago or a couple years ago and continued design wins or what's driving the Newport side of the semi-growth if that's your question. I think, <UNK>, the only other color I would add to that is the laser manufacturing processes are not just the heavy industry type of applications like welding and cutting of metal, but also in some of the finer types of precision laser manufacturing. And that's where we have strength in terms of pulsed lasers. And so, that's even more exciting to us in those applications. So [TCBA] drilling, fine metal cutting and those kinds of applications. Yes, we put it in the category of microelectronics. And certainly at our Analyst Day in June we are going to amplify our position in those markets. We are going to highlight our power business and we're also going to highlight our laser business and give a deeper explanation of why we win and where we think those markets are going. But I agree with <UNK>, it's not just the heavy industrial stuff, it's actually more applications in mobile device manufacturing or other types of displays. Yes, I think that the bigger volume is actually volume. So as we add more ---+ if you look at the Light and Motion product portfolio, pretty good margin, a little above the corporate average. The (inaudible) side is again close to that range as well. So what I find, typically volume is the bigger driver quarter over quarter. So that's what I would say. And then we get a 50% variable gross margin in our model for quite a long period of time. That's pretty applicable going forward as well. So volume is number one. Mix, I think you will see us as we grow the other advanced markets we do get a little better margin there over time as well. So we are not seeing seasonality in the advance markets because the markets we are attacking there are really high-growth markets, these applications in laser microprocessing. And those are really driven by demand and higher manufacturing capacity for things like iPhones. So, that's a much larger growth rate than what might be seasonal in a research environment. Yes, I think we could still grow a lot more market share just by winning more dielectric etch. We certainly don't have all it for sure. And things like V-NAND and DRAM use a lot more dielectric etch than they might have in the past. So I think just dielectric etch itself and our position in it and our continued winning of design wins there should also grow that. Most of the conductor etch we talked about is design wins. We really don't have a lot of insight into their particular OEM, their inventory levels. We just worry about our own for the most part. But it has been ---+ the commentary has been consistent. I can't see that it's either grown or shrunk; it has been consistent from what we see. Yes, I mean I think that's always been, the last few years, kind of a strategy of the customers to deal with larger, more global, more technically competent suppliers, so that's us. We benefit from that. As far as actively seeing them participating in that, no it's more about just commentary, look to your left look to your right, that guy might not be there next year. One of those types of things, I've heard that for 30 years. But I think we are winning because of the capability we have around the world, the deep technology we have and the type of support we provide our customers. So, what's our strategy now ---+ we are gaining share because they believe we can support their business. <UNK> and I will tag team on that one. Yes, I think the OEMs in China are still the same ones; I think we all know who they are. And I think they are still in the design phase and piloting ---+ putting their tools into pilot lines. So we've seen some growth in LED type of OEMs, MOCVD types. But for semi it hasn't really changed from historic levels but certainly a lot more activity. Yes, and we have a very good relationship. We have a concentrated strategy like we did in Korea and you can note the success we have had there, another great quarter in Korea again. The same approach to China that we want our share, we want to make sure that we have full support for those customers no matter how small they are or how fledgling they may be. And we certainly have a lot of content on the tools and when the business picks up we will benefit greatly from it. Well, first of all, we manufacture in China. We have a large operation in Shenzhen. We also have been on the ground in China for probably 15 or more years, well before the semiconductor market ever really thought about forming there SMAIC was really the only customer we had. So we have had a strong presence in China for a very long time. And matter of fact, when we acquired Newport we put more people on the ground in China because we thought that was fertile ground for the laser and optics and photonics business. So, we have the resources on the ground to support that and we are a Chinese citizen by having a large volume presence in Shenzhen ---+ as well as service and sales and everything else. Yes, good question, <UNK>. So we keep driving the rate down, so 3.25% is a pretty low-cost debt and a very flexible debt instrument. There's really no covenant to speak of and we can let this thing go for a while. So I think you will see us ---+ we are at 348 right now at the end of last quarter. We may do a little more. We're kind of in the rate ZIP Code right now for the capital structure and, as you know, the EBITDA ratios and the leverage ratios are very, very modest. So we might do a little more, we might hang here for a bit, but I wouldn't see substantial movement from here quite honestly. Thank you. We're very pleased with the strong start to 2018 and are excited about how well MKS is positioned for the balance of the year in both semiconductor and advanced markets as we remain on our path to sustainable and profitable growth. Thank you for joining us on the call today and for your interest in MKS. We look forward to updating you on our progress and report our second-quarter financial results. I hope to see many of you at our obtaining Analyst Day at the NASDAQ market site in New York on June 19.

2018_MKSI

2017

GIS

GIS #Thanks, Don Good morning, everyone I appreciate the opportunity to give you a deeper dive into our North American Retail segment I’m proud to lead this team We have great people We’re moving with urgency We’re operating differently than a year ago and I think you can begin to see that translate into our performance The key messages for North America Retail this quarter are similar to headlines for a total company We’re driving broad-based top line improvement with organic sales slightly positive amounting to flat in the quarter Our profit was down this quarter, but improved sequentially over the first quarter and we have clear initiatives that will deliver profit growth in the second-half We’re executing well against our fiscal 2018 priorities and we have strong back-half plans in place to maintain our trajectory Looking at the financial results in the second quarter, organic net sales for this segment were up just under 0.5% Cereal posted 7% net sales growth, which was ahead of Nielsen-measured retail sales, due to non-measured channel growth, strong sell-in for new Chocolate Peanut Butter Cheerios and other quarterly timing shifts Fiscal year-to-date, U.S Cereal net sales and retail sales are each roughly flat to last year Snacks net sales increased 5% in the quarter, with growth on Lärabar, Nature Valley and fruit snacks, partially offset by declines in Fiber One Canada net sales are up 1% in constant currency and net sales for the U.S Meals & Baking operating units were down 2% yogurt net sales declined 11% and a 11 point improvement over the first quarter, driven by continued declines in Light and Greek varieties, partially offset by excellent innovation in news and core established brands Segment operating profit declined 5% in constant currency in the quarter, driven by higher input costs, unfavorable trade phasing and increased advertising and media expense, partially offset by favorable product mix and benefits from cost savings We’ve driven sequential improvement in U.S retail sales since the beginning of the year In fact, our second quarter retail sales trends are almost 700 basis points better than fourth quarter of last year and our improvement is driving better results for our categories We saw retail sales trend positive in measured channels in the second quarter And it’s not just a couple of businesses driving this trend, our retail sales trends are better in eight of our nine largest U.S We’ve had absolute retail sales and dollar shared growth in this quarter on six of these nine businesses Not only those – not only are these trends broad-based or high-quality, we’ve increased our brand-building investment this year and we’re leveraging new campaigns on some of our biggest brands, generated by new creative agencies and we’re taking a fresh approach towards consumer messaging For example, new campaigns on Cereals, Nature Valley and Pillsbury are helping drive baseline sales improvements by as much as double digits for these branches at the end of last year We’re also seeing benefits from an increased focus on innovation with retail sales from new products of more than 50% of the share, driven by successes like Oui by Yoplait and Chocolate Peanut Butter Cheerios In total, our second quarter baseline sales trends in the U.S improved by over 600 basis points relative to the fourth quarter of 2017. That represents more than 75% of our overall improvement in the Nielsen-measured channels We’re also driving better merchandising performance this year Our display support, which is the most effective merchandise vehicle was up double digits in the quarter And when you have good brand-building support and strong innovation, your merchandising works even harder for you It’s important to note that we’re maintaining discipline in our pricing in the market Average unit prices for our overall U.S portfolio were up 5% in the first-half However, three quarters of that increase was due to significant mix impacts from our year-over-year business Excluding year-over-year, average unit prices for the rest of our portfolio were up 2% in the first quarter and about a 0.5% in the second quarter The quarterly change was driven in part by moving end of the zone or [ph] dough businesses, where our seasonal pricing is lower than last year, but still higher than two years ago, as we had planned As we look ahead to the second-half of fiscal 2018, remember that our Nielsen pricing metrics will compare against periods last year, when our aggregate U.S pricing was up 5% or more We’re also driving strong results in growing channels, including exceptional performance in e-commerce e-commerce business grew 82% in the first-half of the year and we still enjoy higher market shares in online full basket purchases compared to shares in bricks and mortar channels We’re excited about the opportunity that e-commerce provides and we will continue to develop our insights and capabilities to keep our business in advantage position and it’s important in emerging channel With that as a backdrop, I thought I’d briefly check in on the segment priorities I shared at our Investor Day in July and give you a preview of the product news innovation that will drive results in the back-half of 2018. Our top priority, North America retailers are driving improved performance in U.S I’m happy to report that we’re achieving that goal through six months We’ve seen a strong turnaround performance in measured channels this year, with retail sales growth in the second quarter, and we’ve gained 70 basis points in market share through the first-half Four of our largest taste-oriented cereals, which make up over third of our portfolio driving a performance this year Year-to-date retail sales are Lucky Charms and Cocoa Puffs reached up 14%, while Cinnamon Toast Crunch and Reese’s Puffs are up 8%, the corn puff and kid cereals, because roughly half of the consumption on these brands is by adults Compelling consumer news has been a theme across these brands, whether that’s new marshmallow news each quarter on Lucky Charms or cinnamon news on Cinnamon Toast Crunch, which has driven 43 consecutive months of market share gains for the brands We’re planning to extend our cereal momentum in the second-half behind some exciting innovation and platform marketing executions Chocolate Peanut Butter Cheerios, which launched in October is off to a great start and is turning at the top of the category We’ll continue to fuel this new product in the second-half with strong in third quarter In January, we launched two new blasted shred cereals in Peanut Butter Chocolate and Cinnamon Toast Crunch flavors and an opportunity to invigorate $400 million shredded wheat segment by delivering on to tidy and taste What happened in the fast-growing nut butter channel with new almond butter and peanut butter varieties of our Nature Valley Granola Cereals We’re supporting these launches, as well as the rest of the portfolio with remarkable marketing and merchandising I’m probably most excited about our cheerios and merchandising initiatives at the Ellen DeGeneres show that begins in January We’re running an on packed sweepstakes, where consumers share an active good that demonstrated for a chance to win two prizes One for themselves and one to share with another person as an active good The sweepstakes will be announced on the show next month Now let’s shift gears to our second priority, which is reshaping our U.S yogurt portfolio by innovating in faster-growing emerging segments of the category In 2018, the yogurt innovation has been tremendously successful thus far, led by Oui by Yoplait, which already makes up almost 10% of our U.S yogurt portfolio Oui’s glass jar and unique positioning really standout on shelf, which has helped drive strong consumer trial and we’re seeing an acceleration in repeat purchases Retailers love wheat, because it is driving more sales with current consumers and attracting new yogurt buyers Through the first four months in shelf, we used the largest launch in the category over the past five years And Yoplait Mix-Ins targets towards traditional yogurt levers looking for great tasting snack options is the second largest launch in the category this year While innovation is critical to our U.S yogurt strategy, it’s also critical that we stabilize our two large core platforms in kid yogurts and Original Style Yoplait This year, we adjusted our biggest consumer paying atGoGurt franchise by making the tubes easier to open Consumer investment communicating this change is driving improvement on the GoGurt business, with retail sales nearly flat in the second quarter We’re also investing in advertising for Original Style Yoplait, featuring our Mom On Campaign, where we celebrate hard working moms and show how Yoplait fits into our busy life, and we’ve seen sales trends improved here as well over the last few quarters We have plenty of news to drive further improvement on GoGurt in second-half, and we were launching four additional flavors in January; Raspberry, Key Lime, Mango and Black Berry We’re also launching a new line of Annie’s powder sugars We make this product using organic home milk and four flavors that combine fruits and vegetables with no added sugar Fruit is the hero on the traditional yogurt segment, nearly 50% of shoppers like more So we’re giving them what they want, adding more fruits to our Original Style Yoplait We’re updating the package to communicate the change, and thus using the change on TV and digital advertising We’ve also seen indulgence opportunity in the traditional yogurt segment and then we can bring more consumers to shelf for the decadent home milk and real food offering Our new fruit sideline shows off its indulging ingredients with clear packaging and it’s price for the dollar to maintain broad appeal We know there’s still a long way to go on the U.S sugar, but we like the direction we’re heading We think the combinations were first-half improvements and our back-half news will help us cut our declines to single digits by the end of the year Our third priority in North America Retail this year is driving differential growth on Totino’s hot snacks, Old El Paso and snack bars I would say, we’re generating good growth so far this year with low single-digit retail sales increases across each of these large platforms On Totino’s hot snacks, we were forced to led consumer support plan for the back-half, target towards a millennial male consumer We’re bringing to life for live free couch hard campaigns in time for football championship season by inviting consumers to show us how they couch hard We’re supporting the campaign with football theme in store merchandising and we will continue to run advertising and digital in TV throughout the year For Old El Paso in the second-half, we’re accelerating our in-store activations We’re again partnering with Avocados from Mexico, which is one of our largest merchandising events of the year, and we’re bringing taco truck merchandising displays to key retailers And we will continue to support the business with our Anything Goes in Old El Paso campaign Growth on our snack bars business has really been a tale of two stories, with strong growth from Nature Valley and Lärabar, offsetting declines in Fiber One Retail sales for Nature Valley are up up double-digit so far this year, helped by new advertising on our core and excellent performance in our new nut better biscuits and granola cup platforms And Lärabar continues to deliver 30% retail sales growth behind strong distribution growth and investment behind its food made from food campaign, which will continue in the back-half of the year The story on Fiber One is more challenging We’re working hard to improve performance by refocusing our messaging on our core consumer and renovating our products and packaging which are the Fiber One’s core role permissible indulgence And the retail sales were still down sharply in the first-half, driven by reduced distribution base sales per point of distribution of turn positive, which is a good indicator of future trends We’re working to rebuild the innovation pipeline of Fiber One, including the launch of eight new items in January, featuring four flavors of Fiber One Bites and we’re supporting these launches with our all mine TV and digital advertising We have some great new indulgent offerings on Nature Valley as well Consumers are looking for indulgent treats made from real food So we’re introducing layer bars to have a triple layer of nut butter, granola with nuts and chocolate, and we’re launching soft-baked filled squares that combine whole grain Oatmeal bars with creamy peanut butter filling We’ll support these lunches with TV, social media, digital coupons and merchandising With the winter in full swing here in Minneapolis, I thought I’d share a quick update on our performance so far in the key soup and baking seasons We’re back in our game on – in soup this year Retail sales growth were up 2% We gained a half point to share in the category two months in the soup season, with strength across a core registered business, including new progress organic Retail sales for Betty Crocker Dessert Mixes were up a 0.5% since October, and we gained over a plenty of share behind strong and season support and good performance from our core segments And I’ll closer by refrigerated dough, our results have improved over last year’s key season, but we’re still not where we want to be Our new media campaign Made at Home is driving better baseline sales and we have stronger merchandising plan this year Retail sales declined 1% in the first two months of key season, but we’re seeing month-by-month improvement and we posted growth in November Our final priority for this year is to expand our national organic portfolio and we’re seeing good results here too, particularly on three of our largest businesses Mac And Cheese, Cereal and fruit snacks We generate year-to-date market share gains across each of these categories due to strong consumer engagement, distribution expansion and instruct support, and we’ll continue those efforts throughout the second-half to continue to drive growth in our national organic portfolio I’ll close by summarizing my key messages for North America Retail today We’re seeing broad-based high-quality improvement in our top line trends, including organic sales growth in the second quarter Our profit performance is improving and we have clear initiatives that will deliver profit growth in the second-half We’re making progress on our fiscal 2018 key priorities, and we have strong back-half plans in place to maintain our trajectory For the full-year, we now expect organic sales to be down 1% to 2%, which is a 100 basis points better than our original guidance We expect segment operating profit growth on a constant currency basis With that, I want to thank you for your time this morning, and I hand it back over to <UNK> Good morning, Chris Yes, sure Thanks, <UNK> I’ll give you – try to answer as many of those questions I can as a lot rolled up there Clearly, it’s a competitive environment right now as new players entered the U.S as emerging channels like e-commerce come on to the scene So definitely, it’s competitive both on the retailer side, as well as the manufacturer side What I can tell you is, I feel really good about our ability to compete in this environment Where we’re big in the U.S , we’re one of the top food companies We have scale across center store, refrigerated and frozen And as we grow the categories of our retailers growth, so again, it’s important that we have good plans locked in with our retailers In addition to that, we’ve got one of the best sales forces as ranked by Cantor in the industry They’re doing a great job of really sitting down with the retailers and putting together joint business plans And what we find with those joint business plans is trade-offs And again, even across a retailer, we might give a bit one category to get something in return in another But by applying our scale, and again, if we’re growing broadly, that’s really good for our retailers category We’re finding a way to get to win-win solution So, again, there’s a lot going on And certainly, space optimization, that’s something that we’re seeing as well What I’d tell you there is, we have some businesses that are going to win in that So we have a broad snacking portfolio, which will likely win in that environment in addition to that natural organic’s core strength of ours as well with the third largest national organic player in the country, so that’s good And in the categories that might contract What we tend to see is that, the smaller manufacturers the third or fourth or fifth players tend to be the ones that lose And when you look at our business in the U.S , 80% of our brands are the number one or number two in their category So it’s tough out there for sure But at the same time, I actually feel like, we’re in a place now that we can be advantaged and really win in this marketplace Thank you Yes Sure, <UNK>, this is Jon What I can tell you is that, we really like the way that we’re competing in the cereal category right now When you look at our performance through the first-half, our change in trend is pretty significant and nearly 70% of that change is from baseline sales So, again, it’s really better innovation and better marketing that’s driving our results in the category, and that’s really been the recipe for success in the category over the long-term So we’re very committed to, again, continue to build strong brands and then innovate more aggressively and we feel really good about the pipeline as we look forward As you think about the category, it’s still a big category, important category is the fourth largest class across grocery And we believe and it’s highly penetrated 90% of households consume cereal So we really believe in the category We think there’s growth ahead There are some interesting timing of things So again, if you think about the category grew nicely during the financial downturn So between 2007 and 2012, the category grew As the economy gradually got better and out of home eating increased, we saw the category tip the negative So we’re starting to see that moderate in terms of the in-home versus out-of-home We also know that, 30% of consumption of the category comes from boomers and older adults and that group of consumers are going to grow So we absolutely believe in the category We believe that strong marketing and good innovation can drive it We’re committed to doing our part and we look forward to again driving our growth as we move to the back-half and into the future You too Sure, sure So a couple of things One, we really like the way we’re competing across categories And again, as I mentioned in my prepared remarks, we’re seeing broad-based improvement across the majority of our categories and we like the way we’re competing across channels It’s really is broad-based better as well We feel like we’re winning in the majority of our channels, so that feels really good As we think about share, again, the thing that gives us good confidence that we’re heading in the right direction here is the majority of our change and improvement in trend is really coming from baseline sales So, again, across total U.S retail, 75% of our improvement is via baseline sales So it’s really not a case of merchandising driving the bulk of our improvement, so it’s better marketing And as I mentioned in my remarks, we made a pretty major change last year shifting long relationships with advertising agencies moving to some new ones and we really like that trend that we see in market and we know that is driving our business and our baselines and our innovations are better, it’s up 50% year-over-year And I can tell you that’s actually off the same number of items So, again, it’s not turning much stuff out there, it’s actually better quality So we’re really focused on competing We’re focused on the fundamentals And we believe that if we continue to do that, we can continue to see broad-based wins across our business Again, we feel good generally across the majority of the channels And again, without calling off specific customers, there’s this puts and takes But the reality is, we’re growing share across all channels And I think for us right now, that’s the focus to compete wherever we are So I’m not going to – there’s not one that jumps out of me Again, we feel really good about how we’re trending in all of them I’ll give you a few thoughts on Wii So, again, we’re really pleased with the results there It’s about 1.5 share of the category already We expect that to continue to increase And for year one, again, we expect this to be in north of $100 million in sales So, again, it’s off to a terrific start We’re seeing really good repeat rates and consumers are telling us that they view us very, very unique In terms of how we got there, I’m really proud of we And again, let me just start by saying, we know there’s a lot more work to be done in yogurt So we’re not taking any victory laps in that category, to be clear But I like the way that, that seems really operating They’re focused on playing our game and then looking for opportunities and segments that are going to be growing in the future and bringing fundamental innovation And we did it in a really scrappy way, innovating quickly and closely with consumers is truly is consumer-first innovation And by being in market and iterating over time, we’ve got to a product that we know really resonates with consumers really works hard So the actual process that we used to create, we were actually moving across overall use in the U.S , really around the world to make sure that we move more quickly and make sure that we’re connected as closely to the consumer as we can And we believe that’s going to help our pipeline as we move forward and make our innovation even more impactful Sure, Steve The categories through key season is growing, so that’s good overall And, again, for the rest of the strong share, which we like Similar to some of the other businesses what we really like that 80% of our improvement in trend in soup is actually coming from baseline sales So, again, it’s fundamentals, it’s good marketing Now we’ve got a little bit of innovation with the progress of organics, it’s working for us as well So, again, like many of the other categories, it’s about fundamentals and competing well And if we do that, we think that we can be successful and drive the category And again, through key season, we’re seeing the category grow and it appears to be healthy and we’re having good constructive conversations with the retailers around it So we’d expect continued growth through the back-half of the year

2017_GIS

2017

CVCO

CVCO #Thank you, Bruce, and welcome, everyone, to the phone conference and on the web. Glad to have you today. With me as usual is Dan <UNK>, our Executive Vice President, Chief Financial Officer, and he'll begin with the disclaimer and our financial report, and then I'll come back and make a few comments and we'll be happy to take your questions. Dan. Thanks, Joe, and good day, everyone. Before we begin, we respectfully remind you that certain statements made on this call, either in our remarks or in our responses to questions, may not be historical in nature and therefore are considered forward-looking. All statements and comments today are made within the context of safe harbor rules. All forward-looking statements are subject to risks and uncertainties, many of which are beyond our control. Our actual results or performance may differ materially from anticipated results or performance. Cavco disclaims any obligation to update any forward-looking statements made on this call, and investors should not place any reliance on them. More complete information on this subject is included as part of our earnings release filed yesterday and is available on our website and from other sources. For our fourth quarter financial report, net revenue for the fourth fiscal quarter was $198 million. That's up 12% from higher home sales volume compared to $177 million during the fourth quarter of fiscal year 2016. Consolidated gross profit in the fourth fiscal quarter as a percentage of net revenue was 21.3%, up from 20.7% in the same period last year. Operating leverage, mainly from the increased home sales volume, improved gross profit as a percentage of net revenue. Selling, general and administrative expenses in the fiscal 2017 fourth quarter as a percentage of net revenue was 12.7% compared to 14.2% during the same quarter last year. The improvement was from better SG&A utilization and higher sales levels. Net income for the fourth quarter of fiscal 2017 was $10.9 million compared to net income of $7 million reported in the same quarter of the prior year. Net income per diluted share for Q4 '17 was $1.19 versus $0.77 in last year's fourth fiscal quarter. Comparing the April 1, 2017, balance sheet to April 2, 2016, cash was approximately $133 million compared to $98 million last year. The increase was from net income and cash provided by operating activities. For certain items on the balance sheet, total consumer loans receivable increased from further development of home-only loan programs and additional mortgage sales volume. Prepaid expenses increased from the timing of quarterly income tax payment activity. Accounts payable grew from more home sales as did most accrued liability categories, including warranty and customer deposits as well as unearned income premiums from higher policy counts at our insurance subsidiary. Other asset and liability accounts remained relatively consistent. Stockholders' equity grew to approximately $394 million as of April 1, 2017, up $41 million from the April 2, 2016, balance. Joe, that completes the financial report. Thank you, Dan. Well, we're pleased with the results, and more importantly, we're very pleased with the outlook for our industry and for Cavco in particular. It's interesting to note that in recent surveys, including one just recently by USA TODAY, those who link homes with the American dream are greater than nearly 60% in every age category. And at the 18 to 34 age cohort, it's over 65% of those people who still want the ---+ to own their home, own home. And that's a very important statistic for us because many of our buyers come from that millennial group as well as the empty nester and retiree group, 2 major markets for us. In both these markets, home ownership is still very important. However, the median price, the average price of a site-built home is greater than $350,000 today. So that presents a challenge because of the households aged 25 to 54, studies show that only approximately 40% can qualify for a typical mortgage of the average site-built home that I just mentioned. Yet 80% can qualify for a $200,000 price point home. Now 80% of what our industry sells is less than $150,000. So we think we're in the right spot, right place. Manufactured housing accounts for about 9% of housing starts. We look to increase that as an industry over time, and we also expect the housing industry in general to increase. In fact, most analysts expect it to increase. So as we look out over a few years, we should see industry growth in line with housing in general, and we also, of course, will work towards gaining greater share of housing starts in total. We'll do that by trying to reach out to more people. We'll do it with new product introductions. We're looking at new classes of manufactured homes. Most of you who follow the industry know that we build our homes generally to the federal preemptive code called ---+ generally called the HUD code. The homes can be placed anywhere in the country, but they do have certain restrictions because we transport them over highways. So we're looking at different ways to change the elevation of the home. We'll try to work with HUD to get some regulatory help to allow us to do more to the homes on site, which allow us to do things such as higher pitched roofs and add garages to make them more compatible or competitive with home construction on-site. We'll still have the major advantage of the efficiencies of building in a factory, whether that be with material supplies coming to one location, labor and more efficient use of labor and stringent quality control. So we'll have all the benefits of a systems-built construction process within an enclosed environment, the factory, but we'll also have the advantages of more creative product. So the industry, and we in particular specifically, are working towards that end. In the meantime, we're not going to abandon the truly affordable price point home we have, the HUD code home, which is doing very well and should do, I think, better in the future. So overall, we're quite pleased with the way things are working out so far, and we are relatively or cautiously optimistic, you might say, for the future. I think as the economy continues to grow and jobs are created, we should benefit. With that, I think we'd like to, Bruce, take any questions that these folks may have, if Bruce is there. Well, I'll let Dan address the price point, the average selling price. I'm actually in ---+ traveling. I'm in West Virginia today speaking to people within our industry, our distribution base in Virginia and West Virginia, but Dan's in Phoenix. However, I would comment on the FEMA product. For those of you who are not familiar with it, the industry has typically built emergency housing for the Federal Emergency Management Agency, FEMA, over the years for various catastrophes and did so this past year and in particular, this first quarter calendar '17. We don't know the specific number of homes, hasn't been, that we've seen anyway, hasn't been publicly disseminated, Dan. We did build some, a fairly modest amount from our factories for FEMA. We'd expect to do so again in the future if the need arises. You actually bid for those products, and then we've been involved in the bidding process. And we expect ---+ we've had good performance for them, and we expect to be able to participate again. It's hard to say how much an impact that's had on industry shipments, but it definitely had an upward impact in the first quarter this calendar year in terms of industry shipments. And I'd really be guessing, Dan, to guess the number, but it would probably take that 24% or so in shipment levels down, probably into the high teens, perhaps, maybe 20%. And again, that's just a guess. Dan, if you want to address the average selling price. Sure. And the average selling price, I'd just note here, as you mentioned, it's a little bit lower than it has been in recent quarters, but it's not lower than the range it's been running in over the past several quarters. It's ---+ the average selling price this quarter was $49,894, and that's with, kind of on the lower end of the range, but within the range, it's been running, $49,000 to say, $55,000. And it's a result really of the fluctuation in the mix of products that we build each quarter. There are quarters where we get bulk orders, similar to, you could call this FEMA business we did this quarter a bulk order, and would have a slightly lower average sales price than what would be typical because it's wholesale. It's not retail, as you know. Our home sales include retail sales prices to consumers, and that has the effect of raising a portion of the model mix every quarter. So there's a fluctuation. This isn't unusual, and I wouldn't characterize it otherwise. Well, the ---+ I'm sorry, Dan, you're saying in fiscal Q1. Right. I think so. I mean, we've, of course, not made predictions generally, but I think for MH industry shipments, we would look for a 10% increase or so this year. It could be better than that, but we think we're certainly on track to do that number. There's some forecasts that show that the industry shipments will grow about 28% through, I think, calendar 2019, to about 100,000 units. We don't find any fault with that kind of prediction. And so a 28% move from the 78,000 the industry did in 2016 to 100,000 in '19 would be attractive, and certainly, it would benefit, I think, all the players in the industry. And certainly, with our 20 factories in our country, I think we participate in that and hopefully be working to gain some share above that level. Dan, that's, of course, just HUD numbers. We're also, as you know, producing modular homes, a much smaller sector of the industry, but we're a fairly significant factor in the modular home business. So we'd expect that to show continued improvement. The modular homes are built to local and state codes and can have several different characteristics to them, generally ---+ they're generally a little bit larger and have things like garages and other amenities that make them actually more competitive with site-built. So we have that as well. Well, I don't want to be smart, but we do have those exact numbers, but we're not prepared to disclose them, sorry, because, of course, we don't generate ---+ we don't disclose our individual plant performance. But suffice it to say, I think that we felt very good about acquiring an established operation in a market we have not really been able to participate in to any extent, mainly because of our geographical location of our other plants. So we've been looking at that Deep South market, Mississippi, Alabama, Louisiana and even some of the border states to those states for some time. We just never found the right opportunity, and we believe we found it in Lexington. They are a one plant operation, fairly modest in scope, I guess you might say, but they build a good product. We think we can bring some things to the table there in terms of product design. We can expand its product line somewhat, and we'll certainly look at expanding their distribution base. And that's coupled with several areas where we feel we can benefit them near term. So I think it will be a good opportunity for us to pursue that market. It's not terribly significant in terms of our overall consolidated numbers, however, at this point in time. Right. Well, I'm glad you asked that question. It's a good question, obviously vital to our industry financing, as it is to all homebuilding. And yes, I think the general appearance will be that things are getting somewhat better. The GSEs, Fannie and Freddie, have expressed interest in trying to do more to fulfill their duty to serve obligations, which are statutory. And so they have an interest in trying to explore how they can participate more in the manufactured housing lending market. They have not, in the past, provided a secondary market for chattel or personal property loans. And personal property loans are used to a great extent to finance manufactured homes, because oftentimes, they go on private land that's already owned by the buyer, and that buyer does not choose to encumber the land. So they get a personal property loan on the home itself, or commonly called the chattel loan. And that's been somewhat in somewhat short supply for the industry. There are a couple of lenders in the business. Our CountryPlace Mortgage, our subsidiary, has started to do some chattel activity. We're doing some testing in a couple of different market areas. We found some sources, secondary sources to sell these loans to, and we'll continue to look for others. The securitization market does not look like it's going to open up short term to manufactured housing loans. It's kind of perplexing to us because the loans have performed very well historically, and ---+ but I think we're just not on the radar of a lot of institutional lenders for fixed income product. And I think that will change eventually, but that's a little bit longer-term process. I think in near term, I think you'll see some, maybe some trial programs that will be offered by the GSEs, that may help, and as I say, we'll continue to pursue sources of backup to the loans we may do in this area. And we'll not be hesitant to put some of these on our balance sheet and in anticipation to be able to package them and sell them at a point down the road. And in fact, we're beginning to do just that. This quarter, our average sales price was $49,894. Okay, Bruce, thank you, and thank you, everyone, for joining us today. We appreciate it, and as always, we'll be available for follow-up calls and questions. And please visit our website. You'll see some of our product examples, I think can be very informative for you all. Thanks, again. We look forward to talking to you next quarter.

2017_CVCO

2017

HWC

HWC #Thank you, and good morning. During today's call, we may make forward-looking statements. We would like to remind everyone to review the safe harbor language that was published with yesterday's release and presentation and in the company's most recent 10-K, including the risks and uncertainties identified therein. Hancock's ability to accurately project results or predict the effects of future plans or strategies or predict market or economic development is inherently limited. We believe that the expectations reflected or implied by any forward-looking statements are based on reasonable assumptions, but our actual results and performance could differ materially from those set forth in our forward-looking statements. Hancock undertakes no obligation to update or revise any forward-looking statements, and you are cautioned not to place undue reliance on such forward-looking statements. The presentation slides included in our 8-K are also posted with the conference call webcast link on the Investor Relations website. We will reference some of these slides in today's call. Participating in today's call are <UNK> <UNK>, President and CEO; Mike <UNK>, CFO; and Sam <UNK>, Chief Credit Risk Officer. I will now turn the call over to <UNK> <UNK>. Thanks, <UNK>, and good morning, everyone. We certainly appreciate your interest and for joining us for the second quarter call. As I mentioned in yesterday's release, I'm extremely pleased to report another quarter of progress. The core fundamentals of our business are becoming more evident: reported and core earnings are improved, the balance sheet is stronger, margin fee income continues to move in the right direction and asset quality is stable. For the quarter, we reported $52.3 million in net income or $0.60 per share. And while at first glance that may seem relatively flat to recent quarters, upon closer review, it's a much improved story. And you can see the value ---+ the first 2 ---+ our First NBC transactions have already added. As a reminder, over the first half of 2017, we acquired approximately $2.6 billion in assets and liabilities, 2 unrelated transactions, which we refer to as FNBC I and FNBC II. These end-market low-risk transactions have positively impacted our franchise from the first day, and we expect to generate additional value as we move into the second half of 2017. The 2 transactions also added some short-term noise to our results, and we did include the information in the deck to help investors get a clearer picture of the quarter. For example, in the second quarter, there were about $4 million or $0.03 per share of both FNBC I and II merger costs in our nonoperating expenses. We expect to see more of these costs in the third quarter. Additionally, there are about $7 million or a $0.05 per share of nonpermanent shares in our operating numbers for second quarter. These are expenses such as operating the 29 branches FNBC had when closed by the regulators in addition to processing work for the FDIC to keep operations going and customers served. These expenses have been elevated as we work through the conversion of FNBC II but we expect them to decrease through third quarter '17 and be eliminated by the fourth quarter of the year. As a side note, this past weekend, we executed the final systems conversion for FNBC II. Here at midweek, it appears we have another smooth conversion event within minimal disruption. Alongside that conversion, we were able to consolidate the final 25 overlapping FNBC locations into Hancock Whitney offices. So between the 2 FNBC transactions, we are a net plus 3 in the number of branches across our footprint. Our board and management are exceedingly proud of the team members who executed 2 excellent systems conversions over a span of just 62 days. The successful conclusion of 2 quick integration exercises should provide confidence in the organization's ability to manage operational risks associated with future acquisitions. In the quarter, we also reached a settlement with the FDIC to terminate the loss share agreement from our 2009 Peoples First acquisition. This settlement was fully accounted for in the second quarter results. The settlement from the FDIC was $3.2 million, and we wrote off $6.6 million of the indemnification asset. This $6.6 million or $0.05 per share is included in our nonoperating items for the quarter. Moving on to our best fee income quarter to date with hard fought wins in every category, but such a high level of performance in a few lumpy categories may be hard to sustain. We have worked hard to attain a position where we can harvest opportunistic fee revenue when possible. And for second quarter, performance was very strong. I'm going to let Mike walk you through some of the successes we had in fee income for the quarter before adding back a full $0.13 to our operating results for these 3 items. Our core PPNR improved again totaling just under $102 million this quarter. This is a 9% improvement linked quarter and a 19% improvement from the same quarter a year ago. And when looking back on Slide 7 to when we started this new journey in early 2015, we're up over 50%. That's progress we're very proud of, but we are not yet satisfied and we continue to relentlessly pursue attainment of our corporate strategic objectives. So with that, I'll now turn the call over to Mike <UNK>, our Chief Financial Officer, for a few additional comments. Thanks, <UNK>. Good morning, everyone. It has been a busy quarter for us, but also a very successful one. So besides the highlights we just covered and the news about terminating our loss share agreement with the FDIC, we also, just this past weekend, as <UNK> mentioned, converted the loans and deposits acquired in the First NBC II transaction. And then we also announced a few weeks ago some significant changes to our pension plan. So again, it has been a busy quarter with many positive items impacting our company. As <UNK> mentioned earlier, there are a few unusual items in our numbers this quarter. So we've already talked a bit about First NBC and the termination of our loss share agreement, but we also had a few seasonal and potentially unsustainable items we'd like to call out in a bit more detail. Doing so, we think, gives you a better understanding as to how we view these businesses and future results. So on Slide 5, you'll see from left to right, first, the termination of the loss share agreement, which was $0.05 per share. And then the merger costs we've incurred so far for both of the First NBC transactions, so $0.03 per share. The next item of note is the nonpermanent expenses associated with the First NBC II transaction. Those extension ---+ expenses, which we expect to eliminate in the back half of the year totaled $6.7 million or another $0.05 per share. We also had some seasonal items that positively impacted our second quarter results. The first is a $1.4 million tax benefit related to option exercises and the vesting of restricted shares in May. As you probably remember from last quarter, the accounting treatment to these items changed effective January 1. And instead of impacting capital, any benefit from a change between the grand investing price of stock awards now impacts tax expense. We do expect future impacts from vestings to occur, primarily in the first and fourth quarters of each calendar year. The activity this quarter was a one-off grant dating back to the Whitney merger. The amount impacting tax expense will vary depending on the difference in our stock price between grant and vesting dates. The remaining items on Slide 5 are things we're noting as potentially unsustainable going forward. We're really not calling them out as onetime because they are part of our business model, but they could be unpredictable as to future timing and amount. For this quarter, these items include: Additional derivative income of about $1 million above normal run rate levels; additional SBIC income of $700,000 above normal quarterly distributions; and a $1 million co-arranger fee, our health care team in Nashville, earned on a new business loan. While these items are all normal items earned by the company, as I mentioned before, the future timing and amounts will vary. Adjusting for all of these items, you can see EPS goes from our reported $0.60 per share to an adjusted $0.69 per share for the quarter. So a few other positive items related to the quarter include the continued expansion in our net interest margin. For the quarter, the reported NIM was 3.43% and was up 6 basis points from last quarter. We do expect to see another 3 to 5 basis points expansion next quarter absent any additional Fed rate hikes. We also reported growth in loans of $269 million for the quarter. This included $160 million in mainly performing residential mortgages from the First NBC II transaction. While we did not meet our original guidance for loan growth this quarter, we did have $60 million of net energy loan payoffs and paydowns and a $48 million drop in our outstanding nonenergy SNC loans. Deposits for the company were up $1.5 billion from March, of course, mainly related to the First NBC II transaction. We did use some of the excess liquidity from that transaction to pay down $800 million of home loan debt. We also used the remainder of the excess liquidity to buy securities during the quarter, and then finally also reinvested First NBC's securities portfolio of $220 million that we acquired back in April. So before I turn the call back to <UNK>, I would like to make a few comments about First NBC I and II. Last quarter, we provided specific information on EPS for First NBC I along with our expectation for the impact on the second quarter. At Gulf South, we provide guidance for both First NBC transactions combined for 2018. So now that we've converted both transactions, it is becoming harder to differentiate the impact separately as they have kind of become co-mingled. Having said that, we still feel very good about the EPS guidance for 2018 of $0.56 per share. This means we will achieve a 90% cost savings for both transactions by the end of this calendar year. I'll now turn the call back over to <UNK>. Thanks, Mike. And Leanne, let's just go straight to questions. Leanne, we may be having some technical trouble there with the questions. (technical difficulty) You want to start with that, Mike, and I'll follow. <UNK>, this is Mike. I think that in terms of achieving those goals, certainly the hurdles that we probably encounter include getting the end-of-period loan growth that would be necessary to leverage our balance sheet a bit to hit those levels. The other thing I think that represents a little bit of a challenge is to ensure that we're able to control our deposit cost and don't let those get too far ahead of us. Finally, with the kind of controlling or not controlling, but managing the runoff related to both First NBC transactions to levels that help us achieve those kinds of targets. Those would be the main things, I think, I would kind of point out or call out as the big challenges. And <UNK>, this is <UNK>. I'm sorry, I stepped on you. This is <UNK>. I would just add that the ---+ those are the same challenges that we face every quarter, is ensuring that we grow an incrementally more profitable balance sheet growth section every quarter as time goes by. And that's a little bit more challenging simply because we've done 2 transactions recently. The only real lumpy caveat I think I'd add is energy continues to be a challenge, and while we may have no charge-offs in one quarter and a little more charge-offs another, that could make the overall EPS complement a little higher or lower. We feel like we've adequately reserved for the remaining damage in the energy cycle at least based on what we know right now, and we anticipate continuing the relentless pursuit of the overall objective. So I feel pretty confident that we'll attain that 70% to 80-plus range and perhaps even beat the fourth quarter '18 time line for doing that. <UNK>, this is Mike again. So again, we've talked a lot about this notion of deposit betas and how and when they may normalize. I think that's really probably the crux of your question. So certainly, we've had 4 rate hikes so far. And again, pretty safe to say through 3 rate hikes at least, there really hasn't been any kind of material change whatsoever on deposit betas. With the rate hike that we saw in the middle of June, I think that's beginning to change just a little bit. And again, future rate hikes I think will change even a little bit more in terms of our ability to kind of control those deposit betas. So it is becoming I think a little bit more of a challenge and certainly will become I think a bigger challenge as we kind of experience additional rate hikes down the road. And then the second part of your question was related to energy. Yes, energy through the cycle, guys. And as you picked up, we didn't have any energy charge-offs for the quarter and we're now at the low end of the guidance of roughly $65 million cycle to date. At this point, we think the guidance remains appropriate given what we're hearing from our clients, what we're seeing in the industry and the way the portfolio is performing. We think that we're going to have the potential for both some level of recoveries over the next few quarters as well as the potential prospect for some additional losses, but we've already provided those ---+ for those in the loan loss reserves. We'll continue to monitor the portfolio and the market and assess the environment for additional loss potential. But at this point, we think the guidance remains appropriate. Having said that, we offered that guidance back in the first quarter of 2016 and we feel like we did a pretty darn good job with that. If things change, we'll continue to assess. But at this point, we think the guidance remains appropriate, but we are at the low end of that guidance at this stage of the cycle. I jumped on late so I really apologize if this question has already been asked. But wanted to ask about fees. You say in your slide deck that you expect modest growth in your fee income. Are you talking about that from second quarter levels. Or are you more looking at the upside from fee growth as we look at kind of 2017 as a whole versus 2016. <UNK>, this is Mike. I think really from both of those contexts. So as <UNK> mentioned in kind of the opening remarks, we had an absolutely tremendous quarter in the second quarter related to fee income growth. And certainly, admittedly, a couple of those items kind of fall into the category that we're calling potentially unsustainable. But when we look at the second half of the year, what we're not saying is that all of those potentially unsustainable items won't occur at some point during the back half of the year. The context of really kind of casting it that way is around the challenges in predicting the exact timing of when some of these additional---+some of these items may reoccur. So having said that, again, we're very pleased with the growth that we experienced in all of our noninterest income categories. And again, there's a slide in the deck that kind of highlights those categories and every single category was up quarter-over-quarter, and we certainly would expect to be able to continue that kind of momentum going forward in that overall income statement category. I was just going to add a little bit more color to the fee income dialogue. There's a slide in the investor deck, Slide 5, that calls out the fee income categories that we view as lumpy. Those are the ones that had a more impactful opportunistic revenue performance for the quarter. The remaining fee income categories you'll see in a slide, I believe it's back at the Appendix slide, which one. Slide 17. Slide 17 in the deck shows all the fee income categories. So the ones not called out on Slide 5 are the ones that we expect to see continuing improvement throughout the rest of the year and into 2018. The ones that are in the Slide 5 of the deck are the ones that we consider lumpy. And so as Mike said, I mean, the second quarter fee income number just was superb and we were ---+ I mean every category outperformed first quarter. The work our teams have done for the past couple of years have made that sort of outcome possible. And there really was very little gifted revenue, if I call it that, to the impressive $8 million increase quarter-to-quarter. And if you remember, we had a $4 million handicap ready made because of the gains we had on the sale of the Hancock Horizon mutual funds that were sold in the first quarter. So it really was a great performance. So we're sincere in our efforts to be transparent, so we decided to quantify the outperformance portions of those lumpy fee income categories to set a more fair expectation going forward. So when we say modest fee income improvement the rest of the year, we're talking about the categories that were not called out on Slide 5. Although as opportunities arise, we'll certainly be in position and vigorously pursue those in the third and fourth quarter. Does that help. It helps, that's perfect. And then one I'll follow up on expenses. And again, if this was asked, I apologize. But if we think back to the slide you had out at the Gulf South Bank Conference, you talked a little bit about the outlook for 2017 expenses to be in the 4% to 5% range with FNBC. And then if you look at this quarter's expense run rate and granted there's a lot of nonpermanent expenses in the energy as you work through the FNBC branch footprint. But if you look at ---+ even if you strip those out and you look at your expense cash at the back half of the year, it looks like you're closer to about a 8% expense growth rate for this year. So can you talk a little bit about the difference there. And were there additional branches that you added on that you didn't expect to. Or are there more expenses that we ---+ that could come out of the run rate as we move into next year. Yes, <UNK>, this is Mike again. So no change in the number of our branches that we're consolidating related to the transaction. Again, for the First NBC I transaction, we acquired 9 branches and we consolidated 10. The First NBC II, we brought on 29 and then we're consolidating 25. So the net increase in branches between the 2 transactions is we're up 3. So no change in terms of what we've already kind of done in that particular item. So again, if we look at expenses in total, and as best we can ---+ again, we kind of talked about with the transactions being converted, how difficult it's become really to kind of parse out I from II and there's certainly some aspects of the 2 together that are hard to kind of parse out from everything else going on. But as best we can, if you kind of go back and look at what we're looking at for 2017 and back out as much as we can First NBC transactions, then we're looking at expenses up year-over-year, probably about 6% to 6.5%. And previous guidance before either the First NBC transaction was expenses up around 4% or so. So the question really is, what's the difference between that 6.5% ---+ or 6.5% or so and 4%. And a couple of items that are impacting that in the second half of the year include a higher level of incentives that we're looking at, again, mainly related to overall performance. We're also looking at overall lower vacancy rate in the second half of 2017. Certainly some of that is at least somewhat related to First NBC as we're using some of those folks that were acquired in that transaction to fill vacancies that we have elsewhere in the company. And then finally, and this is not an insignificant item, but we are looking at the increased staffing in our call center again in the second half of the year, partly related to First NBC I and II, but then also related to the rollout of a new online banking platform, primarily in the August, September time frame. So having said all of that again related to First NBC, certainly we're reconfirming our overall guidance of $0.56 per share and certainly believe that our expense levels will pare down as we go through the second half of the year as we're committing to removing the nonpermanent expenses, but then also some of these other items that I mentioned will pare down as we head into the first quarter of '18. And <UNK>, this is <UNK>. To be clear, the bubble staffing Mike mentioned in the call center tied to the digital banking improvements that we rolled out in August and September, that begins to draw back down in the fourth quarter. That's not a permanent expense, it's just a bubble expense for the support of that conversion. So hopefully that makes sense. It does. It helps a lot. Yes. So again, combining the 2 transactions and kind of looking forward to 2018, what we're looking at for 2018 in a way where the context of permanent First NBC expenses is somewhere between $20 million and $22 million. Again, that's both transactions combined. And as best we can, everything associated with both of those transactions. What's not included in those numbers are things like a temporary reduction in our vacancy rate, which I just mentioned. And then also what we're kind of referring to is the up staffing or the bubble staffing in places like our call center. So that's kind of separate and apart from what we kind of classify and call out as First NBC-related expenses. So again, the $20 million to $22 million kind of relates back to First NBC's run rate of expenses in 2016 as kind of an independent company. So that's where the 90% comes from. All right, sure. So 2 big items that will impact net interest income in the back half of the year. The first is we'll have a full quarter's impact in the third quarter as well as the fourth quarter related to the most recent Fed rate hike that happened on June 15, so that's number one. And number two would be a full quarter's impact of the deployment of the excess liquidity that we acquired in the First NBC II transaction. So again, we acquired about $1.2 billion, $1.3 billion of excess liquidity that, by the time we got to the end of June, it had been kind of fully deployed either paying down home loan debt, as we mentioned, or deployment in the bond portfolio. So we really don't see the full quarter's impact of that item in the second quarter, but you will see that in the second half of the year, of course. So overall, between those 2 items, we're looking at an expansion in our net interest margin of around 3 to 5 basis points. And certainly if we're able to control deposit costs, we might have an opportunity to outperform that number a little bit. Yes. So that's going to be certainly related to the loan guidance that we shared in the deck. So that would be the primary delta or driver of an increase in earning assets aside from the carryover of averages from the second quarter. Yes, Matt, this is Mike. I'm not going to share specific numbers related to that, but the loan runoff so far has been about what we expected that would occur. And on deposit side, the runoff also has been about expected, but then was largely kind of offset by our ability to win some of the CD money that was released into the market, again, related to the FDIC paying off the CDs from that company. So overall, deposit runoff and loan runoff has been really within the parameters of what we expected. Not at this point, other than absent the noise related to the stock compensation, it will probably be somewhere in the 25% to 26% range. But again, we'll kind of clarify that or give some more color when we talk about expectations and goals for 2018 in a little bit more specific detail later. It should be fairly stable. So the loan discount and the way we're looking at the accretion projection related to First NBC is that loan portfolio is a little bit longer in duration than what we acquired with previous acquisitions. So it should be fairly stable for the next 3 or 4 quarters. One other item that's out there certainly related to the termination of our loss share agreement is that we won't have the amortization of the IA going forward. I think we kind of called that out in the deck as well as some of the comments. That was about $1.3 million a quarter. Yes, we're not making any assumptions right now related to any additional ORE gains in the back half of '17. Well, hesitate to quantify a run rate number. But there's again, if you look at those 4 items on Slide 5 that we kind of called out as potentially unsustainable, what we're not saying is those items won't ever reoccur. It really is just a little bit of uncertainty around the predictability of which quarter we might get another co-arranger fee income item in or have some ORE gains. So certainly, we need to be ---+ I would caution folks to be ---+ to have that in their mindset when they look at our numbers that these 4 items again a little bit unpredictable around when they will occur in future quarters. But again, they are part of our business model, and we're not saying that they won't ---+ never reoccur. Most of those paydowns were completed toward the end of quarter, so the first part of June. And then the rate that they were paid down at was a little bit less than 80 basis points. Chris, this is Sam. There's nothing specific or systemic in that increase. It's ---+ I would expect just a normal economic circumstances trying to really drive that. So I don't have an expectation it's going to go higher, but I can't tell you that I have an expectation it's going to go lower either. It's just sort of the nature of sort of what we see in the normal cycle of things. So no single credit driving that. It's just sort of the normal sort of bumps you see as you manage an active portfolio. I don't have that number on the tip of my tongue, but we do have a market. Yes, here, Chris, on Slide 20 in the investor deck. You'll see in that lower right-hand corner, we have some information about the specifics related to the 2 transactions. So the loan mark between the two is about $58 million. That's right. Okay. Well, thanks, Leanne. Thanks everyone for attending the call, and we look forward to speaking with you again next quarter.

2017_HWC

2015

KLIC

KLIC #Think I mentioned earlier about 73 million shares, just slightly above it. You will see that when we file our Q. Actually that will be in the schedule mentioned as the weighted average number. We continue to implement that program. It's a three-year program. No update at this point. I gave you the update during my script. That's, basically, we're halfway through the program and have another 50 million it to go. We made an announcement when we announced the program, which was early this year or late last year, so I don't know exactly the time frame, and since that we have bought back $50 million worth of shares. This is an ongoing program that is going to keep going for the next $50 million that we still have. We'll give you an update during the next earnings call for this current quarter. That is right. We only guide to the revenue, <UNK>. As you know we do internal focus to maintain 45% growth margin. So everything we do we try to actually keep it above that. That's a great question, <UNK>. I think the fact that we are driving off our customers' CapEx budget, you know the timing can shift. Sometimes actual utilizations are up in the 85% they can still delay it. So it is hard to predict and forecast when they're going to actually invest in new equipment. Typically as a rule of thumb, if our customers' utilization is above 85%, they start to increase their CapEx, okay. Because in the OSAT world when you run your factory at 90% you are essentially full, as you need about 10% capacity freedom to be able to move the parts within your factory to keep some flexibility. If it's a technology move like we have seen, for instance, for copper, it's a totally different story. Then you may see capacity or capital expenditure done in a way which is not linked to utilization or cyclicality because it's just the new technology that they want and that they will need because it's a customer requirement. In this case you will just see that purchase of that technology be done when they need it. So there are two scenarios. You're welcome.

2015_KLIC

2015

GS

GS #No. Not driven by slowing activity. Any changes in non-comp that you're seeing away obviously from the legacy charge that would have to do with impairment that we might take from time to time as the real driver there. There are always going to be two drivers to incentive fees. There's going to be the normal we'll call year-end incentive fees that you are used to seeing and then there are going to be fund specific events where we're above a certain performance metric and then we'll begin to recognize those fees and so this is very fund specific in terms of this quarter. When we talk to our M&A bankers, the momentum in the advisor side of the business feels very strong. CEOs and Boards are obviously going to incorporate all the relevant news and so not surprising to me that when you see Greece dominating the headlines and lots of volatility in the market that you might see some dip in confidence. But in terms of the degree of conversations we're having and the activity levels, it feels quite good. And you see that, you know, halfway through the year in announced transactions, the Investment Banking team is actually ---+ we have announced $120 billion plus of transactions, actually more than the next competitor and so the dialogue for us with our clients is pretty robust right now. Good morning, Dick. So you were looking at the GAAP income statement, Dick, obviously and that has a lot to do with under the GAAP rules how we have to treat certain hedges versus the portfolios we have to break out certain hedges and move them into the market making business, so it ends up being a net offset. The hedges are hedging parts of the portfolio, so you might get a decrease in the underlying for example the income being driven by the portfolio and then you pick it up in the hedges offsetting that portfolio in the market making business. Correct. That may be completely unrelated to the interest component. That's why in the script, Dick, I break out for you in the investing and lending segment, that net interest income was $225 million in the lending businesses. To try and clarify it. I'm happy to have <UNK> walk you through it, but it's an accounting aspect I wouldn't draw that conclusion. Usually the secondary activity flows for a long period of time, Dick. I think it's hard to draw those kind of conclusions in an individual quarter. If you look at our debt underwriting activity in the first quarter, it wasn't as strong as the second quarter but yet the FICC results were stronger and so if you look at FICC for example on a year-to-date basis, it's down but the second quarter is definitely tougher for us, Dick. Good morning, Steve. So obviously, there's been a whole host of discussion around liquidity in the markets, and I think in the end I think it leaves us quite frankly all with more questions more than answers. I think you can point to some very specific parts of the market where you can say regulation has impacted liquidity. I think the best example of that is the government bond repo market. I think it's hard after that to point to a specific regulation and say oh, well this regulation has impacted liquidity in this market. That doesn't mean it's not happening, I think it's just hard to quantify. I think the repo market you can easily quantify, you can see the reduction in repo commitment from various banks, including ourselves, and you can see over quarter end how repo spreads react. By the way, to me that looks like that's an intended desire by the regulators. They wanted people to either reprice or shrink that business. And so I think away from that the reason why this is difficult, Steve, is because it's a question of really what is the multi-year accumulation of regulation. Things being pushed more electronically, inability to hold as much balance sheet, increasing RWAs, all these things so vocal. I think these things reveal themselves over many years. But obviously, you can't have as much regulation as we have had and not have some unintended consequences. I think it's just the cost of regulation. It doesn't mean the regulation is not good. So you're right to ask that question, and the question has been coming up for the last couple years, obviously, as we've gone through this part of the cycle with tighter credit spread and lower rates. And we talked about this, if the M&A cycle remains strong, then obviously that will be a positive tailwind for the underwriting business and it was for us. When I said leveraged finance activity, I could've said leveraged finance activity facilitated in part by our advisory business, so the M& A backdrop continues the way it feels today. But I think M&A will help. Good morning, <UNK>. I think in an effort to overly simplified this, I think healthy volatility is volatility in which client activity picks up and liquidity exists, clients feel confident. Unhealthy volatility is the reverse of that where clients get more conservative and they derisk. And so as we go through these periods, the general trend obviously feels like volatility is picking up in a healthy way but that doesn't mean from time to time we're not going to hit these kind of pockets. There's nothing we're doing. We are being pretty conservative in terms of our thought process in terms of the business. And our risk taking is being very prudent. It really is all about M&A activity. Again, as I mentioned to you, I talked about the announce but when you look about the completed lead tables, obviously our team is really in the center of all the M&A dialogue. Thank you. Okay, since there are no more questions, I just want to take a moment to thank all of you for joining the call. Hopefully, I and other members of senior management will see many of you in the coming months. If any additional questions arise, please feel free to reach out to <UNK>. Otherwise, enjoy the rest of your day and I look forward to speaking with you on our third-quarter call in October. Take care, everyone. Thank you.

2015_GS

2016

LEG

LEG #<UNK>, first off, you'll remember that, from a residential perspective, we were ---+ and continue to be ---+ up against some really difficult comps. Innerspring volume in the first quarter of last year was up 15% from the previous year. We have those same headwinds in the second quarter, with second quarter last year being up 17%. But, a direct answer to your question, the first quarter was a little bit choppy. February was the softest. We think that it was correlated to a lesser tax refund season than is typical. March improved somewhat, certainly compared to February. And through the first three weeks of April, US spring sales are flat. With unit flat and the real favorable mix benefit that we have going forward, we're pretty bullish, from a selling price perspective, as our customers start to launch their new product lines that are very heavily weighted to our technology. 33% in the first quarter. No, <UNK>, actually furniture, as we speak, is softer than bedding. April, as you know, isn't the strongest month for home furniture typically anyway. And it is a little softer. We have a dynamic that's taking place in that ---+ you remember a year ago the industry, or all industry, was significantly impacted by the West Coast port strikes. We think that there was significant demand or shipment built in Asia, product that did not hit the US shores. So, we saw abnormal growth in the US mechanism business in the first, really, half of last year that normalized in the back half. So those comps are difficult, but admittedly furniture is a little softer, as we speak, than bedding. In Europe, actually, it's 59% of our sales, total units in the first quarter. Now I will say, in Europe we tend to mix higher to the medium price points and premium price points. And for margin reasons really don't participate in the real low-entry price points in the bedding industry. Where, in the US ---+ Yes, <UNK>, market scrap was up $20 in the first quarter. Selling prices didn't follow that. So the spread was tighter in the first quarter than it was during any of the quarters in 2015. With a $50 market increase in scrap in April and an expectation of another $50 increase in May, we have announced wire-based increases ---+ so, at the rod and the wire level ---+ and have started to implement selling price increases in the bedding industry. So, we were narrower on spread in the first quarter. The second quarter, we will probably have that typical lag where you start to see inflation. There's a 90-day lag before we can recover it. We should start to see normal spreads in the back half of the year. And again, I'll remind the listeners, our people do a great job of passing through inflation, but there is a little bit of a lag on the upside. Inflation is very good for our shareholders, and badly needed at this point. <UNK>, let me help you a little bit with that. We should, as we get into second quarter, start to see some sales growth and, in the back half of the year, would expect more sales growth. Obviously, we're gradually anniversarying the 2015 deflation as we move through the year. In first quarter of 2015, we really didn't have too much price deflation. It started to ramp up in second quarter, and then we had a quite a lot in the back half of the year. And then, to <UNK>'s point, we also ---+ based on current commodity environment ---+ should start to see some inflation growing as we move through, certainly late second quarter, but in the third quarter, fourth quarter. That, along with the comp dynamics ---+ if you'll remember, first quarter of last year was actually our most challenging total Company comp quarter, with units up 8%. When you roll all that together, it, I think, helps to make some sense out of our expectation that our sales growth should start to improve as we get into second quarter and certainly back half. Dan, it would be correlated to the relative softness in US spring. So, the expectation is, as the comps get easier, that we'll start to consume more tons of wire internally. We're heavy weighted to internal consumption. So, that's the softness. We don't want to buy it in terms of tons. Yes. Dan, actually, 27% was ---+ I looked back last night ---+ was our full-year tax rate for 2015 also. The dynamics that we are seeing this year are ongoing. First quarter, in most years ---+ assuming that our share price continues to, over time, move up ---+ will typically kick out a tax benefit that will lower our effective tax rates in the first quarters. And then the second quarters just don't have as much of that new phenomenon that hits them because of when our stock-based comp programs ultimately pay out. So, yes, is a long way of answering that ---+ 27% is reasonable this year. It was consistent with last year and what we set our expectations at the start of each year. But there would be no reason to think of ongoing years of being meaningfully different than that, based on what we would know right now. That's a good question relative to progression. We would expect, year over year, in both the first and second quarters ---+ obviously, we did in the first quarter a 150- to 200-basis-point improvement. Back half, year over year, is going to be down because of prior-year comps being fairly challenging. And, collectively, that gets us to the flat to up slightly guidance that we have issued. Dan, this is <UNK>. I would just weigh in and echo what <UNK> basically said. First quarter came in very strong, as you see. The second quarter you should expect a pretty strong EBIT performance. And then, naturally, with some of the seasonality of the business as well as the lag going the other way, with inflation possibly ticking up in the back half of the year, you should see those likely to be a bit lower than the ---+ if 13% is what it's going to be all year long, we think the third and fourth quarter might be a tad on the underside of that, whereas the first two quarters would be on the tad on the upper side. But we'll see. We are certainly not surrendering at all to the margin opportunities through the rest of the year. But you should expect the second quarter to also be strong, and third and fourth quarter will probably be closer to our full-year guidance, if not just a tad below that. <UNK>, why don't you hit the aerospace side of things. Okay. I think for our aerospace business, it's been relatively steady. In the broader market, there is really solid build rates through 2019, mainly driven by more fuel-efficient aircraft. But I think that does create some disruption ---+just through end of life of programs and new programs starting, it creates some disruptions at individual suppliers on those programs. But, for us, I'd say it's been relatively steady. As it relates to global demand, <UNK> actually should probably answer part of that, too, because we continue to see really strong global auto demand. Europe is recovering significantly in the markets that we serve, not only from an automotive perspective but from a bedding components perspective. There's a lot written about Asian automotive. It continues to perform extremely well. So, if there is a little bit of softness, oddly it's in US residential. The rest of the globe and the rest of our businesses are performing extremely well. And, Herb, on your margin question, our full-year earnings guidance has come up by about $0.10, as we noted, but that's partly the tax benefit in the first quarter. We're allowing for the $0.03 benefit from the litigation settlement that <UNK> made mention of. Our overall margin framework has improved a little bit. We were previously thinking that we would be flattish, maybe down a bit from last year's 12.9% and now we're thinking 12.9% to maybe a few basis points higher than that, even with current guidance. That essentially reflects the strong performance that we had in the first quarter, and the fact that, even though we had the FIFO carryover, as we would have expected in residential, much of that impact was offset with really strong operating improvements happening in our industrial segment and in commercial, some other parts of the Company, too. So, I think, collectively, those things are helping to bias modestly our overall margin will be a little higher for the full year. We recognize, to <UNK>'s earlier point, the lag potential on commodity inflation as we start to inflate, but would expect to come out by the end of the year in pretty good shape. From a Commercial standpoint, it was volume. Our people in Fashion Bed are doing a great job of picking up share. The recovery in adjustables is notable and a very good thing for us. So that the expansion is really just contribution margin on additional volume. Those businesses are all extremely well managed. As regards Industrial, the primary driver of the margin improvement is significantly improved performance at our steel mill. It is running at record levels of productivity in, obviously, a tough market from a spread perspective but the tons output per hour, per kilowatt, both are fantastic. And we were implementing some new manufacturing processes a year ago first quarter. So, we are comping at that steel mill to a little bit of year-on-year softness. But they're just doing a great job of executing. <UNK>, I would encourage you and any of your friends to buy adjustables. We can ship them. I promise you. (Laughter). I would not have said that a year ago, but with four manufacturing sites, our people are very well aware of the market demand expectation for growth in that category. And we are dressed up and ready to go. We can service any bit of business that we're graced with. Yes, I think that's actually been the real growth in the category. But that's a story from 2015, as well, that the ultra-premium side, the attach rates probably continue to expand slightly. But, as you know, there's not a lot of units there. But to be able to sell more adjustables in that pricing band between $1,000 and $2,000, all of the manufacturers and the retailers are attacking that band. And that's where we are seeing the largest unit growth, for sure. Just one quick one before we sign off. This was really a great quarter from an operating perspective. But our tax ---+ our accounting and legal people really did some Herculean work with adopting new accounting rules, and the tax folks working well together, and the legal folks getting some of this foam litigation behind us. So, to each and every one of them, I want to thank them, as well. Dave. Anything ---+. With that, we will just say we do appreciate your participation on the call and we will talk to you again next quarter. Thank you.

2016_LEG

2016

SKX

SKX #I don't know about the fourth quarter. Fourth quarter was a big delivery but it certainly should change for the first quarter. I don't imagine we can comp the Star Wars fourth quarter shipments for the kids business. Right now I would expect to make money. Well, yes, because there's bill sell-ins from the year before and year after. They also buy a little closer for their existing and they're learning the business better. But I define low as I did before, 10 to 30. You're talking about just distributors. Chile we've had for almost ten years. Yes. We will be lapping in the second half. Korea should be coming on. And we are still looking for big growth from China and India. So the distributors become a smaller piece of it and they will be concentrated in about four or five bigger distributors that are left. That would be sort of Indonesia and Australia and the Middle East. And then whatever we start to build in Africa through South Africa and moving on. And concentrated depending on what nose areas are like from a macro picture and a retail picture. We're moving more and more into the certainly the biggest piece is joint ventures and subsidiaries. Yes. It\ I would say that's correct if you lost them modestly. Absolutely. I'm still here. I didn't hear you say anything else. No, I said absolutely. I hope you heard that. And anticipated. Okay. It's different in some different countries but yes, it's shifting in a lot of places around the world. It depends where. Parts of Europe are coincidental. Parts are after. Parts of southeast Asia are, no one's exactly the same time but a little slower and certainly the slowest, the biggest lag would be in South America. They've seen pieces of it. Like we said in the comments, they will be here next month in mass for the big sales conference. The pieces they've seen and what they have already been shown, they do like and I have no doubt that they'll like the stuff when they get here and see it. Thanks. I don't know. I'm not really sure yet. I don't really want to come out with any numbers. But it you look at the G&A number last year, it went down from third quarter to fourth quarter in real dollar terms. And unless there's significant growth, it usually does drop some from third quarter to fourth quarter. And a lot of that is volume based. I think we're all set here. We look forward to seeing everybody in New York if you have an opportunity, there is a lot of new product. We've been moving very, very well. You should get an idea of how it's perceived and really what it is. So, if you get the opportunity, we would love to host everybody, within reason certainly, at FFANY in New York in December. Thanks again, and we'll sign off from here.

2016_SKX

2017

GD

GD #Thanks, Bill, and good morning I'd like to start by sharing with everyone that Phebe is not able to be here today as she was unfortunately hit with a bad case of the flu She's asked me to cover today's call, and I've invited our Controller, Bill <UNK>, to join me We all wish Phebe a full and speedy recovery But for now, let's get on with the results As is apparent from our press release, we enjoyed another strong quarter We reported EPS from continuing operations of $2.52 per fully diluted share on revenue of $7.58 billion; operating earnings of $1.052 billion; and income from continuing operations of $764 million, a 10.1% return on sales The EPS performance was $0.16 better than the year ago quarter and $0.09 better than consensus Against the year ago quarter, revenue was down $77 million, or 1%, but operating earnings were up $37 million, a 3.6% increase; and income from continuing operations was up $33 million, a 4.5% increase The quarter's operating margin at 13.9% is 60 basis points better than the third quarter of 2016. Once again, we enjoyed very positive operating leverage Sequentially, revenue was down $95 million, or 1.2%, while operating earnings were down $4 million and operating margin was up 10 basis points From an operating perspective, the second and third quarters look a lot alike as we said they would The $0.07 EPS improvement was driven by a modestly lower share count and a 180-basis point lower effective tax rate in the third quarter On a year-to-date basis, revenue was off $211 million, less than 1% However, operating earnings are up $177 million, or 6%, and operating margins are up 90 basis points Importantly, earnings from continuing operations are also up $177 million, or 8.4%; and earnings per share from continuing operations are up $0.71, 10.5% better year-to-date With respect to cash, we had very efficient conversion in the quarter We had net cash provided by operating activities of $871 million and free cash flow from operations of $751 million For the year-to-date, we have cash flow from operations slightly in excess of $1.6 billion As you can see from the charts attached to our press release, an important story in the quarter was the very healthy backlog increase The total backlog of $63.9 billion is a $5.4 billion increase, in excess of 9% over the second quarter There was very good contract activity in all of our groups, with particularly strong order intake in the Marine group I should point out that each of our defense businesses enjoyed backlog growth, with the exception of NASSCO, and it didn't miss by much Let me say a few words about each of our business groups, and I'll start with Aerospace Aerospace had another solid quarter Revenue was up $70 million, or 3.6%, compared to the third quarter of 2016; and operating earnings increased $8 million, or 2.1%, to $385 million on an operating margin of 19.3% On a sequential basis, the group experienced $83 million less in revenue, about 4%, and a $40 million reduction in operating earnings attributable to a 120-basis point contraction in margins On a year-to-date basis, revenue was up $157 million, or 2.6%; and operating earnings are up $120 million, or 10.6%, on a 150-basis point improvement in operating margin We had good order intake in the quarter for the group of 0.8 to 1 book to bill measured on a dollar value of orders basis But Gulfstream alone was a 0.9 to 1 book to bill on both a dollar value and a number of units basis I can also tell you that our pipeline and active sale discussions are quite good We're, again, reasonably optimistic about our order intake in the fourth quarter and I expect it to look much like the third quarter, if not somewhat better Our certification flying continues to progress well, including the additional test points required to extend the G500 and G600 range As we announced during the recent NBAA Air show, additional testing has enabled us to increase the G500 range by 200 nautical miles at 0.85 mach and 600 nautical miles at 0.90 mach It's really quite remarkable that the G500, with a 5200-nautical mile range at 0.85 mach, can travel 4400 nautical miles at 0.90. This was the approximate range of the G450 at 0.80 mach On the G600, our additional validation tests have proven an additional 300 nautical miles at 0.85 mach as well as 300 nautical miles at 0.90 mach The additional testing required for the specific fuel consumption and center of gravity test points have ensured proper performance and safety margins in both aircraft Although this lengthened the program schedule, we believe the resultant value to our customers was worth the effort While flying has progressed on schedule, testing by one of our suppliers for component level qualification associated with the concurrent FAA and EASA certification has added a new complexity at the end of the program While we accounted for this type of supplier impact in our plan, one of our suppliers apparently didn't anticipate the additional EASA test requirements and is somewhat behind We expect to resolve this issue and deliver the G500 to our customers as planned If you recall, when we announced the G500 and G600 in 2014, our plan was to deliver in 2018 and 2019, respectively So we're still on track and we continue to monitor the supplier closely as we near the end of the certification program Turning to Combat Systems, the group had an excellent quarter with revenue of $1.5 billion, operating earnings of $247 million, and a really strong 16.5% operating margin As you would expect, the quarter-over-quarter, sequential, and year-to-date comparisons are all quite favorable Compared to third quarter of 2016, revenue was up $173 million, or 13%, and earnings were up $38 million, or 18.2%, on an 80-basis point improvement in margin On a sequential basis, revenue was up $86 million, or 6.1%, and operating earnings were up $22 million, or 9.8%, on a 60-basis point improvement in operating margin Year-to-date, revenue was up over 2016 by $332 million, or 8.6% Operating earnings are up $76 million, or 12.6%, on a 60-basis point improvement in operating margin Combat Systems remains on course for a very good year We fully anticipate that the fourth quarter will see around a 15% increase in revenue over this quarter, but also some degradation in operating margin as a result of a mix shift to new programs, so that the increase in operating earnings will be more modest than the revenue increase All of our major programs are performing very well We continue to see opportunities for growth both internationally and domestically for the group The Marine group reported revenue of $1.93 billion, a $144 million or 6.9% decrease compared to the year ago quarter Similarly, revenue was down sequentially by $148 million, or 7.1%, and year-to-date revenue of $5.94 billion was lower by $231 million, or 3.7% Revenue across the year has been down based on Virginia-class Block III timing, a slowdown in the Columbia program design work as a result of extended negotiations over the IPPD contract, and the wind down of some of the commercial work at NASSCO These revenue headwinds are now largely behind us Operating earnings for the third quarter, that's $179 million, were down by $18 million compared to last year's quarter On a sequential basis, the group's operating margins improved 70 basis points, which led to a $1 million increase in operating earnings despite the $148 million decrease in revenue It's very nice to have margins in the group north of 9% once again While this is encouraging, we'll have to see whether it's sustainable And finally, IS&T While IS&T's revenue at $2.15 billion was down $176 million or 7.6% against last year's quarter, it was up $50 million sequentially Year-to-date revenue of $6.4 billion is down $469 million or 6.8% over last year However, we expect a strong fourth quarter and we'll be especially flat with 2016 for the year Revenue has been lower during the year primarily on timing Lower than expected army product sales impacted the third quarter and the Army had trouble executing after the six-month CR and, of course, the change in administration slowed some execution as well We'll recover a lot of this revenue in the fourth quarter but don't have enough time to recover at all Some anticipated revenue will slip into next year, but we're in a good position to hold 2017 revenue close to the 2016 level In sharp contrast, operating earnings of $253 million were up $14 million, or 5.9%, compared to the third quarter of last year on the strength of a 140- basis point improvement in operating margins Sequentially, the story is much the same Operating earnings were up $13 million (sic) [$14 million] (10:43) or 11.7% operating margins, which is a 30-basis point improvement Similarly, year-to-date operating earnings are up $19 million, a 2.7% increase, on a 110-basis point improvement in the operating margins So IS&T has managed to overcome less than anticipated revenue with very strong operating performance So what does all this mean as far as the next quarter and the year are concerned? We fully expect the fourth quarter to look much like the other three from an operating earnings perspective However, we expect a higher effective tax rate in the quarter, leading to a lower reported EPS For the year, stronger than expected operating results year-to-date, a lower than planned tax rate, and a modestly lower share count enable us to increase guidance for the year by $0.05. Our guidance for EPS from continuing operations now goes to a range from $9.75 to $9.80. This late in the year, we anticipate our end of year guidance to be pretty close to actual performance, so the range is narrow And finally, in closing, as tempting as it is at this time of year to ask about next year, let me remind you that we have our planning process later this fall, when the businesses get better insight into the upcoming year The guidance that we gave you last January was grounded in that process and, as a result, was full and thorough So I don't want to prematurely piecemeal next year at this juncture You'll hear from us in detail in January, as has been our custom for many years I'd now like to turn the call back to Bill to cover some additional financial items So first off, I'm really not at liberty to get into any specifics around the specific supplier That's somewhat confidential information that Gulfstream needs to deal with But I can tell you that this is not an issue that has to do with anything related to flight tests or the flying capabilities or the readiness of the airplane to go into service This is strictly a paperwork exercise that we're going through and, really, it has to do with, as we've noted, the additional test points that have allowed the additional range as well as I mentioned the simultaneous – this is the first time we've done a simultaneous FAA and EASA – that's the European Aviation Authority (sic) [European Aviation Safety Agency] (16:19) – certification And really, that is a benefit to our customers, to achieve those simultaneous certifications so that we can accommodate the deliveries to our international customers But long story short, this is not any type of risk item to the program It's strictly a matter of getting through paperwork through that certification process As it relates to 2018, as I mentioned, deliveries are still on schedule with our original plan and our original contractual customer dates You may recall that for a while there we were optimistically considering that there might be an opportunity to advance that entry into service by three or four months We had this opportunity to go after additional capability in the aircraft, and we did that knowing that we would still be able to meet our original customer commitments while achieving that additional capability So really, no impact there And likewise to your question, no impact on our expected 2018 delivery The production and the delivery schedule remain intact as we originally anticipated, and so we don't see any modification there <UNK> - Credit Suisse Securities (USA) LLC So <UNK>, I wanted to ask you about Marine You talked a little bit about the nice uptick in the backlog there And at the very end of the quarter, I think you took in a big Columbia order and then two destroyers, one Flight II and one Flight III I'm curious how much risk you see and the impact on margins from this AMDR Flight III Destroyer, and in the margin profile on Columbia as we go forward here It may not matter that much this year I know you don't want to get into 2018, but I'm interested in the margin progression given that these destroyers are fixed-price incentive fee contracts and that we're bringing in this Columbia work So as we've talked about, and I think you hit on it, the Columbia I think is the primary driver that we'll see, if for no other reason, just the volume impact it has as we continue to grow in the Marine Systems group throughout the balance of the decade And as we've talked about, it is a development cost-plus type contract, so it will come at relatively lower margins that will continue to have a modest dilutive effect for the group So that's no different I think than what we've talked about up to this point It's good to have that contract in place so we can keep moving forward, but the margin impact is consistent with what we've talked about historically <UNK> - Credit Suisse Securities (USA) LLC <UNK>, is there a way to quantify the mix of Columbia as a percentage of Marine as we go forward here? I don't have that in front of me What I can tell you is that the growth profile that we laid out, which, really, we anticipated being off a little bit this year in volume and then picking up in 2018 and beyond until the end of the decade, the growth profile, if you follow that CAGR, is almost entirely attributable to Columbia And it's essentially this design work So you can put some orders of magnitude on it around there as it relates to the growth of the business and those relatively diluted margins <UNK> M <UNK> - Credit Suisse Securities (USA) LLC Okay And then just Flight III versus II It's something that we think about as being higher risk So it's obviously a relatively significant change to the platform, with the additional radar capabilities But we feel like we got to a place with the customer where we balanced the need to meet their requirements with the maturity of our design, and it's a balanced risk and opportunity situation We feel very comfortable with the estimate we've put forth and we wouldn't have put a bid in if we didn't think we could do that So we're still coming out of, as we've long talked about, some of the issues we had at Bath Iron Works with the four-year production break on the DDG-51 Destroyer line So we feel very good about the progress they've made We've got to keep watching that and making progress to see that it's sustainable, but we see this as fitting in very nicely to that book of business I think we have seven destroyers in backlog at this point of the DDG-51 variety, and we think this is very wholesome for Bath Iron Works <UNK> - Credit Suisse Securities (USA) LLC So you can hold margins as you transition on that program? I have every reason to believe that, yes <UNK> M <UNK> - Credit Suisse Securities (USA) LLC Great Thank you very much Nothing has come off that And so recall, there's been a lot of discussion around, is EIS going to be at the end of 2017, beginning of 2018 – we were talking about EIS as a demonstrator model because of the demand requirements that our sales organization was having And so there's been a lot of back-and-forth over when is the first unit going to be there and what's that going to look like But fundamentally, two things With the new revenue recognition protocol, that was never going to be a big impact on 2017, hence the more significant impact in 2018 that we described And as I said at the outset in the earlier question, the production and delivery schedule we're still adhering to and are on track for So continue to see 500 ramp-up in 2018 as having a meaningful impact as we draw down We'll deliver the last 450 in January of next year We'll continue to draw down the 550 and we'll start to feather out a couple of 650s So the 500 is a major contributor among those factors So we've had a number over the year They've been mostly small in nature The more recent one was a business in our IS&T group, really out of our IT services business And it specializes in mission support for the intelligence community, so it fits right in our core as it relates to the GDIT services and a growth market for us It closed right near the end of the third quarter, in mid to late September, so not really much of an impact In fact, no really impact at all in the third quarter but we'll expect to see that to start to contribute in the fourth quarter and beyond The other acquisitions were a couple of small aerospace services business and another mission computing business that we acquired earlier in the year at smaller amounts We've spoken for some time about the fact that, A, we don't have a target balance sheet leverage position; we really are more focused on a couple of things Number one is maintaining the balance sheet firepower that we have for strategic opportunities that will enable long-term growth So with the free cash flow we have and the balance sheet capacity that we've had, we've been able to do things like invest in capital facilities, invest in product development across the portfolio, Gulfstream, now Electric Boat in the facility As well as of course deploy meaningful amounts of capital; in this case, primarily to shareholders in the form of dividends and the share repurchase I think as we look forward, a couple of things We like our credit rating, where we stand today, and we don't look to modify that But certainly, we see the balance sheet as an opportunity for when and if strategic opportunities come up, that we are ready to be agile and move quickly with those opportunities You saw that in a small dose here in the first nine months That's a little bit more of a toe in the water compared to where we've been for the past few years Where that leads us, we'll see It really is all about continuing to find accretive opportunities that are in our core, and that's really never changed That's always been the case and that really is what we hold that balance sheet firepower for So we'll continue to evaluate that on an annual basis Right now, that continues to be our cadence through the balance of the year I'm sure you've heard Phebe talk about priorities on capital deployment, that the dividend should be predictable and repeatable and sustainable, so we'll look to continue that And share repurchase, of course, as always, we do not view that as a strategy It's been a tactical approach to how we deploy capital, and we'll continue to frankly take it that way So I think no real change that I foresee in that regard So I don't know of anything about the 500 delay until midyear Like I said, we remain on track for deliveries in the early part of 2018. So rumors are rumors I don't necessarily want to speak to that kind of speculation but we remain on track with our contractual delivery timing And so as it relates to further delays, it would also be, I think, somewhat speculative I don't know what that would look like, and frankly don't anticipate them, so I don't see an impact to cash or otherwise associated We are on track and feel good about our ability to close on the certification and get the airplane into service in accordance with our original contractual commitments As it relates to competition, we tend not to speculate about them or gauge our performance based on what others are doing It's fair to say over the past couple of years that we have been the beneficiary of taking some share in this market It's not something we focus on; it's just a fact But obviously, if they continue to have issues, if others continue to have issues, we'll continue to do our best to perform and be as competitive as we can be in this market Good morning, <UNK> So on the first question, you read that correctly It may be a subtlety that we're articulating because it's relevant in the moment, but it's always been our approach that, with respect to capital deployment, I mentioned a minute ago the dividend approach, that steady and repeatable M&A is there if and when we find accretive and core acquisitions, and then the residual from a tactical standpoint is share repurchase So I don't think that's any different than what we've talked about; it's just that they've become relevant as you've seen it here in the third quarter of this year So that is absolutely the case As it relates to pension, we did make our scheduled pension contribution so no change to the outlook With respect to that, for the year I believe the number was somewhere in the ballpark of $200 million I don't think that's changed And as it relates to closing out the year, we've got a big fourth quarter lined up but frankly that's not unusual for us It's a pretty typical pattern for us And one of the things we, I think, would look to as the biggest driver behind the ramp there in the fourth quarter is the transition to billing and delivery and collection on these major international programs is starting to unwind a good bit of that working capital in the fourth quarter That's the single biggest driver that brings us down that curve I don't want to speak to long-term leverage We'll get into that depending on the deals that may be out there I think as it relates to the impact on share repurchase, as I've said, that's always tactical And while we targeted a 100% return between dividends and share repurchase modified by the acquisition activity, that's a rough number because it's tactical; it's something we shoot for If it were a penpoint, sort of bullet point at the target, then it wouldn't be tactical; we'd be driving toward a fixed answer And if you look back over the past couple years, we've in fact well exceeded the 100% return benchmark, and this year we're on target to meet that So I don't know that it has any direct implication We'll just have to assess each of those opportunities when they come up and see what they do with respect to the implications on the long-term leverage Good morning, Sam So I'd have to check, and we can go back offline and discuss the math, but the 15-ish percent increase sequentially is entirely consistent with our original forecast of the Combat Systems group being up 7%, maybe a touch higher, approximately 7% full year over 2016. So we're very comfortable with that and that's in the backlog As a relates to IS&T, as I've said, it is a steep curve in the quarter but we feel very good about it The pieces are in place to achieve that growth There are a lot of moving parts but it's in the backlog We had a good September which leads us to feel like we're very well-positioned to close out the year in a strong fashion Most of that growth is coming out of the products business, and the order cadence is there to support that So again, while there's a lot of moving parts, we feel very good about where we are and the pieces are in place to get there In terms of the impact of the acquisition, I would say that's not the big driver It has an impact, but to be honest with you I don't actually have that number in front of me The big driver is the catch up from the timing we've seen throughout the year and its impact that it's had on our Mission Systems product business We've talked a good bit about those timing effects of the Army procurement and some of the civil agencies and so on that we've seen delayed by the six-month-plus CR and so on But we feel good about that timing starting to catch back up this year If we don't get fully back to the 2016 level, it'll be close and that timing will just spill over a little bit into 2018. Good morning, Doug So look, I think bottom line, when you think about this tactical network backbone for the Army, that is absolutely as square in our core as anything else that's out there, and so we feel very good about the fact that we will continue to be a player from a systems integration role moving forward Obviously, the Army is yet to define what its revised tactical networking baseline is going to be, so we don't want to get out ahead of that But as we see it right now, the decisions that have been made to-date and what's on the table at this point has a minimal revenue impact, if any, to 2018. So we feel very comfortable with where we're headed for 2018. And frankly, beyond that, the impact will depend on future Army decisions, so it probably wouldn't be appropriate to speculate and get out ahead of them at this point What I can tell you, as you are well aware, IS&T is a makeup of a vast portfolio of lots of different opportunities and programs And so even this one, if it has some impact, is not going to be one that changes our overall long-term outlook for the group So we feel comfortable that our multi-year CAGR for the group, which I think we gave you at 4.5% or so, remains intact at this point We do feel good Good morning, <UNK> How are you? I don't have it by segment in front of me I know the number in aggregate for the quarter was right around $100 million, which was off a little bit from the second quarter but higher than the first quarter, and that's, of course, right in line with the increased variability we anticipated seeing with these changes under the new revenue recognition model It did have a good favorable effect on IS&T I think we had 11.7% margins in the quarter for IS&T That's not likely to be sustained in the fourth quarter, albeit the margins will continue to be strong for the group in the fourth quarter, but we'll see that come back down a little bit A little bit of an impact in Combat Systems but not too, too much with respect to changes in estimates or true ups And in Marine Systems, we did see a couple of modest, albeit a handful of booking rate changes on some of those programs which, in this case, all just happen to line up positively, and so you saw the strong margin in Marine Systems in the quarter So I would frankly expect to see the Marine Systems margin tick back down a little bit in the fourth quarter but still to show good progress in those yards So bottom line, it had an effect It was favorable to the quarter but not in an outsized way compared to where we've been in the past And again, barring a similar trend in the fourth quarter, we expect to see some of those margins notch back down just a little bit to a range that we consider to be more normal Good morning, Rob Yeah I really don't think this signals any difference in our perspective or our approach to the market While we've been fairly quiet on this front for the past few years, it doesn't mean that there hasn't been sort of activity under the surface in terms of looking and evaluating things that are out there As I've said before, we will continue and will always look at deals that are accretive and are in our core, whether they're large or small And in this case, a couple of them happen to come in To speculate about what the future would look like would probably be getting a little bit out ahead of ourselves because I really just don't see what that is But this will always be our approach until I'm told that it's not And it's just, again, a focus on accretive core deals and we'll announce them as they come So specifically, earnings accretive in the first full year Obviously, if you bring it in late in the year it's going to have a hard time overcoming that geometry But, yeah, accretive in the first full year and that's earnings accretive and, of course, the cash to follow Yeah No change from what we've talked about earlier We're still looking to be right at about 120 deliveries for the year I think if I recall, I don't have it right in front of me, but that's 89 or 90 large cabin and 30 or 31 mid cabin, so that remains unchanged Obviously, as you get toward the end of the year, you could see a unit flip back or forth, so we'll manage that But right in line at this point as we look at the balance of the year The markets continue to be solid for us We've sort of hit a familiar drumbeat, right, throughout the past several quarters and even the past couple years Emerging markets are showing signs of activity Our core continues to be North America, and that's where over half of our order activity and backlog is centered But we're seeing, I'd say, probably another quarter of the activity associated with Asia, Asia Pacific And then if you take other regions notching down, I'd say Europe, then Latin America, then Mideast Africa, sort of in that order in decreasing amounts But we are seeing decent order uptick activity and customer interest around the globe Sure So the growth in the group so far this year has really largely been attributable to the ramp in the international programs that we've discussed We've started the delivery process for those programs And in fact, we're now up at full rate production for the large Middle East program coming out of Canada We've started to make initial deliveries on – I think we've made the first handful of deliveries on the UK AJAX program That will start to build rate and come up to full rate throughout and toward the end of next year, so you'll see some ramp next year attributable to that, and that'll sustain out through the next couple of years and beyond The Middle East international program, as I've said, is at full rate and will be pretty steady state for the next couple of years And now we're starting to see the startup of US domestic ground forces recap, and we'll see that more of an influence in the fourth quarter So I would expect more of the growth that we see in the fourth quarter to be about those programs And really, that dovetails into your margin question because we'll start to see those coming in at traditional sort of US Defense entry-level program margins, and so that'll have somewhat of a dilutive effect on the Combat Systems group margins in the fourth quarter as we start up those programs So a really nice layering of the international programs, the Middle East having a big effect this year, Army recap starting this year and moving into next year, and then the UK program ramping next year and beyond So I think it's a wholesome position for Combat to be in and supported by the tremendous backlog that they see in that group Denise, we have time for one more question Well I think your comments taken in reverse order Number one is if the money is there to support it, absolutely I would tell you that we have the capacity to move the rate up, so we're at a steady two per year now in the foreseeable future There is conversation around what to do in years when a Columbia submarine is delivered, and so we'll have to see if there's opportunity from a budget standpoint to add Virginia-class there But bottom line, we stand ready to do that We have the capacity to do it and it frankly comes at a relatively minimal investment The investments at this point moving forward that we're evaluating for Electric Boat really have to do with the Block V module – for the Virginia Payload Module on the next Virginia-class contract – and, of course, the Columbia investments, all of which we're in the process of discussing with the Navy Sure

2017_GD

2017

NMIH

NMIH #Thank you, Operator. Good afternoon, and welcome to the 2016 fourth-quarter conference call for National MI. I'm <UNK> <UNK>, Vice President of Investor Relations and Treasury. Joining us on the call today are <UNK> <UNK>, Chairman and CEO; <UNK> <UNK>, our CFO; and Rob Fore, our Controller. The financial results for the fourth quarter and year were released after the close of the market today. The press release may be accessed on NMI's website located at www.nationalmi.com under the investor's tab. During the course of this call we may make comments about our expectations for the future. Actual results could differ materially from those contained in these forward-looking statements. Additional information about the factors that could cause actual results or trends to differ materially from those discussed on the call can be found on our website or through our regulatory filings with the SEC. If and to the extent the Company makes forward-looking statements, we do not undertake any obligation to update those statements in the future in light of subsequent development. Further, no interested party should rely on the fact that the guidance of forward-looking statements is current at any time other than the time of this call. Now to our conference call, <UNK> will open with an update on the state of the business and then <UNK> will discuss the financial results in detail. After some closing remarks from <UNK>, we will take your questions. With that, let me turn the call over to <UNK> Schuster. Good afternoon, everyone. I'm very pleased to report that in the fourth quarter of 2016, we once again delivered record performance in insurance in force, premiums earned, and pretax income. We also continued to shift the mix of our NIW to align with the long-term industry averages, achieving a 75% mix of monthly product in the fourth quarter. This fulfilled a key 2016 goal. By these most important metrics, 2016 was a great year, and we believe we are set up for an even stronger 2017. We want to thank our customers, employees, business partners, and shareholders for helping to make this happen. As we have said previously, we are focused on achieving higher returns, which for us means three things. First, we built high-quality relationships with customers where our customer service and reliability as a counterparty are valued. We added 167 new customers in 2016, growing our customer base by 17%. Second, we are committed to managing expenses in a way that supports our growth and our long-term vision for efficiency and returns. In 2016, we more than doubled insurance in force, policies in force, and premiums earned while increasing operating expenses by only 16%. And third, we believe we have a superior approach to managing risk, as we have underwritten or conducted a post-close review on roughly 85% of our portfolio. We believe this is far more than any other mortgage insurer. This practice was a fundamental principle when we started the Company. It gives us a better understanding of the loans in our portfolio, enables us to offer 12 month rescission relief, and we believe ultimately will lead to better loss performance and far better customer relations over a full credit cycle. Our strong execution is evident in our increasing margins and operating leverage. When we compare our performance in the second half of 2016, with the first half of the year, 75% of our incremental revenues drop through to underwriting profits. We expect this powerful operating leverage to drive lower combined ratios and higher returns over the next several years. Assuming we continue to have a healthy origination market, we believe we can achieve our goal of mid-teens return on equity within two years. We currently are targeting return on equity of approximately 10% by the end of 2017 and mid-teens return on equity by the end of 2018. Now I have a few comments on the market. The sharp backup in rates that occurred after the presidential election did slow down refinance activity. This was evident in our mix of commitments, which declined to 17% refinance in January. This is down from roughly 25% for most of 2016. Although rates have leveled off recently, they are still the highest we have seen since mid-2015 and are likely to be a headwind for refinance activity this year. Changes in refinance activity are less impactful to the size of the private mortgage insurance market. Only about 5% of refinancing transactions carry mortgage insurance while the purchase market has roughly 20% penetration of mortgage insurance. The purchase market is generally less sensitive to rates and is driven primarily by job growth and household formation. We continue to believe that there is significant pent-up demand among millennials and other potential first-time home-buyers and that we will see a healthy purchase market in 2017 and beyond even at higher rates. With the trends in refinance and purchase mortgage origination pushing the market in different directions, it's too early to forecast this year's private mortgage insurance market with any precision. What we can say is that regardless of the market size, we are targeting industry-leading growth in insurance in force this year. Regarding recent government developments we are pleased to see increased detention on the FHA and its role in the low down payment housing market. We are hopeful that the new administration and Congress will refocus the FHA on its primary mission, which is subsidizing affordable housing for borrowers with lower credit scores and smaller loan balances. We strongly believe the FHA should not be providing government subsidies to more credit worthy borrowers, especially those with higher loan balances which exceed $600,000 in some markets. With the new administration, we are again hearing talk of potential GSE reform. Although potential reforms would likely be decided and implemented over a period of multiple years, we are encouraged by the current dialogue in Washington. Any serious reform proposal today has included a prominent role for private mortgage insurance to take a first loss position in front of taxpayer exposure. We are confident that any new proposal will maintain private mortgage insurance as a critical pillar in housing finance reform, and we are well positioned to take a leadership role in any future structure. The new administration and Congress have set a course to adjust the corporate tax structure. Clearly a lower tax rate would benefit all American companies, and we believe it would be especially beneficial to companies with high pretax margins such as National MI. Reform could also eliminate the current tax advantage for non-US insurers, potentially leveling the playing field for domestic insurers. Finally, we are pleased to begin the year with one fewer competitor in the industry. As customers begin to adjust the diversification of their counterparty risks, we are well-positioned to take on more of their business. In summary, I am very proud of our performance in the fourth quarter and for the full year. We are excited about our growing operating leverage and returns profile which is a realization of our founding vision. With that, let me turn it over to <UNK> <UNK>. Thank you, <UNK>. And good afternoon, everyone. I'm pleased to share with you our financial results for the fourth quarter and full year of 2016. As <UNK> mentioned, we had a great fourth quarter and it allowed us to end the year with record numbers in our most important metrics of performance. Primary insurance in force at quarter end grew to $32.2 billion, up nearly $4 billion or 14% from $28.2 billion at the end of the third quarter, and more than double where we were at the end of last year. Premiums earned for the quarter were $32.8 million up from $31.8 million in the prior quarter. Annualized premium yield for our primary book in the quarter was 44 basis points and includes the impact of a full quarter of reinsurance. As a reminder, our reinsurance program commenced last September, and as a result we saw only one month of impact from reinsurance in the third-quarter results. Excluding the impact of reinsurance, premium yield of 48 basis points was essentially flat quarter over quarter. In the fourth quarter, we continued to shift our mix of NIW to monthly products. Monthlies represented 75% of total NIW for the quarter up 71% in Q3 and 45% in the fourth quarter of 2015. In Q4, monthly NIW volume was up 92% compared with the fourth quarter 2015. Single premium NIW was down 21% versus the prior quarter and down 47% from the prior year. This is consistent with our objective of shifting our NIW and insurance in force mix to mirror the long-term industry average. And the primary insurance in force at year end was 60% monthly, a significant increase over the 47% mix of monthly we had as of the end of 2015. In terms of purchase refinance mix in the fourth quarter purchase represented 72% of NIW with refinance 28%. This compares with the 75%-25% mix in the third quarter. As <UNK> mentioned, Q4 NIW was a little affected the increase in interest rates in November, but we are now seeing refinance mix come down in our commitments. Total policies in force as of the end of the quarter increased to 135,000, up 13% from 119,000 in the prior quarter. Weighted average Fico of primary risk in force as of the end of Q4 was 753, roughly flat with the prior quarter. Overall persistency in the primary book was 81% also roughly flat with 82% in Q3. Investment income in the fourth quarter was $3.6 million up from $3.5 million in the prior quarter. And total revenues in the fourth quarter were $36.6 million, up 3% from $35.5 million in the prior quarter. Underwriting and operating expenses in the fourth quarter were $23.3 million including share-based compensation expense of $1.8 million. This compares with underwriting and operating expenses of $24 million including $1.8 million of share-based compensation in the prior quarter. For the year, gross expenses of $95 million before the impact of the ceding commission, came in slightly better than our guidance of $96 million. Net of the ceding commission expenses of $93 million were at the low end of the guidance range we provided last quarter. We had 179 notices of delinquencies in the primary book as of the end of the fourth quarter, up from 115 at the end of the prior quarter. We recorded $800,000 for claims expense and there were three paid claims in the quarter. Our fourth-quarter loss ratio defined as claims expense divided by premiums earned was 2%. As mentioned last quarter, we expect our loss ratios over the next several years to be in the low to mid single digits. Now moving to the bottom line, net income for the fourth quarter was $61.6 million or $1.01 per diluted share. This includes a $54.5 million tax benefit resulting from the reversal of the valuation allowance on our deferred tax asset, or DTA. We expect to provide for taxes an annual rate of 35%. However, we will be paying only minimal cash income tax for the next couple of years. In the fourth quarter, we saw a full quarter's impact of reinsurance, which reduced pretax income by $2.2 million. Results for the quarter also include a pretax non-cash charge of $1.7 million related to the change in the fair value of our warrant liability resulting from the increase in our stock price. At quarter end, cash and investments were $677 million down from $686 million in the prior quarter. The decline primarily relates to unrealized losses on the portfolio due to the November spike in interest rates and offset by cash generated from operations. As of quarter end, we had $74 million of cash and investments in the holding company. And in 2016, we generated $71.9 million of cash from operations which compares with $41.5 million in 2015. Book equity as of the end of the fourth quarter was $477 million, equal to $8.07 per share, which compares with $430 million or $7.28 per share at the end of the third quarter. The large increase in book value relates primarily to the reversal of the DTA. As of quarter end, total available assets under PMIERs were $454 million. Which compared with risk-based required assets of $367 million. And with regard to consolidated capital planning, earlier this month we amended our term loan at the holding company which reduced the interest rate by 75 basis points from LIBOR plus 750 to LIBOR plus 675. We also extended the maturities alone by one year to November of 2019. With regard to funding growth in the primary insurance company, we continue to believe that reinsurance is our most attractive capital alternative to support growth and insurance in force. With that, let me now turn it back over to <UNK> for his closing remarks. Thank you, <UNK>. It is clear that 2016 was a great year for National MI. We achieved profitability, more than doubled insurance in force and premiums earned, negotiated a reinsurance treaty to support our growth, and solidified our position as a strong returns oriented mortgage insurance provider. We are very pleased with these results. Looking ahead, we believe 2017 will be an even better year as we continue to execute on the business model, layering on more high-quality insurance in force and driving strong revenue growth while by prudently managing expenses and risks. With our largely fixed expense base we believe that the operating leverage we have already demonstrated is going to drive increasing profits and returns throughout the year. We look forward to reporting those results to you as the year unfolds. Finally, you all should have seen our recent announcement that <UNK> <UNK> will be retiring in July of this year. I want to acknowledge <UNK> and what he has meant to the Company over the past two years. <UNK> is a great personal friend. He came out of retirement to join us at an important time in our journey as we were moving from a startup to a mature company. He helped to bring world-class controls and professionalism into what was already a strong finance function. He also brought a unique and valuable perspective to our management team based on his decades of business experience. <UNK> will be in the CFO role until May, which is when we will welcome Adam Pollitzer as our new CFO. <UNK>, you are a great leader and a valued friend and we are so grateful for your contributions to National MI. You all will hear from <UNK> again on our next conference call. Now a little about Adam Pollitzer, Adam comes to us from J. P. Morgan where he was a managing director on their insurance coverage team. He knows the mortgage insurance sector very well and he comes to us with a deep understanding of the dynamics in our industry. He is a smart and talented executive and we are excited to have him join our team. I believe our ability to attract someone like Adam is a reflection of our opportunity to continue to grow and create value for all of our stakeholders. With that, let's bring the operator back so we can take your questions. (Operator Instructions) The first question comes from the line of <UNK> <UNK> with Zelman & Associates. Yes, <UNK>, this is <UNK>. I think we stated earlier that should be trending upwards towards the 50 basis points before reinsurance. The reinsurance does take about 5 basis points off of the gross premium earned number so I would expect it to trend toward the 45 basis point level. I don't think that we're going to be giving guidance per se, but I think we will expect to see some increases as we continue to grow and as you saw or you heard in the script we were up about 16% year over year, not anticipating that sort of growth but it is going to be moving upward. Thank you. Hey, <UNK>, it's <UNK>. I think the expense ratio you saw come down significantly in 2016, we still will continue to see that driven down with the ROE targets that we've laid out for you. I think that kind of drives based on where we are with the premiums earned versus what the overall combined ratio would be and then also with the low loss ratio, we do expect that expense ratio to be coming down significantly. Yes, <UNK>, this is <UNK>. We don't have any comment on their results that you are referring to. I do think that the decision to act by the new administration was very sound and I'm very encouraged by the potential to again re-examine the mission of the FHA and to get it focused more squarely on lower-income buyers with lower-value mortgages, so we're very encouraged as things develop here but we will monitor it carefully. Thanks. <UNK>, it's <UNK>, so we're thinking something around 50% at that point for a combined ratio. Sorry, one more time, <UNK>. Yes, I think what we said was low to mid single digit, so yes that will be a small part of that 50%. It was approximately $5 million both in Q3 as well as Q4, <UNK>. Okay, we thank you for joining us on the call today, and we appreciate your support. Thank you.

