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maec-2020

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2018

PJC

PJC #Good morning, everyone. I'm here with Deb <UNK>, our President; and Tim <UNK>, our CFO. And we would like to thank you for joining the call to discuss Piper Jaffray's results for the first quarter. Revenue levels came in below our recent string of strong quarters. Our strength in equity capital raising was offset by other major factors that impacted revenue. These factors include the inherent variability of the advisory business, and historically challenging markets for our municipal-related businesses. Clearly, the strength of our franchise and the ongoing investments we are making to grow the business are not reflected in these results. Our long-term revenue level is trending in the right direction. First quarter LTM revenues of $841 million were 8% higher than the prior year LTM period. And even with the lighter advisory revenues this quarter, total investment banking exceeded $100 million of revenue for the seventh quarter in a row, as we now have several durable franchises across multiple industry sectors. I'd also like to reaffirm our commitment to delivering value for our shareholders. With the lower revenues we experienced in the quarter, we managed costs carefully to continue generating strong returns for our shareholders. I'll provide an overview of our equity capital markets and Advisory businesses, then hand the call over to Deb to discuss the rest of our business lines. Tim will finish with a review of the financials, including some perspectives on how the new revenue recognition rules impact our financial results. We will then open up the call for questions. Our ECM business was the bright spot for the firm this quarter. Revenue of $38 million represented our strongest quarter in almost 3 years. The business was led by robust capital raising in healthcare, concentrated in the biotech area. Overall, the healthcare team completed 14 book-run transactions during the quarter. Markets were constructive throughout most of the quarter despite periods of volatility. While volatility was a subject of much discussion in the market, it didn't reach levels where it disrupted capital raising. The Advisory business was down meaningfully, both sequentially and year-over-year. We attribute these results to the uneven nature of the business where the number or size of deals can fluctuate from quarter-to-quarter. By way of comparison, looking back over the past few years, our Advisory business has been up as much as 50% or down as much as 40% compared to the sequential quarter. We judge the performance of this business over a longer timeframe and track transaction activity levels to assess our market position. On an LTM basis, our Advisory revenues of $426 million are up significantly compared to a few years ago. We feel that market conditions for our M&A business remain constructive, our pipelines are strong, and we are confident that we will maintain or gain market share over a cycle. We continue to invest in the business to drive growth. A good example of this is our Diversified Industrials Group, which is primarily focused on Advisory. We have expanded the number of MDs in this grew by 50% over the past 2 years to now give us another solid investment banking platform in addition to our market-leading franchises in healthcare, energy and consumer. Complementing the significant growth of our investment banking platform, we also announced the formation of Piper Jaffray Finance during the quarter. This strategic initiative, backed by $1 billion in capital commitments, represents the addition of an important new debt product and a major expansion to our Advisory business. We believe this product will broaden and deepen relationships with our clients. Initial receptivity has been strong, and we are building momentum, as we gain early traction. We look forward to updating you on this important initiative, as we believe it will have a positive impact on our results in the back half of the year. Now I will turn the call over to Deb to discuss the rest of our businesses. Thanks, <UNK>. As <UNK> noted at the outset of the call, we faced some challenging markets this quarter. First, I will address how our relative exposure to the municipal markets impacted our public finance and fixed income businesses. Then I will discuss some of the challenges we experienced in our equity brokerage business. For public finance and fixed income, which are interrelated, activity in both areas was impacted by tax reform enacted at the end of 2017. One major outcome included a dramatic surge in new issuance at the end of 2017 which pulled forward activity that we would have expected to occur in the first half of 2018. For context, market issuance of $63 billion in December set a record for the largest single month of issuance ever. This dramatically reduced market activity to start the year with new issuance of only $63 billion for the entire first quarter. Activity was concentrated in the large cap issuers, like state general obligation bonds, while we focused on the middle market. We would expect capital raising levels to gradually come back as the year progresses, with a much stronger market in the second half of 2018. We would also expect to see our results for public finance to begin improving in Q2. The surge of new issuance also created an overhang for the investing market to absorb. This overhang hit during a period when demand for tax-exempt securities was subdued as the broader markets sorted out the impact of the new tax rates. This includes how these securities fit into various investment portfolios for institutional investors like banks or insurance companies. Typically, when new issuance is low, secondary activity picks up to meet investor demand. With investors sidelined, while they assessed their response to tax reform, secondary activity also remained low. The unfavorable market conditions were amplified by low interest rates and especially the flat yield curve. Given these market dynamics, we saw both light volume and few trading opportunities. Our focus in this market turned to minimizing risk and reducing capital, in contrast to last quarter where market conditions were more conducive to generating trading profit. Turning to our equity brokerage business, revenue of $18 million for the quarter was down about 10% year-over-year. We would have expected to attract more activity, given the bouts of volatility we experienced in the quarter. However, active asset managers, our client base, did not participate as much in the trading activity which was dominated by passive vehicles. We believe ETFs, which trade through the larger banks and electronic venues, largely drove the spikes in volume during the most volatile periods. Lower volumes for active managers may also be influenced by the introduction of MiFID 2, but we feel that it's still too early to make a definitive judgment on the impact of MiFID based on a single quarter. We continue taking steps to strengthen our position in the market and improve our client relationships. We are making progress as we continue to move up the vote ranks with our buy-side clients. Finishing up on Asset Management, the business was stable in the quarter. Net asset flows were flat for the period. The reduction in AUM was mostly due to market declines in the value of MLPs. Revenue was essentially flat sequentially, and down 20% year-over-year due to the significant outflows we experienced in 2017. Now I will turn the call over to Tim, to go through the financial results. Thanks, Deb. My comments will be based on our adjusted non-GAAP results. Following up on <UNK> and Deb's comments, we would expect revenues to improve from current levels, as we move through the year. Despite the lower revenues this quarter, our focus on managing costs contributed to generating a 13.7% adjusted return-on-equity over the last 12 months. This is down only slightly from our 2017 adjusted ROE of 14.2% and in excess of our cost of capital. Even if we eliminate the tax benefit related to the vesting of restricted stock awards, we would have produced an adjusted ROE of 12.7% on an LTM basis. In order to discuss our operating performance in the proper context, I would like to spend a minute on the new revenue recognition rules adopted this year. The major change, compared to prior periods, is that we now present deal-related expenses as a non-comp expense and no longer net them against revenue. This has the effect of increasing revenue and increasing non-comp expenses but has no impact on the absolute level of operating income. This new presentation of deal expenses also has a collateral effect on some of the ratios used to track our performance, notably, the comp ratio and operating margin. Both of these would decline compared to how we presented deal expenses in prior periods under the old rules. Over the past year, we generally provided target ranges for the comp ratio and absolute levels for non-comp expenses. Our revised guidance under the new reporting would be for the comp ratio to fall into the 62% to 63% range, and for non-comp expenses to fall into a range of $43 million to $45 million per quarter. With this as context, our comp ratio for Q1 was 62.4%, and our non-comp expenses came in a little over $42 million. So effectively, our comp ratio fell within our revised target range and non-comp expenses came in below the range. To provide some additional context for cost discipline, non-comp expenses were down about $1.4 million on an apples-to-apples comparison to the year-ago period. On last quarter's earnings call, we estimated our tax rate would be between 25% and 27% under the new Federal Tax Law. Tax expense this quarter was favorably impacted by 2 items: first, we recorded a $5 million tax benefit related to restricted stock vesting at prices greater than their grant date price. Excluding this benefit, our adjusted tax rate of 22% was below our estimated range. This resulted from tax-exempt interest income, representing a larger portion of our pretax earnings. We recognize that our tax rate can fluctuate quarter-to-quarter, but on an annual basis, we now expect our tax rate to fall in the 24% to 26% range. Finishing up on capital usage, as we've discussed, we reduced capital in our fixed income business in response to market conditions and the lack of opportunities to generate appropriate returns on that capital. We also continue to return capital to shareholders through dividends. In November of last year, we updated our dividend policy to be based on a payout ratio between 30% and 50% of our fiscal year adjusted net income. After taking into account the dividends paid during 2017, the board declared a special cash dividend of $1.62 per share related to 2017 adjusted earnings, which was paid out in Q1. Together with our regular quarterly dividend, we returned about $31 million to shareholders this quarter. In addition, today, we declared a quarterly dividend of $37.5 per share to be paid on June 15, to shareholders of record as of the close of business on May 25. Finally, we continue to explore Corporate Development opportunities that may emerge in choppy markets or otherwise. We can now open up the call for questions. First one for <UNK>. So, <UNK>, you talked about evaluating the business on a longer-term basis, given the volatility there. I completely understand that. If we apply that framework to the business and just think about it over the next couple of years, relative to the last 12 months, can you just give us a sense for your general expectations for the business, given the current environment in middle market M&A and the level of activity or engagement that you are seeing in early conversations. Yes, thanks, <UNK>. Obviously, our Advisory business was down year-over-year in the first quarter, and we've been on a pretty steep trajectory the last couple of years, if you just go back to where our Advisory business has been. We continue to think the markets are constructive. Frankly, our pipelines are good. So I think, if we look out a couple of years, our team is positioned in that Advisory business as well as it ever has been. So we are optimistic about continued growth longer-term for that segment. Okay. And maybe, moving on to the muni issuance side of things. I appreciate the color on the expected trajectory quarter-over-quarter. But if we back up and just think about it year-over-year, if you were to characterize how you describe maybe your expectations for year-over-year trends in that business, given your perspective on the middle market there and then your ongoing conversations with potential issuers, that would be very helpful. Yes, I'll take that one, <UNK>. So as we look at our business and what we are seeing, we see that activity picking up, and as we spoke to earlier in the call here, do expect that that will meaningfully improve throughout the year. But that said, the first quarter was obviously down pretty significantly, 31% overall issuance year-over-year and the middle market was down even more than that, over 40%. So when you take that context of the first quarter being down so much, we would expect the market could be down somewhere 20% to 25% on a full year basis, when you look year-over-year. Okay. Very helpful. And then, moving on to the fixed income trading side of things. You talked about ---+ I think, in the earnings release, you talked about the component of trading gains adding to some of the year-over-year metrics or quarter-over-quarter. So can you size that for us. Yes, if you look at the sequential decline from fourth quarter to first quarter of this year, the vast majority of that was related to a change in trading profits. So we had really put capital to work relative to our municipal inventory in the fourth quarter and saw that play out with pretty significant trading gains. And in the first quarter of this year, we saw just very modest trading losses, as we gave back some of those gains. So if you look at where we are in the first quarter, we have taken inventory down significantly, down 25% from where we were at the end of the year and that's something that we look to continue to decrease. And as we see the ---+ just the opportunities in this current market environment to generate an appropriate return on capital, we are ---+ have been and are committed to taking some of that inventory out. So what that does is ultimately, lessens the ability for us to drive exactly the same level of revenues we saw historically. So if we were to look out going forward this year, we would expect that the second quarter would improve. But overall, likely, a 10% to 15% lower revenue opportunity in the near term here, relative to maybe the average quarter that we saw ---+ average quarters we saw over the last couple years. That's very helpful. I appreciate the color. To your comment on reducing capital in that business. I guess, if we see this ---+ these market conditions, I guess, endure for a bit longer, and at some point, you just had a good amount of excess capital for some time. What's your inclination in terms of what to do with that capital at that point, if you were to find yourself in that situation. Sure. <UNK>, this is Tim, maybe I'll take that. I think, as we continue to think about excess capital, it is ---+ first, thinking about how we can deploy that to grow the business and look for opportunities to do it from that perspective. Given our dividend policy as well would give us the opportunity to look where we would fall within the range from a dividend perspective and provide some opportunity to potentially go to the higher end of that range. But I think our first priority is to look for ways to invest to grow the business. Yes. And, <UNK>, I would just add to that, we continue to see opportunities and ways to grow the investment banking platform and put capital to work, either with teams or Corporate Development opportunities. So I think, just given the strength of the position of the banking platform, we'd hope to find opportunities for some of that capital, relative to growing those platforms. Yes, <UNK>, I would say it's almost really, more the latter. I mean, it's definitely the current market environment that is really causing us to take some pretty significant steps, as we just don't see that opportunity. But strategically, it is something where we are looking to use less of our balance sheet on a day-to-day basis and continue to move the business more towards Advisory and Agency types of businesses. Yes. So I would say, <UNK>, like I said, our pipeline remains strong. I think, if you look at last year, our blend of, sort of, Advisory revenue was pretty balanced over the four quarters. I think this year, as deals close, the revenue is probably a little more back-end weighted like it has been in prior years. But I think, the conditions continue to be very strong. The teams are positioned very well. Like I said, I think the debt ---+ the new debt product is really adding to conversations. So we certainly see a pickup in the back half and feel very good about that. Yes, so, I think, relative to just MD headcount, and this is the first time we sort of put this in the release, we're obviously going to track that. Just to remind folks, I mean, going back, several years, 5, 6 years, we were ---+ we had MDs in the 30s. So we've experienced significant growth to be at currently 86. I would say with some of that heavy growth ---+ there were ---+ there are some gives and takes in certain segments. We had a handful of promotions, a few external hires, and then some natural evolution of us making some moves with a couple of MDs, really focused on productivity. So I think, we've got that great base of MDs. And the plan is to continue to look at adding a few external hires and a few promotions every year. And I think, in the first quarter, we had those few promotions and we added someone in industrials. Yes, obviously, we don't give too much guidance on that. But I would just say, especially because of the evolution of the investment banking platform the last couple of years and the products we've added and the strength of the franchise, and I think the awareness we have in the marketplace, it certainly feels to me like the pace of opportunities has grown. And we think with the position of strength with that investment banking platform that really should create opportunities. Yes, <UNK>, we've thought about that on an annual basis in sort of the $20 million to $25 million range. So this is from a quarterly perspective, maybe on the low end of that. But it's within that range. Yes, so I would say, I mean, relative to some of our middle market peers in some of the boutiques, we've been historically underweighted in Europe. And I do think that continues to be an opportunity. As we've really grow sort of the U.S. MD headcount in all of the products available I think that's an area for logical expansion. Especially, if it's focused around our power alleys, which would be middle market sort of PE sponsors, our industries of strength, healthcare, energy, consumer, technology, industrials. So we do think that's an opportunity, but right now, just relative to headcount and versus competition, we are underweighted in Europe. Yes, so the second quarter, I would say, is not that different from the first quarter. We're seeing maybe some modest pickup in a few areas but for the most part, fairly consistent with what we have seen in the first quarter. Yes. I think our expectations there is ---+ obviously we're down 10% for the quarter, that's pretty much our expectation for the year. I wanted to follow up on the discussion around the underwriting platform and just get a little bit more color on what type of business opportunity you see there over the longer term. And you mentioned, thinking that it might have a positive impact on business in the back half of the year. So what does that mean. What type of ---+ in what size are we talking about. Yes, <UNK>. So obviously, that's a product ---+ you're talking about our middle market debt product. Obviously, we've got partners that are helping back those commitments. We announced that in Q1. We were sort of up and running in early Q2. Obviously some of those deals have lead times. I would say relative to our expectations, the pace of transaction flow that we've sort of been able to bring to Piper Jaffray Finance is frankly much faster than we thought. I think deal sizes are a little larger than we expected. So I think we continue to be very encouraged by that opportunity. Obviously, it takes a while for deals in the pipeline. We do have some transactions where we're exclusive on the commitment and then it's just a matter of how long does it take for those deals to close. But I would say relative to where we felt at the end of the first quarter, we think the revenues for that for the back half are probably going to better than we had planned for. Okay. And then just last longer term, what's the size of the opportunity there. Yes, so I think, we look at that ---+ once it's up and fully running, and we're starting to close transactions, we think that can ultimately, be north of a $50 million revenue opportunity for us. Okay, thank you. And maybe for Deb, on the ECM side, I guess, you guys had talked about having a larger proportion of book run deals this quarter. So just wondering if you have the breakout around that versus the year ago quarter or a quarter ago. Yes, <UNK>, we'll get back to you with the details on the specific number versus last quarter. But it was a really strong ECM quarter for us. I think, as we said, one of the strongest in 3 years. A lot of ---+ when we have ECM quarters, really strong quarters, it's usually heavily related to, are there a lot of transactions in the middle market and our areas of strength. Q1 was an incredibly strong quarter for health care and particularly biotech. And when we see that in the marketplace, we gain market share, which is what happened in Q1. Okay. If there are no other questions, thanks everybody. Have a great day.

2018_PJC

2017

CVS

CVS #Yes, hey, Bob, on the cash flow certainly from a 2016 yield perspective, we did quite well at delivering over $8 billion of free cash. Some of that is timing as we built a payables position with CMS. We'll settle that up in 2017. So that's why you see the year-over-year decline from 2016 into 2017, is partially due to that. I will say that I'm very proud of the team as we continue to improve our working capital turns. Part of that is our focus on inventory in receivable and payables management. But quite honestly, part of that is the power of the PBM. As the PBM grows, the PBM is a very efficient working capital enterprise. And you were seeing that, the effect of that play out from a free cash flow perspective, both in 2016 and in 2017. Bob, I will flip your second question over to <UNK>. Yes, I think, Bob, we feel like we probably have been on, I'd call it, the leading edge of looking at our mix of math spend versus targeted spend. And probably more aggressive than the rest of the marketplace on pulling back on unprofitable promotion and really focused on driving profitable growth. So I do think that as we cycle through that, the good news is we continue to grow share and win in health and beauty which is the lion's share of our focus. And where we've pulled back and seen more of an impact on comps has been in mostly the edibles and general merchandise businesses where we have been less focused and where we really don't have as much of a point of differentiation. A lot of sales historically have been promotional. So that is a constant balance. It's a balancing act we're always looking for. But I wholeheartedly agree, in the long run we do see this as a growth business. We stated at Analyst Day we will continue in 2017 to pull back more on mass promotions. We continue to see profit potential there. But at the same time we are ramping up our targeted capabilities with Extra Care and those things will evolve over the next couple of years. The only thing I would point out as well, as you cycle into the first quarter and look for our performance, I did want you to know that we are cycling two things for Q1 in 2017 that will make the comparison more difficult. In 2016 we had Leap Day, which we won't have in 2017. We also have an Easter shift out of Q1 and into Q2. And if you add those two things together, just those things will adjust our growth in Q1 of this year by negative 185 basis points. That is front store only in terms of ---+ wanted to calibrate that for you as you look forward to Q1. Thanks, Bob. Yes, <UNK>, this is <UNK>. We do have price protection in 90% of our pharma contracts. So as manufacturers raise their prices over a pre-negotiated threshold, that value flows back to our clients in the form of a rebate. We will have certain guarantees in therapeutic classes. I talked about diabetes at Analyst Day so we are very targeted where we are using that. And I think at the end of the day our clients will evaluate us based on how their overall costs are being managed. I think our trend, once we wrap up the year, will be received very well by both our clients and stand up well with our peers. And <UNK>, it's <UNK>. We also have some programs, we've talked about these in the past on indication-based pricing. Which is a version of that to some degree, that's largely in specialty, where we are working with pharma in a different way, based more on outcomes with the patient. All those are passed through to CMS. Think about it as part of our cost of goods sold as we price that insurance product. And so that is how it is underwritten. <UNK>, it's <UNK>, I will start and then I think <UNK> will jump in. I think to a large degree those opportunities are more time-driven based on the current or existing contract and it's going to end up time back to the RFP process. And I would say that there continues to ---+ we've talked a lot over the last year about insourcing, outsourcing. The fact that we continue to believe we bring a lot of value to that equation and it makes a lot of sense. I think when the health plan mergers were being bantered about, there was some growing concern around that. It looks like those are now in the rear-view mirror. So we still continue to believe that we can bring value for smaller regional players. Listen, we have a great relationship with Aetna and we look forward to continuing to be a key partner with them and helping them to grow. <UNK>, the only other thing I would add is, I don't view the health plan market as the low hanging fruit is gone and it's going to be more challenging to win health plans moving forward. Quite frankly, the biggest barrier to health plans moving historically has been the level of effort and the disruption in those moves. And what we've been able to do with automation and processes around moving health plans has really demonstrated we can do it in a near seamless way. As an example, I was with two CEOs of health plans that we won this year within 10 days of welcome season, of 1/1 when they had just transitioned to us. They were just thankful and appreciative of the great job that we did in welcome season. So as I look forward, our capabilities and how we can help health plans manage their overall cost with all of our integrated assets and our ability to move them in a non-disruptive for way, I think becomes a compelling value position. It was put into place early in January. It runs through and should settle by the third quarter. I'll encourage you to take a look at our filings later today. You can see it in our K. Thanks, <UNK>. At the end of the day there's a little bit more than 40 million prescriptions that are cycling out of our business. Those began ---+ Tricare began on December 1 for the most part, maybe some bleed before that. And Prime begins on January 1. So thinking about it almost pretty equally spread throughout the year for the most part, <UNK>. So it's really 40 million scripts on our base of ---+ from a volume perspective. I haven't looked at it that way, <UNK>, so I don't have that number right on the top of my head. But it is something that is easily calculated if you take that 40 million scripts and pro rate them over each of the quarters, you can figure out where we would be. No, that is not the case, <UNK>. I think what you are seeing is a couple things. One, and I think probably the biggest, over the last couple years you've seen a pretty big expansion of state Medicaid programs. So that was fueling scripts into the marketplace. So you're probably seeing a little bit less than that as we cycle into 2017. <UNK>, a couple of things. I would say that everybody probably had their own forecast and expectation for price increases. What we specified today is based on our forecast for 2017, inflation's coming in a little lighter than we expected. It's really two-fold. Partly is that what we have seen pricing increases early in the year or late last year was a little less than what we thought. And also, we do anticipate that trend to continue throughout the year as we think about price increases later in the year as well. And <UNK>, if you look at the 40 million prescriptions on our base at retail, it's about 3.5% impact, if you will. 350 basis point from a script perspective. <UNK>, it's pretty early around that. And keep in mind that health plans typically start a little earlier, so quite frankly, some of the stuff that is starting to come in right now is really for January of 2019 because of their cycle. So as we've done in prior years, we will have more to say on this on the first-quarter call. We will have a better idea of certainly the RFP activity consistent with prior years. Thanks, <UNK>. Yes, <UNK>, I think we're all very pleased with not just standing up Red Oak, but the value that it's bringing to the supply chain. As we've talked previously, the incremental year-over-year benefit obviously has slowed because we've got it up and running. But I think the Red Oak team continues to look for ways in which we can make the supply chain more efficient and we are still looking and exploring those opportunities. So I think we're all very pleased with where we are today and where we're going with it. Yes, I would say, <UNK>, we haven't seen any material change and it's a competitive but rational market, as you just acknowledged. Okay, thanks. Nelson, we will take one more question, please. <UNK>, this is <UNK>. As far as anything new or disruptive for the selling season, it is pretty consistent with what we saw over the last couple years. So nothing really new to report. And, <UNK>, I think in our deck that we posted on the website should have our interest expense guidance for the year. And I will pull it up real quickly for you here. Do you see it. Over $1 billion. Okay. With that, I know it's been a long call but hopefully we provided a lot of information for you today, in light of some of the, I'll call them current events in the marketplace. And we appreciate everyone's time. And as always, <UNK> and Mike are available for any follow-ups you might have. Thanks, everyone.

2017_CVS

2017

OIS

OIS #Thank you, <UNK>. Good morning to all of you, and thank you for joining us today for our First Quarter 2017 Earnings Conference Call. We reported a net loss of $0.34 per share during the quarter after adjusting for $0.01 of severance and other downsizing charges. Our quarterly results reflect current market trends, including an accelerating recovery in U.S. land-based drilling and completions related activity, offset by reduced spending in certain international regions, coupled with continued underinvestment in deepwater. Our well site services segment benefited from the early stages of a recovery in U.S. land completions activity in select shale play regions, dampened somewhat by sequentially lower activity in the Gulf of Mexico along with lower international results. More than 70% of our completion services revenues were driven by U.S. land-based activities, with our land-driven completion services revenue increasing 21% sequentially. As we noted in our press release, we have revised our Offshore Products segment name to Offshore/Manufactured Products to better reflect the higher weighting of our shorter-cycle products, much of which is driven by land-based activity, to total segment revenues. We have also provided additional revenue detail for this segment. Revenues and EBITDA margins in this segment were within our guided range, with margins averaging an adjusted 18% for the quarter. We recorded an improved book-to-bill ratio of 1.1x this quarter, which resulted in a sequential improvement in backlog. Our backlog totaled $204 million, which stemmed the tide of 10 quarters of sequential backlog declines. At this time, <UNK> will take you through more details of our consolidated results and provide highlights of our financial position. I will follow with more details by segment and provide additional comments on our market outlook. Thanks, Cindy. During the first quarter, we generated revenues of $151 million, while reporting an adjusted net loss of $17.1 million or $0.34 per share, which excluded $0.01 per share after tax of severance and other downsizing charges. First quarter adjusted EBITDA of $5.4 million decreased 60% sequentially, and our adjusted EBITDA margin was 3.6%. During the first quarter, we invested $5.8 million in capital expenditures related to expansionary investments for our Offshore/Manufactured Products facilities, along with maintenance capital spent on our completion services equipment. We estimate that our 2017 capital expenditures will range between $35 million and $40 million depending on market activity. We generated $32 million of cash flow from operations, which allowed us to repay $20 million of debt and to fund the purchase of assets and intellectual property complementary to our crane manufacturing and service lines. As of March 31, our gross debt level totaled only $26 million, while our cash on hand exceeded our outstanding borrowings by $39 million. We ended the first quarter of 2017 with total liquidity of $224 million, which is comprised of $159 million available under our revolving credit facility plus cash on hand of $65 million. In terms of our second quarter 2017 consolidated guidance, we expect depreciation and amortization expense to total $27.7 million, net interest expense to total $1.1 million and corporate cost to total $12.9 million. Our 2017 consolidated effective tax rate is expected to average 28% to 29%. And at this time, I'd like to turn the call back over to Cindy, who will take you through the details of our segments. Thank you, <UNK>. I'll start with well site services. In our well site services segment, we generated another quarter of sequential improvement as revenues increased 10% quarter-over-quarter to total $60 million, while adjusted segment EBITDA remained positive totaling $1 million after adjusting for severance and facility closure charges. These sequential improvements in revenue were driven by an increase in the number of completion services jobs performed along with improved utilization of our land drilling rigs. While our completion services business benefited from the early stages of a U.S. land-based recovery as evidenced by 21% sequential increase in U.S. land-based revenue, our first quarter total segment results were impacted by higher personnel costs, customer delays in the U.S. Gulf of Mexico and lower international results, which moderated our sequential growth. Our U.S. land-related completion services results improved throughout the first quarter. In terms of our well site services guidance for the second quarter of 2017, we see continued growth and estimate that revenues for this segment will improve sequentially and range between $65 million and $75 million, with segment EBITDA margins in the mid- to high single digits. We continue to believe our incremental margins for our completion services should average 40% to 45% as we progress through 2017 and realize the benefits of growing completions activity in the U.S. driven by the positive impact from the doubling of the U.S. land rig count since the trough reached in May of last year. In our offshore and manufactured products segment, we generated revenues of $91 million and adjusted segment EBITDA of $16 million during the first quarter of 2017 after adjusting for severance and other downsizing charges. Revenues, adjusted segment EBITDA and EBITDA margin percentage of 18% came within our guided ranges. Major project revenues declined 48%, while our short-cycle product sales increased 31%. Our shorter-cycle product revenues, whose demand is dominated by U.S. land-based activity, comprised 36% of the segment's revenue in the first quarter. Orders booked for the quarter totaled $97 million, resulting in a book-to-bill ratio of 1.1x. Backlog totaled $204 million at March 31. There were no individual major backlog additions above $10 million received during the quarter. This was the first sequential improvement in backlog since the second quarter of 2014, which is encouraging, and hopefully signals that we are near or have passed a trough in segment backlog. As we have indicated for several quarters, with lower levels of backlog, we expect our project-driven revenues and EBITDA to trough midyear with incremental backlog projected to be awarded as we progress throughout 2017. We should continue to see improvement in demand for our shorter-cycle products due to the recovery unfolding in U.S. land drilling and completions activity, which will offset some of the gaps in timing from our major project work. Given these variables, we estimate that our second quarter revenues in this segment will increase sequentially and range between $100 million and $110 million, while EBITDA margins are expected to remain in the 17% to 18% range. In conclusion, improvements in the U.S. onshore drilling and completions-related activity are translating into positive results for both of our reporting segments. We believe the outlook for our well site services segment is trending favorably with expanded U.S. land activity. In addition, for the first time in almost 3 years, we experienced a sequential improvement in our offshore and manufactured products segment backlog and are focused on rebuilding that backlog as we progress through the remainder of 2017. Demand for our shorter-cycle products remained strong and is improving at a significant pace, which should serve to help offset near-term declines in major project work resulting from lower levels of major project backlog. That does complete our prepared comments. Katie, would you open up the call for questions and answers at this time. As I kind of indicated in my prepared comments, we, every month in the first quarter, saw gradual improvements in terms of revenue generation. We have ---+ we obviously have product line details that we do watch, and we actually saw improvement across most of our product lines. Again, a lot of that is weighted in areas you would think, i. e. the Permian, kind of the SCOOP/STACK region, and we are very broad-based. We are not only located in the Permian, so not all areas increased and yet, we experienced proportionately, I think, appropriate increases in the major markets that saw activity increases. I do feel like we're beginning to see a migration back to some of our higher end products, particularly our isolation tools, but I would say that was probably realized a bit ---+ little bit later in the quarter rather than early. As I have explained before, this is largely driven today by land-based activity. So they were not good, really, in '15 and '16 when the rig count was down 80%. However, they are accretive today given improved activity levels. Let me see if I can ---+ <UNK> looks like he's got it at this time. Sequentially, project-driven revenues were down 48% and short cycle were up 31%, sequentially. And then the relative contribution of each you can figure out, now that we've given the incremental breakout. Yes, I can. First of all, historically, Gulf of Mexico and international hasn't been as significant just because we've had greater land-based activities. You get to kind of these lower levels and all of a sudden $2 million is quite a lot of money. And particularly, we've got limited international penetration, I'll call it, mostly driven by Middle East activity and Argentina. Argentina was down, it feels like, almost the whole quarter because of strikes in the region. And unfortunately, those are harsh decrementals, because all it means is, I got my people, I got my base and I had no revenue. I know it might be an exaggeration, but you get my point. So that was a major event, but it's all ---+ also transitory given that a lot of those things have been addressed at this point in time. Middle East for us was down a little bit as well. I don't think that's inconsistent with what you're hearing from the rest of the market. And Gulf of Mexico, we believe, is transitory as well. This is some just operational ---+ customer operational delays outside of our control, both on completions work as well as intervention work. It's hard because a lot of this still remains call-out work, we bid it, we generally think we have the work. But if the customer has delays in getting kicked off, then obviously, it impacts us. But again, a lot of this is what I almost call just a victim of small numbers here where one-off events in Argentina, the Gulf of Mexico can impact low levels of EBITDA more significantly than you would think. But there is nothing here that suggests these are permanent-type trends. But to reiterate, U.S. land was up 21% sequentially in completion services. Again, I think, we have to comment more specific to us. When we're looking at kind of sequential performance in the Middle East, we're kind of flat from Q1, i. e. Argentina should recover back because those were unique issues. And then Gulf of Mexico is kind of the same thing. Those can be spotty. But we're not looking for wholesale improvements. We'd just kind of like to see a steady, either flat to steady improvement from international and Gulf of Mexico. As it relates to pricing, you're right. I also don't think that, that is ---+ we'll, more likely to, obviously, see price improvements on land-based activity before international and Gulf of Mexico, even if it is somewhat flat. I'll say to be determined. Right now, we are doing 2 things. We are looking at small tuck-ins and offshore products. We closed a small one in Q1. We are looking at U.S. land-driven M&A-type activity. There is a couple in the hopper that we are looking at now. Valuation was very concerning 45 to 60 days ago. Clearly, in fact, I asked <UNK> to kind of model some of the recent trends in IPO performance for the ones that have already had some history as well as recent trends as you point out in terms of value expectations. So I think that is clearly more favorable. What will determine our course of action is quality of operations, any intellectual property that the company might have, valuations and after today how that competes with just buying back our own stock. Well, ours is more specific to infrastructure development, not particularly tied to the rig count. I mean, we have some offshore consumables and our large OD conductor casing connector that are more well driven, but the large majority that we are looking at in terms of rebuilding backlog are infrastructure related. It won't surprise you that these are projects that are headline projects right now, the [Leiser] project, Mad Dog 2, [Korando, Zevazebad], some of the Petrobras FPSO opportunities, et cetera, very much feel that ---+ infrastructure driven. We have got, obviously, good knowledge of bidding and quoting. The key there is one of timing. In the past earnings report, I provided to you the thought that we could see some of these bookings come likely in Q2 and/or Q3. We did not expect to receive them in Q1, and we didn't. And again, on a positive note, despite that, we still had a book-to-bill north of 1. Well, again, if you're talking, about 2 ---+ 3 comments come to mind. Number one, yes, we just fell below $50 a barrel. That may be your comment. I don't think that will change the decision on some of these major deepwater projects to move forward or not. If it had any near-term impact, it would likely be more on land, but I certainly don't expect that you'll see any trend changes this quarter. I think we are very close. I don't know if it's Q1 or what would prove to be Q4 on that or Q2. The 2 variables there are I'm increasing my revenue guidance such that even if I had flat bookings sequentially, it wouldn't quite be 1, it'd be very close to 1. So we're kind of on a razor's edge here on trough bookings. But if we're not there, we are very close to there. And the key will be are we going to get a major project award in Q2, or are they going to be deferred into Q3. But either way I don't really think that changes the outlook for this segment. It can be. Definitely, particularly, our large OD conductor casing connectors. But again, most of the backlog churn was smaller projects, repair and maintenance and short cycle, as we've talked about. So I don't know whether to attribute that to seasonality or not, to be honest with you. In the absence of any major project awards in the quarter, a lot of this almost becomes kind of ongoing ---+ hate to say recurring order activity because who knows what's recurring anymore. But we feel pretty good about our overall position, and it seems very consistent with the outlook that we provided the market 6 months to 12 months ago. Well, I'm not as worried about the competitive dynamics. I think if we are to see any major impact from ---+ you mentioned specifically Schlumberger-Cameron. It probably would be more in international regions. Again, that's a lot of their focus and weighting at this point in time. That's not as significant for us. So I don't view that as a major threat. When we talk about the mom-and-pops, they've ---+ quite frankly, a lot of those have very good regional relationships. They are not as geographically broad-based as we are, we believe. Still today, we have the [highest-end] technology and better quality programs and people, but we are a little more expensive. And so when you're in a very weak market cycle that we saw in '15 and '16, price somewhat rules the day. And if these regional players are raising prices, as we know they are, people are experiencing service quality issues. We normally have a reversion back where they're willing to pay a little bit more for higher quality products and services. So again, we feel like our market position is very sound. We do have a lot of ground to recover just in terms of activity, but all the trends right now on land-based activity is moving in a positive direction. That's kind of the ---+ I don't know if that's too genetic for your answer, I hope not. Okay. Katie, thank you so much. And I appreciate all of you who joined the call. I know this is a hectic season and a particularly hectic day based on all the releases that came in last night. We will standby, be ready for follow-up questions. Of course, we're about to move into OTC week and so I'm sure we'll see a lot of you there and welcome the interaction. So thanks so much, and hope to see you next week.

2017_OIS

2017

PLD

PLD #Good morning, and thank you for joining our second quarter earnings call I’ll cover the highlights for the quarter, provide updated 2017 guidance and then turn the call over to <UNK> We had another strong start with core FFO of $0.84 per share, which included net-promote income of $0.18. Net promote income came in above our guidance due to higher real estate values in our USLF portfolio, as well as $4 million promote from our FIBRA that was not in our forecast Core FFO, excluding promotes of $0.66 per share, up $0.03 sequentially, driven by same-store NOI growth We leased almost 47 million square feet during the quarter and have just 4% of the portfolio rolling in the second half of the year as our customers are securing space well before their leases expire As we’ve discussed on previous calls, our strategy has been to push rents to maximize overall lease economics And as a result, occupancy could decline modestly Our operating results reflect this strategy Global occupancy at the end of the quarter was 96.2%, a sequential decrease of 40 basis points Market rent growth exceeded our expectations, which help drive our share of net effective rent change on rollover to a record 24% was 29%, the sixth consecutive quarter above 20% Our share of net effective same-store NOI growth was 4.6%, primarily driven by releasing spreads led the way with growth of 5.2% Moving to capital deployment for the quarter Development starts were the highest quarterly level in the last several years at approximately $900 million Margins on both starts and stabilizations continue to be very good at over 20% Dispositions and contributions are on track as buyer interest remains strong and cap rates continue to compress Recall, we’ve been focused on streamlining our ventures into fewer more profitable vehicles I’d like to discuss two transactions that further this initiative and highlight our unique ability to source capital through this business First, as previously announced, we entered into an agreement to acquire the remaining partner’s interest in our Brazil platform for approximately $360 million; second, after quarter end, we contributed $2.8 billion in U.S assets from our former NAIF fund to USLF at stabilized cap rate of 5.4% This valuation was structured to be consistent with the buyout of the remaining NAIF investor in the first quarter of this year Investor interest was very strong and USLF raised over $950 million from 14 new and existing investors to fund this transaction We received cash proceeds of $720 million and additional units valued at $1.2 billion, which increased our interest in USLF from 14% to 27% Our current ownership leaves us with another $1.3 billion of built-in liquidity as we redeem our position down over time to our long term target of 15% Turning to capital markets We continue to access debt globally at very attractive rates We completed $2.9 billion of financing activity with the vast majority denominated in sterling and yen As a result of this activity, we extended our term, lowered our rate and increased our U.S dollar net equity Leverage, following the USLF transaction, was approximately 25% on market capitalization basis and debt to adjusted EBITDA with gains was less than 4.5 times Our balance sheet has never been stronger with liquidity of $3.7 billion and significant built-in capital from future co-investment rebalancing As a result, we're extremely well positioned to self-fund our future deployment for the foreseeable future Moving to guidance for 2017 which I will provide on an our share basis We're increasing the midpoint and nearing the range of our year-end occupancy forecast to be between 96.5% and 97% We now expect same-store NOI growth for the year to be approximately 5% Cash same-store NOI growth should be over 6% for the year as a lag from longer lease terms and steeper rent bumps begins to close Given the increase in market rents, our in-place leases are now under rented by 13% globally and 17% in the U.S This further builds our organic earnings potential and will drive strong NOI growth for the next several years Given continued strong demand from customers, we're increasing our starts guidance by $200 million to range between $1.8 billion and $2.1 billion, built-to-suits will comprise about 45% We're also increasing our disposition and contribution guidance by $250 million in total Full year deployment guidance excludes the contributions to USLF and the planned acquisition of our partner’s interest in Brazil Our strategic capital net promote income will be $0.16 for the full year as we have no other promotes scheduled for the remainder of 2017. Again, I want to highlight there'll still be a difference in the timing of promote revenue and its related expenses We will recognize $0.02 of additional promote expenses over the balance of this year Putting this all together, we're increasing our 2017 core FFO by $0.05 at the midpoint and nearing the range between $2.78 and $2.82 per share The main drivers of our guidance increase includes $0.03 from higher promotes and $0.02 from core operations Our revised guidance, excluding promotes, represents year-over-year increase of 9% at the midpoint To wrap up, we had a great quarter and are entering the second half of the year with strong momentum And with that, I'll turn the call over to <UNK> On the cap rates, we’re seeing cap rate, I’d say, modestly decline in the U.S probably 10 basis much lower Q1 to Q2; probably expect similar levels in Europe but given some transactions that we expect to close; in the third quarter, we would certainly expect Europe more expansion and contraction start in Europe in the second half of the year; in Japan, given some pending transactions as well, we would expect top rates to continue to go lower; and with our other pending transactions that are rumored to be potentially closing in third quarter; in Asia, I think it would also be another strong indication of compressing values for assets, but I’d also say how asset management business get valued Jamie, one thing I just would add What's really driving the compression, particularly in the U.S , is rent growth And I think given the trajectory of rent growth, higher rents, higher rents are causing valuations to go up and cap rates the cost of that for higher growth expectation So if you're talking about mark-to-market for rents, basically where we are right now looking at our re-leasing spreads, if rent is growing market rents are growing more than 4% or 5% that spread will expand And that's what we saw in the first half of the year and that's opposite of what we expect So this year for sure, it'll stay where it's at and maybe expand a little bit But that's a bit of a threshold that I want to keep 4% or 5% in excess of that you're going to see the mark-to-market No, we do not expect any special dividends we can shelter that income The big increase that you're seeing in our EPS guidance is the expected gain, book gain on the USLF transaction, that’s about $0.87. But we can defer that gain, because the vast majority of that gain, we sold down roughly a third part of the $2.8 billion we put in there So the other is just basis switching out from direct ownership to indirect ownership So that gets sheltered <UNK> to your question, so from a yield perspective think about cap rates for operating assets, stabilized operating assets, cap rates for the nine in front of it We also acquired land as part of this So I think the yield on combined basis for the four investments we will make is going to have a seven in front of it And when you think about total NOI from Brazil going forward after we close on this last transaction for Brazil, we’ll be around 2% of our NOI our share From a same store perspective, as <UNK> said, we don't have a lot to place to same-store The really only variable on same-store in the second half is really going to be on the margin with occupancy, that’s what’s still little role each time the vast majority of what's going to get ---+ what's going to go in service So that's happening I think when you think about the same-store in the second half for our midpoint is going to be 4.8% And when you think about that number that has all rent change The first half of this year and prior years, we've seen a boost in our same-store from occupancy gains Occupancies are now leveling off So it's all about rent change So when you think about ’18 rents, same-store should accelerate, because as <UNK> said, we have built up in-place to market is ---+ that gap is wider, which means our rent change on role in '18 is going to be higher than our rent change in role in '17, that's gapping out So that has to mean our same-store NOI will be higher in '18 than we're going to see in the back half of 2017. So that's really what's going on And so don’t be surprised if you see leasing volume be slower in the second half of the year, because we’re going really from now on, we’re working on 2018 lease renewals

2017_PLD

2015

LM

LM #Good morning, <UNK>. I think that's right, <UNK>. And there's also ---+ they're also just looking to manage their fund line-up appropriately. There is no concern that I have heard, and I wouldn't even imagine about style drift for Royce. Look, as I mentioned, they are clearly under some pressure, and that's going to continue for some time. But they have a clearly a solid reputation. They perform very well over the long term. Their process is consistent. Their philosophy and their process is currently out of favor. But there is really no, I think, concern or worry at all about them changing or chasing performance. They have a well-earned reputation for selecting high-quality companies. That's just a style that's currently out of favor. But there is not going to be any drift there. Well, it is. It's very impactful. So there is sort of generally regarded 15 top consultants. Of those 15, we had 2 already that were a buy on Western. We had one that was a hold. Of the remaining, what, 12 from there, 5 over the course of the year, upgraded them. And the remaining seven changed their outlook from sort of hold to positive. So those are all important indicators of how the consultant community, and let's face it, the intuitional business is very reliant upon the consultant community. Look, I think that reflects the fact that clearly they have improved risk management, clearly their performance warrants it. And so I think it's a very good indicator for Western going forward. I think we have all acknowledged they were a little bit in the penalty box for a while. Clearly they have been emerged from that, and I think are gaining the support of more and more consultants. That portends well for them long term in the institutional business. Great. Thank you, operator. Appreciate it. Look, this morning I would like to leave you all with what I consider to be the five key takeaways that we believe are critical to understanding Legg Mason and our long-term opportunities. First, with nearly $17 billion in long-term flows and a 3% organic growth rate, Legg Mason is definitely back in growth mode. And we look forward to building upon that momentum as we bring QS Investors and Martin Currie more fully online, while we continue to leverage our legacy affiliate growth engines. Secondly, the diversification in our model is a key competitive advantage, as our varied affiliates balance one another to the benefit of clients and shareholders over different market cycles. Third, Legg Mason's global distribution platform represents a significant strategic asset for both our affiliates and our shareholders. This year was a record year for distribution in gross and net sales, and with the expectation of Royce, net positive flows across all regions and for all affiliates within LMGD. Fourth, we will remain very focused on improving absolute earnings and margin over time by maintaining a rigorous cost discipline, accelerating our organic growth, working to improve our asset mix, and by implementing new management equity plans at our affiliates. Each of these actions can be drivers of improved long-term profitability and potential margin expansion. And, finally, we will continue to deploy the significant amount of cash that we generate between investments that expand our investment capabilities and distribution and returning capital to shareholders through dividends and share repurchases. So thank you for your time today. I'd like to congratulate my colleagues at Legg Mason and our affiliates for a good quarter and a strong year, and thank you our shareholders for your continued trust and confidence. We look forward to rewarding your investment at Legg Mason again over the next year. And with that, I wish you all a wonderful day and weekend.

2015_LM

2016

PNC

PNC #Well, yes, it's a little bit of a mix. The majority of that is in our asset-based group, which is secured lending. And many of those instances, although they weren't per se energy companies, they served energy companies; so by extension it was energy-related. No, I don't think so. I think we believe that, as I said in my opening remarks, we're appropriately reserved. And we take all that into consideration. Sure. Specifically what we talked about is a longer-term project to basically streamline the fulfillment of many of our consumer lending products, make it easier for our customers, make it more digital. And we opened ourselves up to our own criticism on the speed at which we do things today and the business we lose because of it. In a prior question, somebody said: Have we seen a turn in the corner and will we grow consumer from here. And I don't know that that's the case. But we have seen and continue to see growth in credit card and in auto. And importantly, inside of auto we've seen continued accelerated growth in direct auto through our Check Ready product which I guess ---+ I think it's in the first quarter of next year we'll actually have on mobile. So I think this will accelerate through time, but it's not something that's going to make a dramatic difference in the first half of 2017. It's just there and something we can execute on over the next couple years that we think long term will have a pretty material difference in our ability to change the growth trajectory of consumer lending. And our overall mix of total loans. Yes, yes. Well, again, we're not going to get into 2017 guidance. As I mentioned, we're in the middle of our budgeting process. We have said before and we say again that our objective is positive operating leverage over a multiyear time period. And thought about in terms of our strategic plan, we see a path to positive operating leverage outside of rates. Independent of rates, and that was the theme that we went through in conference, was: How can we do it even without the help of rates. And that comes on the back of some of these initiatives inside of consumer lending and the continued growth we've seen in fees, which we think we can keep doing. And to your point, in terms of our year-to-date progress, we're not that far off. Not really. Our real estate business has been fairly consistent for a number of years, where we work with Class A developers and markets and products, and that continues. Now, we have seen a slowdown in the origination of new projects and a pickup of balances related to permanent lending. So think of the product that historically might have gone into CMBS; it is now being structured more like what we would call life insurance product: much lower leverage, better loan-to-value. And you'll see that in our permanent lending line. So we're not seeing stress. In fact, our portfolio actually on a credit metric basis continues to improve. We would tell you that we monitor it pretty closely. We're clearly seeing some signs of weakness in multifamily in a couple of markets. We see some signs of weakness down in Houston on the back of oil and gas. But against our book we feel pretty good about it. There was an earlier question in terms of the effect of some of the changes. We think we're appropriately reserved. In terms of our provision guidance, it's ---+ all of what we expect to happen in oil and gas is part of that. And we've seen that for some time now. Yes. Very good. Well thanks, everybody, for joining; and we'll see you in the fourth quarter. Thank you.

2016_PNC

2016

LITE

LITE #Sure. Yes, <UNK>, this is <UNK>. So we don't really sell a lot to the supercomputer market, so we are not impacted by that situation. Yes, I'll take the revenue one and let <UNK> take the OpEx one. I'd say that on the revenue front, I would say that you could kind of look at last quarter as a 13.5 real quarter ---+ 13.5 week real quarter, in that we probably lost half of the production of one week. Because all of our production is not in China, some of it is in Thailand. So I would say that, given that we were hand-to-mouth throughout the quarter, we didn't have the ability to build up inventory and ship it during that timeframe. So we lost probably half a week. So you can say it's a 3% increase on a normal quarter if you want to try to normalize what we are looking forward to in the June quarter. Yes, I'd say that we are really not impacted from a supply standpoint from Golden Week, as we don't have any production in Japan. From a demand standpoint, the Japanese customers probably slow down a little bit, but we've got plenty of demand to make up for that. So I'd say that we're really not impacted by Golden Week this quarter. Hey, <UNK>. On your question on ---+ Did that answer your question, <UNK>. Okay. Okay. And then to follow up on your question on OpEx, so the OpEx for the extra week was almost $2 million for the quarter. Going into Q4, that will drop off. And then we have some other puts and takes. Great. Thank you, operator. You know, the Lumentum team is excited to support our customers, grow our business, and create value for our shareholders. I want to thank our employees for all their hard work that has put us in this excellent position in the market. We see strong market demand from our customers. Our new products, including TrueFlex ROADMs and 100G Datacom transceivers are winning in the market, and position us well as we look forward. I believe we are in the early stages of a worldwide bandwidth expansion, making the future bright at Lumentum. We will be discussing our business at several Investor Relations events in the coming weeks. These events are listed on our website in the Investor Relations section. This concludes our call for today. We would like to thank everyone for attending, and we look forward to talking to you again in another three months.

2016_LITE

2016

ENR

ENR #Good morning. Yes, <UNK>, I think that's an accurate statement. Our Outlook continues to be that the category will be down low single digits over time, and let me give you a little background on why. We don't really anticipate given the research that we do that there'll be any device or demographic trends that would make us think any differently about that projection. Although some mix shifts have occurred, as an example within the price segment, declining faster than our Outlook, we're still pretty much holding true to that. Now, I think what you'll find is we're going to stay true to the core strategies we put in place to continue to bring value to the category given that current projection. And we believe we can do that through both innovation and really driving trade up within the category to higher priced alternatives, given that consumers have a need and a desire for those types of products. So we're going to continue down that path. That is working well for us. Yes. That's a great question. I prefer candidly not to speculate on what that would be. What I can tell you is almost two-thirds of all the category sales were in the premium and performance segment and given what we're seeing over the latest 52 weeks in terms of a shift from the price segment to premium and performance, you can probably do some rough math on your own to come up with a pretty good estimate, but we are confident that the plans we have in place will be able to continue to drive those trends. And I just want to reiterate, by maintaining our long-term Outlook of low single digit decline in the category, it really speaks to our emphasis and continued focus on cost reduction and driving productivity improvements. That hasn't changed. In order for us to win and grow that low single-digit EBITDA that we've communicated previously, we have to continue to find ways to take costs out of the business and continue to operate more effectively, and so that focus has not changed one bit. Yes. As we executed our 2013 restructuring project internally we called project transformers, we made several significant changes to our manufacturing footprint. We reduced our number of manufacturing facilities from 14 down to 7. As a result, we made a conscious decision to not target days in inventory. We knew that as our global supply chain adjusted there would be an uptick in days in inventory, and we saw that. However, days in inventory since we're post the restructuring of our manufacturing footprint, our supply chain has stabilized and as a result, improving days in inventory is definitely a target and a focus for us. We went from 113 days of inventory as we ended the year at the September quarter and we improved it 6 days ending the 12/31 quarter to 107 days of inventory. We will continue to make progress on that. We have not discussed externally a specific target around days in inventory, but it is a key driver that is going to allow us to continue to grow free cash flow on a year-over-year basis. It really depends. And we haven't speculated as to how high we would be willing to go. It would depend upon the deal, the amount of synergies we can get, the cash flow that would generate from the business, so it's all deal dependent. Thank you, <UNK>. Yes. So again, I want to thank everyone for joining us on the call today. Obviously, a very positive quarter. As <UNK> alluded to in our prepared remarks and in the Q&A, we do have some tough comps in Q2. And we feel we've got very strong plans to continue to drive continued value in the category. And I just want to reiterate, because we've been very consistent from Investor Day, we will squarely remain focused on our three strategic priorities of leading with innovation, driving productivity gains and operating with excellence. We believe that in doing so, it positions us well to win in the category regardless of the scenario we face. So we're getting traction behind that. We will continue to remain focused on that. And again we appreciate everyone's time today in joining us on the call. Thank you. Operator.

2016_ENR

2016

ETN

ETN #Our next question from <UNK> <UNK> with Oppenheimer. It's relatively flat. It might be down just a tiny, tiny amount in Q4 possibly, but the reality is that it won't even be a material change and so as we see the balance of the year laying out, just Q2, Q3,Q4 are essentially flat revenue. And I appreciate the concern that a number of you are signalling around the second half volume basis, and what we've said all along is that in the event that the volume [cases are any] different than what we anticipate, that we'll be more aggressive around the things that we will do around managing costs and so as you can imagine, we have a contingency plan that we're working through as a Leadership Team around what happens, if, in fact, we end up with a volume issue in the second half of the year (technical difficulties). No, I'd say Lighting, I mean every year, it's a business given that the input costs and the price of LEDs has continued to fall. Every year it's a business that basically sheds a bit of price, but also the input costs and the costs of that LED technology continues to drop, so I'd say in that business overall, ordinary [force] is that it's a competitive business and the technology costs continue to decline and our margins in that business, quite frankly, are performing just fine. And we had another quarter of strong margins in Q2. We think that business is fine and very much consistent with the guidance that we've laid out for products during the course of the year. Thank you all for joining us today. We're at the top of the hour to [wrapping] and would like to wrap up our call. As always, we'll be available to take questions or follow-up items after the call, and thank you very much for joining us today.