2017_NMIH

2016

IRBT

IRBT #Yes. Well, I think that 11/11 and 12/12 are major events, sales events, in China. We do, in fact, have some visibility already in how 11/11 is going to go based on preorders. And so that as we ---+ we are giving ourselves the confidence to raise guidance, as we've done, we were able to look to that ---+ those indications in China that those events were going to be successful for us. It is our operating procedure to, as we roll out our marketing programs in new markets, test, analyze and optimize the programs. And so that, we are running programs in Japan. We are running programs in China now. We are running programs in the US. And based on the results, we are able to go and add more energy to them as we've done in the US. We ---+ 25% growth in the US this quarter was particularly satisfying. What we're seeing happening in China as we've doubled down on the marketing programs that early in the year and late last year we were starting to get more information on. In China, we have some data. As I mentioned, we get the pre-sale data from 11/11. We've gone through a distributor go-to-market strategy change in China and so that while the inventory levels we're working to optimize the expectations of our new distributor architecture, we felt we wanted to highlight just how effective the sell-through resulted insofar that up by 70%. So we've got confidence in Q4 in what we have guided to as far as if there are additional upside. I think that we are very comfortable with the guidance ranges that we have given at this time, given all of those factors that I just described. It's growing very rapidly, and we think, in the next few years, it is ---+ the overall robot vacuum cleaning market is going to be larger than North America. And so our strategy and our willingness to invest in China is around the thesis that we should be the leading player in that market, and the success of the wet floor care launch in China is an important part of that strategy because the natural daily cleaning routine of the Chinese consumer is mopping, not vacuuming. And so the coming out and investing in driving the Braava and Braava jet category is a way of running around the existing vacuuming market and establishing our brand around this mopping category while bringing in the premium, high featured Roombas into that market and saying, as you grow to appreciate vacuuming, this is the best product. So we think that our strategy in China has great potential to drive the market share targets that we internally hold. It all has to do with the inventory levels and trying to operate as a leaner operation, coupled with the changes in distribution. I know that's a little confusing. It's why we talked about explicitly how we are doing in Japan and what the sell-through in China was. So, as the Company continues to evolve, we're trying to keep our distributors at fewer days in inventory, which obviously has some impact on us in the moment, but long-term gives us much more ability to execute on different programs and work on SKU transitions and that sort of thing. So, it's an improvement in the overall organization, but should not be confused at all with any change in the momentum and rate of appetite for our products. Sure. That is correct. The will 980 and the 960 differ in pack-out slightly, but also the 960 does not have the Carpet Boost feature whether the robot will significantly up the power of the vacuum when it goes onto carpet. So, the added expense of the bigger motor and battery capacity required for Carpet Boost we held back and, as a result of that, COGs savings was able to significantly move down that entry level price point into mapping and navigation. So, again, a very important part of our overall strategy to drive connectivity, mapping, and navigation deep into our product line, and we're trying to do that as aggressively as we can. And that's the true reason behind the 960. So, that will be at some point next year. We haven't announced the exact date. As soon as we work through the technical challenges of operating a device with very, very rich connectivity and sophistication in China, we'll be eagerly prepared to roll out. Thank you very much. What do you mean by the connected features. The percentage that do connect. An extremely high percentage of purchasers that buy the 900 series are in fact connecting. We've gone to great lengths to make it easy. And while the robot will work if you just unpack it and turn it on, we do encourage you to ---+ and prompt the customer to go and connect it. And so I won't disclose the exact percentage, but it is the vast, vast majority of Roomba 900 users. The biggest impact thus far in connectivity is an extremely significant increase in the number of people who schedule their robots. And that's one of the metrics that we track because we are trying to encourage people to change their behavior in how they vacuum from explicitly thinking of doing it multiple times a week to setting it and just appreciating the fact that this is done for them. And the higher the percentage that schedule and reschedule the Roomba, we know that the product promise is being delivered. And on the earlier models where we asked the consumer to schedule it on robot, despite our best efforts to make that as good an interface as possible, we were disappointed by the percentage of people who actually were doing it. And the app, in my mind, there's here folks at iRobot that might disagree with me, but, in my mind, that's the biggest single benefit of the app thus far is reducing the friction for scheduling. We haven't disclosed that directly. I can tell you that, internationally, Japan is still our biggest market. And as we progress through this year, China is closing that gap, and we do think, in the not too distant future, China will certainly overtake Japan. You know, as normal, <UNK>, we won't talk about 2017 and 2018 until our February call, but certainly we are very pleased with the momentum we've already shown in 2016 relative to setting up for those targets. Thanks, <UNK>. Well, <UNK>, you hit the main driver of what will be our average ASP in the consumer business, and that will be the mix of the Braava category, both Braava jet and Braava itself. We're trying to grow that portion of the business as a bigger and bigger percent. And as that happens, it will definitely be a drag on ASPs. On the other hand, we are continuing to drive up the range in the Roomba category and, as you stated, particularly so far this year, the mix of 900 and 800 continues to be a very large portion of the Roomba. So that's a counterbalance to the negative of Braava. Certainly, in Q3, with our sell-in of Braava jet, that did have a ---+ it weighted more so to the overall ASP in Q3, but we'll have to see. Time will tell, but certainly as we push Braava as a category, both Braava and Braava jet, that will have a downward pressure on overall ASPs. I think, <UNK>, as our product revenue drivers diversify into vacuuming and homes, the blended ASP, as a calculated metric, becomes much less valuable because it is absolutely our strategy to go and build the wet floor care market as a great adjacency to the vacuuming market, and the price points of those two products categories are going to be very different. Sure. So, we don't expect to do any more share repurchases for the remainder of 2016. We are due to discuss with the board our plans for 2017. At this point, I think it would be reasonable for you to expect, at a minimum, a program focused on offsetting dilution of newly issued equity. So, the launch of the 960 was not done with the same type of energy and fanfare that the 980 was. And so it wasn't an explicit launch event. It was an expanding of the product line to create availability of connected mapping technology deeper into our line. It's rapidly become a very successful SKU, as we had hoped it would, and is serving the purpose that it was designed for, which is to ---+ it probably it cannibalizes some 800 series product, which it was designed to cannibalize, replacing those sales with products that are connected, that are mapping, which is our longer-term strategy to maximize the installed base of connected products in the home. You know, it's built into the cost of the robots. I think that, as you think about iRobot going forward, you know, we've spoken in the past few years about the ---+ how we were going to drive improved profitability over time. We talked about OpEx leverage and suggested there were less opportunities than product margin. We feel like our software strategy and the value that we are creating in the marketplace with the software creates some potential margin opportunities, and so that we are starting to back off from that prior statement that there wasn't a lot of gross margin opportunity. So we are starting to see a little bit. So there's some foreshadowing, but certainly it's the paying off of the investments that we are making in software, creating consumer appreciated features that we can impact price with. <UNK>, they have ---+ they are expecting a large Q4 just like we always did when we were managing that business. They have a lot they have to accomplish in the fourth quarter in order to hit the numbers in that earnout, so we really won't know until the quarter is complete. Sure. We take a very pragmatic view of intellectual property. We think that it is a huge asset of the Company and we will use it to aggressively defend our market position as we see competitors in the marketplace that have ---+ are actually having financial impact. I think that, yes, we have seen new entrants into the market. We also have seen our market share hold up extremely well in all of the markets globally, but you should expect us to look with ---+ look very significantly at anyone that may be starting to gain momentum because we view our IP portfolio as extremely powerful and we have ---+ there are many competitive products in the market, which at least, in our mind, are in clear violation of our IP. Sure. We have no explicit agreements with any of our vendors requiring us to be the exclusive distributor of robots. So, let me be clear. So, if we are in fact the exclusive robot vacuuming in a particular chain, it's because that chain looked at the relative demand for robot vacuum cleaners across brands and realized that the demand just wasn't there to justify carrying other vacuum cleaners. And we view that as a beautiful thing and a nod to the effectiveness of the products we create and the marketing programs we put behind them. So, we do have a very powerful brand and amazing, amazing products, and that's perhaps the ultimate compliment. We expect to see in retailers over time the robot vacuuming, the robot mopping segments of those stores to grow because the future of vacuuming is robots; the future of mopping is robots. And there is no future where this doesn't continue to grow and grow. And so I think that we've had some experiences in retail where competitive products have come in, and that helps us because we actually create within the store the robot cleaning section of the store, and that helps us a lot. So, it's an interesting place, but it's not by design. It's more of a merit-based phenomenon. Yes. So, the ---+ relative to the first question, the 50% I still hold by. I will give one bit of color ---+ is that that statistic was a US statistic. So I think, in the US, that continues to hold. As we think about Asia and in particular China, I would not be surprised if the wet floor care category exceeds the vacuuming category in only a few years just because of the fact that the daily cleaning habits in China are so much oriented around the hard floor wet cleaning methodology. So, I think that, as wet floor care becomes larger for us, it demands a little more granularity by region so that the 50% vacuuming is relative to North America. On this emerging recurring revenue opportunity with the Braava jet, we are seeing very good attachment rates for pads to robots. And we've gone a little bit deeper. And when you buy a Braava jet, there's an attachment rates of pads you buy with the Braava jet which we view as healthy. And now we are seeing that we analyze the number of pads sold divided by the installed base of the robots. And at this point, we are seeing the daily sales of pads growing faster than the rate of sales of Braava jets. So that's suggesting that people are coming back to the store and buying more pads, as we would hope they would, which suggests people are actively using the robots and buying into the model of use the pads and then go buy more. The impact of this recurring revenue model is going to take some time to build. It's all based on the installed base. And in China, we may see a phenomenon where reusable pads are a reasonably high percentage of the sales, and so that, in Japan and North America where consumables is well-established in the cleaning industry as desirable, in China it lags a little bit so that the revenue from the wet cleaning products in China, the recurring revenue, may be lower on an installed basis than they are in Japan and North America. So, there's a lot of moving parts. Sorry for the complicated answer but it's an evolving situation. And in 2017, it will be more material than it was in 2016 and 2018, and we'll probably start talking about it pretty explicitly because it will get exciting. You know. it really is about having a product line that speaks to the growing acceptance that robot vacuuming is how we will be vacuuming our floors in the future. The upright vacuum cleaner is, at this point, obsolete. People are going to have a robot to clean their floors and a high-powered hand vac to clean couches and stairs. And that's the future. And so the ---+ with that broadening of appeal, we feel like the midrange, which has sort of been underperforming for us, is a real growth opportunity, and so that the 960 again, we pushed the connectivity down, as I said, but we also bolstered that middle price point domain. It is still, if you look at sales thus far for 2016, and remember the 960 is only newly out, we truly are barbelled at the higher end of the range. And then at 600 series, which has been fantastic and been lighter in the center of the category, we think that this move with Costco and the 960 will at least bring additional respectability and opportunity to the middle. So, it is, at this point, not driven by competition. Our market share remains even more favorable than we would have dared hope, so we are enjoying that and hope that it will stay that way for a long period to come. So, thank you very much for the questions. That concludes our third-quarter 2016 earnings call. We appreciate your support and look forward to talking with you again in February to discuss our Q4 and full-year results.

2016_IRBT

2015

AGN

AGN #<UNK>, do you want to talk about our dry eye pipeline. (Inaudible) for any gaps. Sure. In dry eye, it is an underserved market at the moment. There's Restasis out there and a couple of other things in development, but there are not many product offerings for dry eye. And a relatively low proportion of patients suffering from dry eye actually receive treatment at the moment. And I think with Restasis, obviously we have the leading product. Oculeve is a very interesting device. I used it myself recently. I can assure you it works and it's really adding to our product line. In addition to the anti-inflammatory agents like Restasis, there are some other opportunities in the biotech pipeline with different mechanisms of action. I think in the future we are going to see other opportunities out there, which are going to be effective approaches in dry eye. <UNK>, anything to add. Yes, I would just say, right now we have the waterfront largely covered. We have an OTC, or artificial tear. Oculeve essentially is a natural tear option and then Restasis is an anti-inflammatory. So, we offer a more complete product line for the eye care community than any company in the sector. And I agree with <UNK> that there are a few opportunities out there but we have most of the market covered. I think also people underestimate the importance of the multi-dose preservative-free, which we intend to file in September. Having worked in this space before, one of the biggest issues with chronic eyedrops, particularly Restasis because of its single-dose applicator, is dosage and compliance because it's very hard to get that little single-dose in the eye. So, for patient convenience and patient compliance and dosing, the multi-dose applicator is a huge innovation and something that we're very excited about bringing to market next year. And then keep in mind we also have four other development programs of both Restasis and novel mechanisms earlier in our pipeline. On Bystolic and cardio, I think the way I think about it ---+ and <UNK> can certainly chime in ---+ is Bystolic, while certainly a cardio drug, is managed a bit more like a primary care drug. About 80% of its volume comes from our primary care field force. We do have a partnership with Trevena for an earlier-stage product so we're not completely walking away from cardio but it's not one of our core focus therapeutic areas. <UNK> or <UNK>, anything you'd add. That's exactly right. The exclusivity period on Bystolic extends out for many years. It's a big primary care product. We're going to increase detailing in the second half of the year. We have great formulary coverage and it's got a terrific following in cardiology and primary care. I always hear anecdotal, but I hear from doctors all the time about it being their favorite beta blocker to prescribe, so long as they can get it through managed care. Maybe I'll ask <UNK> to talk about his and then, <UNK>, maybe you could chime in on a few of the key aesthetic products. I'll start with Botox therapeutic. We're focused on two high-growth areas which is migraine and overactive bladder. Our priorities right now are to increase injector productivity and expand our injector user base. And we have complete focus on that. We think the trends in the second quarter look terrific. And I think the outlook for the rest of the year is the same. I don't see anything that would disrupt the reliability of that sales stream. As it relates to Restasis, we're focused on a large OTC artificial tear market. There are millions of patients over using artificial tears. We have an effort to increase the diagnosis rate through in-office screenings for dry eye, which have been linked to blurred vision, adverse post-op outcomes. So, there's an educational efforts there. And then, finally, we launched a primary care effort for Restasis. And the formulary coverage on the drug is rock solid. And then I'd just probably add Linzess in there. We have our foot on the gas. The response to our second wave of direct-to-consumer advertising is exceeding industry norms. We just launched an effort into long-term care for the first time since Linzess was approved, and that's about 25% of the market. Our relationship with Ironwood is excellent. And we're waiting to launch a low-dose version of Linzess. So, I feel very good about our top products. And as <UNK> mentioned in his opening remarks, 12 of our 15 products are increasing ---+ if you look at the US business, 12 of the 15 products are increasing at a double-digit rate. And we've had virtually, in my opinion, no disruption due to the integration in this total focus on customers. <UNK>, do you have some thoughts. Sure. On the facial business, grew by 13.5% versus the prior year for the quarter, and year to date we grew by 13%. Very strong growth also in Botox which grew by 12.5%. All this growth is mostly linked to our strong DTC campaign. And you might have seen our Botox ad and our Voluma ad. And on Voluma you can see that brand awareness increased by 42% from 27% in Q1. So, a very strong business and linked to very strong advertising during the second quarter. <UNK>, do you want to take the first question. On an overall basis, ex currency, we grew about 11%. Think about it this way. Most of our aesthetics products are mostly US products. There are products sold internationally but it's not significant as it relates to the portfolio, so a good amount of them does not have any currency impact given they're US-based. Yes. And as it relates to the mesalamine product line, as you know, <UNK>, you win some and you lose some. We got a big win with Linzess on that same formulary at the expense of AMITIZA. But as it related to the mesalamine product line they excluded it. We view it as a mature business. It is promoted behind Linzess. We have a core group of users. We're managing volume and of course taking price increases when and where appropriate. And that's how I would think about it, as an established business. <UNK> can certainly add her two cents. <UNK>, I think it's not that simple. And that's the issue we were trying to highlight with the earlier comments around it being very tough for you guys. And our apologies in advance for that for the next couple quarters because what's in that business, as we report it today, isn't necessarily what's being sold to Teva down a straight line. Also, as you do GAAP reporting and reporting around discontinued operations what gets assigned to what part of each business is also not intuitive and not necessarily straightforward to reality either. So, it's going to make for some difficult quarters ahead. Again, we are committed to as much transparency as we can possibly provide around product sales, and perhaps cash flow may be a good way to look at the business. But it's not as straightforward or as intuitive as you would hope or want it to be, just in fairness. I don't know, <UNK> ---+. If I may just add to that, just to give a little of context. You have to remember that we were really managing the business on a consolidated basis. We weren't managing the business separately as solely a generic business and a branded business. We didn't have the holding company approach. We actually were managing the business on a consolidated basis. And from a segment reporting basis even today, in international brands or generic products and in global generics, there's also branded products. The other thing to note, which you also highlighted is from a balance sheet perspective it's really all intermingled as it relates to debt and the tax rate, some of the things that are not necessarily operationally related. So, I just wanted to give context as to why it's not as difficult to strip out and do a percentage of cash flow and say that's what's attributable to generics. <UNK>, it's a great question. I think we have rationalized our sales force for our acquisitions and for the market as we see it over the next few years. So, we don't anticipate any additional cuts in the field. And, in fact, we would selectively add if we thought the opportunity paid back. As an example, with the acquisition of Kythera, we will increase our facial aesthetics sales force by roughly 75 positions, making us the strongest field force in aesthetics by a large margin. So, I think you'll see us continue to look for ways so long as we are increasing our tight strategy of product flow, either through our R&D engine or through licensing and acquisition, of building and making sure we maintain strong leadership positions commercially in each of our therapeutic areas. With respect to spending on DTC and otherwise, we always look at the return on investment. To the extent we think we can add more money to Botox or Restasis or Linzess, or even Namzaric, which will kick off in the fall in DTC, we're always monitoring the situation, looking at both response and return on those investments, and have no issue making them so long as we see a strong ROI. Yes. It's a slower build but big opportunity over time. Look at the approvals, for example, of Juvederm in China this quarter. That gives us a great opportunity to build on Botox in that market. I'll be down in Brazil next week with our team looking at how we can leverage our infrastructure in Latin America and grow. Clearly the divestiture of the Teva business has some drawbacks in mid markets like Eastern Europe and Russia in that we were going to leverage the old legacy Actavis infrastructure in those markets. But I think we can compensate for those and continue to grow and build in emerging markets. Sure. <UNK>, do you want to take DARPin and I'll come back to the transformational M&A question. Sure. For DARPin in Japan, we actually want Japan to join in our global Phase III program. In order to do that we needed to complete a small study in Japan and compare it to an additional small study in the United States. We're in the process of finalizing those studies prior to including Japanese sites in the Phase III trials sometime next year. So, yes, there will be some updates on that going forward. To your second point, <UNK>, around transformational M&A with companies with lower growth profiles or the like, I think, in fairness, it would be very difficult for us to do a transformational deal with a company with a higher growth rate because I think, based on at least today's measure, the only one with a higher growth rate is Celgene. So, that would really limit the universe. That being said, I think that the issue for us is we want to be in growth pharma. Would we be willing to go from, let's say, roughly 10% to a 9% top-line growth rate to do a highly accretive bottom-line deal. The answer is absolutely. Would we be willing to go from 10% to 3% or 4% top-line growth to do a highly accretive deal. I would say highly unlikely. We want to go out and make sure that we can acquire something that we believe has a growth orientation to it, that has longer duration assets. And I think you should also keep in mind we're pretty, as I use the word, bold in our thinking. I think a lot of people look at the universe of transformational deals and say---+ well, you can't touch this because it's got this particular product drag or this particular issue. We've been known to be very creative in solving for those things in the past. Albeit a very small deal, I would point to Furiex as just an illustration where they had two assets. They had the NDA for eluxadoline and they had a royalty stream from Takeda. We divested the royalty stream to Takeda to Royalty Pharma at the time we announced the deal. We had that pre-wired. So, we kept what we wanted and we sold something that was valuable to somebody else to help pay for the deal. So, to the extent we look at companies or opportunities that have things we like, and some things perhaps we don't like, there are always potential solutions for solving for those issues. <UNK>, I think you're right. It would have to be a bold offer. Second, I think Paul and I always would debate and talk to our Board about the best long-term interest of our shareholders. I think as you step back and look at what I think is so special about this Company, a lot of it goes to the depth and quality of our management team. To the extent someone would be open to thinking about cultural change and change and balance to leadership and talent and management, I think that would be more helpful for us. I think clearly our commitment to R&D and the way we think about R&D is also very special. And I think our ability to be nimble and move quickly and do what we believe is always in the shareholders' best interest is also a bit unique. Those are the types of discussions that we would have. It's not limited to that, but that would be, I think, at least top of mind for debate. I see Paul shaking his head so I know he's in agreement. I'll ask <UNK> to comment. I'll just give you my quick take of why I was so excited to do the deal with Naurex, is that this is an area, a huge market with huge white space for unmet need. You can debate the numbers but very few patients, in fact, a minority of patients, are adequately served by SSRI or SNRI. And then they have to live with, in some cases, very difficult side effects from those medicines, as well as the long onset of action for those with acute issues that need to be dealt with more quickly. And I think, <UNK>, you mentioned this in your earlier remarks, there's been no real novel breakthrough in depression in about 20 years. So, for us to be able to be at the forefront of potentially revolutionizing the treatment of this very large and horrific disease is something I think that's very exciting for us given our commitment to leading in CNS and in particular psychiatry. <UNK>, your two cents. I\ Certainly we'd like to close a deal but then we'll move pretty aggressively into doing that. <UNK>, if I understand the question, I think the differences are between what we have and what Teva had on their slide deck. And it would be very difficult for us to comment on the differences between what we have and what another company has. If I recall, we've provided the generics business EBITDA for 2015 and they provided a number for 2016. That was the difference. And obviously we can't comment on their ---+. And, just to be fair, it's their number for 2016 not our number for 2016, just to be clear. We can address that. Hi <UNK>, it's <UNK>. In the top global branded product highlights slide, the ex-US branded products from Forest, Warner Chilcott and Aptalis are not counted as generic products. They're counted in the brand total. When you look at our global generics segment, our global generics segment still counts those, as per accounting rules, as part of the global generics business. That's the difference. That's what we gave you as the ---+ well, the global generics segment itself grew 17% on a constant currency basis quarter over quarter. That's not a clean ---+ that's the point I was trying to make earlier about why it's so difficult to model. That's not apples to apples of what's being sold and what's staying. There are puts and takes from the segments versus what was actually being sold. And that's what makes it so complicated. That would be the total Namenda business including brands and generics. And the way we think about it is we launched Namzaric only two-and-a-half weeks ago. A DTC campaign starts in September. We expect exceptional formulary coverage by January 1 and the incremental sales from Namzaric by essentially taking advantage of an untapped combination market, especially in moderate Alzheimer's disease, effectively is going to get us to our target conversion rate. As I said earlier, if the formulary coverage had not developed like it has, we might have a different situation right here. But as it relates to 2016, Namzaric is going to be highly economical, XR already is, and I think the majority of patients are going to have an opportunity to get it. Thanks, everybody. <UNK>, would you like to make some closing remarks. Yes. I would just like to thank everyone for joining the call today, and, in closing, just summarize. I think we had a very strong and well-executed quarter. I think our plans are in motion to continue to focus on operational excellence and driving our growth agenda and our focus on our key therapeutic categories, and establishing long-duration leadership in those categories. I think our leading pipeline, our reloaded capital structure, and our now focus on branded pharmaceuticals and willingness to take bold and decisive actions make us the most dynamic company in growth pharma. I thank you for your time and look forward to updating you later again in September. Thanks, everyone. I know we didn't get to quite a few people in the Q&A, so we'll follow-up with you shortly. Thanks.

2015_AGN

2016

SVU

SVU #Thank you. Ginger, we'll take one more question if we could. Yes <UNK>, I will take that. That's a big question. I know that in North America the discount model is significantly less, or at least in the US, developed than it would be in most of Western Europe or in Canada. I think there's a lot of room for growth in discount. You have got the entry of legal coming in. You have got all formidable competitor and retailer. I think the challenges that we've had are that we kind of limited ourselves to a model that restricts itself to a too small a segment of the population and that were not a broad enough appeal. Our model has to be an American model and we proved that in Canada. You can look at a couple discount (inaudible) hugely successful but have sales per square foot that are probably double what we have here with larger footprints both in (inaudible) no-frills concept and now metros food basics concept. My experience has been very, very successful and some of the same strategies we are employing here. As opposed to doing private label by category we've purchased the name America's Choice. It's a fabulous name and we want to morph over three-phase project over the next 18 months to start building real equity in our private labels. We believe that the cutting in of in just the must-have items of the national brands in each category are significant. We look very, very closely at our productivity and there are certain things America is different to Europe. And if you go to the UK where private label penetration is probably in the 60% range, it is probably in the 20% range for most businesses in the US. So we are definitely missing opportunities in the national brand. I mentioned before Coke or if you get into the baby section. People just don't do private label baby food and baby formula. People don't do private label pets. So not that we're becoming a national brand store and not the we're straying from the concept of our discount, we are just making it a much better, much more relevant experience. And the picture that I have in my mind is of a box that successfully does significantly more volume than what it does today through all of these combined initiatives, whether they be private label, national brand, the complete new analytics of our set. We are putting a lot of effort into reordering processes which previously were based on shelf space as opposed to rate of sale. Our advertising strategy significantly more strong than what it was before. So all of these things combined, first of all I think there's a lot of room to grow in the whole space. We have a lot of room to grow within our existing sweet spots which are the circumferences around our distribution centers since they are not anywhere near full capacity, and my belief and very strong belief is better offer, one that we can all extend our demographic. And by doing that we can expand in very, very specific markets where we know we've had success in the past. I think something we don't talk enough about is our real estate strategy, and our real estate strategy is becoming much more precise and the rigor that's going into it is to define exactly where we want our new corporate store growth to go relative to our license store growth. All of these things I think bode very well for us. And the last thing, and then I will turn it back to you, is that in the past we haven't talked a lot about the licensed store growth and our license partners have been out in the field every week two days a week since December meeting with these people. We have some incredibly talented and very committed licensed operators. And we have the ability to grow with these people at a much more rapid rate perhaps than some other businesses because the capital required by the corporation is relatively small compared to growing just corporate stores. So I think that two-pronged approach is a very precise approach, bettering our assortment, ensuring that our pricing strategies are really, really strong against our key competitors; and I think the United States just has so much room for growth in discount and even the entry of new players. There's just a lot of room for everybody and they each have their own strategy, which I think is fine. I'm extremely, extremely bullish. I would say this is a business that just has a whole lot of potential for the long term. This is <UNK>. Just remember that those segment or channel carve out financials that are in the Form 10, which I think is what you are referencing, those are fully [burdened] fully allocated kind of accounting segment results. What I would say is that both the corporate channel, the retail channel and our license channel are both great channels. And I think you've heard from <UNK> in terms of just a tremendous excitement that he has about both of those channels. Thanks. Let me just add one thing on the license part of the business. It's not so much the rate that you're looking at. I've spent a lot of time with some very, very successful license operators and what excites them is the same thing that excites me. The possibility that we have within the box to make it so much better and it makes their model a lot fatter. It's a skinny model for them between us taking our wholesale margin and then staying competitive in retail they've got small margins to work at. By introducing initiatives that we are introducing which they wholeheartedly support, we had a management advisory group of 24 of our talented license operators that worked on this plan with us. They are looking at this model makes it ---+ we plan on doing with this model to make it far more attractive which also allows us to continue to grow with successful operators because successful operators will put good money after a good project. Again, very bullish on that. So, with that, I hope <UNK>, <UNK>, and I have a dynamic picture for the future of this business. I appreciate you letting us share that picture with you. Thank you for participating and we look forward to meeting our investors and analysts. With that, <UNK>.

2016_SVU

2016

NCLH

NCLH #First half, because the second half is still so lightly booked that it's not material to commentary. Look, our brands are strong, our marketing platforms are resonating in the marketplace. As we have repeatedly said other than European itineraries, this is strong as ever. Caribbean is very, very strong, Hawaii, Bermuda. Q1 of 2017 has been very little Europe. As you know is primarily a Caribbean-centric quarter. And as we again distance ourselves from the event of Europe, by Q2 of 2017, things begin to improve. And remember the Norwegian Joy, the new China vessel doesn't come on until Q3. So the fact that we are so well-booked at such high pricing without the benefits of the China vessel, which we all know is higher yielding than the rest of the fleet, is very encouraging for us. Well, look there's a couple of things. One is yes, those events are not hitting our customers in the face every day in the news cycle. It's a bit of history. Nothing new has happened, and let's ---+ hopefully, we keep it that way. But another factor is because the overall travel through Europe is down, the airlines have also had to drop prices. And so our customers are gaining the advantage of that lower price. So it's more economical for them to travel to Europe. So that's having an impact as well. The strong dollar helps as well. So we're hopeful again, that the worst is behind us, and we've got some greenshoots that indicate the worst is behind us. Yes, I'll take your question about the [Med], Eastern Med and so forth. Our Q2 capacity in the overall Med is 21%, and the growth of 26% in Q3. So it's more, but not so materially more. But we are well booked in Q3. And again our guidance for the full year, takes into consideration what has happened in Europe in Q2, what impact it has had in our Q3 Europe business. And in spite of that weakness, we reaffirm our full year guidance. We suggest that if Europe hadn't had the difficulties that its having, our results would have been even stronger. But we do feel confident, that in spite of what's happening in Europe, and without the need for Europe to have a major rebound as I noted earlier, we are confident of our current guidance. Well, the difference between Q2, Q3 when you talk about Europe in general, is that the Baltic which is a very high-yielding itinerary, and has been less impacted than the Mediterranean has, really comes into focus much more in Q3 than in Q2. And in our case, the Baltic represents almost a three-fold increase in capacity over Q2 in the Baltic. Yes. So I think what's really important to keep in mind here is that, as we have rolled out our bundled packages, which actually started in Q1 of 2015, the accounting rules stipulate that the revenues allocated between the ticket and the onboard revenue based on retail value. Sao as a result the individual components are not representative of the selling price in the market. So what I would focus everybody to concentrate on, and I've been saying this quarter after quarter, is look at total net yield, or total net revenue. And so if you look at that, if you just take it on a component basis, and try and divide it out by capacity days, it looks skewed when you look at ---+ when you pull apart ticket and onboard. But it's totally as a result of these bundled packages. And then, once we get into Q2, we'll be rolling over like-for-like when you look at Q2 of the prior year, before rolling out the bundled packages. First half, yes. It's comparable to the prior year. And as you know we've started the year in a great book position. So I'm very happy of where we are for 2017. To be more booked quite frankly, would probably be leaving money in the table, in terms of yield. And I much more preferred at this stage to be up double-digit in pricing, than have another point or two in capacity. Yes, hi, <UNK>. So the per diems are up in the mid to high single-digits, with occupancy slightly down, and slightly down is primarily in Q3, because of the Europe situation we've been discussing. So I'd rather be slightly ahead, but not anything significant that we can't overcome. I'd rather much have the up in price, because it is so difficult <UNK> to claw back pricing, than it is to claw back occupancy. Occupancy is foregone after that ship sales and comes back again, but that pricing tenure that you have in the marketplace lingers. And so we're very, very pleased and proud of what we've been able to achieve on the pricing side. All our three brands are recognizing the industry, as having the highest yield in their perspective categories. And I want to protect that at all costs so to speak. And the good news for us is that the tempo of bookings is strong. It is strong, very strong in the fourth quarter. It is very strong in 2017. We know about the slight weakness in the third quarter, but it's being offset again by Explorer being so well booked ---+ just about sold out, if not sold out in an entire second half. Sirena at a very high-yielding ship, is also very well-booked. And then there is 40 day charter, that it is at a premium pricing. So as we mentioned in the call, approximately half of our second half yield growth is locked in. I am still confident that a Norwegian Cruise Line holding vessel will cruise to Cuba before year-end. We continue to make progress. I'm both happy of where we are, and disappointed that I missed your April deadline, but I'm getting closer. And again feel very strong that we will have all this wrapped up soon, and that one of our vessels will cruise into Cuba first of the year. Look, I still believe that Cuba will garner a yield premium to anything else in the Caribbean. The question is going to be what percentage of any brands or any companies overall capacity will be dedicated to Cuba, and how many sailings will that ship operate in Cuba. Obviously, for a Company like us, that we're smaller than our two other competitors in this space, Cuba or a ship like China that could represent a much bigger impact than it does for others. As you know Norwegian Joy, one vessel in China represents 8% of our capacity. And so I don't want to say I disagree with whoever made that statement, but on a relative term, I think Cuba will likely be more significant for us than it may be for the other two, because of pure size. Thank you, <UNK>. I don't have that number off the top of my head to give you, but I'll tell you that that business is baked in. The charter is a contract, baked in. Sirena and Explorer, both very high-yielding vessels are much more sold that rest of the fleet, and that's what gives us the confidence that we are going to be able to achieve our yields in the second half of the year. Like I said earlier, it's roughly half of our projected yield growth, in the second half of the year are baked in because of our already strong book position. Remember, I said that our currently booked position is up mid to high single-digits in the second half of the year, along with those three items. So I would just add <UNK> that our implied yields are very strong for the back half of the year, approximately 4.5%. But we've also given the cadence that Q3 will be stronger. We don't actually break it out by the brands, but significant strength is coming from those three items we've cited. We typically don't break out occupancies like that, specifically. I will tell you that the back half of the year, the second half of the year pricing is up mid to high single-digits, with overall occupancy compared to this time last year slightly down, whereas slightly down is all in Q3, because Q4 is slightly up. No, by contract we can't talk about that charter. It is at a premium to what you ordinary would generate, had she operated our normal itinerary. But getting back to your first question about cancellations post Brussels, typically when these kind of events happened, cancellations is not what causes the weakness. If you're booked, you tend to stay. What typically happens is new bookings are harder to come by. And that's what happened after Paris. It's what happened after the Istanbul situation in early January, and it's what happened after Brussels. And so it takes a little bit of time for the new cycle ---+ and Brussels as you'll recall, was a heavy news cycle, that lingered on for awhile. So it's now behind us, and bookings are beginning to come back. It's also prime time Europe is, this is when people start going to Europe. And so it is possible, although we aren't counting on it from the point of view of our guidance, that there will be a late Europe booking season, later than normal to bridge the gap from where we are today, versus where we normally are. So in terms of your question on China, yes, it will be roughly 4% for 2017, because the ship comes mid year. And on a run rate basis, based on current capacity it is 8%. And <UNK>, on a ---+ from a mix standpoint nothing has changed. So we're roughly 70% HFO, 30% MGO, but we're using Brent as a proxy for hedging for MGO. Thank you, <UNK>. Sure. So hi, <UNK>. So full year is down about $13 million. And at the time that we gave our original guidance our hedge position was roughly 75%, meaning 25% of consumption was subject to volatility. So we since, pretty much locked that in being 92% hedged. I'm sorry, and what was ---+ did I answer that, or do you have another question. Sorry about that. We don't know what happened. Is everybody back on. <UNK>, can you repeat your question, or did you have a new one. <UNK>. Okay, because we couldn't hear you. Can you repeat that. We're having a little technical difficulty here. Yes. So the updated guidance, <UNK>, is actually a tail wind for us. So we've locked it in. It's $13 million to $14 million on a full year basis that we'll benefit from. No, you have that correct. So it's $15 million in 2016. I would straight-line that throughout 2016. And then 2017 first half, there's an additional $[15] million of cost, and although that would be a run rate of $30 million for the year. We really just call attention to the fact that the ship isn't there in the first half, and it is there in the second half. But even with those costs in 2017, it's still a run rate is profitable in 2017. And that is accretive to our $5 EPS target. Yes, in terms of the Q1 occupancy, it was a strong quarter. We had Escape for the first time, we didn't have Escape Q1 of 2015. She's very popular. It's the peak winter Caribbean season. The marketing has resonated very well, and we rolled out the Feel it, Free at Sea promotions. And the vast majority of the inventory was out of Europe, and already booked at the turn of the year. Remember. , we had a very strong book position at the end of the year, which benefited Q1 more than any other quarter but just because of its proximity. So then, just rolling down through Q1, yields as we called attention to, we have seen great ---+ much greater strength in the Caribbean. We also saw increased onboard revenue. So you get the right passengers on there, they tend to spend more as we've called attention to. So we definitely got a boost to our yield. Net cruise cost, some of that is timing, primarily on marketing. Let's see, on the other income, you can't really model that. So this is the first time that we've called attention to this mark-to-market on our ATS, or advanced ticket sales. The advanced ticket sales is a liability, for the fact that these are future sailings, and due to the weakening of the dollar at quarter end, we recorded this. But if rates hold at these levels, it would provide a similar tail wind to future quarters. So you book that revenue then, as the ship sales if you will. And again, we've never really called this out in the past, because it was immaterial. So I don't think from that standpoint, you can really model it, but we will call attention to it in future quarters. If currencies don't change, what was a head wind in Q1, will turn into a tail wind in future quarters, for the reasons that <UNK> just said. I think that's why it's important, I called attention to it, was the fact that it's $0.02 added on to $0.38. If it wasn't for this mark-to-market, we delivered $0.40 EPS. That's correct. As long as the ship hasn't sailed. Mark-to-market, whatever is in your liability in ATS, but then once it sails, it's actually in yield. Well primarily we source 85% of our business from North America, and therefore 85%, 86% of our business comes in US dollars. So it's not material, and number one and number two, the currency hasn't changed that much. Right. We're rolling over similar levels from the prior year. Latoya, I think we have time for one more question. Well we are working to diversify our sourcing, so that we are not so dependent upon the North American market. It's one of the pillars of the FDR deal that we rolled out last year. So since last year, we opened sales offices in Sidney, Australia, we've opened up three offices in China, we opened an office in Brazil, and we've added resources to both our German offices to take care of Continental Europe and UK office in South Hampton, as the UK is our single largest non-north American market. So that takes time, but we are already seeing a increase in business from these non-north American markets. It's one of the reasons why we feel pretty good about Q3. We'll be able to source more business out of Europe primarily for the Europe itinerary, although we have to recognize that those likely will come in at a lower price point, because that's just how the European business is. But we do have, we are booked so well at such high prices for Q3, that we can absorb that. And we don't ---+I'll take the first part of your question is, we won't break out the capacity by brand. But overall, our Mediterranean capacity, I think I mentioned it earlier in the call is 26% in Q3, versus 21% in Q2, and only 15% in Q4. Fir the full year is 17%. Okay. So when you're saying Latitudes put on ---+ first off, the advanced ticket sales is whether you're a Latitude member or not. It's all revenue that is deferred, that's on the books. But are you referring to the Cruise Next program, where you're actually booking your cruise in advance. Yes, so that's just when they're redeemed. It's like 12 months, and it expires. Thank you. Well thanks, everyone for your time and support this morning. And as always, we are all available to answer your questions throughout the day. Have a great day. Thanks, everyone. Bye-bye.

2016_NCLH

2016

BXP

BXP #So to answer your question, and I've talked about this over the last couple of calls, yes, I think given the slowness in the economy, we have raised the bar so to speak in the level of preleasing that we require on new development. Everyone always asks for a number on this and that's not possible to provide because it depends on the size of the building, the activity level in the market, the speed to delivery, every circumstance is different, where is the tenant coming from, our existing portfolio or from outside. But there's no question, as we evaluate new developments and we have a lot to evaluate even in our own Company because of the large landholdings that we have, preleasing is an absolute requirement and our desire to have it be larger in the portfolio is there. So that is definitely happening. However, I think we still see projects, and I described a couple of them, particularly ---+ several of the projects that we are looking at right now are actually 100% preleased, and those are the kinds of projects that we want to be doing and will create value for shareholders, even if we are later in the economic cycle. As it relates to Dock 72 leasing, we are just too far away from delivery to expect much significant preletting. We are clearly in the market, speaking with potential tenants, marketing the asset, but I think it's too early to expect ---+ for us to expect to have significant preletting. No. We are full systems go with WeWork at the Brooklyn Navy Yard and at the other two properties where we have leases. Let me comment that as we have ---+ in our discussions with WeWork, all evidence that we have points to the fact that the facilities that they have open are very successful. They are fully let and they are creating an attractive margin to WeWork. And we are seeing it in the projects where they are open with us. Particularly 535 Mission has been very successful. So a lot of the press that you are describing is more about WeWork as a company, and again from reading the same press, a reduction in the projections that they are projecting for their overall company, but as it relates to the performance of the individual installations, our evidence suggests that they are doing well. Yes, if I could just add one comment. We are very actively engaged with them at the Navy Yard. We are driving piles, so, as <UNK> said, it's early on ---+ it will be more exciting in the fall when the steel goes up, but we are in weekly communication with WeWork. They have submitted their buildout plans, we are adjusting their buildout plans. We are co-working with them on the amenity space. They are very, very excited about the project. I think the answer is yes to both. So I'm not being tongue-in-cheek about it. We are comfortable with the rent that we pro-formaed for UnderArmour and based upon what's available, we think will do a little bit better. No, there was 68,000 square feet of space. Some of it might have been ---+ as <UNK> suggested, it was on four levels, so there was second-floor space, there were two stories of first-floor space because the level on Madison Avenue and the level on Fifth Avenue are on slightly different planes. And then there was some subgrade space or concourse space and sub-concourse space. So there's a plethora of levels there and it was about 68,000 square feet. And those levels can connect differently. We could put the second floor level connected to the Madison. We can take part of the sub-concourse and put it with the bank if the bank doesn't stay that's on Madison. So it's fairly complicated, but we worked it out I think with UnderArmour. They are committed to the block of space, the square footage that <UNK> mentioned. I think that we will do some construction financing on some of the joint venture development projects that we have, so we are in the market for both the Brooklyn Navy Yard and for the Hub on Causeway. So we are going to do some construction financings on those projects. For the remaining cost for the wholly-owned developments, I would expect that we would use cash on hand and at some point we would do some long-term financing at rates that we feel are very, very attractive to lock in and make sure that we lock in as low a rate as we plan. So we will be evaluating that. And just as a surrogate, right, a construction loan today is probably LIBOR plus 200 at the lowest level and 300 and you can do a 10-year financing at 3%. So the value of a construction loan from a rate perspective is de minimis. That's an excellent point. Sure. <UNK>, do you want to take that one. Sure. First off, we are underwriting at rents that are approximately 25% to 30% less than San Francisco. It's going to take several years to get it entitled and we don't anticipate delivering that building until probably 2019, 2020. So we are quite a ways off based on current market conditions from a standpoint of is the market softening right now, which we are seeing in San Francisco. And, <UNK>, you might just want to describe the Temescal area and the Rock Ridge area and what that is because it's not downtown Oakland. This site is right adjacent to the MacArthur BART station. This is an area that has become very popular for restaurants, shops. It's one of, for lack of a better term, one of the hipper neighborhoods in the Oakland-Berkeley market. And it's one that is gentrifying quite rapidly, so we see it as a very good location long term. So, look, the deals that we have in the works right now add up to about eight floors, so if we are able to do half of them, we probably will get five or six of those floors done and I think that our expectation is that we are going to continue to go at that type of a pace so that as we get closer to people actually being able to go into the building and go to their floor and to experience the spectacular configuration, views, curtainwall, airflow, ceiling height, that that will ramp up the activity and we anticipate that will be happening towards the end of this calendar year where we will actually do those tours on finished floors. And so I will let <UNK> be the spokesperson because he's already made a commitment for the Company, but we continue to be very encouraged by the leasing there. <UNK>. I think Donald Trump would refer to the building as something really, really special. It's the A-1 location in San Francisco. It's going to be the biggest and the best building that's in the marketplace and I'm very confident that it's going to lease up rapidly. I think that larger tenants are not necessarily more cautious. I think larger tenants are fully committed to lease expiration-driven decisions that allow them to build out space. So anybody who is looking for hundreds of thousands of square feet of space is doing that because across the broad markets that we are in because they have a lease expiration and I don't think anyone is looking at the market and saying, well, we think things are going to get worse and therefore we are going to hold off. I think people feel relatively good about the position that the markets are in. On the smaller side where there's a lot more flexibility I think the volatility that <UNK> described and the issues associated with the world at large are creating uncertainty, and uncertainty just doesn't drive significant capital decisions. And so we are seeing a lot more reticence to making decisions on new space for smaller companies. I think there is really three things that we have. One is developments that are occurring and leasing up, which is part of that. We will have a couple of tenants at 888 that will take occupancy later this year that have a benefit to the Company. Also interest expense. We talked about the fact that we don't have any early refinancing in our guidance, but we do have the Embarcadero Center (technical difficulty) and it's a 7% loan, so there is an assumption in our guidance so there's going to be much lower interest expense when we refinance that in the fourth quarter. The other thing I would mention would be operating expenses, which are cyclically highest in the third quarter and lower in the fourth quarter, primarily due to utilities where the HVAC is obviously a little more expensive in the hotter times of the year that we are sitting in right now actually. So those are most of the drivers and there's some positives that we've talked about in terms of leasing activity later in the year that we are guiding later in the year, things like continued activity at Embarcadero Center where we've got renewals that we are working on that we are trying to sign that will have a blend and extend where we will get some GAAP lift later in the year. So it's those kinds of things. We have provided some information as to the timing of that. I can't give you exact numbers. I would say that somewhere between $15 million and $20 million is in today because that was, if you look at our slide, that was 535 Mission and 250 West lease-up was in there and that is done. A good chunk of I would say half of the Embarcadero Center stuff will be in late this year and next year and then the Prudential Center stuff will be in next year, but not this year. And then there's some big pieces that I think will be later. We are going to get some of the lease-up at 200 Clarendon Street and perhaps a floor at 120 St. James that will hit sometime in 2017, but the majority of that I see as being later because most of that space is ---+ we have to wait until the tenant occupies to recognize revenue on that space. And then we've talked about UnderArmour and the timing of that. And then 100 Federal Street, which is another big piece of it, the lease is fully signed, but right now we are relocating another tenant to create the floors. We are not going to be able to deliver those floors until sometime in the middle of 2017, so some of that will be into 2017 and then into 2018. So I didn't give you the numbers, but that's hopefully helpful with some guidance on the timing. So most of the technology-oriented companies in the biotech and the pharma and life sciences companies are concentrated in the Cambridge market and then in the suburban markets, although there's been some migration into the city. So I would tell you that on a ranking, Cambridge is the strongest market. The Waltham-Lexington market is the second strongest and then the CBD downtown markets are below that. And I think our view is that the markets are very strong at the lower level of buildings, but that there's a little less activity at the top of buildings and largely that's because the tenants that are driving demand at the top of the buildings traditionally are professional services and financial services companies and there's just less growth there. We've seen really an incredible stat. The P2 quarter as we call it between the Mass. Turnpike and Route 2 at the Lexington site to the north along Interstate 95, the competitive set of buildings that we follow, 32 buildings, are now at 4.25% vacancy. It's the lowest I've seen in my career there. And I think it's indicative of your question, which was we do have good strong demand from the pharma biotech sector that's looking and as <UNK> mentioned, solid companies, not particularly huge companies, but companies that have growth in financial statements, so we are really encouraged about that corridor in particular. Yes, it's very preliminary as far as them looking in the market. It's been rumored that they are interested in the Central SOMA area. The Central SOMA plan is not approved and won't be approved probably until the end of this year or early next year, so I think as far as them expanding into San Francisco unless they go to an existing building is going to be quite some time off. So on the special dividend, as you know, that's driven by asset sales. I described three deals that we are working on. There a couple of other little smaller things. And I said in my remarks that the sales could be as high as $350 million. I would assume that's the highest they would be. All those deals may not happen. We don't know where they are priced. The original direction on asset sales was $200 million to $250 million. So we don't know yet exactly what the asset sales are going to be, so it's difficult for us to predict what the gains and so forth are going to be associated with that. So we will clearly look at that and we're working with our Board later in the year to determine what if any special dividend we would pay. And then as it relates to the recurring dividend, as you know, we mirror that to net income and as you point out, net income will be rising. So again, with our Board, as we get into later this year, we will be evaluating the ongoing dividend to determine whether and how much we could increase it. I don't have that number for you here. I think that I can say that our taxable income is fairly close in line with where our dividend is. I think that concludes our questions and concludes our formal remarks. Thank you for your time, attention and interest in Boston Properties.

2016_BXP

2017

ANTM

ANTM #Thank you, Doug, and good morning We're pleased to announce strong second quarter 2017 GAAP earnings per share of $3.16 and adjusted earnings per share of $3.37 with both membership and revenue tracking well Our second quarter financial results show that we are continuing to carry forward the strong momentum we built coming into the year and during the first quarter Our membership growth coupled with the strong quality of earnings so far in 2017 gives us confidence that the value proposition we bring to the marketplace is resonating well Within membership, both fully insured and self-funded enrollment continue to track well versus our expectation, as we ended the quarter with nearly 40.4 million members In the first six months of 2017, our membership has grown by 468,000 lives We're particularly pleased with the membership trends in our commercial insured business, as both Large and Small Group membership came in ahead of expectations again during the quarter Our membership results on a consolidated basis translated into second quarter operating revenues of $22.2 billion, an increase of $924 million or 4.3% versus the second quarter of 2016. During the quarter, our Individual enrollment declined by 107,000 lives which was expected Our total Individual enrollment of approximately 1.8 million members consists of 1.5 million ACA-compliant members and 300,000 non-ACA-compliant members Of the 1.5 million ACA-compliant members, approximately 1 million or less than 2.5% of our total enrollment were from the individual exchanges Self-funded enrollment in Local Group and National Accounts were in line with expectations Before I discuss the details of our business unit performance, I want to spend a few moments on the evolving policy landscape As a company, we recognize that access to affordable and high quality healthcare is immensely important and intensely personal for all American Anthem has always been committed to our members and sought to provide value and limit disruption, no matter their financial circumstances or health status Our commitment to all of our members, including the most vulnerable populations, has not changed and will not change in the face of what we believe will be an ongoing period of debate and policy and regulatory adjustments in healthcare State and federal regulatory and legislative changes will likely impact our Individual and Medicaid businesses and we remain focused on informing government leaders as they develop policy to achieve the common goal of creating stable and affordable marketplaces For example, insuring appropriate funding for all whom we serve, a balanced risk pool, effective rules and regulations that limit expensive abuses prevalent in today's marketplace, elimination of unnecessary taxes that add to the cost of insurance Altogether, Anthem will continue to contribute in an ongoing discussion in Washington and the states on behalf of our members and all American, as we work towards stability and sustainability by providing ideas built on experience, data, and member feedback Turning back to our financial results Our strong second quarter financial performance reflected contributions from both the Commercial and Government segments In the Commercial business, we grew our Local Group insured enrollment by 22,000 lives, bringing our year-to-date enrollment growth to 69,000, despite a market that is shrinking overall Operating revenues were $10.3 billion in the second quarter of 2017, an increase of over $400 million or 4.1% versus the prior year quarter The increase was primarily attributable to premium rate increases, reflecting overall cost trends in our Individual and Local Group businesses, as well as enrollment grew primarily in the Local Group business These increases were partially offset by the one year waiver of the health insurance tax in 2017, which improved affordability for our members Our second quarter 2017 operating margin for Commercial of 9.4% declined by 150 basis points from 10.9% in the second quarter of 2016. The decline was largely due to the impact of less favorable adjustments to prior year risk adjuster accruals, the one year waiver of the health insurance tax in 2017 and higher performance-based incentive compensation accruals The decline was partially offset by the impact of strong operating performance in our Local Group business and improved core medical cost experience in our Individual business In the Individual ACA-compliant business, our second quarter financial performance was in line with our most recent expectations The overall morbidity levels of our enrollment identified in the first quarter has stayed consistent, giving us better line of sight into the expected claims experience Our updated 2017 guidance continues to assume that this business will operate at a slight loss for the year We're focused on mitigating the claims pressure through medical management capabilities At the end of June, we received the final 2016 risk adjuster and reinsurance data from CMS and have updated our accruals We're pleased that the reinsurance rate of 52.9% was slightly ahead of our expectations and the significant risk adjustment receivable for the 2016 benefit year was in line with our expectations The work to determine our final 2018 market footprint in the Individual ACA-compliant business is not yet complete We expect to provide additional clarity on our final 2018 market footprint during our third quarter call, if not sooner As a company, our strategy has been and will continue to be to only participate in rating regions where we have an appropriate level of confidence that these markets are on a path toward marketplace stability Thus far, we have notified state regulators of our decision to largely exit the Individual ACA-compliant marketplace in three of our states, which represents a little less than 10% of our total Individual ACA-compliant enrollment While we have filed initial rate request in all of the other states, it is important to note that those filings do not necessarily indicate the final level of participation There are still many areas of marketplace uncertainties, principally, cost-sharing reduction subsidy funding that make it challenging to be comfortable with the level of predictability of a sustainable marketplace If we aren't able to gain certainty on some of these items quickly, we do expect that we will need to revise our rate filings to further narrow our level of participation That said, we are closely monitoring state and federal legislative and regulatory developments And if the level of uncertainty in the marketplace is reduced, we would have increased confidence in our ability to predict the appropriate level of market participation Switching to the Government business, membership was flat during the quarter, but we grew year-over-year operating revenues by 4.5% to $11.9 billion Operating margin for the Government business was 2.5% during the second quarter of 2017, a decline of 150 basis points compared to the prior year The decline was primarily due to higher performance-based incentive compensation accruals and the impact of the one year waiver of the health insurance tax in 2017. In our Medicaid business, our financial performance was largely in line with expectations outside of the Iowa contract While our operating performance improved in Iowa versus the second quarter of 2016, it did underperform our expectations during the second quarter of 2017. We continue to believe the medical performance of the business supports higher rates than provided under the current contract We remain highly engaged in working to secure actuarially sound rates that reflect the acuity of the populations we serve We continue to see a strong pipeline of RFP opportunities for future growth in the Medicaid business, and expect 15 to 20 RFPs to be released over the next year-and-a-half The pipeline includes opportunities for new business in both new and existing states, as well as re-procurements of existing contracts which, in many cases, offer the potential for additional business beyond our current footprint Additionally, the pipeline is largely concentrated in new and specialized populations and services, such as long-term services and support and those with intellectual and developmental disabilities In these areas, Anthem has a proven track record of providing market-leading capabilities, which are necessary to effectively manage these vulnerable populations In the Medicare business, our core gross margin performance was in line with expectations We continue to expect to organically grow our Medicare Advantage enrollment by low to mid double-digit percentages over the next few years, with a financial contribution that is within our long-term targeted operating margin range We also continue to target M&A opportunities to augment our growth profile Turning to discuss our updated 2017 financial outlook We now expect adjusted earnings per share of greater than $11.70 for the full year 2017, an increase of $0.10 from our previous outlook Our updated outlook reflects the improved performance in our Commercial Local Group business and reflects the uncertain nature of the Individual ACA-compliant marketplace Finally, as it relates to our PBM strategy, our pharmacy team is analyzing our options to create the best long-term pharmacy solution While it would be premature to share specifics regarding the RFP process, we remain very confident in our ability to drive significant value for our clients, members, and shareholders The RFP process has further validated our expectation to be able to lower our pharmacy cost by more than $3 billion annually, once we transition to our future state Should we decide to leave Express Scripts, we're very confident in our ability to thoughtfully plan for the transition of our customers to our new solution A seamless transition for our members is a key component in our evaluation process, and we will be very focused on mitigating any potential abrasion for our customers throughout this process We remain committed to informing the market of our long-term pharmacy strategy by the end of 2017. With that, I will turn the call over to <UNK> to discuss our financial statements and provide additional details on our updated 2017 outlook Very quickly, maybe chop your question up into a couple parts First of all, regarding some prior comments regarding M&A around MA, we still are very focused on examining markets, market by market looking at opportunities Yes, we're still mindful of the opportunities for tuck-ins We think that there certainly are opportunities that we should focus on very carefully and so we're going to continue that pursuit As you know, we've got a MA platform that is now restructured and completely ready for expansion, both organically as well as by way of M&A So, we're going to keep our options open We're going to continue to look at the right fit for us in the markets that we believe where we can perform at a very, very high level And so, we do have teams that are very actively engaged and focused on the best proposition possible M&A, broadly speaking, is still a very significant long-term strategy for us given that – kind of an overarching theme is that it's still all about access, affordability and quality of services, both with respect to service as well as safety We're very mindful of that fact that scale does matter in this pursuit, and we will continue to very carefully examine the marketplace to assess our optionality, our targets and hopefully create fits that are really synergistic with respect to how we're going to best serve the marketplace Great example of – you may recall, a few years ago, the acquisition of Simply Healthcare probably stands out as the kind of transaction that I think and will be incredibly beneficial for the company, not just serving the marketplace, but also from a financial perspective being a great fit with respect to the synergies that I mentioned a moment ago, Simply was a incredibly well-run company And I think we're very pleased to be able to, brought that into our portfolio, then being able to leverage off of that significant strength that it brought to us and continue to expand in the Florida marketplace I think that – hopefully that's a response to the question about M&A and more specifically MA open for more questions there With respect to the political landscape, I think we're all very observant of what's happening I don't think it's an exaggeration by the hour, leading up to just maybe a week or so ago, we tried to stay very, very engaged in sharing our thoughts about what it would take to stabilize the marketplace We do have ingredients that we have continually communicated as sort of the recipe or the ingredients to create stabilization in the marketplace, the ingredients that we believe will repair the Affordable Care Act issues that we've come upon repeatedly over the last few years, and we do believe we have been heard , with respect to how that all might play out in the end with respect to policy decisions that will be made by way of a vote in Congress, I think, is anybody's guess, but quite frankly, we do believe we have the ability to share our opinions, our voice is heard, and we're hopeful that the kind of stabilization, we believe, is essential to best serve our marketplace is going to be embedded in whatever may come out of Congress There are other points of view that maybe nothing will happen in the short run I can't weigh in on that at all I don't know But again, we're very hopeful, and we do believe that stabilization is a distinct possibility and obviously, as I said, we will continue to make the contributions necessary for our voice to be heard, as well as the voice of the industry overall So, thanks for the question, and I look forward to maybe talking more about this as these policy decisions are created and put into force <UNK>, thank you very much for that comment With respect to rates, you asked a question about what other characteristics of the market might influence our decisions around rate adjustment Clearly, CSR is a standout We've repeatedly said that that aspect of pricing and the subsidies that support membership in our markets can translate to as much as a – maybe 18% to 20% uptick in premium, if subsidies aren't granted It remains to be seen whether that will ultimately be allowed, but if not, then obviously we're going to have to revisit our pricing market by market in order to judge whether or not pricing adjustment is necessary or even if re-entry on any measure of scale is appropriate As I said earlier, so much is dependent on stability of each of those markets of which you may know We have 139 rating regions and so those rating regions are going to be carefully analyzed, sliced and diced and then determined if quite frankly a rating – or excuse me, a premium increase is tolerable beyond a certain point, and if in fact we will be able to remain as an active participant in those rating regions Right now, as you know, our extraction represents about 10% of membership and our hope that between now and, let's say, through September a lot of decisions will be made, but I can't underscore that time is of the essence, and some of our critical decisions may have to occur in a relatively short period of time So, I would tell you, the decision making is going to be, as they say, fast and furious and time is of the essence for us to make the right decisions for the benefit of the markets we serve, the membership we serve, as well as for the company overall And <UNK>'s absolutely right, there's a cascading effect One other key ingredient, which is material, is the tax And the tax, if it were to have the moratorium lifted, it's probably something on the order of 4% to 5% premium increase, so you can see the compounding effect of all of these issues that don't map to stabilization that then creates this cascading effect that <UNK> mentioned earlier So, again, that's all included in our analytics specific to 139 rating regions that we are looking at very carefully to judge the in and out decisions that we have to make Two parts, one, Iowa; one CSR in terms of further exploring that issue Regarding Iowa, we got a great state partner and, obviously, we've been engaged in dialogue with them now for a quite lengthy period of time and we're very hopeful that, as <UNK> pointed out in his remarks, the actuarial soundness that we're pursuing, I think, will be made clear and the right decisions will be able to occur And again, it's a work in process and I think going beyond, any kind of conversation at that level, I think, is not appropriate given the intricacy of the dialogue that we're having with our state partners And with respect to contract terms, obviously, probably, in fact, cannot go into those terms at this time, but in the main we do believe that over time we'll be able to have the right kind of facts laid out that demonstrates the degree of adjustments that are necessary to create the actuarial soundness that we need to continue to serve the membership in Iowa So, we're optimistic, but it is truly a work in process With respect to CSR, there are a variety of paths and, obviously, the first path focuses specifically on action taken by Congress and if CSRs will be embedded in some type of legislative model and that's going to have to kind of play out based on the votes that occur in Congress Absent that, and again I don't want to predict where all of that might go with respect to yet again another path, but obviously, there may be other choices that may occur related to funding by other means Funding specific to an action taken by the administration, but I think put it altogether, I believe that the leadership that we deal with in Washington are very mindful and fully aware of how CSR really maps to stabilization and, in particular, the effect on premium increases for the people that we serve across the country So, I think it's – that too is a work in process, but it's yet – remains to be seen exactly how that funding will flow to us to support our marketplace We just don't know yet Great <UNK>, thanks for the question regarding PBM Questions really come at us repeatedly on this point and obviously, it's evolutionary from the very beginning back in January of 2016. And go back in time, we've always stated that we would make it very clear, quite frankly make a clear statement of the choice we've made in terms of contracting by the end of the fourth quarter and we still are committed to that With respect to that, we've been engaged in a very analytical process You all well know that RFPs went to the market and we now have received those RFPs and are in an analytical mode that's very thoughtful, very thorough And as we've repeatedly said, we think our pursuit has always been about optionality and kind of constructing a hybrid model has been one of those options that we've carefully evaluated, meaning that we have probably multiple paths that can best serve our customers, our members, whether it's a mail order proposition that is sent out to someone to administer by way of maybe private labeling it, the fact that we will always retain control of our formulary, and then other characteristics of a hybrid model, which represents various constructs within a model that equates to great value for our membership Of course, the other extreme would be to send it all out to another vendor and so we've always been mindful of the many choices we have, which I think speaks to the power, the significance of optionality being very much in our favor We've stood by, as you well know, our expectation in terms of $3 billion per year in terms of savings, go forward at 01/01/2020 and beyond and nothing that has occurred thus far has moved us off of that expectation And so again, we're working very carefully with respect to the analytics around an RFP I do want to underscore that it's not just about the money It has a lot to do with customer service, our commitment to a transition that is virtually seamless Given the complexities, we well recognize that and so whichever direction we go in, we will be very careful in our choices regarding best serving our customers with a seamless transition So, it's obviously a complicated formula for success, but it's literally – it's all hands on deck to get us from today to 01/01/2020 and I feel really good about the path we're on and I don't think there are any complexities that we aren't aware of and working on And I think we again feel very, very good about the process and what potential will come our way in terms of very positive characteristics beginning 01/01/2020. <UNK>? <UNK>, thanks for the question specific to this continued formation of the ACA marketplace We've always said that our target is 3% to 5% margin We certainly haven't backed off of that As you can imagine, toward the day-to-day grind of best managing that portfolio is governed in large measure by rules of engagement and the stabilization necessities that I talked about earlier coming to reality Our sense is that stabilization is a distinct possibility We are still committed to the 3% to 5% margin performance and we're also committed, as I've said repeatedly over nearly a year now and going back to last summer, kind of worked off the characterization of surgical extraction, we still are very focused on that as well And I think, <UNK>, that we will make the right decisions with respect to engagement in the market, detachment from a market Our hope is that we will be able to continue to perform in a very robust and meaningful manner in all 139 rating regions, but so much depends on how legislative process plays out and what stabilization rules are put into place, but again I'll reiterate, we're still hopeful that a 3% to 5% margin is achievable And so, <UNK>, I don't know if you want to add to kind of the outlook and how engaged we are in making that a reality <UNK>, that's kind of the question that is very powerful perspective on the future of our industry I've been a great believer that so-called secret sauce for our performance in the marketplace moving into the future is all about translating data to information, meaningful information that supports our provider community, especially in terms of better choices that they can make in and around evidence-based practice Information that supports the needs of our consumers given the significant risk position that they're now being subjected to in terms of higher deductibles, etcetera They need to make very well-informed decisions in terms of accessing healthcare and remaining healthy Therefore, we are very committed to the wellbeing of all of our members In that regard to your point about artificial intelligence and the foundational aspect of how you support the development of useful information, we're investing quite heavily with respect to data infrastructure, foundational buildout with respect to our IT systems We are definitely using artificial intelligence today and optimizing our ACA benefits across 139 rating regions and actually, this has been a three-year journey for us in the AI space specific to that process Again, I do want to underscore we will recognize that this is the future of a very successful health benefit manager and in that regard, the appropriative amount of funding is being distributed, allocated to our technologies that will advance artificial intelligence that can best support the needs of all the interests that we engage with, whether it's a provider or a consumer, government, what have you, we are intimately involved in building out that kind of capability today Hopefully in the near future, we'll be able to talk more about that So, thanks for questions Very appropriate and very significant Great Thank you, operator And thank you all for your questions They were great questions today And I just want to underscore that as a company we remain committed to confronting some really tough questions and challenges in and around the healthcare delivery system, as we are focused on expanding access to high-quality affordable healthcare to our customers And I think that it's really critical for me to underscore the key contributors to that success being our associates who've given continued support to the company and to our customers, which total 40.4 million members And our associates do that every day with incredible commitment Thank you all for your interest in Anthem, and we look forward to speaking with you soon at upcoming conferences Thank you very much for the time

2017_ANTM

2018

DIOD

DIOD #Good afternoon, and welcome to Diodes' First Quarter 2018 Financial Results Conference Call. I'm <UNK> <UNK>, President of Shelton Group, Diodes' Investor Relations firm. Joining us today are Diodes' President and CEO, Dr. <UNK> <UNK>; Chief Financial Officer, Rick <UNK>; Vice President of Worldwide Sales and Marketing, <UNK> <UNK>; and Director of Investor Relations, Laura Mehrl. Before I turn the call over to Dr. <UNK>, I'd like to remind our listeners that the results announced today are preliminary as they are subject to the company's finalizing its closing procedures and customary quarterly review by the company's independent registered public accounting firm. As such, these results are subject to revision until the company files its Form 10-Q for its first quarter 2018. In addition, management's prepared remarks contain forward-looking statements, which are subject to risks and uncertainties and management may make additional forward-looking statements in response to your questions. Therefore the company claims the protection of the safe harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from those discussed today, and therefore, we refer you to a more detailed discussion of the risks and uncertainties in the company's filings with the Securities and Exchange Commission, including Forms 10-K and 10-Q. In addition, any projections as to the company's future performance represent management's estimates as of today, May 8, 2018. Diodes assumes no obligation to update these projections in the future as market conditions may or may not change. Additionally, the company's press release and management statements during this conference call will include discussions of certain measures and financial information in GAAP and non-GAAP terms. Included in the company's press release are definitions and reconciliations of GAAP to non-GAAP items, which provide additional details. Also throughout the company's press release and management statements during this conference call, we refer to net income attributable to common stockholders as GAAP net income. For those of you unable to listen to the entire call at this time, a recording will be available via webcast for 60 days in the Investor Relations section of Diodes' website at www.diodes.com. And now, I'll turn the call over to Diodes' President and CEO, Dr. <UNK> <UNK>. Dr. <UNK>, please go ahead. Thank you, <UNK>. Welcome, everyone, and thank you for joining us today. First quarter revenue was at the high-end of the guidance, primarily driven by strong growth in the consumer, automotive and industrial markets, complemented by revenue in Europe reaching record levels. In fact, our automotive end-market reached 9% of the revenue in the quarter as we continue to benefit from our successful customer and content expansion efforts. Since implementing our automotive strategy in 2013, we have achieved a compound annual growth rate of 27% in this business, reflecting our expanded customer base, increasing pipeline of design wins and the growing content across multiple applications. The quarter was also highlighted by gross profit dollars reaching a record, growing 33% year-over-year, twice the rate of our revenue growth and contributing to almost 3.5x increase in non-GAAP earnings per share over the same time period. Additionally, EBITDA in the first quarter reached a record $54.2 million or 20% of revenue. The operating leverage in our business model positions Diodes to deliver increasing profit and a cash flow in the coming quarters, as revenue continues to increase at a faster rate than operating expense and approach our target model of 20% of revenue. Looking to the second quarter, we expect to extend our growth momentum with continued strength across our target geographies and the end markets, which we anticipate will result in the achievement of new quarterly records for both revenue and gross profit. With that, let me now turn the call over to Rick to discuss our first quarter financial results and our second quarter guidance in more detail. Thanks, Dr. <UNK>, and good afternoon, everyone. Revenue for the first quarter 2018 was $274.5 million, an increase of 16.2% from the $236.3 million in the first quarter 2017 and an increase of 2.3% from the $268.4 million in the fourth quarter 2017. Revenue increased in the quarter with Europe achieving record revenue, mainly due to strength in the automotive and industrial end markets. Gross profit for the first quarter 2018 was a record $98.6 million or 35.9% of revenue compared to $73.9 million or 31.3% of revenue in the first quarter 2017 and $96.4 million or 35.9% of revenue in the fourth quarter 2017. The 460 basis point year-over-year increase in gross profit margin was primarily due to favorable product mix, increased contribution from Pericom products as well as improved capacity utilization. GAAP operating expenses for the first quarter 2018 were $71.7 million or 26.1% of revenue and $64.7 million or 23.6% of revenue on a non-GAAP basis, which excludes $4.8 million of amortization of acquisition-related intangible asset expenses, $2.6 million of expenses related to officer retirement and a $300,000 credit related to the KFAB restructuring. This compares to GAAP operating expenses in the first quarter 2017 of $64.6 million or 27.3% of revenue and non-GAAP expenses of $57.3 million or 24.2% of revenue, and GAAP operating expenses in the fourth quarter 2017 were $72.9 million or 27.2% of revenue and $64.3 million or 24% of revenue on a non-GAAP basis. Looking specifically at selling, general and administrative expenses for the first quarter. SG&A was approximately $47.2 million or 17.2% of revenue. On a non-GAAP basis, excluding the officer retirement expenses, SG&A in the first quarter was approximately $44.6 million or 16.2%. This compares to $39.7 million or 16.8% of revenue in the first quarter 2017 and $44.7 million or 16.7% of revenue for the fourth quarter 2017. Investment in research and development for the first quarter was approximately $20.2 million or 7.4% of revenue. This compares to $18 million or 7.6% of revenue in the first quarter of 2017 and $19.7 million or 7.3% of revenue in the fourth quarter 2017. Combined, SG&A plus R&D for the first quarter 2018 was $67.4 million or 24.5% of revenue. On a non-GAAP basis, it was $64.8 million or 23.6% of revenue compared to $57.7 million or 24.4% of revenue in the first quarter 2017 and $64.4 million or 24% of revenue in the fourth quarter 2017. Total other expenses amounted to approximately $600,000 for the quarter, including a $3 million foreign currency loss, a $2.8 million interest expense. These losses were partially offset by other income of $5.2 million, which included an insurance reimbursement of approximately $3 million for business interruption due to the KFAB shutdown. Income before taxes and noncontrolling interest in the first quarter 2018 amounted to $26.3 million compared to $2.1 million in last year's first quarter and $20.8 million in the fourth quarter of 2017. Turning to income taxes. Our effective income tax rate for the first quarter 2018 was approximately 29.6%. GAAP net income for the first quarter 2018 was $18.5 million or $0.37 per diluted share compared to GAAP net income of $1.2 million or $0.02 per diluted share in the first quarter 2017 and a net loss of $30.7 million or $0.62 per share in the fourth quarter 2017, which included the impact of the tax reform act. The share count used to compute GAAP diluted EPS for the first quarter 2018 was 50.6 million shares. First quarter 2018 non-GAAP adjusted net income was $24.2 million or $0.48 per diluted share, which excluded net of tax $3.9 million of noncash acquisition-related intangible asset amortization costs and $2 million of officer retirement expenses. This compares to non-GAAP adjusted net income of $7 million or $0.14 per diluted share in the first quarter 2017 and $21.6 million or $0.42 per diluted share in the fourth quarter 2017. We have included in our earnings release a reconciliation of GAAP net income to non-GAAP adjusted net income, which provides additional details. Included in the first quarter 2018, GAAP net income and non-GAAP adjusted net income was approximately $5 million net of tax of noncash share-based compensation expense. Excluding share-based compensation expense, both GAAP diluted EPS and non-GAAP adjusted diluted EPS would have increased by an additional $0.10 per diluted share in the first quarter 2018, $0.05 in the first quarter of 2017 and $0.06 in the fourth quarter 2017. EBITDA, which represents earnings before net interest expense, income tax, depreciation and amortization, was a record $54.2 million or 19.7% of revenue in the first quarter 2018 compared to $28.6 million or 12.1% of revenue in the first quarter 2017 and $47 million or 17.5% of revenue in the fourth quarter 2017. Cash flow generated from operations was $54 million for the first quarter of 2018. Free cash flow was $22.3 million for the first quarter, which included $31.6 million of capital expenditures. Net cash flow was a negative $21.3 million, including the pay down of approximately $46.5 million of long-term debt. Turning to the balance sheet. At the end of the first quarter, cash and cash equivalents plus short-term investments totaled approximately $186.3 million. Working capital was approximately $393.9 million and long-term debt including the current portion, was $221.8 million. At the end of the first quarter, inventory increased by approximately $20 million from the fourth quarter of 2017 to approximately $236.5 million. The increase in inventory reflects a $10.6 million increase in finished goods, a $2 million increase in work-in process and a $7.4 million increase in raw materials. The increase in finished goods inventory is to support our expectations for a continued growth in the second quarter. Inventory days were 116 in the quarter compared to 114 days in the fourth quarter of 2017. At the end of the quarter, accounts receivables was approximately $174.1 million, a decrease of $26 million from last quarter. AR days were 61 compared to 74 last quarter. Capital expenditures on a cash basis for the first quarter were $31.6 million or 11.5% of revenue. This above model CapEx was to put capacity in place with expected strong revenue growth in the second quarter and second half of 2018. We expect CapEx for the full year 2018 to return to our target model of 5% to 9% of revenue. Depreciation and amortization expense for the first quarter was $25.6 million. Now turning to our outlook. For the second quarter 2018, we expect continued strong growth with revenue increasing to a range of $292 million and $308 million, or up 6.4% to 12.2% sequentially. We expect GAAP gross margin to be 35.5% plus or minus 1%. Non-GAAP operating expenses, which are GAAP operating expenses adjusted for amortization of acquisition-related intangible assets, are expected to be approximately 22% of revenue, plus or minus 1%. We expect interest expense to be approximately $2.5 million. Our income tax rate is expected to be 29% plus or minus 3%, and shares used to calculate diluted EPS for the second quarter are anticipated to be approximately 51.3 million. With that said, I will now turn the call over to <UNK> <UNK>. Thank you, Rick, and good afternoon. As Dr. <UNK> and Rick discussed, first quarter revenue was up 2.3% sequentially and up 16.2% year-over-year. Q1 distributor POP was flat and POS was down 6.6%. Europe and North America remained strong with record high POS results. Asia POS is down due to impact of the Chinese New Year holiday shutdown on our customers. Channel inventory increased 7.8% sequentially. As evidenced by our above seasonal results, customer activity remained strong across regions, with solid design activity and design wins. We continue to penetrate our key customer base with an expanded sales footprint, deeper product line and significant cross-selling opportunities with the Pericom product lines. We set revenue records across 4 product categories in the first quarter, including connector ASIC, interface, protection devices and signal integrity. We also continued to see strong momentum in the battery management, EPMS, switches, MOSFET and CMOS LDOs, driven by recent design wins on new products. Going forward, we expect our expanded product portfolio, new product introductions and design win momentum will support continued revenue growth. Looking at the global sales in the first quarter. Asia represented 78% of the revenue; Europe, 13%; and North America, 9%. In terms of our end markets, consumer represented 27% of the revenue; communications, 24%; industrial, 23%; computing, 17%; and automotive, 9% of the revenue. <UNK> mentioned, our automotive market was a highlight in the quarter, setting a quarterly revenue record and growing 50% year-over-year. Given its strong performance, I want to start my end-market commentary with auto market, which has been a key focus area for Diodes for the past several years and also a area where we are seeing expanded opportunities for growth. During the quarter, we continued our penetration momentum by winning design in with key automotive customers worldwide. There are 3 application areas where Diodes is gaining significant traction, including connected driving, which consists of ADAS, Telematics and Infotainment systems. Comfort, style and safety, including lighting and brushless DC motor control as well as Powertrain, covering conventional, hybrid and electric vehicles. Specifically, in the connected driving application, Diodes offers are led by PCI switches and ReDrivers as well as signal switches, timing and USB chargers, an area where Diodes' currently offering some of the only AECQ-Qualified parts available in the market. For comfort, style and safety, Diodes has a range of MOSFETs designed specifically to meet the needs of brushless DC driving, with mainly high- and low-power motors and vehicles covering functions such as seat adjustments, windshield wiping, fuel and water pumps as well as power steering. Also in comfort, style and safety, we've had strong success from LED products like buck, boost, buck-boost, linear drivers and bipolar transistors in applications such as daylight running lights, rear cluster, styling, instrument lighting as well as the latest beam steerable LED matrix headlight technology. This segment represents a large portion of Diodes' auto revenues with strong shipments, numerous design in and close engagements with targeted customers offer further opportunity for growth. In the Vehicle Powertrain segment, Diodes' supplies into conventional internal combustion engine powertrains as well as those for hybrid and electric vehicles. In fact, we have secured multiple design wins and opportunities for the battery management system to meet the need of the fast-growing electric vehicle market. As a result of our automotive expansion initiative, over the past 5 years, we estimated that we can now address over $70 of semiconductor contents per vehicle, which will contribute to driving significant revenue upside towards our long-term goal of 20% of the revenue. Turning next to industrial market, which has also contributed to our growth both sequentially and year-over-year. Diodes also continues to secure expanding design ins for products such as LDOs, LED lighting and packet switches as well as continued growth from our Triac-Dimmable offline LED product samples. Our packet switch products remained a primary revenue driver from our connectivity product family and are gaining increased interest for the applications such as security systems, industrial PCs and virtual currency mining machines. Additionally, Diodes launched new MOSFETs for motor and DC industrial applications, also aimed at industrial motor driving, our 2 new devices are recently launched and increasing popular gate drivers ranging from 60 volts to 600 volts, complementing the gate driver portfolio with 5 additional IGBT products, with 600 volts and 1,200 volts rating and handling currents up to 60 amps. Now looking at consumer market, which continued to be a strong area for us, growing both sequentially and year-over-year with increased momentum for new applications like IoT, gaming, quick-charging, handheld portable devices, USB chargers, smart devices and smart audio wireless speakers. We also continued to gain strong traction for our single-chip USB Type C controller with integrated Mux and speeds up to 10 gigabits per second, that provides the regular Type C connectivity with low power in a very small package. These products are suitable for applications such as IP cameras as well as in computing applications such as LTE routing tablets and notebook. In the same way, our USB Type C cross bar switch enables video applications over the USB Type C as it supports USB 3.1, Gen 2 for data and display for a video. We also continued to expand our footprint with our small-sized low-power high-performance crystal and crystal oscillators product family acquired from Pericom. In the communications market, we continue to see strong design in activity with our hall sensors, USB switches, LDOs, timing, TVS, SBR, MOSFETs and connectivity products that are designed in multiple applications, including telecom gateways, routers, switches, setup boxes, smartphones, wireless devices and chargers. Lastly in computing applications, we continued to gain increased content opportunities with our expanded portfolio of Pericom products. We secured several design ins for our new interface products, signal integrity, logic, LDO and low jitter PCIe Gen2, 3, Gen4, crystal oscillators, clock generators and clock buffers in the server, storage and data center applications. Additionally, we launched several new products for computing applications, including a 30-volt bidirectional MOSFET low switch for USB power delivery as well as TVS products for USB 3. X, USB 3 and Thunderbolt 3.0 applications. Diodes also launched 80 to 100 volt Trench Schottky rectifiers for notebook power supplies. In summary, we are pleased with the growth and momentum we continue to achieve, in particular, in the automotive and industrial markets. We have made excellent progress with our product and content expansion initiatives that have resulted in increased market share and a deeper sales footprint. We are well positioned to capitalize on the continued strength in the global market and expect to continue our strong growth in the second quarter. With that, I'm opening the floor to questions. Operator. You are right, <UNK>. It's ---+ that's one of the reasons. The other reason is, we focus on significant growth in 2018, evidenced by the guidance second quarter, 9% growth over the first quarter. So because of that, we have increased the capacity, and I think by ---+ looking at the CapEx number in 1Q, you can see we're adding capacity to support the growth of this year. And therefore, it will be ---+ the company is already impressed. You're correct, you were right. So but depreciation will be needed right away. And therefore, the depreciation from CapEx in (inaudible) plus 8-inch capacity expansion, those will be ---+ increased the depreciation and interviews un-audit negative PV. But look at the GP gross profit, GP dollar, we actually if you look at the midpoint, the guidance actually up above $8 million from 2Q to 1Q, so the percentage might went down a little bit due to the capacity ---+ under the capacity, but the gross profit is actually focused at $8 million. Okay. I think the 8-inch, I think we already said, the focus is ramping up to about 9,000 to 10,000 wafer per month by end of 4Q. So right now, we look at that, 1Q is only total 800 wafer only. Then Q2 probably ramp it up gradually to probably 2,000, 3,000 at max. Then go to 3Q, 6,000, 7,000 a month, then in 4Q ---+ at end of 4Q probably 9,000 to 10,000 inch wafer per month. And the CapEx is already spent. And now, I think we already ---+ somewhere around 6,000 wafer capacity equipment is already installed. And then we probably have another piece of gear (inaudible) of the year, will give us the capacity up to 10,000 per month. No, we won't consume for sure. We already looked at the (inaudible) consume some. But end of the quarter, we expect it will be ---+ most of them will consume. Again the reason actually is due to the Chinese New Year, most of our customer during the Chinese New Year shutdown, the whole week, and so the POS is reduced. And typically our 4Q in Asia POS is always very high. So if we look at U.S. and Europe, the POS actually will go high. So the whole problem ---+ I won't say the problem, the whole inventory build is actually in Asia. And the Asia was due to Chinese New Year of a customer shutdown they are not using the product, but the design you need is already there. And they ---+ right up in the Chinese New Year, they stop to ramp. So much the POS is already started to move. It's really the 1Q role is in February, and then the March that move and April, we report is quite well, the POS is quite well too. Okay. Let me answer the pricing, and then Rick answer the cash balance-issue. The pricing, we typically put 2% a quarter decoration and that's typically our motto. And from the good time, or from the capacity time, we now is less than 1%. But very hard to go to customers and say, I want to raise the price, we ---+ it's very difficult. But what we tried to do is product mix. So that's one of key, new product ---+ driving the new product to replace the old product and typically new product because of the performance, because the cost reduction, typically new product give you a better margins. And by doing that, each year through improved GP instead of go to the customers and say, now, you are (inaudible) we want to raise the price, that's just in our business, that's not the traditional way to do it. But we can slow down the price reduction and therefore, now our price reduction is less than our model. Rick. So the issue here is that we have debt outstanding of about $222 million and we had cash of $186 million. So the difference is $45 million. So the question is whether we're going to be able to pay down $45 million by the end of the year to just get to a net position. Dr. <UNK> would like us to do that. He's pushing, but I'm not sure we're going to be able to do that because we have to make some equity injections into our Chengdu facility. And so that might preclude us from doing that. But I would say that by the time ---+ by this time at the end of next year, we should be there for sure. Yes, we have a commitment to the Chinese government, that we will invest so much money from an equity standpoint. It was one of the original things we agreed to back in 5 years ago. 5 years ago. The key think is we both ---+ they keep us within, and we kind of biased about them, but they give us the money back. And so we have some commitment is by each year, how much money we'll put in for expansion. So it has to do with expansion. So as we've talked about previously, we're continuing to slowly expand the capacity in Chengdu. And this helps firm that capacity expansion. Well, I hate to say it, but currently we still have some of the product and the allocation. So we'll continue that situation, and ---+ but we do foresee the market's tight since last year, and we are putting the request to put in the CapEx. And it just started coming by (inaudible) of 1Q, and we have installed that, and then we go to start rent in Q2. But that's just enough to support the expansion, because ---+ for this year. And we will still see the capacity is quite tight on certain package. I will also say that, Ed, if you look at the first quarter, we did about $31.5 million worth of CapEx on a cash basis. And that's higher than our model, as I mentioned in my speech, it's to front-load this for the capacity expansion. And during the year, we think we'll go back to the 5% to 9% model that we've had on a yearly basis. So to answer your question, it's going to be more front loaded than it is backloaded. Yes, so our model, who still want to keep our CapEx expenditure at our model, which is 5% to 9%. Now in 1Q, we are more than 10%. It has (inaudible) and because typically our rent is in second quarter and third quarter. So by the first ---+ full fourth quarter is to date to put in putting the CapEx to support this year. That's right. Well, yes packaging is one of the key technology we have in our automotive. And by (inaudible) we are ---+ since installed that strategy back to 2013, we are now in mix CAGR at the 20% for the last 5 years. So in our view, our strategies are working and our ---+ from the product, from the packaging, from since we have been doing it is successful. So we're going to continue the similar effort to continue grow ourselves quickly in automotive. And as in DC, I think we are target at 9% and we're going to achieve better than 9% and then move to 10% probably next year. So just to add a little bit. Beyond the packaging, I think the performance and features are also very, very important. This is also a direction, we continue to invest in technology and working closely with the customer to really find the perfect solutions for their applications. No. That's an adjustment we've made every quarter for many quarters. Well, actually, product really ---+ the DTAM really based on the product. For example, most of the telecom product other than crystal and oscillators, most of the telecom product because the wafer fab coming from foundry and packaging from silicon. The DTAM is low compared with Diodes product. And Diodes product typically are wafer fab. The number of Mux is very less than telecom product start from Diodes (inaudible) to MOSFET probably in 9 days and telecom product 20-something days. So the DTAM on the wafer fab makes significant difference. Packaging is not done much different, except they are outside, and the Diodes product is we do it all internally. Therefore, we can shoot in DTAM a little bit. But majority, the DTAM really coming from foundry wafer and because numbers there are significantly different between the discrete and the telecom product. So I think in general supply is still very constrained, and we really do not see a significant change from our overall lead time situation point of view. Thank you for your participation on today's call. Operator, you may now disconnect.

2018_DIOD

2016

AEIS

AEIS #Thank you, operator, and good morning everyone. Welcome to Advanced Energy's first-quarter 2016 earnings conference call. With me on today's call are <UNK> <UNK>, President and CEO, and <UNK> <UNK>, Executive Vice President and CFO. By now, you should received a copy of the earnings release that was issued yesterday afternoon. For a copy of this release, please visit our website at advancedenergy.com. Before we begin, I would like to mention that AE will be presenting at the J. P. Morgan Global Technology Media and Telecom Conference on May 24 in Boston, Massachusetts, and the D. A. Davidson Eighth Annual Technology Forum on June 1 in New York. As other events occur, we will make additional announcements. Now I'd like to remind everyone that, except for historical financial information contained herein, the matters discussed on this call contain certain forward-looking statements subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Statements that include the terms believe, expect, plan, objective, estimate, anticipate, intent, target, goals or the like should be viewed as forward-looking and uncertain. Such risks and uncertainties include, but are not limited to, the volatility and cyclicality of the markets we serve, the timing of orders received from our customers, and unanticipated changes in our estimates, reserves or allowances, as well as other factors listed in our press release. These and other risks are described in Forms 10-Q, 10-K and other forms filed with the SEC. In addition, we assume no obligation to update the information that we have provided you during this call, including our guidance provided today in our press release. Guidance will not be updated after today's call until our next scheduled quarterly financial release. And just as a reminder, in today's call, we will refer both to GAAP and non-GAAP results. Non-GAAP measures exclude the impact of stock-based compensation, amortization, restructuring, acquisition related costs, and other significant nonrecurring items. A reconciliation of non-GAAP income from operations and per share earnings is provided in the press release table. We will be referring to earning slides posted on our website as well as this morning in the Investor Relations section of the website. And with that, I'd like to turn the call over to <UNK> <UNK>. <UNK>. Thank you <UNK>. Good morning, everyone, and thank you for joining us for our first-quarter conference call. All references to financials reflect the continuing operations of our core precision power business. With our business now focused solely on precision power, we began 2016 with a strong start and a clean slate. Revenue grew 19% sequentially to $103 million, as semiconductors rebounded in the first quarter. This led to 75% growth in non-GAAP EPS over the fourth quarter. We ended the quarter with $184 million in cash, having generated $13.5 million as we prepare for another quarter of growth. All of this sets the stage for a year of building momentum as we execute on our growth strategy, and progress towards our three years aspirational goals to grow revenues to between $600 million and $700 million, drive non-GAAP EPS of $3.00 to $3.50 per share, and generate cash of $250 million to $300 million. As we lay the foundation for future success in pursuit of these goals, our growth strategy is focused on three main tenets ---+ growing our presence in the semiconductor market, expanding into adjacent applications in thin films industrial power, and increasing our TAM through the penetration of specialty industrial power solutions. This quarter, we again won a substantial portion of the designs we targeted. Across our certain markets, we saw success in advanced applications over various precision power technologies, particularly RF. We grew our served available markets by expanding the applications of our technology into new areas. All this was made possible by our ongoing investment in R&D and dedication to staying at the forefront of power conversion technology by providing the most advanced high-value solutions that are critical to our customers' success. In semiconductors, advanced memory took center stage as the market invests in the transition to 3D NAND along with the move to ever smaller nodes and 60 nanometers logic. These investments are contributing to the substantial growth, especially in edge applications across the wafer fab equipment market. Having established AE as a leading supplier over the last few years, our strength in plasma-based applications and our RF products that enable our leading ongoing wins and share gains. In our industrial applications, we are focused on expanding in select regions with our organic and inorganic products to gain adoption in new applications and geographies. This quarter, we saw a diverse collection of wins expand our two industrial categories, thin-film industrial power and specialty industrial power. Let me begin with thin-film industrial power, which includes hard coatings, PV solar sales, low E and architectural glass coatings, flat-panel display and optical coating. First, we won a new position on an advanced audit expansion program. Next, in our hard coatings business, we had some sizable wins for our Solvix products outside of the EMEA region, which has been an ongoing strategic priority for us. In our specialty industrial power applications, which include high-voltage modular systems, power control modules, and thermal and instrumentation solutions, we won a majority of the project-based programs that we targeted this quarter. In our PCM business, we are starting to see some recovery in regions outside of Europe such as China and North America. In high-voltage, we achieved a number of design wins, further enabling our expansion and diversification, including a design for scanning electron microscope applications in Japan. We also won a design in pyrometry for the solar cell manufacturing market. With a newly designed industrial pyrometer, we are expanding our SAM beyond our leading position in semiconductors to include temperature measurement applications for industrial markets. Each quarter, we'll highlight a variety of design wins to demonstrate our progress in penetrating existing and new market opportunities, both large and small. Where many of today's semiconductor design wins can take 18 to 24 months or longer to translate into high-volume revenue, industrial design wins are more project-driven and can convert to volume sales in as little as a few months. The recently released VLSI Research 2016 report serves as a testament to our success in winning designs that are leading to increased market share and revenue growth. Now let me turn to our quarterly results as we execute on our growth strategy and focus on our core semiconductor thin-film industrial power, and specialty industrial power markets. As expected, we began 2016 with a double-digit recovery of nearly 39% in our semiconductor revenues coming off of the mini-trough seen in the fourth quarter. Strong 3D NAND investments as well as some logic and foundry buying resumed during the quarter, leading to increased order activity. Once again, we demonstrated our disproportionate strength in advanced plasma processing enabling products, allowing us to outperform the sector and approach the record run rate seen last year. The biggest contributor to recovering semiconductors are the technology upgrades happening virtually across the board in DRAM and 3D NAND as well as fab capacity ramps at the beginning of the ramp of 10 nanometers logic. These technologies are expanding the market for etch and deposition and remain the primary investment driver for 2016. We expect to benefit the most from these areas given our position in applications enabling advanced patterning, 3D devices and 3D packaging for 3D NAND logic devices. In addition, the sizable investment the Chinese government is making into its local semiconductor market may lead to significant growth in China throughout the semiconductor ecosystem, from IC design to fabs to manufacturing equipment and materials. With a growing number of collaborations and alliances between large global semiconductor companies and Chinese companies, in many cases sponsored by local and central government incentives, our increasing presence in China is a clear advantage that could contribute to our growth. We expect these trends to continue to drive demand in the second quarter with the ramp of newer 3D NAND the focus of the first half and logic and foundry the focus of the second half. In total, revenue from our industrial markets declined 22% from the fourth quarter, in keeping with the general lack of growth seen in the global industrial markets. In spite of this temporary slump, we've continued to develop products, increase our design wins, and invest in channel development and regional expansion while driving operating efficiencies as we move the manufacturing of our acquired products to low-cost regions. In the thin-film industrial power business, hard coatings saw good traction in EMEA during the quarter, while overall investment in Asia and North America paused after some of the large purchases made at year-end. Similarly, large area coating applications showed a decline with glass in particular slowing due to lower investment in construction and infrastructure building in China. In solar cell production, while still relatively small, we are seeing higher demand for crystalline silicon-based sales driven by the Chinese government's new policy that is driving increased investment in 2016. In our specialty industrial power business, we are beginning to generate traction in PCMs in North America and APAC through our industrial automation channel partners. Our entry into the industrial pyrometry market led to strong shipments during the quarter, and our high-voltage product strategy for e-beam applications is also making inroads. Looking at the second quarter, we anticipate an increase in our industrial applications driven primarily by glass coating upgrades and the trend in China for solar PV crystalline silicon applications. We are seeing some recovery in regions that declined last year, leading to a more favorable view of industrial markets. Our primary goal is to grow our SAM significantly by expanding geographically, entering new markets, and winning designs in new applications organically and through acquisitions. Once again, our service business grew this quarter, up 9% from the fourth quarter, in what is normally one of the two seasonally slower times of the year. This growth was due to continued share gain from third-party competitors in the precision power market as customers recognized the significant role that quality place in the total cost of ownership. In addition, we are seeing growing demand from our precision power customers for high-value service offering across our portfolio, particularly in our trailing edge 200 millimeter legacy products. We are also seeing increases in inverter service revenue from our out of warranty installed base. We expect further positive growth in the second quarter as we differentiate our service value proposition. Finally, our capital deployment strategy aimed at returning value to shareholders is proceeding well. Recently, we completed a $50 million accelerated share repurchase as part of our three years $150 million share repurchase program. Next, as part of our allocation of 70% of our free cash flow towards organic and inorganic investment, we have built a solid M&A pipeline. We have begun to narrow the field of potential opportunities that we believe could accelerate our future growth opportunities while maintaining our financial criteria. In summary, we begin 2016 singularly focused on our strategy to grow faster than the core precision power markets that we serve ---+ semiconductors, thin-film industrial power, and specialty industrial power. Looking at the second quarter, we expect semiconductors to remain at near record levels while industrials rebound from their first-quarter lows and our service business continues its upward trend. Longer-term, we plan to invest in developing products in channels to maintain our industry-leading position by staying at the forefront of leading-edge technology advances, expand our SAM by entering new markets, applications, and geographies, be nimble and agile enough to respond to the cyclical nature of our markets, and leverage our financial model and put our cash to work by executing on our share repurchase plan and simultaneously targeting organic and inorganic investments that we believe will take our business to the next level, achieving our aspirational goal and return value to our shareholders. I'd like to thank our customers, partners, shareholders and our valued employees for their support. Thank you for joining us, and we look forward to seeing many of you in the upcoming quarter. I'd like now to turn the call over to <UNK>. <UNK>. Thank you <UNK>. With the strong rebound in semiconductor sales this quarter, we saw significant improvement in profitability as we achieved revenues of $103 million, improved non-GAAP operating margins to 25.3%, and increased non-GAAP EPS to $0.56. Sales by market are shown on Slide 16. Semiconductor sales were $69.7 million, an increase of 39% quarter-over-quarter as we saw substantial recovery from the industry-wide pause in the fourth quarter. Industrial sales were lower at $16.5 million due to the general lack of growth across the global industrial markets. Service revenues of $16.8 million were an increase over both last quarter and prior year primarily due to share gains in semiconductors. Overall, we realized a strong start to 2016. Turning to Slide 17, with the recovery of revenues, profitability grew significantly. First-quarter non-GAAP operating margin increased to 25.3% from 20.7% in the fourth quarter. Non-GAAP EPS improved meaningfully to $0.56 in the first quarter from $0.32 in the fourth quarter. While operating margins and profitability bounced back from the fourth quarter, they were lower than last year's first quarter, which were driven by record semiconductor sales. During the first quarter, total operating expenses increased over the fourth quarter and year-over-year. This was due in part to our ongoing investment in R&D, reflecting our commitment to keep pace with our customers' next gen technologies and our commitment to global sales expansion. Higher stock compensation expense and audit costs, which typically occur in the first quarter, contributed to the increase in SG&A. On Slide 18, our first-quarter tax rate was 15.7%, a decrease from 20.8% in the fourth quarter. The fourth quarter included a tax valuation allowance that increased the tax rate. We anticipate a normalized annual tax rate of approximately 15% for 2016 assuming existing regulations. Turning to the balance sheet on Slide 19, we ended the quarter with $184 million in cash and marketable securities, an increase of $13.5 million compared to December 31, 2015. Our net working capital increased by $8.5 million during the quarter due to higher receivables and inventory to support our growing revenues. Our second-quarter guidance is on Slide 20. We expect to see continuing growth in semiconductor revenue driven by the current capital spending outlook for the industry. We anticipate improvements across most of our industrial end markets and ongoing momentum in our service business. Finally, a few comments on capital deployment. We remain focused on our capital deployment strategy to achieve our aspirational goals and accelerate shareholder returns. We intend to deploy 70% of our cash flows to organic and inorganic growth opportunities, and 30% to shareholder distributions. As part of this plan, we completed a $50 million accelerated share repurchase program, retiring 1.7 million shares since November, or 4.3% of our total shares outstanding. Keep in mind this is just one-third of the total $150 million share repurchase program currently in place. As you all noted, we are aggressively looking at acquisition opportunities that are complementary to our target markets and provide long-term value to shareholders. We have a healthy pipeline of actionable opportunities. In summary, coming off a sharp cyclical downturn in the fourth quarter, we saw substantial recovery in the first quarter. We generated significant profits and cash during the quarter. We continue to focus on winning new designs, investing in R&D, expanding globally, and deploying capital as we marched towards our three-year aspirational goals of $600 million to $700 million in revenues, $3.00 to $3.50 of non-GAAP earnings per share, and $250 million to $300 million in cash generation. This concludes our prepared remarks for today. Operator, I'd like to open the call for questions. Yes, we expect Q2 will be higher than Q1, not the same rate of growth we saw in Q1 compared to Q4. As we look at the rest of the year, we haven't changed our opinion that we expressed the beginning of the year. We believe 2016 will be higher for us than 2015. A lot depends on the timing of some of the large investments that will happen in some of the fabs, but overall we are optimistic for the rest of the year. Yes, let me give you ---+ most of what we saw in Q1 was driven by 3D NAND and memory in general. We saw some small investment in logic. So, in terms of ---+ if you look the 80/20 rule, most of the growth came from the 3D NAND. We assume, based on market information and what we studied talking to the analysts, end-users and our customers, that the second half of the year will be driven by logic and foundry in the transition to 10 nanometers technology. So, if you want to look at how much of the growth in Q1 was driven by memory, it's ---+ I would say the majority, the lion's share of the growth came from memory. Yes. So, obviously, the industrial markets for us, the industrial business, is very fragmented and diversified. We are serving multiple markets and applications, and they obviously do not behave in ---+ they are not sequenced, right. Some of them are very lumpy. The glass business is lumpy. Flat-panel display business is lumpy due to the cycles of capital investment. What we saw in Q1, the decline is a result of, you know, Q4 was a strong quarter. And as the industry digested some of the acquisitions in Q4, we showed a decline in Q1. What we see right now in general is a decline in glass coating business driven by the reduction in the investment in glass coating factories to a really small level, driven by the China infrastructure decline and the reduction in real estate investment in China. We expect to see this trend recover by the adoption of our new technology for upgrades of existing lines around the world. So, again, we serve multiple markets, and they can be lumpy, and that's exactly what happened in Q1, mainly glass and infrastructure. As we indicated in our prepared remarks, we expect to see recovery in Q2. We are constructive towards the rest of the year. As we said earlier, it's a collection of niche markets, many applications, many geographies, and they tend to behave asynchronously. We continue to grow our presence in world regions we did not have any presence before, for example in China and North America. And we leveraged a really good relationship that we have developed with our channel partners, both in Europe and North America, and we see some incremental growth from these new regions that we believe will support continuous growth going forward. The way we look at the market right now is semi obviously strongly driven by the behavior of the end-users. When we look at the investment that TSMC is investing over the year, obviously they did not spend the capital budget they planned for the year. So therefore, the sum assumption is that the second half may be stronger for them for foundry investment. Intel reaffirmed their CapEx spending, which is again up year-over-year, again more second-half loaded as they ramped to 10 nanometers logic capacity and NAND memory in the Dehli and China fab. So at the end of the day, a lot depends on the timing of the specific investments. We don't have very good visibility quarter by quarter. We are still constructive towards 2016 in the second half, and we know, with our nimbleness and agility, we believe that we can respond very quickly and effectively to increasing demand. Good question. Going forward through the quarters, you should see total OpEx spending about the same level with R&D continuing to increase, because we want to spend more in R&D and invest in technology, and there will be a corresponding decrease in the G&A side. So, two comments. The first one, 2015, we spent a significant amount of effort to make sure that the winding down of the inverter business was with the best outcome, that the asset disposition would be done in a way that will be most beneficial for our shareholders, and that was the main focus of 2015. We are now entertaining a very interesting pipeline of target acquisitions. We are extremely disciplined. We have a very rigorous process. We are ---+ we have target models and a target profile of an acquisition that we would like to add to the portfolio. And what you see right now is a careful review and analysis of actionable targets. We are aggressively pursuing the strategy. We are optimistic that we will be successful adding incremental revenue and profit that are accompanied through acquisitions, but we are very disciplined about it. Sure. Let us give you the general criteria. First of all, it needs to be close to our precision power business. It needs to expand our products and our geographies. There is a focus on industrial. It needs to create value, have synergies. As <UNK> said, it's very disciplined. Financially, we are not tied to a multiple. We are tied to in the long-term it needs to have a return greater than our weighted average cost of capital and, in the near term, you want it to be comparable or better than the share repurchase. And those are the criteria that we have been following and we continue to follow. Yes. It's a little under 10%. We expect to see a continuation of growth driven by 3D NAND. Obviously, there's some small content of logic in foundry mainly driven by technology, but as we mentioned before, if we look at the whole year, we see the first half driven by memory and the second half driven by logic and foundry. Thank you, everyone, for joining us this morning. We are very excited about the performance of the business. Q1 was a strong quarter. We expect Q2 to be as strong or better. And we expect the rest of 2016 to be very important and strategic for the future of the Company as we continue to build on the momentum to meet our three-year strategic goal of revenue between $600 million and $700 million, EPS of $3.00 to $3.50 per share, and generating cash between $250 million and $300 million. I'm looking forward to seeing you all next quarter. Thank you very much.