2016_ETN

2016

ETR

ETR #Morning, <UNK>. The big driver is we've seen an uplift in LHV pricing so approximately, a couple dollars of KW a month, so that's probably about a $48 million impact on the positive side, so that offset some of the commodity energy price decrease we've seen. I think that's really the main driver. Some of the cost associated with the metering is in there, yes. Correct. This is <UNK> and I will just say, that's going to be a big topic at the Analyst Day here in a few weeks. We will try to give you some framework around that. But we are still getting our hands around our performance improvement plan. And of course, as you know, Chris, has just been here for a couple of weeks so he is getting his hands around it as well. But I think the important thing for us is that at the same time, we're doing that, we are also looking for opportunities to mitigate that in the business and some of them you've already seen show up. Things like insurance rebates or lower interest cost because the interest-rate environment. We have some O&M opportunities that we've found, that we've ---+ in the first quarter, like the fossil, outage management and stuff like that. So there are opportunities that we have identified to begin to offset that. Obviously, we're not done looking for those but at this point, we think we can manage those costs within a framework of the expectations that we have for guidance and outlooks right now. They are currently the same. We just got the report, the initial report out, I guess, on ANO and we're looking, as <UNK> mentioned, for the letter from the NRC. Once we get that, we will have a better idea if there's any incremental risks associated with ANO. And Pilgrim's inspection, we expect to be sometime second half of this year. We will have better information then. So as of now, those costs are staying pat. Morning, <UNK>. (multiple speakers) About the Encore and the REIT assessments. <UNK>, at this point, we might have to get back with you and follow-up, but I don't ---+ I'm not sure it's been ---+ it's moved forward enough for us to get a, I think a perspective as to how it may impact us. I mean, at this ---+ I don't ---+ we don't see that having any major impact on us at this point. But again, we will follow-up with you if, in fact, that is different. But again, it is fairly generic. Until we get more specificity relative to that, it's ---+ we don't necessarily see it having an impact on us. For the first thing, I would say, <UNK>, is that obviously, we ---+ from an economic standpoint, the closure of FitzPatrick is the right thing to do and we would have loved for there have been a way around that, if economics could have been different. We've, for example, we have been promoting a clean energy standard in New York that would include nuclear plants for several years. And the reason, obviously, that we would do that is one, it's the right thing to do from a public policy standpoint. It's certainly the right thing to do from an environmental standpoint, from an energy price standpoint, in support of the market's reliability, the whole nine yards. we have been promoting it for a number of years because obviously these things must take their course in the regulatory arena, and then in the legislative ---+ if it's legislative, it's regulatory or the courts. And obviously, you can always expect there to be intervention into anything that comes up and these things just take a long time to develop. And so right now, there is no ---+ nothing in place. We don't know if there was something in place, what it would be. We don't know, if we knew how it was structured, what it would provide. We don't know if ---+ what it provided would be enough to support the economics of a plant, and we don't know that the timing of it could ever be done before we had to make the decision to go ahead and re-fuel, which then we're committing to several hundred million dollars of losses. So we're out of time. It's not that we're against any of those proposals in terms of on their face, other than I would say that obviously, we believe if there's a clean energy standard in New York that includes nuclear, it should include all of the nuclear plants. But ---+ and we commend them for their efforts because that's the right thing to do and we wouldn't have been proposing it for the last couple of years, but, I mean, you hit the nail on the head on this point of no return aspect. It's not in place. We don't know what it is. We don't know what it will provide. We don't know what the economics would be and for it to run its course, again, we get to ---+ we're, unfortunately, we ---+ likely out of time. So anything that says we are opposed to a clean energy standard and the like, we're not. We have been full of those all along. Again, we do think they should incorporate all plants in the state. We would ---+ before it all plants in the country, actually, to be consistent. But right now, there is nothing in place that we could look at that would provide us the opportunity to change our decisions. Thank you. Great. Thank you, and thanks to all for participating this morning. Before we close, we remind you to refer to our release and website for Safe Harbor and Regulation G compliance statements. Our quarterly report on Form 10-Q is due to the SEC by May 10, and provides more details and disclosures about our financial statements. Please note that events that occur prior to the date of our 10-Q filing that provide additional evidence of conditions that existed as of the date of the balance sheet will be reflected in our financial statements in accordance with Generally Accepted Accounting Principles. The call was recorded and can be accessed on our website, or by dialing 855-859-2056, confirmation ID: 854-13992. The telephone replay will be available until May 3 and this concludes our call. Thank you.

2016_ETR

2016

XOXO

XOXO #<UNK>, let me ---+ this is <UNK>. I'll start with the ---+ just to give you a little bit broader context around the systems implementation we've been through here. We had homegrown products that were ---+ they were old, they were brittle, and they created risk to our core business, and wouldn't scale to the growth that we want for our Company. So, we've spent ---+ we spent a year planning and then implementing a series of systems that help us manage order entry, revenue calculation, commission payments, CRM for the sales force, among other pieces. It's a ---+ it's the complexity of an organ transplant, and I think the team did a really nice job delivering it and rolling it out to the field. It has two impacts, though. One is, with any significant technology implementation like this, you're going to have some technology issues. You're going to have some bugs. And those impact productivity and can impact revenue for a limited period of time. The second is that, for your team that is face to face with the customer all day, it's a significant change in the systems and the processes to which they're accustomed, and it takes time for them to become accustomed to the new system, and it affects ---+ it significantly affects productivity. Again, for a limited period of time. And this, for us, was probably about 2 months, give or take, of productivity that was affected. So ---+ and as you know, the way our business works, we sell contracts today and then book the revenue over the next 12 months. So, we don't feel any of the effect of that productivity here in Q1, but you're going to feel it stretch out through 2016, as <UNK> indicated earlier. If that answers your first, would you repeat your second question. So, just first on the systems, it's a multi-year process to get our systems where we'd like them to be, and we're always looking at every component of our systems. Certainly the local system transition is a huge one for us. And I think as I've mentioned on our call last year, we ---+ at least, we had actually already done a bunch of work to upgrade our national sales system. So, those two together represent the majority of where you're having sales teams involved with systems. As we move forward, we'll continue to look at all the back-end systems of ---+ that run the Company. But those are the two big systems that touch our sales team, day in, day out. Then I think your question is, if you're thinking about sizing the opportunity, if you took our media businesses and you amortized them all across all of the weddings that we touch, you're probably talking about $60 or $70 per wedding that we touch in advertising value, that we're able to generate for XO today. If instead you were to think about the top categories at a wedding ---+ venue; band; DJ; gift registry; jewelry; travel and accommodations ---+ that's roughly half the spend around a wedding. And those are the categories that you've heard us talking about the last few cycles here. And if you can unlock transactional commissions from what is 50% of the spend in the wedding space, it's a significantly larger unit economic opportunity than media alone. So, that's why you see us focused on this as a long-term exciting opportunity for the Company. In terms of which ones we would tackle ---+ that which we've spoken about so far really is half of the spend around weddings, and has an awful lot of our attention right now. And getting it to scale is going to take time. For us, we continue to discuss our national advertising business as a solid performer, and one from which we want to continue to generate steady progress. We don't expect growth from our national advertising business like the kind of growth that we'll get out of our transactional opportunities. And so, I think what you're going to see here is, the team that came in 2 years ago has delivered really nice growth through superior execution in that business. That team now, each year, is seeing tougher comps, and it's a little bit tougher to grow on top of those comps. We have ---+ there's two important things happening this year for us, <UNK>. One is that we're going aggressively after this local transactions and guest transactions opportunity. And how well we're executed ---+ how well we're going to execute there, and how that opportunity will present itself, is going to become much clearer as this year plays out. The second is that we set a target model that we want to hit for the Company. We haven't gotten there yet. So, we want to get to the target model and we want to have more clarity around our transactional businesses. And then we want to come back and talk to our investors about what's next. I would only add that it would be very boring for us to tell you that where we've gotten to ---+ where we'll get to in the second half of this year is sufficient. We're going to continue to push, to grow this asset and deliver returns for our investors. Thanks, <UNK>. Generally speaking, SEO has continued to be a positive force for us. As you know, we have domains that have a lot of credibility. We are a Company that has content at its center, which means we're very good at creating that which search engines reward, because customers really enjoy it, and people like our products. So, the ---+ generally speaking, the Google algorithm rewards good brands, with good content, that the audience sticks with. So, for us, we don't ---+ I wouldn't tell you to expect anything different than what we've seen the last couple of years, in terms of the performance and the growth of our overall traffic. I mean, just at a high level, our customers want more business, like all local businesses do. We're working very hard to send them more business. And when we do, they're very happy, and they reward us for it. You've seen a nice correlation these last couple of years with our continued increase in leads to our local vendors, and products that support our audience as we [path] them to local vendors, coinciding with continued growth in the ---+ in our local advertising business. So, I would say that, primarily, that is the fundamental conversation we're always having with our local customers, which is, they want more business and we want to bring them more business. It's also a ---+ the primary motivation of our shift toward connecting our audience all the way through to a transaction so that we can always show our business partners the value that we're bringing them. It was $52 million in Q1. So, what you're seeing right now in our registry business is the ---+ we've made significant product improvements over the last couple of years in the three important steps of our registry business. The first, attracting our audience and engaging them through wedding websites; the second, helping them and ---+ with the seamless creation of their registry; and third, helping their guests ---+ helping them connect that registry to their guests, or helping their guests find that registry so that they can buy the gifts. In all three of those areas we're seeing very encouraging product performance, and it's driving a lot of this increase that you're seeing in GMV and this increase that you're seeing in our transactional revenue number. No, not at all. We believe that advertising as well as transactions are going to be value drivers for our local vendors. If I ---+ if you were a local venue and I had you on the phone right now, <UNK>, I would be offering you a suite of products which includes premium preferred listings in the market that can put you at the top of the page and ensure that a larger audience finds you. And if that's not the right fit for you, we'll also include a transactions-only storefront on The Knot, where we can still bring you audience and you can pay us on a per-transaction commissional basis. We think this gives us a broader ---+ a longer-term ---+ <UNK>, this will give us a broader array of products that can more closely match the bespoke needs of each of our local wedding professionals, and help us to serve more professionals and bring more business their way. Remember, we offer the media model, the paid listings model, or essentially all of the verticals that serve local weddings. We've now introduced an additional option for venues where a venue can pay on a commissional base for transactions. We have also ---+ through our GigMasters acquisition are able to offer bands, DJs, to a lesser extent photographers, and a few additional categories, the opportunity to list on GigMasters and to pay on a per-transactional basis. But still, <UNK>, for this year, the business and the revenue is listings. I want to make sure that I don't point you in the wrong direction there. <UNK>, for us, we look first at whether or not we can deploy our shareholders' capital into organic investments that'll drive outsize returns for them. The second thing that we look at is whether or not we can execute investments or acquisitions that will be accretive for our shareholders. If we do not see opportunities in number one or number two, then it's not our money, it's our investors', and we will give it back to them in the form of stock buybacks.

2016_XOXO

2015

LII

LII #If I was going to build a model, I would do it a little less than linear, so a little less than one-third in second quarter ---+ sort of how I think about it. But again, we will have a better view, obviously, as we get through the second quarter, and sort of talk to our customers, and see how it flows. But right now on a full-year basis, as I suggested, we are dealing still solid that ---+ of what we called, which is for the industry to be up low single digits and for us to have another solid year in commercial. I've seen the spreadsheet, but ---+ again, it's sort of ---+ it's all in the $20 million. Yes. I mean, I think if you look at the charts of what we have communicated of the percentage of volume of air conditioners that we build down there, and that labor and fixed overhead ---+ labor is about 10% of our cost of goods sold. I think you can sort of back into order of magnitude. But when you are buying all of the components, even those that we buy from Asia in US dollars, and then you sell into Canada, you still have the issues. I think there continues to be volume in North America, material cost reduction across our businesses, and the commodity tailwinds. So I think those are three sort of major drivers that we'll get: volume and volume leverage, aggressive material cost reduction, and continued commodity tailwinds. That implies that we were aggressive on price on Walmart, a fact not in evidence, because I think we won it for a lot of reasons. Look, we want to make money; and we think we have value-added product. With some of the new product launches we've come out ---+ we've improved the reliability, and delivery and lead times of that business. So we are not looking to be the price leader. We want to win share the right way and continue to grow the business with margins. We didn't give it. And at higher than 10% ---+ I think we said double digits, I would read that as mid-teens. And we didn't give the dollar figure. But I think you can sort of back into it, because I said we are 70% covered for second quarter for our national account business. And it's about half our business. So I think you can sort of figure it out. I'm not sure I understand the question. So burrow down on exactly what you are looking for, <UNK>. I'm not sure I understood. No. What we did was we prebuilt in fourth quarter, so we took production from first quarter in the fourth quarter. For the quarter it probably cost us $2 million or $3 million of absorption in first quarter. I didn't whine about it, because we didn't pound our chest in fourth quarter, when we had the benefit. But net-net, we sort of swapped $2 million or $3 million of EBIT we pulled from first quarter into fourth quarter. And we had that headwind this quarter. But second, third, and fourth quarter will be normal; curve of production change was from first quarter to fourth quarter. Correct. I wouldn't necessarily say that. Let's sort of let it all play out. Because, again, I think the question I was being asked was: how was the miss in first quarter going to be filleted on second, third, and fourth quarter. But we never discussed what was in the base plan for second, third, and fourth quarter. I think the answer is we think national accounts are going to be up each of the next three quarters. But I'm not really guiding to which is the stronger of the three. Yes, I think it has to do with large orders. I think it has to do with the comps, obviously, from the year before. And I think it has to do with the currency. When you look at actual currency, it's sort of a significant headwind. When you look at constant currency, I don't think the story is quite as dramatic. No. It's affecting us on translational. Half our business is residential. And I've seen some great summers in residential, so you sort of always keep that out there. Residential new construction picks up, add-on replacement remains solid, and we get a hot summer ---+ we can sell a lot of air conditioners in one summer. And that's sort of how you think about the peak. You know, we have more volume second half of the year in our refrigeration business than we do first half of the year; in part because of Walmart, but also in part because of other customers. I think where Walmart helps us is sort of the volume in the factory. And we will continue to mix up across our refrigeration business in North America, in part because of other customers, including Walmart. We've called that we are going to get net price this year of $10 million, and we still think that's where we are at. Again, we have to get into the summer selling season, really, to find out more. In January we had a North America-wide price increase of 3% to 5%, and then we had a 5% increase in Canada only in April. Then we've seen Carrier, Trane, Daikin/Goodman, and sort of our other major competitors announce similar pricing both in North America and in Canada. So again, it's early, and we have to get into the major parts of the selling season. But so far, so good on price. No. I think as we called out in our residential business, price mix was positive for the quarter ---+ I'm looking to make sure; I'm sort of doing it from memory ---+ was positive for the quarter. And so that's what we had expected. I think as I talked about in an earlier call, transition from 13 to 14 SEER ---+ it's early, but so far so good. And things are going as expected. But we'll know more as we get into the throes of the summer selling season. You know, we've never shown our own number. I always quote others. And several of the sales-side analysts have sort of modeled it. And if you look at over a four- or five-year period, replacement that was deferred because homeowners didn't want to spend the money on a new piece of equipment and they've band-aided old pieces of equipment, order of magnitude, people who have modeled sort of a full year, if you will, of air-conditioning ---+ volume was taken out of the market over a four- or five-year period. I think we are a couple of years into pent-up demand, and I think there's another two or three, maybe even more, years of it left. At actual currency we expect revenue to be up, and it's across our North American business; our Asia business; in a tough market, we expect revenues to be up in Brazil; Europe we are less optimistic about. We sort of think flat to slightly down there. Thanks. Thank you, operator. A few points to leave you with: we remain focused on capitalizing on growth in our major end markets, capturing additional market share and driving increased profitability through our operational initiatives. We are well positioned for 2015 and expect another year of record profits with strong cash generation. I want to thank everyone for joining us, and we look forward to the strongest seasonal periods ahead.

2015_LII

2018

PARR

PARR #Thank you, Melissa. Good morning, everyone, and welcome to Par Pacific Holdings' fourth quarter 2017 earnings conference call. Joining me today are <UNK> <UNK>, President and Chief Executive Officer; Will <UNK>, Chief Financial Officer; and <UNK> <UNK>, President and Chief Executive Officer, Par Petroleum. Before we begin, please note that some of our comments today may include forward-looking statements as that term is defined under federal securities laws. Such statements include, but are not limited to, those concerning plans, expectations, estimates and our outlook for the company. These forward-looking statements are subject to change and are not guarantees of future performance or events. They are subject to risks and uncertainties and actual results may differ materially from what is indicated in these forward-looking statements. Because of this, investors should not place undue reliance on forward-looking statements, and we disclaim any intention or obligation to update or revise any forward-looking statements. I refer you to the latest Forms 10-K and 10-Q Par Pacific Holdings filed with the SEC for a more detailed discussion of the major risk factors affecting our business. Further information regarding these as well as supplemental financial and operating information, including reconciliations of certain non-GAAP financial measures to the most comparable GAAP figures, may be found in our press release, our investor presentation and our website at www.parpacific.com or in our filings with the SEC. I'll now turn the call over to our President and Chief Executive Officer, <UNK> <UNK>. Thanks, Matt. It was very efficient. 2017 was a record year for Par Pacific. Our adjusted earnings per share was $1.77, more than 4x the previous highest adjusted earnings per share which we recorded in 2015. Our book value increased by more than 20% due to these strong earnings. And we have healthy free cash flow, reducing our debt by $56 million during 2017 and further strengthening our capital structure. We successfully managed through weakening product cracks and increasing crude oil differentials in Hawaii last quarter, reporting adjusted EBITDA of more than $33 million as our team improved our capture margin with excellent commercial planning and operational execution. In December, we rolled up our remaining debt in a broad refinancing, eliminating all of our near-term maturities and providing significant liquidity for operations and growth. Our acquisition of Wyoming has proven to be an attractive transaction. We finished the year just ahead of the $50 million adjusted EBITDA target for Wyoming Refining and Logistics that we announced at the time of the acquisition. Product cracks in our Rocky Mountain region continue to be strong with good fundamentals in terms of inventory levels and product demand. We're very pleased with this addition to our refining asset base. As we enter 2018, we announced the acquisition of 33 retail stores in the Spokane, Washington area to buttress our Wyoming refining operations and expand our operational footprint in the Rocky Mountain region. We believe this region is full of attractive growing markets, and Spokane, in particular, offers the type of logistics complexity in which our organization thrives. As part of this transaction, we also entered into a supplier agreement to benefit our Wyoming refining output. In our Hawaii operations, we finished the year with strong financial and operational results. We announced a new distillate hydrotreater project to enhance our position in the state, especially as we anticipate stronger distillate cracks in the face of growing demand and the expected widening of the spread between high and low sulfur products in the Pacific due to the IMO changes in 2020. This project is proceeding as we anticipated, with start-up scheduled during the middle of next year. This project should allow us to further increase our market share in the state beyond the record on-island sales during the fourth quarter of approximately 67,000 barrels per day. Hawaii refined product demand continues to be led by strong airline growth. Domestic-originating air arrivals were up 5.1% in Hawaii in 2017. Our retail operations also continue to perform exceptionally well. Retail margins have been good despite a rising crude oil price. For the year, we generated a 2.6% fuel volume increase on a same-store basis, and merchandise sales were up 2.1% in 2017 on a same-store basis. All in all, great execution by the team. Overall, we entered 2018 with an improved outlook in Wyoming and a more difficult environment in Hawaii due to a tighter physical crude market. We continue to build our earning and cash generation capability in other business units to mitigate the cyclicality of our Hawaii refining operations. We also enter with a much better market position in both of our principal operating markets and improved asset profile that will be enhanced by our current capital projects and a stronger financial capitalization. We continue to evaluate a number of acquisition possibilities that strategically fit our existing business capabilities. With that, I'll turn the call over to <UNK>. Thank you, Bill, and good morning, everyone. I would like to start by congratulating our teams in Hawaii, Wyoming and Houston on a solid execution in 2017. The consistent focus on safety, environmental compliance, operations reliability and commercial flexibility have led the way to strong 2017 results across the board. Now with regards to the fourth quarter. Strong capture rates in both refineries more than offset planned maintenance and relatively weak market environment in the Mid Pacific and allowed our refining system to generate $31 million of adjusted EBITDA in the quarter. In Hawaii, rising Singapore inventories have negatively impacted gasoline and fuel oil crack spreads. On the other hand, distillate and especially jet-fuel crack spreads have been strong, supported by strong demand and low inventory. On the feedstock side, our Mid Pacific Crude Oil Differential index for the fourth quarter of 2017 implied only $0.02 per barrel discount to Brent compared to $1.48 per barrel discount in the fourth quarter of 2016. As a result, our combined Mid Pacific Index was $7.83 per barrel during the quarter compared to $8.48 per barrel during the fourth quarter of 2016. Our Hawaii refinery throughput in the fourth quarter was 72,000 barrels per day with 99.9% operational availability and record high 52% distillate yield. We successfully executed our planned reformer catalyst regeneration in the fourth quarter on time and on budget. We sold a total of 75,000 barrels per day, including 67,000 barrels per day of on-island sales in the fourth quarter. This number is reflecting approximately 10% growth in on-island sales compared to where we were in 2016 and the first half of 2017, mainly driven by gasoline and jet fuel contracts that were added in the second half of 2017. Our adjusted gross margin was $6.54 per barrel, and production costs were $3.41 per barrel. So far, in the first quarter of 2018, our combined Mid Pacific Index is approximately $7 to $7.50 per barrel, and our first quarter planned throughput in Hawaii is approximately 75,000 barrels per day. We continue to be aggressive in our crude selection process and optimize our crude mix and mode of operations in Hawaii per market condition. In Wyoming, strong margin environment was supported by low gasoline and distillate inventory in the Rocky Mountains market as well as continued constructive demand fundamentals for distillate. Our 3-2-1 Index was $23.79 per barrel during the quarter compared to $13.69 per barrel during the fourth quarter of 2016. In the fourth quarter, our refining throughput averaged 15,000 barrels per day with 99% operational availability, and we sold approximately 15,000 barrels per day. Our adjusted gross margin was $15.70 per barrel, and production costs were $7.46 per barrel, including approximately $0.50 per barrel of production costs associated with the maintenance and upgrade to work. So far in first quarter, our Wyoming 3-2-1 index has averaged $15.50 to $16 per barrel, and our target throughput in Wyoming is approximately 16,500 barrels per day for the quarter. Overall, 2017 was a strong year for both refineries. Beyond optimizing operations and improving commercial flexibility in both systems, we invested $11 million of CapEx in the Hawaii refinery, an additional $8 million of CapEx in our Wyoming refinery. In 2018, we are planning to invest approximately $35 million of CapEx in both refineries, with the majority, approximately $20 million, in growth projects, including our announced DHT project in Hawaii. And now I'll turn the call over to Will to review consolidated results and Laramie highlights. We haven't added any material operating costs associated with the acquisition in the first quarter, and we don't anticipate any significant costs. We're able to leverage the team that we have in Hawaii. We're putting together a small group in Spokane that will be working and reporting directly to Jim Yates, who's responsible for the Hawaii marketing logistics operations. We, first and foremost, think about capital and free cash flow in terms of reinvesting that capital in the growth of our business where it's strategically relevant and where the return on investment is attractive. After that, we dedicate the cash flow to the reduction of debt. And we target a debt to total cap of about 30% to 35%. If we were to reduce our debt to total cap below that level and we had sufficient liquidity, we would then start to consider returning capital to shareholders in the form of either share repurchase or dividend. Yes, the increased distillate yield was mainly a function of feedstock quality. The crude we ran allowed us to make more distillate than typical. And you're right, the demand profile for the Hawaii market is all distillate-driven, especially the jet fuel part, and as the local refinery out there, we are primarily focused on what the market needs. I'm wondering if you could help me a little bit here. I'm just trying to understand, in each of Hawaii and Wyoming, what contributed to the higher production cost per barrel. Is the crude cost itself part of the production costs. <UNK>, do you want to take that. In Hawaii, $3.41 per barrel is actually a very good low production cost. So we're very happy with that, and we'll take that every quarter. In Wyoming, the $7.46 included $0.50 per barrel associated with the maintenance work that we had there. So without the $0.50, it's approximately $7, again, very similar to what we have shown in the past. And when you compare fourth quarter '17 to '16, please remember, the fourth quarter of '16 per our earning release included approximately $2.35 per barrel of positive pension credit that made that number a little bit lower. Okay. But when you look at year-over-year, though, is ---+ are crude costs part of production costs. Or they're below that line ---+ I'm sorry, are production costs below the line of crude costs. Crude costs are not included in production costs. The production costs include only the operating costs associated with the facility. Okay. And you stated on ---+ in the press release and on the conference call regarding the Cenex acquisition that you thought that transaction would close during Q1. You got about 3 more weeks left. Do you still see it closing before the end of the quarter. And is the closing process going smoothly. Yes, <UNK>, we still anticipate closing it before the end of the quarter. We're waiting on a few necessary permits to ensure that we can operate the stores upon closing. Okay. And then we're happy to see a record amount of on-island sales. I think you kind of guided that you were expecting to increase it nicely. Is ---+ are these contracts, are they longer duration. 6 months. A year. Do you feel that this kind of level of on-island sales is something that can be maintained and improved upon. With what we have right now on the table, the 67,000 barrels per day level is a good assumption for the next 12 months. Obviously, it's going to go up and down every quarter, but this reflects pretty well our contractual volume at least. Okay. And then a question for you, Bill or Christine, is I think you guys announced you got a nondeal road show coming up, I think, this week, and then maybe another one. What else is on the calendar play. With a little foresight here coming into the next few months, so when will you be able to make plans. We continue to be very happy with our investment in Laramie. And obviously, it obviously brings a lot of value to our operations as a legacy asset. And as you noted, we're the successor to Delta Petroleum, and with coming out of that reorganization, we had Laramie as well as a large amount of tax attributes. On those tax attributes, we built a very nice refining business with a great team that helps us continue to grow our downstream operations. We evaluate our investment in Laramie and treat it as an investment and are always looking for opportunities for maximizing returns and realizations on Laramie. This could include anything from a sale of our equity interest to an IPO as well as continued acquisition and divestiture activities within Laramie itself. They announced an acquisition ---+ or they completed an acquisition last month in-basin, and that was a nice little deal and an add-on to the business. So we're pleased with the company, and we'll continue to evaluate it in the context of its growth, both in production and contribution toward our earnings per share profile. Well, <UNK> mentioned that our Pacific market margins are $7 to $7 (sic) [$7 to $7.50] per barrel, which is probably $1 to $1.50 below last year's average. But we continue to expect strong results in Wyoming where margins are strong. Our capture rate in Hawaii has improved quite a bit due to our sales and our yields. And our retail business is doing quite well. <UNK>, do you want to add any color to the cracks with the Mid Pacific Index. I will just add that inventories across the board are low. Gasoline, fuel oil, closer to mid-cycle in the Mid-Pacific. But distillate is extremely low in the Mid Pacific, and this is very encouraging. It's always hard to evaluate share, but I do think our team has done a great job in the Hawaii retail market. Margins have been stable and strong and continue to look pretty good. And at the same time, our team has shown volume growth, as you noted. I think some of that's related to the fact that the rebranding to Hele has gone very well. It's also due to the fact that our team has put together some attractive marketing operations and strategies that allow us to grow our fuel volumes from our existing store network. To be honest, we do both. And like we said earlier, we continue to be very aggressive in our crude selection process and use pretty much every place in the world as a candidate for the crude sourcing, Africa happened to be our optimization here in the fourth quarter, and we used it. And I think you can only guess that on the western side of Africa, there's rich distillate crude. So it has something to do with that. So we continue to look every quarter, every month and make the best crude selection for the company. Especially in this type of crude diff environment, flexibility is critical. Yes, we'll continue to monitor equipment and catalyst to make our plans accordingly. We don't think major turnaround will be needed before late '19. Hopefully, we'll be able to push it to early 2020. We will see. Thank you, Melissa. Thank you, everyone, for joining us this morning. We look forward to building our business in 2018 through our recently announced retail deal and the distillate hydrotreater project in Hawaii. With a strong financial capitalization, we'll continue to pursue opportunities that offer a strategic fit and bolster the profile of our existing businesses. I'd like to close by congratulating our organization on a job well done during 2017. Thank you.

2018_PARR

2016

EDR

EDR #Greetings and welcome to the EdR fourth quarter 2015 earnings conference call. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, <UNK> <UNK>, Senior Vice President of Capital Markets and Investor Relations. Thank you, sir. You may begin. Thank you and good morning. We would like to remind you that during today's call, management's prepared remarks and answers to your questions may contain forward-looking statements. These statements are based upon current views and expectations. Such statements are subject to risks and uncertainties and other factors that may cause the actual results to differ materially from those discussed today. Examples of forward-looking statements may include those related to revenue, operating income, financial guidance, as well as non-GAAP financial measures. Risk factors relating to the Company's results and management's statements are detailed in the Company's annual report on form 10-K for the year ended December 31, 2014 and other filings with the Securities and Exchange Commission that are available on our website. Forward-looking statements refer only to expectations as of the date in which they are made. EdR assumes no obligation to update or revise such statements as a result of new information, future developments, or otherwise. It is now my pleasure to turn the call over to <UNK> <UNK>, Chairman and Chief Executive Officer. <UNK>. Thank you, <UNK>. I'm proud of the operation team's performance in 2015. We produced strong same-community NOI growth for the year at 5.8%, delivered another year of industry-leading leasing results, began the 2015, 2016 lease term 97% occupied with estimated revenue growth of 3.8%, and opened over 2,900 new beds at the 6 communities we delivered in August. While we are proud of the 2015 accomplishments, the team shifted its focus to the 2016, 2017 leasing cycle before the dust even settled. We are well into the sales season and leasing velocity at our same communities is strong. We are currently 58.4% preleased for the fall, which is 490 bips ahead of this time last year. Our continued focus on customer service and resident satisfaction, along with our detailed marketing programs and the visibility to market information through our pilot system, have put us in a great position to take advantage of market conditions and maximize leasing results. Please keep in mind that as we have discussed in the past, our same-community portfolio opened last fall near our maximized occupancy of 97%. As such, we expect to see the favorable leasing velocity to prior year of 490 bps to dissipate over the remainder of the leasing cycle. Based on our current progress and market conditions, we anticipate opening the 2016, 2017 lease term with revenue growth in the range of 2.5% to 3.5% with occupancy consistent to prior year. Note, our beds at the University of Kentucky, including 4,600 same-community beds and 1,140 new community beds delivering in 2016, have again been excluded from the same-community preleasing analysis in the financial supplement since the on-campus assignment process will not be completed until May. Currently we're 88% applied for the fall, on target with the prior year, and our beds are clearly the choice of the UK students. In addition, the university application velocity, as reported by enrollment management, is up 11% over prior year, which speaks volumes for demand. Our new communities, which include our 16 developments at the University of Mississippi and at Virginia Tech, as well as our 15 acquisitions at University of Colorado, Boulder, and the University of Tennessee are meeting our expectations with 58.2% of the beds leased for fall. Turning to supply, as we reported in our third quarter earnings call, the volume of new supply being added to EdR markets for fall 2016 is down over 20% from the 2015 levels. This is a significant trend and the second consecutive year our markets have seen a decline in new supply. In addition, the majority of new supply will be further from campus than our communities. In conclusion, our dedicated operations teams are hard at work to produce yet another year of market-leading leasing results, a steady increase in demand, a decreasing volume of supply over prior year, an increased velocity in leasing trends and early strength in rate growth provides a nice backdrop for the 2016, 2017 leasing cycle. I will now pass the call to <UNK>. Thank you, <UNK>. Core FFO in the fourth quarter of 2015 increased $4 million, or 13%, to $33 million while core FFO per share increased 2%. The improvement in core FFO was mainly due to growth in community NOI. Core FFO per share growth was muted due to the November 2015 follow-on equity raise that increased shares outstanding and reduced debt to gross assets to 28% at year-end from 35% the prior year. Full-year 2015 core FFO increased 14% from 2014 to $92 million. The growth in core FFO mainly reflects $25 million of additional NOI from new communities and a 5.8% growth in same-community NOI that was partially offset by a reduction in NOI from communities sold in 2014, higher ground lease expense, corporate G&A and interest expense. Core FFO per share for the year declined 2%, which reflects a dilution from the capital market transactions in June 2014 and November of 2015. While the capital transactions significantly increased shares outstanding, more importantly, they reduced debt to gross assets from 43% at the end of the first quarter of 2014 to 28% at the end of 2015, strengthening our balance sheet and adding additional capacity to fund our development pipeline and other investment opportunities. For the full year, same-community revenue was up 5.4% and operating expenses were up 5%, resulting in a 5.8% improvement in NOI. Expense growth for the year outpaced expectations, mainly due to an $800,000 real estate tax charge that we incurred in the first quarter of 2015, related to the settlement of an assessment dispute brought by a local school board that covered several prior assessment years. Excluding this, operating expenses increased 3.9%, which was within the Company's original guidance range of 3% to 4%. Same-community gross margins for the year increased slightly over prior year to 56.1%. Total community revenue and NOI were up 17% and 23% respectively for the full year, reflecting the strong growth in our same-community portfolio as well as the impact of external growth from our 2014 and 2015 developments and acquisitions, which were partially offset by a decline in NOI due to dispositions in 2014 and 2015. The double-digit growth in community NOI and core FFO is reflective of the continued value creation from the outstanding new communities delivered by <UNK> and his development team and the hard work of <UNK> and her team to fill the new developments as well as produce industry-leading same-community revenue growth. Please refer to pages 6 and 7 of our financial supplemental for additional details in our community operating results and same-community expenses. Turning to our capital structure, our balance sheet strategy is to maintain reasonable current and future leverage metrics when factoring in our development pipeline. However, please note that we have reset our current debt-to-gross asset leverage target to 25% to 30% compared to our prior target range of 35% to 40%. We believe the lower leverage target puts the Company in the best position to not only fund its current development commitments, but, more importantly, to take advantage of additional external growth opportunities as they present themselves. In transitioning to the new debt-to-gross asset targets, we completed a follow-on equity offering in November 2015, selling 8.1 million shares and raising net proceeds of $270 million. The Company also raised $16 million during the fourth quarter, selling just over 400,000 shares of stock under its ATM. The proceeds we used to pay off $261 million of debt, including the remaining balance on our revolving credit facility, reducing our debt to gross assets from 40% at September 30, 2015 to 28% at the end of the year. In addition, at 12/31/15, our variable rate debt was 17% of total debt, our weighted average debt maturity was just over 5 (inaudible - multiple speakers) and we had approximately $500 million in capacity under our existing revolver. Subsequent to year end, the Company announced two new development commitments totalling over $100 million and completed a second follow-on equity offering selling 6.3 million shares and raising net proceeds of $215 million. $108 million of the proceeds were used to pay off $98 million of fixed rate mortgage debt with an average effective interest rate of 5.4% and $10 million of prepayment penalties associated with the early extinguishment of the debt. The remaining proceeds will primarily be used to fund the Company's development pipeline, which includes $404 million of active developments, of which $97 million was already funded at the end of 2015. The remaining $307 million will be funded through a [combination] operating cash, proceeds from the following ---+ follow-on equity offerings, debt and property sales and capital market activities as necessary. Although dilutive on a short-term basis to [2016] core FFO per share, transacting these equity raises at reasonable pricing relative to net asset value estimates repositions the balance sheet to fund our current commitments and take advantage of additional external growth opportunities, which will drive long-term growth for shareholders. Turning to 2016 guidance, based on the Company's current estimates, management reaffirms the initial 2016 core FFO per share guidance it released on February 2, 2016 of $1.70 to $1.76. This includes core FFO per share before potential capital transactions of $1.77 to $1.84, less the impact from potential capital transactions of $0.07 to $0.08 per share. Please note that the midpoint of our 2016 guidance, after a potential capital transactions, represents a five-year compounded annual growth rate in core FFO per share of approximately 6%. This solid performance will be achieved during a period when, including the 2016 estimates, the Company would have delivered approximately $900 million in developments, sold over $550 million in assets and reduced debt-to-gross assets from an average of 34% in 2011 to an estimated 25% by the end of 2016 ---+ a fantastic five-year accomplishment. Please refer to our February 2, 2016 press release for more details on our guidance assumptions. With this overview, operator, please open the line for questions. Yes. As we said previously, given where cap rates are today ---+ I mean, our focus is either on campus or truly pedestrian to campus. And where cap rates are today in the very low 5%s and some reported below 5% cap rates, we're monitoring the acquisition market. We are aware of what is all trading but it needs to make sense in order to make the acquisition. So things do change. And we always study the dynamics of an individual marketplace because all real estate is eventually is really local. I think you'll see the external growth from our Company, the more on the on-campus development and developments that are pedestrian to campus until such time that cap rates on acquisitions on assets that we're targeting has moved north. Sure. We have a number of potential developments that if things come together within the next 60 to 90 days maximum ---+ and that typically is getting appropriate GNP pricing. I mean, as a policy, we don't announce until we're relatively certain a project is going forward. So clearly within the next 90 days maximum, we'll know whether we're adding additional developments for 2017 or not. And I'm sorry, the second part of your question. Yes. That low 7%s is a drop from mid 7%s about 1.5 years ago, primarily because of construction prices going up and then for off-campus, land values and all. Currently, everything that we're targeting is in the low 7%s. Let us get back to you on that while we figure that out. Good morning, <UNK>, it's <UNK>. No. Was I surprised by the pickup. No, because we're in the middle of heavy leasing season. So not surprised ---+ pleased by the results. And we are continually pushing rate on every asset across the portfolio. And if you remember, last year we delivered our portfolio with all assets having rate growth with the exception of one. So we are definitely pushing rate to its maximum. Yes, it's getting pushed. Alex, I think ---+ it was primarily the opportunities that are presenting themselves. As you know, right before that second equity offering, we announced the possibility of the ---+ or the award of the Cornell deal and the possibility that, that might be a ONE Plan deal. So that opportunity, plus just other things that we're seeing in the pipeline, is what drove us to go ahead and issue equity the second time. As <UNK> mentioned just a couple minutes ago, it's possible that we add more than one new development to 2017. Now, likewise, it's possible that none of them get added to 2017 and they move to 2018. But we saw an increasing number of both on and on-campus opportunities that we think we're in good position for. So we thought it would be a good idea to take equity funding essentially off the table all the way through 2017. Alex, I think we would have to look at it at the time. But we have, as you can see from our metrics, significant capacity on our revolver. Well preleasing is very strong overall across the portfolio. But in the Midwest, there's only four assets included in the Midwest. And if you remember last year, at the University of Missouri there was a very public kind of issue with the departure of the president. And temporarily it has hurt enrollment. And with the temporary hurt on enrollment, it has impacted us this year. We expect, as the university does, recovery in the next year. But that is what has slowed down the midwest. Thank you. Well, I'll jump in real quick. Our guidance is our guidance. So there is a little bit of tail wind given ---+ I guess it was 150 basis points of the non-same-store last year. But realize our same-store hit [97%] last year. We've said forever that we believe [97%] is the optimal occupancy for our portfolio. Can we do a little bit better. Sure. But each and every year there is something new that comes up that's possibly negative, like Missouri, like <UNK> just mentioned. So our guidance is our guidance. We hope to do better. Good morning. I'll address the first part and let <UNK> do the second. On the on-campus assets, as you know, we have the on-campus assets at Kentucky, which achieved a 3% increase in revenue growth last year. Then the other on-campus assets are at TCU, Texas, Syracuse. Those assets, I'll say, were kind of all over the board. The Texas asset was up in the high single digits. Syracuse, I think, was mid single digits. And TCU, I think, was closer to the 3% to 4%. So I would like to say there is a blanket conclusion you can draw. I don't think you can. The blanket conclusion that we draw going forward is that we know those assets because of their location and that the universities they serve are going to be much more stable in revenue growth than any other set of assets in case there is some downturn or something. And then this year for Kentucky ---+ Out of the 5,700 beds, we have 88% of them leased, which is in line with where we were last year. I think the other key ---+ we filled those beds to 100% last year. And I think the other key is that enrollment management is reporting that applications to the university itself are up 11%. The dynamics are very strong for another very successful year at UK. I know on the real estate tax growth, we're probably in the 5% to 6% range on just a recurring basis for that. Repair and maintenance is probably in the 3% to 4% range. Getting back to the question that somebody had on the tiers of the assets that we're currently marketing, there is one asset in Tier 1, three assets in Tier 2 and two assets in Tier 3. We typically are pro forming 96% occupancy. Five of the assets are one contract. The other is an individual contract. In all cases, they have not yet gone hard. So they are in various stages of due diligence. Which could include financing. That's typically not the issue today with the people that are buying our assets. They are able to get their financing. Thank you for your time, everyone. And we look forward to communicating our progress again on our first quarter earnings call in April. Thank you.

2016_EDR

2015

EXPO

EXPO #Thank you for joining us today for our discussion of Exponent's third-quarter financial results. For the quarter, net revenues increased slightly to $74.5 million. Net income for the quarter increased 6% to $11.7 million or $0.43 per diluted share. We are pleased with our bottom-line results for the first nine months of the year. We achieved growth in profits and improved margins despite the modest revenue growth. Our third quarter and nine months results also demonstrate our ability to effectively generate cash from operations. Our underlining business continues to grow in the high-single digits. But as expected, our results were impacted by the decline in defense work and a major project ramping up. Exponent continues to be retained to investigate the most significant accidents and failures. We are also seeing strong demand for our proactive services in design consulting for the consumer electronics and medical devices industries. We had notable third-quarter performances in our materials, polymer science, biomedical, and vehicle engineering practices, as well as our infrastructure group. As we have previously indicated, the last of our three major assignments wound down early in the third quarter as the result of a proposed settlement. This project had represented approximately 5% of our revenue. We have made some adjustments to headcount and have increased our business development focus, but still expect to see a short-term impact to utilization. We are now back to a more normal project portfolio with no current project representing more than 2% to 3% of our revenue. <UNK> will elaborate on the details of our forecast in a few minutes. We continue to repurchase common stock in the open market. We repurchased $12.8 million in the third quarter and $19.8 million year-to-date. As we announced today, the Board of Directors has authorized an additional $35 million in share repurchases increasing the Company's current authorization to approximately $50 million. We paid shareholders a $0.15 per share dividend in September, and we intend to continue paying dividends going forward. We believe that the combination of stock repurchases and dividend payments not only reflects our confidence in the Company and the strength and stability of our long-term financial position, but also our commitment to delivering value to shareholders. While we have a challenging year-over-year comparison in Q4, and will need to clear the first half of 2016 to get past year-over-year comparisons that include the last of the major assignments, we are well positioned to deliver strong results in the years to come and believe that we are making the appropriate investments necessary to grow our business. We are excited about our growth opportunities and are committed to providing the best scientific advice to our clients. Now I will turn the call over to <UNK> for a more detailed review of our financial performance and business outlook. Thanks, <UNK>. For the third quarter of 2015, revenues before reimbursements, or net revenues as I will refer to them from here on, were $74.5 million, up nominally from $74.3 million in the same period of 2014. Total revenues for the third quarter were $79 million, also up nominally over $78.6 million one year ago. Net income for the third quarter increased 6% to $11.7 million or $0.43 per diluted share as compared to $11 million or $0.40 per diluted share in the same quarter of 2014. EBITDA for the third quarter increased 2% to $20.1 million versus $19.7 million last year. For the nine-month period, net revenues increased 3% to $225.9 million, and total revenues increased 4% to $239.2 million. Net income increased 7% to $33.7 million or $1.23 per diluted share. EBITDA increased 5% to $59.1 million over the same period of last year. In the third quarter of 2015, net revenues for defense technology development were approximately $500,000 as compared to approximately $2.7 million in the same quarter last year. Year-to-date, net revenues for defense were $2.5 million as compared to $9.6 million in the same period of 2014. We expect revenues from defense to be approximately $500,000 in the fourth quarter of 2015. We had 286,000 billable hours in the third quarter, a slight increase as compared to 285,000 in the third quarter of 2014. Year to date, billable hours increased 3.5% to 865,000 from 835,000 a year ago. Utilization for the third quarter was 73%, which was better than we expected but down from the 74% one year ago. The year-to-date utilization was 74%, up from the 73% in the same period one year ago. We expect utilization to be down approximately 2 to 3 percentage points from the 69% we achieved last year in the fourth quarter. It is consistent with our third-quarter run rate after adjusting for additional holidays and vacation days in the fourth quarter. This reflects the factors discussed earlier but also that our underlying work was very strong last year in the fourth quarter. We now expect full-year 2015 utilization to be approximately even with the 72% achieved in 2014. In the third quarter, the realized bill rate increase was approximately 1% year-over-year but was offset by translating foreign currency for consolidated financial statements. For the third quarter, technical full-time equivalent employees were up 1% to 749 As compared to the same quarter in 2014. And is sequentially flat with the second quarter of 2015. We expect FTEs in the fourth quarter to be slightly up sequentially. Despite the modest revenue growth, EBITDA margin was up for the third quarter to 26.9% of net revenues as compared to 26.5% for the same period of 2014. For the first nine months, EBITDA margin improved to 26.1% as compared to 25.5% in the same period one year ago. For the third quarter of 2015, compensation expense, after adjusting for gains and losses in deferred compensation, increased 1%. Included in the total compensation is a loss in deferred compensation of $2.7 million as compared to a loss of $1.3 million in the same quarter of 2014. As a reminder, gains and losses in deferred compensation are offset in miscellaneous income and have no impact on the bottom line. Stock-based compensation expense in the third quarter of 2015 was $2.6 million. We expect stock-based compensation to be between $2.3 million and $2.5 million for the fourth quarter and between $10.8 million and $11 million for the full-year 2015. Other operating expenses in the third quarter increased less than 1% to $6.8 million. Included in other operating expenses is $1.3 million of depreciation. For the fourth quarter, other operating expenses are expected to be $7 million to $7.3 million and between $27 million and $27.3 million for the full year of 2015. SG&A expenses in the third quarter decreased 9% to $4 million. The decrease was the result of us having a smaller principals meeting in 2015 than the managers meeting we had in 2014. For the fourth quarter of 2015, G&A expenses are expected to be $4.1 million to $4.5 million and between $15.6 million and $16 million for the full year of 2015. Capital expenditures were $2.6 million in the third quarter and $4.4 million year-to-date. Our income tax rate in the quarter was 37.6% as compared to 39.9% in the same period of 2014. Our income tax rate for the year-to-date period was 38.8% as compared to 39.7% during the same period last year. For the fourth quarter and full year of 2015, we expect our tax rate to be approximately 39%. For the third quarter, operating cash flow was $19.5 million. Year-to-date operating cash flow was $34.3 million. In the first nine months of the year, we repurchased $19.8 million of common stock at an average price of $42.70, $12.8 million of which was repurchased in the third quarter. As <UNK> noted, our Board of Directors once again authorized an increase to our share repurchase plan. In total, we now have approximately $50 million available for repurchases. Year-to-date, we distributed $11.8 million to shareholders through dividend payments. We ended the quarter with $151.3 million of cash and short-term investments after the repurchases and dividends. Turning to our outlook for the full year of 2015. As previously indicated, our underlying growth has been in the high-single digits, but has been offset by a significant decline in defense work and the end of a major project. Based on our year-to-date results, we are reiterating our expectations for the growth of revenues before reimbursements to be in the low-single digits for FY15. We expect EBITDA margin to be essentially flat with the 25% we achieved in 2014, a slight improvement to our prior outlook. We remain optimistic about our business and our long-term prospects. And now I will turn the call back to <UNK> for closing remarks. Thank you, <UNK>. For the remainder of 2015 and into 2016, we are focused on further expanding our unique market position in assessing reliability, safety, human health effects, and environmental impacts of increasingly complex technologies, products, and processes. While we are growing at a slower rate than we might like in 2015 due to the various factors we discussed in the last few calls, we are pleased with our strong bottom-line results which demonstrate the resilience of our model. Our long-term financial goals remain the same. Reduce organic revenue growth, improve profitability, and generate significant cash flow to allow us to continue to repurchase stock and pay dividends. Operator, we are now ready for questions. <UNK>, this is <UNK>. Our view of utilization is that in the short term you get some bouncing around, a little bit some ups and downs, depending from quarter to quarter and various things like that ---+ obviously, seasonally. We still believe that over the long term that ---+ when I say long term, I'll say mid-term, over the next few years ---+ we believe that utilization rates should be able to increase. And as <UNK>ard indicated, we expect this year to be about 72% by the end of the year for the full year. And we think that that should be able to move up into the mid-70%s. And we base that on the fact that our larger practices and offices tend to run at higher utilization levels than those that are smaller. So we have larger practices running in the high-70%s to low-80%s fairly consistently. So we believe there is an opportunity for that to rise simply because of sort of an increase over time in critical mass, and for the fact that in larger offices, the sharing of work works out a little bit better, and you get a little bit higher utilization. We don't feel like we're in a mode where we can kind of project a ---+ sort of a 2% change in one year. That's not the kind of thing that we think we can project. We just think that over a period of years, we can gain something of the order of, on average, 0.5% a year. And some years it will be up a little bit more. Some years it will be down. But we still believe that what we described to the market over the past several years about moving our utilization from where it was in the high-60%s now into the low-70%s, we believe that that can continue up into the mid-70%s. Yes, we, in 2014, as we moved through the year last year, we did end up reducing the amount of staff that we had that were individuals that were more focused on the defense industry. And we made some changes in that area, and that probably reflected a couple of percent of our total full-time equivalent billable staff at that time. As we've worked through the adjustments to staffing relative to our environmental group that was the primary group working on this major project, we are, at least to date, that adjustment somewhere probably 1.5% of the total full-time equivalent employees. So clearly over the last 12 to 18 months, we have been ---+ had that headwind against it. The rest of ---+ so that provides some information for you relative to the ---+ what's been going on the last few years. I do think that as we look going forward, we will see a sequential headcount growth that begins to get back into the more normal range, which, for us, will reflect an annualized increase that should run somewhere in the 4% to 7% headcount growth. I think that will be obviously as we're moving through the next nine months, getting back to the transition we made over the major project, that will be somewhat dampened by 1% to 2%. But I think that as we look forward, we do believe that the underlying model will support a 4% to 7%, 4% to 8% headcount growth. Absolutely, we intend to reduce our cash on the balance sheet over the next several years. We've talked about over the next four to five years of bringing back down into the $50 million to $70 million range on the balance sheet. So it is our intent to, through repurchases as well as dividends, and there may, over time, be some smaller acquisitions in there that we do, but to bring that cash down to approximately $50 million by deploying that excess amount back to shareholders. Yes. I mean, these are not big-ticket items. They are relatively small. We do ---+ historically, our business development is ---+ it's largely a reputation business, and essentially we keep our profile up by attending various conferences and things like that. But the reality is, most of the work comes in through clients calling us back. I think as we move to proactive work, there is a little bit more focus on some particular industries, and as such, we've made some investments that focus a little bit more on those industries. These are not big-dollar investments. Clearly, the senior leadership in our environmental practice was very focused on the work and the goal is ---+ obviously has more time now to ---+ and demand to focus on business development in that particular area to refill the backlog. Sure. You're right. There is limits to what we can say. Look, the major news items involving automotive players, whether it be unintended acceleration with Toyota or ignition switches with GM or the airbag situation with a number of manufacturers, these are all things that clients have announced that we've be involved in, and we were able to confirm that. Obviously, a couple of them are in the past. One of those is still ---+ involving airbags ---+ is still obviously very active. At the present time, consistent with our normal approach, which is we can't indicate whether we are retained or not until our client decides to disclose that, we are not in a position to say anything about VW at the moment. But it's ---+ just looking at the track record, it would be surprising if it was something that we didn't get involved in, or that we are not already involved in, whichever way you want to look at it. Yes, so our normal process, of course, is that we go through our planning here in the fourth quarter where we are right now, and during that process we set the bill rates that will become effective in January. We are slightly unusual in the marketplace in that we operate where each individual has a billing rate that they will charge all clients next year. And we don't negotiate bill rates. That way, everybody gets the best bill rate, and so that's kind of the philosophy that we have. There's no question that with major clients there tends to be some pressure to control rates, but the reality is the rates we set for them are the rates we set for everybody, and they also have come to understand that. And so we don't have any kind of a preferential way of treating long-standing client ---+ long-standing large clients different from other ones. So in the end, we have to make some decisions. I think our viewpoint has been that bill rates have ---+ continue to increase every year. Even in 2009, we put in bill rate increases, and we expect that to continue. So I don't see a lot of change in that. I will comment a little further on what I will call the realized bill rate or the mix of our bill rates at the end, because we are in a mode where our realized bill rate increase is very low compared to history. And we think that's occurred because of the mix of projects we have ---+ more projects with higher leverage, some of the busiest practices being ones where the average bill rate might be lower than some others and so forth. The reality is we don't expect that to remain where it is. We expect that the realized bill rates that we get going forward should be moving back toward more of a normal historical rate. We had approximately 10 people that we separated from in the middle of the quarter relative ---+ primarily related to the ending of the project that we had ongoing. That would have been primarily ---+ that would've all been in our environmental and health segment in that period of time. So it had an impact of approximately five FTEs in the quarter because it occurred in the middle of the quarter. Yes, I think that the impact to the top line will be approximately 5% of revenues in each of the first and second quarters, for a full-year impact of about 2.5%. What I had discussed before was that I thought the ---+ obviously, the impact from two FTEs in particular was approximately 1.5% because that's what 10 of the 750 staff that we have, I guess 1.3% or so, in that range being the impact to headcount growth as we move into 2016. That's how I see things happening there. I think the rates that we were achieving relative to the work that we were doing on that project were approximately at the average of the Company. I don't see that that will have any impact on rate. It will have some impact. Obviously, you had that in the utilization or billable hours, and we've adjusted for part of that, but not for all of it, as <UNK> indicated last quarter. Part of this is you make some adjustments to staff, you do some more ---+ really double down on your business development. And you also realize that, in this business area, you're not going to return all the way to the level of utilization you have when you have a major project like that. And that area will operate at a more steady state, lower level once it gets the business development going and adjusts the staff appropriately.

2015_EXPO

2017

VLO

VLO #Well, thanks, <UNK>, and good morning, everyone We're pleased to report that we completed another quarter where we ran our refineries very well at high rates, and also delivered good financial results Our low cash operating cost and highly reliable operations, combined with our advantage footprint focused on the U.S Gulf Coast and the Mid-Continent, enabled us to achieve positive earnings and free cash flow generation, despite the choppy margin environment As always, our team's primary focus is on safety and reliability, and we continue to deliver distinctive operating performance, but remain committed to improvement As such, we're extending our participation in OSHA's Voluntary Protection Program to more of our facilities Moving on to the refined products markets, we're pleased to see a rebound in distillate demand, in addition to the strong gasoline pull by domestic and export customers Downward trends and product inventories and structural shortages in the primary export markets for the U.S Gulf Coast provide an encouraging backdrop as we move into the second half of the year On the crude supply side, we're seeing the impact of the OPEC cuts on the medium and heavy sour discounts, but increased U.S drilling activity and crude production have supported attractive domestic sweet crude discounts relative to Brent in the second quarter As a result, we switched our refining system to a maximum light crude slate in June With current market conditions, operating a system with flexibility to process a broad range of feedstocks is very beneficial Turning to capital allocation, we continued to execute very well on our capital program during the quarter The Diamond Pipeline and Wilmington cogeneration plant are both on track for completion this year Construction is continuing as planned on the Diamond Green Diesel expansion and the Houston alkylation unit, and we're looking forward to seeing the additional earnings contribution from all of these projects once they're complete We continued demonstrating our commitment to stockholders by returning $658 million through dividends and stock buybacks in the second quarter At this pace, we believe we're well positioned to exceed our payout target for the year Lastly, on the topic of public policy, we get a lot of questions seeking our perspective on the many initiatives being worked on by the Trump administration While it's difficult for us to speculate on the range or probability of potential outcomes, we're pleased with the emphasis that President Trump and his administration have placed on the energy sector, and their willingness to discuss the issues So, with that, <UNK>, I'll hand the call back to you Morning, Phil Yes, we are Thanks, Phil <UNK>, last year, at our strategic planning session, we met with the board and talked about the long-term viability of fossil fuels So, the products that we produce And every analyst that we read believes that, and people are doing 20-year outlooks, they all stated that we were going to see continued demand for gasoline and diesel fuel into the extended future This news, I believe that you're talking about, I guess, we saw it a couple of days ago, yesterday or day before, on the EU moving away from fossil fuel vehicles by 2040. And it's not a surprise that things like that get proposed But it's so far out on the horizon and so many things change that it's not something that we would change our strategy today to try to deal with <UNK>, is there anything that you'd add to that? So, <UNK>, just to summarize, I think it's not an issue that we believe is material enough right now that it's something that we need to alter strategy or visit with the board extensively about Boy, that's really a great question Why not let <UNK> take a crack at this, and then we'll see if there's anything to add We have been continuing to work this very actively, and really the administration has been very receptive to conversations around this They are trying to do what's right and to fix broken processes And so, we remain hopeful that point of obligation is dealt with properly, and we also are hopeful that the EPA uses its authority to adjust the RBOs to be sure that the blend wall doesn't become a chronic problem going forward Morning, Brad Well, I mean, that's a good question, too We are producing significant amounts of free cash flow, and we've been consistent in using the capital allocation framework that we've got in place to help guide our use of cash The one thing that we've shared is that we don't have an intention to continue to build huge stockpiles of cash, because Mike's got the balance sheet in a place where with our low debt to cap, if we wanted to do something we could do it So, I think you should anticipate that we're going to continue to execute similarly to what we've done in the last several quarters We always evaluate share repurchase versus dividends, and we would like to be in a position to continue to increase the dividend going forward But to the extent that we have free cash, we're going to use it Mike, anything you'd add to that? Thanks, Brad You bet, <UNK>, and I'll let <UNK> take a crack at this Yeah, <UNK>, I think we said, we look at both, right? We use the 75% of net income as the target, just because it's such a transparent metric But when Mike and <UNK> are looking at our repurchase strategy, and really the use of cash in general, in setting that target, he looks at multiple metrics, right Thanks, <UNK> Yeah, I think that's fair to say, <UNK> <UNK>, you were listening, you missed the tax guidance But we've been so accurate And Doug, just on the capital piece of this So, we are working projects aggressively that facilitate our ability to be very efficient in the export of products And it's just, unfortunately, a little bit premature for us to give you any insight into that But I think that you should expect there to be more communications on this over the next several weeks, as we firm up some of the things that we're working on Well, I mean, <UNK>, it's a good question And it doesn't change our strategy We've talked in the past about a petrochemical strategy, and it's it really not as dramatic or as significant as you might be thinking Currently, we produce a number of petrochemical streams Products like propylene and BTX And the strategy that we're talking about here is really to capture more of the margin available from those petrochemical stream where it makes economic sense to do so The investments associated would be related to any additional processing, and then logistics to store and transport these products We have no plans to deviate from our capital allocation framework, and decisions to allocate capital to these projects will be based on the expected project returns within our notional capital budget So, although these guys are investing in these major petchem projects, that's really not our plan or our focus And we do continue to have a focus on improving our refinery operations We have a focus on integrating from the wellhead into the refineries, and from the refineries out, so that the margin that's captured in the movement of products and crude is something that we capture rather than paying to somebody else And so, I don't think that you should worry that you're going to wake up one day and we're going to be announcing that we're investing in a mega billion dollar petchem complex It's just not on the radar screen for us They're still in development, and we've got placeholders for them So, again, I don't think you should expect that we're going to deviate materially from this 2.5 to 2.7 number, going forward Yeah, I think if you're going to buy assets, you're going to have to be prepared to pay a higher multiple I mean, that's just where the market seems to be today And, so, building them has really been where we've had a great deal of focus I mean, we're looking at assets that are in the market for sale today, but we always compare it to the alternative uses for cash Relative to exports, Rich, you want to give any update? Yeah, but, <UNK>, we really like the idea of the organic growth projects, where we have a great deal of control over the investment profile and the project execution You bet Good morning, <UNK> <UNK>, the way, and <UNK> can talk in more detail about this, but the way that we work our projects, we look at the target for the year And we've got a fairly dynamic approach to doing this, where <UNK>'s engineering staff will work the projects, and then we review them periodically to see which ones we want to continue to proceed forward and to invest capital in And so, it's not like we look at everything in the first quarter, second quarter, third quarter We're looking at them throughout the year Any color you want to add to that? Yeah, so the way that we've talked about this, is we wanted to illustrate the fact that we did have attractive growth projects in place And so, half of that capital is deemed to be refining projects, which have the higher 25% return threshold Could be 24%, could be 28% But they're typically in that range or better And, on the logistics side, we know that those tend to be lower-risk projects, and so they tend to have lower return thresholds And so that's where we use kind of a 12% to 15% threshold for And that capital is split 50/50 between those two categories And if you just extrapolate out where that would take you, you get to your $1 billion to a $1.2 billion of incremental EBITDA resulting from a capital program that would be executed every year for the next five years Thanks, <UNK> Morning, <UNK> Thanks, <UNK>

2017_VLO

2017

HMSY

HMSY #Yes, we're doing a fair amount of detailed work now, Matt, just looking at the IP investments that we could make and how we can simplify our IT infrastructure. So, no dollars I would give specifically now. We're working on that. And we will expect to have more commentary as we give our year-end call. And some of it may be shifting where we're spending some current dollars, as well. But I do think we believe that simplifying some of the infrastructure can help speed our ink to green; also help us reduce costs and actually enhance our yield activity. Now, we've started that that process, obviously, with some of the big data investments we're making, but that's kind of on the front end in managing the overall data assets that we get. I'm talking more on the operational application platforms that we have more work to do on. I think we're going to be methodical when we do that to make sure we are not causing any disruptions to our core operations. So we could see some increased spend there as we go into 2018, but we will give more commentary as we give our annual guidance in February. I think we expect it to be growing as we go into 2018. Again, we will give more specific guidance, but I do think we're getting traction with the customer base. And so I do think we will expect it to be growing as we go into 2018. We will give more commentary on the degree of that as we give our annual guidance in February. Well, I want to thank you all for attending our call. As I said, we're diligently focused on providing the kind of ---+ generating the kind of financial results we know this Company is capable of. We are bullish about our future and the new product offerings that we're pulling together in care management and member engagement. And we look forward to speaking to you again on our full-year 2017 call in February. Thank you.

2017_HMSY

2017

IVZ

IVZ #Yes, very much, thanks, Marty So looking at our schedule on total assets under management, we saw quarter-over-quarter, total AUM increase $23.5 billion or 2.8% That was driven by market gains of $13 billion, positive foreign exchange translation of $8.1 billion, we saw $2.8 billion of inflows into the money market capability Also $0.2 billion of inflows into the QQQs But these factors were somewhat offset by long-term net outflows of $0.6 billion Average AUM for the second quarter came in at $849.2 billion, 2.3% versus the first quarter And then looking at our net revenue yield, that came in at 42.7 basis points and our net revenue yield, excluding performance fees, was at 41.8 basis points, so that was an increase of 0.9 basis points over the first quarter The positive impact of foreign exchange and the change in AUM mix added 0.7 basis points One additional day added 0.4 basis points These positive factors were then somewhat offset by the impact of a reduction in other revenue, which acted to decrease the yield by 0.2 basis points Moving on to Slide 12, that provides our U.S GAAP operating results for the quarter As usual, my comments today will focus exclusively on the variances related to our non-GAAP adjusted measures, which can be found on Slide 13. Looking at Slide 13, you’ll see our net revenues increased by $39.2 million or 4.5% quarter-over-quarter to $906.3 million, which included a positive foreign exchange effect of $9.1 million Within that net revenue number, you’ll see that our adjusted investment management fees increased by $54.3 million or 5.6% to $1.03 billion This reflects higher average AUM as well as an additional day during the second quarter Foreign exchange increased our adjusted management fee by $10 million Adjusted services and distribution revenues increased by $4.9 million or 2.4%, reflecting our higher average AUM in the quarter FX decreased our adjusted service and distribution revenues by $0.1 million Our adjusted performance fees for the quarter came in at $18 million, and these are earned from a variety of investment capabilities, including $7.4 million from accounts managed by our U.K team, $6 million came from our private equity business, $2.7 million came from our Asia Pacific investment teams Foreign exchange increased performance fees by $0.3 million And in the last two quarters of 2017, I will just update my guidance here, we expect performance fees to decline to roughly $5 million to $7 million per quarter, which, again, is subject to my usual caveat, that forecasting performance fees is an imperfect science, and certainly one that we don’t have a huge line of sight to The adjusted other revenues in the second quarter came in at $17.3 million, and that was a decrease of $3.5 million from the prior quarter It was driven by lower real estate transaction fees, UIT revenues as well as other front-end load fees Foreign exchange increased our adjusted other revenue by $0.1 million Again, looking to guidance here, looking forward to the second half of 2017, we would expect other revenues to remain near the second quarter levels at $16 million to $17 million per quarter Moving on down to the third-party distribution, service and advisory expense, which we net against gross revenues, that increased by $16.8 million or 4.8% That’s consistent with our increased revenues derived from the retail-related AUM as well as the additional day count in the quarter Foreign exchange adjusted our third-party distribution, service and advisory expenses by $1.2 million And before I move to the expense area of the P&L, let me try to summarize the revenue guidance I just provided in terms of net revenue yield So looking at the second half of 2017, we have two offsetting impacts We would expect to see our net revenue yield, excluding performance fees, increase by roughly 0.5 basis points, and that’s driven primarily by the increase in day count, as well as the asset mix in the second half of the year This increase, however, is going to be offset by the acquisition of Source assets, which will be dilutive to the firm’s net revenue yield As we had talked about, that’s about $25 billion, and somewhere between 16 to 17 basis points As a result, the overall net revenue yield, excluding performance fees, should remain actually fairly consistent with the second quarter level at 42 basis points for the second half of the year Again, this guidance assumes flat markets and foreign exchange from today’s levels All right, so let’s move to the expenses If we move on down the slide, you’ll see our adjusted operating expenses at $549.8 million, increased by $9.8 million or 1.8% relative to the first quarter Foreign exchange increased adjusted operating expenses by $4.3 million during the quarter The adjusted employee compensation line item came in at $360.6 million, that’s a decrease of $0.6 million or 0.2% This is driven by a decline in seasonal payroll taxes That always happens first quarter to second quarter But it was offset by an increase in variable and other compensation costs, a full quarter of higher base salaries effective March 1 and an increase in deferred compensation expenses for the awards that were granted in the first quarter The foreign exchange impact for our adjusted employee compensation came in at $2.5 million Looking forward, again, to the guidance, we’re assuming AUM and foreign exchange flat to current levels We’d expect compensation to increase ratably to about $370 million by Q4. This increase in forecasted compensation costs includes the – several factors, including: The impact of the Source acquisition in the third quarter; investments that we’re making behind some of our key strategic initiatives, including building out our institutional business, solutions, ETFs and Jemstep as well as resources that we are adding to meet the growth in regulatory and compliance requirements on a global basis Our adjusted marketing expenses in Q2 increased by $4.7 million or 18.8% to $29.7 million That reflects an increase in advertising and client events Foreign exchange increased our adjusted marketing expense by $0.3 million Marketing costs should stay roughly flat to current levels until Q4, at which point in time this could grow to somewhere around $36 million to $38 million, consistent with the historic seasonality that we’ve seen in the past The adjusted property, office and technology expenses were $88.7 million in the quarter That’s an increase of $3.1 million or 3.6% over the first quarter, due to higher outsourced administration and software costs Foreign exchange increased our adjusted property, office and tech expenses by $0.7 million For the remainder of 2017, we see property, office and technology costs coming in between $92 million to $94 million a quarter This is due to the impact of large technology-related projects that have and are coming into service as well as the outsourced administration expenses driven by the activity within our European cross-border business which should move the activity Next, we go to adjusted general and administrative expenses at $70.8 million That increased $2.6 million or 3.8% quarter-over-quarter The G&A increase was largely driven by professional services costs associated with the regulatory changes and compliance that we’re seeing on a global basis Foreign exchange increased our adjusted G&A expenses by $0.8 million We would expect G&A as a line item to remain at similar levels as in the second quarter or slightly elevated levels for the remainder of 2017, somewhere between $70 million and $73 million per quarter So finishing on the topic of expenses, I’d like to emphasize that I do believe the organic and inorganic investments that we are making will serve as key business differentiators for Invesco, and therefore, are critical for our long-term success in what we see as a rapidly changing competitive environment With that said, we will continue to be highly focused on cost optimization efforts in order to remain as efficient as possible and to help fund these investments So finally, moving down the page, you’ll see our adjusted nonoperating income decrease $10 million compared to the first quarter This decrease was primarily due to the gain realized on our pound sterling-U.S dollar hedges in the first quarter And moving to taxes, the firm’s effective tax rate on a pretax adjusted net income basis was 26.7%, which brings us to our EPS at $0.64 and adjusted operating margin, 39.3% So with that, I’m going to turn it back over to Marty I mean, I do think we’re still pretty optimistic about the overall story on the institutional side, for sure The fee rate on flows are at a much higher level, continues to be sort of record highs on the aggregate basis points And then, that weakness, as you suggest, is being offset in other locations Europe is quite strong So again, we – I think it’s more just an aberration around just a confluence of things that happened in second quarter as opposed to a real inflection point indicating that something’s at a whole new level of decline So the thing that I would say is we have pretty good line of sight on the won but not funded, and that’s what I’m referring to right now When redemptions happen, which they can, that’s harder for us to predict And so we did get caught offsided by one large sovereign wealth outflow in the quarter, which was pretty sizable, $1.2 billion And those are hard for us to really see We don’t expect those to recur, but again, we don’t know And Pat, just to remind you, I mean, we did come out, I think it was last quarter, in terms of our position with respect to the use of commissions on research, and so we said that we were going to continue to focus on, within the – of our ability within MiFID II, to use CSAs to fund <UNK>PAs, which would mean that there’s not a substantial impact on cost for us, as long as competitively that’s still, and from a regulatory perspective, that still makes sense The other thing is, just in terms of positioning, and we have a substantial number of people on the ground, have for a long time, in Continental Europe So the idea of what would ultimately happen, in terms of having risk and foreign oversight of capabilities in terms of this passporting topic and so forth, is another thing that I’d say we feel probably better position than most others in the region So overall, I’m not saying there’s no cost there There’s probably some cost, but I don’t think it’s going to be a substantial material cost at this point in time Yes, really not going to add much more to what you said, Marty, other than, I think, quantifying In terms of incremental margin, I mean, I think we’re probably at a level that’s more in the 40% to 50% range incremental margin, as opposed to sort of the 50% to 65% right now, just because of our imperatives to make sure that we build out the capabilities that are going to be critical to our success and trying to do that now, but responsibly in the sense that we’re continuing to find opportunities to save and to fund those So you’re going to see operating leverage, you’re going to see margin expansion as we grow All those things should absolutely continue to be in place, but maybe not quite at the level of lower investment type of positioning So I think it is our capital policy and approach remains in place Obviously, we smartly, I think, are pausing on the buyback just so we can fund this acquisition The opportunity set for things in this industry around consolidation is at a high level, too So I’ll just generally say that we’re seeing probably more inorganic opportunities than we have in the past Certainly, that doesn’t mean we’re going to do something else other than Source But I think our general position is one of this is a unique and extraordinary time, and so we may continue to be thinking about the balance of cash to return, versus opportunities in the market that might not show themselves again, so And again, it’s a little bit hard to say exactly, but we are generally, I’d say, back in our normal return mode post-Source Well, I tell you, I mean, into the second half, certainly a substantial part of the expense pickup is just related to Source Again, you probably have a reasonable sense of kind of the revenues and expenses for that business based on what you know about that business, so you can kind of do the math and see where that’s breaking out The optimization impact is going to be most felt in 2018, because we have some very large-scale projects that are not going to get completed until 2018. And it’s only until that happens will we see sort of the remainder of the – to the full 50 run rate show up So I’d say, through the second half of this year, there’s definitely some offset of the investments through optimization efforts, but not incrementally a lot So I don’t know if that fully answers your question, but I’d say at least half of the expense pickup is due to Source and the other half is just due to the investments that we’ve been making, generally Marketing’s going to be roughly flat to what it was in the second quarter, and it’s really just in Q4 where it goes to that higher level I think this is not a structural topic I think it’s more building around what we see as absolutely key points of differentiation in growth that we want to be ahead of as opposed to sort of running behind competitors and the industry trends So I think we’re doing a lot and we’re really, I think, getting through the bulk of what we need to get through It will probably persist into 2018, I’d say, for us to get to sort of an equilibrium point, but I don’t think it’s a structural ongoing theme in terms of incremental margins for us Yes, I think the 50% to 60% is probably post-2018, based on what I just mentioned in terms of the higher level of investment and we’re probably setting expectations, realistically, that would be in the more 40% to 50% for this year, next year So that is kind of where we are right now We haven’t, obviously, fully completed our plan around what we’re doing in 2018, and a lot obviously will depend on where the markets go and where the mix of products go We’re definitely, I’d say, it’s a good thing that’s very helpful for us is the fee dynamic is working in our favor, with the strength that we’re seeing in the cross-border business, and as Marty said, it just continues through July, very strong flows, that is very helpful And the fact that the pound is now at 1.31 and strengthening, also is going to be extremely helpful for our yield So that could actually help our net – my incremental margin discussion But assuming flat markets and flat FX is what I’m referring to Yes, we have not provided a lot of transparency into the synergies topic Again, in terms of the materiality, it’s all going to be within our guidance that we’ll obviously provide for 2018 and beyond And certainly, some of it is already baked into the estimates that we provided you It’s mostly a growth topic for us, as we said in the past There’s definitely some overlaps that will allow for some cost take-out, but the real benefit for this platform is us growing through flows, and as Marty mentioned, it is flowing beautifully, right, very nicely And so we think we can actually significantly improve flows out of that business We are looking at a lot of new product launches, so really, the – it’s going to be more of investing behind the business than taking cost out So that’s why we really have been focused on it Yes, and the only I would just say is when I was talking about – I wasn’t necessarily referring to large-scale opportunities, because I think we’ve talked about those are hard to do, there’s a lot of risk, there’s a lot of complication So I think the types of things that are most attractive to us would be things like Source, that are smaller, that we could plug in, gives us a platform or capability that we didn’t have before and that we can grow quickly So that’s really, I think, in terms of what we would be thinking about more, than large-scale Yes So I mean, and Marty, you can pick up on the theme, building our institutional business is something that we’ve been talking about in the past You know, I think we have been more retail-focused as a firm and for us, in terms of getting to being seen as a premier institutional player, requires a lot of dedicated support and infrastructure, risk and analytics and reporting and a variety of infrastructure that we just didn’t have in the past That really, [indiscernible] manager, there’s a whole infrastructure around building that out Thought leadership is another kind of element So that’s – handful of the people, but very capable and good people, that help drive that cost Solutions is another area that we talked about and that is, again, a very – an area we’ve been in, but really haven’t built a lot of strong capabilities around, particularly around the technology, and as I mentioned, the analytics for us to be able to sort of go off and really, almost like in a lab, figure out how to solve our clients’ problems through a variety of folks that are a lot smarter than me, PhDs and others, that are thinking about those issues So that’s really that group and that appeals to both the institutional side, but also the retail side And then they are very helpful, in terms of thinking about Jemstep as well, in terms of providing models and solutions to the retail clients ETFs was the other area that you – we mentioned, and that’s more inorganic, and obviously Source, for us, but certainly, the ability to take some of those capabilities and port them over to the U.S and think about the digital platform and being the best-in-class provider of smart beta and differentiated ETFS is still kind of what we’re trying to do and being – not be a distant fourth but be a strong fourth, at least a bit in that space And Jemstep, they’re really savvy in digital advice, which I think is going to continue to be a major opportunity and certainly, firms that have it are going to being differentiated from those who don’t So we need to have a state-of-the-art capability and it’s one that requires a whole different set of skill sets, and so that’s kind of the other big bucket And the other one I mentioned, which you know, is the regulatory and compliance, which is just never-ending That’s all, I mean, really, the biggest detractor from that category has been stable value So that was substantial outflows this quarter So it’s a very low fee, 10 basis points kind of -ish So again, when I think about the flows in versus out, our net revenue yield is, by far and away, moving up in that category So I wouldn’t take too much out of that stable value outflow ETFs will be almost immediate, right, because we have Source coming online <UNK>eally, a result of these two dynamics One, we’re seeing the fee rate improve due to the mix and foreign exchange, so that’s like a 0.5 basis point upward tick, which has been getting flattened out, just purely from the consolidation of the $25 billion, at 16 to 17 basis points of Jemstep – I’m sorry, of Source So based on what we understand in Europe, which is where this conversation has been most focused and relevant, client reaction has been pretty much absolutely accepting of that perspective We’re not alone in terms of the global – a lot of the global managers have come out with a very similar statement So it’s actually been pretty much accepted Ultimately, I think, when – the real trick will be in terms of the actual disclosures And when it will ultimately get implemented, we’ll have to see how all that goes But certainly, in terms of the position, it’s been accepted without much of a, any pushback In terms of the global side, I don’t know, Marty, if you think that we’re thinking about doing that globally? I don’t think at this point we’re in a position to say what we’re doing in the U.S different than normal Penalties, like I mean, that privacy rule, where, if you get it wrong, it’s 2% of total revenues could be your fine, right Pretty substantial element So I think it is the regulatory – the number of regulatory changes plus, I think, the amount of resources that regulators are putting behind the asset management business now relative to two years ago has also increased, and so the level of being absolutely on top of it is – the bar has risen across the globe in terms of what is required Yes, and probably even with some of the rules around MiFID II and the transparency on fees, and whereas there maybe not has been as much, and certainly, the idea of no inducements provided for manufacturers, distributors and how that gets implemented, feels sort of like <UNK>D<UNK> part two In Europe in some ways, and we know that that’s focused on just pure management fees It will probably drive more adoption of lower-fee products, still within the hands of European retail clients as opposed to institutional clients who are using ETFs predominantly When you talk about outside systems, are you talking about Well, the commission side, again, that’s the part that we’re saying would probably stay in terms of being paid through these <UNK>PA accounts funds and clients paid for, and transparency for research So that’s the current approach So that would be largely sort of a continuation of existing P&L and practices other than sort of having those structures in place So there would be no significant P&L impact to Invesco Yes, positive So the net revenue, the flow mix dynamic, given the headline was kind of not great in terms of the net flow number, I was actually really pleased If you peel that back and you understand what’s flowing in terms of the strong flows coming into cross-border – into alternative opportunities which are certainly at a higher – being very active capabilities So yes, when we were talking about sort of a 0.5 basis point pickup into next, the last half of the year, that’s all due to the positive trend around the flow dynamic that we’re seeing, even though it didn’t really show up in terms of the headline flow number The big outflows, as I mentioned, stable value, which was single – 10 basis points, and we had the individual real estate passive outflow, which was a single point kind of – UITs as well, which is something that, I think we all understand that dynamic It’s something that continues to be a bit of a detractor to the flow story, but not one that I think materially impacts our yield So overall, I’d say that people should be looking beyond that headline number and focus on what’s going on, in Europe in particular, because that is going to have the biggest impact on our net revenue yield

2017_IVZ

2015

ASGN

ASGN #<UNK>, do you want to ---+ Yes, Tim actually, not true. If you look at our earnings discussions the last couple of quarters, we have not highlighted government as a fast growing. I think we've performed better than the market in the government side but it's been coming down for a number of quarters now and not double-digit growth. So I think that's what we reflected in our earnings call. I think if you go back and look at budgets in the government sector, same sectors, defense and homeland security, you can see a pretty tight correlation. Well Tim, I have watched Northrup Jones dynamics and Lockheed Martin earnings calls and while their revenue numbers were not good in Q1, they were optimistic. I hope they are right and I trust they will be because those would be examples of opportunities for us. But it has to flow from the government to them and then them to their vendors that support them. So I think there's a feeling of optimism out there in the government defense sector but it has to unfold. I think that is an important point that <UNK> made is, Tim, most of our business in the government services is through a government contractor versus direct to the government. <UNK>, you and <UNK> might want to address that in terms of how we allocate our resources among areas where we see opportunities which I know that we are doing but you can probably provide better color on it than we can. Let me start. This is <UNK>. On the Apex side, Tim, for sure. And I think it has happened long before this discussion right now. We have certain areas that are not growing as fast and we have shifted resources toward midmarket accounts or technology accounts or other possible accounts. So some of that has been going on. There are other accounts, among our top accounts particularly, where there is still flow. You have to be there. When you're supporting these accounts, you have to support whatever flow of recs they do show. It may be negative, because in many of these accounts we're the number one or number two vendor. So you still have to support them. It's just negative growth when you look at it year-over-year. When you look at our comps from a year ago, it varies. But yes, we are shifting resources within these sectors. At the same token, there are still some of these areas, when we look forward, we think are good growth opportunities. So we're going to still put our best foot forward. <UNK>. Tim, on the Oxford side we do the same thing. We're constantly deploying the resources where we need them. What is the fastest growing. We train people differently on different skill sets and all that kind of thing. Obviously, we're organized more on discipline versus industry. But as the same time, as <UNK> mentioned, we've changed our strategy a little bit. We're going after some larger accounts. So we have moved some of our resources specifically, some of those sales resources, into those functions. But overall, it's an ongoing basis and we always do it. It's really across all of our disciplines. It is across the healthcare technology area as well as some of the ERP stuff and some of the other disciplines we do. So instead of a onesie twosie we may be able to sign three or four consultants to a specific project. But Tim, to make sure that we ring fence this, excluding the healthcare IT business which you know does carry a lower margin, the IT staffing business that Oxford is doing is still well above a 32.5% gross margin. So it's not like things are being heavily discounted. It's just things may be moving ---+ I think the peak at Oxford in 2007 may have been a 35% gross margin. I don't know if we're getting what the gross margin is for Oxford International but it is still well above 30%. Absolutely. We are. And we're seeing lines blurred in certain areas and I'd rather wait a little bit to talk about that with you. Our job is to constantly look for emerging technologies or changing and changes in customers buying behavior and who is controlling spend. And so, as you know, we spend a lot of time thinking about it strategically and a lot of our marketing dollars are spent on understanding the marketplace versus just brochures. And we have some thoughts about that that we hope to share at some point with you. <UNK>, could I add to that for a minute, <UNK>. An example of that, <UNK>, is we talk about serving 13 major skill areas within IT but in the last year and certainly in the last half of the last year, we have expanded to 14 and 15 skill areas, mobility and cybersecurity which we have invested in as part of this buildup. So <UNK>, I think that supports what you are saying. Well, you hit the nail on the head, <UNK>. It's still very profitable EBITDA margin but it's not nearly, the incremental EBITDA margin is not nearly as high because we are investing aggressively in internal headcount. If we had not done that, we could have had an enormous incremental EBITDA margin. It probably would not have shown up in the revenues in the quarter or so but we would have felt it later on. We're in a cycle. We want to support the growth and get as much as we can. And so, we're not going to be overly piggish and as you know, our EBITDA margin on perm is north of 22%. I'd rather grow that overall revenue than scrape another 10 percentage points on incremental EBITDA margins by holding the SG&A constant. If my memory serves me correct, Apex's gross margin was 16.5 ---+ excuse me, Apex's growth rate was 16.5% year over year in the first quarter of 2014, 13.8% in the second quarter of 2014, 10.1% in the third quarter of 2014 and 9.5% in the fourth quarter. So the growth rates came down in the third and fourth quarters. It should get a little bit easier on a comparison basis in the latter half of the year just because of the growth rates coming down and hopefully, because these new hires start to become productive. Just to make sure that we are clear. <UNK> was referring to the Apex piece of the Apex segment. That's right. Apex IT, not Lab. <UNK>, I want to be clear. We're not blaming the market and we're not saying that others aren't growing faster. We just think that the particular construct or mix of our customers within these industry verticals has restrained the normal growth rate. With that said, we tend to take a longer-term perspective and we're not going to ruin the natural purchasing rhythm with our customers by overreacting and starting to work on stuff that we just don't think is high-quality business on a longer-term basis. Maybe people are going to criticize us for this but we clearly could have grown faster it at Apex we wanted to start dropping the gross margin and bidding on work that is not as sticky or meaningful and we have elected not to do that. We don't think that there has been a wholesale shift in the end markets that are causing our revenue to slow. Quite the contrary because when we do our customer satisfaction and we look at our ranking within these major customers, we're not dropping. We're staying the same, and/or we have come up a little bit. So it's not like we have gone from third to tenth and someone else has gone from tenth to third at our expense. This is mostly a complete across the board decline in spending. And one staffing firm may have a bigger pigeonhole in a bank than we do or vice versa. We're not being hardheaded. Trust me, there's plenty of focused passion and focused on where we can expand in a sustainable thoughtful fashion and the market still remains relatively productive. All we are saying is it is much more productive in certain verticals than others and our construct of mix leans today more heavily in the unproductive industry verticals than the productive industry verticals. And it's served us well in the past and it is hurting us now and it will serve us well again in the future. I don't know <UNK> if we gave you the Lab Support business growth rate. <UNK> can give it to you. <UNK>, for the Apex segment, it was 5.7% in total and Lab was 5.2%. Yes. They had a pretty good 2014 and we always say they are the most directly correlated. To GDP growth. And we just got some GDP growth numbers that were pretty anemic but we feel the prospects there are good both because of the market and what the customers that Apex can share with it. And the focus on being easier to do business with it on a large account scale basis. Yes. I think that's what the prepared remarks is. Including the contract. Yes, $22.5 million. We appreciate your time and we look forward to visiting with you again in the near future.

2015_ASGN

2015

PFS

PFS #Okay. I certainly think that we're spending a few bucks, certainly we did with systems to make sure that our stress testing can be utilized certainly through our loan portfolio. That has been done. Right now I think if you look at for 2016, between $250,000 and $300,000 would be the cost that we think of more in the way of preparing for, you know, [defast], making sure we have the right modeling in place. And certainly looking at our policies, because you can't just take what you had. You had to move them up and make the fill gap analysis, so we look at a consultant in that regard. Absent Washington, which I'll be down there this week coming up to talk about legislation that might be able to move that out. I don't hold my breath, but I certainly hope that there's an opportunity and I think the regulators agree that some of the things that are being put on institutions of our size, and even some that are a little bit bigger, are a little bit over the top. But we want to make sure we at least have the voice to, you know, see if we can get some of the regulations modified. That would be ---+ that would definitely be it. Right now we don't put in there and put a deal in there. But again, if it's the right deal for our shareholders, we would ---+ and it's priced correctly ---+ we'll go through that. And everybody kind of knows what's going to happen, but that (inaudible). Organically we would not ---+ we'd model it out. We would not hit that number so the earliest would be 2017 just because of normal cash flow, run off of pipelines, and the portfolios. Thank you. Well, we thank you and we look forward to concluding 2015 on a high note. And we'll speak to you again in January. In the meantime, enjoy what's left of the World Series and thank you again for joining us today.

2015_PFS

2015

RDC

RDC #That's a good question and there's a lot of discussion on that around here. There's a lot of opportunities. <UNK>, the answer to that is that we consider all opportunities and we think about them and a few parameters around it. Asset prices for an asset that has not got a contract have to be at attractive levels and for assets we would be interested in, we're not at those levels, we're not at that price level as yet. If there is an opportunity to put something onto a longer term contract, we would certainly look at it, but we haven't managed to realize any of those in this market, as you would probably have guessed. So I feel given where the asset prices are, they're not low enough yet. Also, we do value our investment grade credit rating and we just need to make sure that we balance how we feel about the market going forward and the price of the asset. I would say, though, the concept of buying some high-quality distressed assets is something take we find attractive, but we won't be moving on it until the parameters are in line and I don't see that being any time in the short term. <UNK>, I think it needs come down a chunk more where it is. We see so many different opportunities, but it needs to come down somewhat. Something vague, right, but we're not at the levels where it would be attractive yet. Given the outlook we see in front of us. <UNK>, we're always evaluating every opportunity and as you probably guessed, we're not short of people bringing us ideas; however, we wouldn't comment on anything specifically on M&A. I would say that I would be pretty surprised to see some M&A at this point with a considerable cash component, given that we've seen a number of contractors cutting their dividend. That's spot on. Thanks, <UNK>. Thank you, <UNK>. Thank you, <UNK>. Appreciate it.

2015_RDC

2017

ROCK

ROCK #Thanks, <UNK>. Good morning, everyone, and thank you for joining us today. 2016 was another successful year for Gibraltar. We achieved excellent financial results and executed well on all four pillars underpinning our strategy, and we are continuing to drive the sustainable transformation of the business. Since we laid out our strategy two years ago, we\ Thank you, <UNK>, and good morning, everyone. Let\ Thank you, <UNK>. Two years ago, during our Investor Day in March 2015, we presented this slide projecting the five-year path of financial improvement using the dotted and solid lines that we could deliver, based on the combination of actions resulting from each of the four pillars of our strategy. On slide 9, we\ Well this is <UNK>. I'll start on that multi-part question, <UNK>. To start with, we finished very strong in the segment and for the full year 2016 it was a 17% operating margin, well above what we had imagined, but still in line where we were at the end of the first three quarters of 2016. So that high performance certainly extended through the full year. And what we expect in our 2017 guidance for this segment is going to be in the neighborhood of 15% operating margins. So we're not anticipating a meaningful sharing of those gains as we try to accelerate the top-line growth. So it's still going to be a high performing unit inside Gibraltar, just not the outsized proportions that it had in last year. Does that help at least one part of your question. Well let me put a little finer point on the 15% statistic. Only 5 percentage points of those 15 percentage points are attributable to RBI's top-line change this quarter a year ago. So the vast majority of the balance, the vast majority of the 15% is coming from product lines that we've exited, that we had reported sales in the year-ago's first quarter. So that's a strong fine point that I'd like us all to appreciate. Let me give some context. I think <UNK> did a good job around discerning the difference in the numbers, and the materiality of some of the portfolio issues that create some tough comparables for the first quarter versus the prior year. And also, at the end of the day, you're right, the one core operating component ongoing that shows the shift in revenue is tied to the Renewable Energy piece which is the most significant acquisition we've made. So, let me start first and foremost, the market dynamic out there hasn't changed. There's still a market that's going to grow today and long term based on our original research that we continue to validate that is going to have a 9% to 10% CAGR. So, we have no reservations that if we buy into the right space and do we have a belief that renewable energy and specifically solar is going to continue to play an ever-increasing role, regardless of policy and shifts in tax credits. So that's our opening on this. So now it's a question of how are we affected in ---+ from quarter to quarter ---+ activity relative to the market dynamics as it relates to policies, procedures, and the related tax credits. So as we commented in the last quarter, we expected underperformance in this segment relative to its prior-year comparable 2015 where there was a forecasted end of the ITC tax credit, and there was a material drag forward of business into that fourth quarter 2015, that we expected would create a very defined and a material disadvantage from a comparable on a year-over-year basis. That didn't materialize to the extent that we expected, and as a result we got closer. We had a better fourth quarter in 2016 than we expected, and that was primarily driven by an overperformance in our RBI Renewable Energy segment. What also happened though was half of that, approximately, lagged of restarting of projects. It created a window of a lag that stretched from half the materiality in the fourth quarter of 2016 to drift into the first quarter of 2017. So I would say that's a very material aspect of the downturn and short term in terms of our backlog. The pricing reference is during the same period in 2016, when we used to ---+ we bought a private business that used to have a philosophy of pretty much competing and wanting to win on just about every job in their ground mount space. And we thought, in addition to all the cost improvements in terms of the investments, the rolling out of new systems, the resourcing of raw material in a more cost-effective way as well as freight management, that we wanted to refocus the core talent in our organization through projects that we really thought leveraged our higher-value value proposition. So, we've tempered the top line a little bit so that we didn't stretch out into less predictable aspects of our value proposition in terms of its delivery. So what we're doing now, if you look ---+ and I'm going to turn it back to <UNK> because he's going to talk about backlog and what we see in a real quantifiable way coming out of the fourth quarter into the first month January, and then subsequently the balance of the quarter and going forward. And to be quite honest, it's a very short-term issue for us. And it's less about pricing and it's more about making sure that we're focused on the right projects going forward. And we're going to release the teams a little bit to take on more volume, now that we've got the capacity additions in house in terms of the additional roll forming equipment that we didn't have for the first two-thirds of the operating year and the back end of the year. Despite the margin enhancement, we were really just running in some of those new roll formers and in two of the three cases in new facilities with new staff. So there is a method to the madness, so to speak, in making sure that we're aligned in terms of our resources. If we were going to take that new and incremental revenue opportunity, we didn't want to do it in an inefficient way that stretched our people and our equipment. Today, I think we're coming through that. So that's the order of events. So, at the end of the day, and then <UNK> will speak to the rising backlog numbers that we have, we feel very confident that we're going to get back to at least the 9% to 10% CAGR that the industry provides us. Recognizing that in ground mount which is one of the four end markets we've gone from zero share, to 22% share, to touching into 30% share with opportunities to expand into the adjacencies as well. So no lack of confidence on our part that we're in the right space with the right company and the right team of people. <UNK>. And to supplement <UNK>'s points, <UNK>, our orders through the month ---+ the quarter-to-date orders thus far here in the first quarter of 2017, RBI has already booked more orders and dollar value through half of a quarter than they did in all of the fourth quarter. And the expectation is, what they've got planned for quotes out and securing wins on projects for the balance of the quarter, they feel very confident that they're going to be back to a normalized order intake. So we've over performed and will over perform the shortfall that we had in the orders here in the fourth quarter, and that's why we continue to believe it's going to be just a short-term one-quarter effect. Thank, you, <UNK>. Well we're anticipating for the full year 2017 that this segment is going to have a 15% operating margin. And each of these next three quarters Q's 2, 3 and 4 would be favorable comparisons to its prior-year quarter as a result. Because this is not only a return to normalized order intakes, but we've also got improvements coming from their continuing programs on their cost structure and the effects of new product launches that will be coming forth after the first quarter. Let me draw ---+ if everybody who has got access to the presentation slides, I\ It is, but you can see the top of 2016, the 2016 chart, we've tried to normalize in arriving at base revenues, so that 8% rise is really their base revenues, RBI only, excluding Nexus. So Nexus is going to be incremental, but we're looking ---+ RBI itself has got an 8% rise coming. I'm just scanning one of my aides here. We're going to continue to - actually, the short answer is, there will be margin expansion out of our Residential segment that we are expecting. We're going to be, and now it's already at a healthy level, so its rate of expansion won't be as significant, but is still going to be climbing higher than 2016. Industrial & Infrastructure, I'm pleased to say that we're expecting a margin expansion there. The rate is going to be substantial because we're exiting lines that we've announced that had ---+ they were drags in 2016. So their rate of improvement is the greatest in 2017 over last year but as it climbs to 10%. And in Renewable Energy, I need to correct an answer that I gave to <UNK> <UNK>, but I'll do so with answering you, <UNK>. We finished up with our [Renewable] segment at 17% for 2016, and we're planning 2017 to be at a 15% annual margin. So after we get past the first quarter, we'll still have margin comps against 2016 that will be not as strong but we're hoping to put more money on the top line and more absolute operating income on its bottom line. I'll start by ringing the bell on what our businesses have already done. So as you know, there are step changes in working capital. It's not one of these P&L sustaining year-after-year sustainment themes of cash generation sources. And in inventory specifically, if I dialed back I think it's ---+ if I dialed back 21 months, just as we were getting underway in March of 2015 with our 80/20. And if I adjust our inventories and took our acquisition's inventories of Nexus and RBI's inventories at the date of acquisition, and we added it to Gibraltar's inventories then and compare it to Gibraltar's inventories including Nexus and RBI at the end of December 31, 2016, our inventories are down $50 million. On a starting base of $140 million. I've been in accounting for a long time with manufacturers. That's an astounding drop and source of cash in such a short period of time, but it talks to the power of 80/20 simplification. So it's a long-winded part answer to your question. That from inventory, I think there's likely more to go, particularly as we in line and only manufacture internally our highest-volume products. And turn those faster and faster through higher utilization throughout the course of a manufacturing day, a week, month, and year, and we outsource the product SKUs and inventory holdings for our smaller volume products that would be produced and held by our third parties. So I think there's more to go in inventory, but I think the lion's share of inventory, that $50 million ---+ it's gone from $140 million pro forma 21 months ago down to $90 million. I don't think there's another $50 million coming out of inventory in the next 24 months, but I do think there is additional working capital improvement I think that we'll get out of the combined receivables payables action that will be beneficial and could further improve a source of cash, again step downs in the next couple years. And besides that, I think we're also going to get some meaningful reductions in our fixed-asset base, which will, again, be one timers but it's outside the working capital element of sources of cash. So a long-winded answer, there's more to come but it may not be ---+ it certainly isn't the same degree of what inventories generated for us. And, Dan, if you step back even further and look at the in the same context the working capital, the invested capital that we're working on prior to the two acquisitions. If I recall, the numbers in 2014 were somewhere in, total invested capital was mid $600 millions, $640 million. At the end of the day today, I think we finished somewhere in the $530 million range, $530 million-$540 million, so were down $100 million in terms of invested capital, which includes the acquisitions being rolled in there. So in addition to the inventory component of it, the fixed assets and all the other aspects of an acquisition whether it's intangibles and so on and so forth. So very impressive progress in terms of making more money and using less from an invested capital to ultimately drive the kind of returns we're getting. So is there more. Yes, absolutely. To <UNK>'s point, in inventory there probably isn't another $50 million, but certainly as we structurally change some of our footprints to focus on manufacturing the A items for our largest customers, and to some degree outsource some of the B items. <UNK>l that is going to lower our inventory levels, both at raw material and the elimination of work in process, which by and large still exists, because we still to some degree make in batch-based processes by and large. And then there is going to be a reduction in finished goods inventories on the highest new products without compromising service. Simply because the ongoing flow through of those dedicated lines will ensure that we can react in a more timely way to the marketplace, instead of pre-building three months-worth of inventory in order to guarantee a level of service. So the corresponding part of that is that as we focus on only making A items, we're probably not going to need the same degree of fixed assets. So yes, I think if we dropped $50 million in inventory, which had originally the equal weight to fixed assets on our balance sheet, we probably only dropped just over $10 million in fixed assets. So I would expect ---+ you put those two together, we're not going to total $50 million, but I would be disappointed over 2017 into 2018 that we wouldn't get half the distance again. And that is more difficult work, it's structural work. You've got to move equipment, you've got to train people in different methodologies. We've got to physically connect machines, create some automation aspects to it that maybe didn't exist in the past, and then reeducate a supply line and a series of people to ensure that we've got the raw material in the right place at the right time. So we're not done yet, but half the opportunity maybe, at over twice the period of time to get there. Well I'll just frame it, and then maybe <UNK> can provide some details. Certainly, the new product development areas that we're investing in is the byproduct of end-market research where we think that the markets we're targeting those new products organically to help enter are large enough and there are rising tides in terms of the types of trends that are going on in the marketplace. And that's certainly the basis for the organic new product development is the byproduct of that end-market research. But it is also, to your point, from a strategic accelerated perspective, if we see opportunities to get there quicker than just through organic initiatives then those are the companies we're going to buy. <UNK>. And tactically, on the aggregate of these new products that <UNK> noted, baked into these, that's slide 19, and our incremental base revenues in 2017 increasing, it's approximately, I think it's close to $20 million. It's about $20 million across the sum of all those new products having an impact on our top line in 2017. So it can certainly be a meaningful improvement from across the security perimeters, the adjacencies that were planning on for Residential and the solar segments as well. It does include an element of the Xpress Lockers, yes, which is off to a really good start. You're welcome. Thanks, Walt. Let me quickly, Walt, this is <UNK>. Let me quickly get to slide 20, because I believe what we depict on slide 20 is cash flow from operations, and that's one of four or five categories on the cash flow statement as you understand. In a different category of the cash flow statements, we would report cash from sales of assets. So, for example, we put a press release out a week or so ago about our bar grating product line and selling that to a third party with an improvement in the cash positions to exit that. That would not be reported on slide 20. That's an approximate $10 million. No that's the primary source. The bar grating set of assets here in the US is of significance. It's 20% of that segment's revenue, so the asset base that goes with it is meaningful, compared to the small German solar business that we exited. So the lion's share of $10 million is really coming from the proceeds that we are advantaged by a successful sale of the bar grating assets. Yes. Walt, this is <UNK>. Let me just frame a couple things in our bridge and elevated highway business, the D. S Brown business. It's an important segment for us, and we're not unlike others. We've always been waiting for the manifestation of the Fast Act bill that would give some confidence to the individual states and the related DOT's within them to invest in longer-term projects and more structurally meaningful projects than what was going on with just one-year extensions. And certainly D. S Brown revenue base and skill sets relate to the larger more complicated projects of bridges and elevated highways. So in that downturn of short-term extensions, we went through a series of downsizings and operational initiatives through the 80/20 process to ensure that we aligned our cost base and our ability to serve our customers proportionately. So we get a Fast Act bill that comes out and everybody has high expectations that within a 6 month to a 12 month period of time, that money was going to quickly flow into those larger, more complicated structural projects. And ultimately that would start to show up in elevated bidding activities and release projects, and ultimately 12 months down the road because there longer cycle projects, we'd start to see that in the following year. A year ago, we would've expected all that to start to flow in a meaningful way in terms of top-line revenue in 2017. And I think across the board and it's not unique to us, the inability of the states to match the federal dollars within the fast act I think has created some problems in terms of the expectations. Because a lot of these states have other priorities relative to balancing their budgets and providing services to their individual residents. So I think in effect, it's been the implementation and the value of that money has been pushed out a year. We're certainly starting to see an elevated bid activity. We're certainly starting to win more of those bids. And we expect at the back end of this year to start to see some meaningful revenue opportunities flow out of that. But I think in the end, through our planning process and what our people know, it appears that the materiality of it is really going to start to show up in 2018. With a pleasant surprise that may or may not occur, depending on some of the business in the back end of the year over and above our current planning. <UNK>, do you want to add any color to that. No, I thought <UNK> gave the right answer. I didn't have anything additional to add. Well I haven't retallied it, but it's going to be quite small. For that segment, let's say they've got $200 million of revenue on our $1 billion of consolidated revenue. I don't know maybe, it's I'm going to guess it's $10 million at the most. Well I think it's a lot. It's a big number, it's an ample number. In one of <UNK>'s slides that I'm having a tough time with my lousy fingers here to find, but one of the slides we had this morning talked about accelerating our strategic growth opportunities, slide 14. So on 14 we penciled out our current cash balance, plus our availability on current credit facilities, and what we think they could be at the end of 2017 if we didn't have any M&A activity. So it's essentially a $500 million amount of money with existing facilities. So it's a lot to go after, hopefully meaningfully sized, more meaningfully sized prospects this year that we can successfully close. And I think we had the balance sheet and EBITDA performance, platform and runway, that if we needed additional resources we could get into those without over leveraging the Company. So hopefully 14, the numbers on it, slide 14, helped frame an answer for you, <UNK>. About $500 million, of which $200 million is cash. I'll take the first question. One of the things ---+ we've certainly continued to prospect in all the markets we identified, and we track about 70 different companies. And on a given day, that gets narrowed down into the 20, 25 range, and then we're constantly reviewing a short list of 4 or 5 and we're always in some form of discussions with the hope that one is going to get through the filter for all the right reasons. In addition to that process, and that's where we stand today. In addition to that process, <UNK> and I, just by the nature of the improvements in our balance sheet from when we started a couple years ago, which to some degree was limiting, but even within those limits we were able to execute on RBI which has turned out very nicely for us in a variety of ways. We're now in a position to look at companies instead of $25 million of EBITDA and below as part of our filter, we're now in a position to be able to look $50 million into towards $100 million. We've never really set our sights on those types of targets in the past, either with ourselves or working with third-party banking organizations as partners. And over the last couple months, we've certainly started that process and that has opened up a whole other series of candidates for us that would be more material in size. Not to suggest that we just want to do one big deal, but we're not ---+ we wouldn't be hesitant to do it. Doing a couple deals that total up to those numbers would also be ---+ and being able to check a couple boxes in one or two or three of the target end markets would also fall in line. So it's our expectation and our desire to be able to work through some meaningful prospect in the first half of the year, so that we can start working on the onboarding process throughout the balance of the year and ultimately get a full-year benefit in 2018. We're confident we can do that, and that's where we spend most of our time. And on your question, <UNK>, about share repurchase. It just so happens that in our most recent Board meeting, which happened to be 24 hours ago, at which we gave an updated view of our book financial plan for 2017, in the context of our LRP report out to them in the fall. This very topic came up around using our liquidity, continuing to fund the growth particularly with meaningful M&A to, as <UNK> described, and using a substantial portion of that liquidity on the right strategic acquisition and further solidify the markets that the Company participates in. That said, with that being our first priority for capital allocation, it's going to be a continuing question by our Directors of the Company led by <UNK>'s recommendations on how do we use our resources. And particularly, what would be the timing and what would be the form of other uses of capital back to shareholders, including share repurchases or other means. So it is a very recent conversation again by the Board, and its among their top-of-mind items as we continue to ---+ as they continue to monitor our performance and engage with <UNK> and the Leadership Team on how the Company is performing and filling out its ambitions on this five-year transformation. So no decisions yet, I guess is the punchline of my second answer here for share purchases. But it is top of mind. Just to close that topic out, Walt, certainly not only is it top of mind, we're conscious about making progress on an acquisition perspective. We think that's the most meaningful and most valuable way we can use shareholder's money from a long-term sustainability perspective in terms of guaranteeing returns. That being said, there certainly... we'll be at a crossroads towards the end of 2017 if we haven't been able to accomplish that. To <UNK>'s point, we'd certainly reflect hard on whether or not we'd want to go into 2018 without providing other opportunities for shareholders, in terms of the other alternatives he highlighted. Thank you, everyone, for joining us today and this concludes our call. Talk to you soon.