2016_AEIS

2017

SWX

SWX #Thank you, Sandra. Welcome to the Southwest Gas Corporation 2016 earnings conference call. As Sandra stated, my name is <UNK> <UNK>ny and I am the Vice President and Treasurer. Our conference call is being broadcast live over the internet. For those of you who would like to access our webcast, please visit our website at www.swgas.com and click on the conference call link. We will have some slides on the internet which can be accessed to follow our presentation. Today we have Mr. <UNK> P. <UNK>, President and Chief Executive Officer; Mr. <UNK> <UNK> <UNK>, Senior Vice President and Chief Financial Officer; and Mr. <UNK> L. <UNK>, Vice President Regulation and Public Affairs; and other members of senior management to provide a brief overview of 2016 earnings and an outlook for 2017. Our general practice is not to provide earnings projections, therefore no attempt will be made to project earnings for 2017. Rather, the Company will address factors that may impact those coming year's earnings. Further, our lawyers have asked me to remind you that some of the information that will be discussed contains forward-looking statements. These statements are based on management's assumptions which may or may not come true, and you should refer to the language in the press release, our SEC filings and also slide number 2 presented today for a description of the factors that may cause actual results to differ from our forward-looking statements. All forward-looking statements are made as of today, and we assume no obligation to update any such statement. With that said, I'd like to turn the time over to <UNK>. Thanks, <UNK>. Turning to slide 4, 2016 was a very successful and exciting year for Southwest Gas and its shareholders. Our Board of Directors authorized an increase in our dividend for the 11th straight year. The increase approved by the Board just this last week increases our annual dividend from $1.80 to $1.98 per share. The dividend is an important component of the 42.5% total shareholder return earned by our shareholders this past year. Consolidated earnings reached a record $3.20 per share. Our new holding company reorganization was effective at the beginning of this year. On the regulated side of our business, we reached a proposed settlement in the Arizona rate case that we filed in May of last year. <UNK> <UNK> will provide an update on that resolution later in the call. Operating margin totaled $924 million. We added 28,000 new customers, as the regional economies we serve continued to experience growth, and we invested $457 million in our gas systems to improve safety and reliability and to serve new customers. Finally for 2016 on the Construction side of the business, Paul Daily joined our team as CEO of the Centuri Construction Group. The Construction business contributed a record $32.6 million of net income, representing the fourth consecutive year of increased earnings. The Construction business is now celebrating its 50th anniversary. Turning to slide 5. As I previously mentioned, our new holding company structure took effect at the beginning of the year. The new structure will provide further legal separation between our regulated and unregulated business entities and provide additional future financing flexibility. Moving to slide 6. For today's call, <UNK> <UNK> will provide an update on year-end consolidated earnings as well as additional detail on both our Utility and Construction Services subsidiaries. <UNK> <UNK> will provide an overview on a variety of regulatory activities that the Utility segment has been pursuing. Then I'll wrap up the call with a regional economic overview, planned capital expenditures, growth in our dividend, and our expectations for 2017. With that, I'll turn the call over to <UNK>. Thank you, <UNK>. I'm going to spend a few minutes providing high-level review of 2016 consolidated and business segment operating results, including explanations for significant changes between years. Point out that there's additional detailed information that can be found in the appendix. Let's start with slide 7. In 2016 we earned $3.20 per basic share, an improvement of $0.26 from the $2.94 earned during 2015. Net income grew to $152 million from $138 million, and both business segments had improved results. Moving to slide 8, you can see that net income increase $13.7 million between periods, and $7.8 million of the improvement came from our Natural Gas Operations segment while $5.9 million came from Construction Services. Next we'll look at each business segment, starting with Gas Operations on slide 9. This slide summarizes 2016 and more recent highlights which influence our current-year operating results, or will impact 2017 and beyond. <UNK> touched on several of these earlier, so I'll bring your attention to a few others starting with Company Owned Life Insurance, or COLI, income which was very strong at $7.4 million in 2016 versus a small loss in 2015. We completed a $300 million 30-year financing in September 2016 at a very favorable interest rate of 3.8%. This supported our capital expenditures from the last couple of years and also replaced some higher cost debt that we were able to call at par. Lastly we received approval to spend $57 million on accelerated pipe replacement work in Nevada during 2017 under our gas infrastructure recovery mechanism. <UNK> will speak more to this later. Turning to slide 10. This waterfall chart identifies the major line item changes for the Gas Operation segment income statement. We had strong growth in operating margin totaling $33.4 million, mainly due to the addition of 28,000 customers during the year and the impact of rate changes including California attrition, higher general rate relief, and infrastructure tracker mechanisms. About one-third of the margin increase pertained to demand-side management program surcharges in Nevada with a direct offset in amortization expense. Our O&M costs were up about $8.5 million, or 2%, between years with $2.6 million of the increase attributable to higher pipeline, integrity management, and damage prevention costs. Depreciation and amortization and general taxes increased $23 million, primarily due to our capital expenditures which totaled $457 million last year, along with the demand-side management amortizations noted previously. Now let's turn to slide 11 and our Construction Services. Revenue grew. Our growth was very strong, increasing $130 million, or 13% year over year. Nearly half of the increase came from several large bid jobs with a new US customer and an existing Canadian customer that are not expected to recur in 2017, and the remainder came principally from additional pipe replacement projects. Favorable winter weather conditions were also a tailwind. Slide 12 provides a summary waterfall chart reconciling contribution to net income between 2015 and 2016. We estimate the additional revenue contributed $3 million of net income, or about half of the net change. Carrying costs pertaining to the 2014 Link-Line acquisition were lower, mainly due to expired intangible amortizations, and we had a lower effective tax rate as more income was earned in Canada versus United States than in the prior year so we benefited from the lower relative tax rate. With that, let me turn the time over to <UNK> <UNK> to provide a regulatory update. Thanks, <UNK>. Slide 13 highlights several key areas that will be the focus on my talk today starting with rate relief, namely our Arizona rate case, infrastructure replacement programs, specifically our Arizona COYL program and our Nevada GIR program, and an update on two expansion projects. Turning to slide 14. Just a mere nine months ago we started the process to update rates in Arizona to reflect our current cost of providing service. This filing marked the end of our five-year rate case moratorium that was agreed to as part of our last general rate case. Since that time we've worked closely with all the parties and have reached a settlement agreement that is currently pending Commission approval. Slide 14 highlights several key outcomes from that proposed settlement agreement, including a revenue increase of $16 million and a depreciation expense reduction of $45 million. In addition, the settling parties agreed to either continue or implement certain key regulatory mechanisms including full revenue decoupling, expansion of our existing customer-owned yard-line program which will help us accelerate the replacement of approximately 80,000 COYLs remaining in our system. In addition the parties agreed to implement a new infrastructure replacement program targeting the nearly 6,000 miles of pre-1970s vintage steel pipe we have in our Arizona service territory and to implement a property tax tracker whereby we'll be tracking changes in our property tax expense back to the amounts that's embedded in base rates. The difference will be deferred and amortized as part of a future rate case. We were also able to reach agreement with the parties on a cost recovery methodology for our LNG project. I'll discuss this in more detail later in the presentation when I provide an update on our project. And lastly, the settling parties agreed to a rate case moratorium whereby we agreed not to file a new rate case before May 1, 2019. Turning to slide 15. This slide illustrates the anticipated impact to operating income for 2017 and 2018 following the implementation of new rates in Arizona resulting from the proposed revenue increase and depreciation expense reduction. This assumes a May 1, 2017 effective date. We did receive a draft order just this week approving the settlement agreement, and the matter may be considered by the Commission at either their March open meeting which is currently scheduled for March 14 and 15, or possibly their April open meeting which is currently scheduled for April 5 or 6. The draft order currently contemplates new rates becoming effective April 1, 2017. Turning to slide 16, you may recall that our most recent California rate case authorized post-test year attrition increases of 2.75% per year for calendar years 2015 to 2018. We made a filing in November requesting an annual increase in operating margin of $2.8 million, and this request was approved in December with rates becoming effective in January. Turning to slide 17. From a California rate case planning perspective, we're on a five-year rate case cycle which means we're currently scheduled to file our next rate case later this year. However, following discussions with the Office of Ratepayer Advocates, we filed a petition at the end of last year requesting to extend the rate case cycle by two years. The petition essentially requests the Commission to extend the rate cycle, leaving all other aspects of the previous decision intact including the ability to make post-test year attrition adjustments for an additional two years. The Office of Ratepayer Advocates supports the petition, and we've requested a decision by April of this year so that we have time to prepare for a September rate case filing if the petition is, for some reason, not granted. Turning to slide 18. We continue to focus on establishing and maintaining infrastructure recovery mechanisms in each of our jurisdictions in order to timely recover capital expenditures associated with Commission-approved projects and enhance safety, service and reliability for our customers. Yesterday we filed our fifth report with the Arizona Corporation Commission requesting to increase our surcharge revenue associated with the customer-owned yard-line program. We currently are collecting $3.7 million based upon cumulative capital expenditures of $23.1 million. Due to the timing of our Arizona rate case, those amounts will move to base rates and it's anticipated that surcharge will reset in June of this year. Accordingly, the proposed surcharge is $1.8 million ---+ designed to recover $1.8 million and is based upon 2016 capital expenditures of approximately $12.1 million. Turning to slide 19. Our Nevada infrastructure replacement program continues to ramp up as we work collaboratively with our Nevada regulators to identify replacement projects to be replaced on an accelerated basis. Since 2014 we've received approval to replace over $115 million of qualifying replacement projects. Most recently we received approval to replace $57.3 million of qualifying projects during 2017. As noted on the right-hand side of slide 19, as of January we're collecting approximately $4.5 million as a result of the GIR rate application that we filed in October of 2016 and that was subsequently approved in December with rates becoming effective in January. Turning to slide 20. Since 2016 marked our third GIR rate application, in order for us to continue the GIR program this coming year we're obligated to either file a general rate case to clear out the deferral balances or to file a petition requesting a waiver from that requirement. After discussions with the Commission staff as well as the consumer advocate, we chose to file a petition requesting a waiver from the regulations, allowing us to proceed with the GIR program for another year. As part of that process we also committed to filing a general rate case application sometime before June of 2018. The petition was supported by the Commission staff and was approved by the Commission last month. Accordingly, we plan to file a GIR advance application later this year in May and another GIR rate application in October. We'll then plan to file our next Nevada rate case in the first half of 2018. Turning our focus to major expansion and reliability projects on slide 21, we recently made a filing with the ACC requesting to modify the pre-approval decision to reflect a new not to exceed $80 million for our LNG facility. This reflects the current market pricing to construct a 233,000 dekatherm facility in Southern Arizona. We solicited engineering, procurement and construction bids last summer and received those bids in September, which provided the basis for the request to increase the estimated cost to the project. The Commission granted our request in December. Accordingly we're proceeding with the EPC phase, or the engineering procurement construction phase, of the project and we have invested approximately $4 million in capital expenditures primarily associated with the land that was chosen for the site. We anticipate construction being completed by year end 2019. As mentioned previously, we reached agreement on a cost recovery methodology for the LNG facility as part of our rate case settlement. Essentially the parties agreed to extend the deferral accounts such that the revenue requirement associated with all costs incurred before December 31, 2020 will be deferred and recovered in a future rate case. Lastly, in response to shipper interest for additional transportation service capacity in the Carson City and South Lake Tahoe areas, Paiute announced plans for an expansion project consisting of 8.4 miles of additional transmission pipeline infrastructure at an approximate cost of $17 million. In October, Paiute initiated and received approval to proceed with the pre-filing of view process with the Federal Regulatory Energy Commission for the expansion project. A formal certificate application is expected to be filed by this coming summer. If the process progresses as planned, the additional facilities could be in place by the end of 2018 with new rates in place coincident with the in-service date. With that, I'll turn it back to <UNK>. Thanks, <UNK>. Turning to slide 22. As I mentioned at the outset of the call, we added 28,000 customers this past year bringing our total customer count to 1.984 million customers. We're really excited about the expectation that we will serve over 2 million customers later this year, and expect our growth rate over the next three years to approximate 1.5%. Moving to slide 23. The regional economic picture continues to improve across our service territories with unemployment rates down across the board. Employment growth rates are slightly mixed year on year with the overall picture being one of continued job growth in the areas to which we provide natural gas service to customers. On slide 24. As we continue to serve our growing customer base and invest in the safety and reliability of our distribution system, we've seen our gas utility plant grow as well. Over the past four years the compounded annual growth rate of our gas utility plant has been approximately 6%. On slide 25 we have a bar chart illustrating the experienced and planned capital expenditures for years 2016, 2017, 2018, and 2019. Each year has segmented data to detail how much of our capital is considered general plant, growth related, code required, and the portion covered by tracking mechanisms. Over the coming three-year period, we anticipate investing upwards of $1.8 billion to serve these varying needs. Moving to slide 26. As I mentioned at the outset of the call, just this past week our Board authorized moving our annual dividend from $1.80 to $1.98 per share, an increase of 10%. We believe we've been one of the leaders in the industry over the past several years, with a five-year compounded annual growth rate in our dividend of just under 11%. Turning to slide 27. Looking forward into 2017 for our expectations with respect to the Natural Gas segment, we expect operating margin to increase by approximately 2%. Capital expenditures should total $570 million as we continue to invest in safety and reliability, and opportunities to serve new growth. Net interest deductions should approximate 2016 levels. Normalized Company Owned Life Insurance returns are anticipated at $3 million to $5 million. Operating income is expected to increase by 10% to 12%. Depreciation of general taxes are expected to decrease as a result of depreciation rate decreases included in our proposed Arizona rate case settlement. O&M expenses are expected to range between 3% and 4%, generally tracking inflation and customer growth rates. On slide 28 our Construction Services expectations for 2017 include expected growth and revenues of 2% to 5%, operating income approximating 5% to 5.5% of revenues, net interest deductions ranging between $6 million and $7 million based on current interest rate levels. Collective expectations exclude consideration of earnings attributable to non-controlling interest, and due to our Canadian operations, changes in foreign exchange rates can impact results. Moving to slide 29. While 2016 was a great year, we're really excited about the future here at Southwest Gas. We're pursuing numerous initiatives that serve our customers and our shareholders' interest. On the Utilities side we continue to look into the prospect of investments in underground gas storage and gas reserves. We're looking to expand our Nevada service territory into new areas with the use of regulations directed by Senate Bill 151. We continue to review the potential replacement of our Southern Nevada transmission lines, and we're looking in to the future replacement of our customer management system. At Centuri we look to continue growing the business through organic growth as well as the potential for bolt-on acquisitions, expanded water distribution replacement, and other infrastructure replacement and repair activities. Finally, turning to slide 30, we will continue to look for success by following the principles that have guided our historic success including remaining focused on the core elements of our business, fostering growth across our business segments, controlling costs and improving productivity, maximizing safety and customer satisfaction, maintaining trusted relationships with our regulators, retaining a skilled and motivated workforce, successfully executing on our business initiatives, and managing our business with the long-term view of success. With that, I will return the call to <UNK>. Thanks, <UNK>. That concludes our prepared presentation. For those who have access to our slides, we have also provided an appendix of slides which include other pertinent information about Southwest Gas Holdings and its two business segments, Southwest Gas Utility and Centuri. This can be reviewed at your convenience. Our operator, Sandra, will now explain the process for asking questions. Thank you, Sandra. This concludes our conference call, and we appreciate your participation and interest in Southwest Gas Corporation. Thank you and have a good day.

2017_SWX

2017

WY

WY #Thank you, Beth, and welcome, everyone This morning, Weyerhaeuser reported first quarter net earnings of $157 million or $0.21 per diluted share on net sales of $1.7 billion Excluding after-tax special items of $10 million for merger-related cost, we earned $167 million or $0.22 per diluted share This is over 2.5 times of earnings from continuing operations we reported in the fourth quarter and one year ago Adjusted EBITDA totaled $454 million, an improvement of 14% compared with the fourth quarter and 35% compared with the first quarter of 2016. I am very pleased with our first quarter performance as we illustrated the power of leveraging internal improvements across improving markets Our employees did an outstanding job of capitalizing on operational excellence initiatives, merger-related synergies and strengthening market conditions to achieve outstanding operating and financial results in the quarter, while also fully delivering on our increased $125 million merger cost synergy target One year into our merger with Plum Creek, I'm proud of what our teams have accomplished and the dedication and focus they continue to display as we work together to be the world's premier timber, land and forest products company Before turning to our business results, let me make a few brief comments regarding the housing market Housing activity began 2017 on a very solid trajectory Total housing starts averaged over $1.25 million for the first quarter, an improvement of 8% compared with last year despite some unusually wet West Coast weather Single-family starts rose 9% in the month of March and are up 6% year-to-date Leading market indicators are also favorable Single-family permits are up 13% compared with first quarter of last year and builder confidence remains near record highs Employment and wages are rising, consumer confidence has surpassed pre-recession levels, and interest rates, although increasing, remain historically low Our customers are reporting robust demand with strong activity in California as winter weather has mitigated and signs that an increasing number of millennials are entering the home-buying market Labor and lot availability remain the most active constraints, but builders are motivated to manage through these challenges and capture the benefit of favorable market conditions The spring selling season appears to be off to a robust start and we continue to expect between $1.25 million and $1.3 million total housing starts for 2017. Let me now turn to our business segments I will begin the discussion with Timberlands, charts 3 to 5. Timberlands contributed $148 million to first quarter earnings, $25 million more than the fourth quarter Adjusted EBITDA rose to $242 million Western Timberlands delivered $133 million of first quarter EBITDA, an improvement of over 30% compared with the fourth quarter and 13% more than a year ago The market for Western domestic logs was stronger than expected during the quarter as the combination of solid building activity and low mill inventories drove demand, while unusually wet and snowy winter weather reduced the available log supply Our Western team did an exceptional job of taking full advantage of our scale and operability, flexing harvest settings to some lower elevation tracks and leveraging our strong road system as they directed additional volume into the most tensioned domestic markets Domestic log sales volumes and realizations increased compared with the fourth quarter and unit logging and road costs decreased due to lower logging elevations, continued operational excellence improvements and deferrals from silviculture, and road maintenance activities due to wet weather Turning now to our export markets, in Japan, housing activity remained solid with year-to-date start-up of approximately 5% through February and demand for our logs has remained steady Although Japanese construction activity typically moderates in the first quarter due to winter weather, log sales volumes were up slightly and average realizations increased compared with the fourth quarter In China, log sales volumes declined compared with fourth quarter due to timing of shipment and our intentional decision to flex volume into this strong domestic market Average log realizations improved and market conditions remained favorable Log inventories at Chinese ports remain within a normalized range, having risen early in the first quarter before declining in March as construction activity resumed following the Lunar New Year holiday Moving to the South, Southern Timberlands contributed $96 million to first quarter EBITDA, lower than the fourth quarter due to seasonally lower harvest volumes and slightly lower average realizations Southern markets remain flat as log availability was plentiful due to favorable weather and mills are holding adequate inventory Fee harvest volumes declined seasonally compared with the fourth quarter and average log realizations were slightly lower due to a higher proportion of pulpwood sales Although pulpwood log realizations weakened during the quarter as seasonal maintenance and other mill shutdowns reduced demand, realizations for our delivered saw logs were comparable Northern Timberlands contributed $8 million to EBITDA, an improvement of $1 million compared with fourth quarter as the region benefited from OpEx initiatives to reduce contract logging costs Fee harvest declined seasonally and average realizations were comparable The Timberlands business made good progress on its operational excellence and synergy initiatives in the first quarter Regional teams continue to identify and roll out best practices for optimizing spending and value creation for our silviculture activities and improving wood flows to further reduce cost and maximize the realization we capture from every log The business is on track to achieve its $40 million to $50 million OpEx target for 2017. The strategic review of our Uruguay operations continues to proceed well with strong interest from multiple parties We look forward to providing further information when the review is complete Real Estate, Energy & Natural Resources, charts 6 and 7. Real Estate and E&R contributed $26 million to first quarter earnings and $43 million to adjusted EBITDA Adjusted EBITDA declined by $47 million compared with the fourth quarter but improved $9 million compared with the first quarter of last year Fourth quarter is typically our seasonally strongest quarter, while first quarter typically reflects the lowest level of transaction activity Earnings were comparable to fourth quarter earnings before special items as first quarter had a lower average land basis on the mix of property sold Average price per acre improved by $500 due to mix Approximately three-fourth of our first quarter acreage sales were located in the U.S South with the remainder predominantly in the Pacific Northwest In contrast, fourth quarter included a large transaction in Montana where timberland prices are regionally lower Our team continues to make excellent progress applying the asset value optimization process to our Western Timberland and I remain very confident we will meet our target of completing this work by mid-year Wood Products, charts 8 and 9. Wood Products contributed $172 million to first quarter earnings, an increase of nearly 75% compared with the fourth quarter Adjusted EBITDA improved $75 million to $207 million EBITDA for lumber totaled $99 million, $42 million more than the fourth quarter, primarily due to a 5% increase in average realizations Lumber sales volumes increased 6% Operating rates and manufacturing costs improved due to strong operating performance and reduced downtime for maintenance and capital projects, although several Western mills did lose small amounts of production due to weather EBITDA for OSB totaled $66 million, $20 million more than the fourth quarter and more than double the first quarter of 2016. Average sales realizations increased 3% and sales volumes increased 21% All of our OSB mills ran extremely well in the quarter and unit manufacturing costs declined due to higher operating rate and strong OpEx progress on controllable manufacturing cost Engineered wood products contributed $37 million to EBITDA, an improvement of $11 million compared with the fourth quarter Sales volumes for solid section increased 11% and I-joist volumes were up slightly Operating rates rose seasonally and unit manufacturing costs improved due to less planned maintenance and holiday downtime Average realizations for solid section and I-joist declined slightly due to mix as first quarter typically includes a greater proportion of commodity and industrial products Distribution EBITDA totaled $8 million, an increase of $3 million compared with the fourth quarter and double the EBITDA of one year ago This business continues to make progress by improving product margins and tightly managing warehouse, delivery, and selling costs across increased sales volumes Each of the Wood Products' businesses made good progress on their respective OpEx initiatives during the quarter with OSB and distribution demonstrating particularly strong results We continue to expect collective OpEx benefits of $55 million to $75 million from this segment in 2017. I will wrap up the Wood Products discussion with a few comments on the Softwood Lumber Agreement On April 24, the Department of Commerce announced preliminary countervailing duties on Canadian lumber producers For most producers, the duty will be approximately 20% These duties will become effective upon publication in the Federal Register For some producers, the duties will also be imposed retroactively effective 90 days prior to publication The Department of Commerce continues to evaluate the coalition's petition for antidumping duties, which would be additive to the countervailing duties announced earlier this week We expect a preliminary decision on the antidumping duties to be reached on June 23. We appreciate the action the U.S government has taken to address the unfair trade practices that are harming U.S lumber producers The government will continue its investigation throughout of 2017 as the Department of Commerce and International Trade Commission collect and evaluate additional information in support of final determinations on both the duties and material injury to U.S producers These determinations are expected in early November and late December, respectively We continue to prefer the certainty of a negotiated agreement Formal discussions remain on hold, pending confirmation of the U.S Trade representative In the meantime, the coalition is working closely with both the Office of the USTR and the Department of Commerce We look forward to resuming formal negotiations and are hopeful we will be able to reach a quota-based agreement I will close this morning with a couple of comments on merger cost synergies and other cost reductions As I mentioned earlier, we are very pleased to achieve our merger cost synergies ahead of schedule and at levels that exceeded our initial expectations We captured our original $100 million run rate target at the end of 2016, several months earlier than anticipated, and have now exceeded that by 25%, fully delivering on increase of $125 million run rate target by year one deadline Approximately 80% of these costs have been achieved through reductions in controllable SG&A, while the remainder have come from cost of sales We remain on track to eliminate the $35 million of cost formerly allocated to our sale of Fibers business no later than 2017 year-end I will now turn it over to <UNK> to discuss some financial items and our second quarter outlook Thank you, <UNK> I noted at the beginning of today's call that internal improvements and strengthening market conditions can create a powerful combination Our first quarter results demonstrate this And with a solid improving housing trajectory, favorable dynamics across our Wood Products businesses and continued leverage from operational excellence and merger synergies, we are well-positioned to deliver continued strong results Although markets are improving, we will not lose focus on the factors under our control We remain committed to fully capturing the benefits of our merger with Plum Creek, achieving industry-leading performance and demonstrating disciplined capital allocation to drive superior value for our shareholders And now, I'd like to open the floor for questions Question-and-Answer Session Good morning, <UNK> So, <UNK>, as we have consistently talked about, we are focused on investing capital to drive down our cost in our overall Wood Products operation For last year, this year and for probably the next couple of years, we will be investing at approximately $300 million level in our Wood Products operation overall We would not anticipate investing more than that during the timeframe And, in fact, after investing at the $300 million level for the next couple of years, we would anticipate going back down to what I would call a more normalized level of between $200 million and $250 million We are very encouraged by the initial returns on the capital that we have spent And that part of the capital in our lumber operations – specifically again the focus is to drive down cost to low risk, high-return project But we also will be increasing capacity modestly as we rebuild a mill in Dierks and that will be coming on later this year and also a mill in Millport So, net-net that will add about another 300 million board feet of capacity but again, the focus is on driving down our cost We agree with you, <UNK> We think it would be helpful from that perspective and we're doing a lot of work on identifying and promoting export activity out of the South We've had some initial successes still at a very small level but spending a lot of time talking to potential customers and starting to develop those markets and frankly are pretty optimistic about it It's still early, still small volumes but we think there's a real opportunity to expand Southern export markets as we move forward So, in terms of operating rates, <UNK>, in the quarter, lumber was in the low-90s As we mentioned, our OSB operation ran very well It was in the high-90s and ELP was in the mid-80s You're always looking for opportunities to increase reliability and, therefore, increase production Our mills are running well There's always, what I call, creep in terms of being able to increase production but there's not big steps other than what we've already talked about in response to <UNK>'s question of what we're doing on the lumber side to increase significantly incremental capacity So, what we're focused on is running reliably and at the lowest cost as possible Other than creep, I would agree with you We are almost maxed out in OSB and don't believe we necessarily grew share We've been running at pretty high levels in OSB other than taking some maintenance downtime and those type of things So, we just ran extremely well in OSB in the quarter and demand for the product was very good despite the fact that the first quarter is normally a slower seasonal period What I would tell you is that we were encouraged by the process so far in the West As you also said, we'll be talking more about that when we wrap it up With that said, as we very consistently have said, we're looking for a premium of 30% And I would anticipate that we will achieve that premium or more in the West just as we have in the South <UNK>, really good question, and glad to be able to clarify You're right A big part of the pickup in first quarter versus fourth quarter was due to the fact that Sutton was running for the full quarter My comments were more due the fact that in OSB in the first quarter we ran in the high-90s, as I indicated, but quarter-to-quarter you're exactly right Again, thanks for clarifying That was a specific comment regarding Wood Products and that range is due to the fact that we don't know exactly what prices are going to do from this point forward If prices stayed where they are today or moved up, it would be at higher end of the – towards the 30% If they rolled or turned down from this point, it would be closer to the 20% So that's the reason for the range With that said, <UNK>, that comment was very specific to Wood Products You're right, <UNK> We don't know exactly, but I would be – I am hopeful that we could be in a situation where we could enter into a negotiated agreement – a quota-based agreement sometime this year Well, those duties go to the U.S Treasury and are held by the U.S Not necessarily That was a negotiated agreement, as you will recall, after many months back and forth Some of it went back to U.S Some of it went back to the Canadian producers So, that was part of the negotiations So, I don't think – we'll just have to see how this plays out as we move forward Good morning, <UNK> So, as I said in the comments, <UNK>, we were very pleased with our ability to leverage our scale operability, get roads during the quarter to capitalize on the tight markets What I would tell you as we moved into the second quarter we continue to be encouraged by what we see in the West, continued strong demand To your point, the mill inventories remained thin, especially in Oregon They're better than they were at some points in the first quarter But mill inventories continue to be thin And I would tell you overall, as <UNK> indicated, we anticipate prices in the West to be up slightly in the second quarter So, weather has improved We are able to move up into the higher elevation in the second quarter But we're very pleased with our ability to capitalize on what happened during the first quarter <UNK>, as you know, it's hard to determine how much, if any, impact the overhang from the waiting for the quarters to come out had on pricing What I will tell you is I think key drivers to the pricing improvement were the fact that inventories were very lean going into the first quarter and demand was better than expected I think all you have to do is look at OSB which didn't have the whole tariff situation and those prices ran as well So, I'm not going to tell you that the SLA didn't have an impact on pricing in the first quarter because I'm sure that it did But I think it was more – had more to do with the volatility in pricing that we saw I think underplaying supply and demand was the biggest driver of the improvement in lumber pricing that we've seen year-to-date I think there was a lot of speculation as you very well know, <UNK>, on what those rates would be What I will tell you is they came in about where we expected that it would And I think now we'll wait and see what happens in the antidumping and what the overall number is as we move forward So, what I would tell you is we continue to be encouraged by what we see in the West overall, including the key export markets which, of course, for us are Japan and China In terms of Japan, Japan housing market remains solid 2017 total starts are up almost 5% year-over-year through February Demand and pricing per logs, as we said, was solid in the first quarter and we anticipate that's going to continue into the second quarter In terms of China, inventories there are in good shape which as you know is a real key And in March, it's roughly 3.8 million cubic meters We anticipate that inventories are going to remain at reasonable levels through 2017. And in the second quarter, we anticipate volumes are going to rise and we'll have log prices that are comparable to the first quarter levels And we anticipate as we move through the balance of the year continued strong demand and pricing to be up slightly for the remainder of the year in China I do not see any big moves in terms of competitors kind of maxed out in terms of the infrastructure challenges that we have So, we did see an increase in U.S exports to China so far in the first quarter of 2017 and that number is up pretty significantly versus first quarter of 2016. Good morning, <UNK> So, what I would tell you is, at this point, <UNK>, we don't expect any – let me start about what we've seen in saw log pricing So, if you go back and look at the last four quarters in terms of just saw log pricing, it's been very flat You've seen some pressure on pulpwood pricing, but saw log prices has been very flat over the past four quarters As we look into the second quarter, we don't expect any significant improvement in saw log pricing We do continue to believe there is some potential for, maybe, some minor pricing traction in late 2017 as demand continues to grow and the Canadian (38:04) markets decline, whether it's due to duties or, hopefully, as I mentioned, earlier in negotiated agreement Now, longer-term, as we've talked about, we're very optimistic that due to the additional housing demands, the incremental capacity that's coming online in the U.S South and right now that's at least 12 million tons of additional demand that's in the process of coming on line and then again less lumber from Canada We think all of those things are going to add up to provide us with the opportunity for much better pricing on Southern saw logs as we move into 2018 and beyond Yeah So, we're optimistic about OSB pricing for the year of 2017. We talked about that it was up nicely in the first quarter But as you look at where it is in the second quarter, current prices are up probably 10% versus the first quarter average And we think based again on the strong housing demand that we've seen and the current supply, that OSB pricing should be good for the year 2017. As we move into 2018, as you highlighted, there will be some incremental capacity that comes online But we're going to frankly need some of that as housing continues to grow And the other observation I would make is it takes a while for a new capacity to get up and be fully running So, we'll see how that plays out, but we're hopeful that supply and demand continue to be in good shape as we move forward So, what I would tell you is in Timberlands, as we talked about, we're right on track for the $40 million to $50 million So, I would say in the quarter, we got about what you would expect if you just do it on a quarterly basis In terms of our Wood Products operation, <UNK>, as we said, we had particularly good quarters from a OpEx perspective in OSB and distribution So, I would tell you at least for – and it's just one quarter out of four but through the first quarter we're ahead of schedule in both of those businesses and I would stay right in line with our other two businesses which are lumber and EWP Thank you No Steve, not surprisingly, we don't have any comment on negotiations that go on between the U.S and the Canadian governments Well, clearly, the two countries need one another And, as I said, we are very hopeful of a negotiated agreement between the U.S and Canada as we move forward So, what I would say – I'm sorry There are in fact initiatives to raise prices and we have announced a 7% to 10% price increase and are encouraged by the progress we're making on that Of that 7% to 10%, we should realize that by the end of the third quarter with maybe 25%, 30% of that in the second quarter and most of the balance of that to be realized in the third quarter To your first comment, the reason prices were down slightly was primarily due to mix and the fact that the first quarter typically includes a greater mix of commodity and industrial products, which carry a lower price So, just as you indicated, positive lumber pricing good for EWP and we anticipate EWP prices moving up for the balance of the year Thank you No, <UNK>, we haven't seen that at all What I would tell you is demand for high-quality, well-managed timberland remains very strong As investors continue to view timberland as an attractive part of their portfolio, timberland valuations remain steady We're participants to all the major deals that come to market and have not observed any changes in the valuation trends overall As you very well know, there was a big transaction that happened this quarter by one of our competitors That was at a nice level in terms of value per acre So, we continue to see strong interest from a diverse group of investors in every deal that comes along, again, for high quality, well-managed timberland <UNK>, that is ongoing – or those will be ongoing discussions between the Canadian and U.S And, again, hopefully, we can reach a agreement that works for all involved by the end of this year Thank you So, what we've said is currently our priorities number one, two and three are making sure we successfully merge Plum Creek and get to the bottom-line all the benefits from that merger And as we indicated earlier, we made a lot of progress, but still have more to do So, that is our primary focus As we move forward, we will look for opportunities to grow our company We think our biggest opportunities will probably be in Timberlands With that said, if we can find appropriate acquisitions in Wood Products, especially if it's close to our timber base, those are opportunities we would look at from a bolt-on perspective And we'll continue to identify opportunities for that as we move forward I'm not sure I understood your question Say that again? Well, we would factor in everything in terms of potential bolt-on acquisitions It would probably be more attractive if it was close to our Timberland But would we' necessary rule it out if it wasn't near our Timberland? Probably not But, again, our Timberland base most sawmills, for example, would be more than likely aligned with our Timberland base Thank you Good morning Yeah So, there clearly is a lag and especially in strong markets like we had in the first quarter With extended order files the lag tends to be maybe, if anything, a little longer than normal But what I would tell you as we've moved into the second quarter, prices have continued to improve As I indicated earlier, current prices for OSB more than 10% – ARC (50:19) realizations are up more than 10% versus the first quarter average And we've also seen a nice improvement in lumber prices with quarter to-date lumber prices up roughly $30 versus the first quarter average So, you're exactly right There is a lag, but it is ultimately realized and the lag is a little longer when you're at the situation where you have extended order files, which is a good thing I think that may have been a small factor I think it was more driven by what we've seen on the housing front, <UNK>, but I can't tell you there wasn't any pre-buying But as we move through the second and third quarters I indicated earlier, we will fully capture the 7% to 10% price increase that's being put in place Sure So, as we've consistently said, we are committed to a growing and sustainable dividend With 90% of our assets in Timberlands and a significantly improved cost structure for Wood Products Our go-forward cash flow will be much more stable than it's been historically We continue to work with our board on the appropriate payout ratio and the timing for increasing the dividend going forward And as you would expect the board factors in many things when considering the appropriate dividend level, including the pace of improvement in housing, Southern saw logs and Wood Products as well as the benefits from our internal initiatives for operational excellence and operational synergies So, that's how we're currently thinking about it We have no specific cadence in terms of our dividend review As I understand, that was our final question And I just like to close by thanking everybody for joining us this morning And, as always, thank you for your interest in Weyerhaeuser

2017_WY

2016

SNPS

SNPS #Thank you. We do have leverage in the model. I think as I mentioned earlier, margins are relatively flat this year but it's important for us to manage this business sustainably over time. And when you look at the earnings guidance that we provided for this year, it's predominantly driven by operations. Right. And so our balance this year is to try to invest appropriately to drive growth long term while also generating high single digit EPS growth. Well, we certainly do see the impact of consolidation because all of these transactions come to us initially always with the request of can you reduce our cost. And while we are trying to accommodate our customers as much as possible, we also try to offer up solutions whereby we can do ---+ fulfill a broader set of their needs. And in that context, I think we have continued to do well also because many of the technologies that we provide are essential and are at the leading edge. So none of this is simple. And as you well know, in our industry we've talked for quite a number of times, including at many of our earnings releases, about what's the impact of this. Maybe especially in 2015 where there are a number of very large consolidations I think we have fared well with these. And we're thankful for that. But this is just part of an evolution in the industry around us. And I think we are well positioned to continue to be a corner stone supplier to people that are really going to drive their own companies to the next state-of-the-art level of applications. And that's a good position to be in. You're welcome. Well, we thank you for your attendance at this call. As usual we will follow-up with a number of you after this. And we hope that you have a good rest of the day. Thank you so much.

2016_SNPS

2016

MU

MU #<UNK>e. So let me address the question about the storage business. We are certainly hopeful that we can exit the year at least with a profitable note for the storage business. I think it's dependent on a few things. Obviously, we're in the middle of a very significant portfolio change-out, and we have to execute on those. So far, our record has been good with respect to the client and consumer segments. But we have some big product launches, with respect to both data center and enterprise coming up here toward the end of this calendar year and in early calendar 2017. And those would be really pivotal to us in completing that transition. I think that again, track record has been good. The SSDs have been well reviewed, and we're very optimistic that our subsequent product launches will be equally successful. I also think it's important to keep in mind that we also are seeing benefit of 3D in the memory ---+ or I'm sorry, in the mobile business unit as well. We saw that ---+ we had the mobile percentage of our NAND business this quarter move from the low teens essentially to the high teens, as a result of more and more quals there, and the increasing importance of the MCP portfolio. So we are seeing benefit of that, really across multiple business units. Let me just add to that on the seasonality question. Q4 obviously, typically is a very strong quarter for NAND. Hard to know for sure, but our sense is that the demand picture probably has more staying power than just the typical seasonality that you would see, given the strong growth in the end applications. Yes, I'll take that. So obviously, as has been the case, the specialty markets, the embedded markets, whether it's automotive, industrial, medical probably top of the list. Within the computing and networking segment, graphics has been quite strong. Server probably next, and then followed up with mobile and client. In terms of demand. But that ---+ it's a very quickly moving dynamic right now. So yes, we're seeing that happen real-time as we sell through the early production and move more and more of the products into the TLC format. And certainly more of that opportunity is ahead of us than it is behind us, given that we're just going to hit bit crossover for 3D in this quarter. And as <UNK> said, we're continuing to transition which adds costs because it suppresses output. But with more significant bit growth ahead, we would expect the cost reduction opportunity to accelerate a little bit here throughout FY17. I think, <UNK>, actually it's really a little bit more about the lag that you typically see as pricing starts to turn around in some of these things. Yes, there is an inventory effect relative to some of these products that we built up in inventory that were early production on either 20-nanometer or 3D NAND, et cetera. As we sell-through, that's a little bit of a headwind until that's flushed out. But it's really more around, as ASPs turn around, they don't turn around instantaneously. And they didn't turn around until we were into the quarter last quarter. So remember, we had a pretty significant beat relative to the mid point of our guidance last quarter, which gives you an indication that the pricing was starting to accelerate then. It takes a little while to play out, and to flush through as we see these things happen. So the trends are all in place. And I think we're heading where you think you are, where we ought to be, but it can take a little while to play out through the financials. Yes. And I didn't provide a cost specific cost per bit target for FQ1. Yes. Well, there's a lot of components to it. I think you put your finger on a piece of it, which is that the volatility in this business, I think we can conclude is going to be less going forward. This certainly seems to have been borne out as we move through this last cycle. It doesn't mean the cycles are gone, it just means that the volatility is less, and so that is less of a defensive driver so to speak. An important thing for us in this whole picture is operational flexibility and control. As we think about our ability to drive new technologies, either into manufacturing or to transition technologies with the Inotera assets, having ownership of that asset and the ability to mix and match different technologies, as well as potentially more value-add products and capture that value as significant. Notwithstanding the fact that we have a good operating relationship with Inotera, we believe that there is more value we can bring as sole owners than as Board members and operational partners. And at the end of the day, it gives us the ability as well to take the cash flow that's going to be generated with Inotera, and deploy it across our network where we find that most useful. So a number of different factors playing into it, all of which, I think, point in the direction that we're moving. <UNK>e. So when we provided that CapEx guidance of essentially midpoint of $5 billion net of partner contributions, we did say it included contemplated investments from Inotera. So that's an all-in number, as you know, we don't break out specific CapEx by fab, so we don't plan to start doing that now. But that $5 billion midpoint, with [a little] range around it is inclusive of anticipated investments at Inotera. No, the first out 3D was MLC, but we very quickly introduced TLC. And as we said in our prepared remarks, most of our client consumer SSDs are now out on TLC, and we're qualifying TLC into mobile applications as well. And we will be a majority TLC by the middle of FY17 here as we go forward. So that's part of the engine of the significant bit growth that we've contemplated and forecast. So depreciation life of the NAND equipment is about five years. And really, we conducted quite an extensive study around how long the technology transitions existed, or took in the DRAM world, how long they were contemplated to take on a going forward basis. We looked at the practices of others, both competitors and partners. But really, the substance of the decision was related to what we anticipate and what we've been saying for some time is a slowing of the technology transitions, and therefore, the longer use ability of that equipment as the technology transition times change. And the reality is, there's a range of answers you come up with when you do a study like that. And much like the midpoint of a guided range, and seven years felt to us like it was not overly aggressive, but not overly conservative either. So you could assume that we could have gone a year or two on either side of that, and we chose a position that we thought was reasonable, given what we know and understand about the pace of technology transition. We ---+ yes, we expect depreciation to be somewhere in the range of $4 billion for the year, give or take. And operator, I think we have time for one more question. Certainly, first thing we're going to be focused on is actually accumulating the cash. So that's my first priority, because I have to have some of it to be able to decide what to do with it. And certainly at that point in time, we would certainly look at the opportunities that were available to delever. And we would look at those in the context of, everything else that's going around. And it's really impossible to say specifically what we would decide to do in the context of a future that's not yet here. But I can tell you that delevering is an important priority. And depending on how much cash we generate, we may choose to deploy a $100 million of that or so back into CapEx, if that's the right decision. But delevering is certainly nearest and dearest to our hearts at the moment.

2016_MU

2016

VMC

VMC #I think that, to start with your first question, I think it's a combination of operating leverages and improved volumes and operating efficiencies on the variable side. So it's a combination of both of them. There is a lot of volume leverage in that, but it's a combination of the two. No. And then, <UNK> ---+ I think one of the things, timing of stripping, <UNK>, I would say maybe had some benefit of it that will ---+ that's always comes in fits and starts, but it's not a whole lot. And, <UNK>, for the full-year outlook, we will see ---+ we are very focused, as <UNK> mentioned, on continuing to drive these operating efficiencies to control what we can control, to use <UNK>'s words, and to leverage our cost of sales where we can. We will see how we come out. There are a lot of moving pieces in a business like ours, but it's something we're very, very focused on. First of all, I wish we were running two shifts everywhere. I'm an old operating guy, and life is good if that happens. But it's on a market-by-market, plant-by-plant basis. So, for example, you go to Texas, you've got plants that are running two shifts already. You go to some markets in some of our Atlanta operations, they are not even running a full shift. So it's such a local business and that is market by market, so there's not a broad-based statement. But overall, we will do that a little bit at a time, but we are nowhere close in most markets to adding shifts. It's really adding hours or even adding a full shift on a full plant. But we would love to have those problems. We also, <UNK>, back to <UNK>'s point, we are probably getting ---+ with the breadth of the recovery, we're probably getting to a point where we have enough volume in more of our key facilities to begin to realize a little more operating leverage. Leverage of fixed costs. Now we're a long ways away ---+ and, <UNK>, we discussed it, from any kind of operating sweet spot and we are even further away from production capacity. But one of the benefits to us of getting more volume in more places is that it helps on the fixed-cost leverage. I'd break it into two pieces for you. I think about of the $275 million of operating and maintenance CapEx, for many of those investments we begin to see operating efficiencies pretty darn quick if we are improving or right-sizing mobile equipment fleet, if we're replacing screens or otherwise improving our production processes at a plant level. We try and work those as best we can to have pretty quick return periods on those investments. For the $125 million for the course of the year that we may spend on growth related PP&E, it's really going to depend on the nature of the investment. These aren't long-term payoff things, these aren't things where you invest one year and you get the benefit 10 years down the road. But it's highly variable, whether it's a new railyard or incremental reserve capacity at a quarry or whether it's a new ship. It's hard to say on the growth capital. Thank you. Thank you. Thank you very much for your interest in Vulcan Materials Company and we look forward to speaking to you throughout the quarter.

2016_VMC

2016

LGIH

LGIH #Thank you, <UNK>, and welcome to everyone on this call. We appreciate your continued interest in LGI Homes. During today's call, I will summarize the highlights and results from our exceptional second quarter and year-to-date. Then <UNK> will follow-up to discuss our financial results in more detail. After he has done, we will conclude with comments on what we are seeing for the third quarter and our expectations for the remainder of 2016, and then open the call for questions. Before we discuss our results today, I would like to take a few moments to tell you about one of our 2016 initiatives, LGI Giving, which we launched earlier this year. Through LGI Giving, we are committed to support and benefit our local communities through volunteerism and service. On May 26, we held our inaugural Service Impact Day where we closed all of our LGI offices nationwide in order to perform service projects and give back to our communities. We held 20 events across United States from Seattle, Washington to Jacksonville, Florida ranging from constructing homes in partnership with Habitat for Humanity to building sustainable gardens, to helping communities recover from recent heavy rains and flooding. Through these events, our employees donated over 3,300 employee-service hours and LGI contributed over $120,000 to local organizations. It was a great success and we thank all of our employees for dedicating their time and talents to these worthwhile causes. We would also like to thank all of our employees for their hard work, dedication, and loyalty to LGI. Because of your outstanding performance we are proud to announce that LGI delivered an impressive quarter, highlighted by record setting closings, revenues, average sales price, net income and earnings per share. For the first time in Company history, we closed more than 1,000 homes in a single quarter, ending the quarter with 1,128 closings. This generated over $222 million in home sales revenue which represents a 32% increase in closings and a 40% increase in revenue over the second quarter of 2015. For the first six months of the year, we closed a total of 1,972 homes, which represents a 29% increase over the first six months of 2015. We ended the second quarter with 56 active communities, an increase of 24% over the same quarter last year. The increase in active community count reflects our continued expansion outside of Texas. Year-over-year, we added three new communities in Colorado, three in Florida, two in the Carolinas, and one each in Arizona, Georgia and Washington. Absorption during the quarter was very strong, averaging 6.8 closings per community per month Company-wide. This was an increase over the 6.4 closings per month for the second quarter of last year all while increasing our average sales price by 6% and adding 11 communities outside the state of Texas. Based on absorption, our top markets for the quarter were Houston, Fort Myers, Dallas/Fort Worth and Charlotte. Our absorption pace in Houston was 10 closings per community per month and Fort Myers, DFW and Charlotte each had an average of approximately nine closings per community per month. Texas continues to be our leading division, generating 585 closings, which represent approximately 52% of our total closings during the quarter. We saw a 20% increase in closings in Texas during this quarter as compared to the second quarter of last year with the same number of active communities. 48% of our closings this quarter came from markets outside of Texas compared to 43% for the same quarter of last year. Year-over-year, the Florida division increased closing 57%, the Southeast division increased 50% and the Southwest division increased 34%. This growth was driven by our new communities, which enabled us to increase closings while maintaining similar closings per communities for each of these divisions. Our Northwest Division is off to a solid start. The first closings occurred in May and we ended our first quarter in this division closing 11 homes with an average sales price above $275,000. Seattle is the most recent market that validates our belief that we can enter new markets effectively using our established and discipline processes and our proven sales system. Our marketing strategy continues to be focused on directing marketing to renters living within close proximity to our communities. Based on responses to our direct consumer strategy, we maintain our belief that there is strong demand in the first-time homebuyer segment. In addition, our markets continue to have strong housing demand drivers including nationally-leading population and employment growth trends, general housing affordability and desirable lifestyle characteristics. With that, I'd like to turn the call over to <UNK> Meridian, our Chief Financial Officer for a more in-depth review of our financial results. Thanks, <UNK>. As previously mentioned, home sales revenues for the quarter were $222.7 million, based on 1,128 homes closed, which represent a 40.2% increase over the second quarter of 2015. Our average sales price was $197,450 for the second quarter, a 6% year-over-year increase. This increase is largely attributable to higher price points in some of our new markets, a continued favorable pricing environment, and our product mix. For example, our newest markets Denver, Colorado Springs and Seattle all averaged home sale prices over $275,000. Our adjusted gross margin was 27.8% this quarter compared to 26.7% in the first quarter of 2016, bringing our year-to-date adjusted gross margin to 27.3%. Margins improved 110 basis points sequentially as a result of increasing sales prices and leverage due to increased closings per community over the first quarter. Adjusted gross margin for the quarter excludes approximately $2.7 million of capitalized interest charged as cost of sales during the quarter, representing 120 basis points and in line with expectations. Combined selling, general and administrative expenses for the second quarter were 12.7% of home sales revenues compared to 13.4% for the same quarter in the prior year. As a percentage of home sales revenue, we believe that SG&A will vary quarter-to-quarter based on home sales revenue and we expect the remainder of the year to be at the lower end or slightly below our previous guidance of 13% to 14%. Selling expenses for the quarter were $17.9 million or 8% of home sales revenues compared to $13.4 million or 8.4% of home sales revenue for the second quarter 2015, a 40 basis point improvement. Selling expenses as a percentage of home sales revenue improved primarily as a result of operating leverage realized related to advertising costs. General and administrative expenses were 4.7% of home sales revenues compared to 5% for the second quarter of 2015, a 30 basis point improvement. This decrease reflects leverage realized from the increase in home sales revenues during the second quarter of 2016 as compared to the second quarter of 2015. Pre-tax income for the quarter was $31.4 million or 14.1% of home sales revenue, an increase of 70 basis points over the same quarter in 2015. Our year-to-date pre-tax income was 12.8% of home sales revenue, an improvement of 100 basis points over the prior year. We generated net income in the quarter of $20.7 million or 9.3% of home sales revenue, which represents earnings per share of a $1.01 per basic share and $0.96 per diluted share. Second quarter gross orders were 1,535 and net orders were 1,201. Ending backlog for the second quarter was 887 homes compared to 783 last year and the cancellation rate for the second quarter of 2016 was 21.8%. We ended the second quarter with the portfolio of approximately 28,000 owned and controlled lots. As of June 30, approximately 11,400 of our 18,100 owned lots were either raw or under development. Turning to the balance sheet, we ended the quarter with approximately $50 million in cash, $610 million of real estate inventory, and $301 million of book equity. On May 27, we entered into an amended and restated credit agreement that has substantially similar terms to our previous credit agreement but increased our available revolving credit facility to $360 million which can be further increase to $400 million. At June 30, we had $260 million outstanding under the facility as well as $85 million of convertible notes outstanding. Our gross debt-to-capitalization was 52.6% and net debt-to-capitalization was 48.6%. We had approximately $92 million of capacity available to borrow under our credit facility at June 30. During the second quarter, we sold and issued approximately 594,000 shares of our common stock, which generated $16.3 million in net proceeds and completed our ATM program. Since the ATM program was initiated in September 2015, we sold and issued approximately 1.1 million shares of our common stock, generating total net proceeds of approximately $29.4 million. At this point, I would like to turn it back over to <UNK>. Thanks <UNK>. In summary, we had another successful quarter and a great first half 2016. Let me provide some guidance and thoughts on what we are seeing thus far in the third quarter and looking ahead into the remainder of the year. The third quarter started off with 306 closing in July compared to 311 closings in July of last year. The 306 closing came from 58 active communities resulting in an absorption pace of 5.2 closings per community per month. Month-to-month variability is expected throughout the year. Primary factors that contribute to monthly variances are inventory availability of both lots and homes and the timing of community openings. We continue to see strong leasing demand, which are the key metrics that we monitor. Based on our current backlog, we believe we will close between 350 and 380 homes in August. Additional highlights of our growth and expansion across the nation include our evolving presence in Nashville, where we have started construction on our first homes. In this new market, we expect to open for sales during this quarter and close our first homes by the end of the year. During July, we closed five homes in our second community in the Seattle market, exceeding our expectations and have started construction in our third community where we expect to begin selling later this quarter. We have also closed in our first project in the Portland market, further expanding our operation in the Northwest. We anticipate closing homes in this new market in the first or second quarter of 2017. We are also making progress in Raleigh, North Carolina and have our first two projects under contract. We expect construction to start later this quarter, sales to begin in the fourth quarter and our first closings in Raleigh to take place in the first quarter of 2017. We are still expecting our community count at the end of the year to range between 62 and 67 active communities. In the second quarter, we saw nearly a 3% increase in average sales price over the first quarter. We believe our average sales price for the remainder of 2016 will continue to increase as a result of product and geographic mix as well as favorable market conditions, ending the year with an overall average sales price between $195,000 and $205,000. Our average home sales price in July was about $200,000, a new high for us and largely the result of higher entry-level price points in our new markets. We expect adjusted gross margin, which excludes the effects of interest and purchase accounting, will continue to be strong. We believe that our adjusted gross margin for the year will be in our target range of 26.5% to 28.5%. Based on 2,200 and 78 closings through July and our estimates for August, we believe we will close, on average, 340 to 400 homes per month for the remainder of the year, resulting in closings between 4,000 and 4,300 homes during 2016. Given our increased guidance on average sales price, our confidence in producing adjusted gross margins in the 26.5% to 28.5% range and continued strong SG&A leverage, we are raising our full-year earnings per share guidance from $3.00 to $3.50 per basic share to a new range of $3.20 to $3.70 per basic share. In summary, we are very pleased with our results and are poised to take advantage of continued growth opportunities in existing and new markets. We believe we are well positioned to continue to grow revenue, community count and earnings in line with our guidance, allowing LGI Homes to achieve our long-term goals and objective. Now we'll be happy to take your questions. Sure. <UNK>, this is <UNK>. I can start with and I think Seattle is a good example of higher price points market for LGI. Our three bedroom, two bath, two car garage 1500 square, 1600 square foot home in Seattle market is about a $100,000 higher than it did in the Texas market, that $270,000 to $300,000 range rather than $170,000 to $200, 000 range. And that's a component of land cost and construction costs primarily fees and permits. It's just more expensive to do business in Seattle. How we control cost is make sure we remember that our business model is focused on being an affordable alternative to renting and one of the positive things about these new markets, they're more expensive to get into an entry-level home, but they're also significantly more expensive for rents, and we have found in Seattle, as an example, and the same way in Denver, which will be another one of our higher-priced markets, we are still able to offer an affordable alternative renting. And then, certainly from a construction cost standpoint and having access to trades, we really rely on local expertise, when we go to a new market, for example, in Seattle, we transfer two of our top managers from Phoenix and from Houston to get that area started, but we hired local construction expertise that has all the access to trades. The other factor is; we're expecting lower absorption paces in these new markets as well to get started and also with that average sales price, we're conservative in our underwriting assumptions, but that average sales price is really accretive to earnings as well. Yes, I think from a construction cost standpoint compared to the other large public builders, if we're building the same product, it would be very similar from a construction cost standpoint. One of the advantages we have in our model is building spec inventory in all of our markets, no matter if it's Houston or Seattle or Denver or Florida, we don't offer any options at all. And that consistency that we can offer trades and that consistency in building the same floor plans over and over and consistency with the upgrades that we offer in our homes, I think drives cost savings for us. And certainly, I think we got an advantage over the smaller private builders that don't have the absorptions per community or the scale that we have. So I think the large publics were certainly in line with and probably have an advantage over the smaller builders. I think that's too early an issue. There is no question, are we going to do a new market. As we add communities, as we add scale, and as we get some depth in that market, we're going to see more efficiencies from the trades. Even though ---+ the people listen to this call have an idea of LGI on a national scale or a public builder that have success in the markets. When you go to a new market, we still have to prove to the local trade base that we can drive the absorptions that we say we're going to drive and that we're going to build the houses the with no options, because it is different and they're not used to seeing that. But as we get in and add more communities and prove it to the local trades, we will get efficiencies, no question about it. Yes, it's tracking ahead. If we look at our budget, we probably budgeted San for the very first quarter of closings and the Seattle market ramping up, so we didn't have our first closing till later in the quarter. So I think it exceeded expectations. Then we also mentioned that in July, our second community, Summerwood Park, had five closings in its very first months of closings. We would have modeled that probably at two and the average sales price in that second community would have been in the $325,000 range. So, five of that community, really strong start; so I'd say exceeding expectations. We have our third community opening in Seattle. We're going to have a grand opening next month and have closing in the fourth quarter and have projects four and five shortly after that. So excited about the Northwest, excited about getting Portland started and exceeding expectations is how I would describe it to start with. We did not mention that on the call, but I can tell you, it's going to be very similar to Seattle and be in that $275,000 to $300,000 range. This is <UNK>, Mike. Appreciate the question. I would say, no, we didn't have any temporary dip in demand from a market standpoint. The second quarter absorptions per community of 6.8 was an outstanding quarter, like we talked about, we went from 6.4 the year earlier to 6.8 while adding 11 communities. Going down to 5.2 in July, closings per community was disappointing, month-to-month volatility. Had a great May with 432 closings, wiped out some inventory. So in our top-performing markets like North Carolina market, Charlotte, Texas, certainly had some supply issues as far as running out of homes to sell and not having the next section of developments ready. Certainly we can always use more sales. I don't want to mitigate that. If we would have had more sales, we'd have more closings. But you're correct, we project 350 to 380 closings for the month of August and then the range we gave was really a range around six closings per month per community, more of our historical range over the last couple years, not as strong as the second quarter. But six a month per community sounds in line for the rest of the year. Well, I'd answer in a couple of different ways. One is, as markets mature and stops growing community count, I think it is more likely that absorptions per community increase, because if you look at the Texas markets, if you look at Charlotte, if you look at Fort Myers, we have not been adding a lot of new communities in those markets. They've been more stable and those are our top performing areas. We didn't mention, I've got the list in front of me, but Albuquerque averaged 7.8 closings per community per month in the second quarter and that was in two communities and we've had two communities in Albuquerque. So we're not adding community counts in the Albuquerque market right now. And comparing it to some of the newer markets like Seattle, like Colorado Springs, like Jacksonville, like Orlando, which are all down in the three, four, five closings per community, we've been adding a lot of community count in those markets. So we do expect, as markets mature and get more stable that closings per community would go up. Sure Mike, this is <UNK>. So you're right on raising the ASP guidance. Certainly the performance of the second quarter as far as gross margin, even though the range, overall range stayed the same, I think we have a lot more confidence in where we stand in terms of actual performance and then exactly right on SG&A coming in below 13% this quarter, with 6.8 closings per community. Certainly see the remainder of the year now, heading towards the lower end of that range or maybe slightly below. The other factors, tax rates and everything else stayed essentially the same. Sure. If we believe or end up in the higher end of the closing range we definitely should have some opportunity to show some operating leverage year-over-year. So there is some variability there depending on where the top line comes into play. We've also have the new markets, as <UNK> mentioned coming on in the back half of this year. So we'll have Portland and establishing ourselves with the infrastructure we need as we go into 2017. So, some of those expenses will start to come into play before we actually see results in those markets. So that's coming into play as well. All right, thanks everyone for participating on the call and your interest in LGI Homes. We look forward to getting back to you next quarter sharing our achievements for the rest of 2016. Everybody have a great afternoon.

2016_LGIH

2017

RGLD

RGLD #Thank you, operator. Good morning, and welcome to our discussion of Royal Gold's Third Quarter Fiscal 2017 Results. This event is being webcast live, and you will be able to access a replay of this call on our website. Participating on the call today are <UNK> <UNK>, President and CEO; <UNK> <UNK>, CFO and Treasurer; Bill Heissenbuttel, Vice President, Corporate Development; Mark Isto, Vice President Operations; and Bruce Kirchhoff, Vice President, General Counsel and Secretary. <UNK> will open with an overview of the quarter, and then <UNK> will follow with the financial update. After management completes their opening remarks, we'll open the line for a Q&A session. This discussion falls under the Safe Harbor provision of the Private Securities Litigation Reform Act. A discussion of the company's current risks and uncertainties is included in the Safe Harbor and cautionary statement in today's press release and slide presentation and is presented in greater detail in our filings with the SEC. Now I will turn the call over to <UNK>. Thanks, <UNK>. Good morning, everyone. Thank you for joining us. I'll begin on Slide 4. To summarize the highlights of our solid and straightforward financial results, we're reporting our second consecutive quarter of record operating cash flow. We paid down $45 million in debt and made our final scheduled payment to Wassa and Prestea. We have no additional capital commitments so all cash going forward will be available for acquisitions, debt reduction and dividends. In addition to the quarterly results, I would also like share a bit about the future with you today. We have a sequential growth catalyst expected in each of the next 3 calendar years, Rainy River in 2017, Cortez Crossroads in 2018 and Pe\xf1asquito Pyrite Leach in 2019. We believe this growth profile, with 3 near-term projects already bought and paid for, is unique within the royalty and streaming business. I'll speak more about this later. We also have significant interest at Pascua-Lama and Voisey's Bay, and there are some updates in those areas I would like to discuss with you as well. Let's delve into the details on Slide 5. Today, we are reporting another quarter of strong revenue in earnings from our diverse portfolio of 38 operating properties: Mount Milligan, Pueblo Viejo, Pe\xf1asquito, Wassa, and Prestea were the main drivers of higher revenue over the prior year quarter and offset lower sales of Andacollo due to the timing of concentrate shipments. When you compare our recent results over that of the last few years, you'll see that we've experienced a step change in operating cash flow. The chart on the left side of the slide illustrates that we've averaged about $170 million in operating cash flow per year from 2013 to 2016. However, over the last 12 months, we've generated $250 million, an increase of about 50%. This performance demonstrates how the recent streaming acquisitions at Andacollo, Pueblo Viejo, Wassa, and Prestea have ushered in a new era of growth for our company. Turning to Slide 6. We provided a few notable highlights from our 38 operating properties. At Pueblo Viejo, Barrick reiterated its calendar 2017 production guidance, which calls for 625,000 to 650,000 ounces of gold production. Barrick reported slightly lower-than-expected first calendar quarter production due to the timing of autoclave maintenance. The impact of that shutdown was partially offset by higher gold recoveries. Full year production guidance was reconfirmed at Wassa and Prestea where Golden Star expects to produce 255,000 to 280,000 ounces of gold with production weighted to the second half of the calendar year. Commercial production was declared at Wassa underground back in January and Golden Star expects the Prestea underground to reach commercial production in the second half of this year. I'd like to remind you that our streaming interest is scheduled to increase from 9.25% to 10.5% on the [earlier] of commercial production at Prestea underground for January 1, 2018. Finally at Mount Milligan, Centerra also reiterated its full year production guidance. Centerra is expecting gold production of 260,000 to 290,000 ounces and 55 million to 65 million pounds of copper production in 2017. This results in 91,000 to 101,000 ounces of gold and 10 million to 12 million pounds of copper attributable to Royal Gold. This profile is also weighted to the second half of the calendar year with 64% of the copper and 60% of the gold production expected in the last 2 quarters of the year. As we schedule that revenue into Royal Gold, I should emphasize that there's about a 5-month lag between production and delivery to us. Centerra recently undertook an operational review process with subject matter experts within their organization to identify several value-adding projects, which when implemented, are expected to improve recovery, throughput and unit cost performance. That said, Mount Milligan is already one of the lowest cost producers in the world. As expected, we will have our first copper sales from Mount Milligan in the June quarter. When we announced our amended agreement with Centerra nearly a year ago, we evaluated the impact of taking some copper in exchange for gold. We continue to estimate that we'll have about 85% of our revenue from precious metals even after the copper stream goes into effect. I'll now turn the call over to <UNK> for a financial update. <UNK>. Thanks, <UNK>. On Slide 7, I've summarized a few of our financial highlights. Third quarter revenue of $107 million was up 14% from last year. We benefited from strong volume at several of our streaming interests as well as Pe\xf1asquito on the royalty side. The gold price averaged $1,219 per ounce for the quarter, an increase of 3% from last year. Our effective tax rate was 23% in Q3 and 20% for the full 9 months ended March 31. For fiscal 2017, we expect that our full year effective tax rate will be approximately 20%. DD&A was about $455 per GEO for both the quarter and the 9 months ended March 31, and that's on the low end of guidance of DD&A per ounce of between $450 and $475 for the full year. We took steps to strengthen our balance sheet in the third quarter. You may recall that last quarter, <UNK> told you that all cash flow going forward will be available for acquisitions, debt reduction and dividends. Well, during the March quarter, we generated $76 million in operating cash flow, made our final payment of $10 million to Golden Star, paid down $45 million on our revolver and we paid $16 million in dividends, resulting in a 20% cash flow payout ratio. We ended the quarter with about $460 million in total liquidity, an increase from $420 million last quarter. This includes about $110 million of working capital plus $350 million of revolver capacity. Looking ahead, we expect to continue to pay down debt aggressively while maintaining the increased availability under our credit facility to fund acquisition opportunities. I'll now turn the call back over to <UNK>. Thanks, <UNK>. Turning from our current quarter to development stage projects on Slide 8, you will see 3 properties that will contribute to our next phase of growth. Starting with New Gold's Rainy River project in Ontario. The construction has matured significantly and commissioning of the crusher circuit is expected to commence in the coming days. In the September quarter of this year, New Gold plans to begin dry and wet commissioning of the full process circuit followed by first ore to the mill thereafter. New Gold is working closely with authorities to obtain the scheduled 2 permit, which is necessary for the long term operations to the tailing facility. And I note that there could be an interruption and milling at the final tailings facility work cannot be completed timely. New Gold is pursuing options to sustain production while the tailings facility is completed after their permit is received. From our standpoint, we are much more focused on the long term quality of the build in more than a decade of strong contributions thereafter. Royal Gold has a stream of 6.5% of the gold and 60% of the silver at Rainy River, which has an impressive 3.8 million ounces of gold reserves and 9.4 million ounces of silver reserves. On the photo in the middle of the slide, you'll see an aerial view of pipeline ---+ South Pipeline, gap and Crossroads deposit at Barrick's Cortez property. With reduced need for open pit equipment at Cortez Hills, Barrick began stripping and de-watering the Crossroads pit in calendar 2016 in preparation of ore production, which is expected to begin next year. Much of the Crossroads ore will be heap leach, so it will not complete with mill access with higher grade Cortez Hills underground ore. Royal Gold has a sizable interest at Crossroads comprised of both a 4.4% net value royalty and a 5% GSR royalty. We're also looking forward to the Pe\xf1asquito Pyrite Leach project. The project will result in winning more metals from ore by recovering gold and silver now reporting to tailings. Goldcorp reports that it achieved 6% construction progress and 81% engineering progress at the end of the first calendar quarter. The project is expected to generate an incremental 100,000 to 140,000 ounces of gold and 4 million to 6 million ounces of silver beginning in 2019. Both gold and silver are subject to our 2% NSR royalty, which also includes lead and zinc. Turning to Slide 9. I want to briefly discuss 2 properties which have the potential to influence our portfolio over the next few years. Barrick recently announced a joint working group with Shandong Gold to explore and develop the Pascua-Lama project from the Chile-Argentina border. The prefeasibility study currently underway will explore the possibility of developing the Argentina or Lama side of the deposit first with a block caving approach. It is envisioned that 1 of the 3 lines of the partially completed infrastructure will be used for Lama at an initial 15,000 [tonne] per day capacity with the potential to add more throughput as the Pascua deposit is developed. Royal Gold has a 5.45% royalty on all gold production from the Pascua deposit, which had nearly 15 million ounces of the gold reserves in 2011. To provide scale, if that was in production today, our Pascua royalty would be our fourth largest revenue source. Meanwhile, we continue to enforce our rights with respect to Voisey's Bay ---+ the Voisey Bay royalty. Litigation efforts have progressed and we recently received a trial date for the second half of 2018. The trial will take place in St. <UNK>'s, Newfoundland and Labrador. As a reminder, our claims disputing calculation of the royalty date back to the beginning of production in 2005. In addition, [Vale] has not paid any royalty to Royal Gold since the first calendar quarter of 2016 when they began deducting operating cost, capital cost and cost of capital associated with the new Long Harbour Processing Plant. We obviously believe these are inappropriate deductions when calculating an NSR royalty. Prior to commencement of Long Harbour operations, our Voisey's Bay royalty was among our top 5 largest revenue generators. Both the Pascua-Lama and Voisey Bay royalties are meaningful to Royal Gold, yet neither figures into our growth projections at this time. Turning to Slide 10. You will see in our press release that we issued last evening that we updated our reserves and resources attributable to our royalty and streaming interest. We think these figures ---+ we think of these figures net of the required payment of streams, so we have comparable figures between our royalties and streams. Attributable gold equivalent ounces are 6.7 million, down only about 100,000 ounces due to net consumption during the year. So in summary, Royal Gold continues to benefit from prior investments. We are seeing a step change in cash flow growth thanks to our recent acquisitions of interest at Andacollo, Pueblo Viejo, Wassa, and Prestea. While those acquisitions of producing properties are now integrated, we still have attractive growth ahead of us at Rainy River, Cortez Crossroads and the Pe\xf1asquito Pyrite Leach project, all of which requires no additional funding from us. We are rebuilding the balance sheet by repaying debt, diligently returning capital to our shareholders and keeping our powder dry for future opportunities. Operator, that concludes our prepared remarks. Now I'll open the lines for questions. Sure, <UNK>, happy to do that. First, let me start with our dividends. We have a very lasting commitment in our strategic plan to pay a growing and sustaining dividend. We've been able to do that for the last 18 years, I think, probably. And so that's something that we always have discipline and dedication to so ---+ well, you can expect that to continue. And then, really, it's an opportunistic thing. <UNK> is going to be attacking our debt aggressively in the absence of a deal. And we ---+ that debt, as we pay it down, is immediately available to us again by way of our revolver. So we don't look at those 2 things competing against each other, simply as a good use of our cash flow in the absence of Bill finding our next transaction. So we're very busy looking at different things and we still see things out there that we like and we're working hard to see if they fit into our portfolio. Yes. Yes, happy to. We ---+ a lot of the restructuring of the balance sheets that happened over the last 24 months or so are starting to heal. And so while we may not see the size and transaction that was in the marketplace before, there are still some interesting high-quality things out there that would make an important difference to a company like Royal Gold. I like to often say that it's a strength to be the smallest of the 3 biggest because we can do transactions that are still important to us in $200 million or $300 million range that still are material to our business. So we still like what we see in the business development sector at this point. Yes, that's a very hard question to answer because number one, we've got to see Barrick get through the prefeasibility on the blockade potential and see whether that make senses at all. And then of course after that, I'm sure they'll go into a feasibility type of schedule. So that will take some time. But [overprinting] all of this is some of the regulatory, social and permitting issues that have to be solved on the project. So it's a very, very hard thing for me to guide. But I just emphasize that there's a tremendous amount of capital that's already in place there on the property. It's not a Greenfields project. So when all those things do get cleared up, it could be an exciting point in time for Royal Gold and certainly for Barrick as well. So hard to guide, but it is a very interesting option that's already embedded in our portfolio. Thanks for the question, Mike. We're looking at everything in all spectrums from near term to longer term items. And we do have the luxury of not having to quickly go out and look for some ounces that might help our growth profile. As you mentioned, it is a nice growth profile embedded in the company already. But I wouldn't really classify that giving us a direction in how we look at projects. Bill is looking at things that make sense in any spectrum of the market. So we're trying to be creative in looking sometimes where other people aren't, and also looking at some of those things that we expect to come into production over the near term. Always a strong focus on the precious metals. I think if we ever hit the bottom end of that spectrum, we might say no less than 70% precious metals. But that's just kind of a guide in our company that we won't pierce, but we really are looking at precious metals and we don't have a growth strategy in other commodities. It would be a high class problem and I think we can probably still fit that into the portfolio quite nicely. Remember, Mike, when we bought that company of International Royalties, and that was their material asset and it certainly was much more material to us then than it is now and we still stayed right at that 70% threshold when we bought it in. So I don't look at that one alone tipping us down close to that level. But you're absolutely right, I think the market will respond very, very well if that royalty was back on. Well, I'm not going to answer your question directly, forgive me for that. But what I can say is we often like what we own already. We know it the best, and we're always going to look at opportunities where we can be helpful to our partners. And we've been able to do that a number of times. You've seen that at Mount Milligan, for example, when we added a couple of different tranches to that original investment. And as long as we like the asset, as long as we feel that we're not taking too much of that asset and we have confidence in the partner, as we do in our portfolio, we surely would look at more business opportunities at a number of different assets. I've got actually 2 questions largely related to the balance sheet financial statements. The debt, I see you continue to pay that down. Is there a target level that you're trying to get to either on an absolute number or on, say, a net debt-to-EBITDA basis. Sure, <UNK>. It's <UNK> <UNK> here. Thanks for the question. Right now, we're just under 2x net debt-to-EBITDA and that's a very comfortable level for us. I'll point out 2 levels of capacity that we're ---+ when we talk about acquisitions, I think we're comfortable going up to about 3x net debt to EBITDA on a short term basis as long as we see it delever down in a pretty fast fashion. And then on the lower side, we do feel like there are some reasonable level of debt that we can keep within the company. And something about around 1x our EBITDA is pretty comfortable for us. So as we go forward in the long term, every acquisition we look at, we look at our capital structure, we look at our cost of capital and we make decisions about how we go forward and that's something I work on continuously. Hope that gives you a little bit of a guide to where we think about debt. Yes. No, actually that was absolutely great. The other question that I had is on G&<UNK> I noticed a fair drop over from last year. Is that something that's supposed to carry forward or are we supposed to see that creep up as the quarters go on. The G&A should be pretty consistent except for one item that drove our quarter and we pulled back on some noncash compensation expense during the quarter. It's just a function of every quarter. We're estimating what the future earn-outs will be under certain performance share agreements. In this quarter, we pulled that back really just to reflect current prices. So that's probably the largest level of volatility within our income statement up in that G&A line. So I'd look back more on a trailing 12-month basis on what our G&A is and use that as a guide rather than any single quarter. Yes. Thanks, <UNK>, for the questions. Let me just take a step back and describe that a little bit more for, perhaps, a broader audience. And we had an opportunity to participate in a project in Alaska, an exploration project, which is not specifically within our [DNA]. But we saw an opportunity here that we thought was extremely attractive that the rest of the market had not been, perhaps, seen as we did. And we've gotten involved with a company called Contango ORE to develop an exploration possibilities of a project called Tetlin, and the joint venture is called Peak Gold. We've invested enough to now get about a 25% ---+ earn a 25% joint venture interest there. But we really have built that structure to exit back into our core business, and we want to perfect that. We still think there are some things that we can do there to add value. We haven't had to add any staff. It's been very, very efficient. And we've been investing there on a quarterly basis, somewhere between $2 million and $3 million a quarter. And so we want to come back to the markets in the June quarter to tell you what we found. We're doing an evaluation on the resource as we speak, and we should have that available then. Let me say that we already have a royalty on the project, 2% to 3% royalty depending on whether we're on private ground or state ground. And when we do exit that, we want to be able to do things that, perhaps, are a little bit more controlling of our destiny, being able to participate rather than simply just waiting for the phone to ring for the next deal to come around. Perhaps there are some things like this that we can actually control our destiny on a bit. So things are going well at the present time, but we'll just take it quarter by quarter and see if it continues to make sense to invest there. And if some point in the time, we'll be making the decision to put that likely into stronger hands, developer's hands. Interesting comment. Yes, good observation. So I would encourage you to think about that $2 million to $3 million going forward for the rest of this calendar year. And the reason that we're a little heavier in this quarter is that Mark was able to establish a water well that has been producing all winter long and we actually started drilling there in February. So the climate has not been a significant factor for us. We've been able to drill year round on the project. And part of that is just the location of the project is a little bit more arid area of Alaska, but it also has good infrastructure access. The drillers stay in a hotel complex that's in the town of Tok, and they can drive 15 minutes to the drill site. So it's not a traditionally remote location like many other places in the northern climates. But that's why we had a little bit heavier March quarter than what you've seen in the past. No. Look, we ---+ our skill set is not necessarily an exploration in Greenfields projects and the ---+ our talent set doesn't necessarily yield us to do better than all those other companies that are out there trying to look and explore for it. And this is definitely a one-off opportunity. But having said that, this management team prides itself on being able to see an opportunity when it comes across our desk. And so we'll continue to think creatively in how it is that we can exit every one of those back into our core business. Well, thank you for taking the time to join us today. We very much appreciate your interest, and the healthy questions that you've asked are very much appreciated as well. We look forward to updating you on our quarterly results and also, the Tetlin project next June quarter. Thanks very much.

2017_RGLD

2016

BWA

BWA #Thanks, <UNK>. Now, let's move to the Q and A portion of the call. Melissa, please remind everyone of the Q and A procedures. We don't provide that kind of guidance by segment. We just give the total Company guidance which is on the deck that I was referring to earlier. Sure. Back in the announcement last July, I believe it was, we gave guidance that the synergies on the cost side were going to be $15 million. I would say we are on track to hitting that goal at this point. We didn't give any synergies at this point on the sales side but we are getting some momentum there as well, and you'll have more clarity there as we go forward. The cost synergies was 2016. To be more specific, we're going to realize half year savings up to $15 million in 2016. The run rate in 2017 would be $15 million. I need to be more specific there. I would say it's not purchase accounting coming off. It's more operational driven. There is but I think it's 2018 ---+ maybe 2018 or 2019. Some of the stuff comes off after 3 years, some of it's 10 years. There's a long tail for that. We won't see some of those benefits for some time. <UNK>, you are saying 2017, not 2016, right. I want to make sure I am correct. I would day some of the ---+ as you know, we always target mid-incremental margins, mid-teens incremental margin on our sales growth. That is above our nominal value right now. That would drive increased margin expansion. Then you still have ---+ I will admit Drivetrain is still not where the Engine group is. We still probably have more tail winds there. Trying to think what else. Probably the Remy which we just talked about as well. And then Volar, Volar has to also contribute more going forward. I don't have all the numbers there <UNK>, but I would say there's a lot of tail winds I just mentioned. We don't see headwinds now. Commodity prices are still, I think we are predicting those to stay flat, right. Oil prices and so on and so forth. I don't see them right now, no. I don't see anything right now. In the quarter we did $220 million a quarter, $350 million for the full year. Obviously we were very heavily weighted in the fourth quarter. We purchased a lot. We intend to stay at a healthy pace right now as well, I would say that in the first half of this year, 2016. I think at this point it may be more linear at this point I would just model, okay. 50-50, the number you gave out I would say at this point. Yes, this is <UNK>. That is a really good summary. IIFs and markets are close enough to offset each other, which implies about 4% of organic growth. That is a good summary. Right. Two questions. First is talk about the Drivetrain incremental margin, 156%. In my script I pointed out that in Q4 of 2014, if you go back to the transcript, you will see there's about a $5 million to $6 million headwind. You would have saw that actually sales were up and incremental margins were down a year ago. That is behind us. What you are getting is, you're getting $6 million of flow through that we didn't have a headwind on in the fourth quarter of this year versus last year. So that $12 million, half of it's this one area right there. Then as we go forward into 2016, if you recall, if you go back in our notes, Q1 of 2015 was about a $9 million headwind ---+ $3 million headwind and then we had another headwind in the second quarter as well. So, obviously, we're going to have those headwinds behind us in the first half of the year and we'll get tail winds there, they will have strong incrementals and then we level out like I think you said in the back half of the year to more normalized margins. Hopefully that helps. Right now they are starting to come in. Remember, I also said that we were running at 9% margins. We are up in the 12%s, right. We have been getting some benefit quite frankly over time then as volume comes into play. We are seeing the benefits now and then we are also seeing the inefficiencies, headwinds going away. So it's a combination of both that's uplifting those margins into this 12% range right now. Good morning. I can ---+ let me take a shot at the operating side first of all. The good news for us as we look around the world of the company, and I compare it to some of the last, our temporary employees are in much healthier state. Depending on the region, we run anywhere from 10% to 20% of our workforce re temporary. That allows us to react pretty quickly and flex on the labor side. Europe, I think we have more progressive agreements in place than we had before. So, I feel comfortable on the labor side that we can adjust. I think the other area that we got pretty proficient in is, if we need to flex on discretionary spend we know how to do that from prior cycles. Those are probably the two dials that you would move pretty quickly, all leading to targeted detrimental sales at around the 20% rate is where we look to manage the business to. I would add anecdotally for each of our operations around the world have the plans in place, on the shelf, in a lot of detail by region and by plant. Bottom line, I feel pretty comfortable that if there is some pressures we will be ready. I understand capital allocation, depending on the cash flows, we'll have to reassess what we do with capital allocation. 5%, 10% might have some impact I think. We'd have to watch, <UNK>. But 10% would become more stressful, I guess. 5% probably wouldn't. I think your thought is right. For us and I'm talking obviously, just North America at the moment, that truck to car mix generally speaking, the truck mix is slightly favorable for us. I think it's pretty well known we have, you know ---+ it varies a little by customer. We are very well contented clearly on the Ford platforms and the F150 platform in particular. FCA we're well-positioned, GM we're a little less well-positioned, but we are taking steps to address that. I would say to you it's pretty well balanced both on Engine content and Drivetrain content. On the Drivetrain side we are well positioned on the transmission content, but clearly the transfer case capability that we have there is strong. And on the Engine side I would say one of the big shifts has been more turbo charged engines for those vehicles which we benefited from, which is a big positive for us. And on Engine timing also we are picking up good content. Net-net it is a positive tail wind for us. Not really much of a difference there for us, <UNK>. It's pretty consistent, cars to trucks and region to region actually which we've said fairly consistently. It doesn't change that much for us. There is a couple of moving pieces on that transmission Europe aspect. One aspect is, one of our German customers did some inventory shifts in Q4 and we saw a little bit of that in Q1 on transmission related products. You have seen, that's been in the news publicly so I think you probably know that. That was an element of it. The other element of it was two European transmission programs that are phasing out for us. The replacement programs, I would say net-net are neutral to negative for BorgWarner. It's hard for me to speak to the exact detail on that <UNK>, because of the customer. Importantly though, these were planned. This was all part of our net new business assumption, it was all expected for us. It's not a surprise. It's nothing new. I would say at a high level, <UNK>, it's not a signal of the significant shift in transmission architecture. This is not people making massive moves between stepped automatics to DCT or automated manuals. I think it's more specific program by program for a couple of customers. Okay, <UNK>, so, the incremental margin for the quarter of 24% was primarily driven by the drivetrain segment being up 156%. The drivetrain really drove the full company, right. Although we had 14%, 15% in engine. I would say that there is about $6 million or $5 million last year of headwinds that we didn't see. So, of that $12 million increase in operating income, half of it alone was just not having those inefficiencies in our face, quite frankly. The other half I would just is that business is improving. The whole point of the restructuring. As we go forward, remember, we had ---+ Q1 and Q2 of last year we still had these headwinds coming. It wasn't until three and four that the headwinds dissipated and the incremental margins started returning. The first half of 2016 should have good tail winds because we don't have those inefficiencies in front of us anymore, and then they will level out in the second half to more normal incremental margins. Yes, let me talk to that a little bit, <UNK>. I think what we have alluded to so far is we feel comfortable as we look out into the next couple of years that Remy's going to deliver good mid-single digit-type growth for us. As you can imagine, that is primarily driven off the existing portfolio products into new channels. What I mean by that is there's two primary channels of growth for us with the current product portfolio. One is customers. They have a relatively narrow band of customers, and with BorgWarner's breadth of coverage on customers, that's going to drive content with their existing products. The second growth driver for us is a regional play where they have a strong position in North America, they're well-positioned in China but they start to be quite weak in Europe. That's going to be a series of opportunities for us to sell current portfolio products. That will drive the content growth over the next two or three years. To your point in parallel to that, there's a lot of discussions that we are having with customers around combination products of the Remy architecture and the BorgWarner architecture. There is a number of areas and we can talk more about this offline. But the most prevalent area of discussion right now is the notion of a P2 hybrid architecture, so combining our clutching know how together with their motor know how and we've got a lot of interest in that. That's likely to be a revenue stream that is probably four to five years out, but it's very active and driving it. So hopefully that gives you a sense of both the shorter term growth levers and then the longer term growth levers. If you go back to our guidance full year, I think it was on slide deck that we gave at the Deutsche Bank, <UNK>, remember. There is a slide in there that shows that we have about a $10 million to $20 million tail wind for the full year that was a headwind in 2015, okay. So, it's $10 million to $20 million as a full year. It's in that deck. That is what drives the 18% to 20% incremental margins for the full company for the full year. Normally it's mid-teens. But the tail winds are driving it, I want to round to the 20% range. Sure. So if you go back in time, this goes way back in time. We said that the benefits were going to generate about $30 million of operating income benefits going forward. What's really happened over time is we've been incrementally getting some of that as we go forward, and the margins have lifted up over time from 9% to 12%. We have been getting a little bit of these benefits as we go forward because the labor costs are lower for example, and so on and so forth. So we've been getting some of these benefits. But it's over three, almost four, three years now. So, that math is a little more difficult. But basically it's the absolute rise in the margins as well that we are getting. Yes. It's still ---+ well, all right, so, it's 4%, but I will be honest right now with the Remy coming on board, it might be 10 basis points lower. I'm splitting hairs, right now, but I think it's 4%. <UNK>, this is <UNK>. It's absolutely both drivetrain and engine. We are delivering growth on both segments. Those two phase-out programs I talked about are relatively small actually. They are in there. Just to give you a sense, to put a bit more color to though <UNK> to help you, it's ---+ we drive upwards through the year. So, our launch activity is a little back end loaded, which is not unusual for us. But it's across both Engine and Drivetrain. So, we are launching for example DTC uplifts in China. We're launching solenoid activities in China. We've got all-wheel drive launches with another Chinese OEM, that's Asia. If I talk about North America, we've got a super duty launch. We've got a ---+ so, it's a real mixture, <UNK>, I wouldn't want you to think it's only engine. It's certainly both. It's would say it's weighted to China and North America which is consistent with the net new business announcement. Thanks, <UNK>. Sure. So, the guidance that we've issued implies about $8 million nominal value of extra operating income related to Wahler. The other thing I want to clarify is, when we purchased Wahler, we said two to three years and we also said after we got in the business it was going to be more like three years, not two years. That would still take us into 2017. It's where the run rate would be, where we are happy where the business should be. Yes, the margin improvement, correct. I would be happy to do that. Let me give you some commentary. Our view is yes, there will be the mid-cycle review, obviously, that is all planned. Our view based on the multiple different inputs we get, is we are not anticipating significant adjustments or change to the plan. There's going to be sure robust discussion. That is obviously even more robust with gas at less than $2 a gallon. So I think there will be discussion. But I think significantly or changes I don't think are going to happen is our view of the world. We think it's going to continue on as planned, frankly speaking. What we do see, which I alluded to in part of my comments, Pat, there is absolutely a push for a spectrum of alternative types of powertrains. So, we are not seeing people at all step away from advanced IC engines. That is absolutely front and center. There is a tremendous amount of activity and launches around advanced gas engines. Yet we see a strong push for the pure electrics which we are right in the middle of, and hybrids as well in the many different configurations of hybrids. I think there's a general march towards execution of the standard, maybe with a few tweaks, and each of the OEMs getting a suite or a spectrum of architectures that they can get to deliver on those numbers. And we are right in the middle of all of those architectures in discussions with them. That's our view of how we see it right now, Pat. I would say it this way, Pat. Clearly we are engaged very deeply with all of our customers, that's a real strength. But we talk to regulators, we talk to different business groups, different industry groups. We are taking a large variety of inputs, it's not just our own narrow self view if that makes sense to you, but it clearly is driven off a lot of what the customers are doing. Because they are the ones that are working with us on what those architectures need to look like. Thanks. I would say, I'd give you this sense that Q4 was a good quarter for us in China. We had about 20% growth in the quarter in China. Very strong. As I alluded to earlier, part of that was some of the incentives. We are seeing that strength roll into Q1. So, it's still early in the year. We feel comfortable with the net new business announcement, we feel comfortable with our guidance around growth. I would say, if anything I feel incrementally a little more positive about China than I did a few weeks ago. How much of that's going to translate into real revenue by quarter and by backlog, we will see how that plays out. I would say I'm feeling more comfortable around China after a strong Q4 and the incentives flowing into Q1. You know, <UNK>, a large part of our backlog is China related. I think it's a net help for us right now. In the net new business we delivered in Detroit a couple of weeks ago, we didn't have those, those synergies were not in. The reason just to be transparent with that, we'd only owned the company for a few weeks. It was premature. I think give us a little bit of time is what I would say to you as we go walk through that this year. But if I was thinking out loud, I would say, as we get our arms around that, I think the contribution to the net new business as we go forward will be stronger from Remy than it was in this one. Again, you've to hopefully give us a little bit of time to flush that detail through and go after meetings with the customers, et cetera. But I think we will see a step up in contribution from Remy in terms of growth when we do the next new business. When that will play in and how much, <UNK>, we just need a little bit of time there. But I will tell you, directionally, I feel very positive about it. Thank you When we made the announcements about a year ago, we identified corporate governance cost is a really easy one to grab. Obviously they don't have a board of directors any more and the executive group is gone. That was one. Another one was cost synergies on our purchasing side. That is the one that will take more long term, I would say. Over time we'll get those benefits. Those are the two main ones we pointed out at the time. Then there was another one, just basic redundancy, I would call active corporate, not to corporate officers but to corporate staff itself, some redundancy cost there. We said that we'd get about a $15 million full year run rate, which in 2016 we would see about half of that. Yes, the ---+ you covered the two big ones which was that China was a lower absolute growth market China for everybody. That was weighted for BorgWarner because of our launch activity. And commercial vehicle was the other significant headwind we faced in commercial vehicle. I would say that was globally. But Brazil, to your point, was probably the worst. As we come into this year, our assumptions are based off 3% to 5% light vehicle production growth in China. No growth in commercial vehicle globally. Those are our two macro assumptions and that's how we are going into the year and that's how we built our guidance. Thank you. I would like to thank you all again for joining us. We expect to file our 10-Q before the end of the day ---+ excuse me, 10-K before the end of the day, which will provide details of our results. If you have any follow-up questions about our earnings release, the matters discussed during this call, or our 10-K, please direct them to me. Melissa, please close out the call.

2016_BWA

2016

HWC

HWC #Thank you and good morning. During today's call we may make forward-looking statements. We would like to remind everyone to review the safe harbor language that was published with yesterday's release and presentation and in the Company's most recent 10-K and 10-Q, including the risk and uncertainties identified therein. Hancock's ability to accurately project results or predict the effects of future plans or strategies or predict market or economic development is inherently limited. We believe that the expectations reflected or implied by any forward-looking statements are based on reasonable assumptions, but our actual results and performance could differ materially from those set forth in our forward-looking statements. Hancock undertakes no obligation to update or revise any forward-looking statements and you are cautioned not to place undue reliance on such forward-looking statements. The presentation slides included in our 8-K are also posted with the conference call webcast link on the investor relations website. We will reference some of these slides in today's call. Participating in today's call are <UNK> <UNK>, President and CEO; <UNK> <UNK>, CFO; and <UNK> <UNK>, Chief Credit Risk Officer. I will now turn the call over to <UNK> <UNK>. Okay. Thanks, <UNK>, and good morning, everyone. Overall we had a good quarter, stable earnings that put us on track to beat our core pre-tax pre-provision goal for 2016. Our revenue was stable, and given the seasonality that typically impacts certain line items in the third quarter, stable was good. Our revenue-generating initiatives remain a focus and we are planning on restoring growth in the fourth quarter. Some of those initiatives were reflected in this quarter's results. Within fees, the mortgage area improved again, up $700,000 from last quarter, and based on the third-quarter results, that line item is now close to a $20 million annualized run rate compared to $12.5 million last year. We believe the turnaround in secondary mortgage is a win with more good news to come. Moving to the balance sheet, loans were up 3% linked-quarter annualized, excluding the energy portfolio. As you can see from the waterfall graph on slide 6 of the investor deck, the areas that contributed to the growth were mortgage, equipment finance, and the Nashville healthcare team. All of these areas are either new to the organization or targeted as part of our revenue generation initiatives. On the expense side, we once again found efficiencies across the organization and were able to report a lower level of expense for the third quarter. These cost savings, along with a lower level of taxes, helped offset a slightly higher provision for loan losses. In last quarter's earnings call we shared how we expect the recovery in the current energy cycle to play out. Even with improving oil prices, we expected a lag in the recovery of energy services credits. This is reflected in our third-quarter criticized energy portfolio, where the majority of risk rating downgrades, $84 million, were in non-drilling support credits. The numbers also reflect the impact from the recent Shared National Credit review, 100% of which was reflected in our third-quarter results. Accordingly, the provision of $19 million was up about $2 million linked-quarter. As a reminder, our expectation is that reserve-based lending credits will show signs of improvement first, and in fact already are, followed by land-based services and finally non-drilling services in the Gulf of Mexico. Let's go back to my opening comment. Overall, a good quarter and it positions us to handily beat our core pre-tax pre-provision expectations for 2016, but we still have work to do. This quarter we established a new base to grow from and we are committed to restarting growth in the fourth quarter. Admittedly, there are headwinds along the way, particularly the energy cycle, general economic malaise, and a continued low-rate environment. But that said, we also have had successes in expense control and in growing revenue to a new level while dealing with energy. These achievements will be our tailwind to restoring growth, even if modest, in the fourth quarter. I will now turn the call over to <UNK> <UNK>, our Chief Financial Officer, for a few additional comments. Thanks, <UNK>. Good morning, everyone. EPS for the quarter was $0.59 per share. That was flat versus last quarter, but a slight beat to Street expectations. But as importantly, EPS was up some 13% from the same quarter a year ago, reflecting the improvements <UNK> just mentioned. Net income for the Company was almost dollar for dollar in line with second quarter at $46.7 million. It's just how we got there this quarter, as <UNK> noted, that's a little different. Total loans for the Company at quarter-end were $16.1 billion. That was up about $35 million from June 30, but up $1.3 billion, or 9%, versus a year ago. Our energy loans were down about $81 million linked-quarter and totaled $1.4 billion at quarter-end, or 8.7% of total loans. Excluding the energy portfolio, loans would have increased 3% linked-quarter annualized. The growth this quarter was modest and consistent with what you hear from others. Our C&I portfolio, which includes energy loans, was virtually unchanged on a reported basis and growth was limited in our operating regions, but we did enjoy success in several specialty areas as noted earlier. This modest growth did impact our net interest income and margin in the third quarter, along with impacts from an increased level of premium amortization on the bond portfolio and interest reversals on nonaccrual loans. But even with some slight narrowing this quarter, if you look at slide 17 in our investor deck, you see our core NIM, loan yield, and cost of funds all have ranged only a few basis points over the last five quarters. Stability in our core NIM has been an important focus point over the last six or seven quarters, and certainly we have achieved success in that regard. The Company continues to remain focused on controlling expenses and so expenses were down almost $2 million linked-quarter. Personnel expense, which is 56% of total expense, was down just over $1 million. There were a couple of unusual items in other expense this quarter which are not expected to repeat in future quarters. Over $5 million of ORE gains related to one property were more than offset by $2.5 million in bank property losses from the August flooding in south Louisiana and by a $4 million charge related to an early contract termination. The Company's tax rate for the quarter came in at 20%. This reflects a lower level of earnings for the year as a result of the first quarter's elevated provision. We expect a similar rate in the fourth quarter, which should return to normalized levels in 2017. Our TCE ratio of 7.93% was up 12 basis points, which is almost back in line with our internal target of 8%. However, before we look at whether we will exceed that level next quarter and are asked about excess capital, I would like to remind everyone about the annual pension valuation review coming up in the fourth quarter. And so we expect TCE at year-end to come in a little under the current level. And, finally, while this quarter is about stability, I would like to review two slides in our deck that shows just where we have been and really how far we have come. So slides 28 and 29 show the challenges from the early years post merger and the progress made to get where we are today. Like <UNK> said earlier, stable is good in today's environment, but it's not where we want to be. I will now turn the call back over to <UNK>. Thanks, <UNK>. Well done. I'm glad you wrapped by pointing out those two slides. As you said, both are graphical evidence of the progress we have made and our commitment to the future. I opened with the comment on track to beat our core pre-tax pre-provision goal and I'm very confident we will get there. We are up almost $16 million, or 22%, from the same quarter in 2015. To meet the goal, we need $75 million, so if we are flat in the fourth quarter from third quarter, we beat the goal by about $10 million. But that's not the plan; not what we would like to see. Our plan is to restart growth and build upon successes of the last several quarters. So with that, Charlotte, let's open the call to questions. No, that's a net number, Brad, and thanks for the question. We expect we will have some pay downs, not really sure what they will be. October has not been very challenging so far. In fact, the October numbers, net, are up I guess yesterday around $60 million, so that would put us on track for ---+ just extrapolating ---+ maybe 2.25, 2.5. But you know, energy is really lumpy, and so it's somewhat unpredictable; but still our assessment is that we should be somewhere in $200 million to $300 million net. Brad, this is <UNK>. That will put us in about the 3.5% to just over 4% range year over year, end of period. And of course, that's down a little bit from the previous 5% to 7%. But look, as <UNK> just noted, we have already gotten off to a pretty good start in the fourth quarter, so at this point we feel pretty good about those numbers. Since <UNK> shared that, just some additional editorials about the third quarter. We were disappointed with the net number for the third quarter. We did anticipate energy paydowns to be somewhere in the range they were at, and it wasn't a lack of production. Consumer production was up around 9% over second quarter. Wholesale was up 17% over the second quarter, and the pipeline wrapped up at about 20% higher than the previous quarter. All good numbers. And so when you sort of run through the math, it's like, what will happen ---+ and the answers are pretty straightforward. Beyond just the normal amortization, we had an unusual number of clients that were acquired during the quarter and took the numbers down a little bit. Then we had energy, of course; and then we had line utilization that was down around ---+ I think the number was 1.3%. We usually have a little bit of a decline in the third quarter in line utilization, but that number ---+ just comparatively, last year that number was about 0.3% down. This year, same quarter, 1.3%. That doesn't look like a really big number, just only an additional 1%, but on that big variable portfolio we have, it can have a pretty big impact. So that left us, as <UNK> said, a little short of the 5% goal projected for the year, really all entirely based in the failure to get the $250 million or $300 million we expected in the third quarter. But it wasn't production, it wasn't pipeline; it was just primarily line utilization and energy. I think the other important thing related to the quarter is ---+ and certainly, <UNK>, you called this out in the prepared remarks ---+ but the benefit and the results that we got from some of our specialty lending areas. So these are investments that the Company made last year in those areas that are really beginning to again pay off and show some tangible results. So that's something that we are proud of and look to grow more as we go down the road. As we move into 2017 ---+ and we are not at the point where we are ready to give any kind of tangible guidance for that year yet; that will come next quarter. But, yes, I think as we look at 2017 and we look at our goals that are beginning to come together and are in place, revenue improvement and continuing to build upon the revenue momentum that we have enjoyed so far this year are really kind of the main pathway to us hitting our goals. Close attendant to that is continuing to control expenses. And when we talk about controlling expenses, it's not just cut, cut, cut; it's making enough room through strategic reductions in expenses to give us the capital to reinvest back in the Company. And so again, if you think about 2015, that's exactly what we did; and those investments, we believe ---+ and certainly there's tangible evidence of that ---+ are really beginning to pay off. We've talked about the improvements on the fee income side. Mortgage lending is a sterling example. And then on the operating leverage side, certainly the specialty lending areas are included in that equation as well. <UNK>, a cousin to the expense question is how much relief will we get in conventional expenses from improving our digital delivery. Online account opening for deposits was rolled out a couple of months ago with very promising early results. And that was a soft delivery, without really advertising it or anything other than just making it available, and the returns were good. We're not ready to give any hard numbers on that, but probably will as we get into the fourth or first quarter. And those are extremely inexpensive to load or to get benefit from versus conventionally branch open accounts. The replacement of online banking, which is scheduled for the middle of next year, will be a significant upgrade to what we deliver today. And that will offload some of the maintenance costs for just normal deposit account maintenance from the back-office and from branches onto the web tool. We haven't really sized all that positive impact. We have some internal estimates, but not that we would want to put out there quite yet. But I don't think we will ever be in a position that we will stop looking for creative ways to reduce expenses and, therefore, improve operating leverage. That may have been more than you asked for, Brad, but that was kind of what's been on our mind. That's exactly what we mean, <UNK>. This year it's going to be about 20% or so. Next year we expect it to return to what we kind of call normalized levels, and for us that's 25% to 27% or so. Yes, it's been creeping up over the past couple of quarters, and probably the main driver for us is going to be looking at something like the 10-year Treasury. That rate is up a little bit compared to where it has been, so assuming that continues for the rest of the quarter, I would expect the premium amortization to not grow anywhere near as much as it has grown in the third quarter over the second. This is <UNK>. <UNK> can address the CRE points, and I will add some additional Texas color. I guess just to ---+ when we talk about Texas, or specifically Houston, typically it's really around what the risks are relating to energy slowdown, specifically in real estate. But everything outside of CRE, which really hasn't been (technical difficulty) so far, has been very positive. We have added talent in the Houston market of late and expect some really good continuing returns in non-energy. And the reserve-based lending group, which is housed in Houston, continues to see zero past dues despite the ratings on the book there. The portfolio is really performing quite well, so we are bullish on Houston; continue to be really for overall Texas. Thanks, Charlotte. Thanks for taking care of our call today. Thanks to everyone for your interest and have a great day.

2016_HWC

2017

WRLD

WRLD #Thank you. Good morning, everyone, and welcome to our fourth quarter, fiscal year 2017 earnings call. As well as our earnings release, we've issued a script that provide more details on our results and activities, and I will assume that everyone on the call today has read this script. This script is filed with the SEC as an attachment to our 8-K. To summarize briefly on the quarter, we're pleased with our results in both our Mexico and U.S. businesses, and we're now ready to take any questions that you may have. Yes, in the past, we've opened sometimes 40 or 50 branches in a year. And we believe that, that is too many, because it is a long process to find the right folks to run and manage those branches and to manage that level of branch growth. So I would say that in fiscal year 2018, we'll be tempered in how we approach it and select the best locations. The good news from our perspective is that we believe we'll have more attractive locations in fiscal year 2018 than the number of branches we plan to open. So there is some runway to continue opening branches. No, I don't think so, right. So ---+ I guess, 1 impact ---+ so we try to see what's ---+ how the loans or originations are performing over the first 3 and 6 months, right. And over the last year, those ---+ our originations have performed as well or better than the recent history, right. So we don't think there is ---+ affect this change dramatically in that loan product. Does that answer your question. We just have that authorization. So the 61-day and up, delinquency rate was 7.8% versus 7.1%, so increasing. Should we not then expect perhaps a continued elevated charge-off level for the time being. Yes, most of that elevation is in the 90-day ---+ 90 days past due, which again as you know, are fully reserved. So yes, we may have ---+ continue to have some elevated charge-offs. But the income ---+ [certainly the impact], that's already been provided for through the income statement. More importantly, the funding delinquency, both in the U.S. and Mexico, has improved a lot since last year. So for example, in the U.S. on recency basis, the 0 to 30 days past due dropped 19.4% to 15.9%. A 30-day to 60-day delinquency drop from 3.3% to 2.8%. And a 60-day drop from 1.9% to 1.8%, right. So while charge-offs may remain elevated, we think going forward, it should moderate a little bit. Okay. Got it. And with the cessation of the in-person collection visits almost 1.5 year ago, what collection methods are you seeing now to be most effective as we move forward. Well there's a couple of statements. One is, of course, we have a phone calling policy, we no longer visit the place of home or work, but we have a phone policy that we adhere to and we use that for all late customers. But we also have ramped up our work on recoveries and how we manage charge-off accounts. So we have an internal recoveries unit that has grown enormously from when we started it this fiscal year, in terms of personnel answering calls, and how we think about settlements and so on for charged-off accounts. I see. Okay. Another question, maybe a little bit of a housekeeping. But it looks like you restated last year's fourth quarter insurance and other income. You originally reported, I think, $20 million and now it's $22.7 million. Right, it wasn't a restatement. We changed that before we issued the 10-K. So if you look at the quarterly financials at the back of the 10-K, you'll see the updated number. The insurance income did increase in between the earnings release and the 10-K last year. Okay. Got it. And the tax refund anticipation loans, interest-free and the fee-free, could you talk about how that's helped your tax prep business during the quarter. Sure. We believe that our change in products and strategy for our tax prep business had a very positive effect, both last year when we made some improvements and then most recently in this most recent tax season. And when we look at the performance of the tax loans, we find they are performing very well in terms of paybacks and so on, as well as they did last year. So very pleased with the results of our tax prep business and the products we offer. Okay. And then the increase in tax prep revenue of $2.7 million, I assume that's all from the price increase, since those loans don't have fees or interests. We don't ---+ we're not making money off the loan. We receive a fee for paying the tax returns, right. So the tax advance loan is really just an incentive for our customers to use us to prepare their taxes. And the result in increase in revenue, it's both from an average price increase in our tax-preparation services and from the significant increase in tax preparations that we prepared in this past tax season, as per the earnings script. Right. Okay. Yes, I see that like 13% increase in volume and 7% increase in price. That's pretty good. So it's what we just discussed. So the primary reason for other income being elevated is because of the additional tax returns we prepared this year. And the higher rate we charged on those tax preparations. It is as well. So ---+ and this detail is in the script as well. So the United Auto Club looks flat this quarter ---+ I'm sorry, actually it was up this quarter, flat for the year. But that's important because it has been decreasing quite a bit over the last several quarters. So we have seen a lot more acquisition opportunities arise just over the last several months. I don't want to discuss too much about how we value those acquisitions because of that. So we do expect that there will be some additional opportunities going forward. So I think, we're on a process of continuous improvement, <UNK>. I don't think there's much that we haven't looked at. It's not just about innovation and bringing in new technology, it's how we run and manage every single department to make it world-class; having a data analytics department, having that being world class; improving marketing, so that we are having a stronger digital marketing presence; improving IT, so that we are stronger in our loan origination, loan management systems; and even in a myriad of small functions that we use across the company and how we manage help desk support and everything. So there's going to be continual improvement, and there is a lot of room for us to improve and strengthen and grow the company on every level. So I think, we've done a lot over the last 3 years. We're pretty transparent about the changes that we've made. And there's a lot more that we're working on right now. Sure. So the ---+ will they allow us to buy back ---+ we will be able to get back to the 2 to 1 debt to equity that we were targeting in the past. So if you look at it based on kind of the pool that we build for 2017 net income, will allow us to buy back $36 million in the first quarter. If you assume we have the same earnings as we did last year, that allows about ---+ around $57 million for ---+ during fiscal 2018, and around $72 million through Q1 of fiscal '19. So it won't be at the same levels as ---+ that we were doing several years ago, but still allows for quite a bit of repurchases. So a lot of the improvement is partially to do with just the comp of last year, right. So Q4 of last year was ---+ the first quarter after we'd ceased field calls, so after those charge-offs were elevated as our management has lost contact with a lot of the customers once we weren't able to do field calls anymore. So that explains some of it. Obviously, at the same time, we are lending to a lot more new borrowers today than we have in recent history, right. And we know that the loss rates on new customers are the highest of any of our customers. So that will also have a negative impact on net charge-offs. And the same with live checks. So they seem to have slightly higher charge-off rates than the say the [future] form of borrower than say just a normal form of borrower. So all those things together could lead to just elevated charge-offs in the future, but I think it's necessary. Can I just add that ---+ yes, as <UNK> has said, our live checks program is right now to former borrowers and they're still less risky than new borrowers. But also that at every type of customer, former borrowers, new customers, and of course, our present borrowers, our credit scores are improving for those customers. So to the extent you believe there is a link between credit scores and charge-offs, which we do, we can expect that this will have a positive effect on charge-offs from the other side of the equation. So what I would say is this, we've talked in several past earnings calls about how we've tightened our lending at lower credit scores, for simplicity sake. Of course we have more details behind this, but at lower credit scores, we've tightened our lending, and we've generally seen, as well, through our strength and underwriting, that the credit scores of our new format and current customers are going up. And we've talked about this for a couple of quarters. So going forward to the extent there aren't other factors that impact the economy and so on and so forth, you would expect that to have a positive impact on charge-offs. Certainly more positive than if you had not tightened your credit score. You know what I mean. Yes, so that will all come through our migration analysis, right. So as those loans move through delinquency, if they move through at a faster rate, our model will compensate for that. Furthermore, as we do more and more live check campaigns, I think we've done 5 now, we get, of course, more knowledgeable about the performance of those customers. And so we can restrict or change the criteria in order to improve the performance each time learning from each test. Yes, so generally, just the inbound ---+ the volume of inbound calls of people looking to sell their business has increased. I can only speculate why that is. I think it's probably just a more favorable broker environment and people feel that they can get a better valuation than they could a year or 2 ago. Other than that, I would just be speculating. Yes, so [I believe] ---+ we hope we can use it, right. So we hope through growing the portfolio and share repurchases that ---+ and maintain a reasonable level of liquidity at the same time, we felt it was appropriate level. Also from our strategy and the changes that we've made and the good quarters that we've experienced recently, we believe that we're in a stronger position to not feel in any way constrained by a credit facility when we're moving to growth season this year. So we aren't diverging our effort and focus on growing in the best way we can to worrying about a credit constraint. Just to say thank you very much to everybody who's been on this call. We appreciate your support.