2017_ROCK

2015

IBKR

IBKR #It's sophisticated options traders' accounts that have been moved over to us completely. Those accounts are with us, and they do everything in that account. What they needed was the ability to execute complex trades. And instead of building the system themselves, they rather chose us to do this for them. But since these accounts also need to have stock often, and stock is often a part of the trade, the entire account is with us. Now, it's 1,000 accounts that came over so far, but there are about another several thousand still in the queue. Also in the future, these kinds of accounts for sophisticated option traders will be open with us when they come to Scottrade to open a new account. No, we're not paying them anything. They are paying us. So say if you ---+ for the first 10,000 option contracts, if you come to us directly, we charge you $0.75 a contract. But if you trade over, I think, 100,000 contracts, we charge you $0.15 a contract. So all the Scottrade accounts are looked at as though they were one account, so they get the benefit of these volume tiers. It's a fully disclosed account, but for purposes of charging commission, we use them all as though they were an omnibus account. Difficult in a short few sentences, but it's ---+ I think, suffice to say that the customer losses all occurred in our US broker dealer Interactive Brokers LLC. Therefore, they would be subject ultimately to US rates, and not to anything complicated, because they're not in foreign markets. I think I said the last earnings call that I'm thinking about selling small amounts, like 1 million shares of [Clorice] dollar are up. So by this time, the stock is up by $350. I may be out. Not yet. Haven't reached that level yet. That's right. It's reasonable if you look at the end of 2016, yes. The last quarter of 2016. That's kind of what I'm looking at. Late Q3, Q4 of 2016. Well, we have a team of service people around the globe, roughly 35 of them. And their task is to approach other brokers, hedge funds and investment advisers and prop traders. These are the four classes of clientele that we are marketing to. And we also ---+ as there is more and more publicity about the various things we do, they often receive calls. The conversation with one of our sales force at Scottrade has been going on for, I think, about a year and a half, before they actually decided on doing this. You see the next idea that we're thinking about trying to get them into, is offering futures, because they do not offer futures trading right now. As we transfer all the [optery offense or though] the options accounts, maybe we'll think about talking to them about futures and currencies. The 3 million accounts mostly are small stock traders, and they are just as well being where they are. I don't think the mix has changed that quickly. It's probably the same mix going forward. Our task is to make our platform good enough for them to say to themselves that we can offer a better service if we offer Interactive Brokers' platform, and we just do the hand-holding. That's where we would like to get to. And it's difficult to maintain. It's not only the technology also the back office and the regulations, they are getting more and more complex. So I don't think that a smaller outfits can afford the expense of keeping it up-to-date. Thank you. It's better technology, better sales, we are better known. Two years ago, whenever we approached a potential client, they said ---+ Interactive Brokers, who is that. We've never heard of them. Now that's no longer the case. The longer we have this, the better it will go, I think. No.

2015_IBKR

2015

CEVA

CEVA #So thanks for the question. I think they are ---+ these are important questions. First of all, in terms of cycle time from design to royalty payout. It depends on the product line that we are offering. When it comes to Wi-Fi and Bluetooth, because we are offering a package with hardware and software ---+ it's basically a black box that people can put there ---+ the cycle time can be relatively short. It could be between ---+ at about a year. If you compare it to the baseband, baseband is usually two years so it's almost half of it. We have vision it can be between 12 to 18 months and ---+. Base station. And base station is even longer. But I think when it comes to non-baseband, you're going to see Bluetooth and Wi-Fi licensing getting into the market first and then vision and the rest of the stuff. Just remind me what was the second question. The idea for the rationale of acquiring RivieraWaves was to find a company that has a strong technology focusing now and has big market potential, basically agnostic to all the ---+ to different SOCs. And we are with the connectivity ---+ Bluetooth, Wi-Fi ---+ and we are hitting their 20 billion, 30 billion total addressable market. We have modest expectations for now and we see things beyond it, much beyond it. But we are very extremely happy with this acquisition because it's not just a matter of the business that we are making. The team is extremely competent and we are working fantastic with them. Sure, <UNK>. I think we have managed to demonstrate pretty nice control over the expenses, even post the acquisition. If you look at the last three quarters in a row, the non-GAAP OpEx were about $10.9 million. I don't anticipate that to change or to go up. It could go maybe for one of the next two ---+ third quarter or fourth quarter slightly down because of some timing of R&D grant payments. But other than that we are for now, for this year confident with these types of levels. And I think we have taken all the measures already and do not anticipate any surprises from that point of view. Okay. You need to be almost a magician in order to guess all these factors and there are quite a few of them, both from the industry perspective, market share perspective of our customers, and the pace of adoption. I think we could go and try to tackle this a little bit slower and maybe focus more on the second quarter. We will give you some data around that and then see how you could extrapolate that on an annual basis even for next year, because I think that is a bit too much to answer. Not to ask, but to answer. For Q2 we are getting some interesting data. We're talking about ---+ we are breaking down the baseband and the non-baseband. Why. Because the non-baseband, especially Bluetooth, are becoming significant volumes. I think <UNK> mentioned earlier, last quarter it was about 20 million Bluetooth devices. Next quarter we're looking for somewhere between 25 million to 30 million, so the pace of growth is pretty significant. The ASPs, of course, is much lower. On the base ---+ and this is why we are separating it. On the baseband stand-alone feature phone, smart phones, new LTE design wins that we have talked about, Q2 this year versus Q2 last year there will be a 25% growth in ASP just for baseband. Because the mix is more favorable with higher ASPs into the smartphones, and as you so correctly distilled, the majority of the volume ---+ for example, this quarter 140 million out of 200 million ---+ were feature phones. So the more we moved to smartphones, including the LTE, that number should increase over time. It does increase and it is increasing in the last two quarters quite significantly. Q1 8%, Q2 we're talking about 25%. If I look at the total blended ASP of the Company and now adding the low-cost, but high-volume Bluetooth and the like devices, Q2 year-over-year we are looking at about 10% or slightly above 10% improvement in the overall ASP of the Company. To try to guess how this is going to look like by the end of the year it's very difficult, because again there are too many factors here. We need to break each one down. I think we try to each part of that and the most interesting in the near term has caused the ramp-up in the LTE models and the 3G, the broadband CDMA. I would say let's be smarter, a little bit smarter next quarter and we could probably give more guidance and more insight for the upcoming quarter. Maybe when we get closer to the year and have a little bit more feeling of the year. I don't feel comfortable guessing, but giving you factual numbers for this next quarter based on the royalty reports that we have received so far. Not all of them, but a big portion of them. This is <UNK>. I wouldn't, at least for the coming year, go to a non-baseband and baseband seasonality. By the way, non-baseband it could be pretty straightforward, at least for the coming years. [Christmas, post-Christmas]. In handsets you have basically two low seasons, Q1 meaning Q4 ---+ and this is mainly because this is the time when Samsung do deals with their inventory. They are, by the way, different than others. And Q1, which is the real post-Christmas low season. Now it has become a bit complicated with CEVA because we are in LTE and 3G outpacing the number, outperforming. So that's what happens in the coming ---+ this is our guidance. In LTE and 3G we are outpacing; we are doing more than the market is doing. And it happened to be that in 2G it was we did ---+ it was an undershoot because of inventory in China, which could be in a post-Christmas area. But in general, it's framework. In terms of reporting on royalty, Q1 and Q2 are seasonally weak. Q3 is the maximum. Q4 is a bit lower than Q3. We have pretty good understanding. We don't have all of them, but we have, I think, a pretty good picture on the numbers. For going forward ---+. You mean, the guidance. The guidance or the Q1. Q1 overall ASP, on a year-on-year basis, went up just about 10% I believe. Just, sorry, 8%. It went down. It went down, because last year in Q1 we had $3 million Bluetooth devices and this year we have 20 million Bluetooth devices. So that mix changes completely. If you recall, last year we had 20 million, 21 million non-baseband. This year we're looking at 32 million non-baseband; 3 million a year ago Bluetooth, 20 million this year Bluetooth. So that takes down ASP for non-baseband quite significantly, but as we talked in the past, it opens up the markets for billions of units in Bluetooth devices. For us, for now hundreds of millions over the next couple of years. I think we need some of the new market. The old markets, like that you remember from years ago like DVDs or hard disk drives, that's pretty much dead. The new markets of non-baseband, other than the ones that <UNK> mentioned around connectivity are of course the imaging, the division, the surveillance cameras. These have much, much higher ASPs than Bluetooth or even the average of the Company for baseband today. 2x that amount, more or less. And that should kick in as late as this second half of the year and then mainly into 2016, the bigger numbers. Yes, we include audio. The audio non-baseband will be Bluetooth. It is the design cycle is very short and Wi-Fi, audio, vision, and last is base station. The longer lifecycle; design cycle and lifecycle, by the way. Not sure I follow the question. You mean 2014 or 2015. That's a good question, because Q1 last year was a spike because of consolidations of companies. There was two of these last quarter. So if you compare license revenue Q1 this year and last year, you will see it was just like 1%, but it's not a good reflection of the situation last year. It was a spike quarter. Usually we are at the $5 million to $6 million. Now we are speaking about $7.8 million licensing and many more deals. So that's a good point. No, no, no. I don't recall that we have a consolidation. We have one small one. Small one. Yes, one of the Bluetooth players. No, I think it was windowshopping. Usually these companies pay us on time. We didn't have these types of DSOs, as you recall for many, many quarters and this time we got it two weeks after the quarter end. So I would think it's something more windowdressing on their end, but we already got out of that $11 million. $7 million has been paid in the first three weeks, so that would be my guess. That's a good question. Surprisingly, we are expecting licensing revenue coming from all over the product line. Also in baseband, because last quarter we signed a company in Asia elaborated in the prepared remark, (inaudible) which is like the Verizon [locally]. I think China newcomers from SOC, people that want to go to tablet and understand that it should be LTE connected and they are doing ---+ looking to integrate LTE. I've seen many companies in China also looking to machine to machine, what is called (inaudible) and they need LTE. So I see LTE also as baseband activity is coming. Of course, even in the non-baseband tier Bluetooth and Wi-Fi it's hollow. It's all over the place. We are ---+ we were saying in the prepared remark about Bluetooth 5.0. This standard is coming and people want to go into this one because it has a substantial feature set. So I cannot pinpoint one area; it is all over the place. That is the reason that we are optimistic. I think it's a temporary pause. I don't see any other way for companies, for China not to go to LTE big time. I see Qualcomm and others pushing strong, even carrier obligations for next generation. What we see in the design wins and expectation for customers is LTE is big time this year in China. When it comes to what we are seeing in vision is we see the automotive market is a big potential. It's not just the size of the market and the complexity there, but also we believe that what is going in [this area] will dictate next-generation feature phones ---+ excuse me, smartphone and other areas. So we're investing in automotive grade type of LTE (inaudible) or vision DSP. We are investing in machine to machine, which is part of IoT. We believe [cut zero] will be big time. We think that (inaudible) of LTE advanced for handsets is a potential. We think that our software-defined radio approach is something that will appeal, even to incumbents that don't use our DSP today. So these are, more or less, the areas that we are looking. There are a few things that we are looking from the M&A side, a contextual awareness and stuff like this, but we can elaborate these later. In 3G handsets, I think the pricing that people are speaking about, $30 to $40; it's pretty much the pricing that we are going to see in this here. Bear in mind one thing: there is no difference between 3G and LTE in terms of the application, of the user experience. LTE is lower end and 3G the low end, so there shouldn't be ---+ the screen is pretty much the same. The AP is the same. You had Wi-Fi and stuff like this, so there shouldn't be that big difference between 3G and LTE. With this pricing it's elastic, meaning volume should go up. By the way, I mean just to remind you and everyone that 3G, in a sense, we sort of missed. When Intel went out of this and when Broadcom decided to bail out of that market, the market in China sort of skipped the TD-SCDMA, the local 3G, and they are all jumping almost from feature phones to LTE and higher-end smartphones. That is the demand there. So it's not that we had a big portion of that market and this is a headwind for us, all that I think a lot of it is behind us and now what we are gaining share is the market share from Qualcomm that cannot compete at these prices, as you alluded to. On the 3G part and the 4G, it's all new design wins that we have talked about in the last hour. So I'm not sure we're that much affected from the 3G market. In terms of potential, it has been eventually higher there. And as I said in the prepared remarks, our expectation is go with this vision technology. ADAS is basically object detection, and to expand this or take advantage of it because here is where the activity right now is coming, to expand it to smartphones and tablets and [medical] and robotics and drones and stuff like this. So that's one thing. With whom we are competing, the incumbent there is a company out of Israel, Mobileye. They use their own DSP. We are partnering with many companies and there are many companies coming from different angles, from the Samsung side, from SOC side and they need a vision DSP. By the way, they use us not just because of the DSP, because CEVA has ---+ and I elaborated in my prepared remarks ---+ we are also providing algorithms for providers there. Thank you and thank you, everybody, for joining us today and your continued interest and support of CEVA. We will be attending the following upcoming conferences and invite you to join us there. On May 10 we will be at the Oppenheimer Israeli Conference in Tel Aviv and on May 28 we will be at The Benchmark Company One-on-One Investor Conference in Milwaukee. Thank you and goodbye.

2015_CEVA

2015

BIG

BIG #Thanks Vicki, and thank you everyone for joining us for our first quarter conference call. With me here today in Columbus are <UNK> <UNK>, our CEO and President, and <UNK> <UNK>, Executive Vice President and Chief Financial Officer. Before we get started, I would like to remind you that any forward-looking statements we make on today's call involve risk and uncertainties and are subject to our Safe Harbor provisions as stated in our press release and our SEC filings and that actual results can differ materially from those described in our forward-looking statements. All commentary today is focused on adjusted non-GAAP results. This morning <UNK> will start the call with a few opening comments, TJ will review the financial highlights from the quarter and the outlook for fiscal 2015 and <UNK> will complete our prepared remarks before taking your questions. With that, I will turn the call over to <UNK>. Thanks, <UNK>, and good morning everyone. I am pleased to share once again this quarter our results were solidly in line with our guidance and we delivered on our commitments. Comps increased 1.6% in Q1, representing the fifth consecutive quarter of positive comps, something BIG hasn\ Thanks, <UNK>, and good morning, everyone. Net sales from continuing operations for the first quarter of fiscal 2015 were $1.28 billion, essentially flat with last year. Comparable store sales for stores open at least 15 months increased 1.6% which compares to our guidance of plus 1% to plus 2%. Furniture at low doubles, soft home mid-singles, food mid-singles and consumables at low singles were the key drivers. As <UNK> mentioned, we are pleased with this result particularly given the challenging weather in the month of February. On our last call, we indicated February was a tough month and we expected sales trends to accelerate in the combined period of March and April or Marple. This is exactly what did occur as Marple comps were up in the high 2s with positions us well as we head into Q2. Income from continuing operations for the first quarter was $32.3 million or $0.60 per diluted share, which compares to our guidance range of $0.55 to $. 60 per diluted share and represents a 20% increase over last year\ Thanks, TJ. Before we open up the lines for questions, I want to share a few thoughts in closing. I recently had my two year anniversary with Big Lots and when I look back and consider where we came from, I could not be more proud of this team and what we have accomplished together. We established Mission, Vision, and Values and we live them every day. We have significantly improved our Company culture and we measure and hold ourselves accountable. We developed the SPP focused on three key pillars, Jennifer, our Associates, and our Shareholders. We completely changed our buying processes and disciplines i. e. , QBFV. We focused our portfolio on U.S. retail operations with the wind down of our Canadian and wholesale businesses. We have driven five consecutive quarters of positive comps and delivered upon our financial commitments each and every quarter. We returned over $320 million of cash to our shareholders through dividends and share repurchase activities. We have a seasoned group of professionals and have attracted top talent. I am confident in our leadership team. In fact, just last week we announced the appointment of Rocky Robbins as General Counsel and Corporate Secretary. Rocky is a highly respected member of the legal community and will be a tremendous fit to further enhance our culture and contribute to the long-term success of our strategic plan. Next, we are managing our business for the next three to five years, not quarter to quarter. Recently we announced to our associates our intention to relocate to a new, state-of-the-art distribution center in California. The new facility will be equipped with upgraded hardware, vehicles, and systems to support more West Coast Big Lots stores and potentially our Ecommerce platform. We expect the new facility to open in mid-2017 and will require modest levels of net investment. Additionally, we have established the Big Lots Foundation and our associates have enthusiastically supported our philanthropic efforts focused on healthcare, housing, hunger and education, elevating the perception of Big Lots in our communities. And finally working with our Board, the combination of enhanced governance practices and consistent performance enabled us to receive very high marks from our shareholders during this most recent proxy season. All major accomplishments in two short years. At yesterday\ Thanks, <UNK>. One final comment. During Q1, two additional sell-side analysts initiated coverage on Big, increasing the total number of analysts to 17. We are very appreciative of the support. In an effort to give you an opportunity this morning, please ask just one question. We will keep the lines open as time permits for a second round of questions. Feel free to get back into the queue if you have additional areas you would like to discuss. Alternatively, I will be available after today's call. Vicki, we would now like to open the lines for questions. Sure. Thanks, <UNK>. The merchandising process is always going to be evolving and I tell my folks all the time ---+ it drives them nuts sometimes that I say we are at the beginning of the beginning. It is really about honing in and sharpening the saw and always making improvement and driving the QBFV and other challenges that we put in front of ourselves. I would say that discipline obviously is working and you can't lose focus on that or you become complacent. So it is evolving and it will continue to evolve and we believe a lot of the heavy lifting is done. However, it is continuous improvement so we will continue to improve in all of our categories throughout the area and as we identify those five big categories where we win and then we have the convenience businesses that are really coming to life and you see that evidence in the store. As far as the Furniture department, I would tell you that Martha has been running that thing now without a divisional for quite some time and she is working directly obviously with the team and she has done an outstanding job of really getting them focused and there have been changes in there. You just may not see them but there is some improvement in price points and quality and especially in some price points in upholstery and also in mattresses. Those two areas have really, really stepped up and I think in case goods, we are seeing the quality improvements as well. So again, it is just an evolving process that we will never let up on. It is just the way ---+that is what real merchants do, they are never, ever satisfied. <UNK>, it is TJ. I heard three different things in there. So let me try to address the trajectory questions and ask <UNK> to maybe speak to the quality of assortments and how he feels about the businesses going forward. I think first as a general statement, let me kind of just share with everybody because I know this is probably a question everybody has. In terms of guidance for the second quarter at a 2% to 3% comp coming off of a 1.6% comp in the first quarter, we do see an acceleration in the overall store performance coming out of first quarter and second quarter. That is based on two things. That is based on comps in the month of Marple or Marple, March and April combined, where comps were up in the high 2s. It is based on May sales to date including the all-important Memorial Day weekend where comps are solidly in that 2% to 3% range. So we have seen acceleration coming out of first quarter but really in the back half of first quarter and we have seen that sustained in the month of May. In terms of category trajectory, Furniture continues to outperform the store as expected. Soft Home with expanded footage which was an SPP initiative and executed at the end of first-quarter, is also a leading category. Food, which we commented on as being up mid-single digits internally, we would have hoped for a little bit more than that in the first quarter. However, we have got our arms around that business like no other. The team is doing a great job responding to trends and I\ <UNK>, just to add to that, I would tell you that back to what <UNK> asked about is, it is a continuous improvement and tweaking of the businesses. And I would tell you the last two weeks I sat through the planning meetings for all the businesses for spring 2016 and in those areas that we are now calling convenience businesses, electronics, home maintenance, stationery, etc. that some of it sits in Hard Home, some of it sits obviously in Electronics, the teams are doing an outstanding job of putting together plans as we continue to reduce some linear footage as we have talked about in our SPP. It is not a one year hit, it is a three year plan that will continue to evolve, and we think the assortments in there have improved significantly and what I am seeing for spring 2016 is significant improvement in electronics, home maintenance categories, stationery strategy looks very solid. From a QBFV point of view, I couldn't be more excited, and I think that what you need to know and TJ obviously talked about the trajectory, the businesses that we said we were going to win in, we are winning in and the strategy is absolutely working. There is nothing embedded in this that is not. In fact, I am more pleased than ever with how well Michelle's team has managed Electronics and parts of the Accessory business and has made plan in the first quarter and they continue to perform at a level that we expected them to perform. I believe by the time we get into 2016, those big headwinds will be behind us and those businesses will start to comp positive as well. Yes, <UNK>, it is TJ. We are measuring traffic now in all of our stores and developing a baseline, looking at it week to week, day to day to try to understand and get comfortable with the data. It is a nice byproduct that we are receiving as a result of rolling out EAS, or electronic article surveillance measurement and equipment in our stores. It is premature for us to comment on traffic levels though candidly. That is not a metric and conversion is not a metric that we are holding our teams accountable to yet. That is a 2016 initiative as part of the store revolution that Nick and Lisa are leading. So I'm not going to comment on traffic or those metrics at this point. I would just tell you that the challenges that we incurred in the first quarter are going to be predominantly transaction driven. Think about our prepared comments on weather particularly in certain markets of the country. The good news for us though is building out that basket, she is recognizing, Jennifer is recognizing and communicating back to us the improvements that she is seeing in our store not only from an execution standpoint although it is still very early, but as <UNK> said from a QBFV standpoint. So to have transactions to be lower than last year in the first quarter and still comp up 1.6 on top of a positive comp last year, it tells you some of our bigger businesses are working, we are building out that basket. She sees the value, she is willing to pay higher average item retail in certain categories and importantly too, she is filling out the basket with units. So from our perspective, <UNK> and others who may have the question, I don't want you to walk away feeling as if it was our plan that transactions should have been up in the first quarter, it was not. Those trends and that customer mindset we think takes longer to change than even just the 12 months we have been at it in 2014. Again, from our perspective, we are very pleased with where we ended the first quarter and how we have started the second and that is what is most important from our perspective. <UNK>, that is a great question. We are very bullish on the Easy Leasing program and the opportunity for more and more customers to learn about financing Furniture and other categories in our store. That is all based on results. That is not a gut feel on the part of the team, that is based on results. I think in the prepared remarks we talked about stores that are now in year two of having financing available. They are comping the comp, and in any given week, <UNK>, those stores are seeing Furniture comps that are up in the mid- to high-single digits on top of very strong performance in the prior year. So we do believe we are still to coin <UNK>'s phrase, we are still at the beginning of the beginning on this one. The addition of Soft Home has been well received early. The expansion or really having the Seasonal area of the store, big-ticket Seasonal available for the full spring season this year versus last year obviously is an opportunity for us, and as we look to the back half of the year, candidly as part of the Store Revolution that Lisa and Nick are leading, there will be an expanded Furniture sales training program available to our teams for the first time maybe ever in terms of the training that we are providing them on how to raise that ring and really close the sale. Furniture financing or Easy Leasing is another tool for them to be able to execute to that. So we feel like we are still very early in developing out this program with our customers. Again keeping in mind that that Furniture customer may be in the market to buy Furniture maybe once or twice a year if that. So for those customers who haven't been in the market, it is not inconceivable to think they may not know we have a Furniture financing program. So that is where <UNK> and his team from a marketing perspective really take over too and have made a big deal about it in circular, in print, socially and some of the loyalty card programs and couponing activities that we have tested here in the first quarter. So we could talk about Furniture financing probably for a very long time but I will stop there. <UNK>, this is <UNK>. It is a good question. I would tell you in the prepared remarks I called out that there was a little disruption in the port activity primarily more impact in the seasonal area with Patio Furniture and Lawn and Garden, a much lesser degree in Furniture obviously. As you know Serta, Seeley, those guys are all domestic. So the Upholstery piece, Ashley has factories here in the U.S. as does United so we really didn't have big backups on what we call the kits that come in from Asia and then they get built here, the Upholstery and so on so that area was not really impacted. I would just tell you that Carlos' team, our guys that are in that transportation area just were really out in front of it, and I think we talked about this on the last call about Christmas and how we felt about coming into the first quarter. They really have just been on top of it ,and I think that that has been our key is managing to get those containers out of there. We were behind I would say early on in the first quarter. There was probably a three to four week concern on some items and categories but they managed to get it caught up and we are absolutely fine now and it is behind us, but it really did not have any material impact on the business. <UNK>, it is TJ. So I will play marketing guy for a minute. Jennifer loves coupons. She sees value in coupons and that is what we are all about, surprising her in every aisle every day with value. It is a little bit of a new tool for us, and we were very pleased with the response we got when we executed some of those types of events in the first quarter. Additionally, I want to point out from an inventory and merchandise management standpoint, we were able to execute those all within our markdown plan and markdown budget which again speaks to the disciplines that <UNK> mentioned in his prepared comments. So we feel very good about the opportunity at certain times of the year to utilize that if need be. The second part of your question, Texas, I am sorry. That is a great call out. From our perspective, again the results that we saw in March and April and particularly here in the last couple of weeks of May are encouraging to us in total recognizing there were certain regions of the country, particularly Texas, where we had a tough go over the last couple of weeks. As you know, it is a big state for us, well over 100 stores, the majority if not all of those comps stores. So to be able to execute to deliver the comp in first quarter, Marple and in early May is very encouraging to us. To my knowledge, we have not had any significant store closure activity, any significant damage related to our stores and really that is a very seasoned team down in Texas led by one of our more senior regional team leaders, and I am sure they are working extremely hard to be ready for Jennifer every day. We watch sales every hour, every day, <UNK>, as you know and of late in the last couple of days, it looks like maybe people are starting to come out again so hopefully the toughest part is behind us. But whether it is Texas, whether it is other states or whether it is a deal we had last year that we don't have this year in a certain category, that is what we get paid to manage as a business and I think again, the consistency that <UNK> and the new team have brought from a merchandising standpoint helps us weather those ---+ pardon the pun ---+ helps us weather those difficult times whereas in the past we weren't as good at that. So I take it has a very positive sign that we are able to work our way through more difficult times on a regular basis now, not just on an exception basis. I'm glad you asked, <UNK>, or <UNK>. I'm glad you asked finance question. I think it is important to note because I know again that a lot of models had different expectations for second quarter than we have guided to or that we are talking about today. I think it is real important for everybody to understand in many areas of the business we are investing ahead of benefit, not necessarily always from a CapEx standpoint but also from an expense standpoint. So for instance, in first and in second quarter again, the Store Revolution and the rollout of all the different initiatives and training related to those initiatives being dock to stock, automated labor scheduling and coming soon in the third quarter, Furniture sales training, those are investments ahead of a benefit. Additionally, from an asset per (technical difficulty) standpoint in terms of EAS systems, alarming our stores, cameras in our stores, all of those different activities that have been going on that are now complete as of the end of the first quarter, there is expense associated with those and really the benefit comes later as we move through 2015 and we start to see hopefully markdown activity as well as return activity. And then as we get into the end of the year when we take our next physical inventory, we would expect lower shrink results. So in many regards in the first and second quarter, we are investing ahead of benefit to come later in the year. So that is why it was so important that we wanted to call out the calendarization of how we are guiding is very consistent with how we planned the business and what our expectations were internally. There will be CapEx incremental to our original SPP that will hit primarily in 2016. As soon as we are finalized with kind of, I will say the financing aspect of how we are going to go about building and relocating our distribution center, I will be more prepared to speak to those comments. But there will be CapEx coming in 2016 that might not have been, was not in our original SPP expectations. Having said that, from a cash flow standpoint, you know from following the Company for a long time now, <UNK>, that we own all five of our distribution centers including the one we anticipate relocating in California. That location is of high value, it is on distribution center row so of speak in the Inland Empire and we don't see a need for two distribution centers in California which is why we are going to relocate here sometime in the next couple of years. So from a cash flow standpoint, it is important to understand obviously we will be looking at some point to market that building and as we get prepared to move into the new one. So CapEx yes, in 2016, cash flow opportunity to partially offset if not fully offset the CapEx need is what we are looking at as we market that building here in the next several quarters. <UNK>, this is TJ. I guess from our perspective, there are a lot of questions around what amount of business do you recover versus what is permanently gone. We watch that every day, every week, follow a glide path. Actually the team has daily forecasts when it comes to the Seasonal business so we are as on top of it as we can be. Could there be a little bit of incremental markdown risk in the second quarter. That is absolutely a possibility. So I wouldn't want to diminish that. But I guess from our perspective, what we are encouraged by is the fact that almost to the day when we see weather trends improve whether it is in Texas or California in warmer weather markets or whether it is here in Columbus, Ohio and it is now in the 80s instead of the high 60s or low 70s, we see those businesses respond. So I think the important thing for us is we are all over it from a daily, weekly forecasting standpoint. We are looking at how to flow the inventory maybe differently than the original plan meaning we know different markets are responding differently based on their weather pattern. So there is a lot of detail that goes into understanding what our business looks like every day. We are doing the best we can with it, we think we have tried to capture what if any risk there might be and candidly if we need to make decisions and take more markdowns in Seasonal and look at other promotions in other areas that might not be as important in the second quarter, we will do that. Coming out of the second quarter clean on inventory compared to last year or compared to plan is a priority. As you know, the Seasonal business, particularly and Lawn and Garden and Patio Furniture, etc. , does have a longer life than say Christmas trim or maybe even Pools. So long-winded answer but the team is all over, we've got an experienced team in that area. We feel very good about what we are offering, but we will work our way through the second quarter as best we can. <UNK>, it is TJ. We have not updated the long-term model as you know. Candidly, that is something that we are going to be going through here over the next few months with our Board of Directors and that would include an update on 2016, 2017, and as <UNK> mentioned, three to five years out, where do we want to compete and how do we want to differentiate further. Having said that, we have delivered every single quarter on what we guided to from a financial standpoint on the last earnings call as we talked about annual guidance, I mentioned to you that in order for us to deliver on those SPP goals ---+ primarily I'm thinking about the 6% operating margin goal ---+ we have to be toward the higher end of our guidance or the higher end of that model which called for a 2% to 3% comp. So we know 1.6 every quarter is not going to get it done and not going to get us there. I don't know <UNK>, that we think that even that model ---+ I know we think that that model does not at $170 a foot and a 6% operating margin rate, that just kind of gets us into the conversation. Our goal as a management team is obviously set much, much higher than that and looks much, much further out. So from our perspective, we know that comps have to accelerate and they have as we have come into second quarter which enabled us to guide to 2% to 3% instead of low singles. We believe we have a number of initiatives to drive topline going forward. It is premature though for me to sit here and kind of update three year goals until we have really added that third year in now because it is rolling and walk through that process and engage with our Board. I would just say that again from an execution standpoint and a consistency standpoint that has long been a challenge for shareholders to get comfortable with the inconsistency in our business, I think we have taken down that barrier, we are more consistent today. We've got a team in place that is managing their business with much more discipline than we have had, and I think we have total buy-in on the part of the team now extending on into the Store Revolution. So we feel very good and feel like we have done exactly what we said we were going to do. We know we need to see some level of sustained acceleration in comps and we are hopeful coming into the second quarter that those trends are now starting to unfold just as we thought they would. If I can just add one comment too, <UNK>, is that we are in it for the long haul, not the short haul, right. And so as we changed many, many habits and processes over the last 24 months and it was very well embraced by the BPARM teams, I would just tell you that I intentionally did not launch a very strong campaign on velocity per lineal foot, units per door, per week and that is the next level of conversation that is taking place at this point and we are challenging ourselves to do more. And when you talk about sales per square foot, obviously we look at that gondola on a linear basis and how much more productivity can we get in every 4 foot section and those conversations are happening now about being bolder and thinking bigger. And again, this isn't a one year fix, this is a long-term strategy that is going to drive some of that operating power that you are talking about over time. We just can't put a number to it yet as we continue to work our way through that. And I would say by the time we get to the end of the year or the first part of next year we are going to have a much clearer understanding of how big is big. Matt, I would tell you that directionally again absent markets that have weather, absent a tough February, those I will call them outliers but they are part of our business, but I don't think are a true indicator of how the business is performing. Directionally, we have seen some level of the improvement from a transaction standpoint but again, I want to caution when we are talking about improvement, it is relative to the trend. I'm not sitting here telling you that transactions were positive in the first quarter, they were not. We articulated that a little bit ago, but I think from our perspective directionally in certain quarters where comps are stronger, we have had some level of encouraging signs. It is a long-term view that we are taking on this as <UNK> said. And really from our estimation anyway, we have traffic in our stores each and every day. We are starting to understand better what conversion looks like and how big that opportunity could be, hence the Store Revolution, roles and Responsibilities, Dock to Stock, Automated Labor Scheduling, those are all tools that a store team leader, district team leader, regional team leader now have to try to be better prepared to convert Jennifer when she is in the store today than they have ever had before. Additionally, albeit small in terms of transactions but big in terms of opportunity from a sales training standpoint in Furniture, that is ahead of us. 2016 and measuring and holding teams accountable to conversion and that traffic that we are working hard to generate each and every day from our view that is an opportunity that we have really not even touched the surface on. So this is not something that we expected to turn overnight. We have improved the consistency in our business clearly. And maybe most importantly at least from my standpoint and we talk about this a lot as an executive team, as we have come into the first quarter and we are up against positive comps for the first time in a long time, we are comping the comp. So a lot of positives happening in the business and from our perspective, no real surprises, big surprises that have said to us the strategy needs to shift, move or change and I think that is important for everybody to understand. Matt, I would just add to that, too, this is <UNK>, that our guys enthusiastically jumped all over this traffic counter thing in our stores and what Nick and Lisa and the team are doing there is measuring prior week's traffic to this week's traffic as we build history and that is the important thing is this is the year of building history. So next year to TJ's point, we will be able to speak to it clearer and we will also be able to hold our folks accountable for traffic and conversion. So it is exciting because we have a dashboard that we are looking at on a daily basis, but it is measuring last week to this week so it can look a little goofy some days and drive me crazy. But the most important part of it is Nick is and the seven regional team leaders are looking at it every day and pushing hard to improve our performance and those are things that you guys need to understand out there. When we talk about the Store Revolution, not having traffic counters, not having cameras in the front of the store, not having cameras in the stock room, all these things that we are doing are things they are loving it because we didn't give them these tools. And they are getting all the things they need. Automated scheduling is going to be game changing for us as well. So again, hopefully a year from now when you ask that question, we will be able to give you a very clear picture. The average number of diluted shares for the year, yes, which can be different than outstanding as you know. But yes, that is what we are utilizing for our EPS estimates. <UNK>, it is TJ. Actually let me clarify, I think what we said on the March call was that embedded in our annual guidance is about a nickel a share in drag in terms of Ecommerce expense. Again ahead of a benefit which in terms of a sales benefit comes in the form of 2016. I think what you might be remembering is in our investor day when we talked about our goals of a 6% operating margin, there was no accounting for Ecommerce and the related potential EPS drag in our SPP model so that was totally a retail number. So for this year, nickel drag. To anticipate the next question, we saw about $0.5 million of expense in round numbers in the first quarter related to Ecommerce. So again, if you tax effect that, it was not quite a penny but it is close. So $0.5 million in first quarter, nickel drag to the year, Ecommerce was not embedded in our SPP model which called for 6% operating profit number. That was a retail only goal. Sure, <UNK>. We don't plan severance coming into the year. I think that is the quick answer. We had a couple of different situations where changes were made in leadership, both here in the home office and in our stores. We are not talking about a store team leader, we are talking about much higher level that would round up to some of those types of numbers. As <UNK> mentioned in his prepared comments, we welcomed Rocky this past week. Additionally, we haven't spoken a lot to it but as it relates to the rollout of the Store Revolution and some of the metrics that we are going to be holding our teams accountable go forward, we actually have as you know seven regions throughout the country sitting here today. We have people in new positions or new regions that have mostly come from outside the business. So the assessment of talent that <UNK> and the team went through and the Board went through when he joined us started here in the home office and now as we move into the Store Revolution has rolled out into the stores. So it is both home office and stores. It was not planned and that is the reason to call it out to help everybody understand that from a leverage standpoint and how we are operating the business, we still feel very good that we can leverage SG&A in that flat to slightly positive comp. And the calendarization of it we have done internally and I think it is just a little bit different than maybe what other analysts and investors might have been expecting but it is very consistent with our plan. <UNK>, it is <UNK>. I would just add to that that I have been very consistent in talking about what makes us successful is our people and the strategy is great, but if you don't have the right people to execute it, it doesn't matter. So we again in the quarter made some decisions that we needed to change the talent and improve the talent and that is what we do and quite candidly sometimes you make a hire and you make a mistake and I am the kind of leader that recognizes that and is fully transparent if we made a mistake let's take care of it and move forward and that is what we have done. It shouldn't be ---+ I think this is probably one of the biggest quarters we will probably have for the rest of the year for sure and again I think that we have got a solid team of seven out there and so that is behind us and here in the corporate office as well, but it is truly about making sure that we have A players in the building who don't tolerate anything beneath that. I will try to answer both of those and maybe have TJ weigh in a little bit too. But I would tell you we do have a strategy that we have been very clear about over the three year period of closing more stores than opening. As you know, the guys go through a renewal process on a monthly basis and we make decisions on which stores we are going to close or renew and so on. But I think that as we continue to get the business stabilized which we have done, that we need to improve as I said earlier to one of the other guys, the velocity sales per linear foot in the box. The productivity needs to improve so that we can turn the inventory faster and drive more topline and that is really the strategy of growth. I would tell you that that doesn\ I think just to add on there, <UNK>, I think on the store count question from our perspective as the business continues to be more consistent, grow sales per square foot, as the operating margin expands, our hope would be that the number of store closings actually comes down a little bit over time and that net number starts to flatten out over the next two to three years. Again that is not what is embedded in our SPP but clearly as we are working toward a more productive company and a more productive box, that could be one byproduct. I think what we all are aligned on internally including our Board of Directors is we do not want to open new stores for the sake of opening new stores. And our real estate team is very plugged in and connected throughout the country and candidly there are some markets we would love to grow in that we just can\ Thanks, everyone. Vicki, will you please close the call with replay instructions.

2015_BIG

2017

NX

NX #Thanks for joining the call this morning. On the call with me today is Bill <UNK>, our <UNK>hairman, President and <UNK>hief Executive Officer; Brent Korb, our <UNK>hief Financial Officer; and George Wilson, our <UNK>hief Operating Officer. This conference call will contain forward-looking statements and some discussion of non-GAAP measures. For a detailed description of our forward-looking statement disclaimer and a reconciliation of non-GAAP measures to the most directly comparable GAAP measures, please see our earnings release issued yesterday and posted to our website. I will now turn the call over to Brent to discuss the financial results. Thanks, <UNK>. I'll start with the income statement followed by comments on our balance sheet and cash flow. <UNK>onsolidated net sales during the fourth quarter and full fiscal year of 2017 decreased to $233 million and $867 million, respectively, compared to $249 million and $928 million for the same period of fiscal 2016. As discussed throughout the year, the decreases were largely driven by the decision to exit business that does not meet our financial objectives. We reported net income of $10.7 million or $0.31 per diluted share for the 3 months ended October 31, 2017, compared to $5.4 million or $0.16 per diluted share during the same period of 2016. For fiscal 2017, net income increased to $18.7 million or $0.54 per diluted share compared to a net loss of $1.9 million, $0.05 per diluted share for fiscal 2016. Adjusted net income decreased to $13.1 million or $0.37 per diluted share during the fourth quarter of 2017 compared to $15.7 million or $0.45 per diluted share during the fourth quarter of 2016. Adjusted net income decreased to $27 million or $0.77 per diluted share for fiscal 2017 compared to $27.7 million or $0.82 per diluted share for fiscal 2016. The adjustments being made for earnings per share are as follows: acquisition-related transaction costs, purchase price inventory step-up recognition, restructuring charges related to the previously announced closure of several manufacturing plants, accelerated depreciation and amortization for equipment and intangible assets related to these facility consolidations, impairment of goodwill at our U.S. vinyl profiles business in 2016 and foreign currency impacts, primarily related to an intercompany note with HL Plastics. On an adjusted basis, EBITDA decreased to $33.3 million during the quarter compared to $34.6 million in last year's fourth quarter. For the full year 2017, adjusted EBITDA was $99.0 million compared to $110.3 million in 2016. The decreases in adjusted EBITDA were primarily attributable to lower volumes and short-term inefficiencies related to transitioning away from less profitable business throughout the year, coupled with the impact of the hurricanes in the U.S. during the fourth quarter, which was most notable in our North American <UNK>abinet <UNK>omponents segment. Before I continue, I want to highlight a few 2017-specific items. First, during the fourth quarter, we received a second reimbursement from our insurance carrier for previously incurred legal fees in the amount of $2 million, which brings the total for the year to $4 million. Second, our effective tax rate in fiscal 2017 was 26.7%, which is lower than the 31% we previously expected due to a $1 million discrete benefit associated with the change in the statutory deferred tax rate in the United Kingdom from 19% to 17% over the next 3 years. Lastly, the hurricanes that hit Texas and Florida in August and September impacted revenues by approximately $6 million, $1 million in our North American Engineered <UNK>omponents segment and approximately $5 million in our North American <UNK>abinet <UNK>omponents segment. <UNK>onsequently, margins were down about 30 basis points and 60 basis points in each segment, respectively. Now let's move on to the balance sheet and cash flow. <UNK>ash provided by operating activities was $78.6 million in 2017 compared to $86.4 million in 2016. We generated free cash flow of approximately $44 million in 2017, which allowed us to repay more than $45 million of bank debt during the year, with essentially all of the debt paydown occurring in the second half of the year. Our leverage ratio improved during the fourth quarter and was 2.3x as of October 31, 2017. Looking ahead, we will continue to focus on generating cash and deleveraging the balance sheet and expect to end fiscal 2018 with a leverage ratio below 2x. To recap the 2018 guidance disclosed in the earnings release, we are forecasting revenue of $890 million to $900 million, which represents growth of close to 4.5% to the midpoint after adjusting for the sale of Owens Flooring. Adjusted EBITDA guidance of $103 million to $108 million represents margin expansion of approximately 30 basis points to the midpoint. From a capital expenditure standpoint, we expect to spend about the same amount in 2018 as in 2017 or approximately $35 million. In an effort to be more efficient and help offset labor constraints, we will continue to invest in automation across all divisions with a continued focus on the North American <UNK>abinet <UNK>omponents segment. Longer term, we believe that our annual capital spend level should settle in between $25 million and $30 million. For modeling purposes, it is appropriate to make the following assumptions for 2018: depreciation of approximately $34 million, amortization of approximately $16 million, interest expense of approximately $9 million and a tax rate of 31%. Of course, if <UNK>ongress can get through the reconciliation effort, a reduction of the corporate tax rate would benefit us and change this estimate. I will now turn the call over to Bill. Thanks, Brent. Overall, fiscal 2017 had a lot of moving parts. Just to recap, on an annualized basis, we eliminated approximately $80 million of business that did not meet our overall financial objectives. As a result, we closed 4 plants, redeployed a significant number of assets and reduced overall headcount by approximately 5%. We also transferred 2 plants from the North American Engineered <UNK>omponents segment to the North American <UNK>abinet <UNK>omponents segment. Those plants represented approximately $25 million in revenue and $3 million of EBITDA on an annualized basis. And on October 31, 2017, we closed on the sale of a noncore wood flooring business that generated $9.4 million of revenue in 2017 with a negligible amount of EBITDA through the course of the year. Despite all of this noise, after adjusting for the foreign exchange impact, the divestiture of the wood flooring business and other business we consciously shed, our consolidated revenues grew at 4.4% in 2017 led by the legacy window components business at an underlying growth rate of 6.1%, which has more than doubled Ducker's latest trailing 12-month window shipment growth rate of 2.9%. On a local currency basis, our European Engineered <UNK>omponents segment grew at just under 5% for the full year; and our North American <UNK>abinet <UNK>omponents segment grew at just over 5%, excluding the business we consciously shed, which is a little better than the latest K<UNK>MA year-to-date number of 3.5%. We do not expect to shed any materially relevant business in 2018 based on our current knowledge. All of this gives us great confidence that 4% to 5% overall top line growth in 2018 should be eminently achievable. The margin expansion we anticipate in 2018 however is being somewhat tempered by material cost inflation in Europe, and to a lesser extent, in the North American Engineered <UNK>omponents segment for certain raw materials not covered by automatic pass-throughs. The guidance assumes no price increase to recover this. Improvement in our North American <UNK>abinet <UNK>omponents segment will clearly be key to realizing margin expansion in 2018 and beyond. The potential for that business to exceed 15% EBITDA margins longer term remains intact, and we are confident we will see significant progress towards that goal in 2018. All in all, we're glad to put 2017 behind us and look forward to a clean 2018 with meaningful revenue growth, margin expansion, an improvement in free cash flow and further deleveraging. And with that, operator, we'll now take questions. Actually, I think the components business is positioned well enough that we're actually getting traction, I think, in every single segment. Our spacer business tends to go into more high-end windows. That's performed very well and ---+ but at the other end of the spectrum, our entry price point screen business has also grown disproportionately. So I think the portfolio is pretty well balanced at this point. So the reality is we continue to be confident that in the long term, that is a greater than 15% EBITDA business. We clearly have struggled in terms of timing. We were making some progress in Q3 and expected better performance in Q4. The storms had a much greater impact in the cabinet business than they did in the window business in Q4, and that really slowed our progress down. So I'm reluctant, at this point, quite frankly, just because of timing to put a number on expectations for 2018. Although it is fair to say that any overall total Quanex margin improvement, the bulk of it is going to come out of that segment. But as I say, at this point, I'm reluctant to put a number and timing on it based on our performance thus far. No, I think it's fair to say that the ability to afford a transaction is not the constraint. Quite frankly, there is nothing out there that we have seen in terms of a bolt-on to existing segments until we're further down the path with the Woodcraft. We're not prepared to look at seriously at another segment. And we believe that spending another year improving our existing business after a lot of portfolio changes last year is the right thing to do. We're clearly very confident after 3 years of solid cash flow in a row that we'll be able to delever to the point that we'll be below 2x. We just feel that's the prudent thing to do right now. Well, the big change in the segment number was really the nonfenestration parts of the business, which we talked about last quarter. Those are the ones that are off. If you back out everything else, the underlying components business actually grew at a pretty significant rate. And that's really driven by 2 things: One, we're starting to see the impact of the high-speed lines in our spacer business, which we've been talking about for some time. And that's effectively gaining share from a segment on the market that we were not able to address. And our entry price points screen business, we are starting to see some trends towards further outsourcing. Because again, as we've talked about in the past, the labor constraints throughout the industry are getting tighter and tighter. And entry price points screens are one of the easiest decisions for a customer to make to outsource rather than consume labor internally. So that's what's driving that. Yes, we're clearly seeing benefits from the automation that's being installed. We are in the process of moving some assets around. We're also in the process of relaying out a couple of facilities, including one of the larger ones that's likely to have a very significant impact on margins as well as work in process inventories. It's going to take us through our first quarter and probably halfway into our second quarter before we see the payoff of that. We're scrambling to get as much done as we can over the holidays and through the quiet period but still have a high degree of confidence. George Wilson, our <UNK>hief Operating Officer, is spending a significant amount of time helping that operation improve the rate of improvement. Well, actually, in fairness, the growth rate has, in fact, slowed. So in 2016, I think the overall growth rate there was either just over or just under double digits. For the full year, it's just ---+ it's around 5%. But if you look at it quarter by quarter, we were double digits in the beginning of the year. And the quarter, on a local currency basis, was actually just under 2%. So it has slowed down. The expectation is we'll kind of stay where we are through 2018. As we read in the press, there is progress being made on Brexit, which I think will, perhaps, ease things a little bit in Europe. Where we are seeing difficulty, exchange rates between the U.K. and the rest of ---+ and the euro are still bouncing around, and it's affecting pricing of some of the raw materials a little more so in Europe than we're seeing in North America, particularly on the chemical side. Well, it's a minority component, but in some cases, an expensive component. So specifically, TiO2 in the resin business on both sides of the pond is not a pass-through. It is a small ingredient, but it's in short supply and it's expensive. Some of the inputs to the spacer, including silicon, again not a pass-through. Prices are increasing pretty rapidly, some of this driven by a lack of supply. Some of which was driven by the hurricanes that came through Southeast Texas. The ---+ so we have some degree of certainty on what the price levels are. The guidance assumes that we're not able to recover that, but don't take that to mean that we're not going to try to recover that. It's just, I think, a prudent thing to do in guidance is assume no price increase. And if we get something, it's upside rather than the reverse. That is correct, but it excludes clearly the business we walked away from, which would say, I think where you're heading, the underlying vinyl business, excluding the chunk we walked away from, actually grew at a pretty decent rate, too. Yes, look, without getting into specifics, which we can do offline when I got better data in front of me, the lines that were put in, in '16 and '17 are now really in full production. So we're seeing the benefit of that, hence the growth in '17. There are further lines being installed, and further lines are ready to be installed in the early part of next year. So our expectation is that the growth will, in fact, increase as we go through 2018. And I think more broadly, just to recap a point I made earlier, the underlying business is growing at or a little better than Ducker's numbers, which is sort of what you would expect. But the 2 parts of the business that are driving the extraordinary growth are those new high-speed lines in the spacer business and some outsourcing activity that's taking place in our entry price point screen business, which over the last 3 years, has been the fastest-growing component in the whole portfolio. We'd not like to comment on the margins of any of those businesses, but nice try, Ken. To the best of our knowledge today and as you know, that's obviously very fresh information. To the best of our knowledge, we do not think that, that will benefit us nor do we think that it will detract from anything we're currently doing with the American Woodmark. So obviously, more to follow as they get deeper into that. We have a very close relationship with those guys, and we'll certainly update that situation after our first quarter is over. I think Ken stole all my questions, but the one I did want to harp on is the fact that you guys aren't expecting any ---+ or not building any pricing into the expectations set for this year. Like on ---+ based on the increasing price of those 2 chemicals that you called out, TiO2 and then silica, is that the right way to think about it. It is the right way to think about it, but let me reiterate the point. Don't assume that we're not going to try and recover that. Just assume that guidance does not include a recovery. That, I think, is the subtlety there. Obviously, it's a time of the year where there are pricing discussions taking place. We don't know at this point how ---+ what the outcome is going to be. But as I said earlier, the prudent thing to do is to give guidance and assume that we do not recover any of it. And then the only other question I had is, I know last call, we talked a little bit about what's going on with the hurricanes and the potential for maybe some flood recovery sales in the cabinet business, but it doesn't sound like that materialized. What have you seen since the end of the fiscal year in terms of sales there. Are you picking up some of that business. What's ---+ any read there would be helpful. Yes. November ---+ we just closed down November, and November was in line with our expectations for 2018. It was also in line with last year, so we did not see any real significant pickup. But I would also say, as residents of Houston, and Brent here in the room is living and breathing this right now, I don't think that we have seen cabinets being ordered to rebuild flooded homes this early yet. We're into the rebuilding effort, and it's taking longer to recover insurance monies, longer to figure out what people are going to do that weren't insured. So I still don't expect to see a recovery, particularly in cabinets, maybe until our second quarter would beep into the first calendar quarter of 2018. I just think the order cycle isn't there yet. It clearly has to happen. We've all seen the streets with kitchen cabinets piled high on front lawns. We know they have to get replaced. We know that business will be there ultimately. We just don't know when. I do think we're going to see it in fiscal '18. I think it's going to be very much back-end loaded, and I think it will trail into fiscal '19 as well. Interestingly enough, I mean after the storms, order intake just ground to a halt. And almost every one of our cabinet customers took production days out in our fourth quarter with effectively no warning. So clearly, there's inventory in the system, and we're also hearing stories of labor shifts as well. So one of the things that also impacted the fourth quarter was installation labor was moving around the country. So parts of the country that you would not have expect to have any impact from the storms also slowed down, just simply they had no installation labor. But I really expect to see the second half of 2018 to see an uptick. Yes, it was higher than normal. We also got caught with some inventory in the Window <UNK>omponents business. No cause for concern there. That will get flushed out as we go through our first quarter, but it was higher than normal partly because the suddenness of the slowdown. Yes, labor is still an issue, and I don't think that's going to change across the spectrum. It raises the point that I wanted to make earlier, so it's a nice segue for me here. Because labor is very difficult to come by, one of the reasons that the margin dropped off so significantly in Q4 is we could not and did not want to react by shedding labor over the short term because we know we're going to need it here through the early part of next year and chose to keep labor even though production rates were significantly slower. So that's kind of a tangential impact of the labor situation. Thanks very much for joining us this morning, and we will talk again at the end of our first quarter. And we look forward to a very successful 2018 and a lot cleaner 2018 than 2017. So thank you, everyone. Have a great holiday period.

2017_NX

2015

ABC

ABC #I mean AmerisourceBergen Switzerland is a platform. I think it's helped coordinate with WBAD but it's also a new interface mechanism. As I pointed out I think we gave extensive comments on that and there's a lot of innovation in that group. I've just spent the weekend with them meeting with some of our key suppliers. So we do think there could be opportunity there to carry on doing more services abroad. BluePoint is a great driver for our business. It's been well received in the marketplace. So the mix of business I think is looking favorable in terms of international businesses. And also World Courier if you look at corporate, World Courier is a good driver for us with above market growth prospects. And I think we're starting to make some good progress there on really looking at those ICS orphan drug distribution opportunities, we've got a couple of new facilities that we've introduced particularly in Asia. So I think again the investments we've made, the business emphasis, the people it's quite an extraordinary time at AmerisourceBergen. <UNK>, let me clarify that. The contract was really ---+ it was through September 30 of 2015. We just extended it for a year under the same terms and conditions. So no impact whatsoever to our Q3, Q4 this year. No, I said that was a manufacturer mandated programs and they still dropship programs that are being built by our drug company essentially but coordinated through ASD Healthcare. So there are distribution contracts and the economics are really comparable. These were manufacturers looking to use more of the specialty model on the inventory side with a centralized location. So it's not going through a pharmacy program. We tried to be very consultative with the manufacturers. I think overall the customers prefer it to come with their regular drug delivery. There are certain products you look at the legacy of ASD. It started off of course with blood plasma products. We do a lot of work in through vaccine, both our ASD and Besse divisions and there is now some specialty products where there is unique data requirements for the manufacturers, might have a REMS program or some area like that. And they would like ASP-impacted products, sometimes it makes more sense to go through the specialty distribution as opposed to through broad line wholesale. But we try to be very consultative and thoughtful about both approaches and including taking the customers' perspective but manufacturers have views on especially the larger manufacturers on how this product should be distributed throughout the supply chain. So we have all the tools so whatever the requirements are. I don't know about low value but I think it's maturer products. And certainly where there's quite a few participants in the market there has to be those sort of conditions prevalent for us to do a private label program. And it's really done in conjunction with the manufacturers. And I don't think it's that dissimilar than the European model but I'm not an expert on that. So I would say it's fairly similar circumstances in order to do a private label program. Well again that's one of the three components that I called out, it's grown and increased quickly over the last couple of years. If it continues to grow it will help that mix. So I guess the short answer is it could, yes, it could help drive it could help influence our tax rate. I think we still have a ways to go. It's an area that we continue to focus on. Yes and we like to partner with WBAD and the success of Almus, so we think there's some opportunities there and now that WBA is together we really are starting to focus on that. And I think AmerisourceBergen Swissco, Switzerland I should say is of course going to be very constructive for that. Hey, <UNK>, it's <UNK>. I will start. The DoD will impact us two months in the June quarter, May and June, and then will impact us for the entire September quarter. So we will have that, and again as we talked about it is a significant reduction to market but it is, the offset to that is it's a long-term contract with a growing very good customer. The generic ---+ your second question on generic Abilify it's not in our guidance. We haven't contemplated ---+ it's too new. And that's I guess the easy way to say that's a TBD. We'll have to wait to see how that works and in terms of uptake in the market and also the margin and how many also as we come to market manufacturers. Thanks, <UNK>. Now before we go <UNK> would like to make some final comments. Well, thank you <UNK> and we are now concluding one of the most memorable quarters in ABC's history. I've actually been very active this quarter throughout the ABC universe as we've had many customer and internal meetings. I am tremendously proud of the engagement and passion of the ABC associates. This is true throughout our Company including our international assets. And we highlighted the third anniversary of our acquisition here in the clinical trial space so we could not be more thrilled of our overall portfolio. I just want to give a special welcome to MWI which is our largest acquisition to date where we continue to be thrilled about the quality of the service, the customer base and the people that literally continue to delight us. So thank you for your attention and interest in ABC. Thanks, <UNK>. And I'd just like to highlight our upcoming conference activity before we go. We will be attending the Deutsche Bank Healthcare Conference in Boston on May 6, the Bank of America Healthcare Conference in Los Angeles on May 11, the UBS Healthcare Conference in New York on May 18 and the Goldman Sachs Healthcare Conference in Rancho Palos Verdes on June 9. So thank you for joining us today. And with that I will turn it back to the operator.

2015_ABC

2016

TTWO

TTWO #Listen, I have all the respect in the world for Leslie and for everyone else here, current and former colleagues. And of course I wish him all the best. I can't comment on his plans. So we are excited about the pipeline. We have made some announcements, of course, about upcoming titles. We talked a bit about XCOM 2, which is coming very soon and has gotten great reviews so far. We're really excited about that. That's coming from Firaxis. We have Battleborn coming in May, which will have powerful single-player and multiplayer approach. This comes to the market from Gearbox, the people who brought us Borderlands. And they're immensely talented folks, and we have high hopes. We've talked about Mafia III coming in calendar 2016. And, of course, we have basketball and wrestling in our catalog. We have NBA 2K Online in China. We've launched Civilization Online in Korea. We have GTA Online ongoing and performing super well. And we have our catalog. So the good news is we have a backdrop of this Company against which to populate additional titles. We have not announced our full release schedule. We have not talked about the year after next. What we have been willing to say, though, is we have an enterprise now which is solid, well financed, highly creative, stable, and rational. And that enterprise is yielding great results year in and year out ---+ results that generate high revenues, blazing trails in digital distribution and recurring consumer spending, high profitability and strong cash conversion. We have over $1.2 billion of cash. Because of the way we account for our convert, we have no debt in that context. So I do have to give that background. I know the market would love it if we would talk about titles coming up in the next couple of years, but we make our announcements in an effort to market our titles most effectively. And that's proven to be a sound strategy. And one of the things that I do like saying is: don't look at what I say; look at what I do. I'm likely to do that again. We've described our strategy over and over again: it's to be the most creative, the most efficient, and the most innovative Company in the business. It's to deliver a limited number of the highest-quality releases from both of our labels year in, year out. And it's to annualize our sports and our sports entertainment titles, but not to annualize our action and adventure and other titles. That's a strategy we're pursuing. And it's yielded not only great hits from our franchises, but great new hits every year since 2007. I can't guarantee it'll keep happening, but certainly that's what we are aiming towards. And we're doing that while we build these new businesses ---+ these businesses that are free to play, these businesses that take place in Asia, these businesses that are massive multiplayer businesses. So that's much as I can say about the pipeline. But as you can tell from my voice, we're super excited about it. And specifically, with regard to any of the labels, you know, they'll talk about their own plans. But what Rockstar has been able to achieve with GTA Online, which ---+ even if you did look at it on a stand-alone basis, you'd say, my, that's an incredibly extraordinary, powerful, and profitable release. Again, more than two years after the release, well, that's something to be very proud of, indeed. Historically, it's been somewhere between four and nine months, depending on the label and the release. And by the way, I know I skipped over your basketball (technical difficulty) I didn't mean to. I guess at the risk of sounding over-promotional, which really isn't my style ---+ but you know, we sold-in over 6 million units. This is the industry-leading title. And the team at Visual Concepts has done an amazing job. Their scores are up again this year. And we tend to be people who ---+ you know, the question we like to pose most frequently is: what are we missing. What can we do better. And I promise you, the team, Visual Concepts, and 2K will only try to make that title better and better. And if we succeed, it will continue to perform. That's also reflected in recurrent consumer spending for the title. Our sale of virtual currency is up 72% year-over-year. So ---+ and again, since ---+ we're not organized around those percentages; they are a reflection of what we're doing. I think it's a reflection specifically of just how much consumers love the title. It's a really great question. And I think if you take a look at our headcount, our investment has been on the development side. We showed up here in 2007, I think we had about 1,100 people who were involved with development, and now it's about 2,000 people ---+ maybe even a bit more. You should expect that to continue to grow. What we try to keep as modest as possible is fixed overhead that is not responsible for either creating intellectual property or exploiting that intellectual property. And so some of our competitors made a good deal of noise around building service centers, data centers, call centers and the like; and we'd like nothing more than to have none of that infrastructure here, although we do have some. You're right; we have had to build some expertise on the service side. I think we are proud of what we have built. Pound-for-pound I'm quite certain we have a much leaner service team than any of our competitors, and we want to keep it that way. But it means that we have to be smarter; we have to innovate. But we are pretty well allergic to fixed costs and to non-revenue-generating overhead. Thanks, <UNK>. In terms of our financial commitment in the eSports space, it's not significant at all at the moment. It doesn't mean it won't be in the future. And in fact, it's been a net contributor, because we were an investor in Twitch early on. And we had great return on investment. So we bet very early on this space, and it worked out super well for us. But no, this is not a meaningful commitment. And there's ---+ the risk is de minimis, absolutely de minimis. And that's how we like to do things unless and until we are convinced that an economic opportunity exists. Our view in the business is since only we can exploit our intellectual property, we have the ability to be somewhat judicious as businesses are developing and then step in when there is an opportunity. I think there could well be an opportunity for eSports in Korea. It remains to be seen. It's a very active market. We consider ourselves reasonably expert. We have a terrific partner there, and we know the market well, and we have an on-the-ground presence. But it's a little early to say. Sure, <UNK>. So for the convert, our 1.75% convertible notes mature in December. And to date it hasn't made economic sense to take them out before the maturity date. But we definitely are going to keep an eye on it as it gets closer to the maturity. And we have the option to settle it in either cash or stock. So when we get closer to the date, we'll see what the best option is for us at that time. Yes, it's December of this year. Thank you, everyone, for joining us. We are thrilled with the results that we've just reported. We appreciate your engagement and support. Once again, to all of our colleagues, thank you for all the great work.

2016_TTWO

2016

PJC

PJC #Good morning and thank you for joining us to review our third quarter results. Strong performance by our investment banking businesses propelled us to record revenues for the quarter and through the first nine months of the year. On the call today, I will provide highlights of our results in this market context and Deb will provide a more detailed review of our financial performance. Finally, before we turn the call over to questions, I would like to spend a few minutes on an important addition to our senior leadership team that we announced last week. For the quarter, market share gains on top of generally strong market conditions produced record revenues. This was particularly the case for equity capital raising and Advisory groups, which benefited from the meaningful contributions attributable to our investments in Energy and FIG. Equity capital markets for our focus area sub $2 billion market cap companies saw some slight sequential improvement for the quarter as the market continued recovering from trough levels earlier in the year. Our underwriting activity was up over 80% on a sequential basis, reflecting significant market share gains. Our Advisory business once again contributed strongly to our results and continued to outpace market activity. Through three quarters, the business is close to exceeding the record revenues we've produced for the full year in 2015. Again, significant contributions from the Simmons energy team and our new FIG team. The additional talent in our Debt Capital Markets Group help drive these strong results. Our Public Finance business also performed very well in Q3, albeit slightly behind the record revenue we generated in Q2. The quality of the people we have added geographically and by industry sector, for example, Senior Living, supplemented by the expansion into new products like loan placements, have driven revenues to the $100 million level annually. Markets continue to be supportive for this business. With the interest rates still relatively low, the market reflected steady refinancing and expanding new issue levels in the quarter. Equity trading activity for the quarter was mostly lackluster. Stock markets experienced very low levels of volatility, which is correlated to low levels of trading activity by hedge funds, one of our more significant client groups. We are very pleased with the addition of the Simmons research and sales team and believe that their reputation as best-in-class, provider of energy sector expertise, will have a positive impact on the entire Piper Jaffray research platform. In Asset Management, indices were up for most of our key products. Moreover, we produced strong relative performance against the benchmark for a number of our key products, most notably, our MLP strategies. Improved performance on top of market gains serve to more than offset outflows to drive total assets under management higher for the quarter. Macro trends continue to create headwinds for asset managers. These trends while challenging for our business, also create opportunities to add high-quality investment teams to our platform. This is consistent with our strategy to diversify our business. We made significant progress to this effect with the addition of the COPs capital management investment team, which we announced during the quarter. Their aggressive growth strategy complements our suite of value products. The team formally joined us at the start of the fourth quarter. Now, I would like to turn the call over to Deb to discuss our results in more detail. Thank you, <UNK>. As context, my remarks will be focused solely on our adjusted or non-GAAP results, unless otherwise noted. As <UNK> highlighted, we generated record revenues of nearly $200 million for the quarter. While revenue was up 19% sequentially to 55% increase in our operating income demonstrates the operating leverage in the business at higher revenue levels. Most areas of the firm contributed to these strong results. Capital raising activities including equities and debt were up a combined 22% sequentially. These results reflect our strength across geographies, products and industry sectors. Our Advisory business produced another strong quarter with revenue up well over 50% both sequentially and year-over-year. The most significant driver to the increase was our new Energy team. We also benefited from increased activity in our industrial and FIG groups. The energy team is starting to see signs of momentum building now that oil prices are finding some stability in the mid to upper $40 price per barrel range. If oil prices remain at or above these levels through year-end, we believe that the team will meet our revenue expectations for the year despite getting off to a slow start. The ramp in FIG Investment Banking revenue is meeting our expectations as the team continues to gain traction in the market. Moving onto our brokerage businesses, our equity brokerage revenues were down around 9% sequentially. Low volatility in equities had adversely impacted our business, but to be fair, has helped our capital raising activity. Also, we do not believe our results reflect a full impact of the Simmons team joining the platform. There is a natural lag between when the team joined us and our clients voting cycles. We would expect to see the full impact of the increase in the quantity and quality of expertise we are bringing to there for our clients over the next year. In Fixed Income brokerage, our revenues were down around 10% (sic - press release, "11%") sequentially due to fewer trading opportunities in municipals, as a robust level of new issuance had a subduing effect on the secondary market. Our Asset Management business experienced a bit of a rebound for the quarter. With performance improving across most of our products, we saw investment returns drive asset levels higher with revenues increasing 9% sequentially. Moving on to the cost side. Our comp ratio was just under 64% for the quarter, and 64.7% year-to-date. Our comp ratio has continued to moderate downward as the year has progressed. We started the year with a comp ratio of 66.4%, which was a function of business mix and our aggressive hiring program, primarily related to the expansion into FIG. This quarter, the comp ratio has improved 260 basis points compared to our first quarter results. As our FIG team and other recent hires continue to ramp their production together with a more balanced business mix, we have made considerable progress in bringing the comp ratio back into our target zone. Despite the higher level of activity in the quarter, our focus on cost discipline resulted in non-comp expenses of $38.6 million, which were flat sequentially. So, as you can see, the benefit of operating leverage in our business at higher revenue levels drove most of the improvement in margin, as non-comp expenses were 19.4% of revenue in the current quarter versus 23.1% in the sequential quarter. Comparisons to the year ago period are skewed by a $10 million legal settlement we incurred in 2015. I will now turn the call back over to <UNK>. Thanks, Deb. I wanted to spend a few moments on the appointment of the new senior executive, we announced last week. Stuart Harvey has been appointed as President and COO of Piper Jaffray, effective November 7. Stuart originally joined Piper Jaffray in 1993 as a Senior Investment Banker. He left in 2003 to join Elavon Global a subsidiary of U.S. Bank. He led their international expansion into over 40 countries, and was promoted to CEO in 2008. In 2010, he joined Ceridian Corporation as its CEO. He orchestrated a turnaround of that firm, which included a spin-off and sale of Comdata. He rejoined Piper Jaffray last year as a partner in our merchant banking group. As President and COO, Stuart will be responsible for our operating businesses, including investment banking, brokerage and asset management. He will be a member of the leadership team and report to me. We will now open up the call for questions. So, our fourth quarter is already off to a strong start with several significant transactions announced especially in energy. So, we expect it to be another strong quarter. So what I would say is, all of our sectors participated; Healthcare remains robust, but we really saw a significant ramp in both Energy and FIG relative to the first half of the year, so much better participation there, but it was really relatively broad-based. So, we would ---+ which is reflected in frankly our third quarter and our outlook for the fourth. There is notably an improvement in the CEO Confidence and now that we've had relatively stable oil since maybe mid-summer, there is clearly a backlog of activity now that can start to be worked through and that's what we've experienced. I think the other thing I would note with our Simmons acquisition and the combination of the two firms, we are also seeing some really nice synergies, business activity that neither one of us would be likely to have accomplished independently. I'd point to two things; we priced our largest sole managed high yield financing $600 million was actually in this quarter done for Transocean, one of their energy clients. And we also just did a bookrunner IPO from Mammoth Energy Services. And historically, they had not had books, so two very good examples of activity, the two of us can do together. It appears to be very constructive from our perspective and unless there is a highly ---+ an unanticipated outcome here that gets people to rethink things. The activity, the dialog seems quite consistent from our perspective and CEO Confidence is solid. Sure, I can do that. So at the end of the third quarter, we had ---+ MLPs were just under $4.6 billion and the value strategies in total were just under $3.9 billion, so total of $8.4 billion. So, they just joined us in the beginning of the fourth quarter and we had set a range of [$3 billion to $3.50 billion], it appears to be coming in at close to the high-end of that range. So, those numbers would not be in the third quarter. Really, you said it well. I'd say that's exactly what we're seeing, very modest outflows still, but the interest level is quarterly picking up for the reasons you said, stable oil prices, attractive yields. So, we feel a turn in our performances once again quite strong as well, so that seems all set up for a turn in some inflows. So, from my perspective, one of the obvious catalyst might be shift in the interest rates, which has really driven us this extremely low yields. The amount of liquidity globally that's chased at and created, but I would suggest as bubbles. But, there is so much written now about this dynamic. It would appear to us that you're starting to see people really contemplate a reversion to the mean just based on, you can come up with so many examples of things that have been irrationally priced. Consumer companies that have had 1% to 2% growth for a decade have multiples and PE multiples of 28 and 30. And you just can look at that and see that it really doesn't make a lot of sense, just based on the fact that they have a dividend yield. So, I maybe not smart enough to know exactly what the catalyst is, but it's a tremendous amount of dialog and focus now about how far we've gone from normal pricing in many asset categories. So, I think that's a setup for the beginning of a reversion. Yes. So, our use of the balance sheet in some principal activities has really been always based on our outlook, and whether we thought there was an opportunity in return available, and we have moderated that significantly in the year in a number of asset classes that we thought offer that opportunity and we see those meaningfully diminished and we really haven't changed that outlook in the last quarter. So, I would tell you that, let's see, our year-to-date revenues are up about 18% and ours down about 18%, and I think that's the course we're on for the foreseeable future. Yes, let me start on the non-comp side, maybe. So at $38.6 million, we were at the lower range of what we had talked about after adding Simmons under the platform we had set around $38.5 million to $40.5 million, and really it's ---+ as you noted that 19% non-comp ratio was driven by these really high revenues. And so, we look at that while we are targeting to bring down that non-comp ratio from where we saw it in the third quarter. Really what we focus on are, what are the total dollars there that we're spending more so than the ratio. And so, what we would say given some cost reduction work that we've done is that new ranges more $37.5 million to $39.5 million, really taking about $1 million a quarter out of that range going forward. Then, on the comp ratio side, as you saw throughout the year, we have continuously reduced our comp ratio and grew about 66.4% in the first quarter of the year and we've worked that down now below 64%. With our current business mix, that stays fairly consistent, we would expect our comp ratio to continue to trend down. I'm hesitant to give specific guidance, as obviously there's a number of factors that play into that, be it revenue levels, mix of revenues and as you actually were pointing out investment opportunities. As we look at the marketplace, we have seen a lot of success in our recent initiatives and our incline to continue to invest in the business, albeit at a lower pace and you maybe start with us bringing on the FIG team. Our focus, holistically, is to focus on continuing to expand our operating margin, and that's really the key metric for us and the best way we believe to do that over the long-term is through growth and obviously you saw the leverage in our business in what we produced here in the third quarter. Thank you operator and thank you all for joining us today.

2016_PJC

2016

MHLD

MHLD #Good morning, and thank you for joining us today for Maiden's first quarter 2016 earnings conference call. Presenting on the call today we have <UNK> <UNK>, Maiden's Chief Executive Officer; along with <UNK> <UNK>, our Chief Financial Officer. Also in attendance today is Pat Haveron, President of Maiden Reinsurance Limited. Before we begin, I would like to note that the information presented here today contains projections or other forward-looking statements regarding future events or the future financial performance of the Company. These statements are based on current expectations and future events, and are subject to a number of risks and uncertainties that could cause actual results to differ materially from these expectations. We refer you to the documents the Company files from time to time with the Securities and Exchange Commission, specifically the Company's Annual Report on Form 10-K, and our Quarterly Reports on Form 10-Q. Some of our discussions about the Company's performance today will include reference to both non-GAAP financial measures and information that reconciles those measures to GAAP, as well as certain operating metrics that may be found in our filings with the SEC and in our news release located on Maiden's Investor Relations website. Please also note that unless otherwise stated, all references to common share data in today's discussions are on a diluted share basis, and comparative comments will refer to Maiden's results in the first quarter of 2016 relative to the corresponding period in 2015. I will now turn the call over to <UNK>. Good morning, and thank you for joining us for our first quarter 2016 earnings call. On this morning's call I will be providing an overview of strategic and operating developments, while <UNK> <UNK>, our Chief Financial Officer, will focus on the detailed financial results from the first quarter. While the global reinsurance marketplace remains competitive, our highly differentiated business model continues to serve us well. For Maiden, our focus on serving the long-term capital needs of our regional and specialty insurer clients remains unchanged. Importantly, whether it be continued profitable growth from our significant strategic quota share with AmTrust, organic growth from our existing client relationships in our Diversified segment, or expansion emanating from our European and US new business initiatives; we believe that we're focused on intelligent and disciplined business development. For the quarter, Maiden reported net operating earnings of $28 million, or $0.37 per diluted common share, compared with $27 million or $0.35 per diluted common share. Underlying these favorable results was continued growth in investment income and investable assets, profitable underwriting, and lower expense relativities. Importantly, Maiden's annualized operating return on equity for the quarter was 12.3%, notwithstanding strong growth in book value of over 12% in the first quarter versus yearend 2015. Book value growth reflects significant favorable movements in our fixed income investment portfolio, as interest rates fell during the quarter. Maiden's first quarter 2016 gross premiums written increased 3.6% to $864 million, compared to $834 million. In our Diversified Reinsurance segment, gross premiums written were up 3.4% compared to the first quarter of last year. We benefitted from organic growth of US diversified clients, while maintaining a retention ratio of nearly 90%, despite the nonrenewal of several underperforming accounts. In Europe, our Solvency II oriented capital solutions business has successfully added new clients year to date, and the team is exploring a healthy and growing pipeline of new opportunities. Gross premiums were consistent with our expectations, and we're very encouraged by the reception we're getting from the market. Following the implementation of risk-based capital rules in Europe, Maiden has developed a continuum of capital solutions that range from traditional reinsurance to subordinated debt. And we're actively helping customers meet the new capital standard. We're very gratified as well with the significant broker support we're receiving for this important initiative. Growth in our auto manufacturing focused Maiden Insurance Partnerships business continues to move forward with opportunities to partner with major auto brands and insurers to develop and deliver consumer insurance products. While the quarter does reflect the benefit of some of our new manufacturer branded auto insurance relationships, it does not yet reflect any of the expected growth from our payment protection insurance joint venture with Allianz. We expect a slow ramp-up of this business, as new opportunities move to implementation throughout the next several years. Turning now to the AmTrust Reinsurance segment, we had gross written premium growth of nearly 4% compared to the first quarter of last year. Our AmTrust segment growth was dampened somewhat due to the commutation that was implemented in the fourth quarter of 2015, as well as the completion of the onboarding of the new Tower Group premiums last year, which boosted comparative period premium volumes. That said, we believe that AmTrust remains well-positioned to continue its profitable growth. Overall, Maiden's combined ratio was within expectation, at 98.9%, above the 98.2% reported in the first quarter of 2015, but an improvement compared to the fourth quarter and full-year 2015 results. In the AmTrust segment, we continue to see strong underwriting results. Our combined ratio for the quarter in this segment was 95.3% versus 94.6% in the first quarter of 2015. While loss ratios and combined ratios for the quarter are modestly higher, this reflects a combination of business mix changes and a higher initial booking ratio. The Diversified Reinsurance segment combined ratio was at 102.9%, above the 101.1% combined ratio in the first quarter of last year, but slightly improved versus the fourth quarter of 2015. Within the Diversified segment, results for the quarter reflect net adverse prior-year development associated with the commercial auto line, and to a lesser extent the impact of US weather-related losses, which exceeded our expectations. Focusing on commercial auto, we've seen a significant level of adverse development from this line over the last 12 months, particularly from our excess of loss portfolio. While adverse development slowed significantly in the last quarter, in the first quarter the adverse movement was less expansive, and the vast majority emanated from one terminated account, which experienced further case reserve strengthening and a corresponding increase in IBNR reserves. We'll continue maintain our focus on addressing underperforming accounts promptly and effectively, and ensuring that our results reflect that impact. Importantly, our commercial auto book is significantly smaller than it was at the same time last year. We do believe that our current pricing, risk selection, and terms and conditions reflect the influence of this adverse activity. We've seen many clients who've successfully increased their rate levels and enhanced their risk selection criteria. And we're also working to introduce new underwriting tools that will assist our clients to strengthen their underwriting performance in this line. Absent the adverse impact from the commercial auto line, the balance of Diversified segment results were solidly profitable. Improving Maiden's underwriting profitability remains a key focus for our underwriters and our management team. I'd like to now turn the call over to our Chief Financial Officer, <UNK> <UNK>, to review the first quarter results in greater detail. <UNK>. Thank you, <UNK>, and good morning. As <UNK> said earlier, unless otherwise stated, all references to common share data are on a diluted share basis, and comparative comments will refer to Maiden's results in the first quarter of 2016 relative to the corresponding period in 2015. Maiden reported first quarter 2016 net operating earnings of $26 million, or $0.37 per share, compared with $27 million or $0.35 per share. Net income attributable to common shareholders was $27 million, or $0.35 per share, compared with $32 million or $0.41 per share, due to lower foreign exchange gains in 2016 versus 2015. Net premiums written totaled $793 million in the first quarter of 2016, a decrease of 0.5%. During the first quarter, the change in net premiums is lower than the change in gross premiums, due to the corporate retrocessional program which had a much greater impact in 2016 versus 2015. The Diversified Reinsurance segment's net premiums written totaled $286 million, a decrease of 3%. In the AmTrust Reinsurance segment, net premiums written increased by 0.8% to $507 million. In addition to the retrocessional impact, the AmTrust Reinsurance segment growth rate was muted by the commutation announced in the fourth quarter, and the completion of AmTrust's absorption of the new business following the acquisition of the Tower Group. Net premiums earned of $616 million, increased 7%. In the Diversified Reinsurance segment, net premiums earned decreased 11% to $172 million. The AmTrust Reinsurance segment net earned premiums were up 15% to $444 million. Net, written, and earned premium comparisons are distorted by the significantly larger impact of our corporate retrocessional program in 2016 versus 2015. Net loss and loss adjustment expenses of $404 million were up 7%. The loss ratio of 65% was slightly higher than the 64.8% reported in the first quarter of 2015. Commission and other acquisition expenses increased 9% to $195 million in the first quarter of 2016. The expense ratio increased from 33.4% to 33.9% for the first quarter, reflecting changes in business mix. General and administrative expenses for the first quarter 2016 decreased by 4% to $15 million. The general and administrative expense ratio was 2.5% in the first quarter, compared to 2.8%. The combined ratio for the first quarter of 2016 totaled 98.9%, compared to 98.2% in the first quarter of 2015. Due to the volatility Maiden experienced in 2015, a higher booking rate is reflected in the combined ratio relative to the same quarter last year. But we also experienced continued adverse development in commercial auto. The Diversified Reinsurance segment combined ratio was 102.9% in the first quarter of 2016, an improvement of 1 point from Q4 2015, but up from the 101.1% in the first quarter of 2015, due to the adverse development. Additionally, weather losses exceeded our expectations for the quarter, and added 0.6 points to the combined ratio. The adverse development for Diversified segment increased losses by $8.6 million, and added 4.9 points to the first quarter Diversified combined ratio. The AmTrust Reinsurance segment reported a combined ratio of 95.3% in the first quarter, compared to 94.6% in the first quarter of 2015. The increase was due to a higher booking rate, slightly offset by changes due to business mix. Additionally, the overall combined ratio in the first quarter of 2016 includes $2.8 million of non-operating development in the other category due to adverse development in a few remaining superstorm Sandy claims, which if excluded would have resulted in a 98.5% combined ratio. Absent adverse development, and as we have indicated previously, we expect to maintain a more conservative booking loss ratio across our portfolio for the balance of the year, in light of market conditions and continued loss cost volatility. Net investment income for the quarter was $36 million, an increase of 29%, and reflects an increase in investable assets to $4.72 billion, compared to $4.17 billion at March 31, 2015. The average yield on the fixed income portfolio, excluding cash, is 3.41% with an average duration of 4.72 years. The new money yield on fixed maturities in the first quarter was 3.32% with an average duration of 5.48 years. Including cash, the average duration is 4.47 years, versus an average duration of liabilities of 4.17 years. The settlement of the fourth quarter AmTrust commutation lowered operating cash flow by $107 million. Operating cash flow for the quarter was $9 million, a decrease of $161 million compared to the first quarter of 2015. Despite the lower cash flow, cash and cash equivalents were $231 million as of March 31st, as compared to $333 million at the end of 2015. During the first quarter, we maintained our historical investment approach with purchases of $269 million of high-quality fixed income securities. Total assets increased 7% to $6.1 billion at March 31, 2016, compared to $5.7 billion at yearend 2015. Common shareholders' equity was up 13% compared to December 31, 2015. Book value per common share was $13.23 at March 31st, or 12% higher than December 31st, due to the increased value of our fixed income security portfolio, as interest rates were lower at quarter end. We consistently evaluate our capital position and continue to feel confident that the current capital levels are appropriate for the business opportunities we anticipate. Later this quarter we will have the opportunity to call our $107.5 million of 8.25% 30-year notes, and Maiden's 7.25% mandatory convertible shares will convert to common equity in September. In addition to the capital markets, Maiden has benefited from the purchase of retrocessions, and could utilize additional amounts of this tool should the need for additional capital arise. As always, any capital management will be conducted in the most shareholder-friendly way possible. I will now turn the call over to <UNK> for some additional comments. Thank you, <UNK>. As I mentioned earlier, we're operating in a highly competitive environment. The soft market does not show any signs of abating despite continued low interest rates. And while commercial auto has been challenging, we're adjusting terms, conditions, and rates to ensure that premiums are appropriate for the risk we assume. In the US, we're still seeing strong margins in our other liability lines, including umbrella, worker's comp, general liability, and our individual risk facultative casualty segment. Beyond the goal of improving the underwriting performance of the Diversified Reinsurance segment, we remain focused on profitably expanding our business. In the US we anticipate continued growth from existing client relationships, while continuing to add new clients to the portfolio. We've constantly found that developing and providing new products and services for our clients helps to enhance retention and increase revenue opportunities. To that end, in the first quarter we rolled out our new equipment breakdown boiler machinery reinsurance offering. We'll also continue to focus on our highest-margin business, while calling underperforming contracts. Internationally, where we believe the most significant growth opportunities lie, we see continued opportunity to expand our highly differentiated capital solutions business, leveraging the sub debt capabilities of insurance regulatory capital and the underwriting expertise of the entire Maiden Capital solutions teams in Bermuda and Europe. And finally, at Maiden Insurance Partnerships, our unique auto manufacturer branded consumer solutions business, we see continued opportunities to expand our business through new manufacturer relationships, and by implementing our Allianz payment protection insurance joint venture. Importantly, we also expect to see continued growth in the AmTrust segment. Beyond our underwriting activities, we see continued opportunity to strengthen our earnings run rate with a continued increase in our investable and invested asset base. We also believe there are several opportunities to reduce our cost of capital as we move to refinance our current debt over the next several years. Our lower-volatility reinsurance portfolio, our highly efficient operating platform and balance sheet, and our conservative investment portfolio position Maiden well to continue to generate double-digit returns, while rewarding shareholders with a substantial quarterly dividend. Finally, I'd like to close this morning's prepared remarks to express our sincere and deepest sympathy and condolences to the family of Michael Karfunkel. As you may know, Michael was an original founder of Maiden Holdings. And while Michael did not serve on our Board or our management team, nevertheless, his vision, his unwavering support, and his wise counsel were invaluable to the formation and the continued success of Maiden Holdings. His energy and his enthusiasm for the business were boundless. All of us at Maiden were truly blessed to have known and learned from Michael. And we'll miss him a great deal. We're committed to honoring Michael's memory by focusing on delivering exceptional value to our customers, and exceptional returns to our shareholders. Thank you. This concludes our prepared remarks. Operator, could you please open the lines for questions and answers. Yes, <UNK>, we think---+ and we've talked about this a little bit before. We think it's really important to look at combined ratio, rather than loss ratio. Because our mix of pro rata and excess is really going to distort looking at just the components separately. And with the combined ratio that we reported in Diversified, it's definitely higher than we expected or wanted. And that was due to the adverse development in commercial auto. That was Diversified, correct. I think expense is always a more challenging one. Again, as we've always said, we look at the blend of loss and expense ratio to produce combined ratio. And our G&A is improving consistently. So that does benefit us. But I think the more important focus is on the combined. And I'd say, certainly it's our hope and focus and effort to try to reduce the combined ratio in the Diversified segment. Nevertheless, I would expect a higher booking rate, as we've talked about before, just recognizing some of the volatility we've seen. But hopefully the Diversified combined ratio will be muted over time throughout the year. That was for Diversified, <UNK>. The Sandy claims were related to the discontinued---+ we actually sold the former E&S property business. And so that's all---+ we'll see a bit of noise as those claims kind of pay out in the tail. No. That is correct. It's from a business that we're no longer in that we sold. Yes, I think a couple of things. One of the criteria that we use in evaluating opportunities at AmTrust is that one, we believe that kind of the risk profile fits with our kind of focus; and importantly, that we have some competency to underwrite and evaluate the business. So we've said before, I think, Republic fits nicely. It conforms to the three main segments that were initially part of the quota share. Anything that's outside of that, we do evaluate. Typically if they're kind of outside of our underwriting focus, we do not include them. So we have the surety business. We currently do not reinsure some surety lines. We have the MI business---+ or excuse me---+ we have the mortgage insurance in Europe. That we don't anticipate supporting at this point as well. So we look at them as they're presented to us. And at this point, they've not been presented to us. No. At this point, we've entertained a significant number of transactions. It's kind of interesting. Because as we talk to companies in the European market that are dealing with Solvency II, the dialog many times begins with discussions around subordinated debt. But for a lot of these companies, the more natural source of capital support and the more historical source has been reinsurance. In most of the transactions that we've entered into, most of the new clients, there is an ongoing expression of interest to consider subordinated debt. And we anticipate being able to deliver solutions to them as their needs develop. We've also seen some transactions that didn't meet our criteria. But I would say unequivocally, the ability to offer sub debt has been one of the driving differentiators for us to create deal flow opportunities. So, we are anticipating that we will see some transactions this year. In terms of our participation, we don't intend---+ it's not our expectation to put a large amount of sub debt on our balance sheet. We may support some of the transactions. And we do have some authority from our Board to do so, but a very modest level. More importantly, we think that there are other capital providers. And we have several that have already been identified that have expressed an interest in this business. And so for us, we largely see IRC as a fee business, something that delivers value to our customers; something that we may provide supporting participation on. But to a large extent, we'd really like to build a universe of capital providers that we bring to our client base. It was. And the majority of it emanated from one client that's terminated, [actually]. Mostly, a lot of this focused on the 2013 underwriting year. We did also modify, in the case of that account, our kind of forward expectation on the subsequent underwriting years. We haven't done that on all accounts, because in a lot of accounts we're comfortable with the pricing and the risk selection changes that are taking place. But in the case of this account, we thought it was prudent to also change our forward [picks]. Well, I mean that's a great question. I mean, when you look back at the catalyst for this, I mean people have pointed to a lot of kind of interesting factors that may be driving it. I think fundamentally you look back on it, and obviously pricing wasn't strong enough. So I think it depends on the sector and the geography. But we do believe and we do see our clients strengthening pricing across the board. And I think there are some opportunities, that said, are developing in that sector as well. I guess my---+ certainly my hope---+ and importantly, there have also been companies that have continued to operate effectively in that market regardless of that issue. So we believe that to some extent risk selection and underwriting has to change. There are different factors that are driving loss costs today that maybe historically have. But we do believe that at least many industry participants have taken the right track, and stepped up, and strengthened reserves. And as far as our forward look on this business, we still entertain the business. We don't write as much of it today as we did even 12 months ago. But we're still looking at it. And under the right terms and conditions, we're happy to entertain it. I wouldn't say universally all companies have altered their pricing and their risk selection. But we think a lot of companies have. And I think that's a good sign. Thank you, everyone, for joining us today. I know it's a busy day for calls. And we look forward to speaking with you in the future. Have a great day.

2016_MHLD

2016

NSP

NSP #Thank you. We appreciate you joining us this morning. Let me begin by outlining our plan for this morning's call. First, I'm going to discuss the details of our second-quarter 2016 financial results. <UNK> will then comment on the key drivers behind our strong results. I will return to provide our financial guidance for the third quarter and an update to the full-year 2016 guidance. We will then end the call with a question-and-answer session, where <UNK>, <UNK>, and I will be available. Now before we begin, I would like to remind you that Mr. <UNK>, Mr. <UNK>, or myself may make forward-looking statements during today's call, which are subject to risks, uncertainties, and assumptions. In addition, some of our discussion may include non-GAAP financial measures. For a more detailed discussion of the risks and uncertainties that cause actual results to differ materially from any forward-looking statements, and reconciliations of non-GAAP financial measures, please see the Company's public filings included in the Form 8-K filed today, which are available on our website. Now let me begin today's call by discussing our second-quarter results, which were driven by continued midteen double-digit worksite employee growth and ongoing effective management of gross profit and operating cost. Adjusted EPS increased 43% over Q2 of 2015 to $0.60, and adjusted EBITDA increased 13% to $25.6 million, in line with our forecast. Through the first half of 2016, we remain ahead of our initial budget, having generated a 74% increase in adjusted EPS over 2015 to $2.23, and a 34% increase in adjusted EBITDA to $86.8 million. Our second-quarter highlights were led by 14.2% increase in average paid worksite employees to 163,521, which is at the midpoint of our Q2 forecasted range of 163,000 to 164,000. This growth continues to be driven by a high level of client retention, which averaged over 99% for the quarter, and an increase in sales driven by a 15% year-over-year increase in the average number of trained business performance advisors. Net hiring in our client base was positive for the full quarter; however, included a dip in May, consistent with the weakness reported in the broader labor market. Now along with achieving our forecasted Q2 growth in paid worksite employees, we also effectively managed our direct cost trends and operating cost to achieve our targeted bottom-line growth. Gross profit increased by 9% over Q2 2015, and as expected was influenced by client and product mix changes, benefit plan selection, and the seasonality associated with payroll taxes. Benefit and workers compensation costs continue to trend favorably when compared to our initial 2016 budget. Adjusted operating expenses increased by 7% over Q2 of 2015 and declined 7% on a per-worksite employee per month basis from $211 in Q2 of 2015 to $197 in Q2 of this year due to cost savings initiatives and continued operating leverage. We have continued to closely manage our operating expenses, as demonstrated by an increase of only 4% in corporate headcount, excluding the growth in the number of Business Performance Advisors, and only a 2% increase in G&A costs. As for our balance sheet and cash flow, we ended the quarter with approximately $70 million of working capital, including $51 million of adjusted cash. In addition, we have $95 million available under our line of credit. We have repurchased just over 3.1 million shares through the first half of this year, with a majority of the shares acquired through our Dutch auction tender offer in January. We've also paid out approximately $10 million of dividends, inclusive of the recent 14% increase in our quarterly dividend rate. Now at this time, I'd like to turn the call over to <UNK>. Thank you, Doug. My comments today will focus on three primary areas. First, I will discuss key drivers of our excellent recent results. Second, I will describe our plans to continue our momentum over the last half of 2016, and third, I will discuss the critical elements we are focusing on to set up a strong 2017. Our outstanding second quarter reflects that our overall strategy is in place and our simple formula for success is working. Our wide array of business performance solutions and our premium workforce optimization offering are in demand and our business performance advisors are working the Insperity selling system. Sales for the quarter were solid, as the number of trained Business Performance Advisors was up 15%, delivering a 16% increase in the number of paid worksite employees from new sales. The number of discovery calls were up 14% and the number of business profiles or opportunities to bid were up 12%. Total sales were 93% of target for the quarter and 99% year to date, so we are continuing to see solid execution from our sales organization. Midmarket sales are on track and the pipeline for new business is our strongest to date. This segment now represents just under 25% of our worksite employees and is 19% larger than one year ago. Now this includes clients that grew into this segment from our core small business and emerging growth client base. The sale of additional business performance solutions attached to a Workforce Optimization sale and on a stand-alone basis continued at levels from Q1. These sales contributed at the gross profit line and added new clients to upsell to Workforce Optimization in the future. Another highlight in the quarter and year to date was the effectiveness of our marketing efforts, which is very important as we head into the last half of the year. <UNK>eting leads provided to our sales team are up over 80% as social media followers are up over 100%, and unique visitors to insperity.com are up over 40%. As Doug mentioned, our client retention rates are continuing at historically high levels as our wide array of business performance solutions and the level of care from our service organization continue to meet or exceed customer expectations. This is particularly amazing when considering the service efficiency gains that we've made over the last couple of years. Our key service ratio of number of worksite employees per service provider improved 20% ---+ over 20%, while achieving record retention levels. The third factor relating to our unit growth is the net change in employment and existing clients from month-to-month due to layoffs and new hires. This reflection of the broader labor market continues to be a slight positive contributor overall, but remains unpredictable from month-to-month and week against historical comparisons. Q2 was a good example of this, as April and June were slightly positive. However, this metric was flat in May, and in total, lower for the quarter than last year on a larger client base. We track several additional key indicators in our data to gauge the strength of the labor market in the small- to medium-sized business community, including overtime as a percentage of base pay and commissions paid to the sales staff of our clients. Overtime as a percentage of base pay was down slightly from the same period last year, but remains just over 10%, which typically indicates the need to hire staff. The commissions paid to the sales staff of our clients was up 5% year over year, which is about average compared to historical levels over the last few years. As we look ahead to the last half of the year, our focus is on building on our growth momentum. In order to do this, we will need to increase activity that leads to sales and retention results and be prepared to overcome any obstacles that may appear. Each year, we boost sales activity in the last half of the year with our fall selling and retention campaign. We expect to launch this year's campaign in early September, and our sales and service teams are up for the challenge. Our recent marketing success bodes well for our plans to increase activity this fall. Our goal will be to maximize the amount of time our BPAs spend in front of qualified prospects. Another key factor in our favor for this fall is the direct cost stability we have experienced that translates into favorable pricing for our clients and prospects. We expect these positive trends in our benefit and workers compensation programs will help in converting new and renewing accounts over the balance of this year. In addition, the Affordable Care Act continues to cascade down state-by-state and carrier-by-carrier throughout the country. This fall, many businesses will be facing community rating and narrowed networks for the first time, especially in the 50-to-100 employee category. This translates into more firms looking for solutions to get out of the complexity, compliance, and cost of the Affordable Care Act. We are also cognizant of the factors that can introduce uncertainty in the marketplace and negatively affect business owner sentiment. This would include geopolitical events, which have increased in frequency of late, and of course the upcoming election. Our approach will be to prepare our staff as effectively as possible and maximize the number of opportunities in order to achieve our objectives, even if uncertainty is elevated. There are several key initiatives over the last half of the year designed to set up a strong 2017. In addition to a robust fall selling and retention campaign, we will be focused on growing the sales team, deploying technology enhancements, and becoming certified under the Small Business Efficiency Act. Recruiting and training Business Performance Advisors over the last half of the year is a major priority. We have over 400 BPAs hired now, and expect that number to reach 425 by year end. This will put us on track for growth goals for next year. Another priority for 2017 is to deploy technology upgrades to both the PEO co-employment and traditional employment platforms. Our industry-leading PEO platform will become more HCM-like in both look and feel and functionality. The platform will also accommodate what we call BYO, or bring-your-own, HCM. This will accommodate clients that already have a human capital management system that they've made an investment in and want to continue to use it within the PEO relationship. We also have an upgrade to our traditional employment platform underway that we expect will drive our stand-alone payroll business and traditional employment bundles, called Workforce Administration and Workforce Collaboration. We believe these upgrades in both the PEO and traditional employment platforms will continue to enhance our competitive advantage in the marketplace in 2017. One other priority which sets up a strong year next year is completing the certification process under the Small Business Efficiency Act. We will be completing our application in the near future, and we have prepared for the changes that come with this opportunity. Once we are certified, we will no longer have to restart the payroll tax wage bases on new accounts that come on throughout the year. This will lower our cost related to these payroll tax payments, increasing profitability and allow for more favorable pricing to prospects, enhancing our sales. The combination of the stamp of approval from the Small Business Efficiency Act and the financial benefits of certification provide an additional lift to the PEO industry in general and for Insperity specifically for 2017. So in summary, we are pleased with the recent results and the momentum we have in the business, and we are focused on the right priorities for the balance of the year. And look forward to continuing strong results and increasing shareholder value. At this time, I will turn the call back over to Doug. Thanks, <UNK>. Before we open up the call for questions, I would like to provide our financial guidance for the third quarter and an update to our full-year 2016 forecast. Based upon our solid execution through the first half of 2016 and outlook for strong client sales and high client retention over the remainder of the year, we continue to expect worksite employee growth of 14% to 15% for the full year. As for Q3, we are forecasting average paid worksite employees in a range of 170,000 to 170,700, an increase of 14% to 14.5% over the third quarter of 2015. We also remain on target for a 28% to 32% increase in adjusted EBITDA over 2015 when combining our unit growth outlook with expected gross profit trends and operating leverage over the remainder of the year. This increase translates into forecasted adjusted EBITDA of $141 million to $145 million, which averages to approximately $71 per worksite employee per month, a 13% increase over 2015. As for the third quarter, we are forecasting adjusted EBITDA of $30 million to $32 million, which follows our typical seasonal earnings pattern. We are now forecasting an increase of 60% to 64% in adjusted EPS over 2015 to a range of $3.50 to $3.60. This is up from our previous guidance of $3.46 to $3.58. Q3 adjusted EPS is projected in a range of $0.72 to $0.78, an increase of 26% to 37% over Q3 of 2015. In conclusion, we are pleased with our continued strong growth and profitability and look forward to updating you on our progress over the remainder of the year. Now at this time, I would like to open up the call for questions. Yes, in the last quarter, I mentioned in my remarks that it has been a slight positive overall, slightly less positive than it was a year ago, and it has remained a little choppy. We had a couple normal months in April and June, and then May was pretty much flat. Layoffs and new hires about even. And so that was a fairly weak number, kind of reflecting what was going on in the labor market overall. So we are keeping a close eye on it. The good news is that overtime is still up over 10%. Commissions we pay to the sales staff of our clients, which gives us some insight into their pipeline for new business, still remains pretty good. So we think we are probably going to see more of the same; slight positive tailwind. But the growth comes from the new sales and the retention rate. We are just always happy when it's not headwind. No, not really. We really don't break it down too much by sector. We do some internal analysis of that. But we haven't seen anything that I would call a change in that area. Yes, we continue to see some really good results by having a wide array of business performance solutions. It helps us to sell our core workforce optimization offering. Our attachment rates were good in the quarter. And we also sell those services on a stand-alone basis, which expands our customer base and gives us other clients to sell into and sell upsell over time. And so we had really good results in the retirement services area, where it makes a whole lot of sense when you become a Workforce Optimization customer to go ahead and attach the 401(k) because our recordkeeping services are very economical. And it helps to make the financial numbers work to become a client. We are also continuing to see good strong attachment of the time and attendance offering because of course under the Affordable Care Act, we really have to be all over your timekeeping and recordkeeping. And so that becomes a nice add-on as well. So those two are kind of leading the way, although we've had a really strong year on the recruiting front, which is kind of interesting in a fairly weak labor market. But our recruiting offering has a lot of uniqueness to it and is well received in the marketplace. And so we've done well there as well. I would say that as far as our contribution on the income statement, it's right in line at the gross profit line with what we've been forecasting for the full year when you take the whole array of those Business Performance solutions so together. So we are real pleased. As far as the contribution from the other products and services, it's fairly simple on a per-worksite employee basis as it has been historically. So it's pretty much grown in line with the unit growth. The year-over-year increase in gross profit dollars is up 9%. You may be referring to gross profit per employee number, and a lot of that has to do with seasonality and the benefit plan migrations in the mix of our clients and products and services. I think if you look at the full year, we are expecting it to be fairly similar with the prior year. And so ---+ a lot of it is just seasonality and product mix. But it's still in line with what our initial budget was going into the year, so no real surprises there. Yes. As our budgets get larger each month throughout the year, so we are still at 99% for the year. We were 93% for the quarter, so still a good strong number. And the number of worksite employees paid in the quarter was up 16% on a 15% increase in number of BPA. So all systems go there and pleased with the results. We just like to set pretty good robust internal targets as the year progresses. And we always build in a little bit of room between the sales targets, of course, and what we book into our ---+ or roll into our financials. <UNK>, this is <UNK>. The trends that we are seeing on both the benefits and the workers compensation are right in line with what we forecasted for the year. On the workers comp, it has actually become a little bit better in the last two quarters because, you know, we are under a policy year that starts in October and runs through September. So when we look at this policy year to date, our severity rate on claims is actually down over 20% better. So that trend has been really good. On the benefit side, we are seeing ---+ this quarter, we saw a little about a 2% trend in the medical side of our claims and it was a 6% increase or a 6% trend on the pharmacy. Now that compares to last quarter, where we had about a 1% medical trend on the medical side and a 19% trend on the pharmacy. So second quarter is definitely an improvement over the first quarter, but when we look at the whole policy year, on the benefit side, we are right in line with exactly what we looked at early on. You look on the revenue side of the business, obviously because one of the big elements of our revenue is the amount that's built-in for the medical component of our service. So when people continue to migrate to the lower-cost, higher-deductible plans than what we expected our forecasted for the quarter or for the year, obviously our revenue is going to be lower. But as you all know, it isn't about our revenue, anyway. It's about the gross profit and the contribution at the operating income line, because every worksite employee is a unit of revenue and a unit of risk. And so that's how we measure it. Once again, thank you all for following the Company. We all look forward to continuing these type of results and getting ready to launch our fall campaign for the year. And we will be reporting on that next quarter. Thank you again for participating today.