2017_WRLD

2015

SHW

SHW #Yes, I think what we've commented on is that the second quarter was going to be the highest SG&A increase due to advertising for Lowe's. What we have said is, it was really two buckets of SG&A, incremental SG&A at Lowe's. It was the organization that we put in place, and that was going to be flat lined throughout the four quarters. Advertising is going to be a little stronger in the second quarter. And you're going to start seeing it at a more normal run rate in the third and fourth quarter. Yes, that margin in that group is impacted by gallon movement. That's where we manufacture all the paints for the company, so those gallons have been positive and you can see that, in that segment's reporting numbers. We have them slightly higher than in the second quarter. That could happen. I wouldn't call it so much a surprise. I think your analysis is correct, that we would expect that you're going to get these finished. We're going to move on to these projects. And I think our expectation that will happen is embedded in the sales guidance we're giving. No. I think that the second half of the year will be much smaller, and when you look at the cash generation we're having, again, we're going to be slightly higher than 1 to 1. That would tell you we're going to spend less on stock in the second half of the year. Yes, Rosemary. This is <UNK>. We do believe that in fact the weather patterns we've seen in the first half of the year is probably going to draw the housing recovery, the path back to normal, out even a little more than we anticipated. So certainly three more years to this recovery to reach a peak is certainly foreseeable. On the repaint side, not just the homes that are being put in place, the existing homes that are trading hands, but also the overall appreciation in home values that we've seen in the markets should drive remodeling and repaint activity in the out years. So we think that this is, that the story is still intact. It's just a little bit postponed as a result of the weather. No, that is not completely accurate, <UNK>. For sure, we saw deceleration in that space, but residential, also particularly in the new area, is below our expectation. We're not parsing those numbers like that, but directionally, you're in the ballpark. Correct. I think that the new guidance number, we've said all along, we felt we were going to have efficiencies in our SG&A, but that's when we were at the mid to high single digits. I think that's going to depress a little bit. We're very careful not to break out SG&A, even by a customer. I think that for us, we're probably not going to break out the HGTV SG&A versus the non-SG&A. I think we're just trying to give you, that you can see in the second quarter, that pop, but we're not going to give you a finite number. Yes. It starts with Brazil, which continues to be a tough story from an economic standpoint. We're seeing the Petrobras scandal with really long legs throughout the entire country. That's actually impacting some of our Asian operations as well, because of our position with Petrobras and their production opportunities over there, for things that they build. Just a little bit of a softness, <UNK>, in those end markets as well, accelerated by poor economic conditions and bad currency. Well, I would tell you this. It's not by design and it's a discussion that we have with our teams on a regular basis. We, typically, towards the end of the year, as our developers are pushing to get their projects done, have a run at the end of the year, and then we're reloading going in throughout the year. And we're trying to spread those out a little more evenly throughout the year, but it's not by design. We're pushing these through, and getting them in as quickly as we can, and we've got a lot of confidence in the models. We're continuing to invest in those stores. We always look at the way we run the Company as, we think these gross margins over time are going to continue to grow. We think our operating margins are going to continue to grow. So you're going to have years where raw materials are going to hit you or come back, or do what they are doing this year. We feel very good about our model, and the way we're running the Company, that eventually we're going to have our higher gross margin. I would prefer not to comment on the 2016 gross margin yet. Yes, <UNK>. Actually the 1.3 million to 1.4 million is what we consider to be a normalized, sustainable rate of build. We think that, given the rate of household formation today, the fact that inventories of homes for sale, both new and existing, are very low, and that apartment occupancy rates are very high, that this cycle should peak above the 1.3 million to 1.4 million level. And then that 1.3 million to 1.4 million normalized should trend upward as population grows. So ---+ The last cycle peaked at 2.3 million. We hope this cycle doesn't get to that level. Thanks again, Jessie. As always, this is <UNK>, I will be available for the balance of today, tomorrow and throughout next week to answer your follow-up questions. We would like to thank you for joining us today, and thank you for your continued interest in Sherwin-Williams.

2015_SHW

2016

PLUS

PLUS #Thank you, Andrew, and thank you everyone for joining us today. With me are <UNK> <UNK>, Chairman, President and CEO of ePlus; <UNK> <UNK>, Chief Operating Officer and President of ePlus Technology; <UNK> <UNK>, Chief Financial Officer; and Erica Stoecker, General Counsel. I want to take a moment to remind you that the statements we make this afternoon that are not historical facts may be deemed to be forward-looking statements and are based on management's current plans, estimates and projections. Actual and anticipated future results may vary materially due to certain risks and uncertainties detailed on the earnings release we issued this afternoon and our periodic filings with the Securities and Exchange Commission including our Form 10-K for the year ended March 31, 2015 and our 10-Q for the quarter ended December 31, 2015 when filed. The Company undertakes no responsibility to update any of these forward-looking statements in light of new information or future events. In addition, during the call we make reference to non-GAAP financial measures and we have posted a GAAP financial reconciliation on the Shareholder Information section of our website at www.ePlus.com. I would now like to turn the call over to <UNK> <UNK>. <UNK>. Thank you, <UNK>, and thank you everyone for joining our fiscal Q3 earnings call this afternoon. We continued to execute well in the third quarter across important key metrics, consistent with our long-term growth strategy and we have continued to make the appropriate investments during the year to ensure we are meeting our customers' demands for security, services and advanced technology solutions. In the quarter we achieved mid single-digit growth and non-GAAP gross sales of product and services of 4.4%, $394 million and slightly improved gross margins. We believe our consistent focus on delivering comprehensive lifecycle solutions continues to have relevance for our customers and differentiates ePlus from the competition. In addition, we recorded a record percentage of non-GAAP gross sales of products and services in the security stack, up 300 basis points to 16.2% as compared to 13.2% for the nine-month period. Security remains top of mind for our customers and touches many of the solutions we sell. During the quarter, net sales declined 2.5% from last year's comparative quarter. Net sales declined relative to non-GAAP gross sales for two reasons. First, we experienced an increase in adjustments of gross to net as the relative percentage of third-party software insurance, maintenance and services we sold increased as a percentage of the whole. As we discussed in prior conference calls, we view this as a positive development as it shows we are capturing ongoing revenues from our customers. Second, we experienced a spike in shipments in transit of about $7 million more than normal. This means there was $7 million of sales we couldn't recognize in the quarter. These are related to late in the quarter customer orders which were not delivered to our customers by the end of the quarter. The $7 million figure is the amount in excess of our last four quarters average. We have continued to make investments to ensure that ePlus meets marketplace opportunities and is well-positioned for long-term success. Notably, our Technology segment had 1,006 employees as of December 31, 2015, an increase of 79 or 8.5% from 927 as of December 31, 2014. We continue to invest in people to gain territory, coverage, new perspectives and new skill sets to provide new technologies and solutions to our current and new customers. As a result of our investments in people, acquisition expenses, lower gross profit dollars due to some of the pricing pressures on a few large customer orders and some other costs which <UNK> will discuss later on the call, our diluted EPS for the quarter declined to $1.40 versus non-GAAP diluted EPS of $1.64 a year ago. While we aren't satisfied with the bottom-line results for the quarter, we don't see any long-term adverse trends in the industry or our model. Customer demand remains strong and we remain well-positioned in the relevant emerging technologies. We keep a close line on cost and investments to optimize financial results. We have a long-term strategy that we are successfully executing and we believe our year-to-date metrics which <UNK> will discuss in more detail, are a better measurement of our success. Late in the quarter, we acquired IGX, a Northeast and UK-based security solutions provider with a great set of customers and employees. It is our first international presence which creates exciting new opportunities for ePlus. Like all of our acquisitions, the IGX US operations were integrated into our platform to gain maximum synergies. One of the key strengths of our management team and operations is our experience and expertise in identifying, acquiring and integrating acquisitions. We are excited about IGX, our growth initiatives and the potential for future acquisitions. We remain confident in our model and ability to capture market share. We will continue to make the right investments for the long-term benefit of all our shareholders. Now I will turn the call over to <UNK> <UNK> for his prepared remarks. <UNK>. Thank you, <UNK>. As <UNK> said, ePlus continues to execute against its long-term strategy of providing the solutions and services our customers need to succeed in today's market. Our base of more than 3,000 customers is facing an ever more complex set of IT challenges and opportunities that require upfront consultative services to help develop and design solutions that provide the right business outcomes. To help address this concern, we have continued to expand our solutions, go-to-market and emerging technologies teams to provide solutions, services and support needed to optimize their IT environments. Part of our strategy has been to expand our footprint and overall technical capabilities through organic growth and acquisitions. During the past year, we had an 8.5% increase in overall headcount with the majority of these being customer facing sales and engineering headcount. Our client facing teams now comprise more than 750 people which has helped us to continue to maintain growth rates above those of the overall IT market in the highest growth areas of technology, namely security, mobility, cloud and hyper converged infrastructure. As we have discussed previously, there is a lag between revenue production and expense as it can take at least months for new salespeople to become earnings positive and several months for engineers to become fully engaged and productive. Therefore we have to balance new employee investments to meet demand and grow our solution set which is our long-term strategy against the short-term costs. For example, last month we just added hybrid IT monitoring as an additional service for our customers. This new capability provides automated detection and tracking across multiple technology silos allowing our clients to innovate without concern for cloud sprawl or a loss of visibility. This is a natural fit for our suite of cloud-based managed services and will provide additional annuity style revenue for ePlus. Overall we continue to expand our customer count and feel that we are focused on the right customers where we can grow wallet share. In the quarter, we have closed several large competitive deals where we see long-term growth opportunity but where initial orders had somewhat lower gross margin. We will continue to do this when we believe the potential returns warrant the short-term investment. Our financial results year to date show the success of our growth strategy. We have grown our non-GAAP gross revenue on products and services by 5.7% while gross margins on products and services grew by 50 basis points to 19.7%. As <UNK> mentioned, we faced several factors in the third quarter in terms of both revenue timing and expenses which impacted our earnings for this quarter. This has not impacted our confidence in the outlook for our business though. Customer demand remains strong and we believe that our solution set including security is among the best in the business. Also during the quarter, we continue to execute on our plan to build out our footprint and enhance our security capabilities with our acquisition of IGX. IGX was a successful reseller of security products and services with operations in Metro New York, New England and the UK. This acquisition provides the opportunity for the IGX sales team to upsell and cross-sell to their customers the solutions and services that ePlus currently sells such as managed services, financing and our key vendors in compute, storage and networking such as Cisco, NetApp, Pure, EMC and many others. This acquisition also expands our presence in the UK and allows us to better support some of our larger global enterprise customers. But I must note that it will take some time and investment to bring ePlus solutions and vendor credentials to overseas markets. In conclusion, we remain positive on the outlook for our business. The demand for complex multivendor IT solutions continues to grow. We will continue to build and improve our infrastructure and expertise to meet this demand and we believe that we will continue to post growth rates ahead of the overall IT market. I will now turn the call over to <UNK> for a closer look at our financials. Thank you, <UNK>, and good afternoon, everyone. As you heard from <UNK> and <UNK>, third-quarter sales were affected by several factors. Net sales for the quarter declined 2.5% to $298.6 million. Conversely, non-GAAP gross sales reached $393.9 million, 4.4% ahead of the similar period last year. At the end of the quarter, we had shipments in transit to our customers that were higher than the average of the last four quarters. While we always have had shipments in transit at the end of every quarter, the variation from the norm was approximately $7 million more than the average. This means we had approximately $7 million of net sales which were not recorded in the quarter and are expected to be recorded in our fourth quarter. Considering this factor, net sales this quarter would have been about flat year on year. Turning back to non-GAAP gross sales of product and services which grew 4.4% in the quarter, we had a greater proportion of sales of third-party maintenance, software assurance and services this quarter at 27% as compared to last year at 22% of non-GAAP gross sales of product and services. These transactions we record 100% of the gross profit on the transaction as net sales. Consolidated gross margin and gross margin of sales of product and services were both up from a year earlier at 21.5% and 19.6% respectively while consolidated gross profit declined 2.1% to $64.1 million, tracking the net sales results. Adjusted EBITDA and operating income both increased from the third quarter of fiscal 2015 to $19 million and $17.6 million respectively, primarily as a result of headcount additions and acquisition-related expenses which I will discuss in more detail when I review the segment results in a moment. Diluted EPS is $1.40 per diluted share, below the $1.64 in non-GAAP EPS reported in last year's third quarter. You may recall that last year's quarter included a one-time gain equal to $0.49 per share which is excluded from non-GAAP EPS I just mentioned. Now moving on to our results by segment. Net sales in our Technology segment fell by 2.8% to $289.4 million. Non-GAAP gross sales of product and services increased 4.4% to $393.9 million. Gross margin on product and services was up 20 basis points to 19.6% but gross profit decreased 2.9% to $57.9 million on lower net sales by 2.8%. Several large product sales to enterprise customers in the quarter that <UNK> spoke about earlier were heavily competed but as he mentioned, strategically aligned with our objectives of driving broader and deeper relationships over time. The short-term impact however pressured gross margin and therefore gross profit in the third quarter. Operating expenses in the Technology segment increased 3.8% to $43.2 million. The largest increase was in salaries and benefits line item which increased 4.6% as a result of additional 79 people, 80 of whom are customer facing and 48 of whom came from the IGX acquisition. Additionally we incurred professional fees related to the acquisition of about $300,000. Also included in operating expenses is $680,000 in amortization of acquisition-related intangible assets of which $175,000 related to the IGX acquisition. Amortization of acquisition-related intangibles in our fiscal fourth quarter is expected to be approximately $1 million. Technology segment earnings were $14.7 million compared with $18 million a year earlier. Moving to the Financing segment, net sales in our Financing segment were up 10.2% to $9.3 million as a result of higher post contract earnings. Operating expenses for the segment declined 1.5% from the previous year due to lower debt and lower interest rates. Operating income increased 16.8% to $3 million. Net earnings for the Financing segment decreased to $3 million from $8.7 million last year. In the year ago quarter, net earnings included $6.2 million in other income resulting from a claim and a class-action lawsuit. Looking at our year-to-date consolidated results, net sales were up $3.3 million to $904.8 million. Non-GAAP gross sales of Product and Services were up 5.7% to $1.2 billion and Technology segment net sales were up 3.2% to $876.9 million. Consolidated gross profit for the first nine months of fiscal 2016 increased 5% to $195.1 million, consolidated gross margin was 21.6, up 40 basis points. Gross margin on the sale of Product and Services expanded 50 basis points to 19.7%. Adjusted EBITDA grew 7.4% to $63.1 million and operating income increased 6.7% to $59.4 million from $55.6 million. Our diluted EPS per share for the nine months ended December 31, 2015 was $4.74, up from non-GAAP EPS of $4.38 which excludes other income of $7.6 million resulting from a gain on a retirement of a liability and a gain from a claim in a class-action lawsuit. Turning now to the balance sheet, we ended the third quarter with a cash position of $66.6 million, an increase from the $62.8 million at the end of the second quarter despite the use of funds for the acquisition of IGX of $16.6 million. The cash conversion cycle for our Technology segment was 20 days as compared to 18 days a year ago. Our balance sheet remains healthy with a strong cash position of $4.1 million of recourse debt and stockholders' equity of more than $315 million. This gives us the flexibility to support organic growth and strategic acquisitions in the quarters ahead. I will now turn the call back over to <UNK> for closing remarks. Thanks, <UNK>. In closing, I would like to reiterate that our solid year-to-date results are evidence that our long-term strategy is grounded and working. We expect to continue to benefit from the significant investments we have made by adding sales and engineering headcount and in expanding our leading edge technologies including security, mobility, hybrid converged infrastructure and cloud-based solutions. We are also better positioned than ever to increase wallet share among our existing customers with an expanded geographic footprint now that IGX is on board. Finally, we ended the quarter with approximately $67 million of cash and nominal recourse long-term corporate debt and we will continue to evaluate the best way to increase shareholder value using the solid cash flow of the business. Our returns on capital remain among the best in the industry. Operator, we would like to open the room to questions. Thank you. We actually don't see any softness in the overall market for us and our customers. There are some headwinds with margins in certain cases but we think that the market is pretty good and we are continuing to take market share from our customers. Well, in terms of ---+ hey, <UNK>, it's <UNK>. How are you. So ---+ how's everything. So, in terms of the margins and some of the things that we did, we had a few clients that we made a strategic decision that we were going to take down at lower margins and basically expand the margins over time. So kind of a land and grab if you will and then expand over time. In terms of the verticals, it is still the same top five verticals. We saw a little pressure in the telecom space but Technology was up to offset it. And then if I were looking at the quarter overall from an outlook standpoint, look, if it ---+ I don't think anybody here is satisfied with the quarter but if you look at the trend, the gross sales were up both for the quarter and for the year. If you look at how it affected some of our ---+ I will call it GP, you had the large shipment in transit, the land and grab on some of the deals. And that those are some of the things that affected our GP if you will. But the thing that I would tell you it is not really pricing pressure, <UNK>; it is more us making a conscientious decision to grab some strategic accounts that have a large IT spend that we think we can land and expand over time. Okay. As it relates to the competition, I don't think we are seeing ---+ we are not an apples-to-apples compare. But if you look at our gross sales for the quarter, they were up 4.4%. For the year to date, they were up 5.7%. I don't think we are seeing any competitive pressures. Touching on something that <UNK> said, if you look at some of the things going on in the storage market, although it is getting competitive with some of the legacy vendors with the emerging technologies, we actually see it as an opportunity for us to grab additional market share and mind share over time but nothing that we would see from the competitors that would show. In terms of the overall margins or services. Oh, growth of the services. Yes. Right now, the growth is up year-over-year versus the 14.8%. So we feel very good about where our services solutions are going as well as our revenue gross margins and GP in that space. No problem. Take care, <UNK>. <UNK>, as it relates to Dell and EMC, we haven't seen any slowdown but obviously what is going to happen there is the Dell EMC teams need to figure out what the product roadmap is once they kind of merge and integrate. They need to figure out their go-to-market strategies. They good news is ---+ and this is from when I used to work on the vendor side and used to run a channel at a large vendor years ago ---+ is you normally go to the partners that have the capability in what you would call the compute storage networking space, so the multivendor space which they play in if you will or compete against. And I think we are pretty well positioned to kind of take some additional market leveraging our relationships with EMC and Dell as well as our expertise in that space. Yes, I would agree, <UNK>. This one is a little bit tougher to kind of give you a real quick easy answer on. But I think if you look at our year-to-date trends and what we have done historically that is probably more in line, it is a steady trend that you can track and I think that is what we would expect and we'd continue to outpace the IT market. We believe we will continue to outpace the IT market. Those would be the bigger pieces. If you look at our gross product and services growth if you will as well, the areas that we are invested in are high growth areas. So when you talk about the cloud, when you talk about security, when you talk about the services, both managed services, professional services, staffing, I think we are very well-positioned to continue to grab market and continue to grow our gross margins and GP over time. Okay. So I will take the IGX in terms of what we believe we are getting out of IGX and how we will continue to leverage it. And then I don't know if <UNK> or <UNK> wants to jump in on the other piece. But here's the easiest thing on the IGX. What it gives to us, it expands our presence in New York and New England, so New York Metro and New England. They've got some great security expertise and resources that we can now leverage across that region and get additional sales from a securities perspective based on their capabilities. But just as importantly, they've got some really nice customer ---+ they've got a nice customer base that we can actually go back in and sell all the things that we sell at ePlus such as managed services. We have financing capabilities, dealing with compute storage and networking with Cisco, NetApp, EMC, Pure and all the different players there. So there is a real nice opportunity for us to go back and we really picked up some real talented and good people to add to the ePlus portfolio. Yes. In terms of the margin profile, they had a very similar margin profile to us so I would expect that to continue and file in very nicely with our model. Yes, that is correct. It is <UNK> here. We haven't added 100 people, it was actually about 8.5% which I believe was around 80 people year-over-year and some of those were the IGX team as well. So I think the easy thing to say is we will continue to invest in headcount, we will be opportunistic when we can see if we can bring on some talented folks but you are probably looking at about the 4% to 5% range if I had to put a range on it. You know, here is what I would tell you there. I think you've got to ---+ like I had mentioned earlier, is you've got to look at the year-to-date trends and in that space short term and that is probably where we are about. So we will continue to outpace the IT market. But in terms of IGX if you look at them just from a ---+ if you look at our press release if you wanted to model it, it was about $51 million. So just to kind of give you a feel on the top line. Right. That is what we would expect in the short term, in the short term in the quarters and we would expect that to grow over time as we added our core competencies to that acquisition as we have done with other acquisitions in the past. Sure. No, it was purely a timing aspect within the quarter. There is nothing that I can point to that would tell you that this would or would not occur in the quarter. It was purely a timing issue. Yes. Sure. Take care, <UNK>. We would like to thank you ---+ thank our shareholders for their support and confidence and thank you for your time and interest today. We look forward to speaking with you again next quarter. Thank you.

2016_PLUS

2015

CUB

CUB #Thank you, <UNK>. Please note that certain information discussed on the call today is covered under the Safe Harbor provisions of the Private Securities Litigation Reform Act. I caution listeners that during this call Cubic management will be making forward-looking statements about future events or Cubic's future financial and operating performance. Actual results could differ materially from those stated or implied by these forward-looking statements, due to risks and uncertainties associated with the Company's business. These forward-looking statements should be considered in conjunction with and are qualified by the cautionary statements contained in Cubic's earning press release and SEC filings, including its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. This conference call contains time-sensitive information that is accurate only as of the date of this broadcast, August 6, 2015. Cubic undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call. This conference call will also include a discussion of non-GAAP financial measures as that term is defined in Regulation G. Cubic believes this information is useful to investors because it provides the basis for measuring the Company's available capital resources, the actual and forecasted operating performance of the Company's business, and the Company's cash flow. A reconciliation between the GAAP financial measures that correspond to these non-GAAP financial measures is contained in our earnings press release and our SEC Form 10-K Report for the fiscal year ended September 30, 2014. Any discussion of non-GAAP measures does not intend to detract from the importance of comparable GAAP measures. With that said, let me turn the call over to <UNK> <UNK>, our President and Chief Executive Officer. Thank you, <UNK>. Good afternoon, everyone. Thanks for joining us on the call today. This afternoon, we reported our financial results for the third quarter and nine months ended June 30, 2015. Our third-quarter results were mixed, reflecting slightly lower-than-expected sales resulting from ongoing foreign-exchange headwinds and delays in contract awards. Operating profits this year have been impacted by a number of one-off costs related to improvements we are making to take cost out of the Company, including upgrading our ERP system, as well as the impact of a stronger US dollar and cost issues on two major projects for which we are working to resolve with our customers. Jay will discuss the details later in the call. We expect to close out the fiscal year with a very strong fourth quarter, led by our defense systems business. We continue to have a robust opportunity pipeline across all of our business segments and total backlog of more than $3 billion. In addition, we have strong resources such as balance sheet capacity, talented employees, a long track record of innovation, and state-of-the-art technology that encourage us to be optimistic about our future growth. We are currently in the midst of updating our strategic plan. As part of this process, we are performing a comprehensive portfolio analysis. This evaluation includes looking at transformative actions to greatly accelerate the growth of the Company, particularly in the next [city] and C4ISR domains. In addition, we, like many in the defense space, are carefully evaluating the performance and structure of our defense services business given the poor market conditions. We have refined and rolled out our One Cubic Vision as a hybrid structure consisting of decentralized, agile, customer facing functions to ensure speed, reinforced by centralized shared services and support functions to ensure scale with significantly lower costs. To better serve our customers globally, we are [shoring] up resources to focus on our vision of winning the customer. As mentioned on the previous call, we will leverage One Cubic to provide a scalable, efficient platform as we grow. We are continually improving our shared services model and our new ERP implementation is progressing on schedule. Our business segments share a common mission of providing integrated systems that increase situational awareness and understanding for our customers. In transportation, we [implement] and operate payment information and operational management system which allows transport agencies and their patrons to increase efficiency while traveling through cities across various transportation modes. In defense, we implement and operate training systems and train soldiers, Marines, aviators, sailors and civilians to reduce costs and enhance levels of readiness. We also provide secure communications systems that move critical surveillance data to enhance military operations. Across our transportation and defense systems business, we are pushing both incremental and game-changing innovations. In defense, we are continually innovative, showcased by a recent initiative to combine NeuroBridge technology with our Engagement Skills small arms trainer to measure the mental focus and accuracy of expert marksmen. Our revolutionary game-based learning software for the U.S. Navy on the [littoral] combat ship is being leveraged into new markets. We recently won a contract to export those technologies into the commercial airline market for flight crew training. While this contract is small, it opens up a new market for us. We believe our innovative training technologies are widely applicable to many industries that require cost-effective, immersive, on-the-job training in virtual learning environments. In transportation, we have recently won two more innovation awards for our transportation contactless bank card payment solutions. In partnership with Transport for London, there remains a winner of the Operational and Technical Excellence Award by the UITP, the International Public Transport Association, for introducing open bank card payments, including ApplePay. And in partnership with the Chicago Transit Authority, we are honored to receive the Best New Innovative Partnership Deployment Award by ITS America, the US Intelligence Transportation Society for the [Ventra] open payment system. Now let me discuss our operating businesses. We are actively pursuing and winning opportunities across transportation's three NextCity pillars. The first pillar is the concept of One Account, where the integration of multimodal transport payments. We are working with customers to extend their smartcard and account-based systems to pay for other modes of transportation like parking, taxis, car and bike share. We are also using the One Account platform to expand into the tolling market. The second pillar of NextCity, operations and analytics, is the integration and application of transport data to the agency. Our newly established analytics subsidiary, Urban Insights, recently signed a contract with MasterCard to integrate retail and transit data to provide targeted offerings supporting the customer's retail and transportation preferences. Urban Insights has been working with one of our recently acquired subsidiaries, Intific, to produce revolutionary transit pattern visualization software to help cities optimize transport capacity. Within this pillar, we also have the ITMS business that we acquired from Serco. ITMS was awarded the Tunnel Outstation Maintenance Services contract by Transport for London. The contract, delivering maintenance for critical intelligent transportation systems infrastructure, within TfL's 12 road tunnels and associated road corridors, to extend Cubic's successful history in delivering this important service for the next 10 years. The third pillar of NextCity, customer information and experience, relates to the application of predictive and personalized data to the consumer. Our smart phone application currently undergoing testing in Chicago is a first of its kind method to not only pay for transport, but also to continually improve the customer experience through better information. The application combines journey planning, real-time information, ticketing and payments, that can benefit transport authorities across the customer base. Transportation is making good progress in Vancouver. The West Coast Express had a successful launch last month. And we are in commercial discussions regarding cost recovery for delays that have impacted us. We have been shortlisted for the upgrade of a Smart car ticketing system in Melbourne, an opportunity that would increase our already strong position as the market leader in the Australian fare collection market. We also continue to pursue geographic expansion opportunities in the Middle East and Asia. Now, turning to our defense businesses. In CGD services, we expect this to be the first year of incremental growth in three years. A number of protests that have delayed growth have now been resolved. Margins are lower due to the [LPT] environment. One major highlight is CGD's support of the bilateral Talisman Sabre exercise that was held in July in Australia for more than 30,000 US and Australian troops. Cubic supported this major exercise with our personnel in Australia, the United States, and at the Korean Battle Simulation Center. We are very proud of our multidimensional role in ensuring the exercise was a success, and we have received very positive feedback from our customer. Regarding CGD systems, our strategy to build a strong C4ISR business is on track. Our recent acquisition, DTECH LABs, is performing well and is having a positive impact on our EBITDA for the year. We expect this trend to continue. We have expanded our training footprint in Australia with the award of a new $18 million contract to provide next-generation joint live, virtual and constructive simulation support with the Australian Defense Simulation and Training Center. We continue to expand our support for the Joint Strike Fighter and we were recently awarded an $11.5 million initial funding for our contracted supply of the P5 training system. We also have dedicated additional resources to support our groundbreaking Littoral Combat Ship virtual training program and are pleased with the progress there. Now I will turn the call over to Jay. Thanks, Brad. Consolidated sales for the quarter increased 2% to $347.8 million from last year. Year-to-date sales were just over $1 billion, up slightly over last year. Recent acquisitions contributed $25.5 million in the quarter and $66.3 million year to date compared to $14.7 million and $32.8 million in the comparable periods last year. The strong dollar negatively impacted our sales in the quarter by $14.2 million and $32.8 million year to date. Adjusted EBITDA was $18.9 million in the quarter, down from $26.7 million last year or 29%. Year-to-date adjusted EBITDA was $69.4 million compared to $76 million last year, due to a number of unusual charges that I will discuss later. Operating income was $10.3 million in the third quarter and $40.7 million year to date compared to $19.2 million and $53.2 million in the comparable periods last year. Operating income this year has been impacted by a number of charges including expenses related to a new ERP system implementation totaling $7.8 million, costs related to an audit committee investigation totaling $3 million, costs related to a restructuring in the second quarter totaling $5.4 million, and higher stock-based compensation totaling $1.7 million, related to the retirement of our former CEO. Also impacting operating income this year were lower operating income from our two defense businesses totaling $15.1 million; operating losses from recent acquisitions inclusive of transaction costs, retention and earnout payments totaling $7.6 million; and the impact of unfavorable exchange rates totaling $4.6 million. Partially offsetting these declines in operating income was an increase of $15.6 million in operating income at our transportation business. For the quarter, we had earnings per share of $0.33 and year-to-date earnings per share are $0.11. Earnings per share this year has been significantly lower than last year due to the lower operating income and also due to a non-cash deferred tax valuation allowance taken against our US net deferred tax asset, due to our recent history of US operating losses. In the second quarter, coincident with our decision to proceed with a new ERP application, we recorded a charge for this allowance. Year to date, the impact of this allowance has been ---+ has impacted earnings per share by $1.12. Now, turning to our transportation systems segment or CTS, CTS sales totaling $133.3 million decreased 13% in the third quarter compared to last year, and decreased 4% year to date to $411.5 million. The strength of the US dollar contributed to the decrease in sales of $11.3 million in the quarter and $26 million for the nine months. Sales were also impacted by lower sales in Sydney and the UK, and were somewhat offset by higher sales in Chicago and from recent acquisitions. CTS operating income was down 24% for the quarter, to $11.7 million. Third-quarter operating income was impacted by higher R&D expenses, the strength in the US dollar, and lower income from certain UK transfer contracts. For the nine months, operating income was $50.8 million, a 44% increase over the last year. Contributing to the increase were improved gross margins on the Chicago contract, a decrease in losses on the Vancouver contract, and proceeds from a claim settlement which were partially offset by lower margins on certain UK-related contracts and adverse foreign currency translations. Now turning to Cubic Global Defense Services, or defense services, defense services sales increased 22% in the quarter to $111.9 million and increased 2% for the nine-month period at $298.4 million. The sales increase was primarily driven by higher training-related activity on new contract wins and higher activity at the Joint Readiness Training Center. Defense services operating income increased 72% in the third quarter to $3.1 million. Year-to-date operating income was $4.2 million, down 30% from last year. A decrease in amortization expense on recent acquisitions positively impacted operating income in the quarter. Year to date, operating income has been negatively impacted by lower margins due to the LPTA pricing environment, higher compensation costs related to the recruitment of a new executive management team, and the restructuring charge taken in the second quarter. We expect LPTA pricing pressures to limit the profitability in the segment. We have won a series of new services related work. However, most new wins have been protested, which has delayed the start-up work. Turning to the Cubic Global Defense Systems or Defense Systems business, Defense Systems sales increased 7% to $102.6 million for the quarter, and increased 5% to $295.6 million year-to-date. Sales were higher for air combat systems and from the recent Intific and DTECH acquisitions. Offsetting these increases were lower sales on the ground combat training systems and lower ---+ and also on simulation system and adverse currency impacts. Defense Systems operating income decreased 3% in the third quarter to $3.2 million compared to last year and was at $2.8 million for the nine months, down 83% from last year. Third-quarter operating income was negatively impacted by a $2 million cost increase on the LCS contract. Impacting operating income year to date were costs related to the restructuring totaling $4 million, adverse currency impacts totaling $1.2 million, an increase in the estimated cost complete on the LCS contract totaling $7.1 million and operating losses on the Intific and DTECH acquisitions totaling $5.9 million inclusive of transactions, retention, and earn-out costs. DTECH will absorb approximately $9 million of intangible amortization expense this year and a one-time expense related to acquired backlog. We expect this acquisition will be accretive, starting in the fourth quarter. Intific has won a number of new programs and has also provided significant collaboration to other Cubic businesses across both defense and transportation, and has increased the opportunity pipeline for the Corporation. The largest such opportunity is the KC-46 air tanker training bid. Going forward, we expect improve profitability on these recent acquisitions as retention earn-out and transaction-related costs are not obscuring operating performance. We are engaged in negotiations to recover the cost overrun on the LCS contract. Noted earlier, any recovery will have a positive impact on operating profits once resolved. We are expecting defense systems to have a very strong fourth quarter due to a number of shipments on ground training and communication-related contracts. The Company's total backlog was $3 billion at June 30. Currently related headwinds decreased backlog by $71.3 million since our year end. We expect to finish the year with a strong inflow of orders in our fourth quarter. Finally, turning to the balance sheet, cash flow and capital allocation, we have generated $46.5 million of operating cash flow year to date. CTS and Defense Services generated cash, while Defense Systems use cash primarily for a build of inventories which we expect will turn to sales in Q4. As of June 30, we had $284.1 million of cash, restricted cash and marketable securities. $270.3 million of this amount is held by our foreign subsidiaries. We have not accrued income taxes on repatriating the majority of our foreign earnings to the US, as we consider these earnings permanently reinvested. Year to date, we have invested $90.2 million in acquisitions, primarily DTECH, and invested $15.7 million in CapEx, primarily for our new ERP system. After the quarter end, we issued senior notes aggregating $25 million that will have a final maturity of March 2025 and a fixed interest rate of 3.7%. On our next call, we will update you on the progress of our new ERP system and the expected impact on operating profits in fiscal 2016 for costs not being capitalized. Our acquisition strategy remains focused on opportunities that align with our NextCity strategy in building our C4ISR businesses, both in the US and internationally. As Brad noted, we are reviewing larger transformational opportunities that would leverage our strategy to invest in higher margin niche markets and utilize our strong capital position. With that, I will turn it back to Brad for his closing thoughts. Thank you, Jay. Both of our business segments share a common mission of providing integrated systems that increase situational awareness and understanding for our customers worldwide. We are proud of our rich technological heritage and continue to place a strong emphasis on innovation to generate future growth for the Corporation. We are very optimistic as we expand into new markets and geographies and remain fully committed to increasing shareholder value. Now let's proceed to the Q&A section. Yes, we are reaffirming our guidance. It's primarily in Defense Systems and it's shipment-related. All three businesses will have a good fourth quarter, but it will be particularly strong there. So the KC-46 is obviously a tanker that the US has bought and they need a maintenance trainer, an operation and maintenance trainer, and we bid that and we think we have a very strong offering. We are in the middle of the proposals being evaluated and we expect an answer next calendar year. It's hundreds of millions of dollars, <UNK>. We hope we win. Thank you for joining us this afternoon. As always, we appreciate your continued support and interest in our Company. We are available if you have any further questions. Thanks again.

2015_CUB

2018

GEO

GEO #Thank you, operator. Good morning, everyone, and thank you for joining us for today's discussion of the GEO Group's First Quarter 2018 Earnings Results. With us today are: <UNK> <UNK>, Chairman and Chief Executive Officer; <UNK> <UNK>, Chief Financial Officer; <UNK> <UNK>, President of GEO Care; and <UNK> <UNK>, President of GEO Corrections & Detention. This morning, we will discuss our first quarter results and current business development activities. We will conclude the call with a question-and-answer session. This conference call is also being webcast live on our website at investors. geogroup.com. Today, we will discuss non-GAAP basis information. A reconciliation from non-GAAP basis information to GAAP basis results is included in the press release and supplemental disclosure we issued this morning. Additionally, much of the information we will discuss today, including the answers we give in response to your questions, may include forward-looking statements regarding our beliefs and current expectations with respect to various matters. These forward-looking statements are intended to fall within the safe harbor provisions of the securities laws. Our actual results may differ from those in the forward-looking statements as a result of various factors contained in our Securities and Exchange Commission filings, including the Form 10-K, 10-Q and 8-K reports. With that, please allow me to turn this call over to our Chairman and CEO, <UNK> <UNK>. <UNK>. Thank you, <UNK>, and good morning to everyone. We are pleased with our first quarter results via our diversified business units, which achieved several important operational milestones during the first quarter. In the United States, our GEO Corrections & Detention business unit completed the transfer of 250 inmates from the State of Idaho to our Karnes correctional center in Texas under an emergency contract. At the federal level, the utilization rates at our ICE facility steadily increased during the first quarter. Internationally, our GEO Australia subsidiary completed the successful activation and ramp-up of the Ravenhall Correctional Centre. And in the United Kingdom, our GEO Amey joint venture entered into a 12-year contract with the provision of court escort, custody and secure transportation services in Scotland. Our GEO Care business unit has continued to develop and implement our GEO Continuum of Care programs across not only the United States, but now with the activation of the Ravenhall project in Australia, also internationally. We are pleased that our efforts to reduce recidivism through enhanced rehabilitation programming and post-release services has begun to attract national recognition. As we have updated you in our last quarterly call, we are honored to have received the Innovation in Corrections Award from the American Correctional Association during the first quarter. We are extremely proud of this important recognition, which was based on the implementation of our GEO Continuum of Care at the Graceville Correctional Facility in Florida. Since the launching of this pilot program in 2015, we have now implemented our GEO Continuum of Care programs at 15 correctional facilities in the U.S. and more recently at the Ravenhall Centre in Australia. We are pleased to have issued our first annual report on the GEO Continuum of Care, highlighting our rehabilitation and post-release programmatic achievements for 2017. A copy of the GEO Continuum of Care annual report can be found on the homepage of our website. Our GEO Continuum of Care provides enhanced in-custody offender rehabilitation programming, including cognitive behavioral treatment, integrated with post-release support services. Every day, nearly 3 ---+ 30,000 men and women in our facilities participate in rehabilitation programming, ranging from academic and vocational classes to life skills and treatment programs. Additionally, through our community reentry facilities, more than 15,000 individuals participated in rehabilitation programs. Looking forward, we expect to continue to expand the delivery of our GEO Continuum of Care programs, not only in our correctional facilities, but also in our Community Reentry segment. These efforts underscore our continued belief that, as a company, we are at our best when helping those in our care reenter society as productive and employable citizens. We also believe that the GEO Continuum of Care gives us an important competitive advantage as we continue to pursue quality growth opportunities across our diversified platform of real estate management and programmatic solutions. Looking forward to the balance of 2018, we remain optimistic about our future growth prospects and we are currently pursuing several active procurements, which totaled more than 12,000 beds. Several of these opportunities could result in the reactivation of a number of our idle or underutilized facilities, which total approximately 7,000 beds. Our Board and our management team remain focused on the effective allocation of capital to enhance long-term value for our shareholders. We believe our dividend continues to be supported by stable and predictable operational cash flows and remains well within our guided payout ratio of 75% to 80% of AFFO. As we have expressed to you previously, we also recognize that we can enhance our shareholders' value with the repurchase of our common shares at times when we believe our stock is undervalued. During the first quarter, we repurchased over 1.8 million shares of our common stock for approximately $40 million under our $200 million stock buyback program that has been authorized by our Board. At this time, I'd like to ask our CFO, <UNK> <UNK>, to review our results and guidance. Thank you, <UNK>. Good morning, everyone. Today, we reported first quarter net income attributable to GEO of $0.29 per diluted share and AFFO of $0.57 per diluted share on quarterly revenues of approximately $565 million. Compared to the first quarter of 2017, our first quarter 2018 results reflect several items, including: a year-over-year increase of approximately $3.7 million in net interest expense attributable to higher interest rates as well as higher overall outstanding debt balances; revised pricing terms under the new 10-year contracts for our Big Spring Texas facilities, which as we had previously disclosed began on December 1, 2017; also the issuance of 10.4 million shares of common stock on a post-split basis in March 2017, offset by the repurchase of over 1.8 million shares during the first quarter of 2018; the refinancing of the term loan under our credit facility in March 2017, the acquisition of Community Education Centers which closed in April 2017; the activation of the Ravenhall Australia project in November of 2017; and the activation of an emergency contract with the state of Idaho for 250 out-of-state beds during the first quarter of 2018. Moving to our outlook for the balance of 2018. We have updated our guidance for the full year and have issued guidance for the second quarter. We expect full year net income attributable to GEO to be in a range of $1.27 to $1.35 and adjusted net income to be in a range of $1.30 to $1.38 per diluted share on revenue of approximately $2.3 billion. We expect full year AFFO to be in the range of $2.45 to $2.53 per diluted share. Our full year guidance for 2018 does not presently assume the reactivation of any of our approximately 7,000 idle or underutilized beds, which would represent upside to our forecast. Additionally, our guidance does not assume any additional share buybacks beyond the over 1.8 million shares that were repurchased during the first quarter under the $200 million share repurchase program that has been authorized by our Board. For the second quarter 2018, we expect total revenues to be in a range of $571 million to $576 million. We expect second quarter 2018 net income attributable to GEO to be in a range of $0.30 to $0.32 and adjusted net income to be in a range of $0.31 to $0.33 per diluted share. We expect AFFO for the second quarter 2018 to be between $0.59 and $0.61 per diluted share. Looking at our liquidity, we have approximately $500 million in available capacity under our revolving credit facility, in addition to an accordion feature of $450 million under our credit facility. In terms of our uses of cash, our growth CapEx is expected to be approximately $120 million in 2018, of which approximately $39 million was spent during the first quarter. We also have approximately $10 million in scheduled annual principal payments of debt. Earlier this month, our Board declared a quarterly cash dividend of $0.47 per share or $1.88 per share annualized. Our dividend payment is well within our guided payout ratio of 75% to 80% of AFFO, and we believe it is supported by stable and predictable operational cash flows. As we disclosed earlier this year, our dividend payments for 2017 received more favorable tax treatment for our shareholders than in prior years, and we expect a more favorable treatment for our dividend payments to continue in 2018 and in future years. At this time, I'll turn the call over to Dave <UNK> for a review of GEO Corrections & Detention. Thanks, <UNK>, and good morning, everyone. Our <UNK> Corrections & Detention business unit had an active first quarter of the year. Looking at our state segment, legislative sessions have largely concluded across the 8 state correctional customers, and our facilities have been able to provide high-quality services without being impacted by state budgetary constraints. During the first quarter, we activated a new state partnership with the Idaho Department of Corrections with the transfer of 250 Idaho inmates to our Karnes correctional center under an emergency contract for up to 250 out-of-state beds. Several other states continue to face capacity constraints, and many of our state customers are facing challenges related to older prison facilities, which need to be replaced with new and more cost-efficient facilities. In the states where we currently operate, the average age of state prisons range from approximately 30 to 60 years. The State of Kansas recently awarded a contract for the development of a new 2,400-bed facility to replace the state's oldest prison facility. The State of Wisconsin has also discussed the potential development of new facilities to replace one or more of the state's oldest prisons. And more recently, the State of Vermont has also discussed a privately developed and financed option for a new 1,000-bed correctional facility. Moving to our federal segment. We are continuing to develop a new 1,000-bed ICE processing center in the Houston area under a new 10-year contract we were awarded by ICE last year. The new center is expected to cost approximately $120 million and will be completed at the end of the third quarter of this year with expected annualized revenues of $44 million. With respect to pending federal procurements, the Bureau of Prisons has 2 active solicitations for the housing of criminal alien populations. Under the CAR 18 solicitation, the BOP is rebidding the management contract for the government-owned 2,355-bed Taft, California facility. GEO operated the Taft facility for 10 years until 2007, and we submitted our proposal last June to manage the facility under a new 10-year contract. An award decision is expected from the BOP by the middle of this year. Under the CAR 19 procurement, the BOP expects to award up to 9,500 beds at existing facilities. The proposals were submitted last July, with an award decision expected in late 2018. We continue to be encouraged by a recent DOJ directive regarding increasing population levels in private contract facilities in order to relieve overcrowding in BOP-operated facilities. We have 7,000 idle or underutilized beds, and believe we are well positioned to compete on future BOP opportunities. Turning to IC<UNK> During the first quarter, we experienced a steady increase in the utilization rates across our ICE facilities. We are also awaiting an award decision on a pending procurement for the management of the government-owned, 700-bed Florence, Arizona processing center. ICE also has a pending solicitation for secure transportation services in the San Antonio, Texas area. Proposals were submitted last year, and we are currently awaiting an award decision. Moving to an update on the federal spending bill for fiscal year 2018 that was approved by the United States Congress, this past month, the U.S. House of Representatives and the U.S. Senate approved an omnibus appropriations bill funding the federal government through September 30. The omnibus bill included an increase of approximately $82 million in funding for the U.S. Marshals Service and an increase of approximately $105 million in funding for the BOP. The bill also included an increase in funding for enforcement detention and removal operations under ICE, including funding to support approximately 40,500 detention beds. Looking forward to the federal government's fiscal year 2019, which begins October 1, earlier this year, the President released his budget request. The President's proposed budget for fiscal year 2019 includes a funding request for ICE to support the hiring of 2,000 additional ICE law enforcement officers and 750 border patrol agents as well as a total of 52,000 detention beds. Moving to our international markets. We're pleased to have completed the activation and ramp-up of the Ravenhall Correctional Centre in Australia under a new 25-year contract. The $700 million project, inclusive of our $90 million investment, is expected to generate approximately $75 million in annual revenues based on the 1,000-bed occupancy level. This important contract will provide for quarterly fixed payments for the operation of the facility, plus a service link payment tied to the delivery of rehabilitation, reentry and recidivism reduction outcomes. Growing inmate populations continue to drive the need for additional capacity in the state's jurisdiction throughout Australia. Two of the facilities we currently operate in New South Wales, the Junee and Parklea centers, are undertaking expansion projects totaling 680 and 650 beds, respectively. We expect to enter into a 5-year contract renewal for the continued management of the Junee Centre in the near future. With respect to the Parklea Centre, we were unfortunately unsuccessful during the current competitive rebid process and will be transitioning the management contract in March 2019. Finally, our U.K. joint venture, GEO Amey, recently signed a 12-year contract with the Scottish Prison Service for the provision of court custody and prisoner escort services in Scotland effective January 2019. This important new contract is expected to generate approximately $39 million in annual revenues for our joint venture. At this time, I'll turn the call over to <UNK> for a review of our GEO Care segment. <UNK>. Thank you, Dave, and good morning, everyone. I'd like to give you an update on our 4 GEO Care divisions. Year-over-year, our GEO Reentry division's quarterly results reflect the integration of the facilities and programs acquired from Community Education Centers in April of last year. We are pleased with the integration of our new CEC facilities and remain optimistic about the potential for revenue synergies under our expanded reentry and treatment services platform. We've identified a number of new business opportunities representing significant incremental annual revenue potential. In terms of our used services business, we continue to experience stable utilization rates across our facilities during the first quarter. Our youth segment has remained stable for several years after our team undertook a number of consolidation and marketing initiatives. Moving to our BI electronic monitoring division, the utilization of our ISAP contact with ICE remains stable during the first quarter of the year. At the state and local level, BI continues to pursue a number of new business opportunities. Finally, we remain very excited about the implementation and expansion of our GEO Continuum of Care programs. Our GEO Continuum of Care integrates enhanced in-custody rehabilitation programs, including cognitive behavioral treatment with post-release support services that address the basic community needs of released individuals. We have launched GEO Continuum of Care programs at 14 state correctional facilities operated by GEO, and also in our Rivers Correctional Institution, which houses Washington, D. <UNK> individuals on behalf of the Federal Bureau of Prisons. We are exploring additional opportunities to expand these programs, including in our GEO Reentry segment. As <UNK> mentioned, we are incredibly proud to have recently received the Innovation in Corrections Award from the American Correctional Association for the implementation of our GEO Continuum of Care at the Graceville, Florida facility. We believe that our focus on improved rehabilitation and recidivism reduction programs is in line with criminal justice and prison reform efforts being undertaken in the U.S. and internationally. And we expect these efforts to generate new revenue synergies and quality growth opportunities across our diversified GEO Care divisions. At this time, I will turn the call back to <UNK> for his closing remarks. Thank you, <UNK>. We are pleased with our financial and operational performance during the first quarter and our improved outlook for the balance of the year. Our management team is focused on capturing new growth, and we remain optimistic about the demand for our services. We are pursuing several active procurements, which could result in the reactivation of a number of our idle facilities and could represent upside to our current forecast. We continue to carefully evaluate our capital allocation with the aim of creating sustainable long-term value for our shareholders. We are proud of the continued success of our company. As always, we'd like to thank our employees worldwide, many of whom are listening on this call. We believe that the dedication and professionalism of our employees are unmatched and continue to allow GEO to be recognized by our customers as best-in-class. We are particularly excited about the early success of our GEO Continuum of Care programs, and we look forward to furthering our commitment to bettering the lives of those entrusted to us. We believe strongly that we are at our best when helping those in our care reenter society as productive employable citizens. We welcome everyone to review GEO's website for our first annual report on the GEO Continuum of Care. We are now happy to open the call to your questions. Thank you. We've monitored that, and we'll continue to watch it. We're doing a cash flow analysis on it as to whether or not it makes sense. But we're monitoring that potential for at least some portion of the debt. And if it looks like it makes sense from a cash flow perspective, we'll probably do something like that. Sure. I don't think we're looking at the ---+ we're not connecting the dividend with the share repurchases. As we've said, we believe the stock is undervalued, and the share repurchase, we're using some of our credit capacity for that. Any free cash flow that we have, we're investing back in the business. And then we look to maintain that payout ratio in the 75% to 80% range. So the adjusted funds from operations grows throughout this year. And as we bring on the Montgomery processing center in the fourth quarter of this year, we'll reevaluate the dividend as appropriate. We're hoping some of these federal procurements that have been going on now for, in some cases, over a year will finally be announced during probably the latter part of the second quarter or some part of the third quarter. That's our expectation. Well, there's different states looking for out-of-state beds in particular, and those could occur within the year because those are typically emergency procurements. And Vermont. Well, there's been a steady increase in illegal border-crossings and it, I guess, parallels the steady increase of the census in our ICE facilities, and probably on a tangential basis, our Marshals facilities. And we expect that to continue to increase our occupancy and present opportunities for new facility contracts maybe in the next budget cycle, which begins October 1, as the President will be asking for a significant increase in the detention bed capacity for ICE from, presently, the low 40s to the low 50s. Well, taking the latter question, I think we've seen a stricter enforcement policy articulated by Attorney General Sessions throughout the country. And it's being reflected, we believe, in our census count in our Marshals facilities in particular. And both the Marshals service and the BOP got additional money in their budgets, approximately $100 million each. So we expect the Marshals counts to go up. And the additional funding for the BOP is likely to result in more of the, I think, approximately 9,500-bed procurement and involving CAR 19 to be actually awarded. Thank you, everybody, for joining us today, and look forward to addressing you as to our second quarter results in 3 months' time. Thank you.

2018_GEO

2015

AMG

AMG #Well, I think we covered the variance in our prepared remarks around a small number of institutional clients who chose this quarter to reposition their portfolios independent of performance. So, that I think is the dominant fact. <UNK>, would you add anything to that. So, first, I think we talked about this quarter and the three specific things that impacted it. One, the one you called out which I would say is really US equities in general rather than just sort of Yacktman specific. So, US equities in general, especially US equities in retail where we said in our prepared remarks is disproportionately larger, and then we had the specific to this quarter events. Other than that, I think you look at the long-term trends. We feel good pretty good about it and I think that includes the trends over this multi-year period, which is a large number of good performing products, the global distribution platform is growing. We have this opportunity to keep adding products both from product development as well as from new investments and investments in additional Affiliates as you saw today. And so I think those long-term trends over the long term I think remain in place. Obviously any one quarter will have the kinds of things we talked about an our remarks. But on an overall basis we see as we noted a resumption of the momentum that we've had for now a very long term. Sure, <UNK>. It's <UNK>. I mentioned just earlier that we have ---+ we expect to close at the end of the year and have $500 million drawn on our revolver which leaves $800 million under the revolver spot rate, plus of course we have $1 billion of EBITDA annually, so depending on the timing of new investments have all that we need from revolver or the cash flow from the business. As it relates to your question on repurchases, we repurchased $53 million in the quarter and $332 million year-to-date. We do not expect to repurchase in the fourth quarter, but we would resume our model convention for 2016. Sure. So, on the deals I think I'd maybe start where the last question left off. We had $60 million drawn on the revolver at September 30. Of course we got our distributions from Affiliates in the third quarter this past month, so we've obviously paid off our revolver. I think we expect our revolver balance to be a little over $500 million at 12/31, expecting to close all of the deals at that time. So we are not individually calling out the purchase prices, but I think you can tell order of magnitude the amount of capital deployed. When you think about typical capital deployment in the deals, we've said in the past we see accretion in the $0.10 to $0.14 range per $100 million spent, so I think you can get a good sense for what is in the 2016 guidance based upon that capital and that metric. Because we expect them to close on 12/31, you will get a full year of that in 2016. Maybe I will take a step back and talk about 2016 more broadly if that's okay, <UNK>, which is that range of $13.20 to $14.80, it obviously starts with our pro forma AUM with those deals in it since we're going to get a full-year effect, includes markets as of Friday and that blend was up a little bit less than 4% as of Friday, for the quarter to date. So that's since the end of the quarter because you can see what our AUM was at the end of the quarter. You have to put myCIO which closed on 10/01 into that number, grow it by the 4% more or less, and then you end up adding the deals and you can see what the full-year effect would be in 2016. We have our normal model convention of 2% per quarter beginning the first quarter of 2016, no market performance through the rest of the 2015 period. And then we have a range of performance fee assumptions for the year, and then we also have our model convention of repurchasing 50% of annual economic net income, and I gave you the weighted average share count that we expect next year of 54 million down from 55.2 million. So I think that's the broad set of assumptions that I think you'll need for 2016. As we indicated, the pipeline continues to be very strong, I would say including traditional alternative firms, wealth management firms on a global basis. The volatility ---+ I think if the volatility in the quarter had continued, it probably would've had an effect, but there's no discernible effect that we're seeing on the firms that are in our pipeline at this point. The large majority of our opportunities continue to be in negotiated transactions that arise out of proprietary relationships. We do our best to avoid organized auction processes and you saw the effect in the transactions we announce where all of them, as I noted, arose out of proprietary relationships and were negotiated in a way that was attentive to the particular circumstances of each new Affiliate, and going forward we think that by far that's the most attractive way to make investments, most appropriate way to make investments and obviously results we think in a much better transaction for everybody. Good question. So, the 2015 guidance range of $12.20 to $12.80 so first, <UNK>, that reflects the actual results, right. We've already booked $8.93 year-to-date. We do have an estimate in our model for the fourth quarter, and that's based upon the third quarter AUM plus the closing of myCIO, and then noting that quarter-to-date market blend up a little less than 4% gets you to a reasonable estimate for where our AUM is right now in early November. We don't assume anymore beta, so the last bit then would be performance fees, and performance fees are the primary driver of the range at this point. We have lowered our expectation for performance fees given the market volatility over the past three months, especially in products that are beta sensitive. That being said because of the diversity of our performance-fee opportunity in both the absolute products as well as the beta sensitive products we still see the 2015 performance fees coming in at 5% to 10% of earnings. If you remember last quarter we thought it might be a little bit higher than 10% at the top end, but we're back to that 5% to 10%, just also noting that we've already booked $0.23 year-to-date, so there's already 2% that's already done. And then as it relates to 2016, just to round that out. I mentioned the impact in 2015 on the performance fees in the beta sensitive products, but in the main these products have good long-term track records with annual resets, and so they're well-positioned to generate meaningful performance fees in 2016, so when you think about these products combined with a broad range of absolute products as well as the new investments that we just made, each of which have some performance fee opportunity, but especially Systematica and Ivory, we do expect slightly higher contribution from performance fees at the top end of our 2016 range. We've reflected that a bit in the wider range in the guidance of $1.60, so we do have that opportunity as our AUM in alternatives is growing. I think the last thing I would say about performance fees, just to round it out, is as we add more diversity to our already broad range of performance fee opportunity, I think we said this in the past, we feel good about a base level of performance fees. The diversity creates a positive asymmetry for investors as it increases the probability at the bottom end of our range of achieving that level of performance fees while at the top end gives us more optionality because we could experience upside above our range as there's no cap on performance fees. So I think that's how we characterize our performance fee opportunity. So I'll answer the first bit and then turn to <UNK> for the broader part of your question. With respect to the new Affiliates where we announced investments today, they are all doing very well both from a performance standpoint as well as in terms of organic growth. You would expect that in a way because firms generally choose to pursue investment transactions when they have strong momentum in their business, and these three certainly do. Systematica has terrific long-term and near-term performance, is opening new products and gaining market share in their larger existing products. Abax, the same goes for them, having an excellent year in terms of performance with a very exciting opportunity to build a global equity product or build on and grow an already very successful well-performing global equity product. And then Ivory, as we noted, an outstanding long-term alpha generation record that has a long-only product which has just terrific prospects for growth and excellent performance. So these three Affiliates I think are all very well positioned to generate strong growth as is our overall franchise, but I'll let <UNK> add more color to that. Sure. So, I think the way you set it up was a really good way to do it which is look out the next couple of years and I will try and do it that way, but then I also think there are some longer term trends even in that, that maybe I'll touch on. So as you look at this medium-term year or two trend out I think our Affiliates continue to benefit from a set of trends that we have talked about on prior calls which is investors need to get returns into their portfolios and investors continue to ---+ we've talked about it as barbelling their portfolios between exposures on one end and then active return-seeking managers to meet their return goals and how boutique firms, specialist firms are very well positioned to meet those needs. And we've actually talked about that also in the white paper that we published early in the year. So, I think those trends benefit our Affiliates on this time dimension you described. In addition, and this is the thing that AMG can bring to bear on behalf of these Affiliates is in addition we are taking these good-performing products and we are marrying it to scope and scale of an increasingly diversified global distribution platform; institutionally in many, many markets, retail in some markets, US we've begun building some retail exposure and others. So we're taking those Affiliates that on their own have this really good opportunity set over the next couple of years and we're marrying it to this distribution business that further enhances their opportunity. And we've talked about on calls that we take those together, we're able to build a relationship with the marketplace which is really a unique relationship and again we are in the early stages of doing this which is building a relationship where we can bring all of this to bear with the most sophisticated institutions with the intermediaries who serve them with platforms and allow them access to all of this fantastic manufacturing through a single very high-quality point of contact. And so when you think about bringing those together and then the last thing I'll say here is the virtuous circle component which is as we continue to execute that on behalf of these Affiliates we're having very good success, that obviously makes us more attractive as a potential partner to additional Affiliates. And that was part of some of these things ---+ the firms ---+ investments you saw announced today which is they understand that opportunity that we bring them. So I think the firms have a very good opportunity on their own, but I think combining that with what AMG is doing in distribution is a very significant opportunity. Sure. I can understand the question given the number of transactions, but it is actually just the fortuity of the circumstances, and as you know, our investments in the main arise out of proprietary relationships that we've built over the years and obviously that's a very important part of our forward opportunity set. The timing of transactions is driven by idiosyncratic circumstances of each prospective Affiliate and it varies from demographic considerations to an outside investor's preferences, for example, in the part of what was involved in the Systematica investment. The market volatility in the quarter I would say had really no effect. Those transactions were well underway and importantly as I had said in response to an earlier question, going forward we don't see any discernible effect from the market volatility on our forward opportunity set and we continue to be very optimistic about our prospects going forward with a very strong pipeline and a competitive position that continues to be extremely strong. So, lots of good opportunities but they will never appear in a precise orderly timing because that's just not how it works. So let me try and take those in order. So I think the question about deferred funding. So, as I said in the prepared remarks we did have some mandates in the third quarter that were deferred due to that volatility. A number of them have funded, some of them have not and obviously the ones that have not obviously you're never 100% sure until it's done. I do think the volatility may have ---+ there were a few mandates that I'm not sure, and again this is completely unrelated to performance. I do think the volatility in some product categories did have some potential investors say that their slowing it and I think some of those might not come back, I think it's entirely possible but, again, you'll see what happens if things are stable from here. So I think that is the first bit which is I think we've had a number of them fund, not all. I think there are a couple that you don't know. And then the other thing I'd say on flows, looking ahead, so we've got those obviously still early in the quarter and all that, but the trends that we've been seeing look like they're ---+ sort of meaningful trends look like they are all there and good, and then the other thing I'd say which were in our prepared remarks a bit but just to be clear, if you look at the mutual fund channel, I think we're continuing to see good inflows in alternatives global and emerging markets and we are seeing slowing outflows in US equities, so that channel in particular looks better. And with respect to your question about guidance, <UNK>, as you know, we never guide to flows. So you have heard I think a pretty optimistic and positive view of our forward organic growth prospects and embedded in the earnings guidance which we gave, of course, is I think very good growth looking ahead which obviously if the markets are better and we make additional new investments, we'll be even higher than we forecast, but just the earnings forecast itself I think embeds some strong internal growth without getting to the place of guiding to flows specifically. Let me just talk a little bit about what we're doing right now in the US retail business. So, first, I'd say we're making good progress on the product development side and a little bit of this is related specifically to we have a scale business with the exposures that it has, but we have a bunch of very good opportunities to take the team that we've got there and the sales marketing client service infrastructure and marry it with ---+ we've talked about this on prior calls, marry that with the very good performing products, especially in alternatives, global and emerging markets. So, when you focus on this quarter, I think we've done a lot of work on that what I'll call product development side and maybe I'll call out two specific examples. One is we've started working with Harding Loevner in the wirehouse channel, which is taking their products which are performing well, having good flows in many distribution channels and leveraging the places that we think we can really be additive, for one example. And another example I'd give, and this goes specifically to the opportunity set in alternatives, we had ---+ I think we talked about on prior calls a product that we've been building with Pantheon in bringing private equity into the 40 Act Fund space. We've built that. We've now got that 33 Act registered this past quarter. We will be rolling that out through the team, and so things like that making additional progress in product development and concentrated equity things and some other alternative product, so good progress in product development to leverage our Affiliate's capabilities through the distribution team. The other thing I'd say is the judgments about that business and what it can achieve are in the forecast that we've given you and in the forecast we're not really assuming any big trend changes to that trajectory as some of these product development things come on. We expect it will take a little while to really gain traction and sort of change things, but the last thing I'll say, to repeat a point I made earlier, we are seeing slowing outflows in US equities and we are seeing good momentum on the alts, global and on end side, both within our AMG Funds platform but within our retail distribution more broadly. So, I think it's very hard to generalize. I think the repositioning came I'll say it had sort of three pieces. There were some, and this wasn't the bulk of it, but there were some where it was related to performance, so that's some of it. I think the others where it is clearly unrelated to performance and performance was quite good, I think it would be very hard to generalize and assign it to a strategy. It was a couple things and they were all, we think, unrelated. So I don't think there's something I would generalize beyond that in there. Because we closed on 10/1 but we had actually expected to close 9/30, we had already drawn from myCIO at the end of the quarter. Well, thank you again for joining us this morning. As you've heard, we were pleased with our earnings growth in the third quarter and especially to welcome three outstanding new Affiliates. We remain confident in our ability to continue to create shareholder value through both organic growth of our existing affiliates as well as accretive investments in new affiliates going forward. We look forward to speaking with you in January.

2015_AMG

2017

EIG

EIG #Thank you, Ashley. Good morning, and welcome, everyone, to the Second Quarter 2017 Earnings Call for Employers. Yesterday, we announced our earnings results and today, we expect to file our Form 10-Q with the Securities and Exchange Commission. These materials may be accessed on the company's website at employers.com, and are accessible through the Investors link. Today's call is being recorded and webcast from the Investor Relations section of our website, where a replay will be available following the call. With me today on the call are: Doug <UNK>, our Chief Executive Officer; Steve <UNK>, our Chief Operating Officer; and our Chief Financial Officer, Mike <UNK>. Statements made during this conference call that are not based on historical facts are considered forward-looking statements. These statements are made in reliance on the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Although we believe the expectations expressed in our forward-looking statements are reasonable, risks and uncertainties could cause actual results to be materially different from our expectations, including the risks set forth in our filings with the Securities and Exchange Commission. All remarks made during the call are current at the time of the call and will not be updated to reflect subsequent developments. In our earnings press release and in our remarks or responses to questions, we may use non-GAAP financial metrics, including those that exclude the impact of the 1999 Loss Portfolio Transfer, or LPT. Reconciliations of these non-GAAP metrics are included in our new financial supplement as an attachment to our earnings press release, our Investor presentation and any other materials available in the Investors section on our website. Now, I will turn the call over to Doug. Thank you, <UNK>, and thank you, all for joining us on the call today. As in the first quarter, we again produced strong financial and operating results in the second quarter of this year. Excluding impacts of the LPT Agreement, our current quarter net income increased 13% or $0.08 per diluted share. Our underwriting income increased 19% as our combined ratio improved 3.7 percentage points. We reported operating income of $0.60 per diluted share, an increase of 30%, with an annualized operating return on adjusted equity of 8.1%. Our book value per share was $32.95, a 6-month increase of 4.2%. In the current quarter, final audit premium remained strong, reflecting increases in payrolls, number of employees and hours worked for our insurers. We again delivered strong new business growth in the quarter by actively seeking and finding new opportunities that meet our underwriting requirements. These strong results reflect the successful execution of our business strategies and our consistent and deliberate portfolio strategy despite the soft market trends that have remained largely unchanged. As in recent periods, our markets remained highly competitive while in general, rates linked to improving loss costs continued to decline. In light of these market conditions, our retention in the second quarter remained high and payroll exposure increased. Overall, renewal premium declined slightly in the quarter, driven by one territory in our Southern California market. Our average renewal rate for the first 6 months of the year decreased a modest 1.8%. As a monoline workers' compensation writer, we believe we are in the unique position of intimately knowing and quickly reacting to changes in our markets, and we have demonstrated this capability over the years. We consider this a competitive advantage that we intend to maintain and strengthen as we actively engage in technology, data and analytic initiatives. We often get questions on the current political and economic environment and potential policy changes, and the impact they could have on Employers and on Workers' Compensation broadly. While there is uncertainty about what may or may not transpire along these lines, we are well positioned to benefit from the [deep ---+] additional economic growth, tax reform and positive changes in interest rates. And with that, I'll turn the call over to Mike for a further discussion of our financial results. Thank you, Doug. We delivered solid financial results in the current quarter, in line with our expectations. Net premiums written and earned for the second quarter each decreased 3% period-over-period, which Steve will address in his remarks. Our second quarter combined ratio before the impact of the LPT of 95.1% ---+ (technical difficulty) than the 98.8% reported a year ago, due to an absence of large losses in the current period. Our second quarter commission and underwriting and other operating expense ratios remain consistent with those of a year ago. Net investment income for the second quarter decreased slightly from a year ago due to nonrecurring expenses associated with an investment accounting provider change. At quarter end, our fixed maturity portfolio had an average pretax book yield of 3.2% and a tax equivalent book yield of 3.7%. The lower net realized gains on investments for the second quarter was related to greater sales of equity securities a year ago as part of a routine rebalancing of our equity investment portfolio. During the second quarter of 2017, we redeemed a $12 million surplus note payable, with a resulting $2.1 million gain. Our effective tax rate of 23.9% in the quarter was higher than that of a year ago, primarily due to favorable LPT adjustments made during the second quarter of last year. As of June 30, 2017, the market value of our investment portfolio was $2.6 billion, an increase of 4.5% from a year ago. At the end of the second quarter, our fixed maturities had a duration of 4.1 and an average credit quality of AA-, and our equity securities represented 7.6% of the total investment portfolio. And now, I will turn the call over to Steve. Thank you, Mike, and good morning. Net written premiums for the quarter of $183 million were down $5.7 million or 3% from the second quarter of 2016. This decrease was primarily a result of a decline in final audit premium year-over-year. Despite this decrease, it is important to note that we continue to see strong payroll pickup at final audit relative to the inception of the policy, with this quarter exhibiting almost double-digit increases, which was driven by additional hiring of employees, increasing wage rates as well as additional hours worked by existing employees. With the exception of the second quarter of last year, this percentage increase in payroll pickup is the largest we have seen in more than 3 years. From a new business production standpoint, we grew our new business revenue period-over-period by 3.9%. This occurred despite a declining rate environment in the majority of the states in which we operate. This is also an improvement over the new business growth we saw in the first quarter of this year. This growth has occurred not only in the new states that we have recently entered but we have seen growth in many of the states where we have had a long-term presence across a variety of geographic territories. A substantial contributor to this growth has been from our alternative distribution channels, both long term as well as more recent partnerships. In previous calls, we have discussed the strong retention rates on our smaller premium policies. Those trends continued in the second quarter. We also have previously discussed additional pressure from a competitive standpoint on larger middle market policies. Our renewal premium for the quarter was down slightly from the prior year second quarter due to a decrease in one of our territories in California. Absent this decline in one territory, our renewal premium would have increased period-over-period due to strong renewal production in the rest of California as well as the rest of the country. And now, I will turn the call back to Doug. Thanks, Steve. While our investment income is impacted by continuing low yields, our underwriting profitability is at record levels. Our strong earnings and positive cash flow have allowed us to continue to invest in our business while returning capital to shareholders, most recently through increases in our dividend. We are maintaining the strength of our balance sheet and creating increased value for our shareholders, as evidenced by our continued growth in both book value per share and operating return. And with that, operator, we'll now turn the call over for questions. <UNK>, this is Steve. I'll take that question. I think we've said this before. It's difficult to predict premium with certainty. However, what we would expect is written premium absent audit premium to be in a relatively tight range, slightly up in some markets, essentially flat or slightly down overall throughout the year, given current conditions. So I would expect it to be within a range of slightly up or flat, or even slightly down in the second half of the year. That territory we're referring to is Los Angeles County. And the renewal impact that we saw was, as I said earlier, not on our small business. The retention rates on that were very, very high. On the middle market accounts, there's a lot more pressure from a competitive standpoint of even this year relative to comparisons of last year, especially in Los Angeles. And what we've said before and held true this quarter is that if we don't feel like we can maintain the profit gains that we've occurred over the last couple of years then we're willing to let some of that business go. And we saw that happen in the second quarter. We're not going to chase top line growth at the expense of the bottom line improvements we've had. Yes, and I would say that if you review the results from WCIRB and other entities, California's a much more profitable state than it historically has been, so. Add that to heightened competition as well. It's ---+ market's flat. Yes. There's 2 things, <UNK>. We changed our investment accounting provider and 2 things occurred. One, we had to run parallel with our existing provider, so that increased our investment expenses by about $100,000, which you won't see into the future. The other is that the prepayment speed assumptions and call assumptions are slightly different between the providers, and that gave us a one-time $300,000 increase in our premium amortization. And we'll get that back over time, but the combination of the $300,000 and the $100,000 got you about a $400,000 decrease, of which $300,000 is temporary. I think you have to be careful in how you're defining medical inflation because it can include not only pure inflation as an increase in unit cost, but can also be impacted by or defined to include increases in utilization and certainly on the medical side, from time to time, we've seen that. We don't feel that our book is being pressured. In particular, our reserve book is being pressured by unexpected inflation. Certainly we're seeing on a broader national economic scale an attempt to actually encourage a bit of inflation in the economy. I think the ideal situation for us would be to see that type of inflation, just not see unexpected inflation on the medical side. So and I would say at the moment, it's not a major concern but it's an inherent concern in our line of business given the duration of our liabilities. I'll take that, <UNK>. So our favorites and #1 use of capital is organic growth. And then we ---+ when that is exhausted, we'll look down the ladder and share repurchases become attractive as an alternative. There are some things on the horizon that could lead to some greater organic growth that we don't really want to get into on this call. So we've got a wait-and-see approach, but certainly buying shares back is an attractive option for us. But again, for some opportunities that we don't really want to get into right now, that may or may not transpire, we're in a wait-and-see mode. I would say we consider all of those to be potentials as well as potential market disruption. Matt, this is Doug. I'll take that question. When you look at the industry as a whole, I suspect we may be at a point where the results don't improve significantly. Certainly, seeing falling frequency, continuing falling frequency and modest severity increases, that probably suggests we're at a fairly stable point. But to the second part of your question, and I think it's really the more important part of it is, if it's ---+ in fact, that's what the broader Workers' Comp environment is. It doesn't mean that has to be our fate. And certainly we're focused on a lot of initiatives that are designed to improve our efficiency on an underwriting expense side, as well as drive improved loss cost results. So as you indicate, the outcomes-based network, the accelerating claim settlement activity, a variety of initiatives we have, one of which we've just started rolling out in a pilot form, to identify large losses earlier in the life cycle. There are a number of things that we are able to do that hopefully will continue to drive down our loss cost even though the industry as a whole may be at a flat patch. I'm sorry, I'm afraid we're not quite following the logic there. Could you (inaudible) that. There's been a slight shift out of California. I think we're talking a percentage or so. There has been a shift in California, more of a shift from the north to the south that does have the impact of improving the loss result, although most of that has probably made its way through the book, the shift from premium, more premium being written in Northern California less than Southern California. I'll take that, <UNK>. We really don't churn the portfolio. So we have maturities that we reinvest, and as a result, we're not going to be able to react to those changes in the treasury yields in an abrupt manner. But also, we've got some good legacy stuff that has not come off yet. So we're at a bit of an inflection point, where the new yield opportunities are no worse than the current yield. So with continued increases in market interest rates, you'll see that shift. But it'll be a slow shift for us because we really don't churn the portfolio, from a net investment income standpoint. At this point, it's not having a material effect on the expense ratio. Because of the nature of those activities, they tend to be more capitalized and so they'll start impacting the financial statement at the point where we achieve, at the point where, from an accounting standpoint, they have to move from capital to expense. And I can't project that date for you. But that's the nature of how that rolls out. Okay, thank you. We appreciate your participation today and your support. We look forward to talking to you again in October as we report the third quarter results. Thank you all, and have a great day.

2017_EIG

2017

CGNX

CGNX #Yes. So Other Asia is a region that includes Korea, actually Japan as well, India and ASEAN, which includes countries like Thailand, et cetera. So the ---+ those ---+ we've seen strong growth broadly across those regions but the ---+ certainly the market that's really moved these results is Korea. And that's been very responsive as we've invested in it over the last few years. We've got a great sales team making big inroads in both consumer electronics and automotive in that market. Maybe Rick is muted. We got it. We loved it. Yes, yes, yes, okay. Thank you, Joe. So yes, so 3D is an important space for Cognex and one we're investing heavily in, both in our own engineering of products but also through acquisitions. And like a lot of Cognex business, in the early days the business is slow and then it starts to really pick up. We're certainly seeing our 3D business grow substantially at the moment. Our 3D vision products grew nearly 140% in 2016. But we're still a small player in the $200 million market for 3D displacement sensors. So ---+ and 3D is less than 10% of our overall business and will be this year as well. We've made a recent acquisition, the EnShape and Chiaro, which brings us powerful data acquisition technologies called snapshot sensors that are complementary to our 3D displacement sensing products. And we see a lot of growth potential in both those displacement sensing products but also snapshot sensing. And we see the technology being applied broadly to many different applications. As I mentioned earlier, too, our In-Sight Profiler brings that 3D technology to our ---+ 3D displacement products to a larger audience by making it much easier to program and sell. So this is a major growth area for us, one where we're expecting and seeing substantial growth and expect to continue that journey. Sure, yes. So our journey into logistics is a few years underway at this point, and it's a market where we have the potential to grow at 50% per year for the foreseeable future. And we're confident about that currently, in the current market we're in, and we expect strong sequential growth from logistics to come in Q2, as we mentioned. Growth will come both from large orders and smaller and medium-sized logistics accounts. We made meaningful progress in Q1 to increase the number of our large customers in logistics, certainly in that space. And we see a number of customers emerging who could represent many millions of dollars of revenue annually for Cognex in the logistics space. So we're ---+ revenue can be a little lumpy in that space. There can be some larger orders that can hit in some quarters and not in others. So although Q1 was good, it wasn't exceptional. We expect Q2 to be pretty significant and more exceptional, I would say, in terms of the logistics business. Now you asked also about the MX-1000, our breakthrough product for the mobile terminal market. That's a product we launched last year and have been showing to customers in the market. As I think of kind of when Cognex enters a new space, just like when we entered 3D or when we entered logistics, it takes time to kind of win the confidence and understanding of customers. So we're still in the stage with that product where we're showing it and demonstrating it and having early orders from customers who are evaluating the product. We have had some significant wins that we talked to you about in the past, but at this point we're more evaluating the technology with customers. And what we're hearing is very encouraging, and we're hearing that from a broad base of customers who could be very significant in future. So I think we're still near the bottom of that sort of S curve of adoption, but we're very confident we're going to be moving up that curve in the future. Yes. I think we're known to all ---+ I think the large logistics purchasers, particularly in the e-commerce space, which is where really most of our growth and success is occurring at the moment, we're known to those players really in America and Europe, and we're having good success at winning the majority of their business, I would say. And yes, in terms of numbers, yes, that's ---+ we have some very large customers or significant customers and others that we see developing into that kind of field, where we can have ---+ be doing millions of dollars per year. I don't think I can really get specific about, obviously, customer names or specific dollar numbers for customers. Certainly there ---+ well, I think, as often with Cognex, we're kind of learning and rolling out our technology in America and then we extend to Europe. We're now making very significant inroads in China, where clearly there would be many ---+ or a number of very, very significant e-commerce logistics purchases of machine vision technology. They're earlier in their adoption of technology, and we're well known to them and in evaluation. But certainly, in terms of bookings or revenue, the China business is still relatively small in comparison to the success we're seeing in Americas and Europe. Thanks. It's a good question, yes. So display technology, including organic LEDs, is definitely seeing huge investment in automation, billions of dollars in CapEx going into the production of those ---+ that technology, those technologies in general. So it's major, and we're working both with end-user companies that are manufacturing that technology, which is then consumed by companies that actually sell the products we buy, right, but also, importantly, with OEMs or machine builders who take vision technology and help the manufacturing process for that technology and sell into the big plants where it's manufactured in a number of markets, including Korea, Vietnam and other markets, China. So we're certainly seeing a big, big pickup in that business. I think we ---+ it's well understood by us. Our sales teams are well known. And our application engineers and capabilities on the ground there are, I would say with confidence, the best in the world. You asked a bit about kind of how competitive our actual technology is. Some of the applications that are required in that space are alignment. So you're aligning very fragile and sensitive material to very high precision; also inspection, where you're looking at what is a complex matrix of material that has to be integrated and looking for defects. So both of those are things that we excel at as a company. And so we're very well positioned. So I would say it's certainly helping our growth and our reputation and the inroads we're making into those major electronic suppliers and their machine builders. Yes, thanks, Bobby. Well, building on my earlier comments, mobile terminals is an exciting market where we expect to bring significant change. We\ I don't see us resizing that $200 million market anytime soon, not certainly in the next quarter or so. We're ---+ but that market itself is growing. So if we were to expand it, it might be the fact that we're seeing a growth rate of about 20%, and we probably gave you those numbers back in December of last year. But what I will say is those applications within that market break down to ---+ between kind of complex applications, where Cognex is very strong and has large share, and then simpler applications that use more of a profiler approach. And that ---+ those simpler applications are, in fact, the majority of the market, more than half of it, right. So we're now in a position where we compete ---+ can compete in that space of the market much more competitively with the new product. So I'm not increasing the size of the market we've given you but our ability to be competing in that space now with a much easier to use program, a much easier to sell product is certainly much greater. No. It's too soon to make the call between Q3 and Q4. Well, I think ever is the key term there. But what I'll say is display technology is an area where we're seeing a lot of investments right now. I would say historically, one tends to see kind of phases of investment that go on and where machine vision gets applied. So display is an example. And I guess we saw LCD displays a number of years back on TVs or whatever was also kind of a growth area. I think OLED displays is something we're going to see over a few years. But final assembly and test of electronic devices is something we're going to see over a much longer period. So I think it has the ---+ those final units have the potential to be very long term, substantial business, while display technology, it may be difficult to see out past the next couple of years about whether that's a market that will kind of mature or continue to grow. In either respect, though, I would expect the kind of revenue Cognex received from final assembly and test of smartphones and mobile and wearable electronic devices is going to be bigger than what we see from screens and displays. Would we be able to maybe break that out. Yes, that's a difficult thing you're asking us to break out because I think we risk giving you information that's confidential. What I would say is we're going to see much lower large orders in Q2. So you can really ---+ you could take the mid-teens growth rate that we told you and figure there's really not much in terms of large consumer electronics orders hitting in the quarter, which means it would be ---+ the underlying growth rate is going to be well above our 20% factory automation growth rate that we expect. Well above that. And I would ---+ yes. And I think, if you go back to ---+ if you look at our performance over the last couple of quarters, I think we were up 30% or so in Q4, up 42% factory automation or 40% overall in Q1. I think we're gearing up still for strong underlying performance across broad industries in Q2. And the anomaly is much more the large orders in consumer electronics profile that's causing that growth rate to slip back into the mid-teens that we are forecasting. I think what we said is we expect consumer electronics to grow well this year, and I think we're not commenting on large orders, certainly not from any particular customer, right. I think the message I'd like you to take away is that we see strong growth in consumer electronics in our pipeline in Q1 and for the year but not in Q2. Just a quick, I guess, follow-up question for Rob. In terms of what you're seeing on the automotive side, particularly in Asia and in Europe, are you seeing the use of the product primarily for existing manufacturing lines or is it for new lines as well, assembly lines. <UNK>, thanks. Yes. So our automotive business performed well. I think it's well known that really about ---+ the majority of our business in automotive is with Tier 1 suppliers. And an important but smaller part is with brand owners or end-user companies. We see good growth in both parts of that and particularly Tier 1 automotive suppliers who are looking to develop new components for new kinds of technologies, particularly around electric vehicles. We're seeing significant spending by them and ---+ but also by end users. And then particularly in China is a market where we're seeing very significant growth in our automotive business. But it's really broad-based, as I said earlier, across all of our regions. Yes, no particular difference between existing lines and new lines. No, not that I would say ---+ I mean, not a real change in the pattern over the last 6 months, for sure. I mean, certainly we are seeing significant investment in new lines, as we've said. But we're also seeing significant investment in components and investments in machine vision to support improved production on both existing and new lines.

2017_CGNX

2015

RMD

RMD #<UNK>, do want to take that question. Yes, sure. Thanks, <UNK>. <UNK>, we don't get quite as granular as that, but on those ones that I've mentioned, they all had ---+ if you looked at it year on year, they all had meaningful impact on the gross margin. Clearly, a mention on the FX impact, which was quite large and then product and geographic mix had a quite large impact as well. And then (inaudible) declines year on year also that we've been discussing. All of them were kind of meaningful contributors to that gross margin decline. They are all meaningful and not ---+ there wasn't any particular one that overwhelmed the rest. , let me put it that way, that were kind of all there in the mix, which is really unusual for us to have almost all of them as a headwind. So it's not like any of them were completely driving it, but when you take them as a sum total, then that adds up to quite a large contraction that we saw. Thanks for the question, <UNK>. SERVE-HF is a multiyear journey for us going back a number of years. And we expect that sort of first publication of the trial results before the end of the calendar year. You know, that's almost the starting gun that would go off on a long journey, <UNK>. And there are multiple outcomes in a trial like this. There's the outcome that could improve cardiovascular outcomes. There's an outcome that could improve bigger things, like morbidity or mortality in intention and trade versus per protocol analyses. And so many analyses that the primary investigators will have to do from when they crack the code all the way through to when they present the results and then later publish them in a peer reviewed published journal. So there's a long lead time. To your point, it will benefit the business. <UNK>, I find the easier brand to remember is PaceWave. So the PaceWave product will be picking up from that. And studies both used PaceWave SERVE-HF and the CAT-HF. So we are excited to have that sort of proprietary technology included in the trial. But it's a long journey from there. And so you won't see an immediate inflection point the day of presentation at whichever cardiology conference it may be. What you'll see is the starting gun go off on a marathon opportunity for us, which goes over multiple quarters and multiple years. And really, a lot of it comes down to changing standard-of-care country by country, hospital by hospital, payer by payer, and, frankly, cardiology and pulmonary group by cardiology and pulmonary group and getting them to partner across hospitals. And we see it as a great long-term opportunity for us. Well, in the US, our indication for use to treat central sleep apnea, periodic breathing, and Cheyne-Stokes respiration. So we'll be focusing on that in the US. In other markets in different parts of the world, there will be different approaches of working with cardiology groups. But in the US, it will be focused on what we do in treating these very severe types of sleep disorder breathing amongst chronic disease patients. <UNK>, look, it's really hard being the only public company that sort of talks on a 90-day cycle here about growth rates to get details of the market growth rates. We talk about it in the mid-single digits in the US and Western Europe. I think there certainly are regions and countries where you're getting double-digit growth, mostly in the emerging markets. We talked earlier about China, India, Brazil, and Eastern Europe, where we are really partnering with our channel and focusing on growth in those areas. And then you get some opportunities, like we have with Air Solutions and what it has driven in great value to customers. And you get some share gains as part of that as well. Has market growth tipped up a little because we're moving to connected care models and we're partnering with integrated delivery networks and accountable care organizations. I'd say it's a little early for that traction to have started to really move the market in growth. I think that's more of a longer-term story, as you look out sort of one year, three years, five years, where you'll start to see us be able to influence market growth by the great solutions we are providing to take patients out of hospitals, put them in homes, and save money for broken healthcare systems. So I think we're still sort of looking in that mid-single-digit range. But again, it's blurry and there's a lot of multiple data sources to get to that. So I'll hand that question to <UNK> <UNK>, our Chief Administrative Officer and General Counsel. Sure, <UNK>. Masks are multiple categories. You have the full-face masks, you have nasal pillows, and then you have nasal masks. And in each of those subcategories, there are multiple players in multiple countries competing with their own innovation. What I can tell you is that it is a competitive game. And we are innovating incredibly well and some of our competitors are doing a reasonable job, too. And what that allows is good competition in a market, healthy competition in a market, and the opportunity for us and our competitors to present those opportunities to patients, to HME providers, and to clinicians and get them excited about what we have. So as you go through each of the categories and you go through each of the countries, you win in some categories and in some countries. And then you don't win for awhile in some categories and countries. But over the long term, what we've showed at ResMed that of the 7% of our revenues that we invest in research and development, we put a good chunk of that into world-leading mask and patient interface, more generally, and accessory research. And we have, I would say, across countries and across the categories some world-leading innovation that's doing very well and more in the pipeline. As I said, we are going to get back to positive growth in our major geographies and around the world on that. And we are confident about that. I'll take the second part first. And the answer to that is no. We're not going to go into details on the pipeline. And I'll hand the first part of the question to <UNK> to talk about relative share that you might've seen, particularly in the US geography. Yes, I mean, it's a typical member to get to, market share, because there's not terrific data. But based upon what we see in the market, we think the shares are relatively stable and probably we took a little bit of share on the margin in the quarter. But it's very, very difficult to estimate. So if you went with stable shares, you probably wouldn't be far off. Well, you know, you got the difference between unit share and then you've got revenue share. And you've got pricing and many factors into that, <UNK>. So one of the things that we've said on these calls is we're not going to go into details of year-on-year price deltas. And so if we start to talk about volumes and exactly where that's at, then everyone can reverse engineer the pricing, including competitors or others who may be reading the transcript or listening to this call. <UNK>, I appreciate where you're going in the drill down, but I think we're going to have to go to the next question. Yes, the majority of that is some FX hedge gains and that was largely around our other euro hedging structures, yes. No, <UNK>, we are off backorder in the US. Flow generators and that's a really good thing. The downside of that, as <UNK> said, is that we are doing a lot more air freight than we would like at this time. And so as we start to ---+ and <UNK> and Don and the team in Sydney are really getting the factory there, both there and in Singapore, moving. So we will expect to start to move from air freight to sea freight. And as <UNK> said earlier, to start those cost-out programs over the coming quarters to get us back on track there. But no, we were not on backorder this quarter, which is a good thing. <UNK>, do you want to take the question about the orders. Do you know how it impacted inventory-wise or replacements. It's not something we have perfect visibility into, but I didn't see anything unusual in the quarter in terms of stocking orders. The (technical difficulty) got off to a really good start since its launch and so it's on a really good growth and adoption ramp. And we think we are taking share in that category as well as in APAP and CPAP. But we didn't see anything unusual. Yes, I think what you saw last quarter was a good ramp up of the AirSense 10. And what you saw this quarter was a good ramp up of the AirCurve 10 combined with ongoing ramp up of the AirSense 10. You have the addition of Astral, mainly in Europe, but starting to happen in the US geography, <UNK>. Yes, good question about SERVE-HF. And as we start to complete that study, what you should realize is usually when these studies go out, there are a number of follow-on publications that look to analyze the data that we've collected over these 5 years to 7 years from different angles to produce different things. And so I would expect ongoing analysis and research, certainly on the buyer statistician side and analysis of the data from investigators and workers on the study. Yes, but certainly, the day-to-day recruitment of patients does slow down as you move off those studies. But one thing about ResMed, <UNK>, is that we take a long-term view and we invest for the long term. And so the growing needs and opportunities for us in healthcare informatics, for instance, are an area that we are investing in and we'll continue to ramp up our investment. The growing opportunities to develop channels and research around COPD and the mortality rate that you saw in the [current line] study that we talked about two quarters ago, where you have a 76% relative reduction in mortality for COPD patients treated with noninvasive ventilation. I mean, there's so many opportunities for research in the COPD side that I wouldn't ---+ if I was running your model for FY 2016, I wouldn't be pulling out R&D dollars for ResMed. I'd say ResMed is going to reinvest and keep that sort of 5-year, 10-year, 15-year view that clinical research drives market development, drives market growth, and drives value for patients. And that's something that we focus on for the long term. Yes, I'll take the first one on receivables on the sort of ---+ our days sales and trading terms, they were pretty consistent with where they've been kind of this time last year and over the last few quarters. So I think that's been pretty stable. On the operating cash flow front, yes, it's down on PCP. But around the euro and the decline and so on, that would certainly hurt us a little bit on the cash flow front. But you've got to be a bit cautious, because they are 90-day snapshots on the cash flow. I think I prefer to look at it more of a longer-term trend on the cash flow. So PCP was down a little bit. I think overall, the cash flow remains quite strong, although yes, probably hurt a little bit on the FX front. Thanks for the question, <UNK>. Yes, I mean, to the comments I made earlier, it's ---+ clearly, a number of 42% in the US geography, given the large base we have there, is exceptional. And it's exceptionally good, but it is exceptional and it did include a big chunk of share gain that we would know. To delve out exactly what was market growth versus share gain growth, I'll leave the mathematics of that up to you and the other experts on the call. But as I look to the sustainability of the long-term underlying growth there, I think it is there in that good solid mid-single-digit market growth that we talked about. The difference between AirSense 10, which is in its third quarter, I guess, of real moving up that S-curve of launch, and AirCurve 10, which is just finishing its first full quarter, and then you add in Astral, which is got, for the US market, a much longer penetration curve to go, you can sort of get into some pretty complex calculations as to exactly what shares they'll be. What we are focused on is really the long term, <UNK>. We are absolutely taking share in sleep disorder breathing, but more importantly than that, we are switching the industry to focus on healthcare informatics as a value play. That taking data to the cloud is not enough. You have to then take that data and provide solutions for your customers, to take cost out of the channel, to get efficiencies. And for patients, physicians, and providers to all get real-time data so that they can make their businesses better, make the patients better, and improve outcomes. And so it's sort of a long-term gain versus, for us, let's analyze the 90 days and look at it. And I think what the milestone of that 42% says the long-term game is the right game and it's got some capability. And we should double down our investment in that space. So I'll hand that question to <UNK> <UNK> to talk about bundling associated with CB for future rounds. Thanks for your questions, <UNK>. And I think that will be it there, Adrienne. Great. Well, thanks, Adrienne. In closing, I'd like to thank the more than 4,000 strong ResMed team from around the world for their continued commitment to changing millions of lives, literally with every breath. We certainly remain inspired by our long-term aspiration of changing 20 million lives by 2020. Thanks for your time today. We hope to see many of you at our ResMed investor day, which we are holding this June 2015 in San Francisco. More details from <UNK> on that later.

2015_RMD

2015

SKYW

SKYW #I would tell you that the dynamic has certainly evolved over the last 24 months to where I would say today the majority of our conversation is retaining the 50-seat fleet that we have, you know. As <UNK> pointed out in the last 15 to 18 months we've pulled out a lot of 50 seaters but that's, you know, I think in my view, in our view and strategy, turning the [corner] where we see significant demand on our entire fleets and the products at both airlines. So we are seeing a little bit of that dynamic change and we're strategically aligning ourselves to make sure that we work with our partners to deliver what they want within that fleet. Sure, well I think <UNK>, as we said, that 2016 is the year for kind of positioning ourselves to take maximum advantage of the growth and profitable flying that's out there. So, I think that as we look at 2016 as that transition year, I think from a margin standpoint, again, as <UNK> sort of intimated we've got fleet renewal opportunities that represent potential upside to our model out there but I think if you look at kind of our base scenario that that's something that's achievable just with the core strategy that we've been articulating for some time that we're going to continue to shrink the unprofitable flying as much as possible and we're going to, you know, add accretive new planes to our mix as the opportunity provides itself. So, obviously with respect to our delivery schedules, most of those deliveries begin in earnest in mid-2016 and run really primarily through the four-quarter period comprising the second half of 2016 and the first half of 2017; that's when the bulk of that flying is going to be ---+ you know, the new flying will come online so margins will be correlated with the timing of the new airlines or the new aircraft as well as the timing of any and all fleet kind of renewal discussions that we're able to successfully booked in the upcoming year. So I think margin improvement is definitely part of our core strategy with, again, some potential upside out there based on conversations with our partners. Yeah, so as you look at Q3 there are definitely some aircraft that were added into the system that should continue on for the next foreseeable future honestly. So, we anticipate some of these aircraft to continue on. There were no current contracts that got improved during the quarter. Thank you. Thank you [Andrew]. Again, we really appreciate your interest in SkyWest Inc. , and more importantly it's certainly humbling to represent the 20th professionals at both airlines that work hard to continue to make our progress. I think as you can hear from our dialogue today we had a great quarter. We're optimistic about our future. We have a clear plan in place and it's going to take a lot of work from a lot of parties but we feel like we've got some very good objectives out there for the next year and beyond to continue to make improvements. With that we'll give our thanks and end the call. Back to you [Andrew].

2015_SKYW

2017

KS

KS #Thanks. You know, that's a great question, <UNK>, I'm not sure I have a good answer for you but I can assure you that we're not breaking contracts. So to the extent that we're reducing our export sales it's in situations that are more consistent with a quarterly or monthly kind of arrangement versus a long-term arrangement. That's probably just our normal things and we probably shouldn't astric that. We don't have any big projects going on in Longview. The challenge with Longview being a little more this year is both recovery furnaces on an 18 month cycle now and they are both hitting in this year so that'll be a little bit more. Hi, <UNK>. The $60 million to $70 million is just containerboard and corrugated. Domestic. Right. The $9 million and $10 million are incremental to that. Could I go back to <UNK>'s question. The impact that's being discussed there is we're going to have slow paper machines down when we do our number 19 furnace, we're changing the ID fan and doing some duct work and it'll be down for about 17 days, so that's not actually paper machine upgrades it's a recovery furnace upgrade. For Longview. Okay. Operator, if there's one more question we'll take it. Otherwise we're going to ---+. Go work. Yes, we're going to go try to make some money. Well, you know, I'm not going to comment on the likelihood of a future price increase but I will say, in general terms, the market is tight. We're having some difficult conversations about allocating mill production and we don't see this ending anytime soon so the market is tight and remains tight. Okay. Okay, so I just wanted to thank everybody for participating. We look forward to talking to you again in about two and a half, three months and if you have any follow-up questions you're welcome to contact any of us. Thank you again. Bye bye.

2017_KS

2016

RHT

RHT #Yes, I'll start off. We rarely, given the type of middleware we sell and what we're doing, we rarely directly run into Force.com, which is much more tied around kind of the Salesforce portfolio. Regarding Oracle, we love when anybody raises up, hey, why don't you think about PaaS because when change happens we win a pretty nice share of that, so the fact that there's more discussion and consideration around PaaS it is a really good thing for us. We still remain, in terms of dollar terms, a small-share player in middleware so anybody, including incumbents, who look to make a shift and therefore get people considering alternatives, that's good for us. The more focus on talk about PaaS broadly ultimately is good for us because it just increases the number of at bats we have to win. We feel really, really good about where we are. Again, as people think about modern whether it's PaaS or just more modern types of middleware micro services, all of that is a net positive for us. Well, let me take our most mature product, Linux. The vast majority of our engineering expense around Linux is the downstream sustaining engineering around our releases. It's not necessarily upstream feature development for the exact reason that you mentioned, which is the upstream community does a lot of upstream feature development. We're obviously involved in a number of those components but the majority of our expense is sustaining engineering. We certainly would expect that as we think about the products across the board. Again, coming back to profitability, sales and marketing is a larger share of the expense and that's one where whenever you have a new product there's higher expense associated with that. When we looked and thought structurally against any of our products, at maturity I don't ---+ we don't have any reason to believe that any of our products would be less profitable than Linux. If we look at renewal rates, those are typically similar over time across product lines. I think we look at the relative engineering against sustaining engineering just looks similar. I think at similar levels of maturity so far we think the portfolio will look similar. It's obviously we're at different stages of maturity across the portfolio. Operator, I know we have a few more questions out there but I'm afraid we only have time for one more. Good question, <UNK>. Just reaffirming, yes, because at the Analyst Day I talked about the three different options. One to go more heavily toward, as <UNK> was just talking, about operating system or RHEL, and that clearly would have a better leverage model in the short term. The other extreme would go more heavily toward emerging markets. I think that would accelerate the growth but cause a margin deterioration in the short term. We are going with a balanced approach. This year, as I just mentioned, it's to invest in the first half of the year. Clearly, if you look at the margin profile, first half of this year versus the second half of this year, you'll start to see an improvement in the margin in the back half of the year. I think that's pretty much dynamics of how we're making the investment. As we continue to continue to get momentum on the, let's say, the app dev and emerging technology products as we go into 2018, I think that will allow us a better view of where we think to what extent we really think we can get potentially some slight margin improvement. I would say we want to close out the back half of the year with the guidance that we just gave. We're in the midst right now of already starting our planning for re-uping the next couple years and I think as we get into the beginning of next year, I think we'll have a better view of what that model may look like over a period of years. We'll be more than happy to share that. That's pretty much the takeaway coming off a lot of conversation that many of you and I and <UNK> had following the Analyst Day. We're working on that as far as our planning and we will bring that forward when we think about the start of the new year. Operator, I'm afraid this ends our call. I want to thank everybody for joining us today. We look forward to catching up with you over the next several weeks. We'll be on the road and we'll be at several conferences later in the quarter. Thank you very much, everybody.

2016_RHT

2015

XYL

XYL #Yes, I'd say on the Canada side, it is driven by oil and gas. We had a big distribution order last year that went into that particular segment. So we do anticipate having headwinds through the rest of the year, but it was overly pronounced in the first quarter. And as it relates to Europe, I mean, at this stage, I would say things are progressing. I don't know that we are in a position right now to make a call other than what we've talked about, the year being flat. Thank you. Great. Well, thanks, again, everyone. Once again, as I said earlier, it's very early in the year, but I do feel that we are off to a very solid start. And I look forward to our next call in late July, where we will be updating you on our progress. So, in the meantime, thank you again, and safe travels, everyone.

2015_XYL

2016

PCAR

PCAR #Thank you.

2016_PCAR

2017

ROIC

ROIC #Good morning, <UNK>. Yes. We are currently working on a series of transactions and have been working on that. In my humble opinion will come to fruition this year where we will be issuing a lot more equity with these families, certainly not lower than we issued equity to the public markets. I think you will see more of that in terms of our pipeline, because there are things we started working on years ago that have come ---+ are getting closer to the finish line. In terms of the families themselves, I don't really see yet any sort of acceleration one way or another because I think there's still some uncertainty out there in terms of tax reform and other things that could impact their decisions. The good news is our pipeline is very active in terms of working with these families, but I can't tell you that it's made any difference in terms of what we see from a more external perspective. Thank you. Good morning, <UNK>. No, they shouldn't vary. We typically budget kind of a flat 1.5% of revenues as far as our bad debt first pass, and then we do specific tenant review each quarter. So there's no difference in the guidance on that assumption. That's kind of the way it's looking right now as far as what we see in the pipeline in the immediate future. Our model, the way it works is it backs you into an equity need. It doesn't appear that there's a lot beyond what we're seeing in the OP side. Thank you. In closing we'd like to thank again all of you for joining us today. We really appreciate your interest in ROIC. If you have any additional questions, please contact Mike <UNK> or me directly. Also you can find additional information on the Company's quarterly supplemental package, which is posted on our website. Thanks again, and have a great day everyone.

2017_ROIC

2017

MNK

MNK #<UNK>, I will answer your question around ANDAs and then <UNK> will comment around the FTC issue and other litigation. We have been working on ANDAs over the years. We have not disclosed them generally, but I will tell you we have been active from a licensing perspective over the last year. We see a number of players out there in the specialty generics landscape that are looking for organizations such as ourselves that have good commercial reach. As you have seen, there has been significant channel consolidation, customer consolidation, if you will, in the marketplace. And as a result of that I do think your portfolio has to resonate with these larger players that are looking for large volumes. We are looking for ANDAs that do fit under the moniker of specialty generics. They are hard to make. They are complex. They've got REMS programs. And we are trying to balance kind of organic ANDA production with licensing in products that make good sense for our portfolio. Right. So with regards to litigation, regarding the FTC matter, we believe that's settled and behind us. Obviously, we will continue to comply with the requirements of that settlement and we are in the process of doing that, although it's obviously very early days. Again, if we look at the number of legacy litigation and other investigational issues that we inherited when we bought Acthar, we've resolved the majority of those things now. The largest remaining issue is still an ongoing investigation that was initiated by the DOJ regarding past marketing practices that Questcor engaged in very early on in its life as an independent company. That has been going for a number of years; there's nothing further to report on that. But like we do with all of these investigations, we comply and cooperate completely with all government agencies to resolve these things to the best of our ability. Operator, can you check ---+ <UNK> already asked a question. Could you check the queue. Just consistent with what we've said in prior quarters, if you look over the last year or two, we used to think about mix of business for Acthar being roughly 30% between neurology, nephrology, and rheumatology, with the remaining all other being predominately pulmonology. What we now see is that actually rheumatology is growing, continues to grow relatively rapidly, so it's a bigger portion than 30%. Neurology is probably a bit lower than 30% and nephrology is roughly in the same zone. Pulmonology, though, has grown so that's it's a bit bigger than it was historically. And I mentioned that we have a very early stage ophthalmology pilot. That's still very, very small part of our business. One of the things we continue to be very pleased by is that Acthar is now growing consistently really across the range of therapeutic areas that we just described. Even within neurology, where we've had some challenges regarding MS, again the product is typically marketed for exacerbations of MS. And, frankly, we just are seeing fewer of those going forward. We are actually seeing stabilization of our MS business and we are continuing to see good gains in market share in the treatment of infantile spasms. So neurology is an area that seems to be stabilizing while the other areas like rheumatology, pulmonology, and nephrology are exhibiting very good growth, along with the very early stages for ophthalmology. As it relates to your question around gross to net, that's fully baked into the guidance that we have provided, a mid single to low double. So you shouldn't expect to see significant volatility out of that. Very happy to. Again, this is another I think real strength of the brand is that not only are we seeing good growth across the range of therapeutic area indications, but we are also seeing very good growth across the payer mix. Just to give you a little bit of perspective. When we inherited Acthar, we also inherited some challenges in the commercial sector. If you recall, we had a number of payers who had made some restrictions to their formularies regarding Acthar before we took possession of the drug. And so between 2014 and 2015 we had some real work to do on the commercial side of the business and through our contracting and engagement strategy with commercial payers, we actually stabilized that situation and returned the situation to growth between 2015 and 2016. So now we've got very good growth in both commercial as well as public payers. Again, our mix ---+ our payer mix of business has been relatively consistent now for quite some time, certainly throughout 2016. <UNK>, you were breaking up a lot there, so maybe we can repeat your question back a little bit. You are asking about some of the concepts about big deals. Is that correct. Let me just talk about our concept of doing deals. I will also speak a bit about our views on where we think tax reform may go. And <UNK> may want to add on this. Right now I think the consensus appears there's likely to be some form of tax reform, but beyond that the details of what that may look like are pretty murky at this point. As you might imagine, we are staying pretty close to this, both at the government level as well as at the tax expert level. So I think it really remains to be seen what the tax environment will be and I think, importantly, we don't know what the implementation timing will be for that. What we are hearing is that there would likely be a significant transition period if and when tax reform does occur. But I think with regards to deals, keep in mind that we have never done deals that were dependent on tax. Tax was typically not a major consideration for any deal that we did. We've typically looked for things that we believe are undervalued, that are typically assets that are highly durable, address patients that are relatively underserved, and the products themselves may be underinvested in. This is our whole acquire-to-invest strategy and we believe there continue to be a number of those assets out there. We have been very clear to say we have two fundamental platforms that we build around, autoimmune rare diseases and our hospital channel. We believe those are very broad platforms to enable us to bring in additional assets that leverage the capabilities that we have as a company. And I think we've developed a very good track record of not only being able to identify these undervalued assets, but to invest in them and to execute in ways that create shareholder value. That's our fundamental philosophy for doing deals. It has nothing to do with tax at the end of the day. So when we look at opportunities going forward, we clearly want to continue to diversify our portfolio. We want to build a broader and deeper pipeline and we would prefer, all else being equal, to do bigger deals that move us along those strategic objectives faster. And as typically has been our history, when we have had to lever up to do larger deals, we have typically done so in a way that enables us to rapidly delever and that's the way we would think about it going forward. And that's why we believe that with the assets that we are pursuing, we think we have a significant amount of capital and resource available to us and we don't feel capital-constrained to capture those assets and to further our strategic objectives. Let me pause there and see if <UNK> wanted to add anything. I think you covered it very well. Operator, we are quickly coming up to the bottom of the hour. Let's see if we can get one, maybe two more questions in, so let's please go to the next question. Let me take that. I think the pricing environment certainly is not really any different from a public policy perspective than what we've seen, certainly over the last year or so. I think what you've seen us do is try to match our pricing strategy with value. Again, one of the things that you have clearly seen us do is consistently publish information that supports the positioning and value of our products relative to the price that we charge. And so we believe that the pricing actions that we've taken ---+ and you pointed out correctly we didn't take really any price on our major brands for our last 18 months, or even longer in the case of Ofirmev, for example. But as we have continued to generate data to demonstrate the value that these products bring to the healthcare market, we believe that the pricing is appropriate given that relative value. Again, I just go back to our original prepared comments and I think a question that was asked earlier regarding net gain. If you look at our pricing policy typically, we're going to be something in the mid single-digits when we do take a pricing action, which is consistent with what you've seen with Ofirmev and Acthar. Again, if we net out everything ---+ discounts, rebates, payments to governments, and so ---+ typically we reduce the net impact of that by about a third. Again, we haven't given a lot of history here because recognize that a lot of this is still relatively new in our portfolio. But, again, if you think about the fact for a product like Acthar, where there weren't discounts given before, now with our contracting strategy and our rebating strategy clearly we have 60% or almost 60% of commercial covered lives under some form of contract. So there has been some increase in discounting and rebating. But, again, we have built our contracts in a way that they are really volume-based. And so while we may give a modest discount upfront, typically we're going to be realizing good value on these contracts if they perform, because we are getting the volume at the end that we expected. Over time you could suggest that we are ---+ that there is a trend towards more gross-to-net difference, but again it has been relatively modest for us up to this point and we would expect that relatively modest trend to continue going forward. The only thing I would add is I just want to make sure that third in the prepared remarks was specific to Acthar. Thanks, <UNK>. Operator, I know we have a bunch more questions queued up. Let's see if we can sneak one more in before the bottom of the hour, then we will have to wrap up. Thank you, <UNK>. I do think that [2017] (corrected by company after the call), as evidenced by the guidance we provided, is tough and it's going to be tougher with the guidance we provided than we have historically said around Specialty Generics because the pressure on methylphenidate ER is going to be significant. We already have competitive entrants out there in the marketplace, as you know. Mylan is in the marketplace at this point. We do anticipate other competitors coming in. A couple things, though, I would say that we do see playing out in 2017 that may abate as we move into 2018 and beyond. If you look at the market share of the three large players that dominate downstream the generics industry, it's been highly, highly, highly consolidated over the last couple of years. And so I think the price harmonization that's been going on as these entities have been brought together, it's going to slow just by nature of there's less to consolidate to further reduce margins. I do think 2017 is the year where methylphenidate ER will drop. And, more than likely, this time next year we probably won't be getting asked too many questions about it because of its relative size when compared with the portfolio we have. I don't think the price harmonization ---+ while it will always continue, I don't think it will be as extreme as we have seen in, say, the last six months and moving into the first half of this year in particular. As it relates to your question around the pipeline and the ANDAs, it's hard to predict, principally because you have the ANDA approvals coming out of FDA that have accelerated pretty significantly over time. Rest assured we are doing whatever we can to get those ANDAs queued up as early in the process as possible to maximize the value opportunity to drive ROIC. We have not put that in the public domain. Thanks, <UNK>. With that, we are going to call it. We are after ---+ we are past the 9:30 cutoff. Again, I want to thank everybody for joining us. A couple reminders for you. First of all, this call will have a replay. It will be available on our website later on today. Secondly, Dan and I will be available throughout today to answer any questions that ---+ if you need any clarification on any of the things we talked about today. Thanks for joining us on what I know is another busy day in spec pharma land with a lot of things going on. Have a great week and we will talk to all of you soon, thanks.

2017_MNK

2016

TRIP

TRIP #Sure. Airbnb offers an interesting product. We have a very competitive product in that space but we come at it more from a look, the individual who is looking for a great place to stay in London and they might pick a hotel, they might pick an apartment, they might pick even a more traditional vacation rental. Our supply footprint covers them all and we are growing that around the globe. So in a sense, Airbnb is a competitor, we don't particularly view their traffic or the person looking for the shared room as someone that is naturally on TripAdvisor, but for the other piece, for the city or for the urban inventory we do. Hard to say given the strength of the hotel industry currently that Airbnb is a problem. They just added a lot of supply into the equation and I personally believe that they are generating more travel on the part of consumers because of the supply that they have added. I have no data point to back that up, but it is kind of logical to me as they continue to grow with the hotel companies and folks like us and other OTAs continue to be very strong in our markets. In terms of the mobile experience, boy, tough question. There's aspects of our app and our experience that I think are just terrific. You can find great places to eat nearby where you are standing all around the globe. You can book the hotel, we've stored your credit cards, two clicks and you are done. There is tremendous amount of benefit that we have achieved I believe by delivering a great user experience for close in hotel shopping, places to eat, things to do, bringing the bookability of our attraction inventory onto the phone. Really, really nice. From a, is there more to do. Absolutely. I just think the amount of data that TripAdvisor has that can help you plan a trip that is so hard for us to figure out how to surface at the right time really hard to read your mind to know what you are going to be looking for next. But we have got it because we have so many users, we have so much data on all topics related to travel. Plus we've got the community standing behind us. So do we bring that all to the forefront in a perfect way on the mobile small screen. No. So I still think we are in very early days in what we can do but we are incredibly well positioned because of the rich content across all travel categories and because of our installed app footprint which is as you know just huge. So I would say way more opportunity ahead of us than we have tackled already. We certainly keep an eye on them, but we never are able to detect whether their products have an impact on our business. We are at such a scale, and that is a very recent release on their part. There could be a factor at some point down the road, who knows. I think I have said that to eight or 10 different Google product iterations over the past decade and my answer is still the same. I will take both questions. So on the revenue per shopper, as you pointed out, we did decelerate in Q4 on revenue per hotel shopper. In total, revenue per hotel chopper declined by 12%. And there's a couple of things if you unpack that and if you think about modeling that for the future, there's a couple of things going on there. One important driver is currency, which had a significant impact on that, in the fourth quarter in particular. The second factor you have to consider is that this is an aggregate number across all devices, and our mobile revenue per shopper is growing much more quickly ---+ sorry, our number of mobile shoppers is growing much more quickly. So you've got a mix shift which drags down the average. Having said that, we are very seriously improving our revenue per shopper in mobile in constant currency terms. In 2015, we improved revenue per shopper in mobile by about 30%. So we are improving, but it is still significantly lower monetization than desktop which is a negative impact. Then we had, of course, Instant Book in the fourth quarter, which also negatively impacts that revenue per hotel shopper growth. So as you think about that going forward, we do expect further pressure if you just aggregate now the desktop revenue per hotel shopper and the mobile revenue per hotel shopper. Particularly on desktop but also on mobile, we expect negative pressure on that in the first half before the growth rate improves again on revenue per hotel shopper. Let me just pop in for a second. To the part of the question on the kind of absolute number of hotel shoppers, it is clearly growing stronger on the phone. We are not projecting a lot of growth going forward on the desktop/tablet, simply because the user behavior is shifting. When we look at modeling going forward, it is tough for us to do as well. But I would point out the cycle, if you will, of as our revenue per hotel shopper improves, we are able to acquire more traffic on ours for breakeven traffic basis. And of course, we are always trying to acquire more hotel shopper traffic growth. Simply put, if we make more money per hotel shopper visitor, we can bid more on search engines and other traffic generating sources. So some of the decline in the hotel shopper absolute number in Q4 would be related to our lower revenue per shopper number, which in turn means we were able to buy a bit less. As that flips around second half of next year or whenever it does, you will get to see some of that growth reappear. Sure. So yes, from the definitional perspective when we talk about IB conversion it is folks that enter our booking funnel and come out the other end as a transaction. Compared to meta, we send the click off to a partner and some of those partners we have some conversion related information, so we can tell what percent of the leads we send turn into a transaction. So right, we say it is comparable. It varies a lot of course, type of property, point of sale, even time of year. So we are just trying to point out that we have achieved comparable to meta. And to your second question what trends do we see within, it is a little bit early to say exactly what trends we see of which type of users would migrate from meta to Instant Book. But it is something we are watching quite closely. You are by the way identifying also why we are really focused on the aggregate revenue per shopper improvements because some of these interplays between meta and Instant Book are a little bit more complex than you may think on the surface. Sure, in some cases. A lot has to do with the user intent, so we presume our big meta partners have a lot of user intent that says I am going to their site and I am ready to book. So I drive right through the funnel conversion rate very high. We have some percentage of our traffic coming to TripAdvisor or arguably most of our traffic coming to TripAdvisor right now with a high research intent and we pull them through the funnel and get them to click off to a partner. Sometimes they convert. If we are able to train folks to come to TripAdvisor when they are ready to book then they are we believe more likely to go down the Instant Book path, so our conversion rate would be higher than our average traffic we send off to meta. Yes, that is a very believable, it is a thesis that we would love to prove to be true sooner rather than later. I wouldn't say it is makes our meta leads any less quality, I think it is just a testament to that we have been successful at driving a higher intent purchaser to TripAdvisor when they are ready to do that booking. We have a lot of options there. So the display that you currently see on our site I can almost promise you it will change somehow at some point because we are still iterating. What you are referring to I believe is what we internally called the click distribution. So when someone is looking at a hotel page, what percentage are clicking on Instant Book versus the top meta offering versus the second, third, etc. So a majority of the clicks are still going into the meta flow versus Instant Book on average. And we don't necessarily view that as a bad thing for where we are today. We know we can influence that a lot depending on how we choose to present Instant Book as an option. We do carefully measure, I don't disclose, but we carefully measure the conversion rate for Instant Book, when our prices are as good versus not as good versus better than the meta options and you can imagine that has an impact. The biggest thing that we can do to your question is to actually get Instant Booking available on more properties in more markets then sort of build more partners underneath the instant booking placement. So in the US for instance, we have really good coverage right now. You look at most any city or most any hotel and there is probably if it is bookable online there is probably an Instant Booking option because we have a good selection of partners between the brands and the OTAs. Not as good in one of our newer foreign language markets because we don't have some of that room level content yet. Excellent question. The meta rollout, some of those challenges were more driven by our clients' ability to upgrade or change their bidding mechanism and styles and measurement based upon what we were doing and we have a lot of partners, a lot of clients. So they all had to move forward on the change. With Instant Booking, a client who is an Instant Booking partner has to do a decent amount or some technical work to get integrated but it doesn't really have much of an effect on all the rest of the partner. So the rollout schedule and timing is much more under our control because, especially with the Priceline Group now, we can basically roll out in just about any market that we want to and we don't need the other partners to do any technical work. So lessons learned. Look, with the meta we needed to have given our partners more warning, more sample, more time, a bunch of things but it doesn't apply quite as well to the IB rollout here. To the question of users changing the behavior well, I think meta was a lot easier on the users back then because they put in their dates and they just got more information. Hip-hip-hurray. Here we actually have to teach them what this book on TripAdvisor button means because it is not what they are used to getting on our site. And that is new ground for us and we are doing a bunch of stuff right and I am sure ---+ I know we will be doing a bunch of stuff differently in the coming year to help drive home this new functionality and the benefits our travelers will receive when they experience Instant Booking. I'll take the first one. So we don't break out within our Other segment, which as you know comprises of Viator, but also TheFork and our vacation rental business. We don't break out separately the revenues, but Viator is a healthy part of that and also has very healthy growth rates within that. That is as much as we want to say about that. In terms of China when we talk about a global IB rollout, China is certainly included in that. We have a deal with the Priceline Group, which has a tremendous amount of global inventory, as well as inventory inside of China directly through Priceline and the ability to transact. So we actually don't need an additional relationship with Ctrip in order to provide Instant Booking for Chinese travelers, domestic or international. Though obviously we would welcome additional Instant Booking relationships with every OTA, including Ctrip all around the globe. Great. Thank you all for joining on the call and thank you to all TripAdvisor employees for your hard work in 2015. I'm very thankful to be able to work with such a great team. 2016 is another important year for our business and we are moving quickly to deliver the best user experience in travel. Thanks all and talk to you soon.

2016_TRIP

2016

HFC

HFC #Thank you. Thanks, <UNK>. I can't quote all the RVP timing changes by region, <UNK>, but it's just safe to say that it's happening now, and it will continue to ramp up over the months to come. We can get you the RVP schedules by region or by state if you would like, but I just can't recite them off the type of my head. It's ---+ go ahead, <UNK>. This is <UNK> <UNK>. You are correct. We get varying layers on when the grade changes start, and you're current, we're going to start gearing up for March change-over. That will be the first [tranche] and then go from there. But why don't you let us, <UNK>, get you the exact schedule so that you know for a fact rather than just from poor memory. That's right. That's correct. Yes. Sure. Thanks everyone for joining us this morning. If you have any follow-up questions, please reach out to Investor Relations. With that, have a good day.

2016_HFC

2017

HPQ

HPQ #Thanks, <UNK> We've continued the momentum from our strong first half and I'm very pleased with our third quarter results We delivered net revenue of $13.1 billion, up 10% year-over-year as reported or 11% in constant currency We continue to see broad-based and consistent performance across businesses and geographies Regionally, year-over-year, Americas grew 8%, EMEA was up 14%, and APJ grew 15%, all in constant currency Gross margin at 18.6% was up 30 basis points year-over-year The increase was driven primarily by print margins, resulting from productivity improvements and higher supplies mix, partially offset by higher commodity costs in Personal Systems Sequentially, gross margin was down 60 basis points, driven by an unfavorable Print mix and a higher sequential growth in Personal Systems Non-GAAP operating expenses of $1.4 billion were up 35% as reported, but this year-over-year variance is largely driven by gains recorded last year, resulting from the divestiture of certain marketing optimization software assets Sequentially, operating expenses were down 1% Net OI&E expense was $66 million for the quarter With a non-GAAP tax rate of 22% and a diluted share count of approximately 1.7 billion shares, we delivered non-GAAP diluted net earnings per share of $0.43. Non-GAAP diluted net earnings per share primarily excludes restructuring and other charges of $46 million and acquisition-related charges of $40 million, partially offset by non-operating retirement-related credits of $34 million, tax indemnification credits of $10 million and the related tax impact on these charges In Q3, GAAP diluted net earnings per share from continuing operations was $0.41. Turning to the segments, Personal Systems net revenue was an impressive $8.4 billion, up 12% year-over-year as reported or 13% in constant currency This was our fifth consecutive quarter of year-over-year growth and third consecutive quarter of double-digit constant currency growth We continue to segment the market and offer some of our most innovative products ever These efforts have helped us sustain revenue momentum, deliver consistently across each region, and drive strong market share as an end result By customer segment, consumer revenue was up 14% year-over-year and we gained unit share across each of the three regions in calendar Q2. Commercial revenue was up 11% year-over-year and, similarly, we gained unit share across each region We also achieved strong results by product category, with notebooks up 16%, desktops up 5% and workstations up 11% year-over-year We delivered 3.7% operating margin in the quarter, which is up 0.5 points quarter to quarter, above historical seasonality, and down 0.7 points year-over-year Consistent with what we said last quarter, margins have been pressured by industrywide increases in component costs and currency headwinds We have increased pricing globally and have continued to see positive mix shifts in the business, both of which have helped improve operating margin sequentially However, we remain cautious about the potential negative impact on demand, which could result from higher prices Turning to Printing, the momentum gained in Q2 carried into Q3. Revenue was $4.7 billion in the quarter, up 6% year-over-year or 7% in constant currency Hardware units were up 1% year-over-year, with consumer units up 1% and commercial units flat As noted previously, our total unit growth includes HP Sprocket, our handheld photo printer In calendar Q2, overall print unit share was roughly flat sequentially and year-over-year We remain optimistic about our print growth businesses Our A3 business is off to a strong start since launching its new product lineup in Q2 and we're excited about the opportunity to be a disruptive new entrant in this $55 billion market As <UNK> highlighted, both graphics and managed print services continued to grow revenue year-over-year and we have the opportunity to increase our growth rates Now, moving to Q3 supplies performance Revenue of $3.1 billion was up 10% year-over-year and represented 66% of print revenue The supplies growth was better than anticipated, driven by improving four-box model drivers As we described in the past, the way we look at supplies revenue growth operationally is to take our as-reported number and adjust for two things First, we look at constant currency growth In Q3, currency represented less than a point of delta, so supplies grew 10% year-over-year in constant currency Second, we adjust for changes made in the second half of last year to our supply sales model In Q3 2016, reported supplies revenue was negatively impacted by approximately $225 million or eight points of growth Therefore, when you deduct the eight points against the 10% constant currency growth, net adjusted supplies growth for Q3 2017 was 2% year-over-year We are very pleased to have achieved supply stabilization a quarter earlier than expected We also expect to consistently operate with supplies channel inventory levels, remaining at or below our ceiling And in Q3, channel inventory levels were below the ceiling As a reminder, as part of making the supply sales model changes last year, we lowered our channel inventory ceiling to better reflect the more demand-driven sales model Looking forward to Q4 2017, we expect that our year-over-year supplies revenue growth will remain flat to slightly up when making similar operational adjustments for currency and then backing out approximately $225 million for the supply sales model channel inventory adjustment taken in Q4 of 2016. Print operating profit was 17.3% in the quarter, down 3.1 points year-over-year and down 10 basis points sequentially The year-over-year decline was primarily due to the one-time adjustments I mentioned earlier The positive margin impact of deducting certain marketing optimization software asset, offset by the negative impact of changing the supply sales model, plus productivity improvements year-over-year Excluding the one-time adjustments, we saw good operating profit dollar expansion year-over-year Sequentially, the 10-basis point decline is consistent with normal seasonality Now, turning to cash flow and capital allocation Cash flow from operations was $1.8 billion in Q3 and approximately $3 billion year-to-date Free cash flow was $1.7 billion in the quarter and approximately $2.8 billion year-to-date Cash conversion cycle was minus 35 days, a five-day sequential improvement, driven by an eight-day increase in days payable outstanding, offset by a one-day increase in days of inventory and two-day increase in days sales outstanding The strong Q3 results were driven by Personal Systems revenue performance, which grew sequentially by over $700 million or 10%, well above historical norms This incremental volume materially helped near-term working capital including days payable As you know, since Personal Systems has a negative cash conversion cycle, the timing of cash flow is impacted either positively or negatively depending on its sequential revenue performance Also, we saw positive business linearity in purchasing and other receivables, which supported improved timing of cash flows by couple of hundred million dollars Year-to-date cash flow is now ahead of our full-year range provided during last year's security analyst meeting We are now targeting a higher revised full-year free cash flow outlook of at least $3 billion This assumes a cash conversion cycle down sequentially, more-than-normal seasonality, and more in line with the first half performance Finally, we expect higher fourth-quarter capital expenditures, but will not exceed our full-year CapEx guidance of $500 million During the quarter, we had a total capital return of $524 million through share repurchases and cash dividends Year-to-date, we have returned 56% of free cash flow as compared to our full-year target of 50% to 75% For the full year, we still expect to deliver returns towards the higher end of the range Looking ahead, keep the following in mind related to our financial outlook For the full year, we are on track to deliver our productivity initiatives as announced at SAM In Personal System, we expect to see continued increases in cost of components in Q4. We expect to offset these headwinds with increased pricing, which could have a more significant impact on demand and operating margins than we've assumed With this demand uncertainty, combined with our very strong Q3 revenue performance, we expect Personal Systems Q4 revenue to grow less than normal sequential seasonality For Printing, we expect supplies revenue to be flat to slightly up in Q4 in constant currency and adjusted for last year's supply sales model change We also expect to continue placing units with a positive NPV Given our hedging strategy, we have rolling currency hedges, which extend into future quarters and, therefore, we do not expect a material tailwind from currency in Q4 2017. We will also continue to leverage our balance sheet if we see attractive economic opportunities to do so With all that in mind, Q4 2017 non-GAAP diluted net earnings per share in the range of $0.42 to $0.45. Q4 2017 GAAP diluted net earnings per share from continuing operations is in the range of $0.37 to $0.41. We are raising the midpoint of our full-year fiscal 2017 non-GAAP and GAAP EPS Full-year fiscal 2017 non-GAAP diluted net earnings per share to be in the range of $1.63 to $1.66 and full-year fiscal 17 GAAP diluted net earnings per share from continuing operations to be in the range of $1.46 to $1.50. With that, let's open it up for questions Question-and-Answer Session And, <UNK>, we'll talk more about FY 2018 specifically at our security analyst meeting in October So, everyone should join us then So, from a growth perspective – first off, it's a little bit tougher compare, right? So, if you actually look at what's happened to unit growth, kind of each of the quarters this year, each quarter, the previous year is a bit tougher So, I think that's part of what's going on And then the other part is that we are very much focused on high-value units As we've talked about before, all units are not created equal in the market And where we want to focus all of our energy is really on positive NPV and those typically are really the high usage categories That's where we want to grow and where we want to gain share I don't think there is necessarily a normalized free cash flow One of the things that you saw in the strength of our free cash flow this quarter was the business mix impact So, Personal Systems grows $700 million in revenue sequentially or 10%, well above normal sequential, you're going to see a big increase in accounts payable, as you saw and a lot of free cash flow So, the concept of normalized free cash flow is really not one that I can really comment on directly Sure, Katy So, it's that it'll grow less quickly than what is typical seasonality, not that it'll decline We do expect it will grow sequentially And then in terms of price sensitivity, we see the greatest impact in the commercial space Consumer price increases have taken hold and we continue to perform very well in the consumer space I think consumer revenue was up 14% year-over-year, even though we have done price increases So, it’s much more in the commercial space And our view is that, as we mentioned on the Q2 call that it would take a quarter for them to kind of catch up and we did see some of that in Q3. Hence, some of the sequential improvement in operating profit for Personal Systems <UNK> mentioned that we had 6% share That is up both year-over-year and sequentially, a point or a little over a point So, that's one of the metrics you can absolutely see externally and track as we make progress here So, <UNK>, let me take the second one first Just to make sure that we're all communicating well, what I said was that our business in Personal Systems would grow slower than normal seasonality for our business We have been outgrowing the market by quite a bit So, I don't expect that we will lose share even though our revenue will be a little bit behind normal seasonality So, Toni, we'll talk a lot more about 2018, obviously, at the security analyst meeting in October But I think one of the things that needs to be brought into that analysis is what's going to happen in the market from a pricing perspective We've now seen in fiscal 2017 pretty significant price increases And so, if there is a tailwind from currency in 2018, our expectation is that prices are going to have to come down pretty significantly to relieve some of the pressure that's building because we've been increasing prices this year And so, then it's going to be, ultimately, what is the total impact, it's going to be how many price declines do you have to do and what impact does that have on both revenue and EPS So, first, on the Samsung part of your question, Toni, we don't expect that Samsung is going to close until calendar Q4. So, we do not expect that in our fiscal Q4. And so, I think that's important It will be – Q4 will be without Samsung And then, in terms of kind of the puts and takes of the sequential view, probably, the two biggest things to call out First is commodity costs We do expect commodity costs to go up sequentially And so, that'll be a bit of a headwind But probably the bigger impact is just the opportunity that we see to place more positive NPV units And so, that's really what is kind of the biggest impact sequentially on EPS – I’m sorry, relative to normal seasonality So, <UNK>, I think it's a bit difficult We don't break out kind of that level of detail What we have talked about is, obviously, our commercial business is bigger because of the usage than our consumer business And, therefore, you'll see a difference in toner and ink as a result of that Although, just to be clear, some of the consumer now has our low-end laser in it So, when we talk about our home print system, it includes low-end laser But, ultimately, what's going to drive the supplies is really the four-box model divers It's not ink or toner, it's really about driving across the four boxes, focusing on placing the right units, the high-quality units, working on your installed base, working on, obviously, our market share – our aftermarket market share, as well as the pricing related to supplies So, I'm not aware of other views that say it's going to be flat We actually think it's going to continue to go up, but at a slower rate This is particularly true from a DRAM perspective And then when you step back and you look at it kind of Q4 versus Q3, in the course of Q3, the commodity prices continue to go up So, of course, that will represent a headwind for us in Q4, but we do expect some additional increases in commodities in Q4 as well And then the other thing that I would add is that, I was asked to make a relative comment, and we saw consumer revenue this year – this quarter grow 14% year-over-year and commercial 11% Last quarter, we said that the commercial price increases were going to take a while to work their way through and we saw some of that pickup in Q3. Some of that pickup on in Q3. So, I'm not suggesting that commercial customers are completely sitting on the sidelines at all I think that with our great product lineup, we're certainly able to make the sales that we need to make in that space and get them off kind of the fence So, Rod, let's just make sure we're level set So, what I have is for OI&E last year was a negative $65 million in Q3 and for this year it's a negative $66 million So, I don't see a real big difference there on a year-over-year – are you looking at a full year basis? Sorry, I haven't been focused on Q4 last year I don't remember off the top of my head what happened last – can we take that offline and I can look at that? And maybe even while we're talking here, I can look it up But I haven’t focused on it And then, on OpEx, OpEx numbers were a little higher than we had modeled Maybe we just mismodeled it in July But just wanted to understand, in the October guidance, what you're thinking in terms of operating margins in OpEx? I’m sorry Can you say that again? So, the big drivers off of normal sequential performance from Q3 to Q4 is basically the units that we expect to be able to place We have made great progress in our Printing business on our cost structure, and that is enabling us to go into the market and find opportunities that used to be negative NPV opportunities that are now positive NPV opportunities and we expect to take advantage of those opportunities That’s the biggest reason for not being in normal sequential The other is that we do have commodity cost increases that we see in Personal Systems We don't guide at an OpEx or an operating profit level We are fairly well hedged, in the sense that we have a fair amount of inventory, strategic buy inventory But that's never for multiple quarters or has never been for multiple quarters, and so we will absolutely face increasing commodity costs, both in Q4 to some extent and into 2018. I don't really think of the cash conversion cycle as redefining itself For this quarter, very pleased with the performance We had a cash conversion cycle of minus 35 days, which was five days better sequentially But as I mentioned, that was really driven by the incredible strength and sequential performance of the Personal Systems business Because the Personal Systems business has such a negative cash conversion cycle that when it grows – its growth increases sequentially, you're going to see a fair amount of free cash flow Similarly, if the growth is less in the following – in the next quarter sequentially, you're actually going to see a little bit of a reduction in free cash flow What we expect for this year is that we would do at least $3 billion in free cash flow, so making great progress on free cash flow, and that our cash conversion cycle would likely end the year at a minus 29 days, kind of in line with FY 2016's exit And I think of that more as kind of the range that I would be modeling over the longer-term

2017_HPQ

2018

ROIC

ROIC #Good morning, everyone. Here with me today is <UNK> <UNK>, our Chief Financial Officer; and Rich <UNK>, our Chief Operating Officer. As 2018 gets fully under way, we are pleased to report that the company is off to another solid start. Demand for space across our portfolio in core markets continues to be strong. While the first quarter of each year is typically relatively quiet on the leasing front following the holiday season, that has not been the case for us this year. In fact, it's been the most active first quarter on record for ROIC. We leased over 400,000 square feet driven in part by tenants proactively coming to us to renew their leases well ahead of their lease expirations. In terms of new leases, we continue to not only achieve solid rent increases overall, but we're also making the most of the broad demand to carefully select the best retailers based on their financial strength and their ability to consistently draw daily customers as well as the right fit at each center in terms of retailer mix. Rich will go through the details in a minute, but it's safe to say that we're off to an excellent start in 2018. With respect to acquisitions, as we commented on our last call, given the volatility in the market, we are being cautious in this environment, and have prudently slowed our activity for the time being. With that in mind, as previously announced, we only acquired one shopping center in the first quarter, a property located in the Seattle market, which continues to be one of the hottest markets in the country. In fact, the state of Washington was recently ranked as having the best state economy in the country with the ongoing pet boom in Seattle leading the way. The shopping center that we acquired is located in Tacoma, which is a densely populated submarket of Seattle. Immediately surrounding our shopping center, there are number of new multifamily developments under construction that are geared towards young professionals. Additionally, the city of Tacoma is in the process of expanding their light rail transportation system that includes a stop directly in front of our shopping center. We think the long-term prospects of this grocery-anchored center are very promising. With this acquisition, we now own 16 grocery-anchored shopping centers in the Greater Seattle market, totaling upwards of 2 million square feet. We also have one additional grocery-anchored shopping center acquisition under contract that's located in Portland, which is another very strong, rapidly growing, top-ranked market. The property that we are acquiring is located in a mature, established submarket of Portland, where we currently own several other key grocery-anchored shopping centers. In fact, with this new acquisition, we will own all of the grocery-anchored shopping centers serving this submarket, which will add to our ability to maneuver tenants, drive rents and enhance long-term value. Beyond these 2 acquisitions, we continue to keep a close eye on the market. As it relates to widely marketed, grocery-anchored shopping centers, while the deal flow has slowed a bit as compared to the level of activity during the past several years, there still continues to be plenty of properties on the market. And while there aren't as many buyers as before, the ones that are in the market are still aggressively pursuing grocery-anchored properties such that pricing has only moved marginally. Cap rates have generally been in the low-5s so far this year, or about a 25 basis point increase on average, give or take, from the record low cap rates that we saw last year. That's pretty well consistent across all our metro markets up and down the West Coast. In terms of off-market, privately-held shopping centers, while the flow of inquiries remains active, seller pricing expectations haven't changed much to speak of thus far as people are waiting to see which direction the market and interest rates will head once the current volatility settles down. Taking all of this into consideration, we intend to continue being patient. Now I'll turn the call over to <UNK> <UNK> to take you through our financial results for the quarter. Mike. Thanks, <UNK>. For the 3 months ended March 31, 2018, the company had $74.4 million in total revenues and $27.3 million in GAAP operating income as compared to $65.9 million in total revenues and $22.9 million in GAAP operating income for the first quarter of 2017. GAAP net income attributable to common shareholders through the first quarter of 2018 was $10.7 million, equating to $0.09 per diluted share, as compared to GAAP net income of $10.2 million or $0.09 per diluted share for the first quarter of 2017. In terms of funds from operations for the first quarter of 2018, FFO totaled $37 million, equating to $0.30 per diluted share as compared to FFO of $34.3 million or $0.28 per diluted share for the first quarter of 2017. Included in other income during the first quarter, we received a $2.2 million lease settlement payment from a former tenant at a property that's slated to be sold and redeveloped as multifamily. In terms of property-level net operating income, on a same-center comparative basis, which includes all the shopping centers that we have owned since the beginning of 2017, encompassing about 90% of our total portfolio GLA, cash NOI increased by 2.4% for the first quarter of 2018 as compared to the first quarter of last year. Bear in mind that with our portfolio at over 97% leased, specifically 97.5% for the same center pool both this quarter as well as last year, which is essentially full, we still continue to consistently achieve same-center NOI growth. In other words, our growth isn't coming from the benefit of increasing occupancy through leasing up vacant space. Our consistent growth is a function of our entire team all working together, from our leasing personnel working hard to drive rents higher as leases roll, to our accounting team working diligently to maximize recoveries, to our property management folks working to operate our properties as efficiently as possible. It's this coordinated effort of proactively working our portfolio by our entire organization that continues to drive our performance. Turning to the company's balance sheet. At March 31, the company had a total market capital of approximately $3.7 billion with approximately $1.5 billion of debt outstanding. For the first quarter, the company's interest coverage was 3.4x. With respect to the $1.5 billion of debt, the vast majority of that is unsecured. In fact, during the first quarter, we reduced our secured debt outstanding, retiring a $10 million mortgage, leaving us with only $96 million of secured debt today. In terms of our unsecured debt, the bulk of it is long-term, fixed-rate bonds with a weighted average remaining maturity of 7.6 years. And regarding our unsecured credit facility, at March 31, we had approximately $160 million outstanding on our line. Lastly, in terms of our FFO guidance, thus far we are on track with our previously stated guidance of achieving FFO between $1.16 and $1.20 per diluted share for the full year 2018. Now I'll turn the call over to Rich <UNK>, our COO, to discuss property operations. Rich. Thanks, Rich. Looking ahead, the strong and broad demand for space bodes well for the future prospects of our business not just near term but long term as well, especially given how protected our markets are. Notwithstanding the demand for space given the lack of available land and the difficult entitlement process on the West Coast, there continues to be very limited new supply, especially as it relates to grocery-anchored sector and the specific metro markets that our portfolio is focused in. Additionally, the strength and diversity of our tenant base also bodes well for the future prospects of our business. While many shopping centers across the country continued to be adversely impacted by internet retailing, that's not the case with our portfolio. We focus on leasing to retailers in the daily necessity sector and tenants that provide goods and services that bring shoppers to our properties consistently like restaurants, doctors dentists, salons, fitness clubs, just to name a few, as well as entertaining users like Rich spoke of. In fact, today, over 80% of our revenue comes from these types of tenants, with supermarkets being the largest given that 95% of our portfolio is grocery anchored. Additionally, today our tenants are implementing innovative omnichannel internet strategies to enhance their bricks-and-mortar productivity. In summary, we look forward to continuing to work hard at taking full advantage of the strong fundamentals across our markets as well as taking full advantage of the strong portfolio and tenant base that we've built over the years to continue building value and delivering solid results. Now we'll open up the call for your questions. Operator. It's a mix of deals. It's not what I would call ---+ I mean, it's more specific to the metro markets and grocery-anchored shopping centers, but it is a bit of mix in terms of the number of retailers. So it's primarily across the whole West Coast, but every property is going to be different in terms of where that pricing is going to end up and how wide that number is going to be. We have, but it's very little. And it's ---+ very little on the margin, as I said in my prepared remarks. Sure. I mean, I think as we articulated in our call, our last call, we expect same store to ramp up primarily as we move through the year. But certainly, as we head into the second half of the year, that's when we get a full run rate in terms of all the anchor leasing that ---+ or repositioning we've done as well as the leasing that we've done. So again, it looks like it will continue to ramp up and with some ---+ certainly some very nice increases as we move towards the end of the year. Yes, the buyer pool has shrunk. But certainly, any capital that's out there looking for retail, the focus is grocery, drug anchored in the, again, the more affluent primary markets. Dispositions, I think, as we articulated, we are in the midst of selling a couple of assets that are being redeveloped as residential properties, and both are going through entitlements, which we're helping to expedite, and we expect to have that completed as we moved through the year. And we are looking at a couple of other properties as well at the present time, and we'll have a bit more hopefully to talk about at our next call regarding what we're doing there. Yes, I wouldn't say it's necessarily a redevelopment or expansion. The value enhancement TIs, if we kind of break those up from regular TIs, which are primarily more of the shop space, but the value enhancement TIs are those associated with situations where we proactively recaptured underperforming space and in some cases years ahead of the leases expiring, or recently acquired properties and release it to stronger retailers at higher rents. It's really more reconfiguring the spaces versus going and just finding one vacancy and re-leasing the one vacancy. It's looking at really the what we call the tenant mix and the repositioning of that tenant mix playing offense versus just sitting around and waiting for them to renew their leases. We look at where we could ---+ with the tenant demand at west we would have the ability to look at expirations and then enhance the real estate versus just lease what's there. Well, the gap has gone quite wide for ROIC. Certainly, looking at more debt dispositions as we move through the year. But I think more importantly, what investors really need to understand and look at today in terms of the sector is really looking at the management teams. And I think one thing you're going to get with this management team is one that is battle tested, as we say. We've been through many recessions. We've seen many things occur over the years. And with the high quality portfolio that we have, we feel being patient is the best thing to do at the present time. So certainly, we're looking at share buybacks, and we're looking at increasing dispositions and other things. But the reality is that, the good news is that, we are in a great position to be thinking outside the box, and more importantly, staying very proactive in playing offense on the West Coast. We don't have the ---+ I don't know that broken down in front of me. So I really couldn't give you an answer at this time. We could follow up with you after the call. I mean, the answer is yes. We're looking at a couple of opportunities in terms of either it's some land that is beside one of our centers or maybe an opportunity even within the center in terms of repositioning. But that's our normal business as we say. I think that could be it and ---+ just in terms of looking at the real estate. Dispositions, we are continuing to focus on, but nothing really to talk about at the present time, but we're making some headway there. Certainly, private companies. We don't see as many syndicators, speculators, people that really are looking to deploy capital on a short term. These are really buyers that are much longer term as it relates to investing their capital. So it's institutional capital. It's 1031 buyers. But ---+ and then, I think there are a number of buyers out there that are like us are being somewhat patient. They are sort of watching the market and thinking about where cap rates might go. Whether they go higher or lower. But I think it's a combination of all 3 in terms of why the pool is smaller. And then I think the financing market is having a bit of an impact in terms of the buyer profile. What we do see out there and somewhat hear is that there's not as much financing available for under-capitalized buyers. So that's having an impact. It's all really all of those that's really impacting what we're seeing in the market at the present time. I think it's the cost of debt capital and it's the access. Actually, I think the lender is probably being a little bit more discerning with who their borrower is, and pushing down the LTV max, sticking with (inaudible) depending on the credit quality of the borrower. Yes, we don't see this as a trend, Jeff. This is a ---+ remember, we have to report every 90 days. As Rich articulates there's so many tenants that (inaudible) out within 90 days. So ---+ but no, this is ---+ we don't see this as a trend at all. In fact, as we're in the second quarter right now, we're continuing to see the mark-to-market on our renewals very strong, and in a number of cases, higher than that number, that 3% number. Well, that's the only available debt we can pay down, everything else is fixed rate long-term debt. Our repositioning initiative is kind of on the tail end of stuff of the major ones we're proactively doing. Our free cash flow this year should be higher than in the past. That was just simply to delever. Because obviously, the stock price is now where we would like it to be. That segment of our debt farther down. Exactly. Well, certainly from an M&A perspective, I don't hear much chatter out there at all. And I think a lot of the other companies are working and spending time on their real estate versus trying to go out and get bigger as we say. I think the one thing that you see in the market today that's playing out certainly with the change in retailing is that the smaller, more focused management team, and which are much more focused management team, I think, certainly has a bit of an advantage, which means the smaller companies just in terms of dealing with the changes that we see out there or changes that might be coming. So from an M&A perspective, I don't really see or hear much activity. I don't think there will be much activity in the sector. I think some of the other CEOs who certainly I've spoken to, when I've asked about M&A have said, why would I want to take on more of what I have at the present time, when I'm trying to work through some of the bigger issues out there as it relates to box retailing, primarily. I think you might want to go to the next question. No. I think we're still maintaining that guidance. I think, we expect in the first half to be lighter than the second half, and actually Q1 came in a little bit better than what we thought it would. But we're ---+ not enough to make us want to move the overall guidance range. It's a combination of both really. I mean, we ---+ in our guidance, we assume that we would sell some stuff but redeploy that capital as we go. So on a net-net basis, really no change. However, as we look forward, there is still opportunities out there for the company in terms of doing the OP units as well as sourcing off-market deals that have bought good NOI growth. So it's really the churning of the capital in terms of our guidance, <UNK>. And that's how we've sort of modeled things. A little hard to target a GL<UNK> I mean, we really deal with these as they come up. We obviously, proactively also reach out when we have a lease that's renewing in a couple years. We know that they don't have any options left. We start that conversation early so that we can get some certainty with our anchor tenants. I don't know that there's any good way to predict from a square footage perspective, but every time something comes up, we look at other opportunities. The Kroger deal I mentioned, where they're putting in fuel, and they now want to put a couple million dollars into that particular store, we are now trying another location together with that. We're going to have them exercise an option early. So not only are we dealing with one shopping center, we're bringing in and using our scale to secure an anchor tenant at another shopping center. So we're working it every single day. There's no doubt about it. Just a couple quick ones. <UNK>, you mentioned that you ---+ that the same-store NOI number came in a little bit better than expected. Anything you can point to specifically that would help us understand what that was. And is it stealing or calling forward anything that you might have been expecting later in the year. Or what exactly sort of drove the maybe better-than-expected there. Nothing that stands out individually. It's probably a collection of small amounts across the portfolio of the centers we're in the same-store pool. But nothing stood out usually different from our budgeting. And then, Rich, just a question. As it relates to sort of tenant retention or tenant fallout, what have you seen this year that compares to sort of last year or the year before. Are things better or worse with retailers on that front. Chris, I was just going to say that's kind of reflected in our bad debt. At the end of each quarter we go tenant by tenant and make those appropriate adjustments in terms of bad debt. In the first quarter, they were very and only involving a handful of shop tenants. Okay. Great. And then <UNK>, last question for you. Just as it relates to the ---+ both the unit conversations that you have with potential sellers. What level of flexibility as it relates to sort of where your stock is that you have relative to the valuation that you are willing to accept. How off of sort of current market pricing are those sellers willing to negotiate. Well, pricing expectations among these owners haven't moved. So the relationship to unit valuation hasn't been favorable this year. So that's been sort of one of the underlying issues in terms of trading our currency or doing OP transactions. Although, I think certainly sellers are still comfortable in my discussions in terms of looking at a stock price that even with the current valuations at 20 or higher. So it's becoming a bit harder, but on the other hand, most of these owners know us well, know our real estate, and are looking for the long-term investment horizon versus the short-term. So the volatility in the market for them is not as important. But that's sort of where things sit from an OP transaction perspective. I don't know if was necessarily a run rate, but it's not ---+ we don't think it's indicative of a trend, it was more a function of the timing once certain expenses were billed and paid. Yes, exactly. If you look at the recovering income increase, that basically tracks with our overall recovery ratio as well. Even though expenses were up, so was recovery income. In closing, I would like to thank all of you for joining us today. If you have additional questions, please contact Mike, Rich or me directly. Also you can find additional information in the company's quarterly supplemental package, which is posted on our website. And lastly, for those of you that are attending ICSE convention in Las Vegas next month starting May 20, please stop by our booth, which will be in the South Hall at the corner of [End] Street and 50th Avenue. We hope to see you all there. Thanks again, and have a great day, everyone.

2018_ROIC

2016

ORCL

ORCL #Sure, so of course, you have to remember we're going from Q4 to Q1, so our Q1 new license is our seasonally lowest one anyway, okay. Now as you know, our focus is now on cloud. And so as new license becomes a smaller number, especially in Q1, it means that it does not ---+ that the support base does not grow as much. There's also a little bit of currency, but you should ignore that, so that's the first thing. Now, I know you're probably worried that all of the sudden support is going to go negative, the base is going to go negative. We don't foresee that happening, okay, because the base is continuing to grow even though new license amount is not growing year over year as much or is actually shrinking, as more of our customers pivot to the cloud, we still sell new licenses, which means the base does continue to grow and it grew 3% year over year. So that's, I think ---+ I don't know, you had a few parts to your question, but that's really what's going on here. We don't ---+ yes, that's it. Yes, yes, yes, it is. Absolutely. Absolutely, and I do want to say one more time again, and also <UNK> mentioned it, our retention rates, our renewal rates in our support business remain very, very high. So, in fact, they're a little bit higher this quarter than another quarter. It's all within a band; they're very high, they remain that way. Sure, so first, you really should take direction from what's going on in our gross profit line for the most strategic part of our business, which is moving to the cloud, and software, and software as a service. And that is going to be very much followed up. One of the things we do have that is costing us is that our hardware business outside of our engineered systems is getting smaller, and the expense line has not adjusted equally. As you can imagine, you know us pretty well, that's something that is very straightforward for us to finish out during the year, and that is our expectation. In addition, you also talked or you may have mentioned currency and tax and things like that. So obviously, currency is something I can't project and I think after the Brexit vote, I'm pretty sure nobody else has projected it correctly either. So but the way it affects us, just so that you know, is that the US at Oracle is ahead of Europe in our move to the cloud and outside of the United States; however, as <UNK> mentioned, the bookings are very, very high. So bookings that were booked in the United States over the past year are turning into revenue already in the United States. Since the number is smaller in Europe, the bookings, the revenue numbers are smaller, the bookings are approaching those of the United States, and those are going to start flowing through revenue. That will, in fact, impact our tax rate and readjust it back to the lower rates that you may had be used to. So that's going to take a little while and that should go through. In addition, as you know, we do have some significant borrowings, and as a result, we have a very large amount of cash on our balance sheet right now, which is not earning very high results. We are looking forward to closing the NetSuite deal, which we believe to be accretive and that will also be helpful. I'd add just one less thing. Exadata as a service has been a very strong PaaS offering, so we count Exadata as a service, meaning you can now get Exadata in the cloud, as you can get it on-premise. And our Exadata-as-a-service offering has been a strong PaaS offering. So when ---+ we actually don't even add that into the engineered systems numbers that <UNK> described earlier, and that's really the strength and popularity of Exadata. We also have a pretty good sized business now [built] in PaaS, which is a cloud integration services business inside our platform as well. So everything <UNK>, said all of the [dev-tev] stuff, the supplementing of our SaaS offerings, Exadata, and the data integration services are at the core of our most popular PaaS offering. The answer to your last question is no, and the answer to your first question is faster than I would have thought two or three years ago. So some of the names I wrote ---+ I read earlier are scaled companies. When you see somebody like a Tesco moving, when you see an HSBC moving, when you see some of these brands, and we have all types of brands in our list of ERP customers, ranging from GE and others, as I've described, to newer companies like Lyft and others that are newer, hot, mid-market companies that may have not even had a set of financials before. And it's really all of the above. And I think the thing we get excited about, it's the reason we talk about Workday probably as much as we do, is we see them at least with a SaaS offering. Our core on-prem competitor historically hasn't really done anything. So when they try to ---+when you look at their base, as their base begins to lock for some of the benefits that our base now has the opportunity to take advantage of, we think there's a possibility for a relatively sizeable market share shift over the years as we move forward. So I ---+ <UNK>, I do think you're going to see tire kicking, and you see it now of many scaled companies that are the biggest companies in the world. And you see a few of them showing up on our list of recorded wins. Okay. Can we move to close the call please. But before we do that let though, me just finish up with the last couple of comments. I apologize for this. Thank you for joining us today. A telephonic replay of the conference call will be available for 24 hours. Dial-in information can be found in the press release issued earlier today. Please call the Investor Relations department with any follow-up questions from this call. We look forward to speaking with you. With that, I'll turn it back to the operator for closing.

2016_ORCL

2015

TUP

TUP #<UNK>, let me comment on the first part of that and you add whatever you want and handle the second part, as well. <UNK>, firstly, objective of management and the Board of this Company is the sustainability of this enterprise moving forward from all of our stakeholders, from the 3 million who are sales force to all of our employees and to our stockholders. And we're not going to take short-term actions that could put that at risk. The Board and management have put a stick in the ground after, I think, a fairly sophisticated evaluation of what is our comfort level with regard to leverage, and that's what we're operating with right now. And then when you mentioned benefit to our shareholders ---+ which shareholder. The one that's going to be in and out of our stock in months or the one that's going to be our European shareholders who are in our stock for five years. We look at it for all of our shareholders out there. So, we generally do not do short-term actions that could put this Company at risk. <UNK>. The other thing that the approach enables is to be consistent with the dividend and not have to come off of it if there's some small dip in earnings. So, that's part of the picture, as well. In terms of the CapEx part of the question, <UNK>, the $5 million reduction really reflects the weaker exchange rates given where we're spending. It's not significant change in the projects. It's just they don't cost as much in dollars. It depends on which unit, <UNK>. The key piece of the business is they're doing classes, cooking classes there, and that is a growing percentage. You'll get to some of our units where it's 25% to 50%. Others it's early days of that. That is a growing portion of our business, though. Greg, we've talked about this before. The typical apartment isn't big enough to really have a Tupperware party, so it is the local unit there for parties. But that's where our management team is really putting their effort because it's the most productive. I think one of the things that shows that is about one-third of our business is now the water business, but we're now starting to see other of our products, our food preparation products, start to really come on strong there, and that's a result of demonstration of those in a cooking class. I don't know the exact number but it's got to be less than 5%. Every bit of what you would see in, for example, a Starbucks here you'd see in ours there. They have to have certain signage. We're into our third generation of what the outlets need to look like. And all that merchandising, that's what our headquarters are doing there. And we have regional offices there that are very close to these. It really is a quasi-party plan business in locations where they can't because they can't do it in the house. But it's a demonstration and relationship business there, sold out of these bases. We give various configurations of those. And in the areas where they wouldn't be able to afford that, it's a smaller kind of a unit there. You get more west in China ---+ almost all the high per capita income population is along the coast and in Beijing ---+ you go west, things change dramatically. And that's where China's trying to feed a starving 800 million in that part of it. And so you'll get a modified configuration there. Okay, thank you. Thanks, everybody, for your time. We expect to build momentum this next quarter with our sales force size advantage. Remember, it's [2%] right now and we really are working hard to build off this. As <UNK> said, too, we're hoping to get to 5% to 7% in local currency with full year guidance up 4% to 6%. So a very interesting time in the world. And I think it shows our business model over this past decade, we navigate pretty well through it. And I think the key to it is the leadership team that we're developing out in all of these markets. Anyway, thank you for your time.

2015_TUP

2017

CABO

CABO #Thank you, operator. Good morning, everyone, and welcome to Cable ONE's full-year and fourth-quarter 2016 earnings call. We're excited to have you with us this morning as we review our results. Before we proceed, I'd like to remind you that today's discussion may contain forward-looking statements relating to future events and expectations. You can find factors that could cause Cable ONE's actual results to differ materially from these projections listed in today's press release and in our recent SEC filings. Cable ONE is under no obligation and, in fact, expressly disclaims any obligation to update its forward-looking statements, whether as a result of new information, future events, or otherwise. Additionally, today's remarks will include a discussion of certain financial measures that are not presented in conformity with US generally accepted accounting principles. Reconciliations of non-GAAP financial measures discussed on this call to the most directly comparable GAAP measures can be found in our earnings release or on our website at IR. CableONE. net. Joining me on today's call is our President and CEO, <UNK> <UNK>. With that, let me turn the call over to <UNK>. Thank you, <UNK>. Good morning, and thanks, everyone, for calling in. I'm pleased to review several items with you today. As a general overview, I intend to share Cable ONE's annual results, our fourth-quarter results, as well as some information about our previously announced acquisition of NewWave Communications. I plan on a touching on a few highlights. Then, <UNK> will provide a full recap of our financial performance and get into more detail regarding the expected increase on our capitalized labor costs beginning in 2017, which we mentioned in our earnings release. Before getting into results, I want to take a moment to share a bit of my background, since this is my first call since becoming CEO. I've been with Cable ONE for more than 17 years, most recently as President and Chief Operating Officer. I've worked closely with our Executive Chairman, Tom Might, during that time. I'm looking forward to continuing his legacy of strong and innovative leadership. As CEO, I intend to maintain our heritage of pursuing long-term success for our associates, customers and shareholders by cultivating our unique strengths, one of those being execution. To that end, I am proud to lead our adaptive and dedicated associates as we continue our strategic shift toward being a residential HSD and business service-focused Company. First, our 2016 results. 2016 was our first full year as a stand-alone public company. I believe our strong annual results reflect the execution of our strategy as well as our focus on growing adjusted EBITDA and margins while intelligently managing our capital expenditures. We grew total revenues by 1.5% in 2016, compared to nearly a 1% reduction in total revenue for the prior year. We have passed the tipping point back to generating annual revenue growth. Our product mix change reflects our strategic shift, which can be seen in the fact that more than 54% of last year's total revenues came from residential HSD and business services. Adjusted EBITDA for 2016 was almost $351 million, a 10.3% increase year over year. We grew our adjusted EBITDA margins by nearly 350 basis points. Meanwhile, adjusted EBITDA less capital expenditures rose almost 49% compared to 2015, driven by our adjusted EBITDA growth and our planned reduction in capital spending of over $40 million or 24.5% year over year. Just a note about the fourth quarter. As we have cautioned before, our quarterly results may be uneven, and that is what we saw in Q4. This was largely due to our lack of regularly scheduled rate adjustments. To be clear, we implement our rate adjustments to optimize long-term results, not in an effort to smooth quarter-over-quarter comparisons. As you may recall, we made a $5 residential HSD price adjustment in October 2015, and we turned the corner on that in Q4. We expect that quarter-over-quarter unevenness to continue. For example, in January 2017, we implemented a roughly $6 rate adjustment on residential video service, and we announced a similar rate adjustment of $8 for most business video customers in late February. In both cases, the actual amounts of the adjustments vary depending on the customer's package. These rate adjustments are almost entirely a pass-through of the increased expenses being charged by the programmers. Ultimately, our focus remains on long-term performance through a combination of continued subscriber and revenue growth, along with sustained margin expansion, particularly for our faster growing residential HSD and business services products. Let's talk a bit about our residential HSD service. In 2016, our residential HSD service continued to perform well. 51% of our total customers are now non-video customers, and more than 42% of total revenues were attributable to residential HSD. At the end of 2016, approximately 70% of our homes passed had access to GigaONE, our 1 Gb service. Capital projects related to upgrades continue to ensure more than adequate capacity to handle what is now the fastest speed as well as the fastest standard speed of 100 Mb per second in a majority of the markets we serve. We pride ourselves on customer service and reliability, and the independent research we conduct continues to illustrate high customer satisfaction with our residential HSD product. What about business services. Business services revenues grew 13% year over year, and customer growth was nearly 9% with both business data and phones showing strong positive trends. In early January, we launched Piranha Fiber, which are marketing as Ferociously Fast Internet. It is a 2 Gb symmetrical internet service delivered over reliable, fiber-based architecture and shared bandwidth, which combines the most favorable attributes of coaxial and fiber networks. We look forward to offering this differentiating mid-market business services product in several new markets each year for the foreseeable future. Lastly, on to M&A. In January, we announced the plan acquisition of NewWave Communications for $735 million in cash, which we expect will be a value-enhancing acquisition for our stockholders. NewWave operates in non-urban markets with a small competitive footprint very similar to Cable ONE. We believe NewWave will be a great fit because we have similar strategies, customer demographics, and products. The purchase price represents a multiple of 6.6 times last quarter annualized adjusted EBITDA, after accounting for tax benefits and the realization of $24 million of estimated run rate cost synergies. NewWave has spent resources upgrading their infrastructure to include over 3,700 miles of fiber, positioning them well for future growth in residential HSD and business services. We think we are well situated to execute on those opportunities. Together, Cable ONE and NewWave will serve more than 1.2 million PSUs and generate just over $1 billion in revenue. We expect the acquisition will be accretive on an adjusted EBITDA basis in 2017, while still preserving balance sheet flexibility. We expect the closing to take place in the second quarter of 2017. Now, I'll turn it over to <UNK> for more details on our 2016 numbers, as well as information on the accounting change related to capitalized labor going forward. Through our M&A activity and conversations with others in the industry, we realized that the cable industry overall was capitalizing more labor than we were. Going forward, our capitalization methodology will be similar to our peers. Thanks, <UNK>. As <UNK> already mentioned, we were very pleased with the results that we achieved during 2016. First, let me share a few highlights from the year in the fourth quarter. For the full year, adjusted EBITDA grew by 10.3% with a margin of 42.8%. Adjusted EBITDA less capital expenditures was $225 million, an increase of almost 49%. Residential HSD revenues increased by nearly 17%. Business service revenues increased by 13%. Residential HSD and business service revenues comprise now more than 54% of our total revenues for the year. Total revenues were almost $820 million compared to $807 million in 2015. For the fourth quarter, adjusted EBITDA increased by 0.7% year over year, with a margin of 42.9%. Keep in mind that this increase was affected by the positive net impact of $2.3 million of certain insurance and other related benefits we had in the fourth quarter of 2015. Excluding the impact of these unusual benefits, which we highlighted last year, adjusted EBITDA would have increased 3.4% year over year. Adjusted EBITDA less capital expenditures for the fourth quarter was $54.4 million, an increase of almost 161%. Residential data revenues increased by nearly 13%. Business service revenues increased more than 14%, and now residential data and business service revenues comprise over 55% of our total revenues. Total revenues for the quarter were $207 million, compared to $203 million in Q4 of last year. Now, getting into the detailed results. For the full-year 2016, compared to the full-year 2015, revenues grew by $12.4 million, or 1.5%, with increases in residential data and business service revenues more than offsetting the decreases in residential video and residential voice revenues. Residential data revenues increased $49.7 million, or almost 17%, due primarily to a rate adjustment taken in the fourth quarter of 2015, an increase in residential data customers, a reduction in some package discounting, and increased subscriptions to premium tiers. Business service revenues increased $11.6 million, or 13%, and total business customer relationships increased 8.7% year over year, driven by growth in data and voice services, attributable to both small and medium-sized businesses and enterprise customers. The decreases in residential video revenues of $37.9 million, or 11.4%, and residential voice revenues of $7.2 million, or 14.4%, were primarily attributable to residential video and voice customer losses of 12.4% and 12%, respectively, during 2016. Operating expenses, excluding depreciation and amortization, as a percentage of revenues were 37.1% and 38.5% for 2016 and 2015, respectively, and decreased $6.5 million or 2.1% year over year. The improvements in operating expenses were driven by lower programming costs of $9.9 million associated with the reduction in residential video customers, and these were partially offset by non-programming operating expense increases primarily from higher backbone and Internet connectivity fees of $1.9 million and group insurance of $1.2 million. Selling, general and administrative expenses as a percentage of revenues were 22.5% and 24% for 2016 and 2015, respectively, and decreased $9.2 million, or 4.7%, due primarily to lower customer billing costs following the completion of our billing system conversion of $11.4 million, the reduction of salaries, wages and benefit costs of $7.3 million, and the reduction of general and workers' compensation insurance of $2.9 million. These decreases were partially offset by increases in incentive compensation of $4.8 million, acquisition-related costs of $4.7 million, and marketing expense of $3.2 million. Other income increased $5.4 million in 2016, reflecting primarily a $4.1 million gain on the sale of a cable system. Interest expense almost doubled with a full year of interest incurred on the our borrowings under our credit facilities, compared to only six months of interest incurred in 2015 after our spin. Net income increased $9.9 million, or 11.1%, to $98.9 million in 2016, compared to $89 million in the prior year, resulting primarily from improvements in our operating and selling, general and administrative expenses as a percentage of revenues, and the gain from the sale of the cable system I mentioned earlier. These were partially offset by higher interest and income tax expenses during 2016. Adjusted EBITDA increased 10.3% to $350.5 million in 2016 compared to $317.7 million in the prior year. Capital expenditures totaled $125.5 million and $166.4 million for 2016 and 2015, respectively. Adjusted EBITDA less capital expenditures was $225.0 million, an increase of $73.7 million, or almost 49%, from the prior year. Now, turning to the fourth-quarter 2016 results compared to the fourth quarter of 2015. Revenues increased $3.3 million, or 1.6%, due primarily to increases in residential data and business services revenues of $10 million and $3.3 million, respectively. For the fourth quarter of 2016 and 2015, residential data revenues comprised 42.5% and 38.3% of total revenues, and business service revenues comprised 12.9% and 11.4% of total revenues, respectively. The increases in data and business service revenues more than offset the decreases in residential video and voice revenues of $5.9 million and $2.5 million, respectively, primarily attributable to customer losses year over year. Operating expenses, again excluding depreciation and amortization, decreased slightly in the fourth quarter of 2016 and improved as a percentage of revenues at 36.3% compared to 37% in the fourth quarter of 2015. The improvements in operating expenses were driven by lower programming costs of $1.4 million associated with the reduction in residential video customers, and partially offset by an increase in group insurance costs of $1.2 million. Selling, general and administrative expenses as a percentage of revenues were 23.5% and 21.9% in the fourth quarter of 2016 and 2015, respectively, and increased $4.2 million, or 9.4%. The increase was primarily attributable to higher marketing expenses of $2.1 million, professional fees of $2.1 million, and acquisition-related costs of $1.6 million, and partially offset by decreased customer billing costs of $1.3 million. Net income decreased $1.7 million, or 6.5%, to $24.4 million in the fourth quarter of 2016, compared to $26.1 million in the prior-year period. The lower net income in the fourth quarter of 2016 was driven by higher selling, general and administrative expenses and depreciation and amortization expenses and partially offset by lower income tax expenses compared to the fourth quarter of 2015. Adjusted EBITDA was $88.6 million and $88 million, and capital expenditures totaled $34.2 million and $67.1 million for the fourth quarter of 2016 and 2015, respectively. Adjusted EBITDA less capital expenditures was $54.4 million, an increase of $33.6 million, or almost 161%, from the prior-year period. As I mentioned earlier, adjusted EBITDA growth year over year was affected by the positive impact of $2.3 million for certain insurance-related and other benefits recognized in the fourth quarter of 2015. Without these adjustments from 2015, EBITDA growth would have been 3.4% year over year. Turning to liquidity. As of December 31, 2016, we had approximately $138 million of cash and cash equivalents on hand compared to $119.2 million at December 31, 2015. Our debt balance was $545 million and $549 million at December 31, 2016 and 2015, respectively. Our leverage was low, as net debt to adjusted EBITDA was only 1.1 times at year end. We also had our $200 million revolving credit facility available for borrowing as of December 31, 2016. During 2016, we also repurchased 126,797 shares of our stock under our stock repurchase program at an aggregate cost of $56.4 million. As <UNK> mentioned earlier, in January 2017, we announced the acquisition of NewWave for a purchase price of $735 million in cash. We expect to finance the transaction with $650 million of senior secured loans and cash on hand. This transaction is expected to be completed in the second quarter of 2017. Our financial capacity will allow us to make this acquisition and still maintain very favorable leverage positions. Our net debt-to-adjusted EBITDA, as I mentioned earlier, is currently only 1.1 times. When we announced the acquisition, we mentioned that this leverage level would move to 2.9 times, but based on our change in capitalization policy that I will go over in a minute, our leverage will only be around 2.6 times, so well within the leverage parameters that we have discussed with the market before at 3.5 times. Now, turning to the change in capitalized labor that <UNK> mentioned. In the first quarter of 2017 we changed our accounting estimate related to capitalization of certain internal labor and related costs associated with construction and customer installation activities. Historically, we did not have adequate information to identify and calculate all of the capitalizable labor and related costs, and therefore these costs were expensed as incurred. In the first quarter of 2017, we have implemented systems and processes that allow us to more accurately estimate the amount of directly identifiable labor costs incurred on construction and installation activities. We anticipate that this change will result in an increase in capitalized labor costs in the range of $28 million to $33 million on an annual basis, resulting in a decrease in expenses and an increase in capital expenditures beginning in 2017. To elaborate, this change is expected to reduce our operating expenses by the aforementioned range of $28 million to $33 million. It will therefore also increase our capital expenditures and adjusted EBITDA by a like amount and increase our adjusted EBITDA margin. Net income is also estimated to increase in the range of $16 million to $20 million in 2017 as a result of this change, although the net income impact will diminish over the next several years because of additional depreciation. Meanwhile, adjusted EBITDA less capital expenditures will not be affected. In conclusion, our solid financial performance continued in 2016, and we're very excited about our expected acquisition of NewWave. With that, operator, we are now ready for questions. Phil, this is <UNK>. Talking about demographics in the NewWave area ---+ NewWave, as we have said, is like a mini Cable ONE. They're about a quarter of our size, and their markets are very similar to the ones that we operate in. They tend to be maybe a little bit smaller but they very closely match us. They have also ---+ the team there at NewWave, a great team, has gone out with a similar strategy to Cable ONE, and they're focusing primarily on residential HSD and business services and pushing growth in that area. I don't think we're going to comment on how Cable ONE is going to price and deal with their promotions at this time, but we feel like we are positioned very well to capitalize on the work that the NewWave associates have begun. This is <UNK>. Your question on dividends ---+ the board and management continually look at all forms of capital allocation, whether it be dividends, stock buybacks, or M&A, obviously, that we just mentioned. We will continue to look at it quarter-to-quarter, and we want to be disciplined in our approach to all three measures, but I really can't comment in terms of where we go with dividends. We feel comfortable where we are right now. We will continue to review it on a quarter-to-quarter basis. Thank you, <UNK>, this is <UNK>. To clarify, the $6 rate adjustment was taken on video customers in January. The approximately $8 rate adjustment was taken on some business video customers starting in February. When it comes to rate adjustments, our strategy is to pass along all video cost increases. We will not have other products subsidizing video. I don't think that you can draw a conclusion about what we're going to do with other rate adjustments going forward. As a matter of fact, we've only raised HSD rates once since 2011, and we have never raised our phone rates. But again, we will continue to pass along all video cost increases as that is part of our strategy. As far as disaggregating the HSD growth, I don't think I'll comment to that. Deregulatory, well, I think we are all looking and waiting to see what will happen, both with the Trump administration and possible tax changes, and the new FCC Ajit Pai. We have an established relationship with him, and we look forward to seeing what happens to Title II. <UNK>, this is <UNK>. On the synergies, as we said when we announced the NewWave deal, we believe that the synergies would be in the range of $24 million, and it comes from three different areas: from corporate overhead, from reduced programming costs, and other operational savings. Obviously, their margins are far lower than ours are because of our size. These synergies will be realized over time. Some will be more immediate, some could take a couple of years. For example, programming savings would be realized as certain programming contracts come due, whereas some corporate overhead savings are expected to be more immediate. It is going to range depending on what kind of savings we are, we think we're being fairly conservative in our estimate here, but it will be over time. In terms of our capitalization, I think you can do the math. Yes, if we had applied that range to our existing results in 2016, our capital as a percentage of revenues would have been higher. We ranged right where we told the market at 15%, $125 million of capital, but if you want to add $30 million to it, I think you can do the math. We hesitate to give guidance at the moment on that. We're taking a look at NewWave and a lot of things that are going on, and again, you will start to see these synergies ---+ the capitalization take effect in the first quarter of 2017. So when we get around to seeing the actual change on capitalization in the first quarter and get a better sense on NewWave, exactly where we're going to be, I think we'll give some guidance. But I am really reluctant to give guidance right now on that. Thank you, operator. I want to thank all of our Cable ONE associates for their commitment and caring. Each and every one of you contributed to making 2016 a very successful year for Cable ONE. We appreciate you joining us for today's call and we look forward to speaking with you again next quarter.

2017_CABO

2016

CPSI

CPSI #So, I think we talked about this on the announcement call. This is <UNK>, and good afternoon, <UNK>. So we are excited about the opportunity for TruBridge into the Healthland base, much like we were with TruBridge into Evident, and the fact that we have developed that relationship and the trust based on the delivery of the EHR that they are going to believe in the services that we back it with with TruBridge. So that's a natural cross-sell into that. In my comments, I also spoke to the enhancement of the Rycan products. I think there is a huge opportunity for us to bolster that product as well and to create additional efficiencies and opportunities for the TruBridge services. So, we are excited about that. And when you look at the Thrive going back in what we have got a deep amount of saturation from the TruBridge standpoint, the Rycan again is an additional opportunity to invest deeper in TruBridge from the Thrive platform. It is. It is a best-of-breed clearinghouse product with eligibility and other services inside of it, and mostly it is transactional, so it is depending on the size of the facility. So, it's a scalable model. <UNK>, it is kind of interesting on that front. For the longest time, we were wondering when this whole cloud or SaaS movement was really going to hit in our space and stick, and our results in 2015 have indicated to us so far that trend was here to stay. But as we stated in our prepared comments, those seven contracts that we have slated for installation in the first quarter of 2016, none of those are under a cloud. One of them is under a subscription model, so it will be a lower monthly fee so it won't be that big bump in the one quarter, but the first quarter of 2016 so far looks like it is the oddball out there when compared to the last four or five quarters. No, the NOL is not in that range. Those are the right buckets, but the NOL impact that we are expecting is going to be somewhere in the $5 million range as far as the utilization, so (multiple speakers) somewhere you are a little bit out of whack in the rest of the places. We do expect some improvement in CPSI, in the organic improvement in CPSI, just based off of the cost-containment measures that we've taken during 2015 and the improved revenue numbers. So there will be some improvement there. On the adjusted EBITDA front, there will also be some transaction costs that will be added back, so our projections right now are including around $4.5 million there, which, give or take, that may move some, but if it moves a bit, it will be neutral to EBITDA. Stock-based comp addback of $5.4 million, so that ---+ all that, combined with the improvement in operating income just for managing costs and increasing revenue, is how we have gotten to improved CPSI numbers. If you're trying to get to 2015, I don't have that number in front of me, but you can calculate that from the base of the financials that are in the press release. I don't have those numbers in front of me right now. I would be more than happy to follow up afterwards. Yes, so depreciation on the ---+ for the combined entity for 2016 is probably going to be somewhere between $4.5 million to $5 million. And then on the CapEx front, probably looking at somewhere just north of $2 million. Combined, yes. Sorry, that was just depreciation on the $4.5 million to $5 million. The amortization, I know, granted this number can move around depending on what happens with the purchase price allocation and how that all shakes up, but right now we are projecting that to land somewhere around $12 million. Yes, that's the math. I don't have the exact numbers in front of me, but for the most part the first quarter is going to be pretty low on the synergies, but then second quarter and third quarter, we are going to start building up, and then most of the synergies for 2016 should be captured by the end of the third year. And that being said, as we go into 2017 we're going to have a much improved exit rate on costs and there will be some additional synergies to grab in 2017, but that's a little bit too far out right now for us to try to guide to. No, you are thinking about it right, and we were trying to ---+ we were batting it around about whether or not to include that in both places and we decided to just go one route, but just be transparent as possible about it. And when we look at adjusted EBITDA, what we are really trying to prove there is the cash-generating ability of Company, so really getting to more of a cash gain, cash loss ---+ hopefully not a cash loss ---+ position for the Company in a given period. But in adjusted EPS, what we're really trying to reflect there is what did the Company organically do during the period, so stripping out any of the nonrecurring impact of the deal there. And while we do expect to have multiple years that are going to benefit from the NOL utilization, simply because we are capped in a given period due to certain IRS regulations as to how much of that we can use in a given year, we don't foresee that stretching out into beyond the medium term. So I thought we were ---+ and <UNK> is pulling it up right now, but I was thinking that we were in the 13%, 14% increase into 2016 for TruBridge. So we were at $63 million final for 2015 and $75 million for 2016. 12%. 12%. Roughly 12%, 13%, <UNK>. I think, as someone pointed out earlier on the call, we have struggled with the last couple years with guidance, so obviously we are trying to put a good number out there and there is a lot of potential with TruBridge. We did see the growth slow down a little bit in the fourth quarter, but at the same time we have picked up an awful lot of prospects with this transaction, so we are trying to balance all those factors and that's where we came up with the 12% to 13%. So the model for that is we're doing an analysis with the prospects. As we are finding barriers into doing the full business office management, the cost constraints of the traditional contingency model is sometimes a little much for the hospitals, so what we have done is look at their current performance compared to their expenses to run their business office, and fix the expense, fix the revenue over a quarterly period, and then based on our performance put ourselves in a position for a bonus. So how we produce on a cash net basis determines what that risk model looks like. Yes, less than five right now. Great. Thank you, Edison. I want to thank everyone for being on the call today. We appreciate your time and your interest in CPSI, and I hope everyone has a great Friday and a great weekend. Thank you.

2016_CPSI

2016

IPG

IPG #Okay. Pass-through is a direct pass-through. It has nothing to do with dispositions. The 30 basis points is apples-to-apples. That's principally from our CMG businesses, particularly Jack Morton, our event businesses. Again, as you recall, those are direct pass-throughs for revenue and expenses. I'll comment on PR. I'm going to let <UNK> talk about since it falls within his purview. Remember, the PR business has changed dramatically. What's happening is all our different disciplines are all covering all sorts of aspects of the market place. Digital capabilities, social networking, social media, content, all of that is part of what we're seeing across the board in both digital and PR agencies and our traditional agencies. And as a result, Weber Shandwick in particular was a leader in terms of looking at their portfolio and converting to the digital and social environment, and as a result we've seen them taking market share out there. It's because of their content and new thinking in terms of PR. We're encouraged by that. We think they continue ---+ we have best-in-class offerings there and we continue to see solid growth there. <UNK>. To add on to <UNK>'s comments, we made specific investments around new capabilities around PR. You look at our performance at Weber, at Golin, at [DeBreese] it's clear they're gaining market share. The critical thing is we're going to need to continue to invest and keep our place in the marketplace. Looking at the rest of the portfolio, our sports business at Octagon, our experiential business at Jack Morton, it's very, very strong. The CMG segment does get impacted by the decline in pass-throughs, and that's intentional. We've been trying to migrate our contracts away from being a principal specifically in our experiential business to an agent. So when you look at it on a net revenue basis our growth has been high-single digits for the past three years. So those businesses are very, very healthy. And it's nice in our branding business that Futurebrands had again, a very strong year. We're very supportive of that segment and we'll continue to invest. Let me add when we say we talk about invest, we actually had an acquisition by Golin in China this year. And we haven't had ---+ we basically grow our business in China organically by hiring some really talented people as we did in 2015. For Golin, we actually bought a company that's very attractive and added to their portfolio. The other important part is when we talk about integrated offerings, we mean it. And so when we put together open architecture, whether it's Golin, whether it's Octagon, whether it's Weber Shandwick, we bring them into the open architecture model. So when we're sitting at the table and presenting the best of IPG to our clients, it includes a full array of our businesses. So our marketing services, our traditional agency businesses, our digital capabilities and our media. They're all sitting at the table, and frankly that's what clients want to see and the collaboration is critical to that, which is why we spend so much time on collaboration within IPG. And this open architecture model actually works. And even on ---+ when we're just looking at media pitches we bring in the open architecture on media. We have different disciplines, digital, experiential, all of that comes to play in these pitches. And frankly, I'm a firm believer that's one of the reasons we've been successful in the new business arena. Because I've heard a number of clients say to me when we walked out of the room that what was ---+ it was refreshing is that they didn't know which individual was from which discipline and the team really spoke as one voice and they were focusing on clients. And that makes a big difference to the clients because they don't have to worry about our silos and our issues. They're just interested in servicing their clients. And if we didn't have the marketing service arm that we have at CMG and the media and the digital capabilities and the creative capabilities at our agencies, we wouldn't be able to do that. So I'm very comfortable with that. Thank you. Thanks. Well, that was a good question. Thank you. Could we go on to the next. First of all, as you know, Philippe is sort of an integral part of the collaboration we have at IPG. Henry's done a tremendous job in coming into Mediabrands and the success of Mediabrands is pretty evident by the results of their performance, and he's done a great job, him and his team at UM initiative and all the rest of Mediabrands. Philippe's oversight role at Mediabrands is exactly that, to bring ---+ to make sure that we're looking at all the possibilities of collaboration. And as well Philippe has a technology background and helping in terms of new media and new technology as well. It was exceptionally well received at Mediabrands and the people, plus frankly Philippe has an HR responsibility. So he knows a lot of those people very well and they work very closely together. I can't tell you how many favorable e-mails I receive for both clients as well as individuals on that move, so we're really excited about it. Marketing services, as I said, it fits very nicely into the open architecture model. I don't believe we have to own various data sources and so on when we can rent them. But that said, we did a data analytics acquisition in Israel this year. Mediabrands has their own data sources. And when they need to use that, they have over 80 or 100 different data sources. As long as there's partnering out there we can rent it. We think we have to do it. We have a sufficient amount of analytics and data to make our offerings competitive, if not better. And we don't have to own it. But when there are unique opportunities out there, we make some tactical investments in it. We did it in a little ---+ in TV. We did it in keep. So we look at it both ways. The key to this in the open architecture is having a vehicle without having to restructure our corporation to collaborate. And since we've been doing it for 10 years, we didn't need to restructure our entire Company. We have high priority objectives for all of our CEOs that require them to collaborate both within their networks as well as outside. So it's kind of interesting to see everybody jumping on this, but we started doing this 10 years ago and it's part of our DNA. And every time there's a new thing out there in terms of whether it be data, whether it be content, we want to participate and we'll do it through our partnerships, through investments, or just contractual arrangements. Thank you, <UNK>. Operator, next caller, next question, please. I guess it's been that clear. <UNK>, I'm sorry, we didn't hear the first part of your question. Well, we've been averaging close to $300 million buybacks per year. We have an extra $149 million on top of the authorization. We're not committed to doing all of it in one year. We'll have a normalized annual buyback throughout the year. That said, every once in a while we're opportunistic. You saw we were a little over-weighted in the fourth quarter when we saw some price pressure on our stock. So we have the flexibility. For analytics point, if you use $300 million I think that's a reasonable number for us to spend, and we'll be opportunistic and see how the marketplace goes. This is part of a long-term strategy. We believe that given our leverage, obviously bringing our ratings up one more notch will be very helpful us. In that it will give us a freer commercial paper program which could help us in terms of the cyclicality of our cash flows, and that could free up some additional cash as well. So from an overall program point of view, we're very comfortable with our balance sheet and where we are. We hope to have a commercial paper program if we get one more notch up. We have a robust return of capital on buybacks and 25% increase in dividend is a very nice mix between dividends and buybacks. So our overall structure in terms of return has been very well received by the investors before year end. Between <UNK> and myself and <UNK>, we've met with most of our shareholders. And this is based on the input we're getting from all of our shareholders. And as far as our leverage, we're very comfortable and we want to be where we are heading into a market that is as volatile or potentially volatile as it is right now. That's a great question and the answer to that is yes. Particularly on the digital. If you look for example what R/GA is doing in terms of design and business planning and product development, the accelerated program are examples of that. We have capabilities, and there aren't many companies that have the capabilities we have both in terms of typical advertising role, media planning, content distribution, digital expertise, insights, all of that put together and frankly what we do actually works. And we had data and we have all sorts of information that shows that if we can bring all of these offerings together, we can in fact help our clients move the needle. And it's refreshing to be able to walk into a room and put together some new ideas from a business context. And you're right, it's not just traditional advertising. It's looking into the future. We can anticipate where consumers are going to be spending their money, and based on those insights we can help our clients real-time look at where they can allocate their dollars and if it's not working we can shift with them. We can create dashboards with our clients. We can help them do design work. We can do branding for them. It really turns out to be a full service offering that we can tap into and it gives them a degree of comfort that they're getting cutting edge insights without having to add 12 different disciplines coming in a room, working together. So I do believe ---+ and of course we do consulting. Several of our agencies have a consulting basis arm to it. So yes, our business is changing and frankly, that's why I'm bullish on our industry. For years they talked about our industry being disintermediated, going away. We always find a way to sustain ourselves and I think if you look at our results you've got a pretty good indication we're capable of doing that. So yes. I thank you for that question. With that said I think those are our last questions. I really thank you for your support throughout the year. We're excited about 2016. Notwithstanding some caution that we've made and I look forward to bringing it to light. Thank you very much.

2016_IPG

2017

SWX

SWX #Thank you, Sherrie. Welcome to Southwest Gas Holdings, Inc. 's 2017 First Quarter Earnings Conference call. As Sherrie stated, my name is Ken <UNK>, and I am the Vice President of Finance and Treasurer. Our conference call is being broadcast live over the Internet. For those of you who would like to access the webcast, please visit our website at www.swgasholdings.com and click on the conference call link. We have slides on the Internet which can be accessed to follow our presentation. Today, we have Mr. <UNK> <UNK> <UNK>, President and Chief Executive Officer; Mr. <UNK> <UNK> <UNK>, Senior Vice President and Chief Financial Officer; Mr. <UNK> <UNK> <UNK>, Southwest Gas Vice President, Regulation and Public Affairs; and other members of senior management to provide a brief overview of the company's operations and earnings ended March 31, 2017, and a full year outlook for 2017. Our general practice is not to provide earnings projections, therefore, no attempt will be made to project earnings for 2017. Rather, the company will address those factors that may impact this coming year's earnings. Further, our lawyers have asked me to remind you that some of the information that will be discussed contains forward-looking statements. These statements are based on management's assumptions, which may or may not come true, and you should refer to the language on Slide 3 in the press release and also our SEC filings for a description of the factors that may cause actual results to differ from our forward-looking statements. All forward-looking statements are made as of today, and we assume no obligation to update any such statement. With that said, I'd like to turn the time over to <UNK>. Thanks, Ken. Turning to Slide #4. While we're still early into 2017, we wanted to touch on a number of highlights for the year so far on today's call. First, from a consolidated results perspective, we increased our dividend for the 11th straight year in a row. The latest change represents an approximately 10% increase, so we are now in an annualized dividend of $1.98 per share. We also entered into an incremental $100 million credit facility for our holding company that will run through March 2022, and we established a $150 million equity shelf program. Next, for our natural gas operations, we saw the Arizona Corporation Commission approve a settlement in our previously pending rate case proceeding. The commission's approval established new rates effective April 1, 1 month earlier than originally anticipated. We added 30,000 new customers over the past year, moving ever closer to the 2 million customer mark for our company. And we amended the utility's credit facility to expand our borrowing capacity from $300 million to $400 million. Then, for our unregulated construction services segment, we saw detrimental first quarter impacts from weather as well as the temporary slowdown of work with one of our larger customers. We do remain optimistic about this segment's full year prospects, however. Moving to Slide #5. For the outline for today's call, <UNK> <UNK> will provide an overview of consolidated earnings along with segment details for our regulated and unregulated operations, <UNK> <UNK> will provide an update on our regulatory activities, and I will close with an update on customer growth, regional economic metrics, capital expenditures and our expectations for 2017. With that, I will turn the call to <UNK>. Thank you, <UNK>. Let's jump right into things on Slide 6 with a look at consolidated operating results. For the 3 months ended March 2017, we earned $69.3 million or $1.46 per basic share, down from $75.4 million or $1.59 per share in the first quarter last year. During the 12-month period, our earnings improved from $142 million or $3 per basic share to $146 million or $3.07 per share. Next, we'll look at the relative contributions of each segment to the change in earnings starting on Slide 7. Natural gas operations results were flat between periods, consistent with our internal expectations. Recall that our Arizona rate relief does not kick in until the second quarter. Construction services, on the other hand, saw their losses increase by $5.2 million between periods. Several factors influenced those results, which I'll speak to later. This next slide breaks down the change in earnings between 12-month periods. Gas segment net income increased $8.5 million, while construction services experienced a net decrease of $4.1 million. Next, let's look at each segment, starting with natural gas operations on Slide 9. Now although the change in contributed net income was minor, I'd like to mention a couple of offsetting items. Operating margin increased $4.2 million as a result of customer growth and California rate relief. We added 30,000 net new customers over the last 12 months, the highest annual level in about 10 years. Offsetting the margin growth were O&M cost increases totaling $7.9 million or 7.8%. About 1/3 of the increase pertains to compensation programs, whose accounting expense is skewed toward the first quarter of the year for retirement-eligible employees. Also, proxy-related costs were higher than usual this year. Lastly, income on company-owned life insurance, or COLI, policies exceeded the prior year by $1.9 million. Moving to Slide 10. We summarize the gas operation segment change between 12-month periods. Much of the improvement was attributable to COLI, which reflect an income of $9.3 million currently versus a loss of $900,000 in the prior period. Overall, our operating income was down slightly between periods as the strong growth in operating margin of $25.5 million was offset by higher O&M, depreciation and property taxes. We'll now review Centuri first quarter operations starting at Slide 11. Revenue decreased $14 million between quarterly periods due to 2 primary factors: inclement weather throughout many of our service areas; and a temporary work stoppage, which ---+ with one of our largest customers. Construction expenses and depreciation, on the other hand, disproportionately declined a combined $4.7 million between periods due to logistics surrounding the temporary work stoppage, new customer startup costs and the higher labor costs incurred to complete work during the poor weather conditions. A temporary work stoppage was a statewide regulatory mandate around training, affecting all contractors working for this customer. NPL is gradually adding crews as training and qualification has completed, but a pretax loss of $3.6 million was experienced for the period. Now with regards to weather, the map on Slide 12 shows how many of the U.S. service territories NPL operates in has heavy precipitation, which negatively impacts productivity. It was mainly the southeastern part of the country that was warm and dry, a part of the country we currently do not operate in. And finally with regard to first quarter operations, the slide ---+ or the chart on Slide 13 demonstrates that over the last 5 years, first quarter operating results are not a good predictor of full year earnings. As such, we remain optimistic that much of the first quarter shortfall will be made up during our more productive summer and fall construction season. Slide 14 rolls forward the contribution of net income for the 12-month period. Construction revenues increased $91 million or 9% due primarily to additional pipe replacement work across the U.S. and Canada. Construction expenses increased $106 million or 12% due to the additional workload, startup costs with recent new customers and costs related to the temporary work stoppage. Let me now turn the time over to <UNK> <UNK> for regulatory updates. Thanks, <UNK>. On Slide 15, our regulation highlights that I'll cover today include an update on our recent Arizona rate case result and potential future rate case timing in our other states as well as continued progress on our infrastructure replacement programs and an update on 2 expansion projects. Turning to Slide 16. The Arizona Corporation Commission approved our proposed $61 million rate case settlement, and rates became effective April 1, 1 month earlier than was originally expected. I believe this result is reflective of the constructive working relationship we have with the commission and their staff in Arizona as well as other stakeholders. Slide 16 illustrates the anticipated impact of the $61 million increase to operating income for both 2017 and 2018, including the earlier effective date. We're very pleased with the rate case outcome in terms of the operating income amount but also the tools that were approved as part of the rate case to help mitigate regulatory lag going forward, namely the continuation of our fully decoupled rate design, expansion of our existing customer-owned yard line program, implementation of a vintage steel pipe replacement program and the implementation of our property tax tracker. Turning to Slide 17. From a California rate case planning perspective, we are on a 5-year rate case cycle, which means we're currently scheduled to file our next rate case later this year. However, following discussions with the Office of Ratepayer Advocates, we filed a petition requesting to extend the rate case cycle by 2 years. The petition essentially requested that the commission extend the rate case cycle, leaving all other aspects of the decision intact, including the ability to make post test-year attrition adjustments for 2 additional years. The Office of Ratepayer Advocates supports the petition, and it is our expectation that a decision should be forthcoming very soon. Turning to Slide 18. Since 2016 marked our third GIR rate application, in order for us to continue the GIR program this year, we're obligated to either file a rate case to clear out the deferral balances, moving them into base rates, or to file a petition requesting a waiver from that requirement. After discussions with the commission staff and the consumer advocate, we chose to file a petition requesting a waiver from the regulations, allowing us to proceed with the GIR program for another year. As part of that process, we also committed to filing a general rate case application sometime before June of 2018. The petition was supported by the commission staff and was approved by the commission earlier this year. Accordingly, we plan to file our next Nevada rate case in the first half of 2018, with new rates becoming effective later that year. Turning to Slide 19 and our infrastructure replacement programs. We continue to focus on establishing and maintaining these mechanisms in each of our jurisdictions in order to timely recover capital expenditures associated with commission-approved projects that enhance safety, service and reliability for our customers. Since inception of our COYL program in Arizona, we have invested over $35 million and have been authorized to collect over $10 million in margin. And with the expansion of this program being approved in our most recent rate case, we expect continued growth in our replacement activity. In February, we filed our fifth report with the Arizona Corporation Commission requesting to establish a rate to collect margin of $1.8 million based upon 2016 capital expenditures of approximately $12 million. All previous investment revenues being collected through the mechanism were incorporated into base rates as part of our most recent rate case. We also anticipate being able to start some of our proposed vintage steel pipe replacement work this year, which will allow us then to make a filing in early 2018 to establish a surcharge to collect any margin associated with the replacement work that we're able to complete during calendar year 2017. Turning to Nevada. Since 2014, we have received approval to replace over $115 million of qualifying replacement projects and have been authorized to collect over $9.3 million of margin through the GIR surcharge. Most recently, we received approval to replace $57 million of qualifying projects during 2017, and we're currently collecting approximately $4.5 million as a result of the most recent GIR rate application that was filed at the end of last year and was approved in December. We continue to look to ramp up our infrastructure replacement program in Nevada as we work collaboratively with our regulators and other stakeholders to identify replacement projects to be replaced on an accelerated basis. We anticipate filing another GIR advance application within the next week or so, proposing to replace ---+ proposing replacement projects to be constructed during 2018. Turning our focus to major expansion and reliability projects on Slide 20. In October 2016, Paiute initiated and received approval to proceed with a prefiling review process with the Federal Energy Regulatory Commission for its approximately $17 million expansion project in Northern Nevada. A formal certificate application is expected to be filed by this summer for the 8.4 miles of additional transmission pipeline infrastructure. We currently anticipate the additional facilities could be in service by the end of 2018, with new rates in place coincident with the in-service date. Lastly, our $80 million LNG facility in Southern Arizona is still on schedule for being completed by year-end 2019, and we expect to officially break ground later this year. To date, we have invested approximately just over $5 million in capital expenditures, primarily associated with the land that was chosen to site the facility. As part of our rate case, the commission also approved our proposed cost recovery methodology for the facility, which will allow us to defer the revenue requirement associated with all costs incurred before December 31, 2020, to be recovered in future rate cases. And with that, I'll turn it back to <UNK>. Thanks, <UNK>. Moving to Slide 21. As I mentioned earlier in the call, we added 30,000 net new customers over the past year and now serve just under 2 million customers across our 3-state service territory. Turning to Slide 22. Economic conditions in our service territories continued to be robust. Population growth in the areas we serve is forecasted to be notably above the national average over the coming 5-year period. And as the table on this slide shows, unemployment rates in all 5 of our operating divisions declined year-on-year, with continued positive job growth. On Slide 23, we show our expectations for capital expenditures for the coming 3 years compared to this past year. We invested $457 million last year to serve growth and improve the safety and reliability of our gas delivery systems. As <UNK> <UNK> outlined earlier, much of that capital investment is associated with support of cost recovery mechanisms authorized by our regulators. These capital expenditures are expected to total $1.6 billion to $1.8 billion for 2017 through 2019. Finally, wrapping up on Slide 24, updates to 2 items with respect to our expectations for this calendar year. On the utility side, as I mentioned earlier, we received rate relief in our Arizona rate case 1 month earlier than expected, which should slightly improve year-end utility results. And on the construction services side, we expect operating income to approximate 5% of revenues, a slight decline compared to our previously reported range of 5% to 5.5%. Overall, these 2 updated expectations should largely offset each other, such that our consolidated year-end expectations are in line with those provided in our last call. With that, I'll return the call to Ken. Thanks, <UNK>. That concludes our prepared presentation. For those who have access to our slides, we also have provided an appendix with slides that include other pertinent information about Southwest Gas Holdings and its 2 business segments and can be reviewed at your convenience. Our operator, Sherrie, will now explain the process for asking questions. Hi, Tim, this is <UNK>. We are still qualifying some of our employees or increasing the number of crews each week as weeks go by as we're able to add ---+ get to the training that's been required. It probably won't be until later this year that we're back to full staffing with that customer. And so there could be a little bit of an impact to our earnings, which is why we kind of lowered that operating income range from 5% to 5.5% down to 5%. Tim, this is <UNK>. No change in that from our perspective at the current time. We still think that there are a lot of good prospects to continue growing that business, both organically as well as potentially through additional acquisitions. I think the slide that <UNK> referenced earlier in the call, Slide 13, that shows the earnings growing at that business, continued to show that that's a good contributor to shareholder value. That said, as we've talked before, Tim, we are going to be mindful of our business mix, and we don't want to stray too far from the business mix that we have now because we want to maintain our core utility identity. And as we see that business continue to grow, we'll continue to evaluate the prospects for doing other things with it in the future. Given first quarter results at the construction business and kind of looking at Slide 46 with the drivers, should we be tending towards the lower end of the 2% to 5% revenue growth. Not at this point. We still feel good about the potential to be in the middle of that or even reach the upper end. It's just so early in the year, it's hard to predict with certainty where we're going to be, but we have a lot of bid contracts out there. We have a lot of master service agreement contracts that are active. And so we'd probably have a better view on that in the second quarter call when we get to the first part of the year when we've started to ramp up our construction crews, a better view on that. And could you just give a little more detail about the stoppage. Who ordered it, and what drove that ---+ drove it. Well, we really don't want to comment on the specific customer. The stoppage was statewide, and it was for all the contractors working for the customer. There's been a number of contractor qualification processes that have been undertaken in East Coast states like New York, New Hampshire, Massachusetts, Virginia, and only one of our state areas was impacted by the stoppage. But as we get our employees requalified, we're putting them back to work. And later this year, we should be back to full force. Was it the customer who ordered the stoppage or the state. It was ---+ it ended up being both. The state was looking at the contractor qualification processes and felt like there were some things that concerned them. And so they mandated the customers that worked with their contractors and have all the ---+ all of their employees requalified. Your employees or the customer's employees. All of the contractors' employees. Thank you, Sherrie. This concludes our conference call, and we appreciate your participation and interest in Southwest Gas Holdings, Inc. Everyone, have a great day. Thank you.

2017_SWX

2016

CUTR

CUTR #Sure. Well, you look back several years, Japan accounted for about 25% of our total revenue. So it's always been a material part of our business and spend a lot of time out there just to make sure we're staying close to what's happening with our organization. We have a great leadership there. The sales team in particular is really been significantly upgraded in my view. And as <UNK> mentioned in his prepared comments, foreign exchange will remain a wild card. However, we think that Japan is a critical long-term part of our overall strategy. And we announced earlier in the quarter that we got a big regulatory indication in Japan and that product, enlighten, is in its early days in that market and which we anticipate continuing to be a strong part of our future there. It was in the final months. And so we really just began a lot of our marketing activities with that clearance. So it, again, it's early days with enlighten in Japan. Well our entire sales team in Japan is focusing on the products. And I'm hesitant to project out after such a short experience in Japan. With that said, the early indications the interest from physicians it's extremely high. And we've got an energized sales team so we think that our outlook is very encouraging in Japan. Well, we're direct in Japan. We don't have any distributor relationship. There are sub dealers in Japan that are common. But it really is a direct model. And I think our sales headcount there is around eight for our capital equipment. Well on the issue of pricing, I think it's a number of factors that are probably pretty obvious but having technology that's well differentiated is a critical component, also coupled with a highly trained sales team that can tell a value story with our products and high utility and have a team that can sell premium products and get rewarded with the appropriate pricing. So it's hitting on all those things and I think that our comment about having growth among all of our major product categories is another indication that we've got a sales team that can effectively tell a pretty complex portfolio story and I think all those things manifest itself into the selling price of the products. Well that's the only trends of overall average selling price pressure. The volume for a given product category will change from quarter to quarter, but I think the 30,000-foot view is that across the board we think we're getting our fair pricing. Hi, Ryan. Sure. I think, looking back about a year, there was a lot of moving balls in the air at that time, but the equivalent headcount there was at least 10 to 12 people down from where we are today. So the 47 would fall into say the 35, 37 range. Going forward ---+ I think by the halfway point in this year, we anticipate being somewhere around 50 and then we plan to continue to add through the end of the year, approaching 60 sales reps. And just to the apples to apples, did have a fair amount of turnover with the sales team a year ago, in Q1 of a year ago. So there are a lot of new hires that are reflected in <UNK>'s numbers so sales versus productivity lagged that. So I think we've got a much bigger and stronger sales team in place when we compare it to the same period a year ago. That's correct. Well I think one of the critical components is that our sales management team just does a really good job of training these reps. And the management team is extremely hands-on with the reps and I think that is one of the key reasons that our relatively new sales team that was on board a year ago was able to ramp up faster than what we've experienced historically. And again, having great products. So with that all, it's a great combination. Right. When we budgeted and actually now as we have guided, assumes exchange rates that were very similar to that of the end of the year. We don't project increases or decreases in foreign exchange rate during the budgeting process and now the forecasting and at this point we've pretty much kept our rates the same. So the long way of answering your question that we haven't, our guidance does include the current exchange rate. Yes, <UNK>. We touched on Japan already, so I won't focus more time on that. But we think the trends there are looking really good. And once again, I think the sales management in Japan has made a big difference. We're doing similar things with our direct operation in Europe and with an anticipation of improved results. And then that coupled with continued sales force expansion where we're direct and locating new distributor partners where we opt to do that. So we're shining a bright light on the global commercial side. But the North American market is obviously the largest single market and when you have a management team that's stable and in place, scaling that is a lot easier than say scaling your business in France. Thank you. I'm sorry. New accounts, are they new customers. Well actually, we're seeing a mixture of both, whether they're new or existing customers. I'd say that really our install base is still very interested. They're not just derms and plastics, but we're finding that product to be well-suited for some of our non-core physicians as well. But with that said, we're finding half the transactions that are non-existing customers as well. So penetrating both sides. Yes. In that range. At any given time, we've got lots in progress. I can't give you an exact number, but we clearly want to have all of the technological advances that we've done with enlighten and these other products allow us to be marketed in these markets around the globe. So we do anticipate additional clearances, but I can't give you a specific number. I have to say that it's not obvious to us that acquisition had any impact on the Company. But in terms of talent, Larry has opted to build his own salespeople and they're usually not industry people. Every now and then we'll hire somebody from within the industry, but I think Larry and his team have a unique approach and they like to build people up in terms of learning the business the way that Larry and the team think is best. I don't think so really. I think that top talent usually doesn't want to leave their jobs. So that's why we think that finding people from different backgrounds in the medical field has been helpful to us. But having very hands-on sales management around the globe think is the critical component there. You're welcome. Yes, thank you. Thank you for participating on the call today. We'll be attending many investor marketing events in the second quarter and hope to see you in the coming months. We look forward to updating you on our business progress on the second-quarter 2016 conference call in August 2016. Good afternoon and thank you for your continued interest in Cutera.

2016_CUTR

2018

SBNY

SBNY #It's just reported expenses, Chris. No. I think, I mean, we're going to continue with our strategy on the securities side. We're getting reinvestment yields in the low-3s, so that's really beneficial to the overall NIM. Sure. Certainly, the asset yields being up this quarter was helpful, as first quarter we've seen asset yields increasing quite some time, so the asset side is starting to catch up to the liabilities. If looking at the first quarter, because of the day count, we should certainly be stable and maybe even possibly up 1 basis point or 2. In future quarters, we're looking at a stable margin, big assumption there being that the yield curve stays similarly shaped to where it is today. If we see a flattening of the yield curve, that will obviously put pressure on the margins. I was just going to get to the deposit front. Deposit costs are typically most pressured depending on the frequency and the severity of the rate increases. If we see 2 to 3 rate increases next year, we'll have deposit pressures but nothing that we can't overcome. If we see 3 to 4 and if they happen to be ---+ any of those are larger than 25 basis points, that could put undue pressure on the deposit front. We're thinking both for our employees and the shareholders. So although we have not solidified any of the plans, the first thing we're going to do is we have this saying, long-term health and wealth. With the tax ---+ effective tax rate going to be 27% from around 37.5%, there's going to be a lot more earnings. And with long-term health and wealth is, in all likelihood, we would ---+ we have a component of our 401(k) for the employees that is profit-sharing and we'll probably activate that profit-sharing component and put some extra dollars for our employees into the 401(k) through the profit-sharing component. And at the same time, that's the wealth part. The health part is that we're thinking also of ---+ at the same time, we do see medical expenses and having Signature Bank take on more of the expense for the employees. So that's the health and wealth. And seriously, for the first time, also we're going to consider instituting either/or a buyback program or paying dividend. And, of course, it's going to depend upon the growth of the institution, but we are going to take that up seriously and make some decisions later on in the year. And lastly, we'll make further investments by growing our business and establishing a full banking ---+ a full-service banking presence on the West Coast. We don't want to give too much information at this time for competitive purposes, but we expect to be fully operating at least one West Coast office by year-end. Okay. The pipeline remains pretty solid. It's not as large as the fourth quarter. We do anticipate there being less activity or less growth in CRE compared to last few years because ---+ but we're happy that we'll have a more diversified balance sheet. The changes we made in the fourth quarter by adding on a Chief Lending Officer allows us to really concentrate on an area that we hadn't been for the past several years and that's the C&I world. So between ---+ the C&I and Signature Financial would be able to make up any shortfall that we would have in the CRE market. Rates for our traditional 5-year fixed is 3.75% to 3.875%. We'd like to ultimately push that to 4%, but we're clearly seeing credit compression there. For other forms of CRE, it's at least 25, 50 basis points wider. When you look at other asset classes, C&I is coming in, in the high-4s to 5% range, traditional C&I. Signature Financial is in the low 4% range. And in our securities, reinvestment rates are in the low-3s. Correct. That's the CRE where we think the rates should be higher, but we can't be 50 basis points. Where we logically think the rates should be would be 50 basis points or more above where the competitors are and we would not be doing business. So we have to stay within that 25 to 3/8s range above our competitors. Further declines, but at a slow pace. Sure. We ---+ I'll tell you where we are as of the 16th of January, Tuesday. We were up $778 million in total deposits, of which more than 50% were DD<UNK> Good start. What actually happened at the end of 2017, in the last 2 weeks, we had net outflows of $760 million. That's why our averages were so high because we did have throughout the quarter a high amount of deposits, but the tax legislation had an effect and I'll give you an example on a cash basis paying on taxpayers. We had ---+ one example as a client, on a cash basis, you want high tax rates to push as much as you can because the rates are going lower in 2018 into 2017. So not only did some of our clients pay out all their profits in 2017 ---+ and sometimes they would defer it to the following year, but they didn't. They paid out most of it, if not all of their profits in 2017. And then, they, in some instances, they paid every expense they could possibly pay. And then, in one instance we know of, one of our clients paid out the first quarter profits, estimated the first quarter profits of '18 and paid that out to his partners in 2017. And that was all tax-related and so we saw quite a few net outflows in the last 2 weeks of the year. Having said that, we have a pipeline of deposits that are fairly strong throughout at least the first couple of months of the year, but what happened in some of our initiatives during 2017, we were ---+ what used to be tailwinds became headwinds. For instance, without getting in too much detail, we have one initiative that we've been working on for 5 or 6 years. We have a great flow of deposits for the first 5 years of the 6 and then due to some government inaction in one of our national business lines, and it's ---+ again, they're kicking the can down the road in Washington, but until they finalize their move, there's a slowdown in one of our initiatives, which we had a reduction of $360 million during the year. So the good news is that if Washington gets their act together on one of our initiatives, that spigot will turn on big time. We have some new initiatives that we're working on. And if you look at our growth throughout the year, it's significant in DD<UNK> So what that means is we're still bringing in the core clients. I'll remind you that in the last couple of years, we've talked about some fluff that we had because we moved some deposits from off balance sheet to on balance sheet and now we're up against the off balance sheet rates being higher. So we're fighting some headwinds that used to be tailwinds, but it all looks good for 2018 for deposit flows. There's not a minute that goes by that I don't think about it. No. We don't really see that meaningfully changing over time. We're still going to make those investments for CRA purposes and we'll continue to do that. Joe, I wanted to follow-up on the fluff deposit issue that you just mentioned. Is there a way ---+ I'm assuming that that's mostly coming out of the money market as that was down quarter-to-quarter. The DDA trends were very good. Is there a way to quantify how much of this fluff there is to work through and then the DDA can sort of ---+ while the deposit trends overall can show better once you work through the fluff. We really don't know. You look client by client, we don't want to sit down and ask each client what that says. Some of it is [set] for future investment and we think that, that we have a better handle on, but what's over and above that is hard to determine. What we're looking at from a value standpoint is that if we continue to bring in DDA, even if deposits slowed from where ---+ we had ---+ in 2014, '15 and '16, we grew deposits $15 billion in that 3-year period. It's going to be hard to grow $15 billion in a 3-year period ever again in at least the foreseeable future, but we're bringing in quality deposits as evidenced by the DDA that's being brought in. So sorry if we really can't give you what that fluff number is. Okay. Understood. And then, just on the funding strategy, the loan and deposit ratio ticked up. Is there ---+ are we at a sort of ceiling here. And then, similarly on the borrowing side, how much appetite is there to take that up from that $4.5 billion level from where we are today. We're at a ---+ we're not at a ceiling, but we're close to a ceiling on the loan-to-deposit ratio. On the borrowing side, we're still below our peers, but we really like to do everything ---+ every loan ---+ we like to make and every investment security we buy, we'd like to do it in a deposit. So we're pushing some of our initiatives even further and quicker than we had in the past to bring in deposits, but one of the things we don't want to do is to pay up. There's about 3 banks out there that are offering rates that just don't make sense to us and we won't pay up for them now. Okay. Last one for me, just on the capital management. It's good to hear that you guys are entertaining capital return. Can you give us a sense on how much excess capital you think you have. And are you thinking ---+ I would think you would be more inclined to pursue the buyback than the dividend given where you are from a valuation perspective. Just some thoughts about how you're thinking about capital return later in the year. The only thing I'm prepared to say right now is I think that the stock is ridiculously priced low and there's a lot more value there. That will certainly weigh in, but other than that, it's too early to give you more color. Any expenses associated with that ---+ with them being installed and the amortization has been baked into our numbers already. That's all contemplating our high single-digit expense growth if the $50 billion markets moved. Probably we'll get a low double digits at 10% to the 14% range. Just a little wider hopefully at the low end of that range. The most recent write-down was really driven by sales in the marketplace combined with the increasing cash flows starting as the values on our cash flow models came down. Overall, we've got a net exposure of $310 million and the average per medallion value in New York is at $305,000 and $45,000 in Chicago. No. I mean, we assume some degree of flattening in that. We don't expect the 10-year to move lockstep with the front end of the curve. That's right. I think we're still approximating a 50% beta given a 1-year, 1% ramp scenario, which we managed to be under thus far, but we do anticipate betas to pick up with each rate increase. I mean, that would flow through a little bit, but it's not going to be incredibly meaningful. I think you have a decent amount of ---+ it's not going to be a ---+ shoot like a rocket ship, but we have a situation where we have a very experienced person running the side of the lending to grow it and his experience level will allow us to do things quickly. So it's not a new initiative. It's just taking what we have and making it better. And I think there's a renewed interest in our bankers to go out and do business on the lending side on the asset side that wasn't there last year. Well, with the earnings that we anticipate, with our effective tax rate being 27%, it would be enough capital just internally generated to grow the bank $7 billion to $8 billion on an annual basis, which we don't expect to do. So if we have capital growing at $7 billion to $8 billion, allowing the bank to grow $7 billion to $8 billion and we grow $3 billion to $5 billion, it's an opportunity to return ---+ either return it to a dividend or increase the price through a buyback. Yes. It would be a traditional deposit-taking and C&I facility where we could also entertain doing some level of CRE, but it's predominantly for deposit-taking, Ken. We do. We expect ---+ there were several loans or packages that we expected to be paid in 2017 that were not, but the largest one out of all of them was actually, on the last day of the year, we had $111 million, 3-loan package paid back. So the biggest one did. And although we are going to have some paybacks ---+ prepayments in the first quarter, the large one was largely taken care of in the last day of the year. Yes. Not a strong as it was in the fourth quarter, but certainly it is strong. No. On the initiatives that we've had for a number of years, we're all set with the people. On the new initiatives, we'll be hiring teams in 2018. And so the ones that we've already been in, we're kind of set where we are with the number of teams that we have. We'd love to give what the dollar amounts are if I knew them, but they're vastly ---+ well, look at it this way, maybe not big enough for multitrillion-dollar institution, but certainly significant to a $43 billion institution.