2016_NSP

2018

JKHY

JKHY #Well, there was a couple of things, Dave. First of all, you've got, obviously, all the development but also the additional headcounts we brought in to assist with the migrations for the move to the new payments platform. And those costs are going to be around for the next 18 months or so. At that point, when we get all the customers off on the platforms, we'll have to shut down one of the platforms. We'll be getting rid of or displacing a lot of development people and a lot of the migration staff. So you're going to see a really see nice pop in margins there. The other thing that we're having to kind of grow over is all the development we've done in all these products in the previous 3 or 4 years for the treasury services, the ERMS solution, all those. So depreciation and amortization are both up quite a bit. And so we've got the costs that's rolling out there. But yes, we still ---+ now we're just getting the sales going. And so we're going to have to ratchet up the live customers on those to even offset the increased amortization and depreciation. So that's going to happen slowly over the next, probably, 3 or 4 quarters that we'll be able to grow over that. And that should give a little relief on margins or at least help to maintain the margins where we (inaudible) to offset the increased costs for the move on the payments platform. And then when we get to shut down the payments platform, that's when you're going to see a huge increase in margins. Because, again, that's over 20% of our total revenue right now that you're going to see a significant pop in margins. For fiscal '18, well, we're going to finish this quarter at $0.93 to $0.95, which will put us full year with the impacts of TJCA (sic) [TCJA] in the $4.69 to $4.71 range. Yes. Had a couple of questions. Maybe little bit looking out a little longer term. On a theoretical basis, how do you feel about selling to FinTech disruptors. Reading a lot in American Banker as well as the some of the other publications about some of these new companies coming out offering a lightweight core, maybe offering some payment capabilities. On a theoretical basis, are you marketing to those. Or you view that as something that impacts negatively your target market of regular banks and credit unions. Yes. So it's a good question, Pete. It's a fine line that we walk in that discussion. We don't want ---+ we're committed to the idea that we are not going to set ourselves up to be a competitor with our traditional customers. So with that in mind, where are those opportunities where we can maybe partner with a traditional customer to enable them with a FinTech. So we are not ---+ we are open to the idea ---+ instead of 2 negatives here, I'll say, we're open to the idea of working some of those partnerships. We have some of those discussions ongoing today. But we're very careful about the point of not positioning ourselves to compete with our traditional customers. And by the way to your point about the lightweight core and being nimble and gathering online deposits, that's actually a topic in my discussion for next week because we are ---+ we will be offering that type of solution to our customers with products ---+ solutions that we already have at Jack Henry. So that's ---+ we're well positioned to compete in that space with what we already have. Okay. That's helpful. And then just a follow-up on Ensenta. I've read through the description of what Ensenta does, and I've read through some of your material. And I guess, I'm still not completely clear on some of the additional capabilities that Ensenta brought to Jack Henry. And maybe you can give us some examples of other areas where it either solidified a lead or added new capabilities. Sure. So if you think about our traditional Enterprise Payments business, we were very strong in commercial deposits, working with commercial customers, particularly on the banking side of our business. So we're the most widely installed solution in that space. We had some penetration on the credit union side and we had some penetration for consumer deposits, but we were not industry leader in that space. And the reason we weren't the industry leader is because Ensenta was. So if you put Ensenta together with our EPS platform, we have the industry-leading solution for commercial deposits, consumer deposits, mobile deposits, essentially across the board. Additionally, Ensenta brought to us technology for working in the ATM environment that we didn't have and the shared branching environment on the credit union side for processing payments. Neither of those were huge part of their business, but it broadened our suite, which of course is what we're always looking to do on the ProfitStars. The is a ProfitStars solution, by the way. So always looking to broaden that offering on the ProfitStars side to try and fill as many holes as we can for those customers who do business with ProfitStars. And of course, many of them are noncore Jack Henry customers. So we have to have a best of breed, very broad offering to be competitive in that space. They also brought us some best of breed risk solutions. Yes, right. Yes, risk management technology around payments that we ---+ we had a very solid offering, but they had a better offering. So that augmented that piece of our story as well. Thanks, Olivia. As Dave mentioned, I want to remind everyone that we are having our annual Analyst Day next Monday afternoon at the Omni in Atlanta, which the afternoon presentations will be webcast. We're doing it just like we have in the past. We're going to have all of our group presidents. Greg Adelson, our GM of Payments and our National Sales Manager will all do presentations as will Dave and I and Mark Forbis, our CTO. There will be open Q&A. And then in the evening, there will be a mini tech fair, where I believe, we have 6 of our hotter products that will be shown there, which includes Banno, treasury services, the ERMS and the new payments platform will all be shown there. So we still got some open slots. If you want to go, you can either e-mail myself or Vance Sherard. So to wrap up, we're pleased with the results from our ongoing operations and the efforts of all of our associates to take care of our customers. I thank our associates for their hard work. Our executives, managers and all of our associates continue to focus on what is best for our customers and shareholders. I want to thank you again for joining us today. And Olivia, will you please now provide the replay number.

2018_JKHY

2017

WRI

WRI #1. 5%. 1. 5%. Okay. And then just from going to the new lease deals that you guys signed in the quarter, looks like tenant improvements on a per year basis were down relatively significantly. Is there anything specifically going on there. Or is that just a function of the pool (inaudible). Chris, that's just a function of what we leased this time. I don't think there's any indication there. There were ---+ there was only 1 box included in the number. So that does impact it. Generally, the boxes do have a higher allowance. And then on the renewals for the quarter, the volume was the highest in at least 5 years. Is anything specifically going on there as it relates to just the level of activity. Or how you're going at it. Or is it just a timing issue in terms of just (inaudible) the first quarter. It's just a timing issue. We do incent our people to lease space, and they do lease it as quickly as possible. But we're working on those last year, too. It's not like we just started working on them this quarter. So we're leasing them as fast as we can and as fast as the retailers want to lease space. I'm sorry, <UNK> <UNK>, you broke up a little bit. Can you say that again, please. Not particularly. We went back and looked at all of the leases. There really wasn't a specific lease driving plus or minus the vast majority of them are positive leases. Our expectation is, is that on the total rent growth, we would be in the low-single digits, maybe low-double digits going over the next several quarters. So I don't think we'll get back to these huge numbers, high 20s, 30% increases that we had in new leases, a couple of ---+ a year or so ago, but I think these numbers are very, very positive. <UNK> <UNK>, it's not, it's just timing. When we ---+ when they report and when we account for it, the total percentage rent, I think, is less than $4 million, about $3 million. So it's obviously not a big number. It's certainly down a small amount from the same quarter of the last year (inaudible) from the previous quarter because of the way you have to account for it, you have to stop your accrual and (inaudible). So quarter-over-quarter. . Thank you, Brandon, and thanks to everybody on the call. We'll be around later if there are more questions. Look forward to seeing many of you at ICSC RECon or NAREIT. Thanks, again, for your interest. Have a great day.

2017_WRI

2017

WDC

WDC #Good afternoon, and thank you for joining us With me today are Mike <UNK>, President and Chief Operating officer; and <UNK> <UNK>, Chief Financial Officer After my opening remarks, Mike will provide a summary of recent business highlights, and <UNK> will cover the fiscal first quarter and wrap up with our guidance We will then take your questions We reported continued strong financial performance in the September quarter, demonstrating the power of our platform and underscoring the differentiated value we can deliver, as a comprehensive data storage solutions leader For the September quarter, we reported revenue of $5.2 billion, non-GAAP gross margin of 42%, and non-GAAP earnings per share of $3.56. We generated strong operating cash flow, reflecting continued healthy demand in our end markets, most notably in our flash-based businesses With unabated growth in data creation leading to new challenges and opportunities for our customers, our transformation continues to resonate in the marketplace I would now like to spend a few minutes reviewing where we are with Toshiba There has been significant media coverage around this situation, and a lot of it is speculative So, as a starting point, I want to emphasize that the JVs continue to operate efficiently and productively, which we intend to maintain The JVs benefit from the best talent in the industry, and we are deeply appreciative of the professionalism, focus and dedication exhibited by the teams from Toshiba and SanDisk From the beginning, our number one priority has been ensuring the longevity and continued success of the joint ventures That is why we have invested so much time and energy into finding a resolution, one that respects our partnership, and resolves this matter so we can move forward in the spirit of collaboration and innovation that has been the hallmark of this 17-year relationship Throughout the course of the negotiations, we made numerous allowances to meet the needs of Toshiba and other stakeholders, such as lenders, customers, suppliers and government agencies Most notably, we withdrew from the INCJ-KKR consortium This eliminated our participation in TMC equity ownership, thus minimizing regulatory risk and directly addressing key concerns of TMC's management It also would have meant that TMC would remain under full control of Japanese stakeholders While we believe we provided the best potential solution to Toshiba and their stakeholders, Toshiba announced the transaction with the consortium led by SK Hynix and Bain Capital We have made our concerns regarding their consortium clear It continues to be our position that the transaction is not permitted without our consent That leads to where we are today There are two potential paths for resolution The stakeholders will either engage in constructive dialogue in the near future, or this matter will be resolved through the objective arbitration process With respect to arbitration, we are moving forward with strong momentum, following our successful track record in the California courts On October 5, the International Court of Arbitration confirmed the three-member arbitration panel Shortly thereafter, we informed the panel of our intention to seek injunctive relief to prevent Toshiba from transferring its JV interests to SK Hynix-Bain consortium without SanDisk's consent The panel will set a hearing schedule soon, at which point, we will officially file our motion SanDisk consent rights are clear and explicit, and we therefore feel confident in our request for injunctive relief We expect a ruling in the first part of 2018 in advance of Toshiba's announced timeframe to close the proposed transaction Just to be clear, we do not undertake litigation lightly We are not litigious And it should only be a last resort, especially in the context of this joint venture relationship With respect to Fab 6, you may recall that, over the summer, during negotiations for the first investment tranche, Toshiba announced that it would unilaterally invest in Fab 6. This was a surprise to us In fact, when Toshiba made its announcement, we had more meetings scheduled to further discuss our joint investment This was the first time that SanDisk was prevented from participating in a new fab investment To remind you, Toshiba's actions, associated with the first tranche, are already the subject of arbitration The negotiations regarding the second investment tranche for Fab 6 are ongoing Just as we did during the negotiations for the first investment tranche, we intend to jointly participate in the investment, and we are agreeing to all good-faith commercially reasonable terms proposed by Toshiba However, we will not agree to terms such as SanDisk unilaterally waiving or negating its consent rights as a condition to participate, which is what Toshiba has proposed Consequently, at this time, we are not confident that an agreement will be reached on this next investment tranche either As we have noted, Toshiba's planned initial investment in Fab 6 is solely for its directly-owned capacity that is outside of the JVs If Toshiba proceeds unilaterally with the second investment tranche, it would also be for Toshiba's directly-owned capacity, not joint venture capacity It is also important to remember that the JVs are obligated to provide us our entitled share of flash supply through 2029. Based on the JV agreements, we remain confident in our planned supply bit growth rate of 35% to 45% for calendar 2018 and calendar 2019, irrespective of these initial investments in Fab 6. In closing, I want to emphasize the following; first, our board and management are focused on resolving our differences with Toshiba, whether that is through a negotiated agreement or the arbitration process Second, we are steadfast in our commitment to protect our interests and those of Western Digital's stakeholders We are confident in our fact-based legal positions and our right to injunctive relief Third, as I mentioned earlier, there has been a great deal of misinformation provided into the marketplace through various channels We expect this activity to persist, contributing to potential confusion about this situation and our legal rights Western Digital will continue to communicate consistently and transparently, as we did with the recently filed FAQ, and through public forums like this call And finally, I want to reiterate that our number one priority has been to ensure the longevity and continued success of the joint ventures From day one, we have not changed this priority or our commitment to acting in the best interest of our stakeholders I also want to thank the outstanding Western Digital team You have maintained your focus and continued innovating and delivering for our customers in spectacular fashion With that, I will ask Mike and <UNK> to share the highlights of our quarter <UNK>, this is Steve I'll take the second question first I would prefer not to comment on that in terms of how the technology licensing arrangements work And then the second thing is, as I indicated in my prepared remarks, the joint venture agreements require bit output to be provided to us over a period of time, out to 2029. I think those sort of long-term arrangements are can be part of our ongoing practice So, yes, we do those sorts of things, and from time-to-time, prepayments would be one of the elements of those agreements So, our allocation philosophy has two dimensions Obviously, one of them you referenced, which is economic The other is strategic So we're looking at our goals of, sort of, optimizing between our current and mid-term financial results and our long-term objectives of growing and diversifying our customer base across multiple product segments So, it's a complex formula, and it really is based on those two things Obviously, based upon our results, we are growing in basically all of those segments and you can see the results of some of that activity Mike can take the first part, and then <UNK> can take the second part Yes, I think at this point it's really too early to tell Certainly, we don't have any indication strongly to one side or the other, at this point Yeah, it's in both of our best interest that we continue to advance the capabilities of the joint ventures from a technology and from a manufacturing perspective And so, we're confident that ourselves and our joint venture partner will continue to invest appropriately in that capability going forward And that's independent, frankly speaking, of how the arbitration proceedings turn out I think we talked about last quarter that ASPs had flattened That was our expectation coming into this quarter, and that's really our expectation as we sit today So we don't see continued movement in a substantial way up, but it's being sustained at the current level Yeah, the color we'll give you is we did see significant quarter-to-quarter growth on 10 terabytes We also saw the initial ramp on 12 terabytes, and we would expect that will accelerate into the current quarter So, the continued movements of the market to the highest capacities in this case 10 terabytes and 12 terabytes is progressing very well And we're very pleased with how that's moving in our business I don't think we provided any numbers for calendar 2018 at this point But we are getting more fixed re-output (46:38) than the 2D NAND at this point, so we've realized that crossover point And we've seen no impact of the situation with Toshiba that's changed that No disruption to what our expectations and plans were previously, and we do not expect that into calendar 2018 either Yes, I think your perspective – one of the drivers for seasonality is PC, so, yes, you're on it Also the consumer segments of our business also see a seasonal trends, that would include gaming, as an example And yes, obviously, when we move into the second half of the calendar year, we do see some absorption benefits that help us on the margin All right So you've got a follow-up question quickly, please? I think we're done All right I want to thank, everybody, for joining us today, and we look forward to speaking with you going forward Have a great rest of the day

2017_WDC

2016

FTNT

FTNT #Internal segmentation firewall mostly deployed as ---+ they called switch mode, transparent mode, in an environment and will be 10 times, 100 times faster than the traditional firewall. But most of the switching networking company don't have these secured capability on the networking device which are not in there. And the traditional like security company which is software based is also have high performance need and also how to deploy in a switch mode. That is where we don't see much competitors here, and it is a ---+ we see it is an opportunity and we have huge advantage. So that's where we see is a ---+ we have the best technology and timing to keeping the mass and grow in this space. I think we identified this market two years ago, and we keeping educated market in improving the product and both with ASIC and also the OS we announced today. Still difficult to ask me how quickly the market growing, but from what I talked with the customer, long term wise they see especially in enterprise the same, probably bigger than the traditional firewall market. Nowadays they all feel the traditional way to deploy a few firewall with company internet no longer secure enough. So they need to move internally secure segment department different server, but how quickly they adopt and how quickly they can maybe deploy where the company, deploy the switch, still difficult to say. But I think is that so far the adopt is pretty quick. When the customer see the benefit, they really like the approach given the actual protection. I just want to say thanks to everybody. We're trying to keep our calls shorter, and so we did this time. We will have a second call at 3:30. So as you digest the information we gave you today, feel free to call back in at 3:30 to answer more comprehensive remaining questions. That's it. Thank you very much. Thank you.

2016_FTNT

2017

INCY

INCY #Thank you, Diego. Good morning, and welcome to Incyte's Second Quarter 2017 Earnings Conference Call and Webcast. The slides used today are available for download on the Investors section of Incyte.com. I'm joined on the call today by <UNK>, <UNK>, <UNK>, Dave and <UNK>. We'd like to remind you that some of the statements made during the call today are forward-looking statements, including statements regarding our expectations for 2017 guidance, the commercialization of our products and our development plans for the compounds in our pipeline as well as the development plans of our collaboration partners. These forward-looking statements are subject to a number of risks and uncertainties that may cause our actual results to differ materially, including those described in our 10-Q for the quarter ended March 31, 2017 and, from time to time, in our other SEC documents. I'd now like to pass the call over to <UNK> for his introductory remarks. Thank you, Mike, and good morning, everyone. We appreciate you all taking the time to participate in the call today, and we are very excited to share with you the significant progress we have made during the second quarter. First, Jakafi continues to show strong sales growth of 33% in its sixth year on the market, as the number of patients benefiting from this treatment continues to increase. Importantly, total revenue in Q2 also grew by 33% year-over-year, as strong royalties from Jakavi, sales from Iclusig and the first full quarter of royalties from Olumiant resulted in a total revenue of $326 million for the quarter. Speaking of Olumiant, it's now approved in Europe, in Switzerland and in Japan and let me quickly address the updates that we, along with Lilly, provided last week. Based on feedback from the FDA to its Complete Response Letter for the NDA for baricitinib, we announced that an NDA resubmission will be delayed for a period anticipated to be a minimum of 18 months. We and Lilly are now evaluating options for resubmission after the FDA indicated that a new clinical study is necessary to further characterize the benefit/risk across doses. We continue to disagree with the FDA's conclusion and we believe that the existing clinical data demonstrates a positive benefit/risk profile that supports baricitinib's approval as a treatment option for people suffering from RA in the United States. Moving now to our in-house portfolio. Incyte now has 5 products in late-stage development, which could provide us with significant commercial opportunities pending successful development and regulatory approvals in the 2019 to 2021 time period. These programs are ruxolitinib, itacitinib, epacadostat, our PI3 kinase delta and our FGFR inhibitor. I'll now briefly touch on several important advancements we have made here over the last few months. Most importantly, we have initiated 2 pivotal trials, REACH3, the pivotal trial of ruxolitinib in patients with steroid-refractory chronic GVHD, which dosed its first patient in June; and GRAVITAS-301, the pivotal trial of itacitinib in patients with treatment-naive acute GVHD, which began in July. This results in a total of 4 ongoing pivotal trials in patients with various forms of GVHD. We have also been working diligently with both Merck and BMS, and I can confirm that plans for the expanded ECHO Phase III program for epacadostat are on track for initiation later this year. <UNK> will provide you with some additional color in the clinical section. Our discovery and early development efforts continue rapidly, and I'm very pleased to say that 62079, our selective FGFR4 inhibitor, entered the clinic in June. This initial trial will be a dose escalation study in patients with liver cancer and other advanced malignancies. In summary, we have made significant progress in the first half of 2017. Jakafi and Iclusig sales are robust; we are executing on our clinical objectives. Our global operations are progressing as planned, with manufacturing and market mccess efforts expanding in Europe and the establishment of initial clinical operations in Japan. Incyte was founded on the belief that investments in innovation create value. This belief has served us well to date, and we look forward to keeping you updated as our company continues to grow. With that, I'll pass the call to <UNK> for an update on Jakafi. Thank you, <UNK>, and good morning, everyone. Jakafi sales in Q2 were strong at $276 million, a 33% increase over Q2 of 2016 and a 10% increase over the first quarter of this year. Demand growth was up Q2 versus Q1 by over 7%. We believe this momentum is due to both the quality of the data underlying Jakafi and to the efforts of our U.S. team here at Incyte. Jakafi's performance in the quarter was driven by strong patient demand for both indications, while total PV patient growth continues to outpace the MF patient growth. We believe that a key driver of demand in MF is the impact of the NCCN Guidelines that were published last year, which first included Jakafi as a recommended treatment for MF. Updated NCCN guidelines for MPNs were published late last week. And for the first time, these guidelines now cover polycythemia vera. Jakafi was included as a recommended treatment for patients with PV who have inadequate response to first-line therapies such as hydroxyurea. We are very pleased that the NCCN guidelines for MPNs now include Jakafi for both myelofibrosis and polycythemia vera. A quick word on inventory, which has been very steady within a range of 2.5 to 3 weeks. Last quarter, we stated that we exited Q1 at the high end of the normal range for inventory. This has now been normalized in the second quarter. Lastly, as a result of our strong sales growth, we are pleased to raise our full year 2017 net product revenue guidance for Jakafi from a range of $1,020 million to $1,070 million to a new range of $1,090 million to $1,120 million. Jakafi commercial momentum is clearly very strong. And now I'd like to share a slide on how we plan to further grow the brand. We have pivotal programs which are designed to evaluate ruxolitinib in patients with graft-versus-host disease and in patients with essential thrombocythemia, where there is both a need for new treatments and where the rationale for JAK inhibition is strong. As of late June, all 3 trials in the REACH pivotal program of ruxolitinib in patients with steroid-refractory GVHD have been initiated. This broad program encompasses patients with both acute and chronic GVHD, and we expect to enroll a total of 600 patients into the REACH trials. Should the REACH1 trial have a positive outcome, we would expect to file an sNDA, seeking accelerated approval of ruxolitinib in patients with steroid refractory acute GVHD during 2018. RESET-272, the pivotal trial of ruxolitinib in patients with essential thrombocythemia, is now open for enrollment, and we expect to dose the first patient in the coming weeks. ET is characterized by the overproduction of platelets in the bone marrow, which can lead to unnecessary clotting and cause heart attacks or strokes. The trial is being run head-to-head, ruxolitinib versus anagrelide, and we expect to enroll 120 patients who have failed or are intolerant of hydroxyurea. We are proud of the clinical benefits that Jakafi provides patients with MF and PV, and we look forward to investing further in the clinical development of Jakafi. With that, I'll pass the call along to <UNK> for a clinical update. Thanks, <UNK>, and good morning, everyone. We've made significant progress in the clinic since we updated you on our first quarter call in May of this year. Showing here on Slide 10 are our 5 key programs in development, within which we have initiated multiple trials in the last few months. In addition to <UNK>'s comments on ruxolitinib's comprehensive clinical development program in graft-versus-host disease and essential thrombocythemia, you can see that we have now initiated the pivotal program for itacitinib in patients with treatment-naive acute graft-versus-host disease. In the coming months, we expect to initiate multiple trials with our PI3 kinase delta inhibitor, 50465. Following positive proof-of-concept data presented at both ASH last year and ASCO this year, we intend to study this compound in follicular lymphoma, marginal zone lymphoma and mantle cell lymphoma. Let me provide a little extra color on our expanding ECHO development program for epacadostat. As a reminder, we are planning to initiate 6 Phase III trials of epacadostat in combination with pembro in 4 different tumor types. And we are also planning to launch Phase III trials of epacadostat in combination with nivo in 2 tumor types. On the epacadostat studies in combination with pembro, I am pleased to confirm that, together with Merck, we have obtained all the necessary regulatory feedback, and it remains our aim to open and achieve first patient initiated in all 6 studies before the end of this calendar year. With Bristol-Myers Squibb, we are at an earlier stage in our planning but are still targeting the planned initiation of these studies before the end of this calendar year. As we get a little closer to site initiations and first patients initiated, all of these designs will populate to ct. gov, but you can appreciate that, for a variety of competitive and other reasons, we will not be talking about the designs in any detail before that time. Moving now to ECHO-301, the ongoing Phase III trial of epacadostat in combination with pembro in patients with advanced or unresectable melanoma. The trial is ongoing, and as we disclosed on the Q1 call, has completed recruitment outside of Japan. The endpoints for ECHO-301 are event-driven, and we expect to be in a position to share those data with you in the first half of 2018. I'm also very pleased to announce that epacadostat, and specifically the ECHO-301 trial, has been granted fast-track designation by the FDA. This provision is intended to facilitate development and expedite review of drugs to treat serious and life-threatening conditions so that an approved product can potentially reach the market rapidly. In the near term, we look forward to providing you with an update to the melanoma patient cohort of the ECHO-202 Phase I/II trial at ESMO in September of this year in Madrid. We expect this update to include both the dose escalation patients, which were last presented at ESMO 2016, as well as new data from the Phase II expansion cohorts of melanoma patients from ECHO-202 for the very first time. I'll now discuss some highlights from our upcoming news flow. As I just mentioned, we look forward to sharing updated ECHO-202 data in melanoma patients at ESMO in September. We also expect to dose the first patient in the RESET-272 pivotal trial of ruxolitinib in essential thrombocythemia in the next few weeks. Towards the back end of 2017, we expect the presentation of dose escalation data for both BRD inhibitors, 54329 and 57643, as well as dose escalation data for our PIM inhibitor, 53914. Heading into 2018, we look forward to a number of trial outcomes, including 2 pivotal studies. We expect to be able to share data from the Phase III results of ECHO-301 as well as the pivotal REACH1 study of ruxolitinib in steroid refractory acute graft-versus-host disease. Lastly, we also expect the first presentation of data from our Phase II paired biopsy trials. We are encouraged by the significant progress we've made so far this year, and the next 12 months promises to be a very exciting time for Incyte. If we achieve the goals that we have outlined, we expect to be running up to 20 late stage trials in early 2018. This is a significant undertaking, but one that is enabled by the quality of our discovery and development teams and by the excellent commercial momentum of Jakafi and Iclusig. With that, I'll pass the call to Dave for the financial update. Thanks, <UNK>, and good morning, everyone. The second quarter was very strong. We recorded $326 million of total revenue. This was comprised of $276 million in Jakafi net product revenue, $16 million in Iclusig net product revenue, $34 million in Jakavi royalties from Novartis and $1 million in Olumiant royalties from Lilly. Jakafi's net product revenue of $276 million represents 33% growth over the same period last year. Based on Jakafi's performance for the first 6 months of the year, we are increasing our full year Jakafi net product revenue guidance to a range of $1,090 million to $1,120 million. Our gross to net adjustments for the second quarter was approximately 12%. We expect the total gross to net adjustment for the full year to be approximately 13%. Our cost-of-product revenue for the quarter was $20 million. This includes the cost of goods sold for Jakafi and Iclusig, the payment of royalties to Novartis on U.S. Jakafi net sales and the amortization of acquired product rights related to the Iclusig product acquisition in Europe. Our R&D expense for the quarter was $202 million, including $23 million in noncash stock compensation. For the full year, we expect R&D expense to be in the range of $1,050 million to $1,150 million. This is an increase from the previous guidance last quarter. The increase in R&D expense guidance is related to the acceleration of the Phase III plans for epacadostat. Our SG&A expense for the quarter was $90 million, including $11 million in noncash stock compensation. We recorded a $7 million expense related to the change in the fair market value of the contingent consideration for the Iclusig royalty liability. Moving on to non-operating expenses. We recorded $20 million unrealized loss on our long-term investments in Merus and Agenus and a onetime debt exchange expense of $1 million related to senior note conversions of $20 million during the quarter. For the second quarter, we recorded a loss of $12 million, primarily due to the previously mentioned $20 million unrealized loss on our long-term investments. Looking at the balance sheet, we ended the second quarter with $609 million in cash and marketable securities and expect to end the year with over $600 million. On our final slide, you'll see our full year guidance. In addition to the updates I've already mentioned, a $15 million milestone will be recognized in the third quarter for the Japanese approval of Olumiant. As a result, we now expect up to $145 million in milestones for the year. Incorporating all these previously discussed changes, including the $20 million unrealized loss on our long-term investments, we now expect a net loss between $180 million to $200 million for the year. To summarize, our second quarter performance reflects the strength of our underlying business, as well as the continued advancement of our clinical development programs. We continue to execute on our development plans for a robust pipeline and look forward to updating you on our progress during our third quarter call. Operator, that concludes our prepared remarks. Please give your instructions and open up the call for Q&A. Thank you. Hi Geoff, it's <UNK> answering your question. So obviously, whenever a Phase III reports out negative, this is disappointing for patients and investigators involved. From our perspective with epacadostat and the planning thereof of our studies, it was an eventuality we obviously considered may happen and it hasn't affected our plans to date. In terms of triple combinations going forward, that's really more in its infancy right now with us, and we're still doing enabling Phase I work looking at that. And we haven't decided whether we'll be progressing there or not. And there's no other substitution potential, to answer the third part of your call. So the simple answer to your question is, it hasn't impacted in terms of our execution of IDO going forward and, in our view, opens up the potential for I/O, I/O doublet now to be cornerstone by IDO with PD-1s in many diseases, and that's positive. In melanoma, we've always said that the PD-1 CTLA-4 doublet data as regards response rate in PFS is a clinical benchmark that we wanted to attain with our data. At the same time, we've always been very encouraged by the tolerability profile of our own doublet of PD-1 and IDO. So that's my comments as regard to MYSTIC right now. Yes, it's me again. Thank you for your question. We updated our data last year at ESMO. And as I just said on the call, we'll be doing it at this ESMO in Madrid in September, with more patient data. And you'll get some idea, albeit in a single-arm study, of what our potential progression-free survival rates are with our doublet. And I'll point you towards that meeting itself. In terms of the ECHO-301 study and the read-out, obviously it's event-driven and we need to wait for the events to occur. All our ---+ looking at the operational characteristics of the study ---+ point to us getting data in the first half of next year, and that's when we're expected. The benchmark there, just to be clear, is against PD-1 monotherapy, in that case pembro, per their labels, which are in the 5.5 to 6 months range, is what we have to beat. <UNK>, it's <UNK>. I'll start off with your ASCO question and then turn it to <UNK> on the 2 bromodomain inhibitors. The intent would always be, at an appropriate time, to update those data sets in terms of more mature data, just as we've done for melanoma, by the way, a year apart now: ESMO last year and then this ESMO. Each time, it involves collecting the data, cleaning it and doing data cuts. So it's not something we do in real-time or on a constant basis. But the intent would be to update it at a time point in the future. I can't commit on this call to you for each data set when that will be, but it will be sometime in the next 24 months or so. <UNK>, this is <UNK>. I'll take your BRD question. As we often do for our programs, we'll progress more than one more than molecule into the clinic, and that can be for various reasons. Sometimes it's a different structure to safeguard against a safety problem that could arise with the lead compound. Other times, it can be for differential pharmacokinetics and pharmacodynamics, so that we can evaluate the safety and early signs of efficacy of very different clinical drug profiles. And actually, both of those reasons underlie our decision some time ago to progress '57643 and '54329 into the clinic. Those Phase I dose escalations are all wrapping up now, and we'll present data from each of those in the second half of the year. I don't want to get ahead what those data show, but suffice it to say, we became quite comfortable with '57643 as having a more optimal profile and because of that, it's the compound that will now progress forward into both liquid and solid tumor combination studies. And you'll learn more about those over the coming months. <UNK>, it's <UNK>. In terms of ECHO-110 and the Roche-Genentech collaboration with atezo, as we've spoken about on the earnings calls in the last few quarters, it has been one of the studies that has been a laggard in terms of enrollment. Initially, the study included non-small cell lung cancer patients alone, and then was amended to try and capture metastatic bladder cancer as well. And it never took off in terms of enrollment. It's hard to give you all the reasons related to that, whether it was lack of interest in that particular PD-L1 combination or not. But it was always one of our collaborations because, at the time of NewLink and other reasons, that we knew that would be the case. And I don't think there's any readthrough at the moment, and obviously we'll commit to presenting that data when it's brought in and cleaned in the future. In terms of melanoma, I can't commit until the meeting itself, other than what I said on the actual call, that it will include both the initial patients and now the dose expansion phase as well. We will look at data in all-comers, in treatment-naive setting and at the 100-milligram dose, and present what we think is mature and adequate follow-up for those populations for you. Just getting back to your question and Geoff's question, we'll also try to show the different prognostic subgroups there as regards to some of the known prognostic factors to try and ascertain and give you clarity as to what impacts prognosis here. And then to your question and Geoff's, which has an answer clearly in the beginning, the Phase III study is in more than 600 patients and we have every belief, because of its size, it'll be representative of a melanoma population and will mirror what we saw in ECHO-202. Katherine, yes, it's <UNK>. As you and others are aware, with this particular class, they are all very active compounds and we've shown their activity at our compound now at multiple meetings. Across B-cell malignancies, whether it's diffuse large B-cell lymphoma or marginal, mantle cell lymphomas, they're highly active. The challenge becomes tolerability for the class. And as you allude to, how can you avert some of the longer-term toxicities. With our second generation inhibitor, we now have enough cumulative data that we look like the liver signals seen with the first generation inhibitors is not present with our particular compound, so that's very encouraging. But in terms of on-target B-cell effects, which tend to occur later on, there are 2 really things you can attempt to do, either change dose or change schedule or change both. And we're looking it at, without giving away everything, at trying to maintain efficacy for what we know is a very active compound, and once we have that efficacy achieved, then changing either the dose or the schedule or both to change the tolerability profile over time. And as we gather that data, we'll be able to prove to you whether or not we can do that. But that, I think, is a central challenge with this class. We think we have a best-in-class highly active compound, and I'll just point you to the activity data we've shown to date. In terms of oncology drug development, obviously we're always trying to move the benchmarks and increase either response rate or progression-free survival or survival itself to move the field forward. So currently, it's about I/O, I/O doublets with ---+ in our case, PD-1 plus IDO. And then, looking forward beyond that, is trying to work out the populations you work in versus where you may not work in at a biomarker perspective. Then there are multiple other targets. In our own shop, we already have GITR and OX40 in the clinic. And to come next year, there will further I/O compounds coming into our clinic. We have an arginase inhibitor in the clinic, which is certainly interesting in terms of its biology and potentially being able to address myeloid derived suppressor cells. And then, there are potentially other new exciting mechanisms of action, which we may explore in combination with PD-1 and IDO or with IDO alone going forward to move that benchmark further. But it's ---+ you have to do the slow, iterative experiment and prove first where you're heading and then execute on a Phase III trial to get there. You can't jump ahead of yourself. I'll leave it at that. <UNK>, I'll start and others may want to add to what I say afterwards. Obviously, you have to aim at, in these studies, at improving the event-driven endpoints, whether they're progression-free survival or overall survival or combinations thereof. Depending on the settings, sometimes the OS is short enough that, that may be the point you're trying to achieve. And that's in terms of demonstrating value for your doublet over the PD-1 alone in the settings we've selected to go after. In terms of the therapeutic ratio, though, once you hit efficacy, obviously tolerability comes into the equation as well. And I don't want to forget that. I've said it repeatedly. It's one thing, now we have hundreds of patients worth of data with some longer-term exposures and we're very confident in our tolerability profile, and that's going to be really important going forward in I/O, I/O doublets in general, but certainly as you compare to CTLA-4 combinations, potentially. There are populations where the tumors are either colder or where things don't work and then it's around trying to ascertain, at a biomarker level, why that may not be potentially working and then trying to address it with new MOAs, things like arginase inhibitors or other things will then weigh in. But to be clear, the Phase III programs are going after established entities where PD-1s, for the most part, are the care standard, and now trying to improve that in terms of time-to-event endpoints and then weighing in the tolerability profile. I don't know if <UNK> wants to add anything to what I said. Just a couple of things. I think, <UNK>, we sometimes forget that even in the so-called inflamed or hot tumors, where PD-1 antagonists are quite effective and are approved for use, generally your objective response rate in those populations, save melanoma, is in the 20% range. And so, there is still a substantial unmet need in those populations. And obviously, our goal with the IDO1 epacadostat program is to improve those response rates, improve the patient benefit and be able to capture a larger proportion of the patient pool to derive benefit. That's kind of one question. It's the central question in the epacadostat development program now. There's a separate question around what drives PD-1 resistance, either intrinsic or primary or secondary resistance. And that's a ---+ very much an important focus of our discovery efforts right now as we look at multiple mechanisms that could be operative in that space, and even molecules like arginase were in part brought into the portfolio in an attempt to address some of the immune suppressive mechanisms that may lead to T-cell exclusion in a cold tumor phenotype. So I think both of them are actively being pursued at Incyte, some in development, some in research. And hopefully in the coming years, we'll see the needle being moved in a positive way in both of those tumor settings. Yes. So the translational aspects of the ECHO program are very important. That does include assays to assess IDO1 expression directly. It also includes assessments of PD-L1 status, as you might imagine. It also includes quite a bit of RNA sequencing work to look at things like mutational burden and the inflammatory state of the tumor more generally. I think this is probably one area where we and the whole field have the most ground to make up, and it's very important for us to be able to be smarter when we select our patient populations for these doublets and ultimately triplets. And I think the translational data set that can emerge out of the ECHO program, just as one example, where you have 5 tumor histologies and hundreds and hundreds of patients, you can imagine what a rich data set that will be for us to mine and hopefully be able to help the field forward on the translational aspects of patient selection. <UNK>, yes, it's <UNK>. Yes, very much so. All the ongoing work will be looked at and examined on its own for signals that potentially ---+ we can pursue. The 2 tumor types you alluded to were immature at our last presentation: diffuse largeB-cell and MSI-highcolorectal. With AstraZeneca, it's the same thing. As we're looking at the data now and over the ensuing months, we will make decisions on whether or not there are go-forwards there. So the answer is a strong yes, from my perspective. In terms of ---+ assuming second half of 2017, in terms of decisions on the AstraZeneca program, yes, that is a potential time frame we would have the data to look at and make decisions. I think that's a fair statement. Maybe <UNK> here. I'll take the Lilly question. As you know, as we discussed, I mean, there are a lot of decisions that have to be taken on the path forward for RA. All of these decisions have not yet been made. And obviously based on that, we will have on our side to decide what is Incyte's position today. We are all in co-funding the development of baricitinib. That's the situation we have today. And depending on how the plans are developing, we will have to make further decisions, but none of them have been made yet, though. And then, <UNK>, in terms of the statistical questions related to the ECHO-301 melanoma study, we don\ <UNK>, it's <UNK>. On your paired biopsy question, the studies have ---+ in terms of enrollment, we've done really well. It's now collecting this tissue, analyzing what we have, doing the required testing and then reporting it out. And that part is still under way and there are some tricky natures to understanding do you have adequate representative tumor samples. So we need a little bit longer, you're correct, and we expect to be able to show that data to you sometime during 2018. In terms of the timeline for the RESET program in essential thrombocythemia, and I just want to make sure you understand that this is in a patient population who have either progressed on hydroxyurea or were intolerant of it, and then are randomized to either, in our case, ruxolitinib or the control in this case, anagrelide, with an endpoint that is a composite around platelet control and white blood cell control. And the goal is 120 patients there. And we'll have to just see. Obviously, we always want to do better on operational enrollment than what we anticipate. But we don't expect this to be an incredibly easy population to find, and that's why we've guided to mid-2020 at the moment. <UNK>, it's <UNK>. In terms of the dynamics around how you conduct endpoint analysis and unblinding, it's a co-primary endpoint. Obviously, for a large Phase III, there's a data safety monitoring board who conduct these analyses to begin with. And they will, as is ---+ I mean, it's not a secret here, PFS will always be triggered before overall survival in terms of doing the analysis because it delivers earlier. So I guess the simple answer to your question is, yes. In terms of having mature overall survival data at that point in time, it will be whether it exists or not. Just going to the part 2 and part 3 of your questions, yes, we very much like both those programs. We feel, as we've said before, for '54828, FGFR1/2/3 inhibitor, that we have a best-in-class compound. We understand the compound. We dose the patients to the pharmacodynamic endpoint of hypophosphatemia there, and we have 3 open studies, all of which could serve as registration potential should they reach high response rates that are durable, and all of them are biomarker driven in terms of targets. So metastatic bladder cancer for FGFR 3, cholangiocarcinoma for FGFR 2 and for that rare myeloproliferative neoplasm that's driven by chromosome 8p11, those studies are all under way and enrolling well, and we really like that compound. I think it's premature to talk about potential NDA dates there or accelerated approvals. For the delta inhibitor, just to reiterate the comments I said earlier, I think we've been more stepwise and careful because of the tolerability profile and needing to understand how we can get the efficacy we know we can get, but then keep patients on therapy long enough. And so it's a little bit early to also comment on when those may potentially deliver, but we have programs in diffuse large B-cell and now in additional B-cell malignancies, like marginal and mantle cell lymphoma. So, Ren, I'll do the first part of your question and then turn it to <UNK> for the second part. So the REACH programs are comprehensive programs. They're 3 pivotal studies there, REACH1, REACH2 and REACH3. REACH1 is a single-arm study of rux in steroid-refractory acute graft-versus-host disease. The goal end is 70 patients. The response rate, as you can see ---+ the primary endpoint, as you can see on ct. gov is a 28-day response rate that would need to be durable to reach an acceptable file for a supplemental NDA. And that's felt to be an endpoint that would point to patient benefit in this particular setting in high unmet need. REACH2 is in the same setting but is randomized against best available therapies. It's a global study with our partner, Novartis, and incorporates the same endpoints. And then REACH3, again in partnership with Novartis, is a randomized study with best available therapy as a control by physician's choice and incorporates, in chronic graft-versus-host disease, longer endpoints in terms of being able to show that you can control the disease for longer. All are acceptable endpoints and there's a lot of regulatory feedback on all those studies. As regards the numbers in terms of predicting our revenue for rux, I'll turn it to <UNK>. Yes, Ren. So we said in the past that our top net sales for Jakafi will reach at least $2 billion. And that's for MF, PV and GVHD. We haven't included the numbers yet for ET. Ren, this is <UNK>. I'll pass it over to <UNK> if he has anything to add. The evaluation of clinical trials and prioritization within the I/O, I/O doublets space is an important one for us to get our hands around in the field, because I think we have enough mechanisms now, even within our own portfolio, that you can't do everything in a pair-wise comparison and just have a purely probabilistic approach to drug development. So we do hold a high bar for the preclinical data, one. And so that necessarily allows some mechanisms to move forward at a faster pace than others. Second, in the clinic, we will demand that we see the requisite harmacodynamics activities early on in the studies to take one step towards de-risking the activity of those doublets. And the third, and this is the most difficult one, is trying to have an underlying assumption as to the patient population that's most likely to respond or benefit from the therapy. We can think of a mechanism like arginase as a good example. Arginase is released from intratumoral myeloid cells and it's believed that, that can be an important immune suppressive mechanisms that decreases immunogenicity of the tumor. So you can imagine studying an arginase inhibitor in populations, either individuals or in histologies, which have an abundance of myeloid-derived suppressor cells and intratumoral neutrophils. That will be the approach that we'll take. And based on the preclinical studies, we know that arginase inhibition can synergize with PD-1 axis blockade, and it can synergize with IDO1 inhibition. So you can imagine taking the right patient population and walking through first a doublet study and then ultimately trying to get to a triplet study. Those are the kinds of activities we have ongoing all the time, and we try to always make sure that the programs that we're transitioning into the clinic and investing in meet all 3 of those ends in terms of underlying preclinical data, mechanistic pharmacology in the clinic and pharmacokinetic dynamics, and then finally, a patient population that's appropriate. <UNK>, it's <UNK>. I'll take your first question and then hand you over to <UNK> for the baricitinib question. So in Jakafi, we continue to see growth in both MF and PV. We've got new MF patients and new PV patients. As we've said in the past, PV, percentage-wise, continues to outpace MF in terms of total growth, but MF patients continue to stay on drug therapy for a long time. So for the future, we see that we'll continue to grow if we continue to penetrate the markets for both MF and PV, and then we'll wait for future indications for GVHD and ET, hopefully. <UNK>. Thanks, <UNK>. <UNK>, in terms of programs outside of rheumatoid arthritis, we'll just feed off what Lilly has already told you on their call. But to reiterate, the diseases that are being considered are psoriatic arthritis, atopic derm and lupus are the ones most often mentioned. At this juncture, it's just hard to comment on anything further other than what Lilly has already told you, and all are still being considered. Your comment around would this be able to contribute safety data to a potential resubmission on a file is also ---+ I'm unable to comment on at this time, other than any data would obviously be additive from a safety point of view. Thank you. Thank you, and thank you all for your time today and for your questions. So we look forward to seeing some of you at upcoming investor and medical conferences, including ESMO in Madrid. And so now we thank you again for your participation in the call today. Thank you, and goodbye.

2017_INCY

2016

IPAR

IPAR #Greetings, and welcome to the Inter Parfums, Inc. , first-quarter 2016 conference call and webcast. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, <UNK> <UNK>, Executive Vice President and CFO. Please go ahead, sir. Thank you, Operator. Good morning and welcome to our 2016 first-quarter conference call. Once again, I will start with a financial overview and then will turn the call over to <UNK> <UNK>, our Chairman and CEO, to discuss our business and upcoming plans. After that, we will take your questions. Before proceeding further, I want to remind listeners that this conference call may contain forward-looking statements which involve known and unknown risks, uncertainties, and other factors that may cause actual results to be materially different from projected results. These factors include, but are not limited to, the risks and uncertainties discussed under the headings forward-looking statements and risk factors in our annual report on Form 10-K and the reports we file from time to time with the Securities and Exchange Commission. We do not intend to and undertake no duty to update this information discussed. In addition, Regulation G, [codifications] for the use of non-GAAP financial measures, describes the conditions for use of non-GAAP financial information in public disclosures. We believe that the presentation of the non-GAAP financial information included in this discussion is important supplemental measures of operating performance to investors. The information required to be disclosed for the presentation of non-GAAP financial measures is disclosed in our March 31, 2016, quarterly report on Form 10-Q, which has been filed with the Securities and Exchange Commission. This information is available on our website at www.interParfumsInc.com. When we refer to our European-based operations, we are primarily talking about sales of Prestige Fragrances conducted through our 73% owned French subsidiary, Interparfums SA. When we discuss our United States-based operations, we are primarily referring to sales of Prestige Fragrance products conducted through our wholly-owned domestic subsidiaries. So, here we go. Our first quarter of 2016 compared to the first quarter of last year: net sales were $111.5 million, up 2% from $109.2 million. At comparable foreign currency exchange rates, net sales increased 3%. Sales by European-based operations rose 5% to $92.1 million compared to $86.7 million; and sales by US-based operations declined 14% to $19.4 million compared to $22.5 million. Gross margin was 63.9% of net sales compared to 61.9%. SG&A expense as a percentage of net sales was 48.3% compared to 42.6%; and operating income was $17.5 million compared to $21.1 million. Net income attributable to Inter Parfums, Inc. , was $7.3 million, or $0.24 per diluted share, compared to $10 million, or $0.32 per diluted share. However, first-quarter 2016 results include the effect of a pending settlement of a tax assessment with the French tax authorities in the amount of $1.9 million. Excluding the effect of the pending settlement, net income attributable to Inter Parfums, Inc. , would have been $8.7 million, or $0.28 per diluted share. We've covered key sales drivers in our first quarter sales release, so my focus will be on profitability factors. As I just mentioned, our consolidated gross margin was 63.9% of net sales compared to 61.9%. European operations, which generated 83% of net sales, produced a gross profit margin of 67.3%, up from 64.7% in the first quarter of 2015. Approximately 40% of this increase related to currency fluctuation, as the average US dollar exchange rate was 1.1 during the current first quarter compared to 1.13 in the first quarter of 2015. Gross margin by our European operations benefit from a strong dollar, since over 40% of its sales are denominated in dollars, but its costs are primarily incurred in Europe. The larger contributor to gross margin gain was product mix. Notably, we generated approximately $6.4 million of Rochas brand sales, with gross profit margin in excess of 75%. The decline in gross profit margin for US operations to 48.2% of net sales from 51.1% in the first quarter of 2015 also relates to product mix. As in last year's first quarter, we had major launches of Extraordinary by Oscar de la Renta and Icon by Dunhill, and those two brands generate some of the highest gross profit margins for our US-based operations. Selling, general, and administrative expenses rose 15% as compared to the first quarter of 2015, and as a percentage of sales, SG&A expenses were 48% versus 43% in the same period one year earlier. For European operations, SG&A expenses increased 22% in 2016 and represented 49% of sales compared to 43% for the corresponding period in 2015. For US operations, SG&A expenses decreased 10% from last year's first quarter and represented 45% of sales in 2016 as compared to 43% in 2015. Promotion and advertising expenses included in SG&A expense aggregated approximately $16.1 million, or 14.5% of net sales for the 2016 period. This compares to only $12.6 million, or 11.5% of net sales for the 2015 period. Much of this increase supported the very successful launch of Montblanc Legend Spirit and the continued geographic rollout of Jimmy Choo Illicit. Below the operating income line, in the aggregate, foreign currency losses, interest income, and interest expense essentially offset each other in the year-over-year same-quarter comparisons. The tax issue, however, warrants some discussion. You may recall that in our 2015 10-K we disclosed that the French tax authorities examined the 2012 tax return of Interparfums SA, and in August of 2015 issued a $6.9 million tax assessment. The main issues challenged by the French tax authority related to the Lanvin commission rate and royalty rate paid to Interparfums SA subsidiaries in Singapore and Switzerland respectively. While we disagree with the French tax authorities and believe that we have strong arguments to support our positions, due to the subjective nature of the issues involved, in April of 2016, Interparfums SA reached an agreement in principle to settle the entire matter with the French tax authorities. The settlement requires Interparfums SA to pay a tax assessment of $1.9 million, covering the issues not only in the 2012 tax year but also covering the issues for tax years ended 2013 through 2015. The settlement also includes an agreement as to future acceptable commission and royalty rates, which is not expected to have a significant impact on cash flow. The settlement is subject to formal documentation with the French tax authorities. At the end of the day, we believe that agreeing to the settlement was the prudent course of action. This could have turned into a costly and lengthy litigation with an uncertain outcome. Thus, income tax expense for the three months ended March 31, 2016, includes the pending $1.9 million settlement. In our news release and in our March 31, 2016, quarterly report on Form 10-Q, we included a table to show a reconciliation to adjusted net income attributable to Inter Parfums, Inc. Moving on to our 2016 guidance, assuming the dollar remains at current levels, 2016 net sales should come in as previously reported within the range of $500 million to $510 million. Including the nonrecurring tax settlement, net income attributable to Inter Parfums, Inc. should be in the range of $1.01 to $1.06 per diluted share. As a reminder, our new product rollouts are heavily weighted to the second half of the year with the exception of our new Abercrombie & Fitch and Hollister fragrances, which launched in Q2 of this year. And, finally, moving on to our balance sheet, we closed the quarter with working capital of $352 million, including approximately $247 million in cash, cash equivalents, and short-term investments; and $97.8 million of long-term debt associated with the Rochas acquisition last year. <UNK>, please continue. Thank you, Russ, and good morning, everyone. The year is starting on a strong note. I'm very pleased to report that our two largest markets have done quite well in the first quarter, due in part to the launch of Montblanc Legend Spirit and the continuing rollout of Jimmy Choo Illicit. Far and away, Western Europe was our best-performing market, with sales of $31 million, up nearly 27% from last year's first quarter. North American sales came in a close second at $29 million; and Asia, with sales of $21 million, our third largest market, showed modest improvement versus last year's first quarter. However, we continue to feel the effects of negative market conditions in Eastern Europe, the Middle East, and China. I will answer questions after, if you have any, on these territories. For 2016 as a whole we believe most of our growth within our European operation will come from the inclusion of Rochas (inaudible) and the launch of our first women's scent for Coach. We also have a new scent for Van Cleef & Arpels, line extension for Jimmy Choo Illicit, plus other fragrance extension including (inaudible). Our previously announced plans for US operations are on track and moving ahead. We also have some good news to report, as we got the go-ahead to supply the new fragrances that were created for Abercrombie for their respective US retail and online stores, so we will be selling these products in the stores very soon. While we are very happy with our brand position to sell products in their own stores, we [have now got] 278 Abercrombie stores and 500 retail stores, let me tell you about our international distribution activities. Our new Abercrombie & Fitch men's fragrance, called First Instinct, targets the 18- to 25-year-old man. The rollout starts this month and continues through the fall. The product will be sold in close to 7,000 doors throughout the UK, France, Germany, Brazil, Argentina, Taiwan, Philippines, and Indonesia. And for each market, we have created a customized advertising and promotional plan encompassing digital, print, and outdoor media. The Hollister web fragrance tool, which is targeted to teens and young adults ages 16 to 25, unveils in June and rolls out through September. We expect new fragrance called Wave to be sold over 10,000 doors in the UK, France, Germany, Argentina, Korea, Philippines, and Israel, with an equally (inaudible) marketing (inaudible). We are also following along in our 2017 new product launches. The schedule, unlike 2016, is heavily weighted for the first half. Our first new product for Rochas, the women's fragrance, will be introduced in the winter, as our new (inaudible). We also have a new collection in the works for Boucheron, debuting in the winter of 2017. In the spring, we will have a new Jimmy Choo scent for women unveiling, and in the fall, new Montblanc family will welcome a new member of men's scents to build upon the great success of Montblanc Legend. These [plans] are subject to change and there will be more to say about these launches as the year progresses. There is a great deal happening with (inaudible) brand. As we noted on our March call, our extraordinary (inaudible) debuted in the first quarter, and Oscar Gentlemen, the new men's fragrance, will debut internationally this summer, and we are reimaging and reintroducing the 1977 signature women's scent, Oscar, with two brand extensions, one targeted for the Middle East, the UK, and Australia; and another for the US domestic market. For Dunhill, we will launch Icon Elite to certain markets in the second half of this year. As new agent we will get (inaudible). For the end of the year we have new scents and (inaudible) in select geographic distribution. So with our diverse portfolio of brands and our global distribution reach, our retooling success in establishing and building fragrance franchises for our own Company and brand owners, and we are in very strong financial position. We have every reason, and I have every reason to be very confident about the future of our Company. So, with that, Operator, we're going to open the floor for questions. (Operator Instructions) Our first question today is coming from <UNK> <UNK> from Raymond James. Please proceed with your question. Good morning, <UNK>. On the Abercrombie & Fitch news this morning that you'll be selling fragrances in stores and online, what's the impact to your expectations for this year. Sounds like you guys didn't change sales guidance and that was sort of incremental to that. I'm curious if that's going to be material for this year. I think it's a very good sign because we have learned to know each other and they were so happy with the product that they really wanted to put them also in their stores. Actually, it could become interesting business to have these products in their stores. We have decided not to change our guidance yet, but as the time develops, we will take this into account. Russ, do you want to add something. Yes, it's difficult to ascertain exactly how much business in-store actually generates because people don't typically walk into a Hollister or an Abercrombie & Fitch store with the intent of buying a fragrance. So usually it's more of an impulse-type of a product. So our initial expectations for in-store is not all that significant, although that could change because Abercrombie and Hollister are very much behind fragrance products within their store. So it's really a kind of wait and see kind of a situation. Well, as I said in the remarks, about 40% for the European operations, about 40% of their increase was relating to the currency factor. It's true, the average for the full year of 2015 came in at 1.1, which is exactly the rate during the first quarter. It really just happens to be that the first quarter of 2015 where the rate was 1.13, that comparison gave us a little bit of a benefit here in the first quarter, but we're not expecting that to continue, because as we move further into the year the exchange rates today are around 1.14. So with the dollar becoming a little bit weaker, I stand kind of by the original assessment that I had that I'm kind of expecting gross margins to be flattish or down for the full-year basis. Okay, great. Just one last housekeeping item. The tax rate for the rest of the year, this is not impacted by the assessment from the first quarter, right. No, the tax rate came in right around 34%, if you exclude the tax assessment which was completely comparable to last year's 34%. Throughout the last several years we've been somewhere between 34% and 35%. I don't see any reason why that would change. Good morning, guys. Hi, <UNK>. My main question is on A&P spend. Obviously, you benefited well in Montblanc from increasing spend there, and you mentioned also on the Jimmy Choo. Just kind of wondering going forward, is this kind of what we should expect as far as rolling out obviously a number of new brands here as far as ramping up the A&P spend here. I can try to answer. As you know, in the first quarter our (inaudible) was really up. We spent something like $16 million, which corresponds to 15% of (inaudible), which is quite high. But in order to do that, in order to assure the space and the sell through of the two new ---+ of Montblanc and the new fragrance of Jimmy Choo, for sure we overspent in the first quarter in advertising. I think we made the right decision because we are going to receive the benefit of this over spending in sales in second, third, and fourth quarter. Russ, do you want to add anything. Yes, the only thing that I'm going to add is it's a little unusual for first quarter, but it so happens we have (inaudible) this quarter, and that's the reason why the spending needs to follow the launches. From a full year, 15% overall is not really all that high compared to what we normally spend in Q4. It really is dependent on the launch schedule that helps determine what the advertising spend is going to be. We will spend a good amount of money for Coach in the second and third quarter, more than second quarter. We have very high expectations for Coach in three markets, the US, Japan, and China. I will remind you that Coach brand is the second largest imported brand in Japan after (inaudible). So with (inaudible) we're going to have really ---+ and also because mainly Chinese tourist are shopping in Japan, we will have big exposure of Coach fragrance in Japan. But as I said, because of already the fact that the brand is well known, our spending will be more into promotional in the US than pure advertising. Okay. We continue to spend of course for Abercrombie and Hollister because of the rather big launches. This year the big launches are Montblanc, Coach (inaudible). So we continue to spend, but as I said before, we will ---+ it will level off to a lower than 16% (inaudible). Okay, great. Last question is just on China specifically. Are you seeing any changes there over time. Obviously it's been a soft spot. Just wondering if you could kind of comment on that. We, we've ---+ too soft. Even though I think we have (inaudible) this quarter compared to last quarter. As I said before, a lot of our Chinese customers are now shopping in Korea and Japan, so we see the sales increase in Japan and Korea. It doesn't offset 100% what we are missing in China, but we see this as a trend. For your information, we are continuing to invest heavily in promotion and advertising in China, in mainland China and Hong Kong. Hi, <UNK>. Hello. Perhaps your phone is on mute. Please pick up your handset. Yes. Hi, sorry. I was on mute. Could you just clarify once again, the new launches that are actually shipping in the second quarter. It sounds like Abercrombie, is that shipping just to the international markets or the US stores as well. And then is Coach shipping in the second quarter or the third quarter. Okay. Abercrombie ---+ both Abercrombie and Hollister are both shipping in Q2 and that will be shipping the initial international distribution as well as to the US distribution for their stores. For Coach, that will not be in Q2 at all. That will begin to ---+ we will start shipping in July-August and the actual launch sometime in early September. So that will be a Q3 event. Okay. And then can I ask you, on the Rochas, the effect on the gross margin, does that effect ---+ I assume that's because of the fashion royalties that are in there at 100% margin. So does that become less of an influence on gross margin as the fragrance sales pick up later in the year. No. First of all, it really is not necessarily related to the fashion side of the business. Again, it's just a couple of million dollars a year in royalty income. One of the main reasons are the margins are as high as they are is the big market for Rochas is in Spain and France where we have our own distribution. So we're selling at pure wholesale in those markets as opposed to any product that's going on an ex-factory basis. That's the main reason why that margin is a little bit higher than some of our other product. Okay, great. And then on the SG&A expense, if you exclude the royalties and the A&P, that kind of overhead-type expense, it's been running at $25 million to $27 million per quarter and now it looks like it's jumped up to $30 million to $31 million over the last couple quarters. Is that higher level something to expect the remainder of the year or do you think it will come back down a little. How should we think about that line. I think it's going to fluctuate a little on a quarter-by-quarter basis, but most of that are the normal fix-type of expenses, such as rents and salaries. (Inaudible) quarter after quarter (inaudible) SG&A because of the sales (inaudible) international launches. Okay. Got you. And then last, on the last call you had said when you were talking about the weakness in the emerging markets, you had said that Russia had actually improved a bit in February and March. Is that improving trend still the case in Russia. Yes. We have ---+ we are maintaining our projections for Russia, so we didn't revise them down even though the market is quite soft. We do not see improvement of markets that are weak like Brazil. We have ---+ we continue to lower our expectation, our position in Brazil. The Company thinks that the US domestic market and the Western Europe (inaudible) the main high points for fragrances this year. The Middle East (inaudible) in the region is quite flat, and Russia and Brazil we spoke about. Asia, even though I repeat Korea and Japan are doing quite well and even though duty-free is up, we are not able to offset the sales that we are missing in China. So we see the state of union for our international (inaudible). Okay. And Estee Lauder has been experiencing extreme weakness in Hong Kong for quite a while and it actually kind of got worse this past quarter. Are you also seeing declines in Hong Kong. Hong Kong is affected more than mainland China, but it was already in our projections. Okay. Thank you very much. Our next question is coming from Steph Wissink from Piper Jaffray. Please proceed with your question. Hi. This is <UNK> <UNK> for Steph. A quick question for you about the consumer. Would you be able to speak just a little bit more about consumer trends. Are you finding that consumers are increasingly gravitating towards higher margin, higher priced products, or becoming more experienced at all. We saw on the Macy's release this morning that fragrance was a standout category for them, particularly in the US. Obviously, it's been tough, a tough year-over-year comp for the US consumer, but are you seeing declines there begin to abate or any sort of indication that spending in the fragrance category for the consumer there will be increasing. Okay. I can try to give you my opinion. The things we see, we see reasonable appetite for products that are priced at a high level. And it's why, for instance, a fragrance like Coach, which is at the high end of retail price, we think we will be successful. We see less demand on the less selling (inaudible) products. I'll just comment on as far as the retail environment. From what we see, I'm not surprised that fragrance might be a highlighted category that has been reported. Most of what we see in retail is actually down. Fragrance is holding up a little bit, which we're very happy to see, but the retail trends from what we've been reading and seeing in the marketplace have been relatively weak. Do you have a follow-up, Stephanie. That's all. Thanks very much. Hi, good morning. Just one question on the advertising metrics. As you move forward in Q2, Q3, and Q4, how is that going to look like given that you have different products releasing because last quarter you were talking about Q4 was going to be your big quarter as far as advertising went. Yes. That really does not change. There's a certain amount of advertising that is just automatic due to the holiday season, all right. And we do have quite a few different products that are launching. Coach is really launching third quarter and fourth quarter of 2016. So from an overall trend, I don't think that's going to change. The 15% that we saw here in the first quarter, 14.5%, is high for a first quarter but it's low for a blended rate for the year. Last year we ended up at 18% for the full year and most of that was concentrated in the fourth quarter. So I don't see those kinds of trends changing, although you will have a little bit of fluctuation like we saw here in the first quarter because we had the two products that launch, the Montblanc Legend Spirit and the continuation of the rollout of Jimmy Choo Illicit required additional spending for the launches of those products. But over the course of the year, I think the overall trends are going to be very similar to what we've seen in prior years. Okay. And my other question was related to just with the macro environment with the softer sales that you're experiencing and your peers are experiencing in certain markets, has that created any kind of drop in valuation where it could make it appealing to make an acquisition of some kind like you did with Rochas last year. Well, no, I don't think that the fact that the ---+ this is (inaudible) has an impact on ---+ you don't ---+ has an impact on fragrance companies for (inaudible). We of course look at the different brands, different license, but there is no relation between what's happening in the market and the price of potential acquisitions. As we have always said in the past, that Inter Parfums is trying to be as opportunistic as it possibly can. We are clearly looking at acquisition targets. I'll repeat what I've said for a long time, that we know that the most accretive use for these funds would be if we could deploy it into either acquisitions on licensing on proprietary basis. That's where we would like this money to go. We realize that we have been sitting with a good amount of cash for a number of years now, but these kind of opportunities you don't know when or if they are going to come around. That's why we took a loan out for $100 million to keep our treasure chest cash intact. We still have around $250 million of cash, so of course we are looking for either acquiring license or companies in our fragrance business. Thank you. Okay. Thank you. Just one more point. I just want to mention that I will be presenting on May 25 at the B. Riley annual investor conference in Hollywood, California. The following month I will be speaking at two New York conferences, Citi's 2016 Small and Mid Cap conference on June 9, and the Piper Jaffray Consumer Conference on June 15. I hope to see some of you at these events. Thank you for your participation on this call, whether live or listening via webcast. And, as always, if there's additional questions, I will be available to take your calls. Thank you, and have a great day.