2018_SBNY

2015

RCL

RCL #Hi, <UNK>. We're obviously still in our planning process on both the revenue and cost standpoint, and we will give guidance on cost next year. But I think that you should just generally expect that our focus and rigor on cost has really seated well into the culture of the Company, and you should expect us to behave similarly going forward. When we gave the Double-Double, and I would remind you that it is both net income and ROIC, we didn't caveat that with what actions we would take or the market takes. We're not adjusting it for fuel, foreign exchange, share repurchases, or anything we might be doing. We really just said it's the target. The one ---+ the earnings per share would be impacted by share repurchases, but the ROIC, I would point out, is not impacted by share repurchases as well. No. We tried to be explicit. We have two targets and they are exactly what we've said, which is adjusted earnings per share would double, that is it would get to $6.78 by ---+ for the year 2014, and ROIC would reach double digits, i. e. that it would be 10.0001% or better by 2017. And those are our two targets that we're using internally. Essentially, we will take what actions we should operationally, and the world will give us what it will give us, whether that's foreign exchange gains or losses. It's been bad, but whatever it is, fuel, whatever it is, et cetera. Yes. So I think your description was accurate ---+ that we think that the price integrity program probably helps us on the rate but hurts us on the volume, and so the net effect of that in 2015 and 2016 would be negative on our total revenue. So I think your articulation was exactly correct. In terms of the actual occupancy that you are experiencing, especially by quarter, I think there are so many other factors that the price integrity program would not be a significant part of that, and so to the extent that it's down or up in any quarter, the ---+ that will be really driven by our yield managers and our yield-management system, not ---+ the price integrity program would be a de minimus part of that. Hi, <UNK>, its <UNK>. I think the way that you need to the look at it is, is that, first off, we're talking about very, very small numbers here in terms of what we believe the impact is of this program on a negative basis. And we expect to see that continue, because, you know, these programs are continuing to rollout to more products and to more markets. And, as we've said previously, we expect that to kind of lap and move more into a positive direction in 2017. When we talk about the effect, we really do talk about it on occupancy basis, because, as <UNK> mentioned in his remarks, it's what we can measure. But we do think that this is really changing the conversation with the guests who have booked and behaved in the way that we wanted them to, and also helping us extend out the booking window to position us for stronger pricing. Thanks, <UNK>. Hi, <UNK>. It's <UNK>. I'll take the Pullmantur question. Really, the majority of the write-off or ---+ again, it was a non-cash write-off and it was relating to intangibles that were not amortirizing or depreciating in any way. There is a portion of that, that did relate to some of the ships. It will probably help us by a couple cents going forward, because it's not just about the write-down, it's also some adjustments in the residuals as we look at those assets going forward. But it's a couple cents. It's not material. Hi, <UNK>, it's <UNK>. I'll answer the question on the China and the distribution markup. Yes, I think there was a period when we had the MERS outbreak in Korea, and then we had the triple typhoon impact, and then of course we had the explosion in Tianjin, so we had a period of about ---+ I'm going to guess it was about three months or so where it was a little wobbly because of all of these events. And then, of course, we had ---+ many of the distributors had this charter or group resell relationship with us and I think many of our competitors. So, during that period I think some of them incurred losses that didn't flow through to us. But, of course, it impacts us because they're long-term partners, and so we've worked on strategies to help them throughout and to ensure that we're in a good place for 2016. But it didn't really have a financial impact to us. And, of course, the model is really quite different in China in relation to the distribution. But one of the things that we've been actively working on is expanding the distribution and opening up that channel through various strategies, which of course is a ---+ it's a long-term play, but we feel like we're on a good track to broaden that channel. Hi, <UNK>. Yes, just to clarify, it's really a combination of Latin America and a little bit lighter on the Australia-New Zealand product, just due to the level of capacity. That's in there, that's driving the differential. Thanks, <UNK>. Sure. Hi, <UNK>, its <UNK>. As it relates to the capacity going into the Barcelona market, first off, for Harmony it's a really globally sourced product while ---+ and it doesn't really compete directly with Pullmantur and us putting some more capacity into Spain. And, by the way, when we say you put more capacity and focus on Spain, it doesn't necessarily mean it's sailing out of the Western Mediterranean. It could be sailing out of different places, sourcing guests from Spain. And then when you look at the European customer, we've actually seen very good signs and trends that we're still early for the European products coming from Europe, as well as that continued strength we've seen over the past couple years from the North American consumer who has been highly attracted to European sailings. Hi, <UNK>, it's <UNK>. Yes, we're very pleased to welcome Jim to Royal Caribbean International a few months ago, and he's been very busy. You may have seen ---+ we just launched our new campaign, Come Seek, for Royal Caribbean International. That's gone literally into market this week, and hopefully you'll see us go a slightly different twist towards it. And the way we're approaching the market with this idea of Come Seek, and the imagery and the TV commercials, radio, and digital that we're putting into the market, has tested exceptionally well, not only with existing cruisers, but probably more importantly with new to cruise. So, part of our focus is on the new-to-cruise market, and I think you'll start to see that in the marketing that comes from Royal Caribbean International over the coming period. And that really has been led and directed by our new CMO. I'm quite happy to, actually. I think one of the things that has us feeling pretty good is just how well our brands are being received in the marketplace, and Celebrity is a good example of that. <UNK> here ---+ is here. He can tout his ---+ and has, how his brand is doing. But if Lisa were here she would say exactly the same. It's really ---+ and <UNK> mentioned that he has a new ad campaign coming out, so has Lisa, and she ---+ hers has actually been out for a little longer and it's being received quite well. So I think we are really seeing ---+ except for geographic issues like Latin America, we're really seeing our brands doing quite nicely in their respective markets. And the Celebrity brand has been holding its own. And I think ---+ now, it's also been affected by the geographies because it, for example, has had more volume, particularly in the Eastern Mediterranean, this year. So you will see changes ---+ we see changes between brands. We see a lot of changes between brands and between different geographies, which is just the normal fact of doing business, and I think we sometimes read too much into it, particularly because we've historically been so surprisingly accurate. I think for us to come in looking like ---+ and the year is so close to being over, we're pretty confident about looking to be in the range of a 3.5% yield improvement. That is essentially exactly where we predicted at the beginning of the year, and I wish I could say that we were that accurate. It's simply the margin of error in these things is a little bigger than that, and we have been fortunate that the pluses have offset the minuses. But, overall, I think that's not unusual for us, and I would expect that to continue. Lori, we have time for more question. <UNK>, could you clarify what you mean by ratios. I'm sorry. Okay. Great. We are still very much focused on getting to 3.75 times of net debt to EBITDA, and we see ourselves progressing towards that towards the end of next year as we consider this buyback. So we see this buyback a little bit of a ---+ as a timing opportunity in terms of buying back shares. I would just add, I think as <UNK> said earlier, we would reiterate ---+ our objective is to get to that investment grade. And, obviously, almost anything that we do that involves capital, including ordering ships or buying back shares, makes it a little more difficult, but we think that the move towards investment grade is so inexorable that we can balance those things. No. You know, it's interesting, because one of the interesting features of our business is CapEx tends to come in big bunches, and whether a ship delivers in January or December makes a huge difference on the numbers you just quoted. We don't tend to look at it that way. I think ---+ we made a decision. 2017 was a year that had no ship deliveries, but then we start having deliveries again in 2018. So I think that's simply a coincidence that 2017 worked out that way. Great. Thank you for your assistance, Lori, with the call today, and we thank all of you for your participation and interest in the Company. Carol ---+ and Laura will be with her ---+ will be available for any follow-ups you might have during the day. And I wish you all a great day.

2015_RCL

2018

ANIP

ANIP #Good morning, everyone, and welcome to ANI's Earnings Conference Call for the Full Year and Fourth Quarter 2017. My name is Art <UNK>, I am the CEO; and joining me today is <UNK> <UNK>, our Chief Financial Officer. Before we begin, I want to refer everyone to the forward-looking statements language in this morning's press release and ask each of you to review it carefully as important context for this conference call. Discussions will also include certain financial measures that were not prepared in accordance with generally accepted accounting principles. Reconciliation of those non-GAAP financial measures can be found in our earnings release dated today. Today, we reported our full year results. Record net revenues of $176.8 million, record adjusted non-GAAP EBITDA of $74.2 million and record adjusted non-GAAP diluted earnings per share of $3.91, increases of 37%, 21% and 32%, respectively, as compared to the prior year. Fourth quarter results include net revenues of $47.3 million; adjusted non-GAAP EBITDA of $19.7 million; and adjusted non-GAAP diluted earnings per share of $1.08, increases of 24%, 10% and 20%, respectively, as compared to the prior year period. In 2017 our 2 primary business platforms, generic pharmaceutical and branded pharmaceutical products, generated $118.4 million and $50.9 million in net revenues, increases of 24% and 93%, respectively, as compared to 2016. Last year, we launched 6 products: 4 generic and 2 brands that helped generate these year-over-year revenue increases. For perspective, as compared to 2015, our generic pharmaceutical product revenue has more than doubled, increasing by 115% from $55.2 million. Our branded pharmaceutical revenue has increased nearly fourfold, increasing by 363% from $11 million. It's significant to note that our commercial product portfolio increased from 16 to 31 products, an increase of 94% over that 2-year time period. During this time, we have hedged our generic pharmaceutical business platform by building a small, growing profitable brand pharmaceutical business platform. Brands represent a hedge against our generic portfolio. Nevertheless, our generic portfolio continues to generate year-over-year revenue growth in a very tough macro environment, dominated by price decreases and consortium contracting pressures. ANI became a public company in 2013, and our strategy has not changed. We remain focused on increasing our revenue and adjusted non-GAAP EBITDA through selective new product introductions. As evidence to that fact, from 2013 to 2017, our compound annual growth rates for net revenue and adjusted non-GAAP EBITDA are 56% and 77%, respectively. And our portfolio of products has increased from 7 to 31 products. We believe this is the best approach to increase shareholder value. Our new product launches are the direct result of internal ANDA development, marketing and licensing partnerships and acquisitions. We still have a significant pipeline of 74 products from which to pursue and increase our commercial portfolio of products. Our largest pipeline opportunity, Cortrophin gel, was acquired for $75 million. We continue to invest significant development and capital equipment monies dedicated to re-commercialize Cortrophin, and we are committed to the project. We believe the risk/reward for Cortrophin is well worth it. Frankly, this $1.2 billion market monopoly needs a competitive platform, and we intend to provide that platform with our product. Since 2013, we have deployed nearly $300 million in product acquisitions designed to help build our current portfolio of commercial and pipeline products. At the end of last year, we continued to execute the strategic plan to grow our commercial portfolio by acquiring the NDAs and U.<UNK> product rights for ATACAND, ATACAND HCT, ARIMIDEX and CASODEX. These products can be tech transferred and manufactured by ANI at our containment facility in Baudette, Minnesota. Our approach to our business model was conservative, but not without significant upside opportunity. Our balance sheet and strong capital position remains intact. We are levered less than 2x, have access to capital through an untapped credit facility and an increasing cash position. And as such, we will continue to evaluate acquisition opportunities to expand our business portfolio throughout 2018. We believe the current industry environment creates a favorable backdrop for ANI as we continue to evaluate potential asset acquisitions. Our strong capital position and our experience in successfully executing transaction places us in a position to continue growing via acquisitions at highly attractive prices. We will continue to look to acquire generic and brand assets through product and/or company acquisitions. The impact of recent tax reform that Steve will discuss in more detail is certainly a positive one for ANI. Tax reform serves to provide a more equitable playing field for smaller pharmaceutical companies like ANI, and we intend to use our increased cash flow from tax reform in several ways. For example, we intend to invest in a formal internal ANDA development program. We are actively recruiting for a Vice President of Research and Development, who we expect will hire a formulation team, open a new product development site and continue to manage our ongoing ANDA tech transfer effort in our Baudette site. Our objective is to initially file 4 to 6 internally formulated and developed ANDAs in 2020, free from any profit-sharing arrangements. For 2018, we have provided the following guidance: net revenues of $212 million to $228 million, increases ranging from 20% to 29% as compared to 2017; adjusted non-GAAP EBITDA of $90 million to $100 million, increases ranging from 21% to 35%; and adjusted non-GAAP diluted earnings per share of $5.43 to $6.08, increases ranging from 39% to 55%. This guidance includes an increasing commitment to research and development as well as the effects of recent asset transactions and tax reform. Cortrophin gel and its re-commercialization effort continues to progress in cadence with our internal time line. In the fourth quarter of 2017, we successfully completed the manufacturing of 3 intermediate-scale batches of purified corticotropin powder, the active pharmaceutical ingredient. All 3 intermediate-scale batches of API exhibit lot-to-lot consistency across many different chemical and biological test methods that we continue to employ in building our comprehensive characterization package. These methods are also being utilized to successfully demonstrate comparability to historically manufactured commercial lots of API. We have ordered the capital equipment necessary for commercial-scale manufacturing and plan to initiate commercial-scale API manufacturing in early 2018. We have begun to manufacture development-scale batches of the finished drug product, Cortrophin gel, using API from our manufactured intermediate-scale batches. Our goal is to initiate process validation and registration batch manufacturing by the end of 2018. Also in the fourth quarter of 2017, ANI Regulatory Affairs requested a Type C meeting with the FDA to provide the regulatory plan for the re-commercialization of Cortrophin gel. The FDA granted the Type C meeting, we submitted our briefing book, and the FDA response is scheduled to occur by the end of the first quarter of 2018. In our press release, we have included a Cortrophin gel re-commercialization update and Table 5 that is intended to provide Cortrophin re-commercialization milestone updates as we advance to our supplemental NDA regulatory filing. We also continued to advance the commercialization for another branded product, Vancocin Oral Solution. We remain on target to file a prior approval supplement in the second half of 2018. We believe the launch of this product will fulfill an unmet patient need for an FDA-approved oral dosage form of the Vancomycin molecule, and we'll compete in a market that currently exceeds $450 million annually. I will now turn the conference call over to our Chief Financial Officer, <UNK> <UNK>, who will provide you with more details on our financial results. Thank you, Art. Good morning to everyone on the line, and thank you for joining the call to discuss ANI's full year and fourth quarter 2017 financial results. ANI recorded another strong quarter to close out 2017, and by extension, post our fourth consecutive year of record net revenue, adjusted non-GAAP EBITDA and adjusted non-GAAP diluted earnings per share. Full year net revenue reached $176.8 million, representing a 37% increase versus 2016 and was driven by 93% growth in our brand product portfolio and 24% growth in our generic product portfolio. Gross profit pull-through of these sales gains drove full year adjusted non-GAAP EBITDA to $74.2 million and adjusted non-GAAP diluted earnings per share to $3.91, representing an increase of 21% and 32% as compared to 2016, respectively. These figures place us well within our 2017 adjusted EPS guidance as a result of favorable mix, as net revenue was short of full year expectations by a modest 2%. Turning our attention to the highlights of the fourth quarter. Net revenue for the 3 months ended December 31, 2017 was $47.3 million, up 24% versus prior year, driven by growth in our branded product portfolio. Fourth quarter adjusted non-GAAP EBITDA was $19.7 million, representing a $1.8 million or 10% increase from the year-ago period. This result was achieved while increasing our year-over-year investment in research and development by $2.5 million as we continue to advance our Cortrophin re-commercialization program and invest behind our Vancocin oral solution pipeline opportunity. GAAP EPS reflects a loss of $0.83 per diluted share, entirely driven by a onetime $13.4 million charge recognized in conjunction with devaluing our net deferred tax asset due to the change in the federal statutory income tax rate from 35% to 21% under the Tax Cuts and Jobs Act of 2017. In addition, during the fourth quarter, we recognized a $900,000 noncash writeoff of a finite-lived noncore intangible asset. This intangible related to our NDA for testosterone gel, an asset that was acquired and accounted for in our 2013 merger with BioSante. This asset was previously written down in fourth quarter of last year. We have now officially discontinued this filing with the FDA and ascribe no further value on our balance sheet for this product. Our adjusted non-GAAP earnings per share metric, which excludes these items, was $1.08 per diluted share, an increase of $0.18 or 20% from the prior year. Turning to the details of our fourth quarter sales performance. Net revenue of our branded products more than doubled, increasing from $6.5 million in the fourth quarter of 2016 to $15.5 million in the current year period, driven by the addition of InnoPran XL and Inderal XL, which were introduced into our product portfolio in February of this year, coupled with gains in our Inderal LA franchise. Net revenues of our generic products increased $533,000 or 2% as gains from 2017 launches and certain other key products were tempered by the non-recurrence of initial launch quantities of key products that were launched in the third and fourth quarter of 2016. In addition, revenues from contract manufacturing services were up $335,000 or 21%. Cost of sales, as recorded on a GAAP basis, includes $2.9 million of costs recorded due to the step-up of basis for finished goods inventory purchased in conjunction with the Inderal XL and InnoPran XL product acquisitions. Comparatively, the fourth quarter of 2016 included $2.8 million of such costs associated with the inventory step-up of previous acquisitions. Excluding these amounts, cost of goods sold was consistent, at 37% of net revenues for both the fourth quarter of 2017 and 2016. Selling, general and administrative expenses were $8.9 million as compared to $7.4 million in the prior year, driven by employment and related costs to support the growth of our business, as well as increased legal expenses. SG&A as a percentage of revenues decreased from 19.3% in the prior year to 18.8% in the current year. Research and development costs totaled $2.7 million in the quarter, approaching 6% of net revenues, driven by continued investment and momentum behind our Cortrophin recommercialization program. From a balance sheet perspective, we had unrestricted cash and cash equivalents of $31.1 million as of December 31, 2017, representing an increase of $13.1 million from the September 30 balance sheet, driven by $15.8 million of cash flow from operations during the quarter. On a full year basis, we generated free cash flow of $29 million, reflective of cash flow from operations of $39.4 million and capital expenditures of $10.4 million. In December, we executed a $125 million senior secured credit facility whereby we refinanced the $25 million that was previously drawn down on our asset-based revolver into a new $75 million 5-year term loan and $50 million revolving credit facility. The term loan portion of this facility supported our asset transaction with AstraZeneca, while the undrawn revolver portion of the facility provides ANI with a greater level of flexibility as we anticipate future development opportunities. As of the balance sheet date, we had net debt of $188 million, representing approximately 2x net leverage, utilizing forward-looking 2018 guidance. Looking forward to 2018, we currently project net revenues to reach between $212 million and $228 million, representing a 20% to 29% increase over 2017, driven by the ongoing expansion of our brand revenue base with the addition of revenues from the 4 brands recently acquired from AstraZeneca and the annualization of InnoPran XL and Inderal XL, continued execution in maximizing the potential of our current re-commercialized generic product portfolio and successful execution of 2018 generic product launches. Adjusted non-GAAP EBITDA is projected to be between $90 million and $100 million, reflecting 21% to 35% growth over our record 2017 year. Inherent in this guidance is continued growth in research and development spending, driven by increased investment in our Cortrophin gel re-commercialization program. Our guidance ranges include approximately $14 million to $16 million of total ANI R&D expense as compared to the $9.1 million incurred in 2017. In addition, we assume continued select investments in SG&A expense to support the continued growth of our business and our brands. Adjusted non-GAAP diluted earnings per share is projected to reach between $5.43 and $6.08 per diluted share, and reflects an anticipated combined federal and state effective tax rate of 23% and approximately 11.7 million shares outstanding. As a wholly domestic corporation, the recently enacted Tax Cuts and Jobs Act of 2017 will have a significant favorable impact on ANI. Given our U.<UNK> geographic and legal entity footprint, we are a full U.<UNK> taxpayer, and as such, anticipate that our combined federal and state marginal rate will decrease by a full 14 points from 37% in 2017 to 23% in 2018 and beyond. We currently anticipate that the favorable impact of reduced cash tax burden in 2018 to be worth approximately $10 million to $13 million. We look forward to reinvesting this additional cash flow back into our business. With $31 million of cash as of year-end, accelerating cash flow generation, further enhanced by tax reform, and access to $50 million under our revolving credit facility, we believe that we are in a strong position to pursue business development opportunities in the coming year. In addition, we plan to invest approximately $7 million of CapEx behind our internal capabilities. In summary, we exit 2017 in a very strong position to capitalize on opportunity in 2018. We have an increasingly diverse product base; a healthy balance sheet; strong cash flow; a more level playing field thanks to U.<UNK> tax reform; strong banking relationships and access to capital. We look forward to continuing to build out our capabilities and drive long-term value to all of our stakeholders. With this, I will turn the call back to our President and CEO, Art <UNK>. Thank you, Steve. Moderator, we will now open the conference call to any questions. Yes. Thank you, <UNK>. I've read your report on the FDA slowdown. It may be due to the government slowdown. I think there are other issues alongside that, that are potentially slowing down approvals. You've seen a new effort on the part of the agency to include a subject matter called elemental impurities. And I think you've seen some of the comprehensive review letters occasionally pop up with requesting that information. Any time there's a new effort on the part of the agency to [maybe] perhaps include something like elemental impurities more formally, as compared to just putting it in an annual report, it has a tendency to slow down approvals. Now in our particular case ---+ and I would have to get you the exact number of approvals that we have filed at the agency, I don't have that off the top. But in our particular case, we are still picking and choosing from previously approved ANDA products that we are re-commercializing through tech transfer efforts in our facilities in Baudette, Minnesota. And so we are affected somewhat by a slowdown in approvals as it only relates to prior approval supplements that we would submit against previously approved products that perhaps had a change in raw material supplier that would necessitate a new ---+ a prior approval supplement. We certainly are not affected when the product is ---+ a change is being effected in 30 days-type product and submitting for that. So there's no slowdown associated with that scenario. It remains to be seen how potentially the industry is impacted by any slowdown on FDA's part. I think that's still an open question. We don't see ourselves as necessarily slowed in any shape or form only because we haven't been ---+ we haven't seen it, <UNK>t. So we have a number of generic product launches that are certainly teed up for this year. I don't want to ---+ I have not ---+ as you can tell, I have not stated the amount in the press release. I am going to be a bit cautious. But the ones that are included in our guidance from our perspective are launches that we feel, obviously, extremely confident about, okay. So part of the answer to your question is, I don't know the answer. I don't know whether the slowdown is for real or not. They approved ---+ the agency approved, I believe, a record number of ANDAs last year. That's good for the industry, from my perspective. And I certainly support their efforts and hope that they continue that going forward to ---+ into 2018. Sure. Well, look, first and foremost we ---+ <UNK>t, it's an excellent point. I mean, first and foremost, we have, I think, I'll say it upfront. We probably have the best business development individual, Rob Schrepfer, that's working for us, and I would say, generating a significant amount of value opportunities in the transactions that we have acquired. Even at the height of the asset fever in terms of multiples, we have always kept a ---+ he's always kept us in a very disciplined fashion to not overpay. Now certainly, we believe that this is, today, a target-rich environment for asset opportunities coming to the market, both in brands and generics. In brands, you have somewhat of a more stable environment and understanding how those brands will react and the value you can extract from a transaction over time. Generics are very different. You have to be ---+ there's a crystal ball approach associated with it. You have to be very careful because we have seen companies' EBITDA, and we have seen specific product EBITDA on generics literally get cut in half overnight. So you don't want to catch a falling knife in regards to an asset transaction for generics. So do I believe that there will be a significant amount of both generic and branded opportunities coming to market in 2018. I think we've already seen that. And obviously for us, we're not speaking towards billion-dollar transactions. We're more of the string of pearls type of transactions that you've seen us execute over the last several quarters and years. But I think this sets up very well for us because we are clearly a strategic buyer because of our strong capital position. And so the message to the marketplace is, if you're selling assets, please include ANI as a potential buyer of those assets. Steve. Sure. Good morning, <UNK>. Yes, I think that it is kind of a moderate phase-in as the year goes on. So I think that, obviously, as the 2018 generic launch cadence kicks in, that comes in over the course of the year. I think the launch cadence there really starts to kick in around, say, the back half of the second quarter and then flow out from there. So you would expect some acceleration to the quarters as the year goes on. And so, I would say it's a moderate build off of the base that we enter 2018 on. So yes and no. I mean, you obviously know in the macro environment for public companies, multiples are different than they were in 2015, that's for sure ---+ lower. And I think it really is dependent upon the specific situation. So that's a tough question to answer because, again, it really depends on the transaction. And I mean, yes, so we have certainly seen ---+ there's a few ways to answer this. Number one, there doesn't seem to be a large amount of strategic buyers in the United States. My perspective is that many companies are somewhat tapped out, associated with capital positions in their balance sheets. And I think many companies' focus has turned to reducing debt on their balance sheets, in our space. So that precludes some of those folks from larger transactions. We've seen the FTC approach to some of these transactions, and we still don't know how that entirely plays out. So it really depends on ---+ I think it really depends on the transaction, the company you're dealing with. Is it a distressed transaction. Is it one from a position of strength. But I wouldn't put any overall cover on what's happening out there yet, I mean, again, our focus is specific to us, the assets we're going after. And I think you know us, we have a combination of assets that we've bought that fit into our product launch, pipeline and cadence for future periods of launches. And at the same time, we always are looking at instantaneously accretive asset transactions that make sense for us; obviously there's some tie into manufacturing or lower cost, et cetera. And I think that you should just expect that from us going forward. That's how we're going to approach the opportunities in the marketplace. Outside of our normal dosage forms that could be plugged into Baudette, we wouldn't be able to do that (inaudible). . Oh, that can't be plugged in ---+ yes, there's ---+ well, our largest one is an obvious one, and that's Cortrophin gel, which is obviously an injectable product. So if you're asking me if the company envisions moving into different platforms like injectable drugs or ophthalmic drugs, drugs that require aseptic sterile manufacturing, we are always looking at those opportunities. We've always felt that we can successfully market any AA- or AB-rated generic drug, and ---+whether it's in the institutional marketplace ---+ that's my background, in injectables and in hospitals ---+ or certainly with the consortiums and the consolidation of scripts in the oral solid market. So we would not be ---+ we would not shy away from an acquisition, or a merger if it made sense, that would increase our portfolio without any overlap. And that would include injectables and ophthalmic. So we'll see. We'll see what the future brings us. And I'd like to just thank everybody for attending our year-end earnings conference call today. Wish you a nice afternoon and (technical difficulty) [time off]. Thank you very much, everybody. Bye-bye. Thank you.

2018_ANIP

2016

FII

FII #If you add them all up everything together, you get to about $35 billion in the total. The fund is knocking right on the door of $15 billion. The SMAs are pretty close to $20 billion and the separate accounts have about $1 billion so it's $35 billion, $36 billion. And because of the nature of the stocks that are in there, we're not currently looking at any capacity issues for investing the proceeds that are coming in. <UNK>. In terms of discussions with customers, they vary from customer to customer. Many are still biding their time. Some are just coming to the realization that October is real, and some have begun to move from prime into govy, which can be viewed as the default option because the client gets to keep daily liquidity at par and can put off a decision on what really to do with whether they want to go through systems changes, et cetera. What are the spreads going to be, we don't know ---+ how big are the spreads. And I'm going to have <UNK> comment to you on the spreads and what is going on that side but we are seeing interest by people who are going to stay in a floating institutional fund. <UNK>. If the rates increase to we get the full 15 basis point increase, the client will get to realize the full $6 million. That's why we stay in there based on rates and how things go ---+ (multiple speakers) up, it could be less. Yes. The rates are ---+ it's not waiving anymore. They're going to get the $6 million. But if we are waiving then they won't get the full $6 million. The rate based on rate. Hold on. We fully expect it to happen but we also have to see. Well, basically if we do the numbers, we look at it and say if it were today and everything is exactly the same, it would be around $3 million. It would be our waiver impact surrender, so we went down to five and we said next quarter we see our way to four and that would be running more like three if we got into next year without a rate increase but with the new arrangement with our client. No. Okay, that will conclude our call and we thank you for joining us.

2016_FII

2017

MAT

MAT #Thank you, <UNK> Good afternoon, everyone, and thank you for joining us for our third quarter 2017 earnings call Our Q3 performance was clearly disappointing <UNK>esults in the quarter reflect continued challenges in The Toy Box and certain underperforming brands that exacerbated by the T<UNK>U chapter 11 filing Despite these challenges, we continue to make strong progress against the transformation plan we laid out in June A critical step in our progress is announcing today a significantly expanded initiative to structurally simplify our business, and right-size our cost structure in alignment with our strategy This will unlock substantial resources to invest in our transformation plan and enable us to drive towards the growth and profit targets we discussed at Investor Day On today's call, I will provide an overview of our performance in the third quarter and related drivers I will then share the progress we've made implementing our transformation plan and the roadmap to selected near-term milestones Then our new CFO, Joe <UNK>, will provide further color on our Q3 results and discuss in detail our action plan to right-size our cost structure and reshape how we run our business Joe will also discuss the timing of upcoming investments and our broader capital strategy, including how we plan to fund our transformation plan <UNK> is also here to discuss operations, brand and marketing strategy during the Q&A portion of the call Moving on to our third quarter results Overall, results were significantly below expectations In terms of revenue, international was stable, led by continued growth in Asia, however, the North American business was down 22% We believe this is somewhat of a unique quarter, and we do not believe it reflects the underlying health and growth potential of this company This decline is also a departure from what we expected when we spoke to you in June So I will discuss the drivers in detail About half of the North American revenue decline was driven by T<UNK>U. About a quarter of the decline was driven by tighter retailer inventory management, and the remaining quarter was driven by continued challenges in our Toy Box and certain brands Fortunately, we believe that a majority of these issues are not long-term in nature and expected to turnaround over time I'll walk through each of these impacts in more detail The T<UNK>U chapter 11 filing was a significant drag on both revenue and profits in the quarter as we began to reduce shipping in early September due to significant concerns about the potential for the T<UNK>U chapter 11 filing We then had to reverse certain revenue in connection with our filing, and we were hit disproportionately compared to our peers given the higher proportion of sales we realized through T<UNK>U. As I mentioned a few minutes ago, tighter retail inventory management accounted for about a quarter of the revenue decline in Q3. Although we have worked through the Q4 inventory overhang in the first half of the year, we continued to see divergence between POS and shipping into the third quarter After in-depth assessment, we have identified two principal drivers of this divergence The first driver is key retail partners moving towards tighter working capital management We believe that we've been hit harder by this trend due to the evergreen profile of our power brands, which allows retailers to predictably forecast in-stock levels and hold less inventory The second driver is our decision to transition to lower levels of retail incentive programs in 2017 relative to prior years At the end of Q3, key retailer weeks on hand for our power brands were approximately 15% to 20% below 2016 levels Over the last few weeks, we have seen some stabilization in retail partner weeks on hand, however, we will monitor this closely and do expect some ongoing downward weeks on hand pressure due to the continuing shift to e-commerce The remaining quarter of the revenue decline is due to continued losses from certain underperforming brands The biggest challenges have been in The Toy Box, in particular, with Monster High, Ever After High and Mega, as well as the fragmented long tail of launches which have more than offset positive gains elsewhere In addition, as we shared in June, American Girl and Thomas remain in turnaround Our action plans are well underway, and we expect to see benefit of this in 2018. In the third quarter, American Girl results were particularly stressed by comping revenue from a large partnership deal in the Middle East Turning to margins The challenges in the quarter, which were largely concentrated in North America, continued to sharply compress margins in Q3. Given the importance of this to our quarterly results, Joe will provide a detailed explanation in a few minutes Despite these challenges, we saw several positive trends during the quarter Barbie is growing POS double-digits globally and accelerated each quarter this year As we shared at Investor Day, Barbie is the farthest along in developing physical systems of play and experiences, which demonstrates the clear benefits when we execute our strategy We have continued to innovate our core doll play pattern; diversity is working and driving strong sales improvements for Barbie and Ken We also continue to enhance the physical system of play with careers, which is accelerating alongside momentum in campers, horses, houses, travel and more Our social community development on Instagram and new content programs such as Dolphin Magic on Netflix and Dreamtopia on YouTube Kids are driving excitement for our brand and product And we still have a lot of runway to go further, with both physical and digital systems of play, consumer products, gaming and a broader content slate We also are pleased with the performance of Cars 3. We are executing this well in close partnership with Disney and our retail partners And despite challenges with T<UNK>U, we expect to come close to our original target This is just one example of the strong partnerships we continue to invest in to build top partnerships with Disney, Warner Bros , Nickelodeon, Universal and WWE Enchantimals is another successful launch for us this year, with strong sales performance across our top launch markets driven by compelling content In its first year, we expect Enchantimals to achieve top quartile performance among doll launches with excellent user engagement in our content and more expansion planned for next year Hot Wheels is sustaining solid single-digit growth in POS with double-digit growth in Latin America We continue to introduce excitement into the core car line as well as to improve our physical play system with higher quality play sets and interconnected track and construction systems Our strong content Make it Epic on YouTube and hotwheels com is helping to fuel brand passion and purchase expansion Our core Fisher-Price business is generating consistent single-digit POS growth globally, with acceleration in China where we are delivering a strong omni-channel experience for parents China is one of the largest populations of new babies being born globally, and also is now the second largest market for Fisher-Price So, we believe there is significant upside potential ahead for this brand As we look to Q4, we expect our key power brands and our Cars franchise to perform well We are well represented on top toy lists across top retail partners, we have strong marketing investments against our top brands, and we have substantially improved our digital execution to ensure we are in step with the shift to online At the same time, we expect continued drag from some of the issues we saw in Q3, and also intend to make the tough decisions necessary to right-size our portfolio before the end of the year As it relates to our full year, we will clearly not achieve the top line expectation we discussed in June due to the factors I discussed earlier Importantly, we are taking the necessary actions now to reposition for the future, with a priority on ending the year clean on inventories at retail and working through the long tail of previous product launches We have conviction that this is the best decision for shareholders and enables us to move faster toward the results we expect in the medium term In June at our Investor Day, we said that we would come back to you with more detail on our transformation plan, including how we will reshape and streamline our business model and how we will fund the investment plan We discussed self-funding $150 million to $200 million of our transformation plan investment needs with cost reduction and reallocation We also reconfirmed our previously announced $240 million gross supply chain anti-inflation program designed to offset the rising costs of labor, resins and packaging, which we expect to achieve through the course of 2018. Now that I have my new management team assembled, we have a clear view of the right-sized structure we need to execute our strategy We believe we can reshape our business through portfolio simplification, organization realignment and an optimized number of product launches, which will allow us to eliminate significantly more cost than we articulated at Investor Day After reviewing and realigning all lines of our P&L, we plan to eliminate at least $650 million in net costs over the next two years, up from $150 million to $200 million through a structural simplification initiative, including manufacturing, product, SG&A, and marketing to ensure our spending is right-sized to support our path forward Our review of the unnecessarily high number of SKUs and product launches from the last few years and benefits from better-aligning incentives across our functions gives us confidence that we can deliver much greater savings and better focus our business on our most attractive opportunities This more significant cost reduction from structural simplification will help us reposition our business more quickly to deliver on our medium-term transformation targets for revenue growth and margins that we shared in June as well as to fund our planned investments We intend to invest approximately a quarter of this savings or $170 million over the next two years as the foundational spending for our transformation plan Our priority focus will be investing in areas that present the greatest near-term potential to drive revenue and margin improvement These investments will focus on four areas: omni-channel capabilities, which are critical to capturing e-commerce and revenue growth; emerging markets, where we have a demonstrated track record of accelerated growth; IT to improve line architecture, demand planning and forecasting, which are central to future margin improvements; and content and gaming, which underpin the development of our brands and present meaningful revenue and margin opportunities In terms of investment to build out our connected systems of play architecture, we have determined that we can repurpose existing spending to fund this strategy We believe next-generation connected play systems and technologies can become a meaningful portion of our product mix over time We estimate this can contribute 15% of revenue with attractive margins and strong customer engagement in the medium term We will use the most efficient approach to both our own development and partner development in a stage-gated manner As discussed at Investor Day, we've already begun to make some investments in our strategic initiatives, which Joe will discuss in a few moments Joe will also provide more detail on our structural simplification initiative and broader capital funding strategy I will now walk through our progress to-date implementing our transformation plan At our Investor Day, we outlined five strategic pillars: build power brands into connected 360-degree play systems and experiences, accelerate emerging markets, strengthen our innovation pipeline, reshape operations, and reignite culture and team We have made progress against each of these pillars, and I will describe and discuss near-term milestones for the remainder of 2017 and 2018. The foundation to accelerating our progress is streamlining our organization and putting in place our new leadership team We have made a number of key strategic hires, bringing on a new CFO, CTO, CCO and Chief People Officer, plus a new Head of Manufacturing and a new Head of Product Development; all of these leaders with proven track record in organization transformation We have a world-class management team with full alignment to execute our strategy In terms of 360-degree play systems and experiences, we are taking action to unlock growth potential in our power brands As I shared in Q2, we launched and have completed an in-depth consumer journey and segmentation effort to anchor our brand portfolio and define specific roles and growth priorities for each We now have detailed maps and action plans for how we will build out our physical and digital play systems and experience with deep focus on our top three power brands This consumer and competitive segmentation analysis has reconfirmed the headroom for us to grow our power brand We estimate that Hot Wheels has the potential to grow 2x to 3x, Fisher-Price 2x, and Barbie 1.5x over time To accelerate our content efforts, we are in the final stages of regaining control over unexploited content rights for our power brands This enables us to build a slate of premium content for our power brands and pursue more strategic deal-making across our partners to unlock value from one of the best portfolios of kids and family IP in the world Looking ahead to 2018, for Barbie and Hot Wheels, we believe we can gain share across market through continuing to build out physical systems of play We believe our core Fisher-Price business can regain consistent growth across top markets by re-anchoring on its learning and development heritage as a partner to help parents provide their children the best possible start This global program will take best practices from China in omni-channel engagement and expand them across top markets We expect to stabilize Thomas into next year We announced recently that our refresh content is now complete As a result, we are poised to take Thomas global, and will be activating with leading kids content platforms in major networks in the coming months We expect to stem the decline in American Girl by executing the turnaround actions we have shared previously, and are excited about the opening of the new flagship store in New York City this November We are on track to launch two next-generation connected products that are truly interactive and provide a new customer experience Sproutling, launched this week, is a breakthrough product for parents that collect baby's heart rate, sleeping position and motion to provide insights into baby's sleep patterns In fall 2018, we plan to launch a next-generation connected Hot Wheels experience In terms of gaming, as I laid out in June, we have made great progress on scaling our global publishing, marketing and analytics capabilities, and are on track to launch two AAA new game titles next year in partnership with leading global development partners Looking at emerging markets, we remain on track to scale China 3x to 4x as we shared at Investor Day We are growing strong double-digits and gaining market share in China, led by our leading consumer and digital first approach, as Jeff Wang shared at Investor Day Our direct parent engagement and our learning and development benefits are commitment to systems of play, and our strength in e-commerce underpins our success China is a benchmark for the powerful impact our new strategy can have on our business across products Looking to the rest of 2017 and 2018, we believe we will continue to gain market share led by digital partnerships across Babytree, Alibaba and JD Our Fisher-Price led parenting platform, with over 250 pieces of curated parenting content and play tips launched recently to great success on Babytree It will also launch soon in Alibaba at the 11/11 major holiday, which will expand our direct reach to millions more moms This parenting platform effort will expand this fall on Babytree with an assessment tool that enables customized parent recommendations based on the development needs of each child In addition, our learning center partnership with Fosun is progressing, with our first center scheduled to open in the first half of 2018. Looking at The Toy Box innovation pipeline, first, we continue to grow our investment in providing best-in-class relationship management for our top licensing partners Disney, Universal, Warner Brothers, Nickelodeon and WWE Our global retail execution for Cars is exemplary We continue to focus on superior product design and collaboration with all of our partners We are passionate about their brands and creating breakthrough product lines to excite kids and collectors Our Jurassic World line for 2018 is a great example of this commitment and impact, as we continue to receive rave reviews from retailers across the globe In addition, we continue to develop co-production opportunities, and expect to announce at least two new co-production deals with top media partners Second, we are streamlining our portfolio of smaller brands and new launches For example, this year, we trimmed the number of brands by 30% from a high point in 2016, to enable us to better focus execution on the most important opportunities Our success with Enchantimals and Kamigami are good examples of how we can execute better with increased commitment and focus We plan to trim our launches for 2018 another 20% to enable us to drive greater impact from our investments To underpin our successful transformation, we are aggressively reshaping our operations to be leaner, faster and smarter, unlocking the foundation for faster revenue growth and step change margin gain Here is a quick progress report We are on track with the initiatives we shared at Investor Day to reset our commercial operations with a focus on winning share in an omni-channel world We also have launched our plan to create a streamlined and modernized IT infrastructure across our business, led by our new CTO, Sven Gerjets Our supply chain continues to gain speed as Peter Gibbons discussed in June His team is on track to reduce time to market by 50% versus the historic 12 to 18 months We are already driving multiple products through this new approach with four new products launching recently through our accelerated process, all hitting in three to nine months This quarter, we launched our new control tower, which, as Peter Gibbons previously mentioned, is designed to radically improve demand and supply chain planning, while lowering inventory and improving service We are in the process of implementing a zero-based budgeting process for all areas across the company to better optimize and allocate existing spend to drive our key strategic pillars We plan to reduce SKUs in double-digit percentages in 2018 and 2019 through brand product line optimization, smarter localization and merchandising differentiation We are reassessing infrastructure and plan to announce a reshape of our manufacturing footprint in early 2018. We also are deeply invested in reigniting our culture We are excited about how our wonder values are being embraced across the company, driving increased focus on creativity and collaboration, which is critical to supporting our transformation We are reshaping the incentive system to better align with key performance metrics, which Joe will talk more about later In summary, we've made substantial progress in restructuring our organization, so that we can operate more effectively in terms of strategy, planning, incentives, resource allocation and organization execution, and in turn, accelerate margin improvement and growth The significant structural simplification program now in place, is the foundation for jump starting profit improvement as well as funding our transformation plan Despite the current challenges, we continue to believe in the future of Mattel We own some of the most iconic brands in the world, with a demonstrated ability to transform and meet the demands of tomorrow's kids and parents We're in a growing industry and well positioned in the fastest growing market We believe the progress we are making illustrates momentum and will allows to capitalize on our enormous headroom for growth We are optimistic about the road ahead, but we recognize the need to make the tough decisions to address and resolve current issues and rigorously shape the business to capitalize on the many opportunities before us We appreciate your support, as we continue to execute on the transformation of Mattel for the future We are deeply committed to restoring profitability and delivering our transformation plan and maximizing long-term shareholder value Now I will turn it over to Joe <UNK>, you want to take that? Sorry, Greg, was your question about specific brands? Could you just repeat the question just so we make sure we answer it? So, Greg, as I shared earlier in my remarks, the divergence that we've seen between POS and shipping is largely explained by this inventory reduction situation that we articulated earlier What we have seen is a stabilization of that trend towards the back half of the third quarter And our sense is that we've largely worked through the biggest chunk of it, that roughly 15% to 20% And we expect and will obviously closely monitor it going forward There will always be a little bit of a downward pressure due to e-commerce, that pivot to e-commerce because it's more demand-driven supply chain, but we do believe that we work through the majority of that issue at this point Well, the fourth quarter is obviously a very different quarter because you have the timing of shipment and sales It can be a little bit different between the two quarters But, yes, we would expect, over time, the POS and the shipping to align Correct As we were aware that they were potentially going to go bankrupt, as you know from public documents, we had a large exposure to Toys "<UNK>" Us And not understanding exactly the timing of the bankruptcy, we made the difficult decision to begin to reduce shipments to them until we understood fully what the plan was And then it took quite some time for us to begin shipping again, because of the timing of their own settlement In fact, the final settlement only happened a couple of days ago So, they account for more than half of the decline in North American sales in the quarter Now, what I can tell you is that we've been going through each one of the brands against a very specific framework about where and how we want them to compete What I would say is, one of the biggest opportunities for us is to, overall and then by market, have a much clearer shared understanding across our company about where we're trying to play and win And so I do think we have significant opportunities in some of our brands to be far more focused about where our biggest opportunities are We tend to expand age ranges quickly, or go into new categories, not always with as much depth or focus that I think we would benefit from for some of our brands In addition, as we shared earlier on the call, one thing we've made very strong progress in resetting the foundation for our power brands, the center of the value propositions for those, putting quality back in those products There have been a lot of choices made in the previous years to kind of take some costs out of the system We put the quality back in, so we really command that premium price and experience But in addition to try to outrun some of the challenges with Monster High, Ever After High and Disney Princess, we've launched a large number of items over that time period, which, I think, really drove a very high level of complexity, which was something that when I stood in June, I hadn't fully anticipated the scale of that SKU creep and the resulting cost around it And when you compound that, as Joe was saying, with the relatively high sales targets that we were setting, you really just build up a tremendous amount of issues within our supply chain infrastructure as well as a bloated corporate center So, I think those things are enormous opportunities for us to streamline, as I said on the structural simplification program, to focus on the things that offer us the biggest opportunity And so, I think we're really excited about the going-forward plan to be leaner, meaner and faster And then, <UNK>, on your questions on the cooler toys, the more fun toys, completely agree with you that creativity is the hallmark of this company, and something that we absolutely needed to reignite The wonder values that we'd actually put in place are so much at the foundation of what's important in this company In fact, just today, we had something we call Creative Con, and we've, under <UNK>ich's direction, created a creative counsel that really ties together our distinctive creative leaders and talent from across all of the brands we've been quite solid in the past and bringing them all together, and really enabling us to have really incredible mix fairs and other places where we're really celebrating creativity We're bringing in external speakers to challenge our thinking and really taking more advantage of the inspiration that we have out there In addition, I'm a big believer If you look at many of the hottest toys that are in the market today, they're really very much driven by insights and the focus groups of the world It doesn't take much to go online and see all the unboxing videos and see the things that inspire kids in the media today And we very much need to be more aggressive of taking advantage of those insights, combining them with the latest materials, technology and other things to ensure that we are coming to the market more consistently with some of those breakthrough ideas, both within our existing core iconic brands as well as launching new initiatives I'm very excited about certain products that we've launched this year for example such as Kamigami We brought that to market in less than nine months from beginning to end It's a really wonderful execution of how do we bring a magical experience with robotics to kids And it appeals to both boys and girls, and it's a wonderful opportunity for us Another great example of breakthrough innovation is our Imaginext, which continues to come out with some of the most creative and breakout toys in the marketplace The Batbot has been featured as one of the hot toys for the holidays And that's really a great example of us at our best when we really focus on that inspiration and innovation portion of the company And that SKU rationalization initiative, actually, will create enormous opportunity for us to free up the time of our creative organization and our supply chain to focus much more on innovation versus the SKU creep We have so many different versions for different retailers, the localization process and all those different things were actually making it harder for us to actually focus on the magic So, we're very excited to get back to that focus in the company Thank you <UNK>, on the revenue piece, the way I think about it is, the reason why we gave you those dramatic numbers in terms of the SKU creep in the company is that a lot of that actually isn't attached to a lot of revenue, much of that was driven by localization practices We're a very global business, and our localization didn't have a systematic process Each one of the markets could request a localized version of almost product on the SKU list And so, when you launch so many new things, the people could request their own version, that just drove the amount of complexity without a lot of return In addition, there's been an increasing demand, which is an industry trend for merchants to want exclusives Again, that was not a process that was managed centrally So, for example, the hypermarket in France might have requested an exclusive, in addition to someone in the U.S , in addition to somebody in Australia, et cetera So, there's not as much issue in terms of revenue losses, you would think, given some of these things are driven by the multiplication factor of a long tail of launches, localization, lack of standardization and merchandising, lack of standardization across market So that's one of the reasons why we were comfortable announcing a much larger cost-reduction initiative, because by streamlining and simplifying across the board, we can actually take a lot of cost out with a lot of revenue impact We are still working our way And this year, I think was the end of some of those bigger challenges such as the Monster High, Ever After High We've largely worked our way through those challenges in our Toy Box large brands, where they were in very large decline, in fact – and I think you and I had even talked about the fact that Monster High and Ever After High, the loss from that was as big this year as it was last year So, if you think about, we've had many strong performances, for example on Cars, but they've been offset by some of these continued falls We've largely worked our way through those large numbers this year So, we look at this as really a reset year for Mattel, and then we'll start to see the benefits of our transformation into 2018 with a lot more focus and a lot leaner approach to how we run the business Thank you I think that's a very good chain of logic We're taking a tough look at all the different things that we're trying to put through our supply chain Not just our own, but 50% is in-sourced today and 50% is outsourced And so, the combination of the long tail of SKUs many of which have been ordered in quite small quantities, plus the forecasting approach where we started with a very high target and then worked our way down has led to essentially a lot of fragmentation, a lot of challenges in scheduling, as we talked about earlier, that are not optimal And so, we are very confident when we're able to set a tighter plan from the beginning of the year, reduce the number of SKUs that we're trying to make that the alignment of those two things alone, gives you such a benefit on your existing and your vendor manufacturing footprint And then going into the beginning of 2018, we'll also talk about the broader strategic approach to how we want to drive our investments and things like manufacturing going forward Very viable, especially when you think about when you do that many short runs, it's just incredibly inefficient for you and the vendor You just don't get optimal pricing And so, we want to make sure that the way we're setting our plans, both the number of SKUs and the way we set our sales target enables our supply chain to be dramatically improved And I know that our entire company end-to-end is really excited about that opportunity for structural simplification, because we'll be able to do some of the things that we really want to do for also our retail partners, which provide far better in-stock levels for them, which is just sales sitting on the table And then in addition to that, we'll be able to get our products to market far faster, because there'll be a lot less pressure on our system So, you can imagine that as we've discovered and got into this much more deeply than I was in June, it's very exciting for us to really put this kind of a program together across the company for how we're going to run this business differently end-to-end and free up that many resources so that we'll be able to actually have a very different profile of business going forward As I shared earlier, we saw this as a trend after we worked off that inventory overhang from Q4, we started to see at the end of Q2 a little bit of a trend We weren't sure if that was driven by e-commerce And as we got into Q3 and spent more time working with our retail partners, we did assess that it was a more structural resetting of their inventories with us as their new working capital policies were kicking in In addition to that, we had, as we shared, higher weeks on hand that perhaps others in the system due to some of the sales incentive practices that we had in the prior years And therefore, we do think that this was a larger one-time structural adjustment into this year But then it's starting to stabilize exiting Q3, and we would expect to see always a little bit of downward pressure with the shift to e-commerce, but we're not anticipating another step function decline that would happen rapidly And to answer your other question on the advertising investment; this was a significant challenge Again, as I dug in at a much, much more detailed level, what we uncovered as we moved to one brand leader that was one of the big changes we made so that we could really think about managing the portfolio on an integrated basis, so we have Juliana Chugg now looks across all of our brands That was a key organization decision As we then looked at that and really thought about how do we allocate our resources at a much more detailed level, we were uncovering that we were spending as much on a lot of these small long tail launches as we were, disproportionately versus their productivity, even versus our core brand So, in fact, it's a double benefit for us that we can better optimize the investments in our core brand as well as put more investments, as I was sharing earlier, around the properties that we really believe in So, this is going to give us, I believe, a significant return on the investments that we're making going forward Fair Think about it as having your SG&A in alignment with more industry standard level that you would expect, which when we de-scale we're not quite in alignment Getting our A&P cleaned up, and then getting your COGS back, again, where a more simplified, more focused, lean machine would actually deliver a COGS line So, we are very focused on a strong <UNK>OI for shareholders in our emerging markets We actually have multiple of our high-growth emerging markets that are already extremely profitable And we're very, very disciplined about how we're investing against the absolute size of the opportunity So, for example, our tolerance for investment would be higher in a place like China, where you've got a 3 to 4x opportunity and the ability for us to establish ourselves as the clear differentiated market leader in a window where literally there is a breakout moment for parents and kids as the baby boomers move into child-bearing age And then you've got, on top of that, the two-child policy, and then you've got rising income So that's just an accelerating opportunity for us So, we should over-invest I think in some of the other markets, we're taking a very stepwise approach in thinking about how could we change the game and go into those markets with a more efficient model With, in many of those countries, they are very digital first, particularly in Asia, and there's sort of an opportunity for us to leverage partnership such as Alibaba and others so that we can enter and scale more cost effectively into those places So, we're taking a very disciplined approach to it And we'll be sharing more with you over the coming quarters given that we do believe this is one of the most exciting opportunities in the industry Sure Are you referring to the Barbie and Fisher-Price examples that I gave in terms of the refresh that we've done? Is that what you mean? So, as we've created the 360-degree play experiences and the systems work, we've systematically laid out both for those brands and across markets where we see the most attractive opportunities for growth And for example, in the case of Hot Wheels, if you just look at us continuing the strength on the track set side, as well as the diversification of our core iconic car, you add back in terms of driving up your attachment rate, as I talked about When I was at Investor Day, and then you have us taking a modest portion of the construction industry, for example, of that segment, in some of our key markets, you pretty quickly get to some of those numbers So, we've sized these both in terms of looking at our share in existing categories, looking at key adjacencies where we have a right to win, and then looking at how would we layer that by market So, we've done that for each one of these brands And that's how we think about that We've also looked at, obviously, the market growth rate versus our growth rate, the benchmark for what we think is achievable and what other people have done in similar circumstances And we do feel pretty confident And obviously, the profile is slightly different for each one, right? For Hot Wheels, obviously, it's the attachment, right, of the play sets and the track sets, and then obviously, also moving into the construction play pattern In the case of Barbie, we've actually been that size in the past We've been a 20% share player in the doll industry before So, how you think about that is regaining our footprint and really innovating across more of the doll platform as well as extending some of our experiences And on the Fisher-Price side, again, we have been a much bigger player and a much stronger player historically, but for different reasons around margin decisions and other things like that, we'd exit some of the categories If you thought about us as consistently executing the range of products that a mom wants for her baby from zero to five, and doing that consistently well, plus the enormous opportunity in a place like China, which is now the number two brand for Fisher-Price, again, you can get to these numbers quite easily, and you don't need everything to be perfect So, let me take these in turn First, American Girl is just a phenomenal franchise And we have enormous opportunity to regenerate that business and really get back to that direct to consumer excellence that really was the hallmark of that property historically In terms of the store footprint, we will always be optimizing the returns of those things It's a very profitable franchise for us So, it's, in my view, much more about resetting the stage for how do we actually sustain the steady growth of the franchise, and the consumer engagement through C<UNK>M and other content-driven initiatives that built passion for the franchise It's still one of the most beloved product of all times In terms of Thomas, I'll take that in two parts The HIT acquisition, as I've really looked into the incredible IP library that this company has One of the things I had mentioned on the call was, one of my priorities was to ensure that we had taken back control over the rights of our IP, because we have one of the best portfolios of kids and family IP in the world And we were not fully taking advantage of the opportunities against that IP in terms of how we thought about content development, which then, I think, dovetails into the opportunity for Thomas I think when the company purchased Thomas, they had a strong content development capability I can't really speak to the past, but I think we did not probably leverage those capabilities as well as we should have, but we still actually have those incredible IP assets Thomas' challenge is – again, still a very beloved franchise, but the competitive market, and we were not as quick to the punch as we should have been in terms of updating and refreshing that content I'm incredibly excited about the new content we just launched You can search for it online We just launched it at MIPCOM to rave reviews And I feel like we're right in the zone of really what matters We've got three new girl categories Thomas is getting out of Sodor and he's traveling the world And in addition, we have partnered with the UN in having Thomas teach kids about some of the key elements of sustainability, which we know is incredibly important to millennial moms So, Thomas really just needed to be modernized, but the beloved play pattern and its success is really significant And if you take a market like China where we're extremely successful with Thomas, and we do a theatrical and that sells out instantly We localize the engine We've done a wonderful job of making it part of popular culture We just actually launched a movie there in September It was number two in the box office during that period So, we know when we execute this franchise well, we deliver enormous returns for the company, but we've not done a consistently good job as I talked on Investor Day at supporting these franchises across markets So, <UNK> and I are extremely aligned in how we could think differently, and one of the reasons we flattened out our international structure with things reporting directly to <UNK>, and are driving a very different kind of an accountability approach to how we develop and manage our franchises across markets I don't know <UNK> if you want to add anything Our license partnerships are a real focus of our business In my remarks earlier, I emphasized the fact that partnerships with people like Disney, Warner Brothers, Universal, Disney, WWE are at the cornerstone of leveraging our capabilities of the company, both our creative and innovative designs, as well as the way we can take products to market globally And I think our success with Cars, despite the initial slow box office in the U.S , and then our ability to take that franchise globally and come close to our initial targets in close, close partnership with Disney really demonstrates our ability to take a franchise and take it to the next level The Jurassic line that we put out next year, incredibly excited about that partnership with Universal We've received rave reviews from retailers across the world about the innovation that's in that product, and how excited they are to carry that at retail And <UNK> has been working literally weekly with all those partners, and we're excited about what's ahead, <UNK>

2017_MAT

2016

NEOG

NEOG #$20.3 million. For the first quarter, <UNK>, that number was pretty close to $800,000. You're welcome. That's a good question. He's referring to Tractor Supply which, gosh, we took a lick this morning based on our results but, boy, they really took a lick based on theirs. I own a little bit of that stock and it fell out the map in one day. I was in Tractor Supply stores interestingly this past week and they're still solid. They're strong. I guessed it was a disappointment to some analysts that caused that one to drop. There's still a good strong company. I don't think they're ---+ that didn't have any impact on movement of our vet instruments going through retail, realizing that our veterinary instrument business, some of it goes through retail like the Tractor Supply businesses. They are exclusive. Tractor supply is exclusive and with our vet instruments around the United States. We've got similar situations in other places in the world. I think our sales of detectable needles may have been down a little bit for the quarter. That's a product that's used particularly in this line business. It's a patented product to make sure that if a needle were to happen to be broken in an animal while it was being vaccinated that it would be detected when it went through the metal detectors in the processing plant and not end up in somebody's pork loin on Sunday morning. That has to do with probably the swine numbers being down a little bit that might have impacted that or quarter-to-quarter changes on where the inventories were. I think it's still strong. I think going forward I can get kind of excited about what I see is going to happen, that spread out in the vet instrument area over the next 12 to 18 months, but I see it as kind of life as normal in the next couple quarters as we go forward than what it was. <UNK>. <UNK>, this is <UNK>. Tractor was actually up quite nicely in the first quarter for us. Our sales for tractor were up. Yes. And those are all at decent margins too. Don't let me forget to remind you that we have our annual meeting coming up on October 6, at 10 o'clock here in Lansing, Michigan, at the University Club of Michigan State. If anybody is in the vicinity or could be, we'd love to have you. Probably every bit as important or more important, if you haven't voted your proxies, please find them and vote them. We've got <UNK> who shared this morning, we have enough proxies in to have a formal holder meeting but we'd still like to get all those proxies in if you've got some proxies that you hadn't voted well, please get those in for us so we can get a full count. Thank you for staying with us this first quarter. I'm excited and I think we're going to have an interesting year to report. Once again, as <UNK> said, we look forward to seeing you here in a couple weeks if you can be here. Have a good autumn. Bye now.

2016_NEOG

2016

CMCSA

CMCSA #So let me just start by saying the advertising market remains very strong. Scatter is as strong as it has been really in a long time and that is a continuation. Really we have had quarter after quarter of very strong scatter and we had a super strong upfront in May. For the quarter, our advertising for broadcast, ex Olympics, was up 4%; our advertising for cable, ex Olympics, was about flat. And the up 4% is a sign of CPMs being high enough on the broadcast side to exceed ratings decline and in cable they were about flat. Cable in the last quarter ---+ there are certain quarters where we have more new launches and more things going on. And of course, the Olympics really took a lot of the advertising from the ongoing programs during the quarter. And concerning pricing, our HSD pricing is related on both rate ---+ is based upon both rate and, in some cases, the devices as we increase the speeds to the household. Our rate was a bigger factor this year than it was last year, which was more device-based. We continue to see ARPU upside. We are putting in the fastest Wi-Fi available. The faster speeds; we have increased speeds 17 times in the last 15 years. And we are continuing to improve the product in terms of smart internet where it is easy to integrate new devices into the home, whether it is a Nest thermostat or Lutron lights, it will make it easy for the customers, as <UNK> said earlier to use our service. We have to continue to increase the Wi-Fi capacity. There are about 11 devices hanging off our network now and we will continue to do that but we see ARPU upside overall in the HSD side. Well, I don't think the industry is anywhere near where it needs to be in terms of monetization and we were talking about the Olympics as a perfect example. Something like 100 million Americans consumed at least part of the Olympics online. It was a huge, huge phenomenon on Snapchat and Facebook and other places and the inability for us to articulately walk into an advertiser and talk about all that consumption in an aggregated way is a real problem. And it is a problem that is obviously going to get solve but progress is not as great as it should be. I think what everybody wants is pretty obvious. They want to know what is the total audience delivery of a television show wherever it gets consumed and they want it to be done by a third party in a way that it is objective and quantifiable and that is what we are all working to. I think the world is moving towards C7 from C3. I think the world is moving toward measuring alternative vehicles and I think most advertisers understand when they buy a hit property, they are going to get a lot of consumption elsewhere. And they sort of factor that into the effectiveness intellectually. But you would certainly love for it to be done in a quantifiable way by an unbiased third party and we are not making enough progress on that. And <UNK>, concerning XFINITY Home, we think there is a big opportunity there. We're capturing share and growing it quickly. About a year and a half ago we announced we had passed 500,000 customers and it has grown significantly from there. What is interesting, I find the most interesting is about 55% of the XFINITY Home customers are new to Comcast. We are attracting new customers and new customer relationships and about 60% of those customers have Quad-Play. So it is a very sticky product, it continues to develop and we are very optimistic on the upside potential. Let me take a crack at the second one first which if I understand the question when you say a disaggregated format, I'm not actually sure that I see it that way. What X1 does from my perspective, our perspective I think, is really help you with search, navigation, discovery and enjoyment of the content you end up deciding to procure. So if you just pick a movie star, you now talk to the remote, you say it and then it gives you recommendations and it tells you every episode now whether that episode resides on Netflix or resides on a broadcast or resides on a cable network or if you DVR-ed it. And then it is more like this and it gives you lots of choices. So in the case to your point, we will be upselling Netflix as an example and just as we upsell HBO and Showtime and others. So some content allows you to be show by show our network by network but it is the breadth of all the choices in the bundle that I think is what has powered this industry. And clearly as <UNK> said, we need to evolve and continue to progress and we will and we need to compete with whatever the future brings. But the investment that we have made and the innovation and the people we have recruited I think sort of ties to your first question. Very broadly put, Comcast NBCUniversal is a very special Company and we've move hundreds of people back and forth between different parts of the Company in the corporate office. The Olympics I think are just a shining example of where all those live streams that <UNK> was just talking about were available on X1 and on the NBC Sports app and you could get there through your voice remote or through your XFINITY mobile app. We call that Symphony and we have seen it whether it is talent wanting to work with the Company, people wanting to join the Company or innovation that the Company is doing. And could we do more and will we do more and innovate. Yes, but we have seen a lot of people want to use the X1 platform, there are other operators around the world in Canada and with Cox and we have had others requesting to use the platform. So we are ---+ it seems to be resonating in almost every part of ecosystem the strategy that we are on and again, you get to a quarter like this and you see it really all working well together. Let me talk a little bit about NBCUniversal under Comcast ownership, it has been about 5.5 years, we have more than doubled operating cash flow. We are the fastest-growing media Company in the country. When we came, NBC was number four, for seven years in a row, NBC is starting the fourth season in a row as number one. We have had two record years at Universal Studios. Our Theme Park business has tripled or quadrupled. We have really had a wonderful experience as part of Comcast and part of that is the culture that <UNK> and everyone at Comcast has created. Part of it is the willingness to invest, part of it is Symphony which we call our special sauce. But looking back at the last 5.5 years, the Comcast element has lent to a great, great stimulus to NBCUniversal and I think the results speak for themselves. Well, HSD, there is still 70% to 75% of the country has HSD so we think there is market growth opportunity. We have about 6 million DSL customers still in our footprint so we see that as a market share opportunity. And we have about 43% penetration so we see plenty of room for growth. Concerning 5G, I think it is in the early days and it will be an exciting evolution of the wireless standards. There are limitations to it such as propagation and the antennas it will need to meet power and backhaul and we think that with these thousands of endpoints in the cities you need space, power and a field force to enable the high bandwidth mobile connections. So we think we have a great set of assets that can bring significant value to the equation. Thank you, <UNK>, and thank you everybody for joining us this morning. Regina, back to you.

2016_CMCSA

2018

GWB

GWB #Thank you, <UNK>, and good morning, everyone. Thank you for taking the time to join us this morning to discuss our financial results. We are very pleased with the earnings and growth in our business this quarter. A few of the underlying highlights are: Net income was $40.5 million or $0.69 per share. This is an increase of 15% from last year. Loan growth remains strong, with loans increasing $173 million or 7.7% on an annualized basis. Our efficiency ratio remains strong at 48.6%, or 47.8% if you exclude an accounting gross up that Pete <UNK> will expand upon in a moment. And finally, we increased our quarterly dividend to $0.25 per share. This increase of 25% reflects Great Western Bank's ability to generate excess capital due to our strong returns. Now for more insight on our first quarter financial results, I'd like to turn the call over to our Chief Financial Officer, <UNK> <UNK>. Pete. Thank you, Ken, and good morning, everybody. As Ken mentioned, within our income statement for the quarter, there is a gross-up of noninterest income and noninterest expense by $2.3 million that largely offsets. This is due to a contract termination cost and offsetting sign-on bonus from a vendor change. This has no real impact upon net income but does gross up our efficiency ratio by approximately 1% for the quarter. Now moving to revenue. Net interest income was $102.2 million for the quarter, which is comparable to the prior quarter, driven primarily by loan interest income resulting from loan growth, partially offset by higher interest expense related to deposits and borrowings and a lower day count in the March 2018 quarter. Our net interest margin was 3.92% for the quarter, and our adjusted net interest margin was 3.86%. The adjusted NIM increased by 6 basis points quarter-over-quarter as a result of higher asset yields mainly driven by the fact that 62% of our loan portfolio is floating or adjustable, which was partially offset by the rising cost of interest-bearing deposits and borrowings. Noninterest income for the quarter was $18.7 million, a 12% increase compared to the December 2017 quarter, which was driven by a $2.3 million contract signing bonus. Excluding this amount, noninterest income declined by $400,000, which was as a result of service charges and mortgage income being seasonally softer in the March quarter, offset by higher swap fee revenue and wealth management income. Finally, noninterest expenses were $59.1 million for the quarter, or $56.8 million excluding the $2.3 million contract breakage gross up within data processing and communication costs. This is an increase of $2 million for the quarter. The increase in expenses was driven by an $800,000 increase in salaries and benefits, included within which was a one-time bonus of $300,000 as a result of our living wage announcements last quarter; increased OREO costs of $800,000 and increased occupancy costs of $400,000 due to seasonal property taxes and maintenance and the costs associated with new branch premises. We expect our expense run rate to be broadly in line with this quarter, with the view that OREO expenses should be lower in the following quarter. And also salary expense will not include the $300,000 in one-time bonuses. All regulatory capital ratios remain comfortably above the well-capitalized limits, with Tier 1 and total capital ratios at 11.5% and 12.5% respectively, and tangible common equity to tangible assets increasing to 9.3%. I'd now like to turn it over to Doug <UNK>, our Regional President, to discuss balance sheet activity. Doug. Thanks, Pete, and good morning, everyone. We are happy to report a third consecutive quarter of strong loan growth. Loan balances increased $173 million compared to December 31 and the annualized growth rate of nearly 8%. Growth was most robust in construction, land development and construction non-real estate segments of the portfolio. As we flagged in our December '17 quarterly earnings call, unfunded construction lines were $375 million higher than 12 months prior. So growth in construction and development was expected during this March quarter. We expect continued growth in this segment in the coming quarters, despite some finished projects refinancing into the secondary market. The commercial non-real estate and owner-occupied real estate portfolio grew by $95 million or 4% for the quarter, which reflects our desire and focus to pursue diverse and balanced growth across our portfolio. Commercial and industrial growth represented 55% of this quarter's loan growth. Geographically, growth was distributed across our footprint, with good growth in Arizona, South Dakota, Iowa, Kansas and Missouri, reflecting the benefit of our broad geographic footprint. Deposit growth during the quarter was approximately $360 million on a net basis. The inflow was split between an inflow in consumer and business. This brings our year-to-date deposit growth to 4.6%. Our loan to deposit ratio of 99% remains well within our targeted range. Let's turn the call over now to our to our Chief Credit Officer, <UNK> <UNK>, who will take us through asset quality developments. <UNK>. Thank you, Doug. Turning our attention now to the slide on asset quality. Provision for loan losses was $4.9 million for the quarter, a slight increase compared to the previous quarter. Net charge-offs for the quarter were $3.8 million or 17 basis points of average loans on an annualized basis, which is lower than the prior quarter and also the lowest quarterly net charge-off rate since fiscal year '16. Our allowance for loan and lease losses as a percentage of total loans was stable at 70 basis points. Our comprehensive credit coverage, which includes credit-related fair value adjustments on our long-term loan portfolio and purchase accounting marks, remains sound at 103 basis points of total loans. Compared to December 31, '17, we saw modest increases in Watch and Substandard credits of $7 million and $4 million respectively, which were more than offset by a $16 million decrease in nonaccrual loans. We're pleased to inform you that we've completed 91.4% of all ag reviews, which would typically be completed during this review renewal cycle; and 86.6% of all Watch and worse rated credits during the same period. In addition, we have completed 19.2% of all grain producer annual reviews, which would typically be completed during this review renewal cycle; and 88.5% of all Watch or worse rated credits during the same period. In general, farmers performance in 2017 was in line with our expectations and our previous earning calls, with upgrades modestly outpacing downgrades. We continue to actively monitor the discussion around trade tariffs, with specific focus on soybeans and how that may impact our customers. But at this stage, we do not have concerns around potential impact on the loan portfolio. If we look at soybean future prices as of yesterday, these are still higher than 12 months ago, and many of our customers have forward-contracted part of this year's production. The downward trend on milk prices we have discussed the last few quarters has reversed, with a slight improvement in milk prices during the quarter. With that, let's turn the call back to Ken for some closing remarks. Thank you, <UNK>. We achieved solid results for the quarter. Loan growth was strong, considering this quarter's growth is historically flat. Our returns were exceptional, which 1.4% ROA and a 16% return on tangible equity. Asset quality remains stable and very much in line with our expectations. We are optimistic that the impact of the tax and regulatory reform will continue to have a positive impact on our customers and our own business. Additionally, we remain confident we will see mid- to high-single-digit loan growth going forward. Thank you for your continued interest in GWB. And we're now happy to open up the call for questions. Well, I think it's not going to affect either earnings or growth on it. <UNK>, maybe a few points you want to make just on the tariff itself. But I think, as <UNK> stated earlier, we have very little concern regarding it. Happy to do so, Ken. So far, what's been recorded is exactly, you said, it's a lot of talk, it's a lot of discussion, it's posturing so far. Other thing that we really look at is China imports about 63% of the world's soybean production or 97 million tons a year. The 3 biggest producers are the U.S., Brazil and Argentina. And Argentina right now is in pretty significant drought. The market for soybeans so far indicates not a lot of concern there. I think the market was up again yesterday. And as mentioned in the presentation, the market is up from where it was a year ago. What we do think could happen is see a possible, call it, a distribution realignment, if you would. We've already seen Europe, Indonesia; believe that there's further demands in none other than China out there to take up that production, if China did indeed back off. On top of that, production costs dropping about 6% to 9% a year on both corn and beans. And in our footprint, our producers don't have to just do soybeans. They could plant corn if they chose to. So it's something we are very much watching and aware of. But as Ken said, don't expect significant at all effects on our loan books at all. And I think the other thing ---+ Doug, maybe you want to talk about that ---+ but a lot of our producers are forward contracting this year's production. So Doug. Yes, I think when you look at the grain book and realize, <UNK>, that's mostly in the Midwest, you've got opportunities that most are forward contracting or locking in positions through the mercantile exchange. Additionally, I think it's important to note, as you ask about, growth. And very little of our pipeline and very little of our growth would be focusing around the Midwest ag production. So we see insignificant to no headwind from growth impacts of any Midwest agricultural commodity concerns. Well, I think we probably, <UNK>, want to stick kind of with that full mid- to high-single loan growth for the year. What we saw this last quarter typically was flat to down quarter, so we were quite happy to see the growth that we had this quarter. And I think would help propel growth for us for the rest of the year. So typically this next quarter isn't as strong as our last fiscal quarter on it. But I think we're pretty confident there will be substantially higher loan growth than we have in the past year. Maybe a follow-up on Pete, with the discussion on the expense side. Just kind of the guide there that expecting some lower expenses. Also assume the noise on the contract break expense, that also goes away. Correct. And then, on the margin, just wanted to kind of lean into the ---+ I don't know if the interest rate swap cost decline, if you do that, sort of one-time in nature. But in other words, it sounded like an encouraging hoping to outstrip earning asset yields, outstripping deposit costs. Maybe just more margin discussion about how you see the adjusted going forward. And then, maybe one last one on that. The 3 properties added the OREO, any kind of additional detail there. And the whole bucket of OREO, anything headed for a quick resolution. <UNK>, you want to go ahead. I'll be happy to. With the additions to OREO, the only thing that I'd add ---+ and others certainly join in if you'd like ---+ those are the continuations of the workout strategy, where we got to the point where we got control and/or ownership of the properties, so nothing there was a surprise. As for quick wins, if you will, in that book we've got a number of the properties in OREO under contract. But in that space, I would not ever say that you're going to have 100% of them always come through to fruition. You will have some of those fallout. So all I can tell you is it's monitored extremely closely. And we're having discussions on those at least every month, if not more frequently, on the larger [parcels]. So if I were to circle back to the workout strategy, then, could we see that additional nonperforming loss transition to that OREO bucket, as you'd expect for the balance of the year. It's always a possibility. Right now the best information that we have as to where we're going to go is I think you're going to see a run rate in that book at or lower than what we have now. Yes, the $15 million is still very, very low considering the size of our bank, with $9 billion of loans. So there's always going to be something in there as we work through deals on it, too. But the good part is, with the economy where it is, we're seeing contracts and people looking and very interested in whatever property goes in there. So it is moving fairly quickly. Just a question on kind of the ag growth that you saw this quarter, or perhaps (inaudible). Just curious how much maybe you see this typical seasonal tick in agro that you may typically see during the first quarter of the year, of the calendar year. And then, just within that context, just curious kind of the uptick in ag net charge-offs that we saw this quarter because I think they were fairly low last quarter. Was somewhat surprising as you guys went through the seasonal process. Yes, <UNK>, this is Doug. Let me take the first half of it, and then <UNK> will help us on some of the charge-off reconciliation. On the growth side, we end up with some seasonal increases toward the end of the year. With prepayments, we have some declines that start into play right after the first of the year in January. And then, in the Midwest, we start seeing a number of the spring startup expenses that happen around March 1. So the averages generally were not up, but a point in time was up slightly. Most of that growth is going to be in the Southwest again. Because the quality of the book, the growth in the book that we have in the Southwest, many of it being nontraditional commodity producers starting in a January-February time frame. So a lot of that is increases in that segment of the book, not the Midwest necessarily. On the charge-off side, number one, I absolutely understand where the question is coming from. (inaudible) for agriculture, I think, was $783,000 or so that we had in charge-offs there. I would only call out that it's a continuation of the strategies on individual premise. And I don't think anybody on the call would expect that's going to be exactly even every quarter of the year. But I would also add to it, while the observation on charge-offs is right, if you look at our classified loans, if you look specifically at the grain book, our classified grain loans dropped by about $13 million in the quarter, which we look at as a very positive development. Of overall average USA, it's continuation of plans and the vast, vast ---+ over 90% of what we charged off had already been provided for. So no real surprise. And <UNK>, thanks for pointing that out. Because I think it does show something that we've said for a long, long time, that charge-offs in the ag space is still relatively low, very, very low on it. Even though that's ticked up a lot, that's still a small amount when you consider the size of our portfolio. And so that shows why we're very bullish in that space and why we think long term that's a great space to be in. Yes, if I look at the first 6 months of the year, Nate, year-on-year, ag charge-offs are only $3 million compared to $7.5 million last year. So (inaudible) charge-off. But it's going in the right direction, and it's still pretty low given the portfolio size. And then, just kind of changing gears and thinking about loan price, and obviously, you had good adjusted loan yield expansion this quarter along with higher rates. And I think you alluded to earlier in the call that you're seeing some firmer pricing on production as well. So just curious on what you've seen from competitive aspect that's allowing you to get some firmer pricing, obviously within the context of what you're seeing with higher interest rates as well. One thing where we continue to work through a lot of the fixed-rate book, which I think Pete called out earlier, is about a third of the loan book. We've had, with the sudden increase in treasuries over the last few months, 10-year hitting a near-term high just recently. A lot of the rates are locked in. They close, 30, 60, 90 days later. So as we continue to work through the back book of fixed-rate commitments, the new origination weighted average loan rate and the gross loan rate are going to continue to accelerate, especially more so on the fixed book with the treasury increases. So we do expect positive on the third of the book that's fixed and continue to receive that, again, on the variable side as well with rate adjustments. And then, if I could just sneak one last one in for Pete ---+ think in the past, you guys haven't disclosed the swap fees. I noticed a decent jump this quarter. So just curious if this is a line item that we can expect to repeat going forward, if this is more one-time in nature. I wouldn't say one-time, it was a good quarter, Nate, this year. I mean, this quarter was a stronger quarter than usual. So maybe a little lower, maybe $0.5 million or so lower in future quarters. But we're seeing good demand with, as Doug pointed out, increasing rates. We sort of have seen some increased client demand for longer-term lock-in rates. And I think we track a pipeline, <UNK>, on the loans that we're looking at or quoting in that book. And I think again, because of the surge in rates, we are probably seeing an increasing pipeline. We had a couple large closings in the quarter that helped that result. But again, the pipeline continues to probably increase, just based on business sentiment and maximizing interest rate risk. I think ---+ let me add one more thing on that, <UNK>. I think the other thing we're seeing, and we're continuing to see every quarter, a continued lift in the pipeline and the new loan closings from the new offices we've started. I know we've talked about those in the past. We've had 9 new offices over the last 5 years. And we continue to see increased traction from those locations in several states. And I think part of the expense item Pete mentioned, we're also seeing the expense obviously leads the revenue by several months, but we're starting to catch up. And we're seeing positive improvement there from cost versus revenue in the new offices we've started. Yes, it's going to be predominantly in metro areas. It's going to be a cross section of some multifamily, which we're very cautious of, depending on the market. It's going to be a little bit of some industrial, very little office and, I would say, no retail. So just to kind of follow up on the new markets that you've entered into recently, I think you mentioned 9 offices over the last 5 years. Obviously, you guys noted the progress that's coming out of those. Have you thought about additional markets to look to expand it to either during 2018 or into 2019. And if so, whereabouts. Yes, we did a multiyear plan early in '17 that we received support from the Board of Directors on that laid out a longer-term plan in '17-'18, '18-'19, and '19 and beyond. And we're executing on that plan that started a little over a year ago. As far as new markets, where we're headed, we have 3 applications that should be filed for new offices in 2 different states that are within our existing 9-state footprint. Probably during this quarter, we're waiting for one piece of information in all 3 of those to finalize the regulatory filings. Those would all be full-service offices that we do not currently have loan production offices in. We additionally have 3 loan production offices that are in the queue, and we're working on hiring opportunities in those markets. Some we've got offers out, some we're negotiating on, and some we're still sourcing the person that fits the culture. But those are all plans that were laid in place in early '17, and progressing as planned with staff hiring before we incur overhead. And I would say we're meeting to exceeding results in really all of the 9 we've opened, and preliminary stages of the ones that are in the queue. And until we probably have formal filings out there, we've not in the past disclosed the exact location relative to that until we put the filings out, which should be near term. And really, we have been successful with that. That's what'd led our guidance to the mid- to high-single-digit loan growth. It's helped us propel growth here from what we had last year. So it's working very well. And then, I guess, the credit trends have been very favorable the first 2 fiscal quarters for you guys this year. Loan growth is continuing to chug along. Just kind of wondering what your thoughts are on the provision for the last couple quarters of this fiscal year. I think pretty much in line with where we have, right. <UNK>, Pete, anything. Pretty much in line. Yes, certainly. Tim, really for us, sort of around the 100% loan to deposit. Certainly incremental funding more put towards loans over securities. I would expect that to sort of ---+ in the following quarter, I'd expect that to be more flattish. But certainly, we'd look to expand the loan book over the securities portfolio. I think, while we've had a lot of colder, wetter, damper weather, when you think about the varieties and various options of maturities that farmers have, they may get in the fields a week or two later. But honestly, current genetics don't impact yields, and there's a lot of heat that happens yet in the summer that catches it up very quickly. So no impacts. If we're sitting here at the next call, and we're still talking about wet, cold weather, might be a factor. But at this time, it's a nonevent. Forecast for the next few weeks is very strong during that; much warmer, too. We actually got a lot of planting that's already started probably in the southern Midwest portions of our market already. So we're looking at very modest impacts of a couple weeks, really, in only the northern portions of the Midwest. Thank you for joining us. Obviously, we're very proud of the strong quarter we had this last quarter and look very optimistic into the future here. So thanks again for joining us.

2018_GWB

2015

WRB

WRB #<UNK>, it's <UNK>. On the international front, first off, there are some expenses, as <UNK> referenced, associated with solvency, too, which we will be working our way through as we make our way to the end of the year. We would expect that those expenses will begin to diminish at a material rate as we make our way to 2016. And then we have some other plans as it relates to some reorganizations that we're doing within the segment. Some of which was accomplished in the second quarter, some of it will occur in the third quarter and we would expect that, that component would be quieting down in the fourth quarter. So I think the way that people should be looking at it is that the third quarter, you may see it tick up a little bit more from where it is now. The fourth-quarter you should see somewhat of an improvement, we would hope, from the third quarter. And by the time we're in 2016 we should be certainly in or on our way to a materially better place. I think the answer is that we see opportunity on both fronts. Obviously, we look at each opportunity individually and it needs to stand on its own two feet. <UNK>, again, it depends on how you define greenfield. But if you look at most of our activities, most of the business that we have started, it's been a situation where we have an individual or a team of people to come together that have a significant amount of expertise that they've developed over the years within a particular niche. And we don't expect that we would deviate from that approach. I'll make a comment. It's definitely a combination of both. There's a number of initiatives underway that we know are going to improve things from the expense side. <UNK> could comment more on the premium side, but I think it's going to take a combination of both to get it where we'd like it to be. So as <UNK> suggested, it's going to be a combination of both. Certainly top line and earned premium levels have an impact, certainly. Currency, to a certain extent, has an impact as well in some cases. But fundamentally, much of the action that <UNK> was alluding to earlier that I touched on as well, has to do with quite frankly just trying to find ways to make the biggest better, to make it more productive, to make it more efficient and we think that we are getting some traction and doing so. Really not because of what we're doing here, at the holding Company, as much as really a lot of the good things that our colleagues that run these businesses are doing. Long story short, would more earned premium in the backing be helpful. Absolutely. But I think the way we're going to get to a better place is because of some of these deliberate activities that we referenced earlier. I think the bottom line is, we would expect that, that expense ratio is going to come down and putting aside currency issues, we will, in fact, have somewhat improvement in the volume. So I think that while in the short run, i. e. a quarter, you may not see much dramatic improvement, I think if you look at these numbers a year from now, it will be substantially better. Why don't I let <UNK> talk about some of the opportunities he sees now from an operating point of view, and then I'll talk about it from a broader perspective. Just to make sure we're clear, we're talking about the consolidation that we see going on in the marketplace, correct. The investment for the energy investments, yes. They're profitable this quarter and we expect them to be profitable next quarter. The answer is, we're always willing to do what we think is in the best interest of our shareholders. We think we have some level of obligation to this country, we just think at the moment the way the tax laws are, we won't be able to compete in the long run when we're paying taxes at 30%-plus and we have many competitors who are paying very low tax rates. And they do it, forget about what they show on their statements, they do it in many ways, through loss portfolio transfers, because then they don't pay tax on the discounted value of their reserves, through all kinds of vehicles, some of which they feel are justified and some of which they don't. But the bottom line is, how much cash taxes do you pay. And it's a competitive disadvantage that in the long run, you can't continue with. We look at it all the time. We've worked on Congress. I have no idea how come it has been so difficult to persuade Congress. And I have no idea how some insurance commissioners think, for some reason or another, it's a good thing for people not to pay taxes in the country. But <UNK>, we work at it every day. We make that decision and we look at it all the time. And at some point, we'll have to come to the conclusion, we can't continue in the current posture. But each time they do something to make the differential less, it makes it less certain. But we would look at every alternative, and we do every day. We talk to people about it. No. I don't think so. The fact is, our net ---+ you have to remember, first of all, we have $400 million of statutory capital because we carry health equity at fair market value, so our statutory capital and our GAAP capital aren't the same, so we've had an increase in the statutory capital that you don't see of $400 million from just health equity. And there are other things that we've had increases in statutory capital because there, it's not a GAAP number so statutory capital has gone up, whereas GAAP capital has not. We haven't bought more stock than our net earnings have, so if you look at our aggregate earnings, the amount of stock we bought basically matches our earnings. So we don't think it's a problem. I think that over any period of time, that would be a general thing. <UNK> needs to make a comment about, he pulled up the numbers on his partnership things. I misspoke on the energy fund. I get a quarter ahead of myself with the one-quarter lag, but they actually in the quarter we just reported, they had a small loss, but we don't expect that to go forward. I just wanted to correct that. But at this point, I think they don't have a lot of our attention because the velocity of change now is much less. Okay, <UNK>. I think in the broadest sense, Latin America is a growing marketplace. It has more volatility as every developing market does. We have been successful in Argentina because we have great managers in Argentina and they've done a great job. We have the same in Brazil and we're expanding in Columbia now. The cornerstone of this business is great managers and great people. And we think that we've been able to get those kinds of people to work for us. Now, that said, it's a lot bumpier ride at the moment than it was 18 months ago. But I think that we're pretty happy with our participation and if anything, we would like to use an opportunity of uncertainty for us to expand further. No. The way they do it is they set up domestic subsidiaries. First of all, they can do loss portfolio transfers so they moved their reserves offshore, so they don't pay discount on the loss reserves. And then they quota share a large percentage of what's left. So they bring their tax rate down from 35% or 39% down to less than 10%. So when you can do that, it's a pretty big competitive advantage. I don't think it's the perception of being offshore. I think they have all have great people. But I think some of them have great people and do really well and others don't. But I think being here, doing this now for almost 50 years, we have a competitive advantage, because we have people who are old and gray and have been doing it for a while and most of the others are young and spry. So we're hopefully replacing the old and gray people with the young and spry people and we'll have accommodations that will be okay. Maybe I miscommunicated, but from our perspective, commercial auto is very challenged. While it would seem by and large there's opportunity for additional rate, I still think the economic result that will deliver is not particularly rewarding at this stage. So while it may not be rapidly deteriorating, or deteriorating at all from a rate perspective, I think even with the rate increases that many in the industry are getting, it's not where it needs to be. (Multiple speakers) correct. I'm sorry if I misspoke. Thank you. Thank you all very much. We are optimistic that this is the time that will give us great opportunities in many fronts. The ability to be nimble and select the opportunities that reward our shareholders best is something we've always prided ourselves on. You can only be sure of one thing. We will always do we think is right for our shareholders and you can count on that in this Company no matter what. Have a great day. Thank you.

2015_WRB

2016

CVS

CVS #Yes, <UNK>, this is <UNK>. We're ---+ I talked about the autoimmune opportunity, RA, for where there's more drugs that treat that disease state, so more competition. We believe we can get better rebates versus Crohn's disease. I think there are similar opportunities in oncology. We're still early, but we're working on that. I think, again, there's been a lot of talk about outcomes-based contracting. We think that is a good idea, but practically very challenging. EHRs don't communicate with each other, members move between health plans. The information often doesn't move with them. But we believe, with the tools and capabilities we have, that we're best situated to make progress in this area, and we're continuing to look at it and work at them. We'll be able to talk more about it, we believe, on Analyst Day. I will pick up on ScriptSync. This program is really ---+ as you can imagine, the million people who signed up for it are basically those patients who are filling roughly four prescriptions or more per month. As we did our research with them, what we saw and heard is their number one pain point is they've got a lot of complexity, healthcare-wise, in their lives. Pharmacy is a piece, but there's other elements of it. They're making lots of trips to the pharmacy, and that's hard for many of them. A big solve for them is consolidating all of it. The way it works is we help those patients, and we line them up to one date per month, which they can come in. It sounds simple, but as you can imagine, with all of the insurance plans out there, we've got to work behind the scenes to get them synched up. That's the hard part behind the solution from a consumer perspective. I think what's exciting for both the patients and the plans that we're serving is that ultimately this leads to very high consumer satisfaction, and much higher levels of adherence. That's ultimately the healthcare outcome that we were looking for as we developed ScriptSync. Steve, I guess from ---+ you'd have to look at that based on timing from a seasonal perspective, given year-over-year overlap of the flu. I would say we've not seen a material change in the volumes at this point in time, absent that. Well, <UNK>, there is no question that size and scale in this business matters probably more today than it ever has with costs in mind. I do believe that, as we go through the RFP process, it starts with price and service. You've got to be right there. Then we can certainly add to our offering, with the differentiation that we provide in the marketplace. Yes, I do believe that if ---+ it is harder, if one is lacking size and scale to effectively compete. <UNK>, this is <UNK>. Clients' biggest concern when they think about costs, they're really thinking about specialty. About half of their specialty spend is on the pharmacy benefit, which PBMs historically have managed. The other half of the specialty spend is under the medical benefit, which is not being managed very well today by the health plans. The platforms that they manage specialty medical on just weren't built to manage drugs. We actually have the capability to manage that benefit across the pharmacy and medical benefit. We think about unit cost, <UNK> talked about that. Size, scale, and capabilities really make a difference there. We're seeing specialty drugs come to market and be limited to a few providers. Our capabilities enable us to have access to those limited-distribution drugs. The other side of it is, what can we do clinically to manage the 3% of our clients' patients that are driving 25% of their overall healthcare costs. We've integrated a capability that allows us not to just manage the specialty prescription, but to manage that patient ---+ not just with their specialty condition, but with all their co-morbidities. We've demonstrated that we can reduce overall healthcare costs. As we tell that story to clients, it resonates. It's a key decision point for them as they're making a selection in the marketplace. I think we're seeing a pretty rational marketplace, especially in the drug store business. We haven't seen any major moves, I would say, in the last six months or so ---+ maybe even longer among our key drug store competitors. I feel like it allows us to continue to focus on what I said before, which is driving profitable growth; focusing on that 30% of our customers, where we really are seeing some nice sales and margin growth; and being aware of the marketplace, but being rational, as you said, in terms of our approach there. <UNK>, probably one thing that's a little different with CVS is, just given our tenure and the depth of expertise we have from a loyalty card program, we know who our best customers are. We're engaging with them. We've designed strategies that's allowed us to really tailor our marketing programs and our promotional offers to them. We're probably in a different spot than some of the other industry participants at this point in time. I think we have the ability, if you will ---+ and you saw it through this quarter ---+ to trade off a little bit of top line, but really focus our promotional dollars on those customers that really matter, to drive margin expansion in the front. No, I think that we continue to watch them. They're doing a nice job, but it's a big marketplace. As I've said, we growing share in that category. Okay. Everyone, thanks for your time this morning. Again, we appreciate your ongoing interest in CVS Health. If you have any follow-up questions, you can reach out to <UNK> or <UNK>.

2016_CVS

2017

HOPE

HOPE #Thank you, Nicole. Good morning, everyone, and thank you for joining us for the Hope Bancorp 2017 Second Quarter Investor Conference Call. Before we begin, I'd like to make a brief statement regarding forward-looking remarks. The call today may contain forward-looking projections regarding the future financial performance of the company and future events. In addition, certain statements regarding the proposed transaction between Hope Bancorp and U & I Financial Corp. , including the expected time line for completing the transaction, future financial and operating results, benefits and synergies of the proposed transaction; and other statements about future expectations, beliefs, goals, plans and prospects of the management are statements that may be deemed to be forward-looking statements. These statements are based on current expectations, estimates, forecasts and projections; management assumptions about the future performance of the company; as well as the business and markets and ---+ the company does and is expected to operate. The statements constitute forward-looking statements within the meaning of the U.<UNK> Private Securities Litigation Reform Act of 1995. We wish to caution you that such forward-looking statements reflect our expectations based on current expectations, estimates, forecasts or projections; and management's assumptions about the future performance of Hope Bancorp. These statements are not guarantees of future performance. Actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. The closing of the proposed transaction is subject to regulatory approvals, the approvals of the shareholders of U & I Financial and other customary closing conditions. There is no assurance that such conditions will be met and the proposed transaction will be consummated within the expected time frame or at all. If the transaction is consummated, factors may cause actual outcomes to differ materially from what is expressed in integrating the 2 organizations; and in achieving anticipated synergies, cost savings and other benefits from the transaction. We refer you to the documents the company files periodically with the SEC as well as the safe harbor statements in the press release issued yesterday. Hope Bancorp assumes no obligation to revise any forward-looking projections that may be made on today's call. The company cautions that the complete financial results to be included in the quarterly report on Form 10-Q for the quarter ended June 30, 2017, could differ materially from the financial results being reported today. As usual, we have allotted 1 hour for this call. Presenting from the management side today will be <UNK> <UNK>, Hope Bancorp's President and CEO; and Doug <UNK>, our Chief Financial Officer. Chief Credit Officer <UNK> <UNK> is also here with us today and will participate in the Q&A session. With that, let me turn the call over to <UNK> <UNK>. <UNK>. Thank you, <UNK>. Good morning, everyone, and thank you for joining us today. In the second quarter, we had our strongest quarter of business development since the completion of our merger of equals last year, reflecting the progress we are making in integrating the 2 companies and improving our execution at all levels of the organization. We generated $40.7 million in net income during the second quarter or $0.30 per diluted share compared with $36.2 million or $0.27 per diluted share in the preceding first quarter. Excluding merger-related expenses, the increase in earnings per share was $0.02. During the second quarter, we originated $725 million in new loans, an increase of 23% from $587 million in the prior quarter. This drove a 2.5% linked-quarter increase in our end-of-period loan balance and brought us back to the high single-digit annualized loan growth that we are targeting. Much of the loan production came in later in the quarter, and our average loan balances were up just 1.5% from the prior quarter, so we should see a stronger pickup in the net interest income heading into the third quarter. Importantly, we were able to generate the higher level of loan production without compromising on our pricing or credit quality. During the second quarter, the average rate on our new loan originations was 4.56%, an increase of 31 basis points from the preceding quarter. Our current focus in business development is producing the more balanced loan mix that we are targeting. Commercial real estate loans comprised 63% of total production. Commercial loans accounted for 27%, and residential mortgage loans 10%. We had 2% growth in our commercial real estate portfolio on a linked-quarter basis. We saw very balanced growth across this portfolio with every major property type up between 2% to 4%, with the exception of multifamily which was down 2% in the quarter. We are very pleased that we continued to see higher levels of commercial loan production. We had $178 million in new C&I originations by our commercial lending teams in the second quarter, up from $152 million in the prior year quarter. This resulted in a 5% increase in the commercial loan portfolio on a linked-quarter basis. We saw good balance within our commercial lending groups, including our West Coast, East Coast and corporate banking group, all making significant contributions to the total production. Overall, we now have $2.39 billion in total credit commitments outstanding to commercial customers, and the utilization rate on our lines of credit was 50% at the end of the quarter. We had a strong pickup in SBA originations in the quarter as well, although the production of 504 loans as a percentage of total SBA originations was higher than usual. Since it is the 7(a) originations that comprise the sellable portion of SBA loans and the majority of the originations in a given quarter are sold in the next quarter, the strong SBA production had more of a positive impact to our portfolio growth this quarter than it did to our gain on sale for the quarter. We funded $109 million in SBA loans during the second quarter, with nearly $66 million being sellable 7(a) loans. This compares with $80 million in originations in the preceding first quarter, with $52 million being sellable 7(a) loans. Our residential mortgage group also saw a higher level of production consistent with the seasonally stronger second quarter. We had $71 million of direct mortgage originations, up from $58 million last quarter. At this point in the interest rate cycle, most of our production continues to come from the purchase market rather than refinancing. As a result, we expect our consumer residential mortgage originations may be at lower levels than our historical performance due to the current market trends. Given the preferences of the customer base that we serve in the purchase market, our current production is heavily weighted toward the 5/1 and 7/1 adjustable-rate mortgages that we retain on our balance sheet. So as with our SBA production, our residential mortgage production this quarter had more of an impact on our portfolio growth than our gain on sale. Our overall consumer portfolio which includes our residential mortgage loans increased 10% on a linked-quarter basis. With that as an overview of our business development efforts, let me turn the call over to Doug to provide additional details on our financial performance in the second quarter. Doug. Thank you, <UNK>. As I begin the review of our second quarter results, I will limit my discussion to just some of the more significant items in the quarter since we provided quite a bit of detail in our press release. I'll start with the net interest margin. On a reported basis, it declined by 2 basis points to 3.75%. With the recent increases in the prime rate as a result of 2 Fed rate increases since December, we had a 9 basis point increase in our loan yields when compared to the preceding quarter. However, this was not sufficient to offset the impact of the higher funding costs, a large part of which was attributable to the runoff of the beneficial impact of purchase accounting adjustments on our liabilities. This accounted for approximately 9 basis points of the increase in our funding costs relative to the preceding first quarter or roughly 2/3 of the increase. In the next few quarters, we do expect some continued pressure on our net interest margin from declining purchase accounting, but we believe we will be able to offset deposit pricing pressure with improving loan yields. Moving to noninterest income. Most of the major items were relatively consistent with the prior quarter, with the most significant variances coming within the other income line item. Last quarter, our noninterest other income included higher-than-usual swap income of $963,000 versus $481,000 in the current second quarter. In addition, we recognized as other income recoveries from premerger, fully charged-off acquired loans of $1.1 million in the preceding first quarter versus only $210,000 in the current quarter. As <UNK> mentioned, we had stronger production of both SBA loans and residential mortgage loans, but due to the mix of production, our net gain on sale income was fairly similar to last quarter. We sold $46 million of SBA loans in the quarter with an average premium of 9.2% before broker commissions. This compares with $45 million of SBA loan sales in the preceding quarter with an average premium of 8.85%. Turning to noninterest expense. We had a few notable variances from the prior quarter. Our advertising and marketing expense declined by 30% primarily due to the impact of our new LPGA title sponsorship that was fully recognized in the first quarter this year. Going forward, these expenses are being accrued throughout the year, so we would not expect a significant swing as we saw in the preceding quarter. Our data processing and communication expense declined 26% from the preceding first quarter. This was attributed to a number of factors, including we recognized a credit in the current quarter of approximately $380,000, which is a onetime event following the renegotiation of a contract with a former Wilshire vendor. And two, we had decreases in item processing and ATM debit card processing expenses largely related to our branch consolidations in 2017. Excluding the impacts of the onetime credit, we believe our current data processing and communications expense represents a fair quarterly run rate for the foreseeable future. Our professional fees declined by 21% from the first quarter. As you may have noticed from our Form 10-Q for the first quarter, which was filed with the SEC on July 20, 2017, the amount of professional fees for the first quarter was higher by approximately $1.3 million compared with what we reported previously in our earnings release and conference call. This was due to the recognition of audit fees that were finalized and received late in the second quarter but for services in earlier periods. And lastly, our credit-related expense swung to the recognition of $88,000 of income this quarter. This is always a volatile line item, with this quarter being positively impacted by the timing of OREO-related expenses and valuations. Now that we are substantially through all of the MOE integration, we believe we have achieved the cost saves that we projected for the combination of the 2 companies. However, we continue to invest a portion of these cost savings to strengthen our infrastructure as well as support our new business development initiatives. We have a number of projects in the second half of 2017, much of which is related to the meeting of the higher regulatory requirements. And we would also expect an uptick in merger-related expenses for the upcoming U & I Financial transaction. Despite the recent branch consolidations, our FTE count increased to 1-3-7-8, 1,378, as of June 30, 2017, from 1,352 as of March 31. This is just one example of the investments we continue to make in our workforce. As a result, we expect our noninterest expenses will run higher in the second half of this year before moderating back down to levels that will help us meet our targeted efficiency ratio goal of mid 40s in 2018. Moving on to asset quality. We saw some increase in our problem loan categories but a low level of credit losses in the quarter. Our nonperforming assets increased by approximately $19 million in the quarter. However, earlier this month, we received the full payoff of a little more than $5 million on a nonperforming loan, so we've already seen an improvement of NPAs during the third quarter. Out of the new nonperforming assets, roughly half of this new inflow is coming from 2 larger credits. One is a hotel commercial real estate property that is on nonaccrual, and one is a C&I loan that is a TDR. We believe we are properly reserved for both of these loans. Aside from these 2 larger credits, the remaining inflow of NPAs are much smaller credits. Our total criticized and classified assets increased by approximately $30 million, but the increase was predominantly in the special mention category. We don't see anything systemic in the loans that were downgraded to indicate any broader issues within the portfolio, and we believe that the longer-term trend will continue to be towards a lower level of problem assets. We had just $1.3 million in net charge-offs in the quarter. Due to the low level of credit losses, our quantitative reserve requirements dropped a bit in the quarter, which had a favorable impact on our level of provision expense. We recorded a provision of $2.8 million in the quarter, which kept our allowance-to-total loans ratio essentially unchanged from the prior quarter. With that, let me turn the call back to <UNK>. Thank you, Doug. Looking ahead to the remainder of 2017, we are optimistic that we can continue our momentum in business development. Over the past few months, we've made some adjustments within the organizational structure to enhance our focus on generating new business. And we anticipate seeing the impact of these changes not just in the coming quarters but for years to come, supporting our continued growth. We are also actively adding new talent to the bank that can positively impact our growth and diversification. The most significant recent step was the addition of Steven Canup to head our new Institutional Banking Group. The ability to attract Steven to the bank and to form an institutional banking group was a direct benefit of the increased size and scale we have following the MOE. We now have the capital base, lending capacity and treasury management capabilities to effectively service the larger commercial enterprises that comprise the target customer base of this group. We anticipate that the formation of the Institutional Banking Group will provide a number of benefits for us. It provides an incremental source of balance sheet growth. It will be focused on supplementing our efforts to lend to larger commercial credits, which should improve our overall diversification and reduce our CRE concentration. And it will generate lower-cost transactional deposits. That should reduce our reliance on more costly CDs. We anticipate the Institutional Banking Group will make a meaningful contribution to both deposits and loans over the second half of the year. With this contribution and the healthy pipeline we have in our traditional lending areas, we believe we are well positioned to maintain high single-digit annualized growth rate in loans that we are targeting. With regard to the previously announced acquisition of U & I Financial Corp. , as a result of our delayed 10-K filing, we expect the completion of the transaction will also be delayed toward the end of the year or early 2018. As most of you should have noticed, the company filed its Form 10-Q for the first quarter of 2017 on July 20. As a result, we have received confirmation from NASDAQ that we are now back in compliance. And as previously guided, we expect to be timely with our quarterly SEC filings going forward. And finally, we announced last week an increase in our quarterly dividends from $0.12 to $0.13 per share. This represents our fifth consecutive annual increase in our cash dividends and exemplifies our board's commitment to continuously enhance shareholder returns. This dividend increase also underscores our board's confidence in the long-term growth prospects of the company as the only super regional Korean-American bank in the U.<UNK> As both organic and acquisitive growth strategies add quality assets to the bank, we anticipate a positive impact on our level of profitability going forward. With that, let's open up the call to answer any questions you may have. Operator, please open up the call. Yes, that is true. As you saw in the second quarter, it has grown nicely in the double-digit range. And I think it should support the high single-digit annualized growth that we are targeting. It's the other gain on sale, so roughly a little under 400. It's a very small number. That's all of it. Yes, there's a lot of moving parts in there, obviously. And we, as a result of all the moving parts, went through a sort of reforecasting internal process. And I'll break it into 2 pieces: We do have the U & I merger coming up, and so merger-related expenses will probably cause a spike of maybe 2% of the efficiency ratio within the quarter that closes. Barring that, the current run rate of expenses and efficiency ratio are actually pretty close, and that's where we are in the second quarter. And the reason it's not getting down to what we have previously guided in terms of mid 40s as soon as we thought is a lot of onetime projects were identifying that they're going to hit the second half of the year. And those relate to, not only some new business units that are starting up, which <UNK> referred to, but some more expenses related to things like enhanced stress testing related to DFAST and credit modeling and some of the infrastructure-d. So an extra $4 million, $5 million of sort of project-related expenses that are going to hit the second half of the year, we believe, are going to hold that efficiency ratio up closer to the current level, excluding merger expenses, delaying when we get back to the mid 40s to the start of next year. Yes, I'm going to answer those in reverse order. On the asset side we are seeing some upward tick in loan yield as things reprice and as we have some inflow of loans that are higher than the coupon rate in the portfolio. That spread is a little higher than that in the investment portfolio with ---+ and new purchases and repricing in the investment portfolio are noticeably higher than our current portfolio. On the deposit side, the good news on the purchase accounting benefit we're losing, we have very little left to lose there. We will lose about another 3 basis points in the third quarter for purchase accounting benefit, and then that's it on the Wilshire deal. It's gone. And that will be ---+ that will then be able to stabilize. With the other costs of deposits where we're seeing the most movement is on retail CDs. On that piece of it we're definitely seeing repricing. So on the $600 million or so of retail CDs that'll reprice in the quarter, we'll see a definite uptick of anywhere from 15 to 25 basis points on some of those. Overall, that drives an increase in overall cost of deposits in the neighborhood of 2%. We think we can offset. And if I were to factor in the rest of the liabilities side of the balance sheet, I'd say the cost of funding could go up 2 to 4 basis points in the next quarter. And we expect to be able to offset a fair amount of that on the opposite side such that the core NIM excluding the purchase accounting is really fairly unmoved right now. I hope that wasn't too long an answer. It's about $800,000 we'll get. And you'll see ---+ well, how much is left for the third quarter. No, there's about $250,000 left for the third quarter. Roughly we're up by about 2 basis points on a core basis. We don't break it out in as much detail. There are very touchy rules about non-GAAP disclosures about things like margin, but currently we're running at 3.75%, of which about 1/4 is purchase accounting. I'm rounding a little bit. That core is up from about 3.48% last quarter. No, purchase accounting was comparatively flat between quarters. The Wilshire deal is still new enough that, that number is not moving very fast. It'll bounce around a little bit. We will start to see that decline, particularly in 2018, but I think we're in good shape to have our growth offset that. Well, I think the integration between BBCN and Wilshire during the past 12 months was a quite successful one. And we'd pretty much achieved all the cost saves that we anticipated and represented to the investment group at the beginning of the deal, but we had a lot of projects going on, which resulted in higher-than-expected expense levels at least in the year of 2017. So that is I see those more like an investment for the future of this organization. And it will eventually benefit the Bank of Hope and its shareholders, and I feel very positive about that. Once we complete those investment type of the expenditures, I think our efficiency will be achieved as originally expected. And for the next 6 months, our revenue will continue to grow, but at the same time, our expenses will be there, but from 2018, I think we begin to see the real benefits of all the investments in the deal that we did during the past 12 months. Well, no. That's in the second six ---+ in the second half of the year. A good part ---+ I ---+ a good part of that will drop out. I mean the ---+ I don't want to say 100% because we do ---+ are making some net investments on infrastructure that result in some higher headcount, but it ---+ we're talking about some projects that really are kind of onetime help us finalize getting over that $10 billion hump and things like that, in a variety of projects that are ---+ that I do believe are onetime, that ---+ so that the ---+ it's not just the efficiency ratio. The actual ---+ those actual expense levels should decline in the first part of next year. Sure. I think about half of the NPLs are coming from those 2 large credits. They're actually both unrelated industries. One is a hotel CRE. And there was a TDR loan about $5 million that was in the C&I area. So both, I think, have ample reserves. The actual calculations are coming off of our impairment, and basically those 2 loans combined are about $9.2 million. So pretty much half of it was based on those 2 unrelated customers. And as we noted, in the third quarter, we already had some good recoveries or some collection activities on those nonaccrual loans, not the 2 I just mentioned but in the rest of the portfolio. So about $5 million of it are already in the third quarter. We were able to make some progress. And just to touch upon, I know, on this special mention category: We also had a little bit of an uptick there as well. And there were 2 large CRE loans that drove that increase. About $18 million of that increase in the special mention category came from these 2 loans. And both of these loans actually are well secured, and they're paying as agreed. And I think it's a reflection of just our proactive management of our portfolio. Not really. I would add ---+ not even not really. Not at all, I would say. We've been in an environment where our customer base has been anticipating rate increases for the last 6 months, and it's been a very competitive promotion pricing-driven environment for the last 6 months. And I haven't felt that change at all as a result of the branch closures, but it is in fact there still. I had here another follow-up, I guess, on the expense and efficiency question. My recollection from last quarter is that you all had talked about a low- to mid-40% efficiency ratio in the third quarter. Now I get why it's getting pushed out to '18 given what you're talking about, some investments for the back half of this year, but in terms of not getting the efficiency ratio maybe down as low as you previously guided, is that an expense item. Or is that a revenue item that's kind of keeping the number of little bit higher. Well, a little bit is revenue because we did have lower growth in the first half of the year than we would have hoped for just in terms of earning assets and so forth, but we've been thinking in terms of mid 40s for a while now. And it really is mostly what we're looking at and in our internal forecasting, the timing of some of these infrastructure expenses in the second half of the year. Okay. And <UNK>, I don't know if you'd be able to comment at all on Steven <UNK> stepping down as Chairman of the Board. Any kind of changes. What does that mean in any sense. Well, I don't know what I can say about that. It was Chairman <UNK>'s long, hard decision to voluntarily step down from the leadership, but he will remain as a member of the board. And I think we will rely on his leadership in the future as the Honorary Chairman of the Board and also as a director of the board. He ---+ his influence in the community is really big. And I think he will continue to serve as a good ambassador of the bank in the community, and I hope that will continue for a long time to come. Okay, thank you, everyone. Thank you again for joining us today, and we look forward to speaking with you again in 3 months. Thank you.