2016_IPAR

2016

POST

POST #So going into fiscal 2016 we had what we considered to be an appropriate level of spending behind A&C. Given the strength of the year, we chose to increase it above what we considered to be an ongoing level of required A&C, and entering 2017 we will have a budgeting start point of normalcy. To the extent the business supports it, we would continue to reinvest in A&C, but that is not our starting point. We view it as more of a dynamic budgeting tool than a fixed decision with which we enter the year. So I would not at all want to say it did not work. It looks in fact like it did work but it was an unusually high level, so we are simply creating cushion around the overall portfolio performance by normalizing the budget. Thank you. So my comment was more intermediate than specifically to the fourth quarter, although the fourth quarter could participate in that as well. The balance of the portfolio that will pick up the slack was the comments I made around annualizing synergies already achieved, incremental synergy, and I am in our cereal business now. Annualizing synergy is already achieved, incremental synergies that are being realized in 2017. The pullback of the incremental spending, I just mentioned with <UNK>; within Active Nutrition the normalization of costs at Dymatize, ongoing growth of the Premier shake business with new distribution, and terrific velocities. And finally, within private brands, the growth in each of the lines of business that result in the capacity expansions that are currently underway. So the comment is true in the fourth quarter but really a longer term, more intermediate comment than that. Well, that is what I am attempting to address. Is making a distinction between the Company over-earning and an individual segment within the Company over-earning. We do expect to see some mean reversion within the Michael business to be the other side of that over-earning, but that it be offset by other opportunities in the balance of the portfolio, such that the conclusion on a 2-year basis will be that the Company did not over-earn, even though one segment may have over-earned. I am not going to comment specifically on where our focus has been, other than that we have had a rich pipeline throughout the year. We have looked at a lot of opportunities. And in a year in which our business was growing as significantly as it has, perhaps our focus shifted slightly towards an internal orientation but that we are no less engaged in M&A than we ever have been. And part of what we are paid to do is sometimes not do M&A when the opportunity is not the right one. So we are quite active in the M&A market, and as I made the comment in my prepared remarks, that quiet and inactivity should not be construed as, or quiet should not be construed as inactivity. There is a lot of activity. Thank you, <UNK>. Hey, <UNK>. So let me start with normalization. We think normalization lands at a premium to the pre-AI levels as a result of better mix and an AI insurance premium built into our go-forward pricing model. I think you are accurately reflecting the potential. I would not necessarily want to tie it specifically to the next couple of quarters because there is some uncertainty about the timing of the grain-based supply and the interactions with the urner barry, but that is a potential that exists in the near to intermediate term as we see those different variables operating in different directions. So that is why I caution that it is better to look at Michael over a 12-month basis than to try to make any near-term prediction on one or two quarters. And we will try to further illuminate that when we come back with a fourth quarter call. So we will give you the incremental spend. In aggregate it is $25 million. On PCB it is $15 million specifically. What we are not going to do is line item go into synergies. What we are wanting to come back with is consistently improving profit and margin levels such that the synergy is self-evident, but that we do not want to be focused on and accountable for delivering a specific synergy so that we can make realtime dynamic decision it is throughout the year that may choose to lead into something different than a synergy number. The synergies are real and significant and will be baked into all of our guidance numbers but we are not going to line item provide them. Thanks, <UNK>. Hey, <UNK>. So that is somewhat what I was alluding to in the ---+ my answer to <UNK>, is that we will make on a dynamic basis decisions around investing in longer term so that if we have the opportunities, as we did this year, to lean into certain programs with less near-term but more long-term benefit, we may do that. Otherwise the answer to your question is "yes. " If you look at EBITDA margins, we in all likelihood would want to maintain it at that level or actually bring it down as we spend more behind the brand and see additional growth and distribution in velocities. It is a very rapidly-growing brand and we do not want to bleed it by over focusing on margin structure during its growth phase of its product life cycle. So what you are going to see in the very near term is a heavier marketing spend, which will have a dampening effect on near-term EBITDA margins. Long-term we think it is a mid- to high-teens EBITDA margin structure business once you get to a more mature segment or a more mature portion of its product life cycle and we are spending less behind A&C. Sure. Specifically what we are talking about is the input costs that they have been incurring for their primary protein inputs, raw materials. As we have commented before, they were along a higher-priced contract compared to market throughout this entire fiscal year. We are now seeing visibility into the fact that towards the tail end of our fiscal fourth quarter, we will start to be able to get through that contract and buy on the open market. And we discussed before the order of magnitude, if Dymatize was able to buy on the current market, which of course is not a given but if it could for a full fiscal year, the order of magnitude is in the $12 million to $15 million range. Well be the predicate for being able to do that, of course, is the return of full supply. And we would anticipate, as we mentioned in the comments, that that would occur by year-end. So in the time frame that you mentioned, we certainly would have the capacity to pursue and meet that demand. Really no update since last time we talked, and my earlier comments that we expect, between the shift and that premium, there to be a normalization at a higher level than pre-AI. Throughout this year, because of some of the unusual characteristics of the AI phenomenon, we have been trying to give previews into 2017 and a bit longer term than we frankly are comfortable giving, given the timing of our planning process. So many of these questions will become more clear as we go through our annual planning. So I am going to limit it to directionally, rather than put a specific quantification of it. Again, directionally, we think it will be better. Quantification will take a little more time. Last year's fourth quarter had the significant write-offs in it, if you recall. So last year's comp is very negative. Look at it more sequentially. We expect third and fourth quarter to be relatively comparable, although there is some investment, as we mentioned, occurring in the fourth quarter in the Dymatize brand as well. So it probably will be slightly down on a sequential basis. Sorry. Go ahead. We are past the damage but again the comps are not comparable because the fourth quarter would have been the first quarter last year, after we have we had closed our plant. Thanks, <UNK>. Hi, <UNK>. Well, we have ---+ you almost have to go through that segment by segment. The cereal business is a flat to potentially 1% up business, with cost reduction allowing us to manage EBITDA to the 1% to 2%, and I am making that comment on the other side of full synergy realization. So that really does not kick in until 2018. We see significant growth in our Active Nutrition portfolio well ahead of the CPG peer group. And then within the Michaels segment, once we get past the AI supply situation, we think that is a mid-single digit grower as the increased consumption of protein portends well for its unit volume growth as it represents one of the cleanest and most affordable forms of protein consumption. Private brands is very specifically tied currently to a few segments of nut butter, which have some very positive dynamics behind it. So on average I would say we have an internal growth algorithm which is slightly ahead, on a blended basis, of our peers. And then I would argue we have potentially greater M&A optionality. As I mentioned, we think about it in the terms of the mid-teens for EBITDA. Well, as always, thank you for your participation, and next call we will look forward to giving you both the results of a really solid fiscal 2016 and give you our formal guidance as we look further into 2017. So thank you and we will talk to you soon.

2016_POST

2017

NWSA

NWSA #Good day, ladies and gentlemen. Welcome to the News Corp second quarter FY17 earnings conference call. Today's call is being recorded. Media is allowed to join today's conference in a listen-only basis. At this time, for opening remarks and introductions, I'd like to turn the conference over to Mr. <UNK> <UNK>, Senior Vice President and Head of Investor Relations. Please go ahead, sir. Thank you very much, Katherine. Hello, everyone, and welcome to News Corp's fiscal second quarter 2017 earnings call. We issued our earnings press release about 45 minutes ago and it's now posted on our website, at newscorp.com. On the call today are <UNK> <UNK>, Chief Executive, and <UNK> <UNK>, Chief Financial Officer. We will open with some prepared remarks and then we'll be happy to take questions from the investment community. This call may include certain forward-looking information with respect to News Corp's business and strategy. Actual results could differ materially from what is said. News Corp's Form 10-K and 10-Q filings identify risks and uncertainties that could cause actual results to differ and contain cautionary statements regarding forward-looking information. Additionally, this call will include certain non-GAAP financial measurements, such as total segment EBITDA, adjusted segment EBITDA and adjusted EPS. The definitions and GAAP to non-GAAP reconciliations of such measures can be found in our earnings release. With that, I will pass it over to <UNK> <UNK> for some opening comments. Thank you, <UNK>. In the second quarter, we saw the efficacy of our strategic reinvestment and digital diversification. Both were evident in our increased operating profitability in the quarter, when the challenges in the advertising market, which is in the midst of transition, were patent. We achieved 16% EBITDA growth year-over-year, driven by strong performance in our Digital Real Estate Services segment and robust revenues at HarperCollins, along with appropriate and ongoing management of the cost base at our news mastheads. As noted in the press release, reported earnings were significantly impacted by a non-cash reduction in the current value of Foxtel and a non-cash impairment charge related to our print properties in Australia, while they also benefited from a one-time gain as a result of the cash proceeds from the sale of REA\ Thanks, <UNK>. We reported FY17 second quarter total revenue of $2.1 billion, down around 2% compared to the prior year. Currency had a $53 million unfavorable impact to revenues, with modest year-over-year improvement in the Australian dollar more than offset by continued weakness in the pound sterling. Reported total segment EBITDA was $325 million, compared to $280 million, up 16% versus the prior year. For the quarter, EPS from continuing operations were negative $0.50, compared to $0.15 in the prior year. Significant nonrecurring items impacting EPS in the current quarter include a pretax non-cash impairment charge of $310 million principally related to fixed assets of the Australian publishing business. In addition, equity earnings of affiliates include a pretax write-down of $227 million to reduce our carrying value of Foxtel. These were offset, in part, by a pretax gain of $120 million at REA from the sale of their European businesses and a significant improvement in our operating results. Adjusted EPS from continuing operations were $0.19 versus $0.20 in the prior year; and adjusted EPS excludes the items I just mentioned and the other items shown in the press release reconciliation table. Turning to the individual operating segments. At News and Information Services, revenues for the quarter decreased 7% from the prior year to approximately $1.3 billion. And within segment revenues, advertising, which accounted for 53% of revenues this quarter, decreased around 9%, or down 8% in local currency, driven by weaker global print ad trends. Circulation and subscription revenues decreased 5%, but rose 1% in local currency, driven by price increases and higher paid visitor volume offset by lower print volume. News and Information Services segment EBITDA this quarter was $142 million, down from $158 million in the prior period, or approximately 10% down, driven principally by lower print advertising revenues partially offset by cost saving initiatives and higher profit contribution at News America Marketing and at News UK versus the prior year. Looking now at performance across our key units. At Dow Jones, total ad revenues declined around 20%, similar to the prior quarter rate, as The Wall Street Journal continued to face challenges in several ad categories, including business-to-consumer, finance and technology. Circulation revenues at Dow Jones grew 6%, driven by higher subscription pricing and higher digital paid subscribers. And Professional Information Business revenues were relatively stable with the prior year, similar to last quarter. And as we mentioned last quarter, Dow Jones has begun the implementation of cost savings initiatives under its WSJ2020 plan, with a target of approximately 8%, or $100 million, in cost savings on an annualized basis by the end of FY18. We continue to expect a pretax restructuring charge of $50 million to $60 million for this fiscal year, including $17 million that was reflected this quarter. At News Australia, advertising revenues remain challenged and for the quarter declined 12%, or approximately 15% in local currency, with continued weakness in retail, real estate and auto. Circulation revenues at News Australia increased 1%, but were slightly lower in local currency, as cover price increases and higher paid digital subs were more than offset by print volume declines. On cost initiatives, as I mentioned last quarter, we are on track for an additional AUD40 million in cost savings in the second half and continue to seek additional cost reductions this year. As I mentioned earlier, we recognized a non-cash impairment charge of $310 million, reflecting a write-down of the carrying value on our fixed assets in Australia. Following this impairment, the carrying value of the remaining long-lived assets at News Australia is approximately $420 million. At News UK, whilst reported advertising revenues decreased 29%, ad revenues were down only in lower teens in local currency, due to print declines, a slight improvement from the prior quarter rate. Reported circulation revenues at News UK declined high teens versus the prior-year quarter, but were flat in local currency, as cover price increases were offset by single copy volume declines. News UK benefited this quarter from a combination of cost savings initiatives, including lower sports rights costs for The Sun, lower marketing and lower production costs. While this group contributed around $25 million to reported revenues this quarter, representing low single digit growth in local currency driven by talkSPORT, the integration into News UK is progressing well. Commercial efforts are now focused on extending News UK\ (Operator Instructions) <UNK> <UNK>, Jefferies. Hi. Thank you. On Dow Jones, with the revenue there more than 50% digital, how quickly are the digital circulation and advertising buckets growing. Is the Journal primarily competing with Facebook and Google or traditional publishers for ad budgets. And what is the time line of the $100 million in cost savings. <UNK>, <UNK> here. I think the Journal itself has a quite distinctive audience, as you can imagine, both by virtue of income and demography generally. And it's difficult to imagine Facebook, Snapchat or anyone else replicating what is a unique audience. I think that's what the team at Dow Jones are emphasizing a unique audience that's growing because of its unique quality content. And the push for WSJ2020 is not only to improve the flow of news, but to make much more efficient the actual delivery of the content in ways that suit the contemporary user. Generally speaking, at Dow Jones, as you said, digital revenues are growing, both in terms of advertising, circulation revenue is up around 6%. And in terms of print this quarter, as I mentioned earlier, it's hard to give you a definite outlook for this quarter, but certainly thus far, the decline is moderating. And just with regard to the cost savings that we mentioned under WSJ2020, we're expecting to take out $100 million on an annualized basis by the end of FY18. <UNK> <UNK>, Deutsche Bank. Hi, <UNK>. Hi, <UNK>. My question is around Foxtel, basically around the churn rate, which has remained around that 15%, 16% mark. Do you expect that to decrease in coming quarters, as perhaps you get into more favorable comps. And just on Foxtel, as well, you've obviously detailed the expected shutdown costs around Presto. Will there be any [output] deals which will remain on foot that will also need to be renegotiated that may stay with the Foxtel platform and will continue to incur costs. <UNK>, I handle the first bit of that question. As you say, Q2 churn was around 15.6%, compared to 10.3% in the prior year during Q2. Clearly, there are a lot of offers out in the market, no contract sales, which aren't necessarily more fluid. Also, last year at this time, we had the Rugby World Cup, whereas you know, Australia performed unexpectedly well, which was obviously auspicious for some. There is no Rugby World Cup this year. But we're entering a crucial sales period for the key core winter sports, Rugby League and Aussie Rules. And so over the next two quarters, we obviously expect to see stronger results. But look, there are offers out there with the phasing out of Presto and the focusing on Foxtel Play, and it's certainly up to our team in Australia to prove to customers what we all know to be a fact, that the offering in sport and other programming by Foxtel is far superior to that of the competition. I think in terms of the question you had on the Presto shutdown, look, we expect, as I said, for additional costs in the coming quarter. We don't comment on specific output deals, but we have recently renewed HBO. I think that was announced. And the team there is keeping a very close eye on the costs. <UNK>, <UNK> here. No disrespect taken. As you know, and as we've made clear to investors, we are in the midst of transition. You can see what's happening to the newspaper business. That's no secret to anyone. And to someone as observant as you, that's certainly no secret at all. As you also realize, we've made a series of investments and divestments, including Amplify. So it is a company in transition. We are seeing ---+ you asked about change ---+ the character of the company itself has changed. It's based on the traditional principles that were the fuel to success for the old News Corp for many decades. But it's also a company that's using that expertise, for example, in news and judgment and analysis to enhance its profile in digital real estate, which is now the fastest growing sector of the company itself. And as you can tell, from both our numbers and our voices, we're optimistic about the expeditious evolution of that particular sector. At heart, as we are, as we have always been, focused on long-term value per share. And we are quite confident that over a period, that will become evident to all. Thank you, <UNK>. Katherine, we'll take our next question. Just on News America Marketing, <UNK>, all I can tell you is that we are very pleased with the performance of the in-store sales. As we've indicated, the freestanding inserts, which are themselves partly dependent on the newspaper business nationally, haven't been performing as well. But our particularly strong position in in-store does indeed prove the potency of point-of-purchase. And we're working with our partners in that area to further develop our expertise and dovetailing that expertise with the data and intelligence that we're harvesting from Checkout 51. So overall for that segment, we're quite confident about performance and potential. And just with respect to Foxtel, obviously we don't comment on the specific assumptions that we use, but we do expect Foxtel to improve as a business. The management team there is working hard. They have their target to improve [the stragglers] into the future. Clearly, they've got some cost challenges and they're meeting those head on. So I would say we're optimistic about Foxtel's future. Katherine, we'll take our next question, please. The Books business is difficult to forecast too long term. But what we're very confident about is the broader strategy that <UNK> Murray and the team have developed for internationalization of HarperCollins through the purchase of Harlequin. The ability that that gives us not only to take advantage of the front end, but also backlist books. And secondly, as <UNK> has outlined, the current roster of books, which is performing particularly well and enduringly so. Interestingly, we are seeing an uptick in digital sales. And fascinatingly, part of that is due to the popularity of digital audio. But as I mentioned earlier on, we are particularly heartened by the Nashville-based HarperCollins Christian business, which is generating a lot of titles which aren't matched by other publishers, given the orientation, and generating a lot of revenue. Thanks, <UNK>. Katherine, we'll take our next question, please. Well, <UNK>, what I can talk about is the broad principle, which is harnessing the audiences that we have from our different mastheads and related real estate sites around the world, where you are in a verified environment, where the advertising can be authenticated, where advertisers are not embarrassed by the guilt by association that's clearly evident in The <UNK>es in London report today. Many of our executives have been talking about the lack of veracity in digital metrics. They are mad metrics. And I think we are reaching a point where this awakening by advertisers is becoming a reckoning, which makes a verified environment of quality content with a quality demographic much more desirable. And I'm fairly certain that advertisers will start to be more digitally discerning. And while not going into too much detail about what our plans are at this stage, we're not quite ready to do that, but our plan is fairly well advanced, but we do believe that we will be the beneficiaries of that reckoning. Okay. Thank you, <UNK>. Katherine, we'll take our next question, please. We haven't given that sort of specific number out. But I think we have said in the past that when we look at our capital expenditures, a significant part of the CapEx is IT-related. And within that IT-related bucket, quite a lot of it goes into investing into digital products. So even though CapEx is down year-over-year, the percent there that remains focused on digital is about the same. So that's one way of probably thinking about the kind of investment we're making. Now obviously, there's Op Ex costs in addition to CapEx. But we don't generally break those out, but most of our Op Ex investments are being focused more and more towards digital. Thanks, <UNK>. Katherine, we'll take our next question. Great. Thank you, Katherine. Thank you all for participating. We'll talk to you soon. Have a good night.

2017_NWSA

2017

PFS

PFS #Thank you, Phil. Good morning, ladies and gentlemen, and thank you for joining us today. The presenters for our second quarter earnings call are Chris <UNK>, Chairman, President and CEO; and Tom <UNK>, Executive Vice President and Chief Financial Officer. Before beginning their review of our financial results, we ask that you please take note of our standard caution as to any forward-looking statements that may be made during the course of today's call. Our full disclaimer can be found in the text of this morning's earnings release, which has been posted to the Investor Relations page on our website, provident. bank. Now I'm pleased to introduce Chris <UNK>, who will offer his perspective on our second quarter's financial results. Chris. Thank you, <UNK>, and good morning, everyone. Solid earnings performance continued in the second quarter, with record levels of revenue, net interest income, net income and earnings per share. Our return on average assets for the quarter was 1.03% and return on average tangible equity was 11.33%. This was accomplished despite a lack of material loan growth as prepayments of larger credits partially offset new loan originations. Payoffs totaled nearly $213 million year-to-date, as some clients have sold properties or businesses to recognize gains. The loan pipeline remained strong, however, at over $1.3 billion with C&I and CRE leading the way, and the committed rates on new loan production exceed the current portfolio yields. Generally speaking, any fallout we've experienced from the pipeline has been to either the incumbent bank or to competitors who make overly aggressive loan pricing or credit structure offers. We continue to be selective in the credits we pursue. And as for the balance of 2017, we still anticipate low single-digit loan growth with corresponding deposit growth. Average deposits increased slightly during the quarter, and we have, thus far, been able to maintain stable deposit rates, although we have been hearing from selected larger clients who see the Fed tightening is an opportunity to negotiate better returns. There are deposit specials being offered by some of our competitors who appear to be addressing high loan-to-deposit ratios, and we continue to monitor the market and we'll defend our market share as necessary. Our core deposit level remains at 90% at June 30, 2017, and our all-in cost of deposits was consistent with the trailing quarter at 28 basis points, just 3 basis points lower ---+ higher than the lowest set in 2015. As always, we will continue to rationalize our branch network, back-office staffing and operations to keep our expenses as low as reasonable. As discussed in last quarter's call, we have received multiple bids on the possible sale-leaseback of 12 of our own branch locations, and we're entering the due diligence phase of that transaction. As we approach the regulatory threshold of $10 billion in assets that we expect to cross in 2018, we are meeting and discussing our status with regulators and our preparations are on schedule. We will work all avenues to be part of the conversation in Washington to bring about the desired regulatory changes to Dodd-Frank for community banks. However, the distraction in Congress from the White House may preclude any material changes in the near term. Investing for the future, and our digital offerings continues, including mobile banking upgrades, an online banking upgrade and an exploration of widely accepted person-to-person digital payment options. With the growing number of our transactions now being done electronically, we must persist in our investments to satisfy the ongoing evolution of customer needs and expectations. We are also investing in a new loan pricing model, which we believe will result in an improved pricing and structure methodology for our relationship managers. Our asset quality continued to improve during the quarter, with nonperforming assets to total assets at 48 basis points at June 30, 2017, versus 58 basis points for the same period in 2016. Our capital base is strong, with tangible common equity at 9.46%, and we have the financial capacity, regulatory stature and desire to prudently leverage our capital and provide an attractive dividend to our shareholders. On that note, the board has approved a 5% increase on our regular quarterly cash dividend to $0.20 per share. While organic growth has always been our preferred leverage vehicle, M&A in both the wealth and whole bank areas also remains a focus. The outlook is that businesses and consumers are becoming more confident in the future. And notwithstanding the headlines from Washington and the partisanship in Congress, overall, we are bullish on the U.S. and our local economy and its potential for stronger growth. With that, I'll hand it over to Tom for some more details. Thank you, Chris, and good morning, everyone. As Chris noted, our net income for the second quarter was a record $24.4 million compared with $23.5 million for the trailing quarter. Earnings per share were $0.38 compared with $0.37 for the trailing quarter. This was a $3 million or $0.04 per share increase compared with the second quarter of 2016. Revenue has also set a record as net interest income reached a new quarterly high of $69 million. While loan growth was subdued in large part due to accelerated loan payoffs, our net interest margin expanded 6 basis points versus the trailing quarter up to 3.17%. The margin benefited from stable funding costs, favorable repricing of variable rate assets and higher new loan and investment origination rates. Looking ahead, the loan pipeline remained strong and the pipeline rate has increased further, continuing to exceed our loan portfolio rate at 4.32%. We anticipate modest additional expansion of the net interest margin throughout 2017. We provided $1.7 million for loan losses this quarter, an increase from $1.5 million in the prior quarter. Asset quality metrics improved further versus the trailing quarter, with nonaccruing loans decreasing $1.6 million to $38.9 million or 0.55% of total loans. The amounts for loan losses to total loans was unchanged from the trailing quarter at 89 basis points at June 30. Net charge-offs decreased slightly to $1 million on an annualized 6 basis points of average loans. Noninterest income was $2.4 million greater than in the trailing quarter as loan prepayment fees were $1.2 million higher, income on bank-owned life insurance, including death benefits, was $1.1 million higher and wealth management income, including tax preparation fees, was $296,000 higher than in the trailing quarter. These items were partially offset by reduced income on loan level swaps. Noninterest expense increased by $1.2 million versus the trailing quarter to $46.1 million as increases attributable to the stock-based portion of annual directors' compensation, and REO write-down and legal costs more than offset seasonal rate reductions in occupancy expense and payroll taxes. Expense management remained strong, however, with the efficiency ratio at 56.44% and annualized noninterest expenses to average assets at 1.99% for the quarter. Income tax expense increased $2.1 million from the trailing quarter to $10.5 million, and our effective tax rate increased to 30% from 26.3%, as the change in accounting guidance related to the recognition of benefits from share-based transactions reduced our income tax expense by $1.2 million in the trailing quarter. We currently project an effective tax rate of approximately 30% for the remainder of 2017. And that concludes our prepared remarks. We'd be happy to respond to questions. Well, Tom will give you some detail on the pipeline, Mark. But I certainly would think that we are seeing in that space that the incumbent comes back and it kind of low balls the idea that they don't want to lose that. So we go down a path and we're in terms sheets, we agree, and then all of a sudden, there's an aggressive approach to keep the business. So sometimes, we miss out on those. So we go down a path of that process, and then all of a sudden, it doesn't come through. And that's why we have to keep the pipeline very full because there is that runoff at the end of the day. Tom, maybe the pipeline details. Pretty much. We have got a term sheet. We have an indication that they're interested. We're going down the pipeline. It is the process. It is not just a registered hope. There is definitely paperwork and information being gathered and put together, and some of that is also all the way through the process of being underwritten and then closed. And so, Mark, in the broad pipeline of $1.3 billion right, that's the gross pipeline subject to pull-through, we anticipate about a 56% pull-through of that total pipeline. Within that, $251 million is approved to waiting closing, you've got about $1 billion in work in process. Part of the routine, the slowness in the pickup in outstanding is a large piece the lending, more currently, has been in the construction arena. So while you have loan originations, you don't see funding on day 1. And as Chris mentioned, some of the competitive pressures, as you're working through the work in process, sometimes you see some fallout. In addition, we've been doing less in the multi-family space for some time ---+ some period of time now as we've gotten more discerning, supply is starting to exceed demand in our opinion. So those are the reasons why you see some limitations in growth. Overall, I got a 4.32%, Mark, which is up in last quarter. Last quarter, we finished with a 4.18%, and our actual on rates were 4.26%. So even though I was concerned about where we were going to close those homes because of the volatility in the 7- and 10-year space, we actually did well for the quarter, which is why we saw the 6 basis points of margin expansion. And the other thing, Mark, that we're seeing is people are extending their rate locks out of the 90% and even, sometimes, further to keep the business in place. $2.3 billion. It's been pretty steady and pretty flat. Sure. Preparation costs recognized this quarter were about $150,000. We're looking at about another $500,000 to $600,000 for the back half of the year. And then, anticipating crossing in the second quarter of 2010, providing another $0.5 million in the first part of the year. And then we start to hit our run rate ---+ did I say (inaudible) I'm sorry, 2018. And then we start to hit our run rate, which will be in the $6 million to $7 million a year range. That's including Durbin of $2.8 million. Not a whole lot of detail yet, <UNK>, because we're still working through the diligence stage, so I don't know what the ultimate proceeds will be. I expect it to be fairly neutral. I think we'll see some reduction perhaps in our lease cost as a result of, hopefully, a gain recognition that will be deferring use to reduce leasing costs going forward. But I really can't give you a solid number at this point. Seasonal stuff, for the most part, snow ice removal from the trailing quarter and utilities costs being lower. It's typical from Q1 to Q2. I think beyond rates were a little better than I expected, as I just as mentioned on the previous question. We had a 4.18% pipeline, and we actually closed at 4.26%. And funding has perhaps held up better than we thought when we're trying to forecast the margin. We didn't move at all this quarter. Our noninterest-bearing deposits, albeit small growth, there were still some growth there. So I guess, looking forward, the pressure has been in selected pockets and we try to react to it selectively rather than repricing the book. Overall, we're just not seeing that much pressure on the funding side. Chris, do you agree with that. I agree. One thing that I think we are seeing, as I mentioned in my comments, was that the business people that have large balances see the material difference when you look at the rate of interest paid whereas a lot of our consumers don't see it as evident when you're having smaller balances, so we're talking pennies. So I don't think that, that's going to happen until we get, again, like, maybe another Fed hike or 2. So ---+ and on the other hand, we know we have to defend our market and our customers. We do a lot of relationship type of pricing. So we are not just leading with a special product that has a high CD. We are just meeting with our customers when they have a conversation. We give our relationship managers and our branch people the flexibility to, within our parameters, to make different rate adjustments. And one thing on the operating expenses, I want to remember that we did close down and consolidate 2 locations in the first quarter. So those cost savings are coming through also. I don't have it broken it up by quarter in front of me, <UNK>. It was about a little under $213 million for the year-to-date. Going forward, I think we expect to see a little bit of a reduction from that level. Yes. I think ---+ <UNK>, this is Chris. I know that ---+ as an interesting ---+ in less than a month, we had 3 of our middle market clients sold their businesses. And so that's something you probably don't see very often as opposed to a commercial loan that was, again, somebody selling their property. So I think that's evidence of that it's very tough to predict, and that's something we want to be involved in the conversation. The one thing about one of the businesses is that they've sold out, and now we're going to be able to at least maybe offer them some of the opportunity to put their wealth to work at Beacon Trust. And obviously, we'd rather hold the earning assets, but we do have prepayment protection on many of those loans. And then, you saw how that contributed to the fee income side for us this quarter. Again, to remind everybody, we do not include prepayments in the margin there in the fee income section. We report it for margin. Well, we certainly haven't been absent with a lot of things going across our desk in the way of seeing other people doing deals outside of the market. We are always involved in having good conversations. There are certain size institutions that wouldn't make sense to us at this stage. But we consider this an opportunity for us to put our capital to work for the right opportunity at the ---+ a price that's fair to our shareholders, to their shareholders. So I think there's definitely conversations on out there. On the other hand, I think they're just that. I think everybody's trying to look at what's going on and are there ---+ is there going to be tax reform, is there going to be regulatory release of some of the burdens that are going on there. Some of that might be wishful thinking. So we just ---+ we want to be involved. We want people to like what we're doing and we would like what they're doing to make it accretive. And certainly, earn back has to be within our parameters. And that's also on the wealth space, where we see deals here and there, some of them match up, some of them don't. We continue to be very disciplined in our approach. I think we probably have to look at the balance sheet. Is it a deposit type of franchise. Is there excess capital. How much of that loan-to-deposit is that of CRE. How much of that has grown over the last few years. So I think we would ---+ we look at all things and, obviously, we look at every bit of credit that's in there, and I would expect anybody would do the same thing to us. For the most part, I don't think we say no to anything. On the other hand, we want to make sure there's an asset generation capacity for either us or them and vice versa or funding that is beneficial to us and our shareholders in the long run. Obviously, that scenario presents some challenges in terms of regulatory approval, given that we have a greater than 100% loan-to-deposit ratio and CRE concentration as well. So you'd have to look at what the opportunities were and then remixing the balance sheet on any target that has those characteristics. We're not going to hold onto the range just to stay under $10 billion. We think that growth is important. If we have to, we go through it organically. We would ---+ I don't think that we would do a very dilutive deal just to get size and scale. I think we would look at anything. We will go over it. We're pretty sure that everybody knows that we would continue to work on that opportunity to grow through it. If there's an opportunity that is right and accretive, we would definitely look at it. We are also getting into the time frame where it wouldn't ---+ by the time we close the deal, we'd be past that March time frame, and that certainly has ---+ helps us to defer some of the expenses going out to '19. But we still stand ready to look at anything that makes sense. And if not, we have to do it organically. We can't stop and stay at $9.7 billion for the next 3 years and just tread water. Well, thank you. In closing, on behalf of all of us at Provident, I would like to extend our sympathies to the family of Kevin Ward, our former Vice Chairman, who passed away late June. Kevin was well known to many of the analysts and investors who followed PFS since its inception, and he will be fondly remembered by all who knew him. So we're wishing well to the family. And we'd like to thank you for your interest in Provident and have a great day.

2017_PFS

2016

CDNS

CDNS #Yes, we're sorry. We understand that we have had audio problems today so we wanted to remind you that our prepared remarks will be posted on our website after the call. Thanks for mentioning it. Yes. As you would expect, and as I think we said in our Q2 call, we expected Q3 to be actually have lower revenue than Q2. Certainly functional verification and emulation was a large piece of that. Yes, it is the fact that we are taking our business as it naturally occurs. We don't want to change our dynamics or our value calculations in any way, so we want to take it when our customers want the product. By the way, that came after two record quarters in both Q1 and Q2. So I think we expect a little bit of a downturn and that's what happened in Q3. Yes, leasing is recognized, the revenue is recognized up front because it's a lease, but we collect the cash over a period of time. I think that's key for us. It remains a small portion. We don't break out the details, but it remains a small portion of it. We do want to point out that we've had a very good year and we expect that to continue in Q4. The guidance at this point for Q4 includes everything we know. Product mix has certainly been a factor this year. Hardware has been better than expected for us, offset by IP revenue that was a little bit below our expectations. We do also expect in Q3 we saw some and in Q4 we will see some of the cost at the end of the life of Palladium XP. Yes, I think, <UNK>, first of all, and we have a lot of respect for our friend, Mentor and then the management team. They are a very important industry player and clearly, as you know, we don't comment on some of these topics. We have a lot of respect for them. Their product is, Calibre is well known in the industry. So I think we just stop there and we are not going to comment on any of the specifics. Sure, thank you. Yes. I think as you know, IP is a new business a few years ago. And we embarked on that and we grew nicely to 10%, 12% of the revenue for our Company. This is very strategic for us in our whole key component to our SDE strategy. We reviewed recently IP business strategy and as I mentioned earlier, we are going to be focused on standard off-the-shelf IP, pursuing the vertical market that we want to pursue and then the most advanced process nodes. And we're deemphasizing the customized IP, that more once off and it's not many of the IP reuse and that is where you are going to make money. I think long-term we like that. It's very important this outsourcing trend continues because a lot of companies, our customers we talk to just catch up and then follow these various protocol that keeps coming up. And if they have Tensilica-proven IP and then they would love to outsource that, so we see that as an opportunity. We are going to be really disciplined, just like when we do the M&A. Again, this is a refined strategy. We are focused on scalability, sustainable, and are more focused on the profits and more focused on the quality of the customer and more focused effort into this whole vertical market we're going to go after and the most advanced nodes and deemphasizing some of this customized IP. <UNK>, we don't break out that. We don't break out the segments of our IP business. All we can say is clearly this is a refocus. As you know, when you grow to 10%, 12% and then you are starting to look at okay, now you grow to 10%, 12%, is this scalable. Is it sustainable. And is it profitable. And then we can refine the strategy for the next phase of growth. And then are more focused and more IP reuse and more repeatable, scalable business model going forward. Again, we expect sequential growth from ---+ modest sequential growth from Q3 to Q4. We don't break down the segments by geographic, but obviously Asia continues to be a strong market for us and a strong driver for us and we anticipate that going forward. Just to add on to it, this is <UNK> here. The China semiconductor sector actually this year growing at 26% compared with the overall global market is kind of not growing. And so the government have put a lot of effort into it and Cadence is very well-positioned for the two designs in IP. So we are excited about the opportunity and you see that over time, that region is growing. A very good question. In terms of the growth in the semiconductor and systems company area, the thing that I like a lot is the cloud data center. That's a sea change in terms of the workload requirement and then how to optimize some of the hardware and then the container software. I think that is going to be a sea change. And then the IoT and all this data is going to be in the cloud. So the cloud infrastructure is going to be a very great opportunity for us. And then the other part is clearly the machine deep learning. And that is a very broad application to the ADAS and automotive, to sequencing genomics, single-cell sequencing, to the search engine from the eye to the brain function, that whole neuroscience is intriguing to me. And then I think those are going to be driving some of these growth opportunity going forward. And then of course the security-related to across all this vertical will be very interesting to me. And all too is try to optimize to address some of these design challenges and order different applications of different challenges. And also our IP and that the refinement that we make will be focused on some of this vertical market. And then also some of this application opportunity for Tensilica to explore and then with the DSP programmability and low-power, it will be really [shy] on the Microsoft HoloLens, as an example. In fact, one of the indicators I always look at is how much new design engagement we have. And our hard-working, capable employees, they are working really hard. I have not seen any time in the last eight years they work harder than today. That tells you a good indication that we're so heavily engaged with some of this new product development. Thank you. Yes, we don't break out auto. We just say with system companies as about 40% but we do believe it's growing is a portion of our business. On the revenue recognition, my favorite topic, we are still working through the details with our advisors to determine how we'll implement it and what will be the impact, if any. There's still a lot of work to be done, not just by us but my most companies. And we expect to retain recurring revenue treatment. I think that's the take-away I want you to have. Yes, <UNK>, to take the geographic question first, I wouldn't read too much into the Americas or Japan or Asia or whatever else. I think the long-term trends remained intact. Asia will continue to grow. Japan, I think, has probably bottomed out. North America will fluctuate sometimes from quarter to quarter. And clearly hardware always place a portion in that because that is the part of our revenue that's up front. So don't read too much into it. As far as emulation, I think the key thing is the math isn't simple here because we are going through a big change in product mix. We are moving from the Palladium XP, the old generation product, to the Z1. And we have said the Z1 will have higher margins than the XP. I think it is complex to do the accounting from within; it's is probably even more complex from you. Please don't read too much into that either. In closing, we are continuing to innovate and deliver system design enablement solutions to our customers. And we're looking forward to continue to execute our strategies and creating value for our shareholders. I want to take this opportunity to thank all our hard-working employees, shareholders, customers, and partners for their continued support that makes this possible. Thank you all for joining us this afternoon.