2017_HOPE

2018

NJR

NJR #Thanks, <UNK>, and good morning, everyone. I think as you know from our news release, we have good news to share with you this morning. So I'll start with Slide 3. We reported net financial earnings, or NFE, for the quarter of $1.56 per share and that compared with $0.47 per share during the first quarter last year. As you can also see, tax reform is very positive for both our business and for our customers. Energy services is having an excellent year and made a significant NFE contribution this quarter of $20.3 million. Our team in NJR has worked very hard with customers day and night to meet the increased demand for natural gas that was caused by extremely cold weather. As you know, we have a diverse portfolio of assets and many of the states were energy services operates recorded the lowest temperatures that they have seen in the past two decades. I want to turn to tax reforms, which is you saw from the release has produced a meaningful incremental boost to NFE in the first quarter. We also expect that it will positively impact our results throughout fiscal 2018 and beyond. Our plan is to reinvest those earnings in our business to reduce our external equity needs as we advance our infrastructure growth strategy. Tax reform will also help New Jersey Natural Gas customers who'll benefit from lower energy bills, our regulatory team will be working through that process with the New Jersey Board of Public Utilities. As a result of all this activity, we have raised our fiscal 2018 earnings guidance to a range of $2.55 per share to $2.65 per share and that compared with our previously announced range of $1.75 per share to $1.85 per share. We also adjusted our annual growth rate to 6% to 8% from 5. ---+ from 5% to 9%. Our decision to adjust our annual long-term growth rate was based on several factors. First of all, we increased the lower-end of the range based on the new lower corporate tax rate and our confidence about delivering steady results in the future. Second, we lowered the top-end of the range to more accurately reflect the outperformance of ---+ from Energy Services of that was due to weather as did this quarter and will for fiscal 2018. The midpoint of the annual growth range remains at 7% and our goal is to achieve that 7% target going forward. In addition to the benefits in tax reforms in the performance of Energy Services this year, our business fundamentals remain strong and our goal remains to achieve consistent long-term NFE growth. On Slide 4, we illustrate where we expect to be this year and also shows the impact of the lower tax rate going forward. New Jersey Natural Gas and Clean Energy Ventures are adding customers at a steady rate and solar continues to be an attractive energy choice for New Jersey homeowners and businesses. We're also making significant progress on our key natural gas infrastructure projects, the Southern Reliability Link, PennEast and Adelphia Gateway. Moving to Slide 5, you can see our revised guidance of the anticipated sources of NFE for fiscal 2018. Aside from incremental NFE due to tax reform, which we show in red on the pie chart, the largest increases coming from Energy Services. We currently anticipate that energy services will contribute between 20% to 30% of our total NFE in fiscal 2018. And you can see that, that is up by 5% to 15% in prior guidance, and we also expect our regulated businesses to contribute to between 40% and 55% in annual NF<UNK> Moving to Slide 6. We continue to target a strong annual dividend growth rate of between 6% and 8% with a payout ratio goal of between 60% and 65%. This performance will provide a competitive return to our shareowners and keep our balance sheet strong. We'll continue to reinvest earnings to the company to reduce our external equity needs in the future, while supporting future growth with our substantial capital investments, in new natural gas and Clean Energy infrastructure. And with that, I will turn the call over to Steve <UNK>, our Chief Financial Officer. Thanks, Larry, and good morning, everyone. During the quarter, New Jersey Natural Gas continued to experience excellent customer growth and we have made progress on our infrastructure programs. The big story was the extreme cold weather, which led to some of the highest throughput days in New Jersey Natural Gas' history. In fact, 4 of the 10 highest throughput days over the past 11 years were in fiscal 2018. Our system met the challenge and these extreme weather events further emphasize the need for infrastructure investments, as we continue to strengthen and maintain our natural gas delivery system. We will invest approximately $300 million over the next few years to accomplish this task. These projects include the Southern Reliability Link, SAFE II and NJ RIS<UNK> Our Energy Service business is a provider of physical natural gas assets to producers, utilities, power generators and industrial customers across North America. Energy Services' portfolio today includes nearly 50 BCF of storage capacity and 1.5 BCF of daily pipeline capacity. These assets are strategically located throughout the United States and Canada. Slide 8 illustrates the temperature departure from normal during the Arctic blast that began in December. It also shows the areas throughout the country where energy services has contracts for storage and pipeline capacity. It is in these areas where we saw strong price volatility during the Arctic blast. Our portfolio has effectively supported our performance and we expect to nearly double planned results from energy services for this fiscal year. This equates to an expected $0.30 to $0.40 per share contribution in fiscal 2018. Moving to Slide 9. The PennEast Pipeline project was approved by the Federal Energy Regulatory Commission on January 19. It is now moving to complete land surveys and permit applications. PennEast is estimated to begin operation in 2019. As you know, we are a 20% owner of PennEast, which will help bring low-cost natural gas from the Marcellus to markets in New Jersey. It is nearly fully subscribed and 6 of the shippers are utilities. During the recent Arctic blast, natural gas traded in New Jersey for $150 per decatherm and in less than 50 miles away in Pennsylvania, they traded for $6 per decatherm. The need for more pipeline capacity could not be more clear. If PennEast had been in service, our region of could have saved an estimated $300 million in recent peaks. On Slide 10, I'd like to update you on our Adelphia Gateway project. As you know, in October, we signed an agreement to acquire an 84-mile, 18-inch pipeline for $166 million. This pipeline runs from Marcus Hook, Pennsylvania, which is just south of Philadelphia, North to Martins Creek, Pennsylvania. We intend to convert the 50-mile southern section of this pipeline to natural gas and bring it under FERC jurisdiction. Today, the Philadelphia market is constrained with limited access to affordable natural gas. The project will have minimal impact on the environment because the pipe is already in the ground. The conversion process for natural gas involves minimal construction and utilizes existing rights of way. This provides for a clear path to project completion. On December 15, we completed a successful Open Season that exceeded 2x our available capacity with contract terms up to 20 years. And most recently, on January 12, we filed with the Federal Energy Regulatory Commission for a certificate of public convenience in necessity and shortly thereafter, we received a notice from FERC that our filing had been accepted. We expect the project to be in service in 2019 and contribute material to earnings in 2020. Moving on to our Clean Energy business. This slide shows the results of our SREC hedging strategy. As you can see on the chart nearly all our SREC sales from facilities currently in operation and under construction are hedged for energy years 2018, 2019. Last time we spoke, we had roughly 30% of our SREC's hedged for energy in 2020, since that time, we've made some additional sales and are now 50% hedged for energy year 2020. With the BGS auction currently underway, we will continue to hedge our forward exposure. Now I'll turn the call over to Pat for some details on the numbers. Thanks, Steve. I'd like to begin with Slide 12, discussing the effect of tax reform. You've seen this slide in the past, however with the final legislation, we were able to quantify the impacts. The lower corporate tax rate will provide between $0.05 and $0.10 of ongoing NFEPS benefit to our nonregulated businesses, including the BGSS incentives. For New Jersey Natural Gas, a lower corporate tax rate will result in lower bills for our customers. We currently estimate about $228 million to be returned to customers associated with a reevaluation of deferred tax liabilities. In addition, the lower corporate tax rate also results in reduction in customer bills going forward. We are working with NGBPU to determine the timing and methodology of the decreases in customer bills. Reevaluation of net deferred tax liabilities for our nonregulated subsidiaries, resulted in significant benefits that we currently estimate to be between $0.60 and $0.65. As Larry, indicated in his opening remarks, we've increased our NFEPS guidance for fiscal 2018. Major components of the increase are the reevaluation of deferred tax liabilities, NJR Energy Services performance and the impact of a lower corporate tax rate on our fiscal 2018 results. In addition tax reforms provide us with opportunity to create additional economic value for New Jersey Resources. We use sale lease back financing for all of our planned commercial solar investments. An increase of $52 million over our plan and a reduction of ITCs for fiscal 2018, equating to approximately $0.15 of NFEPS. In fiscal year 2018, our statutory tax rate is 24.5%, a blend of the old and the new. Fiscal year 2019 is when we get the full benefit of the lower rate. To the extent we can, we'll move SREC sales from fiscal 2018 to fiscal 2019 to take advantage of the lower corporate tax rate. Additionally, we'll be pulling forward some expenses into 2019. These items in total are reflected on the chart on Slide 13. We expect that these actions will create between $0.03 and $0.07 of NFEPS benefit in fiscal 2019. On Slide 14, which shows the quarter-to-quarter comparisons for each segment, excluding the deferred tax reevaluation. As you can see, each of our segments underlying business fundamentals are strong and that resulted in quarter-over-quarter improvements for each. Moving to Slide 15. You can see that our capital plan is anchored by strong cash flows from operations as well as our dividend reinvestment program to help finance our capital investments and dividend growth targets. We originally forecasted about $83 million of new equity in fiscal 2018. In the first quarter, we raised about $23 million of new equity and expect that are needs for the balance of the fiscal year will be about $15 million, which we plan on raising through our dividend reinvestment plan. This is a decrease from our original plan due the outperformance of Energy Services and the benefits from tax reform. I'll now turn the call back to Larry for some closing remarks. Thanks, Pat. So before we open up the call for questions, I wanted to summarize our outlook for fiscal 2018. So I think you can see clearly that we are off to an excellent start and we expect fiscal 2018 to be a strong year and due to tax reform, higher NFE contributions from Energy Services and steady performance from our core businesses. Our regulated business segment including New Jersey Natural Gas are expected to contribute to between 40% and 55% in annual NF<UNK> Our long-term strategy remains to build a safer, cleaner and more affordable energy future for our customers, and our infrastructure investment strategy is focused around natural gas, clean energy and energy efficiency. The fundamentals for New Jersey Natural Gas remains strong, steady customer growth, strong regulatory relationships and infrastructure investment opportunities will continue to drive consistent NFE growth at New Jersey Natural Gas. We have collaborative regulatory relationships, which help us with not only our regulators but also public policy leaders that are important as we work together to support New Jersey's energy goals. We're looking forward to working with Governor Murphy and his administration to advance his energy agenda while supporting economic development growth activities in New Jersey. In fact, we've invested nearly $600 million in solar and we currently plan to invest nearly $500 million in solar through 2021. We've also invested more than $150 million in SAVEGREEN, our energy efficiency program, which has generated over $370 million in local economic activity, and to our conserve-to-preserve program, we've saved our customers almost $380 million since 2006 by helping them reduce their energy usage. Our team works every day to meet the needs of our growing customer base to improve the environment and to create more affordable clean energy choices for our customers. And to achieve our long-term NFE growth rate of 6% to 8%, we continue to maintain a disciplined capital allocation strategy that focuses on appropriate risk-adjusted return on capital to support our growth. We'll also maintain a strong and efficient financial profile that will provide access to external capital as we need it. Tax reform, combined with our expectation of financial performance this year, give us the ability to maintain a strong balance sheet without issuing significant amounts of new external equity and our infrastructure investments will support customer needs for safe, reliable, resilient and affordable service, to projects that we're pursuing will support our long-term growth strategy and will help us meet our customers energy needs for decades to come. So now before we go to questions, as always, I want to say thank you to more than our one ---+ our more than 1,000 employees for the work that they are doing. Results that we are presenting to you today are ---+ really show the work that our dedicated women and men do every day. They are truly the foundation of our company and the driving force behind our performance. I'm also pleased to tell you that our team won another <UNK> <UNK> Power Award for the outstanding service that we are providing to our business customers. That makes it 12 awards since 2002. And clearly, as you can see, I'm very proud of what they do. So with that I want to say thank you for joining us here today and we would welcome your questions and comments. <UNK>, this a Steve <UNK>. Yes, I mean certainly the investments that we've made, the utility have strengthen the system. The cold weather that we experienced, end of December, beginning of January, was actually colder than what we experienced in 2014 to Arctic blast and our system performed very well. But it does reinforce that as growing gas needs happen, we continue to need to reinforce and ---+ reinforce the reliability of our system. So everything performed well and everything worked well through that extreme period. <UNK>, Larry. One point that you'd be interested in since 2008, we've invested over a $1 billion into our infrastructure. You hear us talk about the accelerated infrastructure plans that we have with here in the state with the Board Public Utilities, and I think as Steve correctly points out, the performance of the system clearly has shown the benefits of those programs. This is Larry again. I think our regulators have done an outstanding job, giving us the tools that we need to invest properly, not only in the capital resources but the human resources as well. And clearly, the weather that we experience recently was a test of all of that. But when I used the word collaboration in describing our relationship with the regulators, it is truly that and the steps that we're able to take. In the programs we're able to pursue put us in the best possible position, to be able to serve our customers on the most extreme conditions. So the tariffs that we just instituted which raised the cost of solar panels. Currently, we don't expect that to have a material impact on our business and in fact, for the projects that we have scheduled for this year, a lot of those panels have been already been purchased. So as we move forward, we expect that those costs will be absorbed by everybody in the value chain and we should continue to make ---+ move forward and make those investments. <UNK>, this is <UNK> <UNK>. The only other thing I would add is that it doesn't meaningfully impact the project economics because at least for most of projects the panels are the smallest portion and let's not forget that we do get 30% of that increase in cost back by virtue of the investment tax credit. Mike, this is Steve. At this point, we're going to keep the initial phase at 250,000 dekatherms. We're working through the contracts with those counter parties and hope to have them contracted relatively soon, and we don't plan on expanding that line beyond its current pipeline that's in the ground. So we do have a second expansion that we're capable of but that will happen a year down the road. That would just be compression that we would add. I think the key differences between polar vortex and what we've just experienced was polar vortex was much longer in duration but it didn't have temperatures which were as extreme. So if you recall back, last time, in 2014, I think, high prices were $100, somewhere around there. I think the highest prices that we saw during this period was $175 was the high print. So I think, it was really characterized as a much shorter duration but a more extreme duration. So you had your volatility somewhat compressed during that period but we had the right assets in the right place, the team performed very well and we're able to capitalize on some of the volatility in the market.

2018_NJR

2017

ESE

ESE #Thanks, <UNK>, and good afternoon. Before I give my perspective on the quarter, I'll turn it over to <UNK> for a few financial highlights. Thanks, Vic. When we laid out our detailed guidance for the beginning of the year, we noted that our quarterly earnings profile was once again back-end loaded from an EPS perspective. In that initial guidance, we also projected a more heavily weighted Q4 than previous years given the timing of several large projects across the company. As we sit here at the halfway point, the year is playing out a bit ahead of plan, and the quarterly profile we projected at the start of the year is being delivered as expected. Moving on to the Q2 results. In February, Q2 EPS was projected to be in the range of $0.37 to $0.42 a share on a GAAP basis. And additionally, we indicated our GAAP earnings were impacted by some noncash purchase accounting charges related to our recent acquisitions ---+ when we described and quantified these incremental charges related to the inventory step-up at Mayday as well as additional or incremental noncash depreciation and amortization charges that were expected to be incurred as a result of our recent M&A activities. As noted in the release, we delivered Q2 GAAP EPS of $0.43 a share, which beat the top end of our expected range. The better-than-expected earnings were primarily driven by the continued strength of our commercial aerospace platform as well as significantly higher Navy and space products delivered in the quarter, coupled with lower Corporate spending. Westland and Mayday delivered a combined $15 million in sales in Q2 along with solid EBITDA contributions. I'll remind you in Q2 that we recognized the final piece of Mayday's noncash inventory step-up charge, which was approximately $1 million. And as you can see from the financial tables within the release, depreciation and amortization increased $1.7 million in Q2 compared to the prior year. So on an EBITDA basis, we increased our Q2 contributions significantly despite incurring the noted inventory step-up charge. Our Q2 '17 EBITDA increased 19% to over $25 million compared to Q2 '16 as adjusted. A few other Q2 and year-to-date highlights include the continued strength of our entered orders and the resulting growth in our March 31 backlog, especially as noted in Technical Packaging and Test, where we recorded Q2 book-to-bill of 1.3x and 1.2x respectively. Doble also reported a favorable book-to-bill and Filtration's 0.9x is not of concern as this reflects higher sales at VACCO and Westland related to the runoff of large multiyear procurements of submarine projects coupled with the continued delivery of VACCO space components for the SLS program. Year-to-date, I'm pleased to report that all 4 operating segments delivered a positive book-to-bill, which increased our backlog by $42 million or 13% from the start of the year. The strength of our orders and the resulting $375 million in backlog provides additional confidence supporting our outlook for the back half of the year. Additionally in Q2, we delivered another strong quarter of cash flow, which brings our 6-month cash flow provided by operating activities to $37 million, which is well ahead of plan. At March 31, our net debt was $116.5 million with a very reasonable leverage ratio of approximately 1.5x. Given the solid position we're in at the halfway point, our EPS and EBITDA outlook for the balance of '17 remains consistent with the expectations communicated earlier. We continually expect '17 EBITDA to increase between 21% and 23% and to be in the range of $122 million to $124 million compared to '16's adjusted EBITDA of $101 million. 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. 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 Q3 EPS guidance is projected to be in the range of $0.46 to $0.51 a share on a GAAP basis. And as a reminder, this includes the quarterly impact of the incremental depreciation and amortization from M&A as communicated previously. Now I'd be happy to address any specific financial questions when we get to the Q&A. And now I'll turn it back over to Vic. Thanks, <UNK>. I also am pleased with our second quarter performance and with the way we were wrapped up the first half of the year. Our second quarter sales came in on plan, and we exceeded our internal targets on EBIT, EPS, cash flow and orders. As <UNK> mentioned, our current backlog level is the highest it's been in a number of years, especially in Test, which bodes well for meeting our commitments over the balance of the year. We continue to deliver on our results across the 4 operating segments, and I believe our 6 months results validate our strategy and demonstrate one of the major benefits of maintaining our multisegment business platform. Given the diversity and strength of our end markets, it allows us to manage around the normal operational and project timing issues and provides us with several alternative paths to achieve success. Our results communicated today demonstrate what, I believe, we do best: collectively, our management teams continue to execute to plan and remain focused on delivering sustainable operational results. This gives us the chance to exceed expectations despite the normal business challenges that industrial companies face regularly. Since <UNK> covered the detailed financials in his commentary, I'll focus my comments on the balance of '17. Given our guidance for the third quarter and by reaffirming our full year EPS expectations, it's obvious we're counting on a very strong performance in the fourth quarter. I'm confident in our ability to deliver these commitments over the balance of the year, supported by the strength of our current backlog and the detailed insight by program supporting this ramp-up in sales and earnings. So here are a brief comments on the individual businesses. In Filtration, we continue to expect to deliver solid results in sales growth, EBIT and EBITDA contributions and cash flow. Mayday and Westland have several opportunities to provide further growth over the balance of the year as well as in the outyears, given the bid and proposal activities we're currently addressing. Since becoming part of our Filtration group, we've had several current customers reach out to Mayday with new business opportunities, and they want to consolidate their supplier base. Based on the experiences with our legacy Filtration companies, these customers feel comfortable adding Mayday to their list of preferred suppliers. Additionally at Filtration, we remain well positioned on several fronts, including the continued upcycle in commercial aerospace, growing opportunities in space, unparalleled technology on Navy submarines and surface ships, which are critical to our national security. Our Technical Packaging group's outlook is solid, and as noted previously, we're making additional investments to add production capacity both domestically and internationally. With the recent acquisitions, we now have meaningful scale and market leadership positions across several growth markets and geographies, which allow us to address the needs of our global customers, in the medical, pharmaceutical and consumer markets. The opportunities we're addressing set us up nicely today and in the outyears. Move on to Doble. We continue to see some easing of the spending constraints within the electric utility capital budgets, and we set our expectations around this view. The growth opportunities we're seeing today will be coming from our new products, such as the M series, doblePRIME and our DUC enterprise solution. Coupled with the strength of our software offerings, I remain enthusiastic about Doble's future. In March, we hosted our 84th annual conference which as in the past was very well attended. The enthusiasm and continued loyalty demonstrated by our customers is outstanding. At Test, our sales and operating performance gained momentum in the second quarter as we began shipping product for one of our large key customers. I was really pleased to see the favorable impact on the EBIT from the cost savings we implemented last year. As the year progresses and a strong backlog converts into meaningful increases in quarterly sales, we expect these higher sales to result in EBIT margins in the third and fourth quarter at meaningful higher levels than today. On the M&A front, we're currently very engaged in several opportunities which provide confidence that we will add nonorganic growth this year to supplement our current outlook. Wrapping up, I'm pleased with our second quarter and first half results, and I remain confident that our outlook for the balance of '17 remains solid. Our focus remains constant: to continue to improve our operational performance and execute on our growth opportunities both organically and through acquisitions. That's how we will increase shareholder value. We'll be glad to answer any questions you have. Okay. We'll thank you for calling in today, and we look forward to talking to you next quarter.

2017_ESE

2015

L

L #Thank you Lori and good morning everyone. Welcome to Loews Corporation's first-quarter 2015 earnings conference call. A copy of our earnings press release, our earnings PowerPoint snapshot and Company overview may be found on our website loews.com. On the call this morning we have our Chief Executive Officer <UNK> <UNK> and our Chief Financial Officer <UNK> <UNK>. Following our prepared remarks this morning we will have a question-and-answer session. Before we begin, however, I will remind you that this conference call might include statements that are forward-looking in nature. Actual results achieved by the Company may differ materially from those projections made in any forward-looking statements. Forward-looking statements reflect circumstances at the time they are made and the Company expressly disclaims any obligation to update or revise any forward-looking statements. This disclaimer is only a brief summary of the Company's statutory forward-looking statement disclaimers which is included in the Company's filings with the SEC. During the call today we might also discuss non-GAAP financial measures. Please refer to our security filings for reconciliation to the most comparable GAAP measures. I will now turn the call over to Loews Chief Executive Officer, <UNK> <UNK>. <UNK>. Thank you <UNK>. Good morning and thank you for joining us on our call today. I hope that you've all had a chance to look at our press release which was distributed earlier this morning. Loews reported income from continuing operations for the first quarter of $109 million compared to $265 million in the first quarter of 2014. The quarter's results were significantly impacted by an impairment charge at Diamond Offshore of $158 million after-tax related to the carrying value of eight of its older drilling rigs. <UNK> <UNK>, our CFO, will provide more details on the charge and key earnings drivers later in the call. I want to start today by looking at Loews $5.5 billion portfolio of cash and investments. Obviously this is a lot of cash. But that's nothing out of the ordinary for Loews. Over the years maintaining a sizable liquidity position has given us the freedom to deploy our capital opportunistically in order to create value for our shareholders over the long term. We've done this by using our cash to invest in our subsidiaries, to add new businesses and to repurchase our shares. Let's briefly examine each of these levers. Two subsidiaries we've provided funding for over the years over the last few years have been Boardwalk and Loews Hotels. At Boardwalk when attractive capital markets funding has not been available or when flexible forms of financing are required Loews has stepped in and provided bridge financing. We work closely with Boardwalk's management team to hone the financing plans and our cash position enables us to utilize parent company capital in projects with attractive risk-adjusted returns for both Loews and Boardwalk. At Loews Hotels over the past six months the parent company has invested approximately $300 million to finance hotel acquisitions. Some of these investments have been in the form of equity bridge financing which we anticipate will be returned as Loews Hotels brings in outside equity partners. We like this model and we intend to use it going forward to acquire additional hotels. In addition to enabling us to invest in our subsidiaries a high level of liquidity allows us to move quickly and decisively when considering an acquisition at the holding company level. We're actively seeking to diversify our portfolio of businesses but we don't want to rush into a deal simply because we have the funds available. Current valuations for companies and assets don't lend themselves to the kind of equity returns we want. We're looking for the right deals at the right price, either a company with good cash-on-cash returns and strong secular growth trends or distressed undervalued assets at an advantageous entry point in the cycle. And finally let's not forget about share repurchases which remain an important way that Loews creates value for shareholders. On our call last November I discussed in detail the various metrics we use when considering share repurchases decisions including the sum of the parts calculation. Over the last year Loews spent almost $700 million of its cash buying back almost 16 million shares. As we've said before money doesn't burn a hole in our pockets. While we acknowledge that cash can be a drag on Loews' short-term returns we feel that having the flexibility to be opportunistic and not rely on financing markets has served our shareholders very well over the long term. Now let's look at some highlights from our subsidiaries. Let's start with Diamond Offshore. Loews has been in the offshore drilling business for more than 25 years. In that time we've learned one thing with absolute certainty, offshore drilling is a cyclical business and therefore Diamond is managed accordingly. Nine years ago when others were paying top dollar for new drilling rigs Diamond began returning capital to shareholders by paying special dividends. Since January 2006 Diamond has paid over $41 per share in regular and special dividends returning more than $5.7 billion to shareholders over that time. As the current cyclical downturn accelerated, however, Diamond decided not to pay a special dividend. Instead the Company elected to retain cash in order to maintain Diamond's financial strength and to position the Company to be ready to act if rig acquisition opportunities presented themselves. While Diamond has been able to secure long-term contracts for its newest deepwater rigs prospects have been far more challenging for its midwater fleet. Diamond expects newer rigs to continue to compete aggressively against lower spec units. As a result of the increased competition and dramatically reduced rig chartering opportunities for midwater rigs this quarter Diamond decided to cold stack or scrap eight of those rigs that have no foreseeable employment prospects. We have no doubt that Diamond will withstand the cyclical downturn and we hope and expect that the Company will emerge having found opportunities to acquire good assets at attractive prices. But as of today we're not aware of any distressed assets available-for-sale at prices even close to a price we'd be willing to pay. Hopefully that situation will change in the next several quarters and when it does Diamond will be ready. Now let's turn to CNA. The Company had a good quarter producing an 18% year-over-year jump in net operating income. The results were helped by lower catastrophe losses and strong investment income from limited partnerships. More importantly management continues to focus on margin improvement in its core P&C business. While there's more work to be done we're pleased with CNA's steady progress. For the coming year CNA will be operating in a market where rate increases are likely to be relatively modest and investment income will be constrained by the low interest rate environment. CNA will remain focused on improving its underwriting capabilities in its commercial segment, maintaining its leadership position in its specialty segment and prudently managing its long-term care book of business. At Boardwalk over the last 15 months the Company has secured an extraordinary $1.6 billion in organic capital projects. These projects are backed by long-term agreements that are expected to generate double-digit unlevered returns once completed in the next two to four years. Since the projects will not come online immediately Boardwalk raised $116 million in equity to help fund its capital expenditures this year and to manage its leverage. Maintaining its credit quality will be a key focus for Boardwalk during the buildout phase of these projects. Last but not least let's turn to Loews Hotels. The hits just keep on coming for our hotel company. Since the beginning of the year the company opened the Loews Chicago Hotel and has completed the acquisition of the 155 room Mandarin Oriental in San Francisco which has been proudly renamed the Loews Regency San Francisco. New additions to the hotel company continue to be well received especially our newest hotel in Orlando, the Cabana Bay Beach Resort, which has been going gangbusters since it opened a year ago in March. If you haven't visited one of our hotels in Orlando you should. And now I'd like to turn the call over to <UNK>. Thank you, <UNK>, and good morning. Loews reported income from continuing operations of $109 million, or $0.29 per share for this year's first quarter down from $265 million or $0.68 per share in the first quarter of 2014. Diamond Offshore reported sharply lower earnings this year only partially offset by earnings improvements at CNA and Boardwalk. As I will discuss more fully, unusual items affected earnings comparisons at both Diamond Offshore and Boardwalk. Loews' net income which reflects the impact of a $206 million loss from discontinued operations in last year's first quarter was up year over year. As a reminder, last year's loss from discontinued operations related primarily to the sale by CNA Financial of its life insurance subsidiary. CNA contributed $202 million to Loews' income from continuing operations in this year's first quarter as compared to $176 million in the first quarter of 2014. These amounts exclude after-tax realized gains of $8 million this year versus $24 million last year. The increase in CNA's net operating income was attributable to two main factors: number one, higher net investment income driven by limited partnership investments and two, higher P&C underwriting income driven by lower catastrophe losses and improved non-cat accident year results. During the first quarter CNA paid a $2 per share special dividend and a $0.25 per share regular quarterly dividend. At quarter-end after the payment by CNA of over $600 million of shareholder dividend the Company's capital and liquidity positions remain rocksolid. Diamond Offshore contributed a loss of $126 million to our first-quarter net income down from an earnings contribution of $69 million last year. Diamond's first-quarter results include an after-tax impairment charge of $319 million of which $158 million flowed through our net income. The charge resulted from Diamond's decision to impact eight of its lower spec rigs, seven midwater semisubmersibles and an older drillship. Diamond announced that it plans to scrap three of the seven midwater units being impaired. Additionally, Diamond booked a restructuring charge in this year's first quarter that reduced Loews net income by $2.3 million. Absent the impairment and restructuring charges Diamond's contribution to our net income declined from $69 million last year to $34 million this year. Lower rig utilization negatively affected rig operating income. In addition depreciation expense was up from last year because of new rigs having been placed into service. Boardwalk Pipeline contributed $25 million to Loews' net income during Q1 2015, up from a loss of $18 million last year. The loss last year included a $55 million after-tax charge related to the write-off of all capitalized costs associated with the former Bluegrass Project. Absent this charge Boardwalk's contribution to our earnings decreased primarily due to lower EBITDA and higher depreciation. The EBITDA decline stemmed from lower revenue from transportation, park and loan and storage attributable in large part to warmer winter weather this year versus last in Boardwalk's market areas. During the first quarter and into early April Boardwalk sold 7 million common units under its equity distribution program. Net proceeds to Boardwalk were $116 million including the general partner contribution. Boardwalk sold equity to manage its capital ratios during a period when it is spending capital on projects that are not yet in service and thus not producing EBITDA. In keeping with its focus on capital management we anticipate that Boardwalk will draw down its $300 million subordinated debt facility from Loews later this year. Loews Hotels generated net income of $5 million during the first quarter, up from $3 million last year. Adjusted EBITDA which you can find in the earnings snapshot posted on our website was $35 million during the first quarter versus $24 million in the prior year. The increase in adjusted EBITDA was driven by Loews Hotels properties at Universal Orlando including the Cabana Bay Beach Resort as well as improved performance at various other properties. As <UNK> mentioned during the first four months of 2015 we invested over $300 million in Loews Hotels to finance the all-equity acquisitions of the Loews Chicago and Loews Regency San Francisco hotels. Over time Loews Hotels will likely put leverage on these properties and may if appropriate bring in equity partners. Turning to the parent company, after-tax investment income declined from $34 million in 2014 to $19 million in 2015 driven by reduced performance from equities partially offset by higher returns from the parent company limited partnership portfolio. At quarter-end cash and investments totaled $5.5 billion as compared to $5.1 billion at the end of December. Over $4 billion of our cash and investments were in treasury bills and notes and other short-term instruments which given the current interest rate environment earn us very little but provide strong liquidity. We receive $567 million in dividends from our subsidiaries in the quarter which broke down as follows: $545 million in regular and special dividends from CNA, $9 million from Diamond and $13 million from Boardwalk. As for returning capital to our shareholders, during the first quarter we paid $23 million in cash dividends and spent $71 million buying back 1.8 million shares of our common stock. We also spent $24 million during the quarter, buying just over 900,000 shares of Diamond stock, taking our ownership to 53.1%. I will now hand the call back to <UNK>. Thank you, <UNK>. Before we open up the call to questions let me summarize how we think about each one of our businesses. As I said six months ago trouble is opportunity when it comes to the offshore drilling market. The market is certainly challenged but Diamond is positioned to withstand this downturn and hopefully seize opportunities as they arise. CNA is improving its underwriting performance and maintaining a stellar balance sheet. Diamond is repositioning its operations to align with the evolution of the US natural gas marketplace and Loews Hotels is adding to its presence in key markets with exciting potential. We continue our commitment to pursuing a value-oriented investment strategy and to creating a diverse portfolio of solid businesses. As always Loews is focused on managing capital to achieve the best long-term return for our shareholders. We found that disciplined capital management coupled with a diverse portfolio of businesses is an exceptional way to create value over time. Now I'd like to turn the call back to <UNK>. Thank you, <UNK>. Lori I think we're ready to start the Q&A portion of the call. So we have the Loews Regency in New York which is a hotel that is of a higher quality than the other Loews Hotel brands. And when we had the opportunity to acquire the former Mandarin Oriental in San Francisco we decided that that would be a good place to extend the Loews Regency brand. So voila you see that we now have two Loews Regency hotels. If we have the opportunity going forward to create more Loews Regency hotels we'd certainly like to do that. No, no. There are no plans to upgrade any of our hotels to the Loews Regency brand. So I think right now the conditions are bad enough for rig valuations to go down. The problem is they haven't been bad enough for long enough. There are people who either have rigs chartered so they are not feeling any pressure. There are people who may have lost charters or who have rigs that are unchartered now that are feeling a lot of pressure but interest rates are low and at least for the next few months they are able to get by. People that have rigs that are scheduled to come out of the shipyard many of them have delayed the arrival of the ships. But there's no doubt in my mind that as the charter market remains a vast desert for these fifth and sixth generation rigs that the carrying cost of the rigs which is both the interest that they have to that owners have to pay on their that and additionally the staffing costs for these rigs which can be as much as $2 million to $3 million a month, that will start to weigh on the owners. And at that point in the next two, three or four quarters I think we could see that some fifth- and sixth-generation rig assets become available for sale. Or at least a number of quarters. We own about 53% of Diamond. Yes, we will get it for you. It's probably 73 million ---+ 72.9 million. 73 ---+ 72.9 million. Yes. So I don't recall the comment that I made, I'm sure that I made it. Let me just talk about where I think the market is right now. I think that after all these years of low interest rates and quantitative easing what we have is markets both fixed income and equity markets that are priced for perfection. Stocks are almost at new highs, the NASDAQ reached new highs last week, the S&P is within a shot of it today as we speak. The market multiple is I don't know 16, 17, 18 times earnings. When you look at companies that are auctioned in the private equity world what I would say is that 10 is the new 6. And what that means is in the old days when companies would trade at an EBITDA multiple of 6 times today that number is 10 times. Yes interest rates are low but still it seems to me that even though you can finance at low rates there just isn't enough room for return for the equity holder at these kinds of valuations. So my guess is that for the time being businesses look like they are priced too high for us. Now one other thing that I always remember is that the world is cyclical and it's easy to lose sight of that because we're now in firmly in year six of an up cycle for equity prices. But at some point in time something will happen, people will lose all the confidence that they have and my guess is that opportunities will present itself. Like I said for offshore drilling, it could be a while and offshore drilling it's the next several quarters in the market for businesses it could be in the next several years. But I'd rather be patient and get a good business at an attractive price rather than lose patience and buy a business at two high a price. No, we're happy to buy businesses here that have foreign operations. I think it's a much bigger leap to buy a business based in a foreign country. First of all we keep score in dollars, secondly it's the foreign markets are markets that don't scare us but by the same token we're not fully familiar with the rules, regulations, customs and taxation. And so our hunting ground is primarily in the United States. You know, WTI is currently at about $59 a barrel. Brent is $66 a barrel. I think you're at the price where investment starts to make sense for offshore and onshore drilling. But there's something else I think that has to happen in order for investment to pick up. And that is that I think people are going to want to see how volatile prices are. So will prices be at $59 a month from now. Will they be at $49. If they are at $49 and there's still a lot of volatility in the marketplace then I think you're not going to see confidence come back to the market. On the other hand if $59 on WTI and $66 on Brent is the new normal and we'll see that over the coming few months then I think you'll start to see some glimmers of drilling. But there's a lot of headwinds for the market. Number one we have thousands of wells in the United States that have been drilled that have not yet been fracked. Number two we have very high levels of oil in storage in the United States beyond the normal levels. And so I think at that there is a distinct possibility that those headwinds can be a real hindrance to prices moving up much more from here. Six months or so. One other thing, one other thing. That is there's a real distinction between drilling for oil in shale formations and drilling for it offshore. When you drill for oil in shale it can be as little as two months between the time that you make the investment decision until the time that you start production. So it's relatively ---+ and you also have a very good sense of exactly how much oil you're going to be able to produce from that shale well. So with prices at $59 a barrel you're able to pretty effectively hedge your first several years of production which makes all the difference in terms of the economics of your well. So remember with onshore shale production it's two months from the time you decide to drill until the time you're producing. For offshore drilling it's two to five years from the time you decide to drill until the time that you can be producing. So the offshore guys are much less concerned about the spot price for oil and much more concerned about what the trend is going to be. They don't know nearly as well how much oil they are going to be able to produce from that well that they may drill in the next year and they've got to do all manner of completion so they don't know exactly when the oil is going to be produced. So it's much more difficult for them to hedge their production than it is for the onshore shale people. So offshore production is about 20 million barrels a day and it is a very important part of total worldwide oil production. Shale production is probably under 5 million barrels a day, so shale production just cannot make up for the production that takes place offshore. That's number one. Number two, when you look at breakeven rates you see that offshore oil drilling in many theaters is very competitive with the economics of shale production. So there's no doubt in my mind that moving forward we'll continue to see shale drilling and shale production and we'll continue to see offshore drilling and offshore production. You know, I don't know. All I know is that the business has been growing very rapidly recently. We've added hotels ---+ we've added hotel ---+ we've added two hotels in Chicago, Minneapolis, Washington, DC, Boston, Orlando, Hollywood, San Francisco and there's one more on the boards for Orlando. We've seen a significant increase in EBITDA and hopefully earnings will soon follow. So I think you're seeing a rejuvenation of the Loews Hotels brand name and we'll just see how we're able to do going forward. You know, you're talking about far in the future and I just don't know. Thanks everyone. I just wanted to remind you the replay of this call will be available on our website in approximately two hours. That concludes today's call.

2015_L

2016

FCN

FCN #Welcome. I think it was ---+ that business is a relatively small one and so they have a certain lumpiness in the revenue cycle having to do with the staging of initial evaluations versus follow-on work that they often were awarded after the initial evaluation. And you had less business in that two-stage pipeline that produced in the fourth quarter. But I think that they've got a lot of things underway and the pipeline is filling out nicely and it gives us confidence that they should be able to deliver more smoothly in 2016. Thank you. Good morning, <UNK>. You mean if we start licensing it to partners, would there be positive cash flow implications. Absolutely. Well, sure. The question is how does that net against the investment we need to be making in this business is an interesting question. But, of course, if to the prior question we're forced by the channel partner strategy to take on another investor, obviously they would pay, we presume, a reasonable amount for to have a chance to participate in that. And that would be ---+ I don't think that's an operating cash flow. I will let <UNK> and <UNK> talk about that. I don't think they'd classify those as operating cash, but it's an inflow of cash. Am I hearing your question right, <UNK>. So I think the answer is the burden wouldn't be lessened, but the point is the revenue base over which it would be amortized would be higher. I mean, that is clearly what's going on in this industry. And to stay leading-edge you have to spend a lot of money. And if you look at it, it used to be there were a lot of software providers and some of you know some of these players in depth, even if some of them are private. My sense from the outside, a lot of places people have this software but they basically said I can't compete and they're not willing to invest the R&D necessary to compete and we are. But what I believe is ---+ in order to do that and to stay leading-edge, you need to not just be licensing it to ourselves. So the goal of this would be to continue to invest in the R&D and probably do, as we said, some significant add-ons this year, but on an ongoing basis to continue to invest. But the goal here is to amortize that over a lot more ---+ a bigger ecosystem and you get a big revenue stream from licensing and that's pretty margin. That's a high margin business. So that's the goal. Does that answer your question, <UNK>. I think that's right. The challenge (technical difficulty) to other people outside is the thought we were thinking about, yes. <UNK> or <UNK>. I think we've disclosed in the K it's a range of about $35 million to $45 million. We don't disclose specifically what's Tech related, but some of that number will shift towards Tech as part of the R&D expense that they experience this year turns into capital. But it's included in that range that we talked about. I don't think we've ever disclosed that, but ---+ But I would say, look, this is a pretty ---+ outside of technology, this is a pretty simple business. It's furniture and fixtures and it's laptops for the practitioners. But it's not 90% Tech either. I guess the global point is this Company generates a lot of cash and has fairly simple CapEx needs for our practice with approaching $2 billion of revenue. So we are not constrained in our ability to make capital investments should we need to. And even with the run rate we are on in terms of plans for technology coming out of 2015, it's a very manageable amount of capital expenditures. If we needed to increase that, it's well within our resources. The obvious answer is we can do more than we have in the past. Now we don't have all the same segments and obviously it's not just segments but geography. If you have extra heads in Australia, it is not quite so easy to have them staffed on cases in New York, right. It's all those sorts of issues. And what you need to be a leader in Strat Comm is different than what you need to be a strong junior person in our Econ business. But obviously you pick on two areas where the question sort of leaps out at you, which is junior staff in FLC and junior staff in Corp Fin, with many of whom places where we recruit from the same background and it's an issue we're looking at. I think there's always big project risk and that's one reason why we have a range on our e-guidance, right. I would say I think we are doing a better job of understanding the distribution of those risks than we have in the past. There's risk on the upside that you get a lot of jobs and there's also risk on a downside that some major assignment settles, which is great for the client, but that means you have an abrupt end to your revenue stream. And I think we've historically thought those were kind of symmetrical and when you really look at it, actually the ending thing happens faster than the ramp-up stuff and so forth. And so we've gotten ---+one of the things we've done over the last months is try to get a little bit more analytical about where we've missed in the past on our budgets and correct for some of those. So I would say, on average, I believe we are ---+ we have more disciplined budgets right now and are doing a better job of trying to calibrate those risks than we have in the past five years, including during the first couple years when I was here. So does that mean we are perfect. No. And will I probably ---+ if I'm here for the next five years, will I come up in front of you and say, Wow, we got blindsided by that. Almost certainly, because it's just there is a randomness to this, but it's not quite as random as we've been whipsawed by and we're trying to tighten that. Does that answer. I'll take that unless, <UNK>, you were waving. Did you ---+ that was on the last question. Okay. The separate locations, we have a video screen up, so we're trying to figure out who's taking the questions, so I didn't know whether <UNK> was taking that. As I say internally, I love my house. And I'm not going to sell my house. My kids grew up there. On the other hand, if somebody comes along and offers me stupid money for my house, I will listen. So that's always the case. As a CEO of any major Company, that's the responsibilities you have to the shareholders. But the other reason why people sell businesses is because they don't have confidence in those businesses. And I think that's the more often reason why people sell businesses. And I was worried about that when I first came in and that was the first gig, right, and some of you said, jesus, we can't do anything with Strat Comm, with the whipping boy of the day. And you should be dumping that. And every business I've looked at, we have real opportunities to build those businesses. And where we have those, I don't spend a lot of time trying to think about selling those businesses and that's where we are on all of our businesses today. We have real upside. There's been a lot of value that we could have created over time and that we can create going forward and that's what the Management team and I are focusing on and we're getting tighter and tighter and more effective at that focus in going forward. But that is my focus going forward here. Now if you want to come along and have somebody offer us the Google valuations for any ---+ my house, by the way, I'm happy to listen to it. But other than that, I'm not looking to dump any of these businesses and I'm looking to create the value out of them. And let me use that to close on a key point. I believe if we do ---+ we don't have to be perfect. If we do the right things with most of our businesses most times on these bets, we don't have to have perfection, and we continue to improve these businesses in a significant way, we're disciplined, we're a little bit more rigorous on our planning processes so we know when we're kidding ourselves, and we stay disciplined with cash except when the right acquisition comes along, which will be periodically, but we are disciplined, we will turn this Company into sustained double-digit EPS growth. And that is a pretty good performance. And I think we're not far from that. In fact, we have a shot this year of being the first time in two years ---+ first time since 2007 and 2009 to be two years in a row. And we are looking by the end of this year to put ourselves on a platform for sustained double-digit growth. I think we can do that without dumping businesses and that's where we're thinking right now. , <UNK>. Is that clear. Thank you. I think we are over with questions. I just want to say thank you all for joining the call. And we're looking forward to this year and we look forward to engaging with you during the course of this year. Thank you very much.

2016_FCN

2017

ULTA

ULTA #Again, when you're giving guidance, there's a range of outcomes, right, that you're looking at, a continuum. And so, we feel comfortable that between having flexibility on the upside to do better with promotion tactics. I mentioned earlier, other benefits coming out of supply chain investments maybe quicker than we had originally thought, and just other stronger retail trends that drive a lot of leverage on fixed-store cost. So a combination of those things, and as we look at the range, we feel very comfortable that we can stick to our target. The promotional environment what, that we're ---+. Yes, the best way to think about it is that we compete across a lot of dimensions. So we compete with I like to say 70,000 places on any given day that you can beauty, because we offer all the product categories and price points. So department stores are certainly one source. But we also compete with mass, with drug, online retailers, so it's really across the board. Promotional environment, for us, what I feel good about is the quarter that we had with consistent levels of promotion a year ago. I think is a really good way to think about the underlying health of our business, and that we're always going to make sure that we're providing a great value to our guests. And so, there's always going to be some levels of coupons or promotions in store, but certainly, our loyalty programs allow us to get that much more focused and targeted and we've been doing that over the last few years. So I feel like we've got good control over our levers. We've got levers we use as we need them. And more importantly, we're really just in an environment where beauty is certainly, it's a growing category, it's very active, there's a lot of players. Nobody is doing exactly what we do, so we really try to just play our offense. And that's why we're talking about really continued investment in the long term of our business. Because obviously, the beauty enthusiast is voting with her dollars. We are not complacent, we are not perfect, so we know we just have to stay on top of our game. Yes, so I'd start by saying we don't give, as we said before, we don't give specific numbers on that. But I'd say increasingly, many ---+ most of our stores, certainly more than half, have at least one boutique in them. And as we continue to grow. I think if you look at the history of what we've talked about, we said at the beginning of last year that we started the year, started 2016 with approximately 200 of each shipped Clinique and Lancome, and 700 of benefit. And then we added about 500 boutiques last year, and this year, as we said, another 700. So increasingly, we will be reaching pretty much the whole fleet with at least one over time. And we think that's important to continue to elevate the experience and invest in our stores, as <UNK> has said. As far as the mix between prestige and mass, we really focus on making sure the entire store is growing. Certainly prestige has been leading, but our mass business across cosmetics, for sure, but also skin care and bath has also been contributing in a very strong way to our overall business. And that's really important, because that's ultimately what our guest comes to us for is that mix. So as much as we talk about and we spend a lot of time today talking about prestige boutique investments, we've been equally as focused on building all parts of our store. We're investing in our hair care business, adding a lot of new brands there. We're, as I said, building our mass side. So the balance overall is important. We don't see a real dramatic shift. Might gradually continue to grow within prestige, but we're focused on keeping that balance for the long term. Yes, so as far as D&A and CapEx is concerned I think D&A we said $215 million. $250 million. $250 million, sorry, $2-5-0 million for 2017 is the estimate. And CapEx, <UNK>, it's hard for me to sit here today and think about how we could do any more. How could we take on anymore with the capacity that we have. So with respect to CapEx, I've learned now never say never, but it's hard to imagine that the number could get larger than what we're looking at for 2017. It's a large undertaking, but again, a lot of it is going into the store fleet so we think there's great payback there and great prospects for our investors over the long term. One other thing I would say about CapEx, so again, getting back to that $80 million number year over year, there's a lot of other things going on behind the scenes, right, besides just the MAC and Clinique and Lancome boutiques. There's things like Estee Lauder; we introduced it last year, going much larger with it this year across the fleet, 250 comp stores, up an additional 100 new stores. There's things like that. Remember when we go into the stores and we do these boutique drop-ins, we're also taking the opportunity to refresh the store right, on a pretty large scale. So we're going in with new nail fixtures, fragrance fixtures, updating the Ulta Beauty collection where it makes sense. So there's a lot of activity going on in the store just to keep it fresh. When she comes back, it's like a new shopping experience, and we just want to continue to do that. So that's the CapEx explanation. Great, and the Ulta Beauty collection I think we break it out. It's between 3% and 4% of the business, similar online to in store, which is true for most of our business. But actually I'm really proud about our little Ulta Beauty collection, the growth rate. <UNK> talked about this. The mass side of our business is very important to our guests, and our private label brand, we've really doubled down and making that a stronger brand than we had, and I'm proud of it. So part of the investments in store have to do with making sure that we're choosing fixtures and showcasing that brand to its best possible light. We've invested in, we bring down the packaging, we're really bringing newness to that line much more rapidly and it's doing very, very well. So I don't know if there's a cap. Certainly, I like it; it's a great margin and our guess was the response to our guests is wonderful. The constraint would be we're not going to be too big in anything. We want this to be a mosaic of brands that our guests want and love. Having said that, we know it can be bigger, it will be bigger, and we have a fair amount of space dedicated. We can make that space even more productive over time and we will. But we're proud about what's happening with Ulta Beauty collection. Thank you. Yes, I would say again, the quarter, when we look at individual quarter, every quarter has a special set of challenges and opportunities right. And really over the last couple years, there's been a lot of investments. So I think we saw last year in the fourth quarter, we deleveraged on the SG&A line. For the year, we were flattish. But the fourth quarter included some consulting expense, we were thinking about our analyst day and refreshing the five-year plan. We were ---+ the business was strong so we pulled forward some of our supply chain expense to try to get a head start on things. We also had people decisions that we made to get more footsteps on the ground to make sure we could ramp up some these investments even quicker. So again, we're lapping that in 2016, and you saw fourth quarter this year, we saw the fruits of our labor, so to speak, in a lot of different ways. We got a lot of leverage this year, because we've gotten an early start on a lot of those things. So I think we mention as we look at 2017 now, SG&A, slight leverage I would say for the full year. So there's still a number of things that we need to work on people wise and tool wise, and we're just being pragmatic and doing what we think is good for the business for the long term. Thank you. I just want to reiterate we're really proud about the year that we had in 2016, and I'd really like to thank our 32,000 associates for delivering that year and all their efforts to continue to drive our success in 2017 and beyond. I appreciate your interest in Ulta Beauty and look forward to speaking with everyone soon. Take care.

2017_ULTA

2016

COG

COG #Where our internal curtailed volumes were, at the time that we had maximum curtailment. Is that kind of the ---+. Well, I think you could look at it, <UNK>, just like you would look at the baseline decline. You look at, you kind of look at where the curtailed volumes were, even though you weren't producing at that point in time. As you bring the baseline decline, it's all proportionate to those curtailed volumes. Thank you. Can't hear you, <UNK>. Yes, the production was kind of in the mid-teens, and it was more the Cotton Valley assets, and not the Haynesville. That was about three-quarters of a Bcf, just those alone for us in the South region. And it was done ---+ when did it ---+. It was down most of the, or half or so of the first quarter, and it's back on line about the April 20 or so. Hey, <UNK>. Well, I think it's, I agree with some of what I read out there right now, that the midstream space is being challenged by an effort to, basically keep hydrocarbons in the ground, point blank. I do agree with it being more difficult, and the activists trying to stop progress on the midstream. I think in certain areas of the country, it will be more pronounced than others, and geographically it seems to be up in the East right now, where it's a little bit more populated, it seems to have more intensity and more emotion attached to it. But again, I'll go back to what we referred to last quarter, and you look at the footprint necessary to get a certain level of energy to a demand source. Natural gas has one of the smallest footprints that there are out there. If you make an equivalent to renewables, and what it takes to deliver equivalent production, what's being discounted and not discussed is the footprint necessary to be able to deliver renewables and the equivalent production levels. So all those things are part of it, but I think geographically, it's going to be more difficult in other areas to lay the infrastructure. But I do think that the process is being considered by the administrators in a way differently, than it has been in the past. And I think it's clear, that there's not scalable opportunities for renewables to take the place of what hydrocarbons, and natural gas in particular, will deliver as far as demand as concerned. So just a difficult time right now. I do feel though, that with the projects that we have in place, I think the mitigation discussions that we'll have going forward to mitigate in an objective way, will also come into play. I think we do that, but we're going to be better at that aspect of it. We're certainly sensitive to all the needs out there, and we'll continue to move forward with what we think are projects for the majority's need. Well, first off, let's back up to the premise, that is the reason for the question. One, is what is the level of contamination of any water in the first place. That question has been evaluated in a lot of different ways, water well tests, and it's a significant amount of dollars and a significant database that represents to us that the water has not been contaminated by the operations. On the chemical side, drilling side, we have a closed-loop system. We have, also through the frac side, we have a closed-loop system on the frac side, less and except what we put into the formation. So we're confident that our operation using best available technology is mitigating any concerns about water. Do I think that there are other areas that maybe has volumes of produced water, and those volumes of produced water then going through a process different than today, and continuing to look at produced water, and how you dispose of produced water. I think there's probably ongoing research that will continue to look at that, and try to improve in an area that's very good right now, but would try to improve on any produced water disposals. Yes, thank you, <UNK>. All right. I appreciate it, Rocco, and I appreciate everybody's interest in Cabot, and I look forward to a report next quarter. Thank you.

2016_COG

2016

CHE

CHE #Thank you, <UNK>. Good morning. Welcome to Chemed Corporation's first quarter 2016 conference call. I will begin with some of the highlights of the quarter, and <UNK> and Tim will follow with some additional operating detail. I will then open up the call for questions. In the quarter, Chemed generated $390 million of revenue, an increase of 3.6%. Consolidated net income in the quarter, excluding certain discrete items, increased 3.4% to $27.8 million. This equated to adjusted earnings per diluted share of $1.62, an increase of 5.2%. As most of you are aware, on January 1, 2016, CMS implemented certain changes to the Medicare hospice reimbursement per diem. This rebasing eliminated the single tier per diem for routine health care, and replaced it with a two-tier grade, with a higher rate for the first 60 days of a hospice patient's care and a lower rate for days 61 and thereafter. In addition, CMS provided for a service intensity add-on payment, which provides for reimbursement of care provided by a registered nurse or social worker for routine home care patients within seven days prior to death. The reimbursement for continuous care, inpatient care and respite care were not impacted by this rebasing. The two-tiered national per diem rate for routine home care provides for a per diem rate of approximately $187 for the first 60 days a patient is in hospice, and $147 for periods thereafter. These are national per diem rates, when the actual reimbursement is adjusted based on variations in geographic cost of living. Rebasing is revenue-neutral to a hospice if it has 37.6% of total routine home care days of care being provided to patients in their first 60 days of admission, and 62.4% of total routine home care days of care provided to patients after the 60 days, basically a 38% to 62% ratio. Historically, VITAS has had roughly a 29% to 71% routine home care ratio. As a result, this change in reimbursement is anticipated to reduce our revenue and pretax profitability by roughly $16 million when compared to the prior reimbursement methodology. The rebasing impact on revenue in the current quarter was somewhat higher than anticipated. However, we reviewed the quarterly historical pattern of routine home care under 60 and over 60 days of care ratio, and the first quarter of 2016 was within our historical pattern. VITAS anticipates a significant portion of the estimated $16 million reduction in revenue growth will be offset by increased efficiencies in 2016 and 2017 in areas of non-bedside field operations and general administration. With that, I would like to turn this teleconference over to <UNK> <UNK>, our Chief Financial Officer. Thank you, <UNK>. Net revenue for VITAS was $278 million in the first quarter of 2016, which is an increase of $7.9 million or 2.9% when compared to the prior-year period. This revenue increase is comprised of several factors that net to the 2.9%. The most significant of these factors are our Medicare reimbursement increase of approximately 0.6%, a 5.6% increase in average daily census, offset by acuity mix shift, which negatively impacted revenue by 1.8%. The last significant factor impacting revenue growth is the change in Medicare hospice reimbursement, which negatively impacted revenue by 2.1%. VITAS did not have any adjustments to revenue related to the Medicare cap billing limitation in the quarter. This compared to $0.2 million of Medicare cap billing limitations reimbursed in the first quarter of 2015. At March 31, 2016, VITAS had 31 Medicare provider numbers, none of which has an estimated 2016 Medicare cap billing limitation. Of these of 31 unique Medicare provider numbers, 28 of the provider numbers have a Medicare cap cushion of 10% or greater for the 2016 Medicare cap period. Two providers have a cap cushion between 5% and 10%, and one provider number has a cap cushion between zero and 5%. VITAS generated an aggregate cap cushion of $264 million during the trailing 12-month period. Our average revenue per patient per day in the quarter, excluding the impact of Medicare cap, was $194.84, which is 3.5% below the prior-year period. Routine home care reimbursement and high acuity care averaged $160.92 and $702.52, respectively. During the quarter, high acuity days of care were 6.3% of total days of care, which is 66 basis points less than the prior-year quarter. The first quarter of 2016 gross margin was 21.0%, which is a 14 basis point decline when compared to the first quarter of 2015. Our routine home care direct gross margin was 52.1% in the quarter, a decrease of 60 basis points compared to the first quarter of 2015. Direct inpatient margins in the quarter were 5.7%, which compares to 8.4% in the prior-year quarter. Occupancy of our 31 dedicated inpatient units averaged 78.3% of the quarter, which compares to 74.5% occupancy in the first quarter of 2015. Approximately 76% of our inpatient days of care are in these dedicated units, with the remaining 24% of our inpatient care utilizing short-term contract beds. Continuous care had a direct gross margin of 15.1%, which is a decline of 80 basis points compared to the prior-year quarter. Average hours billed for a day of continuous care was 18.2, which is a slight increase when compared to the 18.0 average hours billed for continuous care in the prior year's quarter. Selling, general and administrative expense, excluding litigation costs, was $22.4 million in the first quarter of 2016, which is an increase of 7.9% compared to the prior year. Adjusted EBITDA, excluding Medicare cap, totaled $35.9 million in the quarter, an increase of 0.3% over the prior-year period. Adjusted EBITDA margin, excluding the impact from Medicare cap, was 12.9% in the quarter, which is 34 basis points below the prior-year period. Now let's turn to Roto-Rooter. Roto-Rooter generated sales of $113 million in the first quarter of 2016, an increase of $5.8 million or 5.4% over the prior-year. Commercial drain cleaning revenue increased 10.6%, and commercial plumbing and excavation increased 0.9%. Overall, commercial revenue increased 4.9%. Residential plumbing and excavation increased 6.0%. Drain cleaning was essentially flat, and water restoration increased 23.3%, which equated to total residential water restoration revenue of $10.7 million in the quarter. Overall, residential sales increased 6.1%. Now let's look at our consolidated balance sheet. As of March 31, 2016, Chemed had total cash and cash equivalents of $15 million and debt of $145 million. Capital expenditures through March 31, 2016 aggregated $11.5 million, and compares to depreciation and amortization during the same period of $8.5 million. During the quarter, the Company repurchased 400,000 shares of Chemed stock for $52.5 million, which equates to a cost per share of $131.15. On March 11, 2016, Chemed's Board of Directors authorized an additional $100 million of stock repurchase under Chemed's existing share repurchase program. As of the end of the March 31, 2016 quarter, there is $100 million of remaining share repurchase authorization under this plan. Our guidance for calendar 2016 remains unchanged from the previous guidance provided in February 2016. I'll now turn this call over to Tim O'Toole, Chief Executive Officer of VITAS. Thank you, <UNK>. Total average daily census in the first quarter of 2016 was 15,653 patients, an increase of 5.6% over the prior year. If you exclude the three small programs we closed in the past year, our average daily census on a unit-for-unit basis increased 6.7%. Our overall admissions are also somewhat distorted by the closing of these small programs. Total admissions in the quarter were 16,868, a decline of 2.3%. On a unit-for-unit basis, admissions declined 0.7%. This slight admissions decline is not spread evenly in the communities we serve. Florida, our largest state market, had overall admissions growth of 5.7%. However, within the State of Florida, individual communities with established programs had admissions which ranged from a decline of 6.4% to an increase of 10.3%. California, our second largest market by state, had a decline in missions of 4.3%. Within Florida, our established programs had admissions ranging from a decline of 20.1% to an increase of 15.2%. This type of local admission volatility is normal. Admissions are subject to a fair amount of volatility, depending on a number of factors, some of which are within our sphere of control, and some involve factors completely out of our short-term control. With that said, it is our responsibility to educate the community and referral sources of the Medicare hospice benefit, call on all appropriate referral sources, and intake all appropriate terminally ill patients on a 24-hour, seven-day-a-week basis. During the quarter, admissions generated from hospital referrals, which typically represent over 50% of our admissions, declined 2.1%. Home-based referrals increased 2.4%. Nursing home admissions declined 12.1%, and assisted living facility admission referrals declined 2.1%. Our per-patient per-day pharmaceutical cost averaged $5.93, and are 8.8% favorable to the prior-year quarter. Medical equipment per-patient per-day cost in the quarter totaled $6.68, and compares to $6.41 in the first quarter of 2015. VITAS's average length of stay in the quarter was 83.7 days, which compares to 79 days in the prior-year quarter, and 89.8 days in the fourth quarter of 2015. Median length of stay was 15 days in the quarter, and compares to a median of 13 days in the prior-year quarter. Median length of stay is a key indicator of our penetration into the high acuity sector of the market. Our days of care totaled 1,424,386 days in the quarter, an increase of 6.8%. This days of care growth rate is higher than our average daily census growth rate of 5.6%, from the benefit of one additional care day due to 2016 being a leap year. With that, I will turn the call back over to <UNK>. Thank you, Tim. I will now open this teleconference to questions. Good morning, <UNK>. Before ---+ <UNK>, I'm going to turn it over to Tim, but let me say that when you get behind the numbers there is an important point which is probably the summary of part of the answer to your question, and that is this. The net effect is, yes. You look at our quarter and it was, we thought, very solid. We did an analysis, this was great from a data analysis standpoint. We did an analysis on historical patterns of what we should expect on January 1 with regard to the split between the over 60-day and the under 60-day. Of course, we can't factor in the effect that the split will have on demand and competition within our sector. And we saw that the fact that if the government is paying more for the under 60-day stays, that it becomes more competitive in that regard. So we saw a deterioration in that comparison, which cost us a little bit more money in the quarter. The good news is, and this is where I turn it over to tim, which is really where your question is, and that is we have said how do we deal with pressures like that, and the overall issue of the $60 million rebasing cost. And I will just tell you, the net effect is, when you look at the all-in cost of hospice program expenses, they were 9/10 of a percentage point better than our expectations. So I guess what I'm saying is ---+ so that was enough to give us, I believe, a very solid quarter, which leads me to the intro to Tim's question is Tim, how did you achieve the 0.9% improvement over the expected hospice program expenses. Well, as you say <UNK>, I mean the good news is, again, we look in the first quarter, being able to increase our EBITDA was somewhere in $5 million to $6 million of less revenue on the same expense load. So we were able to be effective and efficient in the quarter, already. Of course, we were preparing for this, as we worked all of last year for it. So mainly the ability to have our cost structure be reduced from productivity, it is a lot around being able to capture real-time data. When you have a real-time data, you can schedule more effectively, and make sure that you're completely efficient in the process. So for example, when we have referrals come in now, that are coming into digital servers, where humans don't intervene, and they are tracked to make the right thing happen on a timed basis workflow system. So again trying to reduce the time for when we have the opportunity to when we can actually visit with the patient and family, and referral sources, and meet their needs. So that capture is very important, so we can manage the data, and we've been working from that for years. Of course 70% of our cost is around labor, and having the data around your labor to schedule efficiently allows us to reign these costs down. The other areas have to be very cautious and keep our eye on, of course, are the ancillary costs. And those would be in the categories of pharmacy and medical equipment. And supplies, which of course we have a per diem rate, and if those costs go up, we have margin problems. So as we noted in the talk here earlier, all of those costs went down at year-over-year, just through really great work of the team, and reaching out in the marketplace and using our strength and our size to have better negotiating power. So again, our goal of the future is to be more effective, have a closer contact with the referral sources. In fact, we are making some good breakthroughs right now on what the marketplace is calling interoperability, where we're connecting through digital platforms directly to the systems of major hospital sources, so we are building those out and we see the benefit of that. And I am encouraged, as we see the quarter proceed, March was firmer than the early part of the month and we are doing well in April. So I'm very confident that we can keep our costs in line and absorb some of these rate reductions, that we have shown that, and I hope that helps answer and give you a little more detail, <UNK>, on your question. There's a significance, not relative. I think with the CapEx we estimate to be in the low-to-mid $30 million range, so call it $31 million to $34 million. Water restoration is going to be a part of that, but not a significant piece. That more relates ---+ to do with IT replacement of Roto-Rooter equipment, buildout of inpatient units, and as administrative offices leases our rolled-over or renewed buildouts there. Kind of the usual dogs and cats. Probably. The only reason I would hesitate is, every so often Roto-Rooter in put into the position of having to do a significant the buildout or construction, if there is nothing in a market that meets it ---+ needs storage equipment. VITAS has gone through, and it's a community-by-community basis, but making a decision in terms of does it make sense to do a buildout a of an inpatient unit for one, for disability within the committee that kind of goes beyond just the raw needs of a bad as well as they have been taking more expensive real estate located in better areas, to also increase the visibility. Those types of things tend to spike the CapEx, but again, on an average roll-forward basis I would say that low-to-\\ mid $30 million is a good number. <UNK>, would you like ---+ I think so. I would say that the thing that is like the tsunami in ---+ since that time has been really, if you look at the Internet, if you look over an eight-year period, the percentage of Roto-Rooter's calls that come in over the Internet are now approaching 60%. In other words, they are coming in on numbers that only appear on the Internet. It was more than reversed eight years ago, as far as the percentage, with the rest coming basically from yellow page numbers. You have to remember that what has happened during that period is in almost every major metropolitan book, we had a company-owned operation. We were the longest-standing advertiser with the biggest presence. So the plumbing section started in almost every ---+ almost every city with two pages of Roto-Rooter advertisements, and in several markets three pages. The situation now is, they're looking on the Internet, and we do a great job, we have great ---+ we show up in that list of five companies on the first page. We do advertising. But we're just a little ---+ we're just one name in a group of five, as opposed to having the first or three pages of a section. That means Roto-Rooter has been able to overcome that burden by doing a number of things, including having a little less problem dealing with new construction plumbers. But I guess that ---+ so what I'm saying <UNK>, is yes, I think we see that, but there are other issues that Roto-Rooter has to deal with. The biggest one is that marketing issue of having a less dominant position in the first thing that a consumer looks at. Now, the first thing they look at is the Internet and not the Yellow Pages. So a long-winded way of answering your question. I would say yes, we see that, but the much bigger factor is the change in marketing, which Roto-Rooter has done, I think, a very good job of dealing with. Okay. I was going to say one thing, I think one time we had no questions at the end of one of our meetings, but I will just add one question that I know I will get, because of the last two days our stock is down substantially. We have had a very good quarter. The question I always get at this point is: am I missing something. Is there something that came out that I didn't see, that type of thing. And I guess what I am saying is, that is the question that I am asking myself here, and my best answer, and I will give Dave an opportunity to make a comment too, I don't think so. I think there is an issue ---+ we were happy with the results. I think one comment could be that yes, but there is a miss on sales, and as Tim said, well, you have to make a few adjustments, like we closed three programs last year, so ---+ and we don't make a big point of the unit-to-unit comparisons, because again, you start falling in on yourself when you make too many of those. The second thing is that you have to remember that I think what ---+ again, just examining the data, it looks like there is more competition on ---+ for short-stay patients. Our view is that we still do ---+ we've always done a great job getting short-stay patients. You know, with 50% of our admissions through hospital discharge planners, a little more competition for those. To the extent that is having an effect a little bit on some of our numbers, you have to remember that those ---+ here is revenue dollars associated with those admits that we're not getting, but the fact of the matter is, there is not a lot of profit associated with those ---+ not getting those patients. That is why you don't see much effect on our census numbers or our overall reported profit numbers. So bottom line is I think, yes, there is volatility in our stock price, there is volatility in the overall markets, but again, we are very comfortable with the quarter and our outlook for the rest of the year. With that, I think ---+ first of all, I compliment myself on an excellent answer to my own question. But with that, we will end the call and reinvigorate this in about three months. Thank you.

2016_CHE

2016

FARO

FARO #That is correct. As you know, predominantly we are in two categories right now: three-dimensional documentation, and measurement or metrologies. Some of those individuals will be ---+ and it's very much in discussion right now according to their wishes. And the needs of the vertical are transitioning to some of the other verticals. So there will be some backfilling. Then there will also be some new hires in each of the verticals as a function of how we roll out the new product in the different areas. So it's very much a bit of a jazz dance at this point. There will be a net increase and account managers overall to get the representation we need. But there is shuffling between the existing and the new verticals. Yes. It should follow a pattern that we've had in prior years unless we do something extraordinary to change that trend. If you look back over the last few years by quarter as a proportion of sales, it's a fairly consistent pattern. We would suggest that that pattern would continue unless we do something dramatic to change that by a significant increase in growth rate, for example. So that remains to be seen because we are not sure how successful or how quickly we will be successful with the various initiatives that we are undertaking. But for the moment, I would view seasonality to be consistent with the pattern you have seen in prior years. You want to be more specific, <UNK>. I'm not sure how to answer that. Right. Well, clearly it was part of the idea of early adopter product introductions means we don't commit to a worldwide global introduction. We introduced at a very measured level in certain specific geographies. With respect to Robo-Imager, it's very early in that process. We have seen, as I mentioned also in my talk, that FARO has been a Company that in the past reduced the cost and the price of access to small and medium-sized businesses; so, technology which normally could have only been afforded by larger companies. So we imagine that there's a number of small, medium-sized businesses with serial production in various things that will need the adaptability of a robotic imager to do automated or semi-automated inspections near the line. That's our aspiration. The very reason it's in an early-adopter introductory phase is, in fact, to find out what that interest is like. I was at the Control show in Stuttgart, Germany, last week, and there was a great deal of interest around it as well as on the Cobalt imager for the arrays and/or the arrays on larger robots. So it is very much a new foray for us. The product is unique in that you can put multiple imagers on a single computer, which is unique in a industry, which provides you the ability to create arrangements that don't require robotics and only require one computer. So it's a bit of a new wave in factory automation. And this is all an experiment. I think that we can speak to the reception to it probably in the next couple of quarters. Our strategic focus there is to ---+ as I mentioned in the last call, we have a number of opportunities which have emerged because we have now segregated our interests in a number of verticals. So I can say that our M&A process is active and bigger. And obviously we will be announcing those as they occur. Well, first of all, we don't necessarily provide guidance as to forward-looking quarters. But in terms of ---+ I would believe that if you look back over the course of our history, you will see the percentage of the total revenue service. I did mention previously that we are actively driving to sell (inaudible) sale and then, on a renewable basis, our warranties. So that is actively something that our sales team ---+ our inside sales team is working on each and every day. But I'm not going to provide a forward-looking guidance for you. It is absolutely. We have initiatives across our Company that we make sure that we reach out to those customers whose warranties after the plan of sale are expiring, that we reach out. We remind them that ---+ and try to renew their contracts. So there's absolutely a piece of revenue that we do not want to leave off the table. We want to bring that forward. And we have inside sales working actively every day to do that. How do you mean assessment. Okay. Well, it's kind of a passive situation right now because we try to deduce from our installed base where primary interest lies. So the verticals we've selected are metrology, obviously. We have expanded metrology to clearly include both the building and verifying, so it's metrology build and verify. We also have factory automation, which is an outgrowth of that. Something that we started to touch on with the new product introduction. So, factory automation would be number two, and it is also build and verify. Then we have the AEC market, which was, in our opinion, a little bit too broad and conflicted with the idea of surveying. So we are not a surveying Company, but we are building information and modeling companies. So, we have focused that on the BIM-CIM side of the AEC market. In addition, you find public safety is one of our primary verticals. And we've done, as you know, acquisitions and product introductions around that. We've also had the ---+ of course, the product design, which is one of the areas that a lot of our products have been used for for reverse engineering. But, clearly, differentiated from the demand of the metrology market. So we find product design is one of those verticals. If you want to review the script from the year-end conference call, in there I give a fairly detailed review of how the verticals are decided upon. And the sixth one would be the services market. As you can see, our service revenue and warranty revenue increase. As part of expanding that, we want to do specific product development, 3-D services and provide access to early product concepts through that. In terms of really the ---+ let me start by the ASP side. First of all, it was (inaudible) for several different models out there in the marketplace. One is our X30, one is our X130, the other is our higher-priced model X330. So one of the things certainly we tried to do on our sales approach is try to correctly fit that ---+ our product key application. One of the things we have seen over the course of the last several quarters, we have seen a shift to that X330 based on the needs of the external market. So that does help our average selling price because it's about $10,000 or so higher than our X130. That's the ASP side. And also as we shift away from distribution, what you will see is that you will see an increase in our average selling price. But then that is somewhat offset by the commissions and the sales and marketing lines. So I would say two factors. One is a model shift, and then number two is just the movement towards the direct. In terms of the demand side, we are trying to actively address that in terms of scanning localizer, in terms of the HDR. But one of the things we are impacted is certainly by macro conditions. We are certainly impacted by some sector conditions. As I said before, there were parts of our EMEA business that were affected by oil and gas. They are somewhat affected in the US by surveying. But certainly what we are trying to do to address that is find other places in the market for this early-adopter technology, really. And in there's a lot of applications out there that we will be looking at to really penetrate further those applications. Okay. We just wanted to say thank you very much for all the attendees, your questions, and we look forward to talk to you in Q2.

2016_FARO

2017

ADP

ADP #Thank you very much, <UNK>, and good morning, everyone ADP revenues for the quarter grew 5% on a reported basis, 6% organic Our revenue growth this quarter experienced pressure as we began to lap our fiscal year 2016 ACA-related revenues Pre-tax earnings from continuing operations before taxes grew 4% on a reported basis to $828 million, despite almost 2 percentage points of combined pressure from our second quarter business disposition and our fiscal year 2017 acquisitions Adjusted earnings before interest and taxes or adjusted EBIT grew 4% Adjusted EBIT margin decreased about 20 basis points, compared to 24.8% in last year's third quarter Our margins this quarter were impacted by slower revenue growth as we maintain our investments and product sales and service, including dual operations cost related to our service alignment initiative Our net earnings grew 10% on a reported basis to $588 million and benefited from a lower effective tax rate Our effective tax rate this quarter was aided by an incremental tax benefit related to prior period software development efforts, $0.04 of which was not previously anticipated and $0.02 tax benefit related to the adoption of new stock-based compensation accounting guidance Diluted earnings per share grew 12% to $1.31 and benefited from fewer shares outstanding compared with a year ago Our new business bookings performance this quarter was disappointing However, we have continued to make investments into our sales organization to better position us for growth We're confident in the competitiveness of our portfolio and the strength of our distribution capabilities, and in turn, our ability to execute on our pipeline of market opportunities In our Employer Services segment, revenues grew 2% on a reported basis for the quarter and included 1 percentage points of pressure from the sale of our CHSA and COBRA businesses earlier this fiscal year Our same-store pays per control metric in the U.S grew 2.5% in the third quarter Average client fund balances grew 2% on a reported basis, or 3% on a constant dollar basis compared to a year ago As a result of improving employment, we have continued to see pressure from lower state unemployment insurance collections impact client fund balances This pressure was offset by a combination of wage inflation and growth in our pays per control metric Employer Services margin decreased about 40 basis points in the quarter This decrease was driven by slower revenue growth as we maintain our investments and product sales and service, including dual operations related to our service alignment initiative PEO revenues grew 12% in the quarter with average worksite employees growing 12% to 471,000. The PEO continued to experience slowing growth in the benefit pass-through costs, resulting from lower health care renewal premiums, which outweighed growth from higher benefit plan participation of our worksite employees during the quarter The PEO margins continued to expand through operational efficiencies, which helped drive approximately 100 basis points of margin expansion in the quarter New business bookings this quarter were down 7% And as a result, we now expect new business bookings for fiscal year 2017 to decline about 5% to 7% compared to the $1.75 billion sold in fiscal year 2016. We have also updated certain other elements of our fiscal 2017 forecast, which I will now take you through Despite our revised new business bookings guidance and this quarter's revenue retention decline, our revenue outlook remains unchanged at about 6% This forecast continues to include 1 percentage point of combined pressure from the sale of our CHSA and COBRA businesses and the impacts from foreign currency While Employer Services segment consistent with our prior forecast, revenue growth is anticipated to be 3% to 4%, which continues to include 1 percentage point of combined pressure from the sale of our CHSA and COBRA businesses and the impacts from foreign currency For the PEO, ADP continues to anticipate revenue growth of 13% We continue to expect our consolidated adjusted EBIT margin expansion to be about 50 basis points, which includes about 20 basis points of pressure from dual operations pertaining to our service alignment initiative, which was not part of our non-GAAP charges On a segment level, we continue to anticipate margin expansion in Employer Services of 25 basis points to 50 basis points For the PEO, we expect continued operating efficiencies and slower growth in our pass-through revenues as compared to fiscal year 2016 to help drive margin expansion on a full year basis Accordingly, we continue to expect fiscal year 2017 PEO margin expansion of at least 100 basis points We are also now expecting growth in client funds interest revenue to increase to about $20 million compared with our prior forecasted increase of about $15 million The total impact from the client funds extended investment strategy is now expected to be up about $15 million compared to the prior forecast of about $10 million The details of this forecast can be found in the supplemental slides on our Investor Relations website As a result of the software development related tax benefit, some of which was not previously contemplated in our prior guidance and the additional benefit related to the stock-based compensation accounting change, we now estimate our adjusted effective tax rate for fiscal year 2017 to be 31.4% as compared to our prior forecasted rate of 32.4% Based upon our revision of our effective tax rate guidance; adjusted diluted earnings per share is now expected to grow 13% to 14% compared to our prior forecast of 11% to 13% Our forecast also continues to contemplate a return of excess cash to shareholders via share repurchases of $1.2 billion to $1. 4 billion, subject to market conditions during fiscal year 2017. This forecast includes any repurchases required to offset dilution related to employee benefit plans So, with that, I will turn the call back to our operator to take your questions Question-and-Answer Session I think that's true But, <UNK>, you're mathematically correct that our new business bookings get implemented and turn into revenue after six months approximately and so some of the impact of our lower retention and lower sales will be seen in the revenue growth next year, as you roll it forward Just to be clear, when we migrate our clients, the migration itself is not counting as a new business booking because business bookings account only incremental recurring revenue that we report So the migration is generally cost-neutral to our clients, and they have enhanced feature functionality with a new product that they get In the process, clients continue to make buying decisions and buy incremental modules as they do, and we have seen that trend continue in particular in the midmarket But the actual migration is revenue-neutral, as we approach it, and that will be the same for all upmarket clients So the change – if a client buys more, I don't have the most recent statistics here, but I think the trends continue that a number of clients purchases incremental modules as they see the power of the integrated platform And so there is some slight revenue uptick that we do see for the clients who choose it and only that incremental revenue would be reflected But it would be immaterial for the new business bookings number in total And I think that it is – as I think we've been trying to signal for, I think, probably three years if you go back to my notes, it's very hard because we're obviously in uncharted territories, because we were in something completely new And it was a very comprehensive regulatory framework that required a lot of information from HR platforms, payroll platforms, benefit platforms, et cetera And when you look back, we had two years of more than 12% new business bookings growth And this is why we were cautious all along because that is a little strong We were happy with it and we take it It's good for our shareholders It's good for our revenues But it definitely felt like a fairly significant tailwind And I think, in hindsight, it was obviously a big tailwind Now, what has now added, I think, potentially to that pressure, which again we can't quantify scientifically is that we have, I think, a different environment politically that's creating some uncertainty, that certainly has impacted our new business bookings We just can't put our finger on exactly to what extent So as an example, we knew we had a grow-over issue just for ACA itself because we had already sold 50% of our addressable client base But we did have some planned sales of ACA this year And even though we've gotten some, it's significantly lower than plan, which is not surprising given the headlines and the frequent votes on repeal and replace of ACA And so I think that's a second factor that I think was not certainly anticipated as we entered into this fiscal year in terms of our planning process We knew we had to grow over the mathematical grow-over issue Now we have what I would call the political issue And then the third one that you mentioned, which again, is very hard for us to put our finger on, but I think you're onto something because we experienced the same thing back when we had the Y2K phenomenon in year 2000, where you do have some amount of pull forward, if you will, of business because we've seen this particularly on some of our wins last year from ERPs were quite high and elevated And I think some of that, it appears, with the benefit of hindsight is, people on kind of older legacy technology trying to find a new solution for ACA And by the way, some of that happened to us So as we mentioned, before we think some of our retention issues last year may have been related to the same factor of people kind of just out looking for new solutions as a result of what I would call an event, which is a significant event called ACA So I think all three things are a factor We really wish we could put our finger on exactly how much each one is accountable But unfortunately, we can't I think the only thing, Jim, just keep in mind our new guidance is down 5% to 7%, is our expected new business bookings guidance and I think <UNK> captured it Our longer-term expectations for organic growth is 7% to 9%, as you correctly quoted And it's driven by growth of new business bookings in the range of 8% to 10% growth And it always was meant to cover multiple year type of cycle elongated and it was not a commitment obviously, as you see realistically – not a commitment to perform every single fiscal year So we are not updating our long-term growth outlook at this point in time But, clearly, our new business bookings have fallen a little bit behind, but relative to a three- or four-year cycle of new business bookings, we still feel good about our growth opportunities a little comment to this on the outlook, which <UNK> described correctly kind of roughly in line with fourth quarter and the full-year guidance But we'll also continue to put our dollars where our statements are and the investments into the sales force, the incentives that we're bringing out to get the sales force ready, and the hiring and preparing for growth in the next year are actually fully underway and have actually to some degree impacted our third quarter and fourth quarter results because we believe we have that opportunity going forward So we're preparing for growth in the future And maybe a tiny bit of further detail, <UNK>, is when we look at our competitive position against this multitude of competitors in the quarter, some competitive positions have improved and some have not And that is a fairly typical thing we see each of these competitors evolving quarter-by-quarter up and down So when we say the general competitive dynamic we feel has not changed, it's rooted in this analysis, and we see in some cases we have improved and some cases we have not So it's a mixed bag obviously, but we believe it hasn't changed Well, next fiscal year, we are clearly half – still a little bit of grow-over but not that material So next year should be a clean year relative to the ACA-related grow-over Just a further clarification, we have tried to illustrate this a few times With the ACA core module that we have sold came off an incremental fuller bundled sales that particularly included benefit administration module So the impact of the Affordable Care Act have been broader than the direct impact of the ACA-related sales, which makes it a little bit harder to predict And as a consequence, our clients (54:35) typically provides ADP-wide about 50% of our incremental new business bookings, however, come from selling more to existing clients And that dynamic has now changed because we have fuller bundles now in particular in the midmarket And so we started to transition to drive new logo growth in the midmarket and those channels have to readjust a little bit as a consequence of the ACA surge that has driven a more complete bundle in particular in the midmarket So that transition is still present obviously next year, but we feel that we have great strategies in place to replace basically that up-sell strategy with a more aggressive new logo sales And as we have clarified, it is a disappointing quarter, but despite our down guidance for new business booking sale, it will still be our second highest sales year ever for ADP So keep that in mind Just a quick reminder, as one of the advantages of ADP is that we serve such a broad range of segments and markets in the U.S and globally and multinational, and so as we had our challenges in the mid and upmarket, we continue to perform tremendously in the down-market, in the PEO, multinational So there's a broad range of products that are gaining share and really driving success So obviously, in that balance, our investments into sales signal our confidence for ultimate success in distribution Yeah You're never complete on operations, <UNK>, but the majority of our work is actually this fiscal year and next fiscal year So in next fiscal year I'd still anticipate some dual ops We haven't determined what that will be specifically, but there is still transitioning happening, but the vast majority relative to those three new locations and the two existing ones should be completed in 2018. But our service strategy is obviously organic and evolving and we're going to continue to drive improvements, but 2018 is a big year still for us Yeah The sources of our business and the sources of our losses is something that we track And both have very similar dynamics It's a fragmented and there's no clear trend to it, and so they go to a variety of different targets Some in the ERP space, some to our traditional competitors, some to other solutions, so it is a wide range Some is driven by their M&A activity, moving to on (1:03:41) So the loss reasons and their targets is varied as the sources of our businesses are varied and as a consequence we feel the competitive dynamic has not fundamentally changed as we observe it And on the tax rate, <UNK>, this quarter was onetime unanticipated strong outcome relative to our tax strategies of the R&D credits So this quarter is not a regular quarter, it was a onetime effect and so we're going to be returning to our – well, that said, we're not giving guidance for next year But it's certainly not going to be at the level that you saw in the third quarter The tenets translate into what you have heard Our belief that our core strategic platforms need to be funded and need to be innovative So we have a belief in our core capability to develop those products And we continue as we had in a prior question, our belief that the service alignment initiative is fundamentally positive for our business outlook going forward So we need to continue to drive the execution of those core strategic initiatives, and we continue to believe that our sales force has opportunity to execute and we will be funding those appropriately So those may be the core tenets kind of really executing around the strategy that we have laid out for the last few years, also on 2018 is a fair assumption to make Thank you

2017_ADP

2016

PII

PII #Yes, I think some of it is a sequential improvement just given we were out of the market for a good two months on some of our key products. When you look at it on a unit basis, it's not a substantial uptick and you are comparing against the last year where we saw things worsen pretty dramatically and that's become somewhat of the new norm that we are dealing with within the current context. I do think that the fact that we have some pretty impressive new products out on the market, or coming out on the market shortly, is going to be a big driver even in a market that's a bit challenged. Yes. We are not going to get into a math exercise on 2017 at this point. I will tell you, one of the things that we didn't highlight as much as we could, or should have, is the significant progress that Ken Pucel and his team are making on this VIP program. The year-over-year savings increase in 2016 has been significant. It's just been consumed by our recall-related costs. As we roll into 2017, they're going to have additional projects and additional opportunities to drive more savings. But to look at what's going to be ---+ actually hit the bottom line as we offset the additional engineering cost that <UNK> referred to in the difficult environment, that's just not an exercise we are going to get into today. But it certainly is fair to say that the work that Ken and the team have done this year with VIP and will do next year will be helpful for the business. I think ---+ not I think ---+ the word that I used to drop the RZR impact in Q3 was, precipitously dropped. The July and August decreases were hard to look at and it really had two factors. One is that there was just not products available for sale and we had a stop ride, stop sale on Turbo for almost the entire month of August and part of September. So it was dramatic. I am proud of how the team handled it and fought through and ultimately drove the recovery that we saw in September. But it was a very, very significant impact for our business and our dealers. Yes, yes. We stepped up the promotion level and, if you look at our average selling prices that we have on each of the charts with the Off-Road Vehicle business, you can see our ASPs are down 8%. That gives you a pretty good context of the significant amount of promotional activity. I think in light of what we have seen and what we anticipate will continue, we do think it's probably going to continue at least into the first half and at that point we would start to lap some of the activity we have done this year. We just want to make sure people were thinking that through as they think about margins and overall revenue performance headed into next year. Hi, <UNK>. <UNK>, I think it's fair to say that we take our relationship with our dealers extremely seriously. You have heard ---+ we talked about it earlier today that, that's an area of focus for us. But let's be clear. There are a number of our competitors that are accepting extremely low margins to buy their way into our dealerships and we are not going to compete at that level. As you know, for the longest time Polaris made up for dealer profitability with our significant volume increase and you tack on PG&A, it's a pretty good recipe. That is not what we're going to be able to do going forward so we're going to have to look to other elements for it. I've got tremendous confidence in the way that <UNK> Larson and Matt Homan and their teams are looking at how we do this. But it relates, obviously, to improving our quality so that they have less issues with our customers, making the PG&A stocking, which we have already done, less burdensome for them and ultimately helping with the attachment rates going forward. What we have done with dealer inventory, I mean I'd put ourselves, at this point, against anyone in the industry and as we drive RFM next year and get to a much shorter lead time and ultimately a position where we can probably get to a make-to-order business model, that's going to be a tremendous benefactor to them on lower carrying costs, as well as higher attachment rates as the customers get the exact vehicle they want. So it's a multi-pronged approach. I don't think there's anything that's not on the table except a pocket shift from us to them to get lower profitability like our competitors. When you say industry, are you talking ORV or are you talking Side-By-Sides. If it's ORV, I doubt it was up much, without. Side-By-Sides was probably up slightly. And we always, always want a better market. When you are the leading share player, even when you are losing share temporarily, you still want a good market. Obviously, that has not been the case for much of the year. We are not projecting it to be a great market going forward, so we are positioning ourselves, as we talked about, to get back to a stabilization on share so that we don't contribute any longer to the down market aspects of it. So I will tell you that as we looked at the Side-By-Side market, really there's only a couple of players that are doing well. I don't know that it's necessarily the players that you think. Part of the reason we have confidence in Matt and the team going into the fourth-quarter is how we have looked at the competitive landscape and where our new model-year 2017 line up puts us, as well as product availability. It's a dynamic market for sure but we want the industry to be good. Part of it is, is that's our PG&A shipments into the channel. And so we have obviously modified our ---+ as we indicated in the past ---+ our process for how we ship into our dealers. Again, this is aimed at helping them from an inventory standpoint, more frequent ordering, lower quantities. It's also somewhat driven by the mix shift that we have seen. As <UNK> indicated, we are selling disproportionately more of the smaller bikes, like the Scout, Scout Sixty and the Octane and those typically carry less PG&A along with them. Those are going to be the big overall drivers. Well, there's a whole bunch in there. When you talk about heat shield, the heat shield is just one of the elements that we've corrected on the RZR. There's reflashes, there is a fairly complex list of corrective actions that we have taken. Obviously, I can't stress ---+ and I will use this public speaking opportunity to talk about it ---+ the importance of heat shields and any of our consumers that have that vehicles to make sure that they are on because they are an important part of our thermal safety of our vehicles. But what we have done is gone through an extensive ---+ and I mean extensive ---+ effort to understand any thermal risks on our RZRs and other vehicles. Part of the issue, the reason that we didn't see it in 2013 and 2014 is that we didn't have the processes and tools to get the information from the field as quickly as we could and manage the information flow and, ultimately, it took us a while to recognize the trend and, ultimately these are very complex issues. We have had some of the best engineering experts in the industry, including the automotive industry, to help us review these situations. And in some cases it would take us many months to ultimately define the root cause. And we went as aggressively as we could once we understood the risks and it just took us a while to figure it out. As I said in my remarks, we have embodied all of that knowledge now into both our processes and our products going forward and we feel extremely confident in our ability to manage this thing, the thermal risk of our vehicles going forward. I think from a ---+ maybe taking the Motorcycle piece first. Our expectations coming out of the last quarter was for the industry be down low-single digits. The industry has weakened. I think you've heard that from one of our major competitors. We are now anticipating the industry probably will be down mid-single digits. Our performance is still significantly better than that just given the focus and attention and the progress we are making with Indian. It's tough for us to say. I think the oil and ag weight that we are seeing, that's impacting our Off-Road Vehicle business is obviously impacting our Motorcycle business. These are significant cash outlays and a lot of the same states are driving as significant a reduction and, as we indicated in our prepared remarks, we don't anticipate that to get significantly better. I think the play that we have that's proving to be very successful is, with the introduction of Scout, Scout Sixty and Octane, we are attracting a slightly different demographic and that's giving us some opportunity as the age demographic is starting to cause some of the declines in the motorcycle market. That's giving us an opportunity to outperform and we don't anticipate that changing as we move forward. Yes, so if you looked at us through the first half, ASPs were down about 3%. It gives you some context around the significant shift. I'd say the majority of it is directly related to what we're doing from a promotional standpoint as opposed to anything dramatic from a mix perspective. And then I would just reference back to the comments we made that we think the promotional levels are going to remain consistent at the second half of 2016 as we head into 2017. Is it going to snow are not. (Laughter) Actually, we do believe it's going to be a slightly better snow year and Chris and the team are on top of that from a product perspective. I think probably the Side-By-Side space is going to continue to be the best space in the market as that just becomes the preferred choice of so many people and that's where a lot of the innovation is being driven. Obviously, where we are driving innovation and have a big market share, we want that to be the fastest growing part of the market. That's your name. Yes, so essentially as we've indicated, and we're obviously talking 2016, TAP adds just over $740 million worth of revenue and our existing Aftermarket portfolio is right around ---+ just over $90 million and that Aftermarket portfolio, as we indicated, is KLIM, Kolpin, 509, Trail Tech. Yes. And we'll ---+ as we provide our guidance, as I indicated, when we provide our guidance for next year, we will obviously provide historical context so that you guys can update your models. Mostly related to SnowCheck, <UNK>. We have year-over-year, sometimes we'll have more SnowCheck and we will ship them early and sometimes we don't. I think that was just strictly a timing issue there. Obviously, we don't worry much about snow until November and, actually, late October, November then it starts to matter. But until then these small shifts based on year-over-year SnowChecks don't worry us much.

2016_PII

2015

QSII

QSII #I think also as I look at it we will continue to deliver capabilities in the cloud as we already have. And having on premise hosting versus being able to host the NextGen ambulatory footprint, that NextGen footprint in the hosted offering allows us to much more easily migrate piecewise certain capabilities that are in the NG regulatory footprint today, but might be for example better positioned in a multi-tenant cloud offering. I would say it creates a little more frictionless optionality for us as we continue to release some of these new cloud-based capabilities regardless of whether they are EHR/EPM or other population health orientated capabilities. Let me just chime in here. What I would say is the core value to us is the improvement and client satisfaction and the ability to continue to move clients towards a more consistent footprint. Which of course does have a lots of goodness both from a client satisfaction standpoint also it helps us better utilize our service resources to continue to provide that better customer experience. We are not really in a position to comment on what that might mean on a per customer basis from a revenue standpoint. This is <UNK> and furthermore I want to say we're in exploratory phase of this we have not baked those into that forward-looking information that I described for the second half of this year. <UNK>, thanks for your question. Certainly the areas you talked about are important, also things like messaging are included. The key way to think about this is these are auxiliary products that are part of our core set of products that we offer to our ambulatory clients. They're as a general basis included in the overall workflow of the client's operations with a lot of different touch points. One of the reasons that we continue to have good success in that line item is that we continued to enhance and increase the number of relatively small but important features and products that are all built within this EDI nomenclature. They all tend to roll up over time. Their strategic to our clients because they enhance workflow capabilities and increase the overall experience as well as increase the financial viability of a small practice a medium practice and a large practice. One of the reasons it keeps going is we do have a lot of greenfield opportunity within our client base and outside of our client base. We are beginning to have much more connections and involvements with payers in this environment. As payers have EDI kind of needs and request for data. If we expand EDI to talk about data monetization a little bit and the opportunities are there. So I think the key is, it's a bundle of services that are interrelated and an important part of the operations of almost all of our customers. And it's one that we have, with the exception over the last couple of years, not had a lot of conversations with them and as we have more conversations we find there's more opportunities. This is <UNK>. There was no individually large deals that skewed that number upward from Q1, Q1 was particularly low, relative to prior quarters. I think that was just timing; bad luck if you will, for Q1 this quarter's more normalized. I continue to look internally and externally and evaluate our path forward there. It's certainly something I'm focused on but that's the only update I have right now. Thanks <UNK>, appreciate the question. Certainly for those of you that have heard from me in the past you are aware of the fact that I have a good deal of experience in delivering, frankly, net new solutions from my experience at Pyxis. I really got in and examined where we were in the software development lifecycle, got a better understanding of where we are from a requirement standpoint and then really worked hard between <UNK> and myself and some external consultants to really help the team come to what we felt was a truly actionable project plan, program plan. That's where the date came out. My job is to be transparent with my clients and my investors and so that's where we set today is 2017. That being said, I am right now for example, aggressively looking for a CTO that has the ability to really drive this program forward. I am starting to bring in external resources to look at how we can accelerate that timeline and then I'm also looking across the marketplace to make sure we have a full exhaustive understanding of the capabilities that might be out there. And so I'd say there's a number of levers that I am looking to pull, more granularity as we move down the path here. But I'm a believer in transparent processes, rigorous discipline, and client focused execution. So I think you will see all of those things start to really come to the table as we move forward through the next couple of quarters together. This is <UNK>. With regard to the current quarter we had good deal flow. There was no single deal that skewed this quarter particularly high; again, Q1 was low. With regard to subdividing some of the commentary I made regarding the second half into the individual revenue streams, that's more granular than we are prepared to get on this call. Between EHR and EPM we never get that granular when we talk about revenue streams. With regard to Mirth products that is one of the components of our subscription revenues so you can see the trend in that number year over year and sequentially. That's going to be a little bit of an evolving discussion as we move forward. Certainly today we are delivering great value to our clients through our core flagship platform but as we bring a cloud-based capability to the table that's more of a multi-tenant capability, I would think we would be attempting to do both. We feel like first of all, there is a lot of greenfield in the smaller physician practice space and certainly a cloud-based product with a lower cost of operation is something that is attractive to that client base. And so that would certainly be an area of focus but we also feel like we can continue to provide more and more value and lower total cost of ownership not just through our hosting operations but in migrating some of our larger clients to this cloud based offering. So <UNK>, I would say it's probably a little of both. This is <UNK>. As I mentioned our bookings this quarter had greenfield, we had opportunities and assistance sales, RCM, we also had sales to existing clientele. Pretty broad-based. I think that the dramatic uptick in bookings again from Q1 was the anomaly. This quarter was more what you would expect. <UNK>, do you want to add anything to that. This is <UNK>. Look I look at interoperability as a great boost not just for us but for the industry and the provider base, and the patient base as a whole. There's a number of different standards out there. Different organizations go after it, honestly I think they work that we did with all the other EHR vendors as well as the provider in Utah, where we are really looking rather than looking at any individual body really stepping back and saying ---+ how do we as a community work to create interoperability, not just to exchange data, but interoperability that's actually used inpatient care. And how do we measure that as an industry and make sure that we are challenging each other and our provider partners to effectively bring that information frictionlessly across into a provider patient interaction. We will continue to look at different bodies and different standards as we sit there today. We are comfortable that through our vendor agnostic open source Mirth capabilities that we are already significantly contributing to the conversation and the realities of interoperability. Thank you and we really appreciate both the attendance and the questions today. As we look forward to continuing our journey on this path of further aligning our employees and our culture with the Company's future goals and objectives, we will continue to deliver increased value to our ambulatory clients. We will continue to bring solutions to the market that allows these clients to quickly and easily adapt to evolving healthcare models. With healthcare continually changing at such a rapid pace our employee culture is an incredibly important boost to our ability to remain flexible and to enable our clients to thrive. I am grateful to our employee base who has been very receptive of me as the CEO and really excited about some of the cohesive culture that I am seeing emerging in the organization. I look forward to continuing the conversation with you our investors, our clients, and our employees. So thank you for your participation today we look forward to keeping you apprised of our developments as we move forward in this exciting time. Bye now.

2015_QSII

2017

FB

FB #Thanks, <UNK>, and thanks, everyone, for joining us today Our community continues to grow, now with nearly 2.1 billion people using Facebook every month and nearly 1.4 billion people using it daily Instagram also hit a big milestone this quarter, now with 500 million daily actives And we saw good results in the business, where total revenue grew 47% year over year, and we had our first ever quarter with more than $10 billion in revenue But none of that matters if our services are used in a way that doesn't bring people closer together, or if the foundation of our society is undermined by foreign interference I've expressed how upset I am that the Russians tried to use our tools to sow mistrust We built these tools to help people connect and to bring us closer together, and they used them to try to undermine our values What they did is wrong, and we are not going to stand for it Now for those who followed Facebook, you know that when we set our minds to something, we're going to do it It may be harder than we realize up front It may take longer and we won't be perfect, but we will get it done We're bringing the same intensity to these security issues that we've brought to any adversary or challenge that we've faced The first step is doing everything we can to help the U.S government get a complete picture of what happened We've testified in Congress over the past couple of days about the activity we found in last year's election We're working with Congress on legislation to make advertising more transparent I think this would be very good if it's done well And even without legislation, we're already moving forward on our own to bring advertising on Facebook to an even higher standard of transparency than ads on TV or other media That's because in traditional media, there's no way to see all the messages an advertiser is showing to different audiences We're about to start rolling out a tool that lets you see all of the ads a page is running and also an archive of ads political advisers have run in the past We're also working with other tech companies to help identify and respond to new threats because, as we've now seen, if there's a national security threat involving the Internet, it will affect many of the major tech companies, and we've announced a number of steps to help keep this kind of interference off our platform This is part of a much bigger focus on protecting the security and integrity of our platform and the safety of our community It goes beyond elections, and it means strengthening all of our systems to prevent abuse and harmful content We're doing a lot here, with investments both in people and technology Some of this is focused on finding bad actors and bad behavior Some of this is focused on removing false news, hate speech, bullying, and other problematic content that we don't want in our community We already have about 10,000 people working on safety and security, and we're planning to double that to 20,000 in the next year to better enforce our community standards and review ads In many places, we're doubling or more our engineering efforts focused on security And we're also building new AI to detect bad content and bad actors, just like we've done with terrorist propaganda I am dead serious about this And the reason I'm talking about this on our earnings call is that I've directed our teams to invest so much in security on top of the other investments we're making that it will significantly impact our profitability going forward, and I wanted our investors to hear that directly from me I believe this will make our society stronger, and in doing so will be good for all of us over the long term But I want to be clear about what our priority is Protecting our community is more important than maximizing our profits So security and the integrity of our services will be a major focus Beyond this, our focus is on building community I talked about this last quarter when we changed our mission to focus on building community to bring the world closer together, and that's more important now than ever This gets into our roadmap for the next three, five, and ten years Over the next three years, the biggest trend in our products will be the growth of video This goes both for sharing, where we've seen Stories in Instagram and Status in WhatsApp grow very quickly, each with more than 300 million daily actives, and also for consuming video content We recently launched the Watch tab, where you can discover shows, follow creators, connect with people watching an episode, and join groups with people with similar interests to build community But as video grows, it's important to remember that Facebook is about bringing people closer together and enabling meaningful social interaction It's not primarily about consuming content passively Research shows that interacting with friends and family on social media tends to be more meaningful and can be good for our well-being, and that's time well spent But when we just passively consume content, that may be less true When done well, video brings us closer together We've found that communities formed around video like TV shows or sport create a greater sense of belonging than many other kinds of communities We found that live videos generate 10 times the number of interactions and comments as other videos But too often right now, watching a video is just a passive consumption experience Time spent is not a goal by itself We want the time people spend on Facebook to encourage meaningful social interaction So we're going to focus our products on all the ways to build community around the videos that people share and watch That's something Facebook can uniquely do Moving along, over the next five years, I expect us to make some good progress on several newer initiatives In messaging, today already more than 20 million businesses are communicating with customers through Messenger Now we're starting to test business features that make it easier for people to make the same kinds of connections with businesses through WhatsApp We rolled out <UNK>etplace to Canada and 17 countries across Europe, giving people the ability to discover, buy, and sell things in their local communities Today, more than 550 million people are using <UNK>etplace and buy-and-sell groups on Facebook to connect with other people for transactions We're also seeing good progress with Workplace, helping companies connect their own teams internally through their own versions of Facebook It's been less than a year since we launched Workplace, and today more than 30,000 companies are using it This quarter, we welcomed on Walmart, the largest employer in the U.S Over the next 10 years, we are working on the foundational technologies needed to bring the world closer together I'm proud of the work we're doing with AI We're now using machine learning in most of our integrity work to keep our community safe When Hurricane Maria hit Puerto Rico, we used AI to look at satellite imagery and identify where people might live and need connectivity and other resources Progress in AI can unlock a lot of opportunities This quarter we opened a new AI research lab in Montreal, and we're building another lab in Paris as well This quarter we held Oculus Connect and we announced Oculus Go, our first-ever all-in-one headset that's great for feeling like you're present with someone when you can't physically be together in person It's great for playing games, watching movies, or hanging out with friends And at $199, we think it's going to help us bring great virtual reality experiences to more people It ships next year At Connect, I also showed off our new Santa Cruz prototype, which is the first time any company has shown the full experience of positional tracking in a standalone headset and controllers It's a major technical achievement, and I'm looking forward to getting this into developers' hands next year In order to support our community's growth, we need to keep investing in our infrastructure This quarter we broke ground on our New Albany [Ohio] data center, and we announced that we'll build our 11th major data center in Henrico County, Virginia As always, all our new data centers are powered by 100% renewable energy These long-term investments are important for our community's future We can do a lot to help people connect through phones and computers, but so much more will be possible in a world where everyone has Internet access, where AI improves all our services, and where we can basically teleport anywhere or be with anyone anytime we want With all the issues we've faced, it would be a lot to just invest in addressing those But we know that we also have a responsibility to deliver these fundamental technical and scientific advances to fulfill the promise of bringing people closer together So we're going to keep making significant investments looking ahead towards the future too We've made some real progress this year Across the board, we have a lot of work to deliver on our mission of bringing the world closer together, but we're committed to rising to the challenge and doing what we need to for our community Thanks to all of you for being a part of this journey, and I'm looking forward to the road ahead And now here's <UNK> to discuss our business So the strategy here around helping people connect reflects more on what we do around the videos than some of the content itself So hopefully, the experience on Facebook will not just be that you come and watch a video and you get informed, you feel entertained, and that's it We think that the most valuable thing that people do are help build relationships with other people on the platform So to the extent that video can serve as a touchstone for building community and helping facilitate interaction, then that's the thing that we feel like we can uniquely do So we're going to continue investing heavily in video content for Watch that is centered around people, that is centered around the things that people want to talk and connect around, that give people a sense of pride and bring people together But we're going to invest as much in just making sure that we build out the community features around that And that I think is going to be the thing that differentiates this over time I think it might be useful to talk a step back and first talk about why we're funding lighthouse content and Watch overall So video is growing incredibly quickly on Facebook And today, most of that is in News Feed But most people who come to News Feed and who come to Facebook today in general are trying figure out – they're trying to see what's going on with their friends, see what's happening in the world They're not coming necessarily to engage in a specific type of video or specific community around video So the Watch tab is mainly – it's a way to give people a tool to do that When they want to specifically come and engage around video or communities around that, they can go to the Watch tab So the intent there is different Now in order to build that up, we think it makes sense to first invest in a bunch of lighthouse content, some that we may produce or some that we may license, to get to your question We're pretty agnostic on how that goes We just want to start the flywheel going, so that way there's content and communities that are there that support this use case of people coming to Facebook specifically to engage in that Long term, our hope is that the business here will primarily be through revenue shares of videos that normal creators and businesses put into the system rather than ones that we proactively go out and license ourselves So that's a look at where we're trying to get on this But first, we need to build this behavior where people want to come intentionally to engage with this content I'll talk about video engagement, and then Dave can jump in on some of the stats So one of the important points here that I tried to communicate in my comments up front is that connecting with friends and family and having those meaningful interactions is more important than just consuming content So video is growing incredibly quickly, and that goes across both social content and more passive public consumption of content And they create different dynamics in the system, and I think that's an important thing to understand When your friend posts something and you get to engage with it, it might inform you and entertain you But you also, if you interact with it, you're building a relationship with that person or you feel closer to that person, and that is a really important part of what social networking is supposed to do Whereas when you engage with public content, you might get informed or be entertained, but it's not necessarily increasing social capital in the same way or building relationships between people So we really differentiate what the core thing is that we're trying to do, which is help people connect with each other and build meaningful relationships And that's why on a lot of these calls, I emphasize products like Instagram Stories or WhatsApp Status, which are very video-based products, but they're improving social interactions And we're going to focus a lot more on helping people share videos of their moments in their lives Because in a lot of ways, I think if you take a video of yourself and your family out trick-or-treating, that's more engaging than a photo and a better representation of that than writing it out in text But overall, I would say not all time spent is created equal That's why I tried to stress up front that time spent is not a goal by itself here What we really want to go for is time well spent And what the research that we found shows is that when you're actually engaging with people and having meaningful connections, that's time well spent, and that's the thing that we want to focus on So out of this big video thing that's growing very quickly, I think that is the real opportunity and product area that we should be focused on more And to the extent that there is going be a lot of public content, which there will be, a big part of the focus is going to be around building community and interactions around that content Yes, and I can speak to that Let me be clear on this, that people do not want false news or hate speech or bullying or any of the bad content that we're talking about So to the extent that we can eradicate that from the platform, that will create a better product, which will also create a stronger long-term community and better business as well So the reason why we haven't been able to get these things to the level that we want today is not because we somehow want them on the platform It's that it's a really hard problem And we're going to invest both in people and technology because we think that both are really important parts of the solution here, to go after all different parts of these problems And that was what I tried to stress earlier on We're going from 10,000 people working on safety and security to more than doubling that to 20,000. We're building – we're doubling – in some cases more – our engineering teams focused on security We're building AI to go after more different areas of harmful content and finding fake accounts and other bad actors in the system And I expect that all of these things will make our product better over the long term, but we will incur the expenses a lot sooner as we ramp up these efforts And I also just think that going forward, we're going to be investing in these things at a much higher level because we realize that this is important, not only for our community and this company, but it's part of our responsibility to society overall Well, I think the answer to that is we don't know all the answers around what kinds of content are going to work and are not, so we will probably experiment with a number of different things I do think your point is right that not all kinds of content can be supported by ads, no matter how effective we make that That said, the current model that we have for at least getting some of the lighthouse content onto the platform is to pay up front And what we would like to transition that more to over time and what an increasing amount of the content is, is revenue shares for ads shown in the videos And as we do better and better on the monetization there, that will support people with higher production costs and doing more premium production and bringing their content to the platform And we've certainly found on the Internet and YouTube and in other places that there are whole industries around creators with different cost structures than traditional Hollywood folks who can produce very informative and engaging content that a lot of people like and enjoy and that builds communities and that helps people connect together in a way that definitely can be supported by this ad model So I think the answer is we're going to try a bunch of things That's a bunch of what the budget is I'm very optimistic that a lot of this stuff will be able to be supported long term, but you're certainly right that not all of it will be able to be supported by ad models alone One clarification on your question two is that the 550 million people is across both <UNK>etplace and buy-and-sell groups, not just the <UNK>etplace tab So that's the total amount of activity that we're seeing there across both of those things Sure, I'll speak to the safety and security investment, and then Dave can speak to the other question So we need both technology and people for this And the best articulation of this that I can make is that today, AI has different strengths than people do So the AI tools that we've built can enable a system to look at millions of pieces of content and make rough assessments on them and figure out what to flag for people But ultimately, if you want to get those high-quality judgments today on sensitive content and you want to do it quickly when the stakes are pretty high in terms of taking down content or leaving things up, and we take that extremely seriously, you want people to be looking at that So earlier in the year, when we were working on problems like seeing issues when people were going live, there was this really serious issue around people with self-harm and in some cases suicide on Live, and we made an investment in AI tools and in dramatically increasing the staffing of the team that was working on that and brought the amount of time to review those Live videos down through a combination of those things to – I think it's under 10 minutes now That might still be a conservative estimate, and we're continuing to work on that So now what we're trying to do is just increase the SLAs that we have across all of these different types of content and security threats that we might see So that way, through a combination of the AI tooling that we build and having people to look at these things, we can get it right faster for more of the types of content And you're definitely right that a lot of the AI research that we do is applicable to multiple areas, but we still need to build those tools So it takes a lot of engineering investment, and we will be prioritizing that, in some cases by adding people to teams and in other cases by trading off and doing more security work instead of other product work that we might have done, but this is really important and this is our priority

2017_FB

2018

ESE

ESE #Thanks, <UNK>, and good afternoon. As noted in our release and as <UNK> will describe in more detail, we wrapped up the first half of the year in solid fashion. We began the year with Q1 adjusted EPS coming in at the top of our guidance. I'm pleased to report that our Q2 results beat expectations by $0.05. Additionally, our orders and cash flow remained strong. We exceeded our expectations and the balance of the year remains on track. Now, I'll turn it over to <UNK> for some detailed financial comments. Thanks, Vic. As Vic noted, our Q2 and year-to-date results on both a GAAP and adjusted basis came in better than expected across several financial metrics. Given the large GAAP EPS impact of the first quarter's one-time gain resulting from the new tax law, I will focus my commentary on adjusted EPS and adjusted EBITDA as these are more relevant measures of our operating performance when compared to expectations and to prior year. Before I comment on the Q2 details, I'll recap a few data points that we communicated during previous earnings calls. At the start of the year and before anyone could estimate the impact of the then pending tax reform narrative, we set our original financial goals on a GAAP basis and centered our discussion of expected operating performance around EBITDA, which was expected to be in the range of $141 million to $143 million, reflecting an increase of 15% to 17% over prior year. We also described the timing of several project-related items that were impacting the comparability of our first half compared to prior year's first half and we discussed what was driving these increases in sales and earnings that resulted in our significant back half weighting for this year. In our February release, we raised our original GAAP EPS guidance to $3.55 to $3.65 a share and raised our adjusted EPS in the range of $2.65 to $2.75 per share. While today, we see some upside to these estimates and we believe our risk to the downside are well-managed, we feel it is both prudent and conservative to maintain our current expectation. Now, touching on a few financial highlights from Q2. We reported adjusted EPS of $0.48 a share, which beat the top of our guidance by $0.05 a share as each of our operating segments reported stronger-than-expected earnings. Sales were consistent with our February expectations. And when compared to prior year, sales increased $14 million, primarily driven by our recent M&A contributions. Test lead the way organically with a 6% increase in sales year-over-year. And within Filtration, commercial aerospace sales remained strong, which helped mitigate the lower industrial automotive sales at PTI that we described at the start of the year, along with lower space sales at VACCO resulting from project timing. USG and Technical Packaging sales were consistent with previous expectations. Our adjusted EBITDA increased by 6% in the quarter to $28 million, which in turn drove our EPS to the high end of our range. Year-to-date, cash flow from operating activities was $33 million, also well above expectations, and this was driven by strong cash collections across the company and lower tax payments. This cash flow allowed us to pay down debt and reinforced our view that our significant cash-generating capabilities over the balance of the year as well as our credit capacity and available liquidity have us well-positioned to continue to execute our M&A strategy. Entered orders were $187 million in Q2 on top of the $200 million recorded in Q1. This reflects a book-to-bill of 1.11 and it increases our March 31 backlog by $40 million or 10% from the start of the year. Test orders of $106 million during the first half on top of last year's $200 million provides us confidence in their ability to achieve the back half of the year financial commitments they've made. So in closing, we remain on track to meet our financial commitments for the balance of the year and I feel we have sufficient contingency to protect us from unforeseen risks. Additionally, I'm confident that our current backlog and program delivery profile supports our strong outlook for the second half of the year. So I'll be happy to address any specific financial questions when we get to the Q&A. And with that, I'll turn it over back to Vic. Thank you, <UNK>. Continuing the theme from when we spoke last, I remain confident that all our businesses are in solid financial condition with solid growth opportunities and an ability to add and integrate future M&A opportunities. <UNK> and I just completed our annual midyear planning and strategy meetings at each of our operating segments. And after being on site and seeing where we are positioned in our various end markets and understanding our growth opportunities, I continue to feel confident we're well-positioned to deliver our projected long-term growth objectives, both organic and supplemented by targeted M&A. I'll provide a few specific thoughts and comments on the individual businesses. In Filtration, we continue to expect solid results in '18 and I remain comfortable with our outlook for 6% to 7% growth in adjusted EBITDA in this segment compared to prior year. All of our served markets remained strong led by these specific items: VACCO and Westland are benefiting from their positions in submarine programs, coupled with an increase in overall spending on U.S. Navy programs; PTI and Crissair will grow as commercial aerospace deliveries and overall OEM build rates continue to increase; and Mayday is experiencing outsized growth as a result of their entrance into the MRO market. The outlook remains positive, driven by new customer wins and additional product requirements from existing customers. Our Technical Packaging group's outlook continues to improve as a result of our scale, broader footprint and leadership position in several growth markets. Our domestic performance and outlook remains strong as we have a number of multiyear programs in backlog and several others in a pursuit mode. In USG, we continue to see solid growth opportunities across the global platform, including hardware, software and services. Our rep and distributor network rationalization and our cost reduction actions are complete. And as we look forward, we see clear and tangible sales opportunities, along with margin enhancements, which will benefit the back half of this year as well the future. Doble recently held its annual global client conference in Boston and reported a record number of clients in attendance. Our customers came away with a high level of excitement as they were able to get an in-depth understanding of Doble's expanded products and solutions now offered with the addition of NRG, Morgan Schaffer, Vanguard and Manta to our USG portfolio over the past 12 months. Moving on to Test. We had another strong quarter as we generally hit our Q2 sales plan, beat our profit targets by a meaningful amount and remain committed to our EBIT margin expectations for the year. Orders continued to be a highlight in Test as we booked $106 million in new business year-to-date. We continue winning new business in Test across a wide range of end markets, including satellite testing facilities, automotive-related antenna test facilities, electric vehicle motor testing chambers in China and several large projects related to the developing 5G market. So in summary, I feel good about the growth opportunities we have across all of our businesses and I see tangible avenues for additional growth in future years. Regarding M&A, the pipeline remains robust and we're currently exploring opportunities which would supplement the Filtration and Utility segments. Acquisitions remain a key component of our ability to meet our longer-term growth targets and we have the balance sheet and management capacity to meet our goals while remaining disciplined in our approach. So our focus remains constant to improve our operational performance and to execute on our growth opportunities, both organically and through acquisitions. I'll now be glad to answer any questions you have. So we obviously look at that. And as I mentioned in my comments, we were just out at the operating units and went through that in a lot of detail. Sort of a couple of things that play into that. First of all, we have all the acquisitions for that quarter and we didn't have all of those in last year. The other thing is a big piece of this is the Test business. And as you know, it's very much a project-related business. And those are ---+ the delivery schedules that we have on several very large projects did take place in the fourth quarter. I think it's also important to remember that all of that is not things that are produced in our facility. There's some pass-through there so we're getting large pieces of that from third parties as well as a lot of that is actually installation sales, so products that we're producing now which will be installed in the fourth quarter. The fourth quarter is always big in Filtration business, somewhat driven by the fact that we deliver those large submarine valves in the fourth quarter, and that's always a big piece. So it's pretty consistent with we've seen in past years, but it's obviously a big fourth quarter, but we feel very confident we've got our arms around that. It was about 3.5%, 3% to 4%, so somewhere in that range. It's probably a little bit better than that right now. I'd say within 0.5 point to the upside of that just because of the contributions that we're realizing on the Vanguard piece of the business, I think, are coming in better than plan. I think the Morgan Schaffer piece of the pie is coming in better than planned. And that's not accounting for currency, that's just straight up. So I think those 2 factors are giving us a little tailwind as ---+ on the margin side as we look at the upsized growth there. So Morgan Schaffer is primarily a North American business, but they do, do some internationally. Vanguard and Manta. Manta is a Canadian-based company, but all of their sales are in the ---+ in North America as well. So we think we have good opportunities with both of those companies to increase their international content. And you got to be aware that historically, both of those being small companies, have very small sales force. And so what we've been able to do is obviously put the full distribution network and sales force available behind those products. So we think that there is a good opportunity to push those products internationally. We're just in the early phases of that, but we do think that's a good opportunity for us. Well, I'll address the second part of it first. I mean, as we're able to leverage that business and you look at it on a quarter-to-quarter basis, you will really see that in the second half of the year. We were able to increase sales pretty dramatically without any additional SG&A. So as we're having bigger sales quarters, you'll see those margins go up accordingly. As far as the sustainability, the other, I mean, it's ---+ who knows if we'll have exactly the same level of orders we've had and we've had just a fantastic past 12 months in that business. But the thing you've got to think about the business is probably 80% of it we won't see as recurring business, but it's pretty predictable. So whether it be the medical piece or the industrial shielding piece, the components piece, all of that's pretty predictable. And so what really drives that business to the upside are these larger projects, like what we're doing in some of the automotive chambers, what we're doing with some of the defense chambers. And so those are the things that really kind of drive that outsized growth. And today, I would say it continues to look pretty good. I mean, the other piece of it that will really drive that is the move to 5G. And a lot of people are involved in those markets and we're really the people that companies look to help them with those types of solutions. So right now, we're feeling really good about that business and the level of backlog that we have today really gives us a lot of comfort not only for this year, but really going into next year as well because a lot of those large projects that we've entered over the past 12 months and, say, have a good bit of sales content in '19 versus just selling everything in '18. Mike, let me add a number around what Vic's commentary is relative to how we can leverage off of the overhead as we ramp up. But I'd ask people to look at Q4 last year in ---+ where we did a little over $50 million in sales, so that's obviously about $200 million run rate. In Q4 last year, we did about 16.5% EBIT off of that sales level. So as we go to the back half of the year here, 16% is reasonable relative to a $50 million sales profile because, as Vic said, the way we leverage, we don't have to add G&A to get that. So that's how we maintain some of our confidence in the back half of the year because the sales volume will pull through that kind of margin contribution. So the ---+ there's a number of opportunities that we're looking at now and ---+ but as you know, you've got to chase a lot of these things to make them happen. I'd say the valuations we're seeing today are not unreasonable. I mean, if you go back and look at type of multiples we paid for the businesses that we've acquired over the past 1.5 year, all of them have been 10 or more except for one. We had to pay up for some, but that was kind of a must-have for us. So if they get the auction, obviously they get more expensive, but what we'd try really hard to do is make sure that we get to those things before they get to auction. And even if they do then, we just ---+ we're still going to be very prudent about what we think we can do with the business. So as of today, the pipeline's robust and the multiples are not crazy for at least the things that we're looking at. Which part of it, I'm sorry, <UNK>. Okay. So I think what you're referring to was our online monitoring. Yes. Yes, I got you. So it's going well. The online piece of it, I mean, obviously that's a more expensive way to test transformers and relays and things like that because you're dedicating a sensor to a specific piece of equipment, but obviously that's where the future is and we're working hard to address that market. Obviously, the Morgan Schaffer piece of it has brought a bit of that with them because a lot what they do is online monitoring and we're supplementing that with some of the things we already had done. So I'd say that we've had good traction there and I think, in the future, that's going to be a big driver for the business. I'd say on the percentage of revenue as we sit where we are today, it's about ---+ the aftermarket is about 25% of ---+ on the aerospace side of the business. Obviously, there's not a whole lot of aftermarket in the submarine side. There's some, but it's not as prevalent. And the reason that relationship might seem awkward is because obviously, on the OEM sale, it includes the manifolds and all that kind of things. So if you're selling to the OEM side on the first install, what ---+ historically, what we run into is the aftermarket where you're replacing the modules or the filter elements inside of the manifolds. You tend to be at about 25% of the price point. So if you're selling something for $50,000, you're going to get $10,000 in the aftermarket, but you're going to replace that, replicate that multiple times. So that kind of should help you get an understanding why the relationship generally is about 75% OEM and 25% aftermarket because the cost differential or the selling price differential relates to that. Okay. Thanks, everyone, for your interest. I look forward talking to you in the next call. Thank you.

2018_ESE

2016

NEE

NEE #Is in terms of our equities for 2016, our base case is that we have recycling opportunities available in our merchant generation portfolio that we will continue to explore, similar to what we did with the Lamar Forney transaction back in 2015. We also have some renewable assets that may be rolling off of contract that could be good opportunities as well. And then we have some renewable assets on the balance sheet that we have not previously put debt financing up against, that could provide additional sources of capital for 2016 offsetting what would otherwise be a modest equity need in 2016 for NextEra Energy. Julian, this is <UNK>. I think the way you should think about it is, everything we have is always for sale. And if there's an opportunity to sell something that's accretive to our earnings going forward and makes sense from a strategic standpoint, we're going to sell it. But we're also not betting that we are going to have to sell in order not to have to issue equity this year. How much equity content we need in any given year is always driven by how much capital we are going to deploy, what the opportunities are, how we're doing against all of our financing activities. And we have a whole host of things that we ---+ a whole host of levers at our disposal that we go to. And obviously issuing equity is very well ---+ and the team knows this, this is very low on my list of the kind of things that we want to do to finance the plan. Obviously, the flip side of that is, is we need a strong balance sheet and we are committed to strong ratios to maintain a strong balance sheet. So what we said is I think very clear in the script. We said we don't believe we're going to have an equity need this year, and if there is one, it's going to be very modest. On the one hand, you could say it should create more opportunities, given the distressed nature of that space and potential assets coming up for sale. On the other hand, it does provide somewhat of a limitation in that you have to be able to identify producer operators that are willing to sell in today's lower natural gas and price environment at a price that makes sense for Florida customers. But we're working hard to identify those opportunities through the FPL origination efforts. Yes. Julian, this is <UNK>. I will just add that on the three solar projects, it has no impact. Those are underway. And remember, those were advantaged sites that we had because we had the property, the transmission was there and so we're moving forward with those. They provide customer benefits right up front. So, <UNK>, I think the first thing we look at is, if you go back over the last several years, you've probably had a renewable market in the US of 8 to 9 gigawatts. It's lumpy though, as you know. When we look at 2017 through 2020, we see a market that's probably much closer to 13 to 15 gigawatts and there are some out there that would say that towards the latter part of the decade, that that market could get up to 18 to 20 gigawatts. So when we look at it, we say well, gee whiz, we've gotten our fair share in the past and so our expectation is to continue to get our fair share in the future. If you look at wind on its own, and by the way, it's often very difficult to separate how much of that is going to be wind and how much of it is going to be solar. Although I will tell you that solar is more and more competitive the longer you go out. But if you look at the near term, if you look at 2017 and 2018 on the wind side, certainly the expectations are that there's going to be an awful lot of wind build. Especially if the IRS comes through with what we think they are going to come through, the same interpretation of in construction as they've had before, you're going to likely get 100% PTCs for CODs on wind all the way through the end of 2018. 2017 remains to be seen whether that will be a banner year for wind or not, but I think combined 2017 and 2018 will be pretty good on the wind site. Then you look at wind a little further out, obviously you've got CPP. We and others have provided comments to EPA on CPP. One of those comments that EPA asked for was, what do we do with the clean energy incentive program. So right now, states have to have a state implementation plan that could go in as late as the fall of 2018. Before that plan goes in, you can't really get under the incentive plan for renewables, so that's probably a 2020 to 2021 build that you see there. We're hoping that that comes up a little bit. We do see CPP making a difference for wind, probably starting in 2019, but certainly no later than 2020. On the solar side, the way that it's been structured, you could potentially get 30% ITC on solar all the way through 2020. I've said this over and over again in the past. We continue to be surprised by the demand for solar out there. It's certainly it's more competitive, but there's a lot of demand for solar. So we see fairly steady solar growth from 2018 through 2020. I think it was <UNK> that asked the question before about 2016 maybe go to 2017, which I don't ---+ I agree with what <UNK> said. But the point there also on solar is, you may actually see a smaller 2017, because so much is getting built in 2016. So, is that good. It will have ---+ look, I know that a lot of people have read the CPP. We have read it 100 times. It's complicated. We want to make sure that we understand what we think is going to happen in the market. But in addition, we are out talking to all of our customers to make sure that we understand what their plans are for the next couple of years. So we are making good progress in terms of timing on the projects. And so I feel good about ---+ on the pipeline projects, I feel good about that. There's always pressure on timing, and certainly FERC has been a little slower in terms of pipeline permitting than it's been historically, but we're feeling good about that. In terms of counterparty risk, obviously, we feel good with our portfolio of projects that the vast, vast, vast majority of the counterparties that we have on all of our pipelines across both the Florida pipelines, Mountain Valley pipeline, and the Texas pipelines are all very strong credit-worthy entities. And so we don't have that counterparty risk that some of the other folks in the pipeline business do, and our average contract length is quite long. It's probably close to 20 years. So given where the market is at, obviously there's a lot of distress in this market right now. We would have interest only in pipelines with strong credit counterparties and long-term contracts. So if there are those that come available, and there may be some of those that come available, given some of the things going on in the industry, we will be interested in that. Obviously, we will be disciplined as we always are, vis a vis acquisitions, but it would be something that we would look at. But I have no interest in adding anything with commodity exposure and short contracts. Okay, <UNK>, this is <UNK>. I will take the first one, and then I'll turn it over to <UNK> for the second one. On the depreciation question about $200 million. And the surplus amortization balance, I think the $263 million that I mentioned earlier for 2016, rolls off by the end of the year as part of our settlement agreement that expires. And, <UNK>, we're going to have to get back to everybody. Obviously, it's $37 million next year, which <UNK> mentioned in the call. I don't recall what it is in the following year. Hey, <UNK>, this is <UNK>. I think the way you should think about the impacts of the reserve amortization, first of all, when you do a depreciation study, everything gets washed out in the study. So you are looking at things fresh, you are looking at the current ---+ what would currently depreciate in terms of our ongoing depreciation expense, and we do a new study and we come up with a new revenue requirement from that study. There are a lot of puts and takes in it. And the fact that we've had some surplus amortization over the last several years has led to rate base being a little bit higher than it otherwise would have been had we not had the surplus amortization. But actually doesn't have a giant impact on the ongoing depreciation expense in the study. So, <UNK>, I give the sponsors a lot of credit for working to try to get something done in this environment ---+ that, this environment in Washington. That said, I think it's highly, highly unlikely that anything gets done this year.

2016_NEE

2015

DAKT

DAKT #Thank you, operator. Good morning, everyone. Thank you for participating in our year-end and fourth-quarter end earnings conference call. I would like to review our disclosure cautioning investors and participants that in addition to statements of historical facts, we will be discussing forward-looking statements reflecting our expectations and plans about our future financial performance and future business opportunities. All forward-looking statements involve risks and uncertainties which may be out of our control and may cause actual results to differ materially. Such risks include changes in economic conditions; changes in the competitive and market landscape; management of growth, timing, and magnitude of future contracts; fluctuations of margins; the introduction of new products and technology, and other important factors as noted and detailed in our 10-K and 10-Q SEC filings. As a reminder, FY15 was a 53-week year and FY14 was a 52-week year. The extra week of FY15 fell within the first quarter, resulting in a 14-week quarter versus 13-week quarter comparison. At this time, I would like to introduce <UNK> <UNK>, our Chairman, President, and CEO, for a few comments. Thank you, <UNK>. Good morning, everyone. Overall we had a successful FY15. Our sales exceeded $615 million in this 53-week fiscal year, surpassing pre-economic downturn years and setting a record sales level for the Company. This sales volume reflects the health of digital systems solutions in the global marketplace. Our international business earned over $100 million in sales, a first for this unit, a result of our ongoing strategy and investment in growing our international market share. In August of 2014, we acquired a Company in Ireland focused on the transportation market in Europe and the United States. While international sales for this entity approximated only $5 million of our international sales in FY15, the knowledge, capabilities, and product platforms acquired will be leveraged to further grow our transportation sales outside of the US. Live event sales remain strong, reflecting the continued trend of professional and college sports arenas upgrading to new, larger, and higher resolution systems in order to attract, entertain, and inform their fans. Sales also increased in the commercial business unit relating to digital billboard and spectacular solutions. During this FY15, we changed our name of the schools and theaters business unit to high school, park, and recreation, HSPR, due the sale of the rigging and theatrical portion of this business unit. HSPR sales improved year over year due to the inclusion of video systems in the sports side of this business and the increased size of many of these projects. HSPR on-premises message centers sales remained strong. These systems are used by the schools to communicate with students, parents, and the public. Sales in the transportation business unit were down, mainly due to project timing and uncertainty in the federal transportation highway bill. This is a key funding source for state projects that include intelligent transportation in display and control systems. The acquired business in the US from the Ireland entity contributed nearly $4 million of sales for the year. While sales level improved, our overall operating margin, while positive, declined year over year. This decrease was caused by many factors, including our overall mix of business. FY15 had a significantly higher amount of large project work, and this work had increased amounts of subcontracting, which is done at a lower gross margin than our product work. Another factor was the capacity constraints experienced during our fiscal Q2. We were fortunate to win more orders than expected, but then needed to spend more to fulfill these orders to meet critical customer deadlines. And finally, we had increased operating cost as well as the continued competitiveness within our businesses. For more details on the financial results, I will turn it back to <UNK>. Thank you, <UNK>. Sales for the fourth quarter of FY15 increased to $158 million, as compared to $136 million last year. Live events contributed to the sales increase, as the number of projects for both Major League and Minor League baseball stadiums were up as compared to last year. We were also successful in our commercial business units, due to projects in our spectacular and billboard segment. But still saw some softness in our on-premise and national accounts segments. International also had a nice increase in projects when compared to last year, primarily due to the timing of business, due to the lumpy nature of the large project business in international. Looking at the full year, sales were up by over 11% due to increases in international; commercial; live events; and high school, park, and recreation. A portion of the sales increases relate to the additional week in the year. The increases were also due to continued demand in the marketplace, as many of our customer segments have increased, as <UNK> mentioned. We also broke $100 million in international, as we continued to execute on our international expansion strategy. On the other hand, transportation sales were down for the year by over $6 million, due to the general lag and the timing of orders. For the fourth quarter, gross profit was 22.3% as compared to 24.8% in the fourth quarter of last year. This decrease for the quarter was primarily impacted by the mix of business. We had more larger projects, which puts pressure on margins due to the competitive nature and the inherent subcontracting work within those projects. Gross profit for the year decreased to 23.5% from 25.7% for similar reasons, and which were mentioned in <UNK>'s commentary. Operating expenses for the quarter were $28.2 million, as compared to $26.9 million last year. Increases in operating expenses are primarily due to personnel-related expenses and the additional cost infrastructure of the acquisition. For the year, operating expenses increased for the same reasons and were $113.3 million compared to $105.2 million. Overall, while sales increased a little over 11% for the year, operating expenses [came to] 7.7%, which caused the decrease as a percent of sales from 19.1% to 18%. While we enter the year with a record $191-million backlog, I would like to point out that a little over $30 million of this backlog is not expected to be realized until late FY16 and mostly into FY17, because of the large project for the new Atlanta stadium. As we look into the first quarter of FY16's buildable backlog, estimated customer delivery schedules, and predicted order bookings, we estimate sales in the first quarter to be comparable to slightly up from last year. And as a reminder, our first quarter of last year included that extra week. Gross profit percent is expected to be lower than after year's first quarter and comparable to the fourth quarter, due to the current projected sales mix and estimated fixed operational costs. We anticipate operating expenses in dollars to be comparable to slightly less to the first quarter of FY15 for increases in salaries and related costs and additional costs for the Daktronics Ireland Company we acquired in the second quarter of last year, offset by the additional week of FY15 and slightly better as comparable to the ratio of operating expense to sales. Our overall effective tax rate for FY15 was 34.1%, slightly less than our FY16 forecasted rate of 36%, as research and development credit was reinstated in FY15. As we have previously discussed, our tax rate can fluctuate depending on changes in tax legislation and the geographic mix of taxable income. Our balance sheet remains strong, and we have generated free cash flow this fiscal year to date. Our cash and marketable securities position was at $83 million at the end of the year. We are projecting capital expenditures for next year to be $25 million for continued plant equipment for newer replacement product production, for capacity, and for investments in quality and reliability in-line production equipment. We also will continue on expending some of that CapEx for IT infrastructure costs. With that, I'll turn it back to <UNK> for additional comments on our outlook. Thank you, <UNK>. As we enter our new FY16, we are confident in the global digital marketplace and the opportunities available across the sectors we serve. Domestically, many companies continue to turn to digital messaging solutions to advertise or communicate information in the on-premise and out-of-home marketplaces. They use our solutions on local, regional, and national levels to create higher levels of engagement, greater relevancy in their messaging, and better brand consistency. You will see our systems at main street businesses, at schools, at regional and national chains, major retail centers and by major roadways and transportation hubs. We also see the number of opportunities increasing in the commercial spectacular segment. These are unique projects you might see in Times Square or the Las Vegas area or other locations attracting large, sustained audiences. While our on-premise solution sales were down for FY15, we are optimistic for new product-line releases in FY16 and positive economic conditions will create continued opportunities for expansion. The trend is continuing in the sports to add larger video systems from the local schools and colleges to the larger universities and professional sports stadiums. We expect this level of sales to continue in the near term. Our transportation unit is seeing a number of projects move ahead, giving us confidence this market continues to grow with opportunities for digital messaging systems. In addition, the acquisition we made this past year in Ireland has opened up additional opportunities in the United States because of the new product line acquired. Internationally, we are focused on continuing to leverage the acquired knowledge and our now combined product offerings to expand our transportation business in the Europe and in Middle East markets. In addition, internationally, we have focused on sports, spectacular, and out-of-home application projects, all of which have continued opportunity for expansion. In all our business areas, we have natural replacement cycles as these products have a known end of life. This, combined with the general economic conditions, are conducive for continued modest growth in demand from the marketplace. We match this demand with a broad range of applications, services, and solutions, offering our customers high degrees of reliability and performance. We also bring technical expertise to intricate designs and logistically complex installations. We work with our customers to offer them cost-effective solutions to meet their objectives. While the market is set for growth, we understand we need sustained profitability to capitalize on this opportunity. We've continued to focus on improving our operating margins and growing profitably over the long term. We have a number of initiatives in place to work towards these improvements; however, the benefits will take some time to realize. With this said, we are not alone in seeing the opportunities and we live in a competitive marketplace. Many others are seeing a positive demand picture and continue to compete aggressively in this business. Our competitive field has been stable, but in the last fiscal year there have been some consolidations in acquisitions which may have some impact on us. Also, as our international business increases, we are influenced to a greater degree by economic conditions across the globe. We're also experiencing some cost pressure in wages and benefits that has and will have impact on our costs in the coming quarters. While there are some regional and role variations, this is the general trend in South Dakota, in the US, and many international markets. We did increase our US manufacturing production employees' pay at the beginning of FY16 to remain competitive in the marketplace. These economic conditions are a reality, but we believe our market reputation, product portfolio, and internal capabilities put us in a strong, enviable position. We are focused on succeeding in this business, and we have initiatives targeted at continued improvement in our world leading solutions and operational excellence. We have a number of product introductions coming this next year to serve the demand for transportation solutions, higher resolution video systems, and specific customer requests, through our ongoing investment in product and control system platforms. We are focused on continuous improvement methodologies in our manufacturing and services areas to create efficiencies, which drive cost savings and improve the experience for our customers. To support our initiatives, we continue to make selected capital investments to support new product lines and automation as we size our capacity to the overall market. Work also continues on forecasting and planning tools to maximize profitability, as we continue to grow volumes and revenue. We see ways to improve future profitability, although we do not believe it will be a smooth path. While we are focused on improving operating margin year over year, we believe that seasonal variability, along with the influence of large projects, will continue to affect individual quarters in fiscal years. The good news is our markets are growing and we have products and solutions to meet industry demand. Overall, our markets are dynamic and the underlying fundamentals are strong. While the market is competitive, we remain optimistic about the future of sales opportunities and expansions in our business. With that, I would ask the operator to please open it up for questions. Our live events marketplace continues to be a great spot for Daktronics, as these systems get bigger and more complex. And we think our winning ratio is similar to previous years. However, depending on the timing of the projects and the orders, what we can deliver within a certain quarter can vary. There are still projects that are on that are still in the decision-making process that are for our Q2 and the first half of the year. So, we'll see how those play out, as the next months unfold. Is that helpful, <UNK>. I think, the bookings are good. I would say that we're very happy to have the Atlanta Falcons contract and the Vikings, but those are not for fall delivery. They're for later on in this fiscal year and into next fiscal year, as <UNK> said. Many of the big projects for this fall happen to be in indoor arenas, which was different than last year at this time when we had a lot higher mix of football. With that said, it's not that there was some big projects in football that we missed out on; it's just, they didn't happen this year at the same extent as last year. I think we've given guidance or some indication of what we could see based on how we view the market in the first two quarters. As we roll out some of these product enhancements, we'll see how that impacts the second half of this fiscal year. I'm personally hoping that we can see an impact of our changes, and see some increase in gross margins. As we tried to indicate in our conference call, it's maybe a collection of things. We had this ---+ our last fiscal year, we had this issue in our Q2 of last year where we had capacity constraints. We are seeing increased competitive pressures in the marketplace. There have been a few minor changes ---+ minor acquisitions and consolidations in our industry. We'll see how that plays out in our FY16. As far as a real dramatic thing I could point to, <UNK>, I'm not finding a real silver bullet there. I will say warranty, as you mentioned, continues to decline as a percent of sales for us. And we're continuing to focus on our quality and reliability to make sure that continues to trend in a favorable direction. Yes, that's further out than I project, <UNK>. We continue to focus on improving our internal processes and the performance of our products, both performance our customers see, and then the performance it takes for us to build and the cost to build. And so, we continue to drive in that direction. I think it's early for me to make a prediction on that. There is some impact to us because of the strong dollar. It's hard to maybe see in our financials; it's more on the quoting side, where we become a little less competitive in, say, Europe and those sort of areas. But I would say there was some impact, but not a material amount. But we did see some impact because of it. Sure. For the billboard revenue for the quarter, we had a little over $17 million of sales, as compared to about $14 million last year. That competitor's presence in the billboard market hadn't been at the same level as in previous years. And so, with that consolidation, it hasn't really impacted our billboard market, as we sit today. In the display products, we're seeing continued competitive pressures really across the board, but that is similar to previous years. And then, in our live events or this large project business, we have the products that we manufacture, as well as the site works and what we would call subcontracting work that we do. And the projects that were available last year had a bigger percentage of subcontracting than the previous year. All of those blend together to create the overall gross profit for the Company. As far as firm backlog, we, of course, have visibility to that, but it doesn't go out in time. We generally book in this ---+ what we book in this quarter, we would ship next quarter. So, our visibility on that is in three- to six-month range, and doesn't go out over the long term. I would say, looking into the first quarter, it's similar to our mix from fourth quarter. So, there is a level of subcontracted work yet to be performed. We had a nice year of sales and orders in our billboard marketplace. And that can be somewhat of a timing when our large customers place large orders to us, but we continue to have optimism there. And then, we talked about our spectacular niche and the displays in, say, like a Times Square or in Las Vegas. We've seen a nice uptick there. But we have seen a softness in the on-premise advertising or for the local businesses that might buy a display. That's been a little bit down this past year. It's been pretty nice in international. We've had some out-of-home advertising. We've had some nice sports orders ---+ some of these spectaculars. The transportation business, we're doing this nice product ---+ this nice project in Switzerland, as well as some other work in the European areas. So, I don't think it's maybe any one niche that excelled beyond the rest, but just a blend in the Business. As I said in previous calls, we've invested a lot in the years in an international presence. And we're seeing that having people in different offices around the world, they're able to build relationships and be responsive. Certainly, we're doing better internationally. Understanding the whole market for international, and what our peace of that is, is a pretty complex picture. I don't know if I have good figures to give you there, <UNK>. Sure. Maybe for the whole year, we've seen around $1 million, $1.5 million of additional costs that weren't covered by additional sales. So, that's maybe the drag we could characterize for the whole year. The planning that we talked about was to really help prevent us from getting into an over-capacity situation. And I think we're in a much better position there, and have better visibility. But we didn't see that situation happen in our Q4, so I don't think it impacted Q4 as much. Thank you, everyone. I appreciate your time and your candid remarks. I hope you all have a pleasant summer, and we look forward to talking to you again after Labor Day. Thank you.

2015_DAKT

2015

PFS

PFS #Thanks, Len. Good morning everyone. We appreciate your participation on today's call. First-quarter earnings of $0.32 per share they exceeded the same quarter last year by 6.7%. Our return on average assets was 94 basis points and we achieved a return on average tangible equity of about 10.67%. Net interest income of $61.9 million exceeded the same period last year by 12.2%. And our provision for loan losses was reflective of the improvement in asset quality and the resolution of a number of smaller credits. With our earnings release this morning we announced a continued cash dividend of $0.16 per share. Loan originations during the quarter were $349 million but overall portfolio growth was muted due to several large commercial payoffs. Volumes in the pipeline were impacted by our credit and pricing discipline as competitors in or market have aggressively extended duration or offered loan rates and terms that would not meet our ROE minimums. Our asset-based lending group is gaining traction and our medical lending team is also building its pipeline. The compression in our net interest margin of 6 basis points in the quarter can be attributed to the drop in asset yields as rates remain historically low. As on-rates for loans are lower than current portfolio yields and originations are skewed towards adjustable rates or shorter initial terms we anticipate that margin expansion will be difficult to attain in the near-term. Our balance sheet size remains static compared with the year-end as we utilize cash flows from deposit growth and investments to fund loan growth and reduce overnight borrowing positions. Our business advantage checking product is being well received in our new markets and core deposits now represent over 86% of total deposits. Non-interest income of $10.3 million exceeded the same period last year by 27% due to prepayment fees on commercial loans and an increase in wealth management income from improved client pricing as well as growth in assets under administration as a result of the October acquisition from Suffolk County National Bank. On April 1, 2015 Beacon Trust closed its acquisition of The MDE Group. We look forward to the successful integration of the staff and clients of MDE which gives us approximately $2.5 billion in assets under management and more than 900 client relationships. <UNK> will go over into more detail the non-interest expenses. But suffice it to say that the harsh winter had an impact on operating expenses along with increased compensation and benefit cost. Our new markets in Pennsylvania and Western New Jersey are showing promise as we have added staff in the Lehigh Valley and Bucks County regions and are promoting our brand of relationship banking in those areas. We continue to review opportunities to leverage our capital through accretive deals as smaller institutions struggle to cope under the weight of the onerous regulatory burdens and the flat interest rate environment. Before turning it over to <UNK> I would like to publicly thank Jeff Shein and Geoff Connor, our two retired directors, for their guidance, leadership and dedication to the success of Provident. Their efforts and professionalism will be missed by all of us who had the pleasure of working with them. <UNK>. Thank you, <UNK>. Good morning everyone. Our net income for the first quarter was $19.8 million compared with $21.2 million for the trailing quarter. Earnings per share were $0.32 compared with $0.34 in the trailing quarter. Net interest income decreased by $1.4 million to $62 million as the effects of the shorter calendar quarter and an 11 basis point decline in the average loan yields more than offset the benefit of a 5.6% annualized increase in average loans outstanding. The net interest margin decreased 6 basis points to 3.24% with 2 basis points of that decline attributable to a reduction in the accretion of purchase accounting adjustments. The cost of interest-bearing liabilities was unchanged versus the trailing quarter; however, the margin was aided by 7% annualized growth in average non-interest-bearing deposits. Therefore our total cost of deposits declined 1 basis point to 0.25%. We provided $600,000 for loan losses this quarter compared with $1.3 million in the prior quarter as asset quality metrics continued to improve. Non-performing loans decreased $3 million from the trailing quarter to $51 million or 0.83% of total loans. Net charge-offs for the quarter decreased to $1.2 million or an annualized 8 basis points of average loans. The allowance for loan losses to total loans decreased slightly to 1% from 1.01% at December 31; however, the allowance coverage of non-performing loans increased to 120%. Non-interest income decreased $1.1 million compared to the trailing quarter as increases in loan prepayment fees and wealth management income were more than offset by reductions in gains on loan sales and lower loan swap income. Non-interest expense increased $1.1 million versus the trailing quarter to $43.4 million. Compensation and benefits increased $1.9 million reflecting annual merit increases, increased incentive accruals and payroll taxes. Net occupancy cost increased $876,000 versus the trailing quarter primarily due to snow and ice removal and increased utilities cost attributable to the harsh winter weather. These increases were partially offset by reductions in advertising and various other expense items. Our efficiency ratio was 60.1% and our annualized operating expenses to average assets were 2.07% for the first quarter of 2015. Income tax expense was $8 million compared with $10 million for the trailing quarter and our effective tax rate decreased to 29.8% from 32%. The decrease in the effective rate was primarily a result of the prior-quarter recognition of a $639,000 write-down of deferred tax assets due to the apportionment of income to Pennsylvania stemming from the Team Capital acquisition. We currently project an effective tax rate of approximately 30% for the remainder of 2015. That concludes our prepared remarks. We'd be happy to respond to questions. Yes, I think it adds about $600,000 roughly to the bottom line per quarter, Mark. I'm sorry it's in my revenues. Yes, it's about $2.5 million to $2.8 million per quarter additional. About $1.7 million operating expenses per quarter. I would expect around 90 basis points on new loan originations as a rough guide. Asset quality metrics have continued to improve. That's really what drove the reduced provision versus the trailing quarter. About 3.52%. Probably, Mark. We looked at certainly our origination volume has skewed more towards adjustable-rate. I think we were about 52% of it being adjustable and I think that's kind of where we're trying to keep that in mind being a little conservative and we could probably make more money by doing fixed but longer-term duration. We figure so being a little bit more flexible and ready for rates going up if they ever do we're going to give up something to get something in the end. I would say ---+ are there opportunities. They are coming. I think the stress of this environment has got everybody trying to figure out where they're going to go. I don't think it's heating up to the level that everybody had anticipated, though. ^ Well, that all kind of hedges on if it was organic growth of our Company and balance sheet it would take a lot longer than if we did another material acquisition but we've already started the process. We've been working with regulators. We are spending a little bit of money on systems. And so I think the transition would be there if we move along and there's an opportunity to have a very accretive acquisition we would probably move that needle very quickly. So it's not something that's preordained. Well, certainly <UNK> will chime in also. We did see a lot of payoffs in the first quarter and this was not really related to competitive factors necessarily but a lot of our clients are monetizing gains on properties that they are selling. Now there might be 1031 exchanges going on at the same time but in our talking to clients that have been paying off they just saw the opportunity to be too good to pass up. And these are people that have been in the business for 25, 30 years. So they know when the market's getting a little frothy and/or there are opportunities for them to sell now and buy later. So some of our payoffs were related to that. And then we're also dealing with the agencies and the life companies coming back into the space for larger credits and being able to offer one of our clients got 4% 30-year on a property and that's something we certainly can't do but that was from a life company. So they opted to stay with us for a little bit longer and this is a construction that just got finished up so it is going to perm. So we are dealing with a little bit of that going on. And we always say the quality of our portfolio being a lot of a borrowers they are also very refiable by very aggressive terms out there. So we really can't fault them on it but it's tough for us to go ahead and try to compete on some of those. I think I would just add I would expect to see some acceleration in loan originations and loan growth in the second quarter given the strength of the pipeline. The pipeline is about $100 million or so better than it was in the trailing quarter and it's pretty well diversified among the various lending categories. I think we're still in the mid-single-digit range. Well I think our multifamily originations probably would slow up a little bit. Being it's such a competitive market we see more people coming into that space. As you know we do mostly New Jersey, Pennsylvania, not in the boroughs. But on the other hand I think the market has done well in the middle market space, the asset-based lending group, again small but it's moving in the right direction. And the residential has picked up as of late. We hired a few new people to do originations and that volume has picked up a little also. So when you look at a pie chart it definitely has a lot of diversification from all fronts. But certainly shortening up on the duration and trying to keep it more adjustable or shorter resets. It's primarily two categories, <UNK>. The gains on loan sales were down about $640,000 and the profit on swaps was about $230,000 less than the trailing quarter. Yes. The more routine core fee categories pretty much performed as expected in line. It was really those volatile items that showed the drop. Primarily gains on SBA loan sales. So sometimes you can have a significant gain on a one-off kind of item in that pool. I'm sorry. The ---+ I think inclusive of the operating expenses related to MDE we're probably at about $45 million for next quarter. That excludes a little bit of transaction-related charges that we'll see. And then I think you'll see it drop off a little bit in Q3 as certain of the payroll tax changes roll through the rest of the way.

2015_PFS

2016

PGR

PGR #They are mostly comp at least on the vehicle side. So typically when we give you numbers for frequency and severity, we don't put comp in there because it's ---+ that would just be a random walk in terms of your graph. So most of the frequency and severity numbers we give you are the more sustainable coverages like BI, UMBI, PD, but certainly as we look at it, yes, it factors in. Well, I'm probably going to [rate] myself here a little bit. The last quarter, we had our ---+ 2015 fourth quarter wasn't that much different than 2014 fourth quarter. As we start this first quarter of 2016, we are starting to see that be considerably above. That tracks with gasoline demand. That all makes reasonable sense. Now the question is how high will it go. Well, people aren't going to drive infinite miles just because gas is cheaper. They are not going to drive to work more often, so this is more recreational and discretionary type trips. And frankly, I think everybody can have a theory on that. I would just tell you that what has changed is, in the first quarter, we are seeing miles driven as our Snapshot population, which is large enough to be credible ---+ I'd make the claim that is different than the claim I made for the fourth quarter where we hadn't seen it be dramatic; in fact, it had flattened off. It is now showing increase and we are going into what is really the high vehicle mile traveled part of the year. So it'll be interesting to see whether or not the discretionary usage continues to be higher or not. In this one, <UNK>, I think all I can do is report the news. We have incredible interest in this sort of thing because it makes a big difference. But whether I could say that we are seeing a dramatic change in frequency simply because of that; no, we take it as it comes and the indications that because those miles are more discretionary and longer distance trips that the effect on frequency is not quite as linear as you might expect. I wouldn't bet against you on that one. I don't have the April numbers. Actually, as soon as I get off this call, I'm actually probably going to get more of the April numbers. That will be very interesting, yes. And I would add, while we can't model it perfectly, we think gas prices ---+ there's some step functions in there. Certainly back when we hit $4, that was a ceiling that people retracted a lot, but we think in some reasonable range, sort of the marginal change in driving is not that linear with gas prices. Airline travel too for discretionary travel, yes. Unfortunately, we report the news more here, but we have our own theories, but I don't dismiss or suggest that yours is not an interesting one as well. April will tell a story because we are really going into April and May and June, which are the high travel vehicle miles traveled months. <UNK>, do you want to jump in on that.

2016_PGR

2017

UFCS

UFCS #Good morning, everyone, and thank you for joining this call. Earlier today, we issued a news release on our results. To find a copy of this document, please visit our website at ufginsurance.com. Press releases and slides are located under the Investor Relations tab. Our speakers today are Chief Executive Officer, <UNK> <UNK>; <UNK> <UNK>, our Chief Operating Officer; and <UNK> <UNK>, Chief Financial Officer. Please note that our presentation today may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. The company cautions investors that any forward-looking statements include risks and uncertainties and are not a guarantee of future performance. These forward-looking statements are based on management's current expectations, and we assume no obligation to update them. The actual result may differ materially due to a variety of factors, which are described in our press release and SEC filings. Please also note that in our discussion today, we may use some non-GAAP financial measures. Reconciliations of these measures to the most comparable GAAP measures are also available in our press release and SEC filings. At this time, I'm pleased to present Mr. <UNK> <UNK>, Chief Executive Officer of United Fire Group. Thanks, <UNK>. Good morning, everyone, and welcome to the UFG Insurance Second Quarter 2017 Conference Call. Earlier this morning, we've reported net income of $0.12 per diluted share, operating income of $0.05 per diluted share and a GAAP combined ratio of 107.2% for the second quarter of 2017. This compares with net income of $0.12 per diluted share, operating income of $0.08 per diluted share and a GAAP combined ratio of 104.8% in the second quarter of 2016. Our second quarter 2017 net income was comparable to last year's second quarter. In both periods, we had an elevated level of losses in our P&C segment. However, in second quarter of 2016, losses were driven by catastrophes, and in the second quarter of 2017, losses were driven by an increase in frequency and severity of commercial auto claims. We are disappointed we are not making more progress in our commercial auto line. We will continue to take more aggressive actions until we see improvement, focusing on rate increases, additional tightening of underwriting guidelines, loss control requirements and ---+ along with implementing new analytical tools. These initiatives will take some time before we realize the positive impact in our financial results. Mike will discuss the initiatives we're putting in place to improve our underwriting performance in this line in more detail. In the second quarter of 2017, we had 16 large commercial auto claims, which we define as claims larger than $500,000, compared to 5 large commercial auto claims in the second quarter of 2016. These claims were geographically dispersed, with losses occurring in each of our regions. Year-to-date, we had 28 large commercial auto claims as compared to 9 large claims in the prior year to-date. In both the second quarter and year-to-date 2017, we also experienced an increase in frequency of commercial auto liability and commercial auto physical damage losses compared to the same period last year. This increase in the frequency and severity of commercial auto losses is the primary reason for the deterioration in the core loss ratio, adding 7.7 percentage points to the combined ratio. Moving on to catastrophe losses. Cats added 11.6 percentage points to the combined ratio in the second quarter of 2017 compared to 15.3 percentage points in the second quarter of 2016. The cat load for the second quarter of 2017 is in line with our 10-year historical average for the second quarter of 11.3 percentage points. Our expense ratio continues to meet our expectations at 30.3% for the second quarter of 2017, which is level with the second quarter of 2016. This is the fifth straight quarter of an expense ratio right at or around 30%. For the life segment, we reported net income of $2.8 million or $0.11 per diluted share in the second quarter of 2017 compared to a net loss of $300,000 or $0.01 per diluted share in the second quarter of 2016. Year-to-date, net income was $4.2 million or $0.16 per diluted share compared to $100,000 or less than $0.01 per diluted share year-to-date 2016. In 2017, the life segment benefited from an increase in realized gains on the sale of 2 fixed maturity securities that were previously impaired, which resulted in an after-tax gain of $1.5 million. In addition to these gains, we are beginning to see some positive momentum from the strategies we put in place earlier this year to improve profitability in this life segment. As we discussed in previous quarters, these strategies include pricing changes and the restructuring of commissions. With that, I'll turn the discussion over to Mike <UNK>. Mike. Thanks, <UNK>, and good morning, everyone. As <UNK> indicated, we had a deterioration in our core loss ratio in the second quarter of 2017, driven by an increase in frequency and severity of losses in our commercial auto line of business. Much of this deterioration is due to strengthening of reserves on the late ---+ on the last 3 prior accident years, and only slightly due to an increase in current accident year paid losses. This reserve strengthening is partially due to bodily injury loss inflation which we and the industry are experiencing. This inflation is due to jurisdictional issues and an increase in unfavorable awards, which increases potential exposures on commercial auto bodily injury cases. We believe a majority of this increase in commercial auto losses is due to an increase in miles driven and distracted driving. As we mentioned last quarter, one of our initiatives that we will be implementing later this year is the distracted driving campaign. This campaign, which we're calling 'worth it', is a comprehensive educational and marketing program to remind drivers their life is worth it, driving distracted is not. This collection of resources is designed to reach and engage. It can be used by business owners, insurance agents, educators or individuals, basically anyone interested in helping fight the epidemic of distracted driving. Other loss control efforts to improve profitability in our commercial auto line include tightening of underwriting guidelines and loss control requirements. During the second quarter of 2017, our loss control reps have increased the frequency of visits to our insureds aimed at improving commercial auto results. Our reps are working with insureds to implement vehicle use policies to set guidelines for acceptable driving behavior. They're also grading accounts A through F on the account's vehicle use policy, their attitude towards cell phone use as well as the level of rigor and monitoring in enforcing these policies. Our underwriters are also using these loss control grades in their renewal and pricing decisions. They have significantly tightened underwriting guidelines and are aggressively increasing pricing on heavy auto exposures, including waste haulers, sand and gravel haulers and other heavy-wheeled exposures that are driving some of our issues of severity of losses. Commercial auto rate increases during the second quarter are in the mid- to upper single digits depending on the region. We will continue to push for rate increases in our commercial auto line and continue to review and nonrenew underperforming accounts. We have increased the level of detail in our tracking of price increases in our commercial auto line of business to ensure we are getting the increases we are targeting. One way we are doing this is through the use of new analytical tools. As we mentioned earlier this year, we created a new analytics department that rolled out a new analytical tool at the end of the second quarter to assist in providing pricing and acceptability guidance to underwriters on our commercial auto business. Moving on to catastrophes. As <UNK> indicated, catastrophe losses in the second quarter were in line with our 10-year historical average and decreased compared to the prior year second quarter. In the second quarter of 2017, we experienced a decrease in severity of catastrophe losses, although a slight increase in frequency of catastrophe events and claims. During the second quarter of 2017, we had 1,243 catastrophe claims from 20 of events as compared to 1,172 claims from 16 events in the second quarter of 2016. Continuing on with our discussion on loss ratios, our commercial other liability loss ratio improved significantly in the second quarter of 2017 as compared to prior year, primarily due to favorable reserve development in prior accident reserves and a reallocation of IBNR reserves primarily from our construction defect book of business. While we saw a deterioration in our loss ratio in commercial fire and allied lines as well as personal auto and personal fire and allied lines of business. The deterioration is primarily due to an increase in frequency, with claim counts increasing in each of these lines of business. We continued to experience competitive market conditions with an increase in competition in the second quarter of 2017. We were most successful on accounts with less than $10,000 in premium, but also had success in accounts over $100,000 in certain regions, specifically in our Midwest, Rocky Mountain and Gulf Coast regions. Overall, average renewal pricing changes for commercial lines was nearly flat with first quarter of 2017, with pricing varying depending on the region and size of the account. Commercial auto and commercial property rate increases continued to be in the mid- to upper single digits, with negative rate changes for workers compensation and BOP lines of business. Overall, average renewal pricing change for personal lines was in the low single digits. Premium and policy retention were comparable to the first quarter of 2017 at 84% and 81%, respectively. Our success ratio on quoted accounts decreased 1% from the prior quarter to 33%. As we continue to address the deterioration in our auto book of business, our expectation is that premium and policy retention may be negatively impacted. During the second quarter 2017, property and casualty premium written increased 3% as compared to second quarter of 2016, with the majority of the increase coming from endorsements in audits, with new business decreasing slightly during the quarter. With that, I'll turn the financial discussion over to <UNK> <UNK>. Thanks, Mike, and good morning. For the second quarter of 2017, we reported consolidated net income of $3 million or $0.12 per diluted share as compared to $3.1 million or $0.12 per diluted share in the second quarter of 2016. Through 2017 year-to-date, consolidated net income was $22.9 million or $0.89 per diluted share compared with $25.5 million or $1 per diluted share in 2016. The decrease in net income in the second quarter and year-to-date as compared to 2016 is primarily due to deterioration in our core loss ratio, previously discussed by <UNK> and Mike. Quarterly consolidated net premiums earned increased 2.4% in Q2 compared to 2016, and total revenues increased 2.6%. And year-to-date, consolidated net premiums earned increased 3.8% and total revenues increased 4.5% compared with 2016 year-to-date. Specifically, Property and Casualty segment net premiums earned increased 5.6% in the second quarter and 6.4% year-to-date as compared with the same period in 2016, and both relatively in line with previously mentioned expectation. Consolidated net investment income was $24.6 million for the second quarter of 2017, which was comparable to the prior second quarter with $24.5 million. Year-to-date 2017 investment income was $49.6 million or a 6.2% increase as compared to the same period in 2016. The increase in net investment income through the comparative first 6 months of 2017 was primarily driven by the change in value of our investments in limited liability partnership and not due to a change in our investment philosophy. This resulted in an increase of $2.2 million in investment income year-to-date 2017 as compared to the same period of 2016. Losses and loss settlement expenses increased by $17 million or 9.6% during second quarter 2017 compared with the second quarter of 2016, an increase of $43 million or 13.3% over 2016 on a year-to-date basis. The primary driver of the increase in 2017 was due to an increase in severity in commercial auto losses, as we've already discussed. Favorable reserve development for the second quarter of 2017 was $16.3 million compared to $2.5 million in the second quarter of 2016. Year-to-date 2017, favorable reserve development was $41.2 million as compared to $26.4 million in 2016. The impact on net income for the second quarter and year-to-date in 2017 was $0.41 and $1.04 per diluted share compared $0.06 and $0.67 per diluted share in the same period of 2016. Looking at favorable developments in more detail in the second quarter of 2017, the majority of the favorable development impacted 2 lines: commercial liability with $15.8 million, and workers compensation with $6 million. That favorable development was offset by reserve strengthening in each of commercial, fire and allied with $3.8 million and commercial auto with $2.1 million of adverse development. Year-to-date 2017, once again, the majority of the favorable developments impacted 2 lines: commercial liability with $41.5 million; and workers compensation with $10 million of favorable development. This favorable development was offset by the reserve strengthening in both commercial, fire and allied with $6.3 million and assumed reinsurance with $5.4 million of adverse development. The combined ratio in the second quarter of 2017 was 107.2% compared to 104.8% for the second quarter of 2016. Year-to-date 2017, the combined ratio was 102% compared to 98.7% for the same period of 2016. Removing the impact of catastrophe losses and reserve development, our core loss ratio deteriorated 11.6% and 7.7% in the second quarter of 2017 and year-to-date, respectively, when compared with 2016. The primary driver of the deterioration in the core loss ratio is an increase in the severity of commercial auto losses, as previously discussed. Referring to Slide 9 in our slide deck on our website, we've provided a detailed reconciliation of the impact of catastrophes and reserve development on the combined ratio. As <UNK> noted, our expense ratio for second quarter 2017 was 30.3%, level with second quarter 2016. Year-to-date, our 2017 expense ratio was 30.3% or a decrease of 0.7% when compared to the same period in 2016. The decrease is primarily due to a decrease in post-retirement benefit expenses, which we discussed the past few quarters, and a reduction in our accrual for contingent commissions based on the deterioration in the loss ratio. Partially offsetting these positive impacts to the expense ratio is $4.1 million of underwriting expenses typically eligible for deferral and our deferred acquisition cost. This adjustment is due to the deterioration of commercial and personal auto lines of business that has been previously discussed. Return on equity was 4.8% year-to-date 2017 compared to 5.6% in 2016. The decrease in ROE as compared to the same quarter last year was primarily due to a combination of a decrease in net income and an increase in shareholders equity. Our return on equity excluding unrealized investment gains was 5.7% year-to-date 2017. With respect to capital management, during the second quarter, we declared and paid a $0.28 per share cash dividend to the stockholders of record on June 1, 2017. And as I mention in each conference call, we have paid a quarterly dividend every quarter since March of 1968. Continuing during the second quarter of 2017, we remain active with our share repurchase program. During the second quarter, we repurchased 361,627 shares of our common stock at an average price of $42.68 and a total cost of $15.4 million. Year-to-date through June, we have repurchased 496,608 shares of our common stock for a total cost of $21.2 million. As a reminder, we purchase the United Fire common stock from time-to-time on the open market and/or through privately negotiated transaction as the opportunity arises. The amount and timing of any purchases will be at management's discretion and will depend on a number of factors, including the share price, general economic and market condition and corporate and regulatory requirements. We are authorized by the Board of Directors to purchase an additional 2.4 million shares of common stock under our share repurchase program which expires in August of 2018. And with that, I will now open the line for questions. Operator. <UNK>, this is <UNK> <UNK>. I'll maybe make a comment and then maybe <UNK> <UNK> will want to comment as well. But I wish we could raise rates more. We were probably slightly disappointed with the rate increases that we were able to get. The market is kind of strange right now. I have never seen a time where I would call this a soft market, but there is some hardness in commercial auto, but not nearly enough in our markets, anyway, to be able to cure the problem. So we're having to do it with a combination of rate increases and underwriting actions and loss control actions, but, in essence, the market won't let us get the rate that we really need to solve the problem with rates alone. Mike, do you have any other things to add. Yes. <UNK>, maybe just to echo what <UNK> said, I would say it's a multi-pronged approach to try to improve the loss ratio. Everything from analytics to tightening underwriting guidelines, trying to get more rate, getting our loss control more involved, better tracking, I might say, on the claim side, we're trying to better job managing the claims, especially if litigation is involved. So we're trying to take a multifaceted approach to improve the results from a lot of different angles. This is <UNK> <UNK>, again, <UNK>. Thanks for the question. I would say that there are geographic differences in the problem, but it's a problem pretty much across the United States. Kind of some of our regions that are doing a little bit better are maybe able to write business in less population-concentrated areas, and ---+ but other than that, all of our regions have an issue with commercial auto. Like I said, some are much worse than others. Our West Coast has kind of continued to be the biggest area of problems and, again, that's a lot of population concentration there as well. Mike kind of mentioned jurisdictions, kind of along with what we're seeing in the distracted driving area. We're also seeing courts being very unsympathetic for people who cause accidents because they were distracted. So that's kind of a ---+ multiplies itself. Mileage is up, and we've learned that with mileage increases, losses don't increase by the same percentage but some multiple of that. So on the analytics side, we're just trying to find more predictive characteristics other than the ones that our underwriters have been using in the past. Mike, do you have any other things to add. Maybe the only thing to add to what <UNK> said, I'd say the makeup of the book of business in the regions is also a factor. So we've seen more issues with books that have more heavy-wheeled exposure, and ---+ particularly on the severity side. This is <UNK>, again. Yes, we ---+ as you can see, a lot of our profitability pickup was actually through the sales of some securities that we'd written down previously, but we did make some tough choices on commissions and rates that have been implemented fairly recently. But the good news is, we are starting to see some pickup there. So that's, obviously, a very interest rate-driven business, but ---+ yes, I think, we've got a couple more things to ---+ <UNK> was pointing out to me, that we have in the future, so we think we can get a little bit more lift in that area in the quarters to come. Okay. This is <UNK>, again. So kind of ---+ in our past, our philosophy has been that it's very difficult to grow kind of from square 1 in new geographic areas. We've tended to grow geographically through acquisitions. But kind of over the last couple of years, we've kind of put out the plan to grow in 4 additional states that we have somewhat surrounded. Ohio was our first expansion of a new state from scratch, and that is exceeding expectations for a competitive state. That's went very well. Kentucky, I'd probably list, pretty new in the game, but as expected. And then, Michigan and Washington are ---+ will be our 2 next areas of expansion, and kind of due to some internal resource strain on some of the projects we have, we'll probably be pushing those 2 back maybe a couple of quarters. But that's kind of in a nutshell how we're doing. A lot of our organic growth is really growing in areas that were already successful, and that's kind of the plan for the future. Well, we kind of ---+ I've always felt that our best use of capital is to ---+ organic growth, writing new business. That being said, we have kind of a price-to-book level that when our shares fall below that, we do buy back. And so we look at share buybacks as probably the worst use of capital that we have, but it is a use of capital and it ---+ and sometimes, when there are not other opportunities such as acquisitions and things like that, it is a use of capital. So we ---+ when our share prices drop below a certain price-to-book value, we do buy back. We're somewhat limited just by our daily number of shares traded. So it's ---+ we're not able to make as big of an impact, but we like to use our capital for organic growth, which we do, but every now and then, when our shares drop a certain price-to-book, than we do that as well. So we try to ---+ our capital management really is kind of looking and using all the tools we possibly can to utilize the capital in the best way. This now concludes our conference call. As a reminder, a transcript of this call will be available on the company website at ufginsurance.com. On behalf of the management of the United Fire Group, I wish all of you a pleasant day.

2017_UFCS

2016

MD

MD #Thanks, <UNK>. Good morning. Yes, it's not really material to speak of. Again, most of the increase that you see as a percentage and in dollars is just rolling in the portfolio of companies because they have a different classification of expenses. So as a percentage, for G&A, even as I look out into 2016 as I think I mentioned in a prior question, I'm really not looking at that composition as a percentage to change. Obviously, dollars change as we get larger, but from our own what we call core, those have been absorbed in the normal increases that you'd expect us to have from being a larger organization. We really don't want to comment on that. I had to answer that quickly. Before my counterpart over here. A good (inaudible). I'd say it's a little better than it was last year at this point. Well, the maternal-fetal is more ---+ volume is more dependent upon how busy the obstetricians are. And so, what I find is that when the obstetricians ---+ the general obstetricians are busy, they send patients off to the MFMs, when they are not, they tend to keep the patients. And then it also is dependent upon what part of the country you're in. So it's more complicated than there are a lot of births and so they get ---+ they see an increase in volume. It doesn't really fall ---+ although we would like that and we look at that many times as a leading indicator, it doesn't pan that way. Thanks. Well, if there are no further questions, then I thank you for participating this morning, and I look forward to speaking with you next quarter. Thank you, operator.

2016_MD

2017

AZO

AZO #I think they are both very different businesses, by the way, and they have made some improvements since the previous quarter. So I think they will continue to grow. I think AutoAnything has had some challenges over the last six or so months, and there are some real opportunities for us to expand SKU assortments and also to increase our search engine optimization activities, et cetera, in order to drive traffic. I think that we will continue to be competitive there. And ALLDATA continues to be a very strong business and a very important business in the commercial segment as well. So both businesses are flattish at the moment, down a little bit but they are making some improvements, and we expect to see them to continue to make improvements over the next few quarters. I don't think there is any question that they are priced below us in many different cases, but I think their value proposition is extraordinarily different. Number one, the convenience factor. You can walk into our store and the sense of immediacy, particularly if you have a failure part is right at your hand so you can get back on the road immediately versus having to wait overnight or couple of days in most cases. I don't think many consumers today are willing to wait when their car is down for that. So that is one element. There are many elements. Another element is we have got tremendous trustworthy advice in our AutoZoners in store. That comes with a cost, and therefore it is part of the value proposition, but for an AutoZoner to help a customer figure out what is going on with their vehicle and what the solution is, there is value to the customer in that. We do core returns. A significant amount of our sales come with a core return. We are there to take that core back, and on and on and on. I think we feel like there is a significant value proposition differential between us and any online competitor, and what happens with that over time, we will see. We have dealt with price competition for years, and some of that price competition for instance is in mass merchandising and we have effectively managed through that over the years because there is a different value proposition. We don't see it necessarily any different. The core return is if you by an alternator from us, we will sell you the alternator for let's say $100 and it has a $25 core because the old alternator is a remanufactured alternator and the old alternator is the raw material to make the next one, so there is a deposit, if you will, is what a core charge is. But the point is there is a tremendous reverse supply chain in this business that doesn't exist in many other businesses. A lot of other businesses talk about returns but this one has a significant reverse supply chain. On buy online and pick up in store, it is not a significant part of our business today, so I don't want to overstate that. You asked how are we going to determine what this right price differential is over time. I think we're going to do it just the same way we have done it the last 37 years. It's trial and error. We've had different competitive channels over the years, and we have very effectively been able to optimize our pricing in the light of the different competitive sets, and I think we will continue to do that. I wouldn't overstate their role into south Florida. We have different competitors that are going into different parts of the country all the time. Clearly, Florida is a strong market for us, but we are not the most dominant player as far as store count in Florida. There are others that have significantly more stores than us. I don't think we're seeing anything different in Florida than we've seen as we've had competitive encroachments in other parts of the country. I would start with first of all, we are very pleased with the performance of our Mexico business. I think our team down there has done a superb job of managing in light of this significant devaluation of the peso. Frankly, this all started a couple of years ago, and if you recall, we were talking last year that we thought it would be a one-time deal and then would have muted impact going forward; that clearly has not happened post the election. The peso has significantly deteriorated yet again. We can't manage the peso. We can go off and hedge but we have elected not to do that. We have elected to try to do most of our hedging by buying in local currency, and therefore we hedge the product cost versus hedging the profitability. But at the end of the day, if there is a deterioration in the peso, it hurts our US dollar profits. But at the end of the day, we would be doing the same thing in Mexico we've been doing all along. It's been a good business for us and we anticipate it being a good business for a long time. I think it is multifaceted. Number one, yes, we are out communicating to our customers, Yes We've Got It, in a way we never have before. We believe we can do that because we are in a better position than we ever have been before. I would add a lot of the emphasis to just strictly the improvements we have in inventory availability. And as we've talked over the last year, another big part of what we are trying to do is significantly increase the engagement of our store managers and our district managers in this business. Many of us, myself included, grew up with the retail business and so for lack of a better term, it's kind of our comfort zone or our fastball. We've got to force ourselves to get deeper and deeper into the commercial business and I think we are doing that over time, and I think that will pay long-term significant dividends. I think on both sides that we've done, we are very pleased overall even with the recent performance in the quarter. We had an acceleration in our commercial programs overall. We are clearly gaining share, growing significantly faster than the industry. The team has put in several new programs in order to help drive both existing store customers as well as prospecting and attaining new customers as well. So that business does seem to be healthier, and it seems on a track to continue to grow. So I think on both sides it's been healthy, but it's really more the existing customers that have been really strong, and that's the one area that we are really focused on. It's very broad, and in fairness we have a low market share, so we believe that there is enormous greenfield opportunities for us across the country. All the regions performed reasonably well. Clearly, the weather affected regions in prior years have been more challenged but they weren't this year. They continued to perform well. So we see it pretty balanced across the country, so we feel pretty good about the commercial team as a whole and how they are performing. Thank you. Before we conclude the call, I would like to take a moment to reiterate that our business model continues to be very solid. We're excited about our growth prospects for the balance of the year. We'll not take anything for granted as we understand our customers have alternatives. We have a solid plan to succeed this fiscal year but I want to stress that this is a marathon and not a sprint. As we continue to focus on the basics and focus on optimizing long-term shareholder value, we are confident AutoZone will continue to be very successful. Thank you all for participating in today's call. Have a great day.

2017_AZO

2016

COG

COG #Well we have recently ---+ on the spacing side we have ongoing wells currently producing that have term production and certainly setting their own production curve that we will continue to utilize and evaluate the spacing that we think we can get down to. We just had enough data ---+ enough well results to be able to determine that between 700 foot and 800 foot and we were comfortable that stage. But we will continue to look at it ---+ down the road we will continue to look at the viability of the spacing that we think we can get down to without the creation of an acceleration profile to our mix. So and with that being said, we have tried all different frac stage spacing scenarios and we have a fairly voluminous database in that regard and feel that 200 foot spacing is a good design. We continue, though, to look at any of the ideas that are new to industry, whether it's something as simple as more profit per stage or different profit size. All of the things that are discussed and looked at out there by the industry, we will continue to look at it. And both <UNK> <UNK> and Phil Stalnaker, who runs our North and South region, they and their crew continue to read and look at and, in some cases, test all the different ideas that are out there in industry that we all hear about and we talk about and they visit with the third-party service sector on what might be applicable to enhance efficiencies in our program. So I don't have anything specific that I will talk about today but we do look at all of it, I can assure you. Thank you, <UNK>. It's a number based on timing of when we decide to bring on any given pad location. For example, if we bring on a pad location that has three wells on it versus ---+ and that ---+ we still have some opportunities to address where we go with our frac crew. And that movement of where we move a frac crew can dictate how much in a snapshot period of time, our a finite period of time, we would curtail. If we bring on a 3 well location that has 32 frac stages per well versus an 8 well location that has 40 stages per well the ---+ and the timing of that is three or four months, it affects the amount of volumes that we might have curtailed for 2016. So it's a hard number to just say exactly what it is. I'm not trying to dance around your question. I'm just saying that it's hard to be specific but it's certainly [100,000 to 200,000] cubic foot per day. Keep in mind just as a backdrop, <UNK>, the entire area that we have out there has both the upper and lower Marcellus under our acreage. So as we reduce the spacing in those areas, we will have both upper and lower Marcellus in those additional wells that we are adding to the inventory. Let me give it a stab, <UNK>. We feel very comfortable about our balance sheet. We feel very comfortable about being able to ramp up a level of activity to a level that we have already experienced in the past. We feel very comfortable that our balance sheet will be able to handle that level of activity and the outspend being minimal through that process. I'm sorry, the last part about your question ---+ Thank you, <UNK>. I'll ---+ thanks, <UNK>, for the question. And I will pass that to <UNK>. <UNK>, you are correct. We model the upper 3's the low 4's. We're not ---+ unless there's a dramatic drop in the strip even further, the 4.75 does not come into play. But we do have some ---+ as I mentioned earlier, we have some assets that we could potentially trade. We do have a level of interest ---+ not committed to doing that but it is an option. We could also slow down activity further if we really decided. And one of the comments is our activity level at 3.25, which we reaffirmed, is contingent on continuing progress on the infrastructure project. If those get delayed, that spend, which is part of our overall analysis, goes down also. So we could conserve capital to manage through that process. Our effort and the amendment process of the covenants was to give us enough flexibility through 2016 and we believe we accomplished that. Thanks, <UNK>. I will pass that on to <UNK> since he is the catalyst behind some of that. Okay. If I understood the first part of your question, you were asking about whether or not we felt that Williams could continue to fund the projects. Okay. So we have had that discussion with Williams. And I don't know if you listen to the call yesterday or a press release they made a few weeks ago, but they are committed to their interstate projects. They feel any cutback on funding would have to do with expansion of nonregulated interstate projects such as processing plants or even in the gathering infrastructure world where they operate in Ohio and southwest PA. But they are committed to the funding on the interstate pipeline projects. And I think they even mentioned that they are really not moving ahead with any projects that are in the design phase but are going to concentrate on the ones that are fully committed to and in the queue. I think the lack of activity drilling and completion, <UNK>, is going to show up in any curtailed volumes, just like Cabot. Any curtailed volumes that were back earlier in the year, and whatever volumes they were, you're going to have some natural runoff with the lack of activity of your base decline. I think that is certainly going on. I can't give you an exact figure of what's curtailed today. But whatever is curtailed today, I think is significantly less volumes than that were curtailed back in the summer of 2015. All I can really answer is directionally, I'm sure less volume curtailed. Yes. I think that is exactly the case. Ducks are ---+ will be coming down some and with 4 rigs and 4 daylight frac crews running up there in an area that has 8 Bcf, you could do some real simple math and determine that it's not going to maintain production flat. We get the question, what kind of maintenance capital is necessary to keep 1.5 Bcf or 2 Bcf flat. And you look at that maintenance capital that is necessary and we had the absolute best rock in the northeast area of Pennsylvania. So that other 8 Bcf, you might note, is not coming from the similar rock as Cabot. It's good rock and I'm not throwing stones at it but it nevertheless ---+ statistically, it is not as good as Cabot's rock. So 4 rigs and 4 frac crews is not going to keep 8 Bcf flat. That's a hatchet. (laughter) Thanks. I think it's between $0.85 to $0.90. It would go to the end of the first quarter, end of the second quarter of 2017. Thank you, Carrie. I appreciate the time today. And I appreciate everybody's interest. And I can assure you by the results that you've seen in our 2015 program that we are going to be able to navigate through this difficult environment. And we expect that 2016 numbers will be equal to, if not better, than 2015. Thanks again and we will see you at next quarter call. Thank you.

2016_COG

2017

KLAC

KLAC #Thanks, Rick, and good afternoon, everyone As Rick highlighted in his opening remarks, the June quarter represented another outstanding period of financial performance and operational execution for KLA-Tencor Shipments were a record $971 million, finishing above the range of guidance, and revenue and GAAP and non-GAAP diluted earnings per share each finished above the midpoint of the range of guidance in the quarter This result was driven by strong demand across our product portfolio as well as solid execution in cost management in our engineering, manufacturing and service operations Revenue was $939 million in the June quarter; GAAP diluted earnings per share was $1.62 in the quarter; and non-GAAP diluted earnings per share was $1.64. In our press release, you will find a reconciliation of GAAP to non-GAAP diluted earnings per share With the exception of when I explicitly refer to GAAP results, my commentary will be focused on the non-GAAP results, which exclude the adjustments covered in the press release Now, turning to highlights of the June quarter demand environment Although we have discontinued guiding quarterly orders, beginning this quarter, we will begin to offer greater detail on our shipment results and guidance to provide more information and color on the current business environment to give investors insight into industry trends and KLA-Tencor's performance For historical shipments mix data, please refer to the supplemental information posted with today's press release on our website So as a reminder, the following details are related to shipments: total shipments in the June quarter were a record $971 million, up 7% on a sequential basis and finishing above the guidance range Foundry was 64% of shipments in June, driven by an anticipated broadening of the customer base for investment in 10-nanometer production and 7-nanometer development, and by continued investment in legacy technology nodes We are currently modeling foundry shipments to be approximately 42% of the total in the September quarter Memory was 32% of shipments, with delivery evenly split between DRAM and NAND We are currently modeling shipments to memory customers to be about 43% of the total in the September quarter, with NAND representing about half of the memory mix Logic was 4% of shipments in June and is currently forecasted to be approximately 15% of the September quarter total In terms of the approximate distribution of shipments by product group, wafer inspection was 50% of shipments; patterning was 25%, patterning includes orders from our reticle inspection business Non-semi, which includes our back inspection business, was approximately 4%; and service was 21% of shipments Looking forward, we are modeling September quarter shipments to be in the range of $945 million to $1.025 billion Current build plans are supporting quarterly shipment levels of $900 million to $1 billion, and we expect this trend to continue into calendar year 2018. This outlook has strengthened since the earnings call back in January, consistent with the upside in orders we've experienced year-to-date In fact, compared to the outlook we provided back at our earnings call in April, the CY 2017 order forecast is over $225 million higher than three months ago, and shipments for the second half of calendar year 2017 are expected to be up mid-single digits compared with the first half, inclusive of the stronger-than-guided performance in the June quarter Turning now to the income statement, revenue was $939 million in June, finishing at the upper end of the range of guidance We expect revenue to be in the range of $910 million to $970 million in the September quarter Non-GAAP gross margin was 63%, in line with expectations for the quarter The strong gross margin performance in June is consistent with recent margin trends in terms of mix of product business and operating leverage in our manufacturing and service operations Looking forward to the September quarter, we expect gross margin to be in the range of 62.5% to 63.5%, flat at the midpoint compared with June, as we expect a similar mix of product revenue with slightly higher manufacturing costs, offset by an improved service mix quarter-to-quarter Total non-GAAP operating expenses were $238 million in June, and non-GAAP operating margin was 37.6% This operating margin result is in line with the updated target model for annual revenue levels in the $3.6 billion to $3.9 billion range as we outlined earlier in this quarter We are modeling operating expense levels to be approximately $250 million in the September quarter due to increasing R&D head count and prototype material expense for current programs as well as approximately $2 million to $3 million of incremental operating expense associated with the acquisition of Zeta Instruments, a privately-held company that designs and manufactures optical profilers and defect inspection systems for the advanced wafer packaging, LED and data storage industries We completed this small transaction in early June Our non-GAAP effective tax rate was 21% in the quarter, just below our long-term planning rate of 22%, reflecting the higher mix of revenue from products developed or manufactured offshore and other discrete items impacting the tax rate We are modeling the September quarterly tax rate at 20% due to a non-recurring tax benefit expected in the quarter <UNK>wever, you should continue to model a long-term tax rate of 22% going forward Finally, non-GAAP net income for the June quarter was $259 million, and we ended the quarter with 158 million diluted shares outstanding I'll turn now to the highlights and the balance sheet and our cash flow statement Cash and investments ended the quarter at $3 billion, an increase of $313 million compared with the March quarter Cash from operations was a record $463 million in June, and free cash flow was $452 million As mentioned earlier, we completed the acquisition of Zeta Instruments in the June quarter Total purchase consideration was approximately $37 million, including cash paid of almost $32 million at closing And finally, during the quarter, we paid an aggregate of $85 million in regular quarterly dividends and dividend equivalents for fully vested restricted stock units In conclusion, KLA-Tencor's results in June reflect our market leadership, the critical nature of process control and our customer's growth strategies at the leading edge and in legacy design rules and our industry-leading business model This, fueled by record total backlog of $1.8 billion as of the end of the June quarter, position the company for another year of growth in a strong and stable overall WFE industry environment This performance demonstrates the company's market leadership, the strong customer acceptance of our portfolio of solutions addressing the most critical yield requirements of leading edge, and our focus on operational execution across our business With that, our guidance for the September quarter is: shipments in the range of $945 million to $1.025 billion; revenue between $910 million and $970 million and GAAP diluted EPS of $1.48 to $1.72 per share; as well as non-GAAP diluted EPS of $1.50 to $1.74 per share This September quarter EPS guidance range assumes a 20% tax rate in the quarter This concludes my remarks I will now turn the call back over to Ed to begin the Q&A Yes, <UNK>, it's <UNK> I think the only thing I would add to that is we're still waiting for these products and that contribution But we have from a 3D NAND perspective, from planar NAND, we have seen intensity improve If you think about the peripheral products around their wafer inspection and in metrology, where wafer flatness is really, really critical to advance layer developments, 3D NAND, film measurements, CE measurement, laser scanning, opportunities around defect inspection Some of the bigger challenges are still out there that these platforms hopefully will address But we're encouraged by what we're seeing so far, and as Rick said, it's a big part of our calendar 2017 view Thank you It was pretty high I mean, as you know, free cash flow can be pretty lumpy But the linearity of shipments enabled our record collection quarter, so that was a big part of it this quarter So we're real pleased with it and Well, it's a great question and I think as our business has been so stable at these levels, we're not having to make significant investments in working capital Obviously, we invested a lot in ramping inventory to prepare to be able to ship it, $900 million to $1 billion where we are today And, so now you're seeing modest increases in inventory to support that activity So then as a result of that, given our capital position and so on, we see a fair amount of the operating margin dropping through So the way I think of – I mean, when I look at calendar 2017, I probably see free cash flow probably in excess of $1.1 billion, and we're talking about revenue levels of $3.6 billion to $3.7 billion if you take our guidance and expectation around the December quarter So you're in that 30th percentile ranges I think if I do the math quickly So I think that's probably how we ought to think about it I think if you see an inflection, obviously we'll have to invest into that But the resiliency of the model is pretty strong The margin profile of the business is good And I think that a lot of the trends that I've outlined around gross margin is, I think, is fairly sustainable going forward So, we feel pretty good about the model going forward, and the cash flow generation that comes from it Yeah, <UNK>, I think the only thing I'll add to that is, is that the first part of – well, all of 2016 and part of 2017 was very foundry-centric We thought most of the memory bookings we would start to see in calendar 2018. And I think one of the things that we've been encouraged by, is the strength of what we've seen from an order perspective, both in the June quarter but also what's in the funnel over the next couple of quarters So those are tools that are slotted to ship early in 2018. So from a shipment and revenue perspective, they're into next year But as Rick said, those projects are clearly real and are moving quickly and we're preparing to ship into that in the first part of next year Thank you Yes, C J , I mean, it's a little early I mean, given the backlog position we have and what we expect in terms of the order outlook over the next six months, we'll see where WFE is I think we've got a view that a lot of the dynamics that are driving the industry today continue into next year Obviously, NAND flash will probably be a higher level of investment next year China's probably bigger DRAM is probably flat to a little bit lower Foundry is probably on the margin a little weaker So, I think as we look at all of that, we see sort of this continuation of these trends And so we're sizing the company and modeling similar levels of output So I don't think it's – right now, I'm not seeing anything that leads me to believe that it's not flattish or a little bit better than that Yeah, Patrick, it's <UNK> It is a different business than our process tool peers And so what you typically have is – so 75% of that revenue stream is contract, right? So we have customers that buy service contracts with different levels of coverage across either certain tools or broadly across a fab And so most of that revenue is repeatable, and it allows us to test and right-size those fabs to maintain good utilization, but also to get pretty good predictably about part failure and so on But what we end up selling is, we replace parts, right? And so, then there's parts and as those parts fail over time, and you have lasers that have lives, useful lives and so on, so that's really the biggest part of the business But it isn't traditional break and fix and that – it's billable It's really contract So it really works for us and works for customers, because we can keep the tools up and keep them optimized and run preventative maintenances, and those kinds of checks on them over time to keep them running, and it works out on both ends Yeah, one other interesting attribute of our business environment – we looked at this recently – the concentration from the top customers is actually down We actually have broader customers When we look at the top 10, the percent they make up of the business has decreased in this calendar year It was slightly down last year and we anticipate that broadening So the good news is, I think we have more customers in more locations and more offerings for them I mean one thing about next year is, it looks like next year's WFE mix is a little more memory-centric And as you know, the process control intensity in memory, while it is getting better, isn't near foundry So $1 billion of WFE depending on the segment is not created equal for us But we've seen some improvement on the memory said, which we're encouraged by I think these new products, given the timing of when they'll ship and go to market, and we'll actually start to see revenue given the valuation process and so on, I think in the second half of the year, we might see some revenue, but I think it will be a pretty small amount But as I look at our plans for next year, I look at the funnel, I don't see any reason why KLA shouldn't grow in line with – at least in line with the market, as we move into 2018. Thank you

2017_KLAC

2018

EE

EE #Thanks, <UNK>, and good morning, everyone. I will start on Slide 3 of the presentation by highlighting some of our 2017 accomplishments. We are pleased to have ended the year on a positive note when the Public Utility Commission of Texas issued a final order approving the unopposed settlement in our 2017 Texas rate case. The order provides, among other things, for an annual nonfuel base rate increase of $14.5 million, a return on equity of 9.65% and a determination that all new plant placed into service was prudent and used and useful and therefore included in rate base. As part of the negotiated settlement, the new rates became effective in January 2018, including a surcharge for rates relating back to consumption on and after July 18, 2017. We were also able to implement new rates and revise our rate structure for new customers with private distributed generation systems behind their meter, which will help to limit inter and intra-class subsidies. This is an initiative that we previously sought to include as part of our 2015 Texas rate case, and we are pleased to have moved in a positive direction for all our customers by working together with our interveners, including the solar groups, to reach a compromise. Additionally, we proactively included a mechanism to provide the tax savings benefits for the reduction in the federal statutory income tax rate as part of the negotiated settlement in our case. We currently anticipate issuing credits to our Texas customers in the first half of 2018. Another benefit of the final order in our Texas rate case was the establishment of baseline revenue requirements for transmission and distribution infrastructure costs. The establishment of the baseline allows us to file for the recovery of T&D investments outside the full rate case proceeding to help reduce regulatory lag. We are able to file an application for transmission and distribution cost recovery after January 1, 2019. In 2017, we also filed a request to reduce our existing Texas fixed fuel factor by 19% to reflect lower estimated fuel and purchased power costs. The decrease to the fixed fuel factor became effective on November 1, 2017. The filing affects the fuel portion of rates for Texas retail customers and does not affect nonfuel base rates. We also issued an all-source request for proposal for resources in June of 2017. The RFP will assist us as we prepare to meet the needs of our growing service territory and as we evaluate the potential retirement or life extension of older units. The resulting resources will be vital as we continue to experience consistent customer growth that exceeds the national average. Continuing on Slide 4. Last May, our Board of Directors approved an increase to the annual cash dividend of $0.10 per share or approximately 8%. We remain committed to move towards our goal of achieving an annual 55% to 65% dividend payout ratio by the year 2020. One of the biggest accomplishments in 2017 was the addition of the Texas Community Solar Facility to our fleet of generation resources. This solar facility is the largest utility-owned community solar facility in Texas and its output was fully subscribed within 1 month of accepting applications. The addition of affordable large-scale solar projects to our mix of generation has been an important objective for our company. The Holloman Air Force Base solar project is another example of the company's commitment to implement clean and cost-effective energy alternative. In 2017, we began construction of the 5-megawatt Holloman Air Force Base solar project, which will help the Air Force meet its renewable and energy security goals. I'm also happy to report that over 3,000 devices have been registered for our demand response pilot program, which was implemented in 2017. Through the program, we can evaluate the effectiveness of using smart thermostats to reduce peak demand. Lastly, I want to highlight that El Paso Electric received the 2017 Local Employer of Excellence Award by the Workforce Solutions Borderplex, which was given for the substantial work our employees have done in the community. As a major employer in the region, I feel it's vital to ensure that our community thrives and provides opportunities for students and professionals. That is why I'm extremely proud of our employees' efforts to participate in the Workforce Solutions Borderplex team program and their efforts to work with local universities to offer internships. Moving to Slide 5. I will share our primary objectives for 2018. In 2018, we will continue to evaluate the bids submitted in response to our all-source RFP issued in 2017. As we evolve with the increasing demand and changing preferences of our customers, we will work diligently to select the next round of resources that are clean, cost-effective and reliable. As part of the ongoing analysis, we will also evaluate the potential to retire/extend the lives of our current resources. Another major objective for 2018 is preparing for our next general rate case in New Mexico. You may recall that the commission previously approved our motion to delay a rate case filing until a date no later than July 31, 2019. Later this year, we also plan to publish our first sustainability report. That report will provide insight into the economic, environmental and social impacts of our daily operations. We have been working to create a comprehensive report that will encompass historical performance measures and also provide details on our sustainability challenges and strategies. One of the pillars of our sustainability strategy is the identification of opportunities to expand cost-effective and reliable renewable energy resources. In addition to the other projects we have already mentioned, we intend to seek approval to begin construction of a 2-megawatt community solar facility in New Mexico and to expand our Texas Community Solar Program due to its popularity. We currently have a waiting list of about 1,000 customers in Texas who are not able to subscribe to the initial 3 megawatts of the Texas Community Solar Program output. Another goal for 2018 is to engage with our regional stakeholders on smart community initiative, including the possible clarification of the law in Texas during the 2019 legislative session regarding deployment of advanced metering infrastructure in our service territory. This will allow us to take advantage of technology to enhance grid resiliency in operations. It will also allow the company to provide expanded customer services, such as smart pricing options, high-usage alert and online energy management. Our ultimate goal in partnering with our regional stakeholders is to build upon recent economic development successes and to prepare our regional economy for the future. Slide 6 details some of the economic successes that the region has benefited from in recent years. El Paso's city leaders had the vision to place almost $500 million of Quality of Life Bonds on the ballot, and El Paso voters approved the issuance of the bonds in 2012. City leaders also teamed up with private investors to secure a Triple-A ballpark ---+ baseball franchise and financing for a state-of-the-art baseball stadium. Land for the stadium was secured in Downtown El Paso and the multiplier effect quickly took hold as several downtown renovations were also announced. The positive momentum was evident and we began to hear of several national brands that announced their intent to enter the El Paso market. Today, we have a vibrant El Paso economy. Our unemployment rate is at a 40-year low. Over 30,000 jobs have been created since 2010. The city has issued more than 200 downtown building improvement permits since the ballpark opened in 2014. Nothing highlights the growth in our community better than the chart we provided on Slide 7. The chart demonstrates a pattern of consistent and continual growth in our service territory over the past 17 years. In fact, our native system peak load has grown by 67% since 2000. We have now set a new native peak record in 16 out of the past 17 years. Due to the sustained growth and the demands placed on our system, we have identified the need to plan for additional resources to be in place by the year 2023. Turning to Slide 8. We have determined that a total of 370 megawatts of additional resources will be needed by the summer of 2023. We are continuing to evaluate all the bids that were submitted in response to our RFP and analyze the potential retirement or life extension of older resources to determine the optimal mix of generation and resources that will power our region into the future. Our capital expenditures plan, which we have summarized on Slide 17, may be subject to revision until a final decision is made and regulatory approvals are obtained. If you'll now turn to Slide 9, <UNK> will cover our fourth quarter and year-to-date financial results. Thanks, <UNK>. For the fourth quarter, we reported net income of $6.5 million or $0.16 per share compared to the fourth quarter of 2016 net income of $5.7 million or $0.14 per share. For the year, we reported net income of $98.3 million or $2.42 per share compared to 2016 net income of $96 million ---+ $96.8 million or $2.39 per share. As I will discuss in more detail, our improved overall financial results are largely due to rate relief we received during the fourth quarter. Turning to Slide 10. I will now discuss the earnings drivers in the fourth quarter of 2017 compared to 2016. Starting with the positive earnings drivers, retail nonfuel base revenues increased by $0.14 per share, primarily driven by the base rate increase approved by the commission in the 2017 Texas rate case. Nonfuel base revenues included approximately $8.8 million of relate back revenues for the period from July 18, 2017 through December 31, 2017. A decrease in the effective tax rate also increased earnings by $0.03 per share, which was primarily attributable to a reduction in Texas margin taxes resulting from a settlement with the Texas taxing authority. Turning to the negative drivers. Earnings declined by $0.04 per share as a result of an increase in depreciation and amortization expense, which was primarily due to increases in plant closings. Increased O&M expense at Palo Verde decreased earnings by $0.03 per share, primarily due to a nonrecurring reduction in employee pension and benefit expense in 2016. Increased taxes other than income taxes resulted in a decline in earnings of $0.02 per share due to increased property taxes in Texas and Arizona and increased revenue-related taxes in Texas. A decrease in wheeling revenue related to the expiration of a contract resulted in a decline of earnings of $0.02 per share. Now turning to Slide 11. During the quarter, the average number of customers increased by 1.7% over the same period in 2016. Megawatt hour sales during the quarter remained relatively unchanged compared to the same period in prior year. While the company experienced a solid 1.7% increase in the average number of residential customers served, mild winter weather resulted in lower residential sales compared to the fourth quarter of 2016, which was also a mild quarter. I will now discuss the impacts of weather in more detail on Slide 12. During the fourth quarter, El Paso experienced the mildest winter weather on record in over 70 years. Heating degree days for the fourth quarter were 23.9% below the 10-year average and served as a drag on revenues for the period. While the growth in the number of customers helped to partially offset the mild winter weather, it was not enough to completely close the gap on the impacts of record-setting mild winter weather. Turning to Slide 13, I will briefly discuss our capital requirements and liquidity. On December 31, 2017, our liquidity was $183.4 million, which consisted of a cash balance of approximately $7 million plus borrowings available on our revolving credit facility. Our cash capital expenditures in 2017 were $190.3 million, net of insurance proceeds. In terms of cash dividend, our board declared a quarterly cash dividend of $0.335 per share payable on March 30, 2018, to shareholders of record as of the close of business on March 16, 2018. As we continue to make progress on our current construction program, we are considering returning to the debt market in the first half of 2018 to issue long-term debt. If you will now turn to Slide 14, I would like to walk through some of the anticipated impacts of the recently passed Tax Cuts and Jobs Act. The tax reform legislation that was passed in December of 2017 had minimal impact on the company's earnings for the quarter and year-to-date periods. However, as a result of the legislation, we reduced our accumulated deferred income tax liability to reflect the $298.9 million impact of the reduction in the federal income ---+ federal corporate tax rate. We offset this reduction by recording a net regulatory liability to reflect the future refunds of such amounts to customers. In compliance with our 2017 Texas rate case, in January of 2018, we began to recognize a reduction in revenues in an amount that approximates the tax savings. We currently anticipate filing a refund tariff, which we will ask to be implemented in the first half of 2018. The refund tariff will be updated annually until base rates are implemented pursuant to our next general rate case filing in Texas. Additionally, in New Mexico, we are required to file our next general rate case by July 2019. Nevertheless, we are working with the commission to evaluate possible approaches to begin passing the tax savings benefits along to our New Mexico customers. Overall, the tax legislation is beneficial to our customers, yet it will have a negative impact on cash flows by approximately $26 million to $31 million during 2018, which is reflective of the anticipated reduction in our revenues due to reducing the federal tax rate from 35% to 21%. In 2018, the discontinuation of bonus depreciation will decrease our tax deductions. So we will utilize our net operating loss carryforward 2 years earlier than anticipated. Accordingly, we anticipate making higher tax ---+ income tax payments in 2019 and 2020 than originally expected. Even though we had a high level of net cash provided from operations in 2017, we anticipate that the new tax legislation will place a strain on our credit ratios, but we remain focused on credit quality and a healthy balance sheet. Now turning to Slide 15, I will provide some details regarding some of the new financial accounting standards that were implemented in 2018. The new accounting standards that we have outlined on Slide 15 will impact the volatility of our earnings and/or the presentation of our financial results beginning in 2018. The accounting standards dealing with financial instruments requires the changes in the fair value of equity securities owned by El Paso Electric will be immediately recognized in net income rather than in accumulated other comprehensive income as was reported prior to 2018. This will increase the volatility of our earnings as unrealized gains and losses on our nuclear decommissioning trust portfolio equity holdings will directly impact our earnings. The accounting standard that pertains to the revenue from contracts with customers provides a single revenue recognition model regardless of industry. We do not anticipate that the adoption of this standard will change the timing or pattern of revenue recognition. However, our future disclosures will include a disaggregation of our operating revenues categorized principally by tariff and off-system sales. The final accounting standard that will have a noticeable effect on 2018 relates to compensation and retirement benefits. This standard requires companies to present the service cost component of net periodic pension cost for pension and other retirement benefits in the same income statement line item as other employee compensation costs within operating income. The other components of net periodic pension costs, including investment earnings and interest expense, will be presented in other nonoperating income elements of the income statement. Turning to Slide 16. We have initiated 2018 guidance with a range of $2.30 to $2.65 per share. The guidance range assumes normal operations and considers significant variables that may impact earnings, such as weather, expenses, capital expenditures, nuclear decommissioning trust gains or losses and the impact of the recently enacted tax reform legislation. The midpoint of guidance range assumes a 10-year average weather. In 2018, we had a few items that need to be taken into consideration in addition to the changes for tax reform. For instance, in the second quarter of 2017, we recognized $5 million of Palo Verde performance awards, which contributed $0.08 per share. These awards are normally recognized every 3 years, so we will not have a corresponding benefit in 2018. Furthermore, as discussed on Page 17 of the press release, in the fourth quarter of 2017, we recorded $4.8 million or $0.08 per share of relate back revenue, which related to the third quarter of 2017 for the period from July 18, 2017 through September 30, 2017. So in the third quarter of 2018, we should see a quarter-over-quarter increase for this amount and an equivalent decrease in the fourth quarter of 2018. Also, as has been the case in recent years, due to the seasonality of our business, it is possible that we will again report a net loss in the first quarter of 2018. Turning to Slide 17. To continue to support the economic growth in our community and to provide clean, safe, reliable and affordable services, we have revised our 5-year capital expenditures projections. On this chart, you will see that we plan to spend approximately $236 million in 2018. Over the next 5 years, we anticipate spending approximately $1.3 billion, which includes the initial cost for a 200 ---+ I'm sorry, 320-megawatt generating resource scheduled for completion in 2023. These amounts are subject to revision as we're in the process of evaluating the bids submitted in response to the all-source request for proposal that we issued in June of 2017. The results of any necessary regulatory approvals could also change, accelerate or postpone the projects currently included in our estimates. At this time, we'd like to open up the call for questions. And Tracey, maybe you could help us with that.

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2015

CBOE

CBOE #<UNK>, that's a good question. There is not a timeframe. It could be next week. It could be next month. Actually, it is continuous. We always look at expenses. What we look at his volume, volume trends, product mix, those things that affect our revenue. We have been responsive before on the expense side, as you mentioned, and when we see lower volume, and that behavior will continue. The line items that were impacting are employee cost, professional fees, outside services, travel, and promotion. We look for items that could be scaled back or delayed. I'm looking for ---+ we are looking for a short-term solution to what I view as a short-term problem. And so no timeframe. If it's really horrible volume, it'll be sooner. If it's mediocre volume, probably push it out a little bit. It's really dynamic. But the commitment to watch expenses is there. Thank you. That completes our call this morning. We appreciate everyone's participation and your interest in CBOE. I am available all day for any follow-up questions you may have.

2015_CBOE