2016_CDNS

2017

ZBRA

ZBRA #Good morning, and thank you for joining us. Today's conference call and slide presentation will include prepared remarks from <UNK> <UNK>, our Chief Executive Officer; and <UNK> <UNK>, our Chief Financial Officer. <UNK> will begin by discussing our first quarter highlights and key drivers of the results. <UNK> will then provide more detail on the financials and discuss our outlook for 2017. <UNK> will conclude with discussion of recent progress made on Zebra strategic priorities. Following the prepared remarks, we will take your questions. Joe <UNK>, our Senior Vice President of Global Sales, is traveling internationally and has joined us by phone. This presentation is being simulcast on our website at investors. zebra.com, and will be archived there for at least 1 year. Before we begin, I need to inform you that certain statements made on this call include forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements reflect the company's current expectations concerning future events and are subject to a number of factors and uncertainties that could cause actual results to differ materially. A detailed discussion of these factors and uncertainties is contained in the company's filings with the Securities and Exchange Commission. During this call, we will make reference to non-GAAP financial measures as we describe business performance. You can find reconciliations of our GAAP to non-GAAP results in today's earnings press release and at the end of this slide presentation. Also, as a reminder, our reported financial results include the divested wireless LAN business through October 2016. In this presentation, our references to year-over-year growth are on a constant currency basis and exclude wireless LAN sales from the first quarter 2016 results. Now I'll turn the call over to <UNK>. Thank you, Mike. Good morning, everyone, and thank you for joining us. As you see on Slide 4, we are off to a solid start in 2017. Our team executed well and delivered strong first quarter results, including: adjusted net sales of $866 million, with organic growth of 7% that exceeded our guidance range; gross margin expansion of 20 basis points; adjusted EBITDA margin of 17.2%, reflecting an 80 basis point improvement over the prior year; non-GAAP EPS of $1.37, a 29% increase over Q1 of last year; and more than $100 million of free cash flow driven by improved profitability and prudent cash management. We achieved solid sales results with double-digit growth in EMEA and Latin America and 5% growth in North America, driven by a strong demand across our retail and e-commerce customer base. Growth was diversified across our major lines of business, with especially strong results in mobile computing and data capture. This was led by our industry-leading portfolio of solutions and the strong reception from large enterprises for our newest offerings. In the quarter, we extended our market leadership and delivered innovation to our customers. Our solutions are essential to our customers to execute on their strategies. We've also witnessed an improved environment compared to the very challenging first quarter 2016. Our stronger-than-expected Q1 provides us the confidence to increase our full year sales outlook. With that, let me now turn the call over to <UNK> to review our financial results in greater detail and discuss our 2017 outlook. Thank you, <UNK>. Before we get started, I would like to remind you that all references to year-over-year sales growth are on a constant currency basis and exclude wireless LAN sales from the first quarter 2016 results. Let us begin with a walk through the P&L. As you can see on Slide 5, adjusted net sales for the first quarter were $866 million, up 7%. Our first quarter sales performance was driven by strength across our product portfolio, especially mobile computing and data capture, resulting in growth across all regions. Enterprise segment sales of $544 million increased approximately 9%. Pre-transaction Zebra sales were $322 million, up approximately 3%. Printing and supplies were higher as were sales in our location solutions business. Sales of services increased slightly from last year. Turning to our regions. Sales growth in North America was up 5%, driven by strength in mobile computing and data capture. We continue to perform well in retail and e-commerce, as the industry continues to transform to meet evolving consumer purchasing preferences. As <UNK> highlighted, EMEA sales increased 11% from a year ago, driven by double-digit growth in data capture, printing and mobile computing. We saw strength across most of the continent in an improving macro environment. Latin America sales increased 16%, as we cycled weak first quarter 2016 sales. We saw especially strong sales in printing and supplies across the region. Sales in Asia Pacific were up 1%, as we are cycling strong results in the first half of 2016. Consolidated adjusted gross margin of 46.4% was 20 basis point higher than the prior year period, primarily due to our product cost-reduction initiatives, partially offset by slightly lower services margin. Adjusted operating expenses in Q1 were flat compared to last year. The impact of the sale of the wireless LAN business was primarily offset by higher incentive compensation expense associated with our improved operating performance. First quarter 2017 adjusted EBITDA margin was 17.2%, an 80 basis point increase from the prior year period. This was driven by higher sales and improved gross margin. Q1 EBITDA margin was negatively impacted by approximately 30 basis points due to foreign currency impacts. Non-GAAP earnings per diluted share increased to $1.37 in the first quarter, an increase of $0.31 or 29% from the prior year period. Integration expenses of $27 million in Q1 declined by $9 million from the prior year period. With the successful launch of our fully integrated ERP, we expect spending to be sequentially lower in the second quarter. We expect minimum integration expense in the second half of 2017, as we complete the first steps to exiting all remaining Motorola Solutions transition service agreements. Turning now to the balance sheet and cash flow highlights on Slide 6. We ended the first quarter with $180 million in cash, which includes $99 million held outside the U.S. Zebra has strong liquidity and no borrowings on our $250 million revolving credit facility. As of the end of the first quarter, we had $2.6 billion of long-term debt on the balance sheet, of which approximately 2/3 is fixed rate, including nearly $700 million of floating to fixed LIBOR swaps against our term loan. Strong Q1 cash flow of $104 million enabled us to pay down $80 million of principal on our term loan in the quarter. Free cash flow increased by $27 million or 35% compared to the first quarter of last year, primarily due to increased profitability, solid working capital management and lower capital expenditures. With respect to foreign exchange, as a reminder, we have a [hauling] 4-quarter hedging program in place to mitigate the impact of euro to U.S. dollar exchange rate volatility. Approximately 1 quarter of our total company sales are denominated in euros and it is the only currency where we have much exposure to cash flow and profitability. Slide 7 shows our past 2 financial deleveragings. Our top priority for cash flow and excess cash balances is to aggressively pay down acquisition debt. We expect to exceed our original goal of $650 million of debt paydown for the 2016 and 2017, 2-year period. Our net debt to adjusted EBITDA ratio dropped below 4x as of the end of the first quarter, which is down from more than 5x as of the close of the Enterprise acquisition in late 2014. Our ultimate goal is a leverage ratio of approximately 3x. On Slide 8, you will see that for the second quarter of 2017, we expect the change in adjusted net sales to be between negative 2% and positive 1% on a nominal basis. Organic sales growth is expected to be between 3% and 6%, which excludes the adverse impact of 4 percentage point from wireless LAN as well as the adverse impact of 1 percentage point from changes in foreign currency rate. We expect organic sales growth to moderate through the balance of 2017, considering the more challenging year-over-year comparisons and the lumpy nature of our business. Second quarter 2017 adjusted EBITDA margin is expected to improve from last year and to be in the range of 17% to 18%. This rate assumes flat to slightly higher gross margin as compared to the prior year period. We expect to drive adjusted operating expenses, as a percentage of sales, lower than both Q1 and the prior year period. Non-GAAP diluted EPS is expected to be in the range of $1.35 to $1.55. Given our strong first quarter sales and backlog entering our second quarter, we are raising our full year sales growth outlook. We now expect low- to mid-single-digit organic sales growth. This outlook excludes the adverse impact of 3 percentage points from wireless LAN as well as the adverse impact of 1 percentage point from changes in foreign currency rates. Full year 2017 adjusted EBITDA margin is expected to be in the range of 18% to 19%, which is higher than 2016 and assume a 40 basis point adverse impact from foreign currency changes. Our full year outlook assumes slightly higher gross margin rates compared to the prior year period due to cost reductions and productivity improvements. We also expect to drive lower adjusted operating expenses due to productivity improvements as we complete the integration of the company. For 2017, we expect debt paydown to exceed free cash flow. Our goal is to pay down at least $300 million of debt, which is supported by higher EBITDA, lower integration expenses, lower interest cost, and reduced cash on hand required to operate the business. Other full year 2017 modeling assumptions shown on Slide 8 include: interest expense of approximately $165 million to $170 million, which includes noncash amortization of approximately $20 million to $22 million; stock-based compensation expense of $30 million to $35 million; non-GAAP tax rate in the low- to mid-20% range; capital expenditure of approximately 2% of revenue; and depreciation and amortization expenses of $260 million to $265 million. With that, I will turn the call back to <UNK>. Thank you, <UNK>. We are focused on several areas to build upon our leading positions globally and to drive profitable growth and cash flow. First, we are leveraging our scale, innovation and relationships with customers and partners to extend our leadership with the most innovative portfolio of enterprise solutions and sensing technologies in the market. It is the 1-year anniversary of our redesigned channel partner program, which was the most comprehensive change to our channel strategy in the company history. In April, we began hosting our annual meetings with partners around the globe, and feedback has been extremely positive. The new program has added thousands of value-added resellers and has successfully provided better incentives for partners to expand and grow their business with Zebra. Second, we are advancing our vision of Enterprise Asset Intelligence, or EAI, by leveraging Zebra's deep knowledge of the markets we serve and capitalizing on key technology trends. I will elaborate on our progress in this important strategic area in a moment. Third, we are executing on the final phase of the Enterprise integration. Last week, we went live with our global ERP and IT ecosystem. The final key milestone of our integration is to have exited all remaining third-party service agreements by the end of the third quarter. As we ramp up the integration, we have the opportunity to further increase productivity across the Enterprise and improve the experience for our partners and customers. Our fourth area of focus is to further enhance Zebra's financial strength by increasing profitability, improving cash flow and optimizing our capital structure. As we continue to drive profitable sales growth and improve productivity, we will enhance cash flow generation to aggressively pay down debt to achieve our target capital structure. Now turning to Slide 10. Zebra's resources and deep market expertise make us uniquely positioned to capitalize on key megatrends in mobility, cloud computing and the proliferation of smart devices. To address the opportunities these trends create, we have developed an operational framework that enables more intelligent enterprises. It starts with solutions that sense information from all enterprise assets, such as inventory in a warehouse, medical equipment in a hospital and customers in a retail store. Data from these assets, including status, location, utilization or preferences is then analyzed to provide actionable insights in real-time. This EAI framework includes Zebra's hardware, software, services and analytics, which connects customers' physical assets, systems and people. This provides a digital view of the entire enterprise, which enables visibility into their business operations and workflows, resulting in smarter business decisions. Our offerings resonate with our customers as we collaborate and innovate with them on a daily basis. Slide 11 highlights how we serve our key industry verticals. Major trends in each vertical are driving opportunities for Zebra. Examples include: a higher proportion of retail sales executed online or through multiple channels; increased shipping demands for transportation providers; more hospitals running on real-time health care systems; and increased mobility in the manufacturing environment. Zebra's solutions assist Enterprise customers across multiple industries to gain critical insights into their operations, comply with increasing regulations, enhance the customer experience and empower their mobile workforce with actionable information. At the ProMat trade show in April, we announced new offerings in the transportation and logistics and manufacturing sector that further differentiate us as the leader in Enterprise Asset Intelligence. We featured our SmartPack Trailer software analytics solution, which enables fleet managers to maximize capacity utilization. We also featured our network connect solution for manufacturing, which seamlessly connects printers and scanners on the plant floor to the Enterprise network, without the complexity, failure points and workarounds common in today's environment. Zebra is a clear beneficiary of the transformation taking place in the retail sector. Both traditional brick-and-mortar and e-commerce retailers are committed to investing in their capabilities to enhance the customer experience. E-commerce fulfillment and omni-channel offerings are operationally intensive, and we provide retailers the insight they need to meet increasing customer expectations. Our understanding of the complexity of these workflows makes our solutions essential to our customers' operations. We are winning in retail with our compelling offerings. As an example, we recently won a large competitive bid to provide a fully managed mobile computing solution for a leading pharmacy chain. The solution includes our new TC51 mobile computers and ET50 tablets as well as providing support and managed services. Our mobile devices layer enterprise-rich features on top of the Android platform. We are uniquely positioned to provide security updates and patches for the full life cycle of the devices, reducing the total cost of ownership below other competing mobile device offerings. Additionally, we will deploy our Asset Visibility Services offering, which provides the customers with insight into device health, utilization and availability, resulting in increased productivity and operational efficiency. In the health care sector, Zebra is capitalizing on opportunities to help enterprises advance the quality of care. Patient identification and timely treatment are critical success factors. Providers require smart noninvasive technology that tracks the patient journey, including positive patient ID, laboratory specimen tracking and medication administration. Additionally, mobile communication with voice and secure texting, along with patient alert, will contribute to improved levels of care. In closing, we've had a strong start to the year, thanks to excellent execution by the Zebra team and their tremendous support of our partners and customers. Our strategy is working and our new products and solutions are being well received in the marketplace. Overall, we are confident with our positioning in the market and we are energized by the opportunities ahead to drive value for our customers, partners and shareholders. With that, I will hand the call over to Mike. Thanks, <UNK>. We'll now open the call to Q&<UNK> (Operator Instructions) Thanks, Jim. Retail has been a strong vertical for Zebra for a long time, right. And it clearly came off very well in the first quarter. We are capitalizing on some of the shifts that are going on in the retail today, but with the movements from traditional, let's say, brick-and-mortar towards e-commerce and omni-channel spending. And I'd say all our brick-and-mortar customers and e-tailers too, they are investing in our type of technologies today. So while they might be investing less in new stores or closing stores, they are prioritizing more IT-type of capabilities in their CapEx budgets. We have also been very fortunate here now of being able to develop a very strong product portfolio that is resonating with our retail customers. Android has been well accepted by retail and is going very well there and our Enterprise Asset Intelligence vision is also resonating very well, as we are coming up with more and more new types of solutions that help to drive greater visibility into their operations, such as with SmartLens. Then moving on to some of your follow-on verticals here in health care, that's been our fastest-growing vertical over the past several years. We see strong growth drivers for continued good performance around both the ability to help improve the quality of care, but also the efficiency of care with the cost of care. The electronic medical health records is really the catalyst for this to happen. But we also are starting to see better growth in health care from outside of the U.S. It started off really being a, say, a North America vertical, but now it's becoming more prevalent to more spending in Europe, Middle East and Asia, also. And we have some new products coming out here in Q2, like the TC51 for health care, that we expect to drive greater growth also. And lastly, I think you asked about our transportation logistics vertical. Again, that's ---+ it's been a strong vertical for us. It's been benefiting from some good secular trends, particularly, the shift to e-commerce. So you have so many more packages that need to be delivered to enterprises and to people's homes and we've gained a good amount of share in the T&L space over the last couple of years. And again, we have expanded our type of solutions to the ones I have mentioned on the prepared remarks like the SmartPack at the ProMat show. Also, we have the Preload Smart Scan solutions, but both of those are great Enterprise Asset Intelligence solutions that's been resonating very well with our customers. Yes. So I'll start with first the ---+ on the cross-selling side. Then I'll ask Joe <UNK> to also then participate in that and give some further details on what's going on. But yes, we've ---+ we put a lot of emphasis around the One Zebra across not just sales, but across the entire company and making sure that we get aligned and that we can prioritize the right things across the company. From a go-to-market perspective, we have invested a lot in cross-training our sales people and the systems engineers to ensure that they are as comfortable and as well-versed in all of our different types of solutions. We also have overlays that can provide specific, more deeper expertise in parts of our portfolio because it's obviously hard for anyone person to be an expert in the breadth of portfolio that we have. And I'd say that's been working very well. We've seen a lot of great wins that has been really a result of the One Zebra, where we've either been able to pull in printers into an account, which was strong ---+ had a strong position for our Enterprise business or vice versa. So that's been working well, but it's work-in-progress. We will continue to work hard on making sure that we get the entire sales team as well trained and focused on the entire portfolio, and that also goes to our partners. Joe, do you want to add a little bit to that. Yes, you touched on the all the high points. We had integrated the sales force relatively quickly as you might remember, already at the end of 2014, and we intensively trained the sales forces in cross-selling the full portfolio of products. We also, at the beginning of 2015, already introduced the compensation plan, which to this date rewards the sales people for cross-selling. And that has shown results in our big deals as well as in our revenue overall. We've also had an initiative underway across the company to integrate on a cultural level that a large percentage of our employees have already participated in, to bring the cultures of Motorola and Zebra together to a One Zebra culture. And the other piece I would highlight in the cross-selling is that, our ---+ as we transition towards more and more solutions such as the SmartLens offering that we mentioned, our professional services will play an increasingly important role in bringing solutions that span really across the portfolio and later value-added on top of the products that we bought together in the acquisition, to market through professional services that bring those solutions to life. So a broad array, really, of cross-selling activities. Yes, our printing business has performed very, very well for many years, I'd say. We had a good quarter in Q1 for both printing and our supplies business. The One Zebra message we had around how to leverage the full complement of all of our solutions, to pull in more printing, has been working well; it's been a success for us, I'd say. And I feel very good about the long-term outlook for our printing business. We have a very strong product road map that has some of new products coming out later this year that I would expect to have a meaningful impact in the market. We do see significant opportunities to expand our supplies business, which we think of as a somewhat underpenetrated vertical for us, or so our product space. And we're including Enterprise Asset Intelligence capabilities into our printers. So Link-OS is a great differentiator for us; it enables our printers to be good network citizens in our customers' networks. Profile manager is a capability we have which is unique to Zebra and very well valued. And we talked about on the prepared remarks the network connect solution, which enables us to connect into Rockwell Automation's IT systems very easily and makes it a lot easier for our customers to expand and reconfigure their businesses. So we feel very good about where the printing business is, and I think we expect to see good growth as we go through the year. So let me take your first question about restructuring. So we expect restructuring charges to decline significantly in Q2 and to be de minimis in the second half of the year. As we are finalizing the implementation of our ERP, we believe that cost will ---+ would be significantly managed down. In term of your second question for deferred revenue though, we are today, as <UNK> indicated, entering more and more into the Enterprise Asset Intelligence space, meaning that our revenue has multiple elements on it, services, managed services, and the deferred revenue was associated with those multiple elements we associate with our sales. Yes. So first, I would say, our mobile computing business had a very strong quarter, especially in North America and Europe, and driven in no small parts to large wins, more large project-based wins. We got a lot of interest in our new Android solutions like the TC51 mobile computing and the tablets. So ---+ And the Android migration generally is continuing to gain momentum for us. It's becoming a bigger part of our overall business. It's now about half of our total mobile computing sales and our market share is over 50% in Android compared to ---+ this is higher than what we have overall. We have a very close working relationship with Google, which enables us to work more on early insights into what's coming in future releases and impacts influence a little bit of what the road map will look like. And we have by far the broadest Android product portfolio with about 15 products in there. And in Q1 here, we launched a new service that we call Lifeguard, which basically enables us to extend security patches and security upgrades for all devices through the life cycle of those devices. That's something I think we are uniquely well positioned to be able to do as we have such a big installed base. But we should also say that Windows continues to be a very prominent operating system and we think of ourselves as being agnostic in kind of the world of operating systems. We want to provide the right device and the right operating system for our customers, and there's still a lot of Microsoft devices being shipped, and the kind of the total legacy installed base of Microsoft operating systems, it continues to be very large. So the future opportunity to upgrade that and refresh that is substantial. And then on the channel side, Android has ---+ initially took off from ---+ based on our larger deals into our direct customers. But as time has gone by, we do see more and more channel business for Android and the characteristics of those is very similar to the characteristics of similar deals for Microsoft. So I'd say, today, the migration or the growth of Android in the channel is developing along the lines of how we expected it to. So we're pleased for that also. So we're indeed, pleased with our gross margin performance. It has been increasing by about 40 basis points year-on-year. It's due to multiple factors: one, the strength of the product portfolio. As <UNK> indicated, we're now selling more and more solutions at the back of our Enterprise Asset Intelligence strategy. So strength of the portfolio would be first. Second is also the focus of the Enterprise on maximizing productivity. We have ---+ the DNA of the company is to improve cost management quarter-after-quarter and you see that happening in the P&L. And third, we pay special attention to run rate margin. Joe and his team are very careful about how we price our portfolio. And you see that also happening ---+ materializing in the gross margin performance. Yes. So as part of preparing for the ERP cutover, which happened at the end of April, we worked with our distribution partners to ensure that they were appropriately stocked before that outage. And that basically translated into us working with them to make sure that they've raised orders on us earlier, but not shipping. We designed these programs very carefully to have no impact or minimal impact on Q1. So the ---+ so we entered Q2 with more backlog in order so we could ship early in the first ---+ second quarter to cover the period of 10 days or so where we were ---+ when the ERP system was down. So ---+ but the intent was clearly to make sure that we minimized any impact on the first quarter. And if you look at the outlook for the second quarter, I think ---+ it seems like that we feel ---+ we feel we've been able to achieve that objective without distorting Q2 based on any of this. Nothing specific. I'm going to state the obvious, but as <UNK> indicated, our priority #1 is to reduce our debt burden. We want to achieve our objective of repaying $300 million of debt this year. We are on track for that. Managing for cash is a focus across the enterprise. We have a cross-functional team working on all the elements of cash flow management and you see that happening at the moment. I would say lower. So you should expect interest charge to decrease as we go through the year, as we reduce our debt burden. Yes, I wonder if you could talk about the performance of the manufacturing vertical in the quarter and if you're seeing any signs of pickup there. Yes, so manufacturing is a vertical we've been participating for a long time and was one of the real strengths for the original Zebra business. We are seeing visibility and mobility solutions being a driver for manufacturing. Some of the things we've been doing here to drive new innovative solutions, it will be around this Network Connect solution that we demonstrated at ProMat to get ---+ facilitate or make it as easy as possible for customers or enterprises to incorporate printing and scanning into their workflows and into their IT ecosystems. And we're also working hard to expand the route delivery business. That's a big part of our manufacturing, of actually working with manufacturers to get their products delivered to, if it could be restaurants or distribution centers and other things. So we see manufacturing to continue to be a good vertical for us, not as high growth maybe as health care, but is still a good growth business for us. And you talked about some expectations for a moderation of organic growth in the second half of the year. Is that just due to the prior comparisons or are you seeing any reduction of larger budgets in the pipeline. So the first quarter, I think we had a particularly, strong pipeline of large deals, to some degree, fueled by some of our new products like the TC51. So we wouldn't expect to be able to maintain that high level of that cadence for kind of large project business. So and then second half also has tougher compares. So we would expect that the growth rate in the second half will moderate a bit from the first half. And then, finally, I think you mentioned the expectations are for the gross margin to be, I think you said flat to slightly down year-over-year in the second quarter. Wondered why you are expecting that, that you would not see gross margin expansion year-over-year in the second quarter. Yes, I ---+ we believe that the margin for Q2 is expected to be slight to slightly higher. Yes, and again, a few reasons for that. One is we're working on productivity initiatives, as I mentioned earlier. And two, we have a very strong portfolio of products and solutions and that allows us to compete on variable, which is different than price. Yes. So I'll start and then I'll ask Joe <UNK> to add some comments at the end also. But yes, retail, we had a very strong portfolio of products for retail overall. We are very much focused on driving our One Zebra into retail too, and so it's not like we're looking to really just lead with one product. We want to make sure that we have our mobile computers, our scanners, our printers in with customers, and I think our ability to cross-sell and upsell has been improved over the last few years here. But some of the newer things that are having ---+ resonating or driving a lot of the larger deals, it tends to be the mobile computers, as ---+ so like the TC51 that we launched in Q4 of last year, that's used in a multiple different use cases. But omni-channel enablement is certainly one. As ---+ if you think of what has to happen within a retail facility in order for them to execute on an omni-channel strategy, they have to have much greater use of technology to be able to do those tasks. So that's ---+ will be one of the newer solutions that are having a lot of traction. But if you look into the future, I would highlight SmartLens, or SmartSense as we called it earlier but we renamed it SmartLens, as one that we think has a great opportunity, and certainly is resonating very well with our customers. We have a great pipeline of interested retailers who want to do pilots for that. But that's a solution that really helps to drive much greater visibility into inventory, tracking assets in the retail facility, both people, both customers and sales associates. So it can drive a great ROI. So that will be, I guess, my 2 cents, and Joe, you can add a little bit to that. Well, building on what you said, I think there's 3 areas in retail where both the business processes and the technology innovation are coming together. One is the front of the store, where we're enabling empowerment for the associates to interact more with customers. The second is the warehouse, where we're driving a lot of improved productivity. And the third is really the drive towards omni-channel fulfillment that we see in retail. And in all of those, you can see what <UNK> was talking about, the mobile computers and scanners and printers, the more traditional products are enabling each of those 3 processes and that's where also a lot of that Android migration we talked a lot about, that's where a lot of that is happening today. And then, in the future, all of the retailers are looking forward to deploying some of our new technologies. The RFID technology, which included SmartLens, is one of the future technologies. In the warehouse, it would be technologies like augmented reality that we're working on and bringing to market. So that would be, I think, a good way to overview where we're making an impact in retail. Yes, I'll start and have Joe add some comments also. But I'd say, across all our verticals we are seeing our ability to engage with executive conversations about the longer-term vision of where we're going and how our new types of solution can help our customers address some specific problems areas or business opportunities for them. Retail is a great example, where we meet with ---+ regularly meet with a number of CIOs and kind of the executive leadership teams of retailers to kind of brainstorm together about what their biggest business issues are and how we could help apply technology to solve some of those. But these conversations are meant to be additive, so by no means are we looking to, in any way, diminish or de-emphasize the conversations we have had over time with people who are in the operations areas or IT areas or whatever they might be within our customers business. But we just want to make sure we can cover the entire organization better and make sure that we can be better aligned on the business issues that are top priority for our customers and make sure we can align our road maps to that. Joe. Yes, I would say the area in which we continue to do a business at maybe the conventional levels with the organization, our large run rate business, which is quite healthy, continues to operate smoothly with all of the relationships that we have had in place traditionally. Where we have [quant] leveled our relationships significantly, I would say is particularly around 2 areas. One is, some of these large deals, in particular, as customers make a transition to Android, those deals are large enough that they ---+ and transformational enough for many of the customers that they bring us to the attention of a senior level of management and we have those conversations there and build relationships out of that. And then the second one is, where we talk about solutions like SmartLens, we are always talking about business cases. We're talking about ROI and we're having conversations with business level decision-makers at a senior level. Those are the 2 cases. So the implementation of the ERP is now creating the conditions for us to drive productivity further now. As I said earlier, that's not new at Zebra. We have could show off improving efficiencies. We did that before the acquisition. We would do that as the acquisition is finalized. And we have the opportunity to improve the values, ratios of the P&L, so gross margin, but also OpEx. And for that reason, we feel confident about the EBITDA margin range we gave for the year of about 18% to 19%, despite currency headwinds. Thank you all for joining the call today. Have a great day.

2017_ZBRA

2015

DLR

DLR #Hey <UNK>, it's <UNK> here. We literally closed the transaction October 9, so we've gotten preliminary readouts on the numbers but obviously we haven't had our team go through and scrub all of the financials and get to a comfort level where we want to tell the public markets where we are coming out. Preliminary review is that they are on track from a revenue and EBITDA standpoint. Nothing is changing with our expectations for underwriting for 2016 where we're pacing. We did commence, literally in conjunction with the closing, we commenced the execution of our synergy plan. We had a handful of executives depart on that day. We entered into transitional agreements with a handful of executives throughout the end of the year roughly. And we've commenced on that rest of the expense plan, which we expect to be done with and deliver on those synergies before the end of the year. That leads me to your second question. NAREIT definition doesn't add back the transaction expenses. So we will have transaction expenses associated with Telx including severance that will run through the P&L in the fourth quarter. I think most of them will be done in the fourth quarter. The large majority of it. Yes that's basically timing, Vin. The generators are a leading indicator and we would fully expect that the CapEx guidance will increase next year. This is <UNK>. Before you ask your second question, it's just a timing thing when you release to shelf, when you spend the money to construct. We basically released to shelf a little bit later so the bulk of dollars are going to bleed into next year versus this fiscal year. I think it will be closer to the high end of what we put out in investor day, plus or minus $50 million. I don't think so. I mean we are signing a lot of leases right now for space that doesn't exist. So I think you're going to see a decent amount of pre-leasing percentage on everything that we develop next year. So the table on page 10 ---+ all of the assumptions from the slightly positive renewals down to timing on the debt are all standalone and do not include Telx at all. So you don't see $1.9 billion acquisition, you don't see the $250 million preferred, you don't see the $714 million of equity, nor the $950 million of bonds. We are factoring the impact of Telx in our end results here. So we think we will achieve this core FFO per share including Telx for 2.5 months in the results. But the financings do not include it. We've completed $500 million of debt this year it was a green bond. We are still evaluating the potential Euro bond before the end of the year. Now there's only so many weeks to the end of the year so that may roll into next year. <UNK>, the reason it's not up higher is that we are factoring a couple of pennies maybe up to a nickel potential dilution from Telx. For the fourth quarter. That's not for 2016. Remember we literally closed on the 9th. Our assumptions for Telx 2016 include synergies being executed. We're working through that plan but those individuals are still on the books. We have not consolidated our office space and haven't achieved some of those expenses synergies. And that doesn't include some of the underwritten growth so there is some dilution, a couple of pennies, from Telx that brings down that high end. Does that make sense. I hope we don't have less take up of the pre-stabilized stuff. That stuff has already kind of ---+ I mean it's already staying in that rate so it should be easier to attack then from a leasing standpoint. And if we're very focused on that in our sales discussions in our [vestment committee]. I'm just saying that 2.5 months is a very low time from sign to commencement. And it feels like from looking at the business over a longer time period when you don't have lots of standing finished inventory, six months is a closer amount to a regular time period. I think <UNK> wants to jump in and give a little more color as well. <UNK>, thanks for asking a question to <UNK> then made him give me a curse look. Our focus on the pre-stabilized space remains intent and I would say laser focused as we've been saying around the table. And the history of the folks in my organization are such that pre-stabilized space has become a pretty profitable target for us. So we're going to keep focused on it. So <UNK>, I think your phone may have been on mute for the first second when you chatted so maybe just make sure we answer your full question. On the mark-to-market piece two examples are northern New Jersey where we obviously have a heavy concentration of financial services. A lot of activity that would happen on the backs of the financial crisis where it was a very tight supply market and we delivered and signed pretty great leases. In that tight market some of those leases have rolled down historically and there's onesy, twosies in that market to come. Another example is in Phoenix, off the top of my head, where we bought a portfolio and when we bought the portfolio at the time it had above market lease; we underwrote that. We factored that into what we paid the seller of the portfolio. And there is a lease or two in that market from that portfolio acquisition that will come through in the next year or two and roll down. And <UNK>, this is <UNK>, to answer your question on big cloud platforms and driving connections. That's exactly the strategy that we have been looking at executing before the Telx acquisition, but the Telx acquisition just makes it that much more crisp. We've been having conversations <UNK> and I have been having conversations with most of our major customers and all of the major cloud providers in the space. And very specifically we've started to see an interest on their side to not just land the large compute, cloud compute loads in our facility, which we've become expert at, but also making sure that there is available co-location space right next to that at extremely low latency and providing some direct connect facilities so that they can connect securely as well as with low latency. So we're seeing increased demand not just for the large cloud workloads to continue to land in our space, but to have those enterprise clients land right next to them in co-location space. In fact I'm proud to announce that just late last night we were able to land another major cloud provider in our Chicago facility and the conversations have began on just that structure. We've only ordered the generators, <UNK>, because we have clear visibility into the demand, which is to say that <UNK>'s team has been busy signing leases. A decent amount of which has occurred at the end of the quarter so it's October business rather than September business. Perfectly correlated. <UNK>, so we're still going through budgets for next year to give you the most up-to-date data. I mean we are looking at the numbers it looks like it's around flat across the entire portfolio. We're trying to push it into the positive territory. But it's these one-off exceptions which have reasons to it, not due to other anything other than being signed at peak rents or something we underwrote that are driving the down piece of it. So you're going to get a full picture when we put out our guidance at the beginning of next year. Sure <UNK>, this is <UNK>. So out of the gates what we've said before and what we continue to plan to deliver is essentially $148 million of EBITDA from the 20 Telx locations, $15 million of expense synergies, $10 million of it roughly flowing through the P&L. We expect to meet or outperform in all of those metrics. Capital intensity, recurring CapEx associated with that 2016 plan is 20% of that EBITDA, there is a little bit more of expansion CapEx outside of that. But obviously the expansion CapEx won't have a massive EBITDA contribution in 2016. Anything beyond that we view as a revenue synergy which we've been doing a lot of work towards and continue to develop throughout 2016 but we think it will be a small contributor to 2016. And those are the examples we've outlined before and some of which on this call, be it bringing Telx to an Ashburn, [domestically] expanding their presence in some of our Internet gateways. [Tethering] in certain assets, we're eventually bringing the Telx product of co-location and connection into our international campuses such as a Singapore or London. But I would say that's a more ---+ we'll be doing a whole lot of work on that in the next 12 to 18 months, but I don't think you'll see a ton of capital intensity or a ton of EBITDA contribution during that time period. Thank you, Denise. I like to wrap up our call today by recapping our third quarter highlights as outlined here on page 16. First and foremost we picked up another 10 basis points of improvement in our ROIC during the third quarter bringing the total improvements since the fourth quarter of 2013 to 130 basis points. I would also like to point out the 10 basis point improvement during the third quarter excludes the one-time property tax refund and the 130 basis points since year end 2013 likewise excludes the impairment charge we booked during the fourth quarter of 2014. These items would've added another 10 basis points each to the total. As you know, we recently closed on the acquisition of Telx, which we believe will be a truly transformational transaction for our Company. We beat third quarter consensus estimates by $0.05 and we raised guidance for core FFO per share from the prior range of $5.05 to $5.15 up to $5.12 to $5.18. In short, we continue to execute on our top priorities. I would like to thank the incredibly talented team of Digital Realty employees around the world who were responsible for delivering yet another solid quarter. Many of whom have been working around the clock on the Telx acquisition and integration. That concludes our third quarter call. Thank you all for joining us.

2015_DLR

2017

VSH

VSH #So first of all as you can imagine, we're closely monitoring the discussions with the US Congress and the American President. But of course nothing is really definitive yet. So we would continue to monitor that in that and if became favorable for us we would certainly take advantage of it. At the moment what I had said in the past is that we were repatriating, it was going to take us three to five years to bring that cash back to America. So this year we bought back approximately $50 million based on the announcement of last year. And on the share buybacks, just one moment. $23 million approximately was used for share buyback. As a matter of fact, you're absolutely right. We see supply shortages, even in certain places, especially in semiconductors. There are many reasons for it, I guess, but as a matter of fact, we see exactly that. We have seen quite strong orders especially in the fourth quarter, but more so in January. So it's clear it's true, I cannot see the pipeline replenishing at this point. There's a lot of request for products. 23%, now you have the real number. First of all, the biggest effect vis-a-vis our expectations came from two points. It was the variable margin that was disappointing and this comes from quite a few but adding up inefficiencies in quite a few divisions, which have to do with lower volume. You've seen our inventory decrease in the fourth quarter which is mainly in MOSFET but also happened in a few other segments of the business. And then of course also we had a less favorable product mix. We saw it in a way coming and I commented on it in the last telephone conference, but it turned out to be more severe this change to a more normal mixture. Remember in quarter three we had an excellent mix and it normalized more than we thought. This was the main reason. Then of course we had inventory decline, inventory reduction which was not planned. We had supply problems from really one of our suppliers, didn't help us very much. And then of course we had the sales came in slightly below the consensus you have seen, which was our expectation, also. These were the three major reasons. Yes. About 1.3 in January. 1.3. Chinese year is every year, that means it was really strong, really strong and there are some shortages of supply in the market mainly at semiconductors. So the currently approved program by our Board of Directors runs until May of 2017. And of course they would have to evaluate the situation and determine if they would like to prolong that. I think it's both. It's really across the board for Vishay, indeed we had successes, finally I may say after trying for quite a few years, measurable successes in the passives which is mainly industrial, some automotive but mainly, both, industrial and automotive. Otherwise this broad demand for semiconductors which we just have seen in the recent ---+ weeks, really weeks, has to do with certain shortages which I don't want to comment on. This came as a surprise to us and I would call this a very temporary situation as I see it. <UNK>, I would hope so, but on the other hand, it's as I said, we regard this shortage as a temporary effect. Plus most of the OEM contracts have been negotiated and we keep contracts obviously. As a matter of fact of course, if such a supply shortage would remain in place for say half a year or so then inevitably the whole market will see a less steep price decline, a less of a price decline for sure, always been the case. But it takes some consistency before we see it. <UNK>, we historically grew and we have been talking many years. We grew in the automotive industry and in the industrial industry quite well over years. I do not believe that we need to further acquisition but I don't want to exclude it either. It depends, it's an opportunistic business, so if something came about, sensors would for sure be an area where we would look to. If there was a reasonable acquisition attempt, but I'm talking about acquisition. I believe in organic growth which we will show again already this year. And it goes always to the same areas. It goes to automotive, and it goes to industrial, which are our good markets, our traditional markets anyway, and we do have a good position there. So maybe I start first with the SG&A. So you're correct. We guided to $95 million, which is slightly up compared to quarter four because we had a gain on the disposal of some of the remaining fixed assets when we closed on our in wafer fab in California, it does repeat in Q1 nor in 2016 by nature. So the estimate for the full year is only $370 million. It's not a super increase in that sense. And quarter one is the highest SG&A of the four quarters for 2017. Yes. Correct. Sorry for that. It didn't help the gross margin item, obviously. Sorry for that, I interrupted. Realistically speaking we will still be handicapped to a degree in the first quarter, especially in MOSFETs, only, it's just in MOSFETs we're talking. The supplier improves, improves steadily. But you remember, a part of the sales which we made in the fourth quarter was based on stock reduction, inventory reduction. And this inventory is gone, so as a matter of fact despite the fact the supplier supplies better now and hopefully is back to normal foreseeably, it will take a little time until these constraints will over and will lead to higher sales. I still see, as was unexpected I must say that, this delivery problems, they were unexpected, but for the moment they are improving but in quarter one we still are handicapped. No, it's not across the board. Is not in automotive, but it's all the more consumer-oriented product. We have at the moment a backlog increases much. Yes, we do. Yes, exactly. Thank you for your interest in Vishay Intertechnology. This concludes our Q4 call.

2017_VSH

2015

UAL

UAL #This is <UNK>. I'll talk a little bit about that. Pilot availability clearly, particularly for the 50-seat operation, is an issue for us which does indeed affect the ability of our Express operators to fly the schedule. And moreover, the 50-seat product is something that is not as good a product as the 76-seaters are. For example, the new Embraer 175s that are in the market are a spectacular product. It's a very attractive airplane, very comfortable airplane. It has Wi-Fi. It has putting first-class food up front. It has better ancillary revenue opportunities of seats, and it's a very good product. But the shift of pilots, or reduction in the availability of pilots for smaller airplanes, is clearly affecting us. As it is affecting all of our competitors who operate this aircraft. It's fair to assume that, <UNK>. A lot depends upon on earnings. But to your point, we tend to build a lot more cash in the first and second quarters. And we expect very strong cash generation there. We have a goal, though, of being free cash flow positive in every quarter. And given the earnings profile of this business, that's not an unreasonable assumption. Again, it depends upon your earnings assumption. But yes, potentially. Well, I think it's reasonable to assume that as we conclude our existing share repurchase program that we'll be in the market with something additional. Whether it be a share repurchase dividend, whatever we think is the best way to return cash to shareholders at that point in time. Thank you. <UNK>rey, this is <UNK>. The 747 is something that we do intend to keep for a few more years. We have a couple coming out of our fleet in the near future. But some of these, we've made some improvements to the operating reliability of the aircraft. And we could expect to keep them for another few years. They have another sort of big maintenance event in the 2020 timeframe. That'll be another decision point for us. Whether we want to extend them further at that point or go ahead and retire them. We have not disclosed which model we substituted. And, we might not elaborate on the discount. (laughter) That's something we'd like to keep us between us and Boeing. You bet. We're still a big believer in the 787. It's a great aircraft in our fleet today. The 777-300ER is also a very good aircraft and happens to have the best reliability of any plane in the sky today. We have an opportunity to put that in some markets that it's a better aircraft than with the 787 or some of our other existing planes out there today. So this is all part of normal fleet planning that we do from time to time. And there's nothing to read into this about the 787. I won't give you a specific route. But clearly, it integrates well with the 777 we fly out of Newark. It allows us to upgauge Newark, which has always been a strategy of ours given the constraints there and the demand that we're seeing in New York with the hub and how it's working in New York. So that's a great aircraft to upgauge in New York with that 777-300. We haven't disclosed what the fourth quarter in terms of international in total. We are bringing our Atlantic capacity to flat to down year over year. Again, for us, we've been very much focused on capacity discipline. So our Japan capacity, for instance, in the first quarter was down 11%. It's already planned to be down 7% in the fourth quarter. So we've been ahead of this as we create the flexibility in our fleet plan to match capacity and demand. It won't be this year. Okay, with that, we're out of time and we'll conclude. Thanks to all of you on the call for joining us today. Please call Human Relations for your further questions. We look forward to talking to you next quarter. Goodbye.

2015_UAL

2016

OMI

OMI #Good morning, ladies and gentlemen. Welcome to the Owens & Minor first-quarter 2016 financial results conference call. My name is Candace, and I will be your operator for today. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Ms. <UNK> <UNK>. Please go ahead. Thank you, operator. Good morning everyone, and welcome to the Owens & Minor first-quarter 2016 earnings call. I'm <UNK> <UNK>, and on behalf of the team I'd like to read a Safe Harbor statement before we begin. Our comments today will be focused on financial results for the first quarter 2016, which are included in our press release. In our discussion today we will reference certain non-GAAP financial measures. Information about these measures and reconciliations to GAAP financial measures are included in our press release and in the supplemental information posted on our website. In the course of our discussion today we may make forward-looking statements. These statements are subject to risks and uncertainty that could cause actual results to differ materially from those projected. Please see the our press release and our SEC filings for a full discussion of these risk factors. Participating on our call this morning are <UNK> <UNK>, our President and CEO; <UNK> <UNK>, EVP and Chief Financial Officer, and President of International; and Nick Pace, our General Counsel. Now I'd like to turn the call over to <UNK> <UNK>, who will start things off this morning. <UNK>. Thanks, <UNK>. First let me comment on the customer loss, and then I'll get to your specific question. First, obviously we were disappointed in this decision. This was a 15-year relationship with a major customer. And their RFP process spanned a pretty long time, probably 12 to 18 months. At the same time, we had a lot of change going on with me coming onto the business and building a new team. It was a long process. Quite frankly, I'm not sure we got to put our best foot forward in this process. But we respect their decision and we're going to move on. Let me address your specific question. I think our value proposition is focused on attacking the enormous complexity in the healthcare value system through our services, through technology and through the processes that we bring to bear. So we believe in that pitch. We see it resonating with our customers. And we actually renewed new contracts and won new business with that value proposition. So I think to answer your question specifically, we think this is more of a one-customer issue. And we think we are well positioned to attack the same complexity that was talked about. Let me put it in perspective first. Most of our customer contracts are 3- to 5-year contracts. So any point in time we have 20% to 30% of our contracts up for renewal. There is nothing new about that. I would say we don't see anything abnormal. The healthcare environment remains a competitive environment, especially for large customers. Everybody wants to go after large customers. It is kind of business as usual. But it is a competitive environment. <UNK>, hi. This is <UNK>. We don't believe this is going to have any direct impact on any of our GPOs. Most of those volume-related issues are customer-specific in terms of how they get their pricing and the various discounts. As I'm sure many of you know, we have our own GPO renewal cycle potentially kicking off towards the end of this year. Certainly with MedAssets being acquired, that may be postponed, depending where Vizient ends up and how they want to look at their aggregated relationships. We're pretty comfortable that this isn't going to impact our relationships with the GPOs going forward. Sure. I think one of the reasons that we moved to the new segment orientation is what we characterized in our prepared remarks, is this is how we are operating our business going forward. Certainly at Investor Day when we characterized our initiatives, we talked about the Domestic business and the initiatives there. And we looked at sort of the International segment and the CPS segment as opportunities to grow the business. We don't provide detail at a gross profit margin level, but certainly from an operating margin level we would expect that business to be a contributor to our growth. Obviously when we acquired these assets it was a higher margin business, and certainly accretive to our overall platform. And as we showed in this quarter the growth of the CPS business year over year, and putting this business together with sort of Medical Action, ArcRoyal and our sourcing business, we think this is an opportunity to contribute to improving profitability and contributing to growth over the next couple of years. Hi, <UNK>. This is <UNK> again. I wouldn't characterize the nature of the CPS business and our kitting, whether it is over in Europe or here in the United States, as really seasonal. I think it is very contract-oriented. The contracts are similar to our distribution contracts. They usually run anywhere from 2 to 5 years. So, I think it is fairly consistent. The aspect of what we do in Europe and some of the business that we do on a fee-for-service basis directly for the manufacturer maybe a little bit more seasonal than what we'd characterize as our provider-based business. But I think there's a certain amount of stability to the revenue streams moving forward here On the portion of the business that is related to sourcing, the sourcing aspect maybe slightly seasonal in terms of managing, because we source not only for the CPS business, but we are sourcing for our private-label business as well and potentially some third-party customers. So there may be a little bit of seasonality based on the product or the end market sales related to that. But overall, I think you will see this being a fairly consistent business throughout the year. One of the things I would say, <UNK>, is we are excited about this business because it is directly linked to our overall value proposition of reducing complexity. So one of the things we're excited about is bundling the CPS capabilities with other services we offer for large IDNs to attack complexity. And in some ways we think we are uniquely positioned to help bundle across manufactured products and to address points of complexity in the hospital. We haven't broken out a specific penetration rate or growth rate yet, but we anticipate this will be a contributor to growth and it will be accretive to our margins. <UNK>, that is a great question. I appreciate it, because it gives us an opportunity to give, again, a little bit of clarity around it. The first quarter historically is when we typically experience manufacturer price increases. And the performance and the contribution in this area this year was again slightly ahead of what we experienced last year. But in the time I've been here, this has been in a reasonable range, and it is typically a first-quarter event. What we were alluding to last year is there was a number of events where people had out-of-cycle price increases, and we experienced almost on a quarterly basis, some benefit from manufacturer price increases. We don't see that as being as robust this year. And again, I think the first-quarter is what I'd characterize as a fairly normal event, slightly ahead of last year. It is the remaining of ---+ the remainder of the year and the results we have last year that we were trying to provide some clarity around, that was probably not sustainable. <UNK>, again I want to be careful not to try to speak for the customer here. We're in the process, and we're still getting feedback from them. But overall, again, we feel that our value proposition is very strong. We got very good feedback from them. I think the one area that we would say our competitors have something that we don't is in the non-acute space. That is a known gap and we are working hard to address that. So if there was one factor that I would say was a gap, it would be that. And we are working hard to address that. And again, we had a 15-year relationship with this customer. And it was a long, lengthy process. I will leave it at that. I don't want to speak for them. And we're still in the process of getting that feedback. But specifically the one area, post-acute is a known gap for us and we're working to address it. <UNK>, I think whenever you lose a large customer you sort of have to sit back and look at how it impacts the network and your fixed cost overhead. I think what we wanted to impart on our investors was, on an annualized basis when you just separate the revenue and gross margin from the business, there are some variable costs that we know that we can take out pretty directly, and what is the net result that we are really going to have to address. About that's really what the $0.20 to $0.25 represents if you just pulled out of the business. I think what we've tried to communicate is with the transformational agenda and the performance in the first quarter, we are well on our way to improving the overall productivity of the Company. I think we have demonstrated our ability to manage and transition large customers with what we did last year in the fourth quarter and outperforming our fourth-quarter expectations as evidence that we can manage these types of transitions fairly aggressively in a fairly short amount of time. But again, we wanted to give folks the deep impact and some of the headwinds that we would have and we're going to have to address going forward. We feel pretty confident, and we have the whole organization mobilized to address the mitigation actions that we're going to take, and we will keep you updated over the course of the next couple of quarters of how we are doing that. We're still looking at the timing of the transitions. And again, as we indicated, most of this impact will probably fall in 2017. But I'm sure we're going to be preparing for this transition in 2016. And we will probably have some costs associated with that. But again right now I thought it was ---+ our team felt strongly that it was most important to give you what the ---+ some compartmentalized numbers when you just look at taking out the revenue and the contribution margin, and what is left. So the $0.20 to $0.25 is that. And again, that is more ---+ we feel most of that will fall in 2017. But we feel pretty confident that through the activities that we have done and demonstrated the capability around, plus the activity with <UNK> coming onboard, about that significantly improving productivity, that we'll be able to manage through this. I would like to take this, your question, and give you a little bit more color on some forward statements that we've provided. At Investor Day we talked about 8% to 10% earnings per share growth and having that come into play in 2017 and beyond. While this may a bit of a headwind associated with that, we're still deeply committed to driving sustained earnings per share growth and getting to that 8% to 10% growth over the course of the next couple of years. I think we will continue to be very well-positioned to manage this transition, as <UNK> indicated. We're disappointed in the loss in any long-term relationship that we have had. But I think over the 134 years we've demonstrated that we can manage through these things and come out stronger, and really be positioned to continue to attract and build new business. And probably the most disappointing aspect is we had a really solid first quarter. We retained a tremendous amount of new business. We grew our CPS business and International. And while this is a bit of a headwind, we're operating on all cylinders going ahead. Thanks, <UNK>. Appreciate that. <UNK>, I think it is more of the later. And having come out of that industry, I think what we are trying to do is just say, look, these are not something you can forecast with any great regularity. I think the device and medical technology industry is taking cues from the pharma business, and on a product or product category considering out-of-cycle price increases with much more regularity. But as you know, simply just taking price increases doesn't automatically give us the benefit of a price increase. It is [a little] more complicated for us and it depends on what our inventory levels are and a variety of other things. So I think out of caution what we're telling people is, look, this is probably changing in the industry. But we had a fairly significant amount of this in 2015, and we don't think that amount will repeat itself in 2016. But we have told people that we think this is a trend that is more likely to continue. The amount of benefit we receive is just something that we can't predict. Sure. I think there is a couple of very specific reasons for that. And it is really, I think, going to help as you begin to see the segment reporting. International revenue was down. That has a direct impact to gross profit, given that is more a fee-for-service business. And the CPS business was down. And we've had a slight degradation. And as everybody knows, provider margins continue to be under some marginal pressure. So those are the two or three things that are continuing to impact it. But the biggest year-over-year impact was just the decline in the International business and our CPS business. What I would characterize is at Investor Day we gave guidance to 12% to 12.5%. And we're still pretty comfortable with that range. And that implied that we had a lot of good cost management as well this year. So I think while we're slightly on the lower end of our range, we're still comfortably in that range for the full year. So I don't think this is that outside of what we were expecting. Thanks <UNK>. It was not. But obviously that is going to be something that I'm sure was in consideration for the future. Our understanding is that is a future event but it was not part of this bid. We have a strategy process underway right now. And I'm not ruling out anything, but I would say pharma would be a bit of a stretch for us right now in the traditional sense. What I do see, though, is as we think about how we attack complexity in large systems, there are very innovative services and solutions that we can provide in and around pharma, some of which are in place today, and I am excited about them. But in the traditional sense of pharma, probably a long putt in our strategy. <UNK> I will answer that. Yes, as part of the recasting of our segments, when we acquired our more manufacturing-oriented resources in terms of Medical Action and ArcRoyal, depreciation and amortization becomes part of cost of goods sold. So as we move forward it was certainly in those numbers in the right place last year, but the segment changes you're probably getting a little bit more visibility into that. But that did not have an impact on gross profit margin. It was appropriately categorized and classified in our income statement last year. But we have recast the numbers a little bit, just to give people some greater visibility. So when you look at D&A, you have to not just look at what is in the income statement and the consolidated numbers, you have got to go to the cash flow statement to see the entire aggregated depreciation and amortization. We have been working on improving performance over in our International segment for a number of years, and I think this is a culmination of a lot of great work with the team over in Europe and what they have done. As many of you know, we talked a lot last year about the transition of a number of customers, and particularly one large customer in the UK that was leaving, transition of a customer from a buy/sell to a more fee-for-service. And as we put in price increases last year, really getting much more to a market-oriented pricing, some customers exiting as well, to really put this in the business to return to growth and as we look forward. So year over year, I think the revenue is down, it's at $4.3 million or so when you look at sort of an apples-to-apples basis. It is probably a reasonable place, but we would expect that business to start growing as we move forward. And in terms of the operating income, the European business is probably a little bit more seasonal because of the nature of the vaccine business that we participate in and the number of countries over there. So where we get a third- and fourth-quarter strength, typically our weakest quarter is the first quarter. So you will see an improvement throughout the year as we move forward. The direct answer is, I wouldn't look at the first quarter as a run rate because there are just a lot of things going on over there. It wasn't that large, but it was a fairly significant customer. They exited in July of last year. So we've got one more quarter of having us to say the exit of the UK customer. We have ---+ the first one is scheduled to do that, although with MedAssets and Novation getting together, there is some discussion about whether or not they will go just on the Novation schedule, which is later. We're still anticipating that the MedAssets side will start this year. But there's a possibility that will be delayed and just combined with the Novation and just do it is a Vizient contract. Thank you. Thank you, Candace. Thank you for participating in today's call. We are pleased with our results in the first quarter with solid revenue growth and adjusted earnings of $0.50 per share. Thank you again for joining us today. And we look forward to seeing you at our upcoming investor events.

2016_OMI

2017

CPSI

CPSI #Yes, <UNK>, this is <UNK>. I think the cash flow that we have seen in the last two quarters is indicative of what the new normal is. Naturally, as we can grow revenue during 2017 we should see that improve modestly. But the past two quarters are more indicative of what we expect. The first half of the year, the big story and cash flows for the first six months of 2016 was really, call it a ballpark $10 million investment of working capital related to the acquisition. That was a one-time event. With that clearly in the rearview mirror, the past six months are much more indicative of what we expect going forward. I just want to thank everyone for their time today and being on the call, and I hope everyone has a great Friday and a great weekend. Thank you.

2017_CPSI

2018

WRB

WRB #I'll give you what clarity I can. So our expectation is by the end of the first quarter where we will be in 2 more states. Some of that is a little bit out of our control, quite frankly, because we are at the mercy of insurance departments and their approvals. So we haven't come out and said exactly what those states are. But the gang that's running that business they have a few in the hopper, and I think there are 2 at the top of the list. But I don't know how much we've communicated it. What I would tell you is, we are going to markets that you expect we would go to markets, markets that are not as rich, if you will, and our target market are probably not markets that we are making as much of a priority. I'm going to stick to my answer before. And we will make sure that when we announce it, you're on the distribution. The new money rate on that we are seeing now is at about 3%. Yes, that's correct. And it's shorter duration, also don't forget. So <UNK>, I would suggest that that's a conversation for you to have with them. I can't square it, so if they connect the dots for you, maybe you could pass it on to me particularly to my father, he would be very interested. But again, I just look at the macro and I look at their economic model. I look at economic model that others have similar to ours. I look at what's changing. And if people want to be able to remain where they are, it just doesn't work. So maybe there's something that I'm missing. And again, I certainly don't want to be rude or disrespectful to any of our competitors outside of the United States. We have a lot of time for them. But when I look at the situation as a case study, I don't understand how they would reach that conclusion. So maybe you can figure it out and let us know. So as far as that marketplace goes, I think that the #1 barrier to entry is expertise. Unfortunately, that barrier is not always recognized by pools of capital and they just step in and oftentimes, it takes a little while but that ends in tears and then they respond accordingly. So ---+ and we've seen that happen. The good news about this line of business is it's relatively short tail, so people who zig when they should zag it, it comes into focus pretty quickly. As it relates to the marketplace overall, I think one obviously needs to be very cognizant of what's going on with loss trend. But generally speaking, from our perspective, we've been in the business for many years now. We're very pleased with our participation. And while it's competitive market like every market we operate in, we are not particularly put off at the moment by the level of competition. The answer is that any time an account moves from one place to another, there is a bit of friction, if you will. But I wouldn't want to lead you to the belief that, that is a significant barrier. Ultimately, it really varies very much by state and by regulator. Clearly, there are some insurance departments and state rating bureaus that are very focused on the idea of a healthy and sound workers comp marketplace for their state, and understand the implications on their economy in their state. I think there are others that may take a shorter-term view. When the day is all done, we look at a marketplace, we look at exposure, we think about what an appropriate rate is. If we can get that rate, we'll write the business. If not, we're not going to write it. The answer is that we are in a position to provide continuity to a marketplace that we think make sense. Ultimately, if the marketplace moves away from what we think is an appropriate rate, customers are certainly able to find an alternative perhaps at a different rate. But our goal, as we have explained and demonstrated to stakeholders, is to provide a continuity for customers and ultimately we think that's part of our value proposition. I just had a quick follow-up. I wanted to make sure I understood the comment on the energy portfolio. Could you just repeat it one more times. Sure. Let me make sure this is what you think you heard. We may have made a couple of comments on the energy portfolio. Long story short, we bumped the energy portfolio on a quarterly lag. As a result of that, what you saw come through in the fourth quarter was actually the results from the energy portfolio in the third quarter. So when you look to the first quarter results, those will actually be a reflection of what happened in the fourth quarter. So to the extent that you want to try and anticipate what will happen in the quarter, if you look at the prior quarter, that will give you a sense. Okay. And maybe just one for Rich real quick on the accounting change you had mentioned. I think that's just the mark-to-market changes that you're talking about. And if so, will that just cause a bit more volatility in the numbers. Yes, they will. So as you know right now we mark-to-market the equities as well as our fixed income portfolio for the most parts through equity. And so this accounting change is going to apply to the ---+ obviously, to everyone. So equities will now go through P&L and we'll weigh up that variability. But it is only as it relates to certain equities, just to be clear. So ---+ and that's been fund and so our equity accounted for, so those would not be mark-to-market other than if the underlying fund to market is positioned to market. Right, right. And will you just lump these mark-to-market changes into your capital gains line or will it have a separate line item. There are special disclosures that we'll need to follow under the accounting rules, so there will be change with regards to that. But you'll see the delineation. Okay. Well, thank you all for calling in. Couple of quick sound bites before you run off and start checking out other releases. From our perspective, our strategy around risk-adjusted return and focusing on volatility, we were able to execute that, again, second quarter in a row. I think that was demonstrated in the results. In addition to that, we are optimistic quite frankly about market conditions for parts of the market that we are meaningfully players in. I think we touched on that as far as rate as well as some of the underwriting actions that we have taken. In addition to that, we continue to be very enthusiastic about what has happened on the tax front and ultimately, what that means for our economic model. And finally, of course, the comments earlier about a rising interest rate environment and the leverage for us and our economic model, in particular, given the significance of investment income as a result of our large reserve base. So by and large, we are very enthusiastic about '18. We think '18 is going to be good year for us. And quite frankly, it is going to be an opportunity for us to set the table for what will be a good '19 as well. Thank you all for calling in and we will speak with you next quarter. Good night.

2018_WRB

2016

ARR

ARR #Leverage could come down if we are able to increase our exposure to the Non-Agency side a little bit, <UNK>, because as I had said earlier to Doug <UNK>, we look at the CRT bonds as about 4 times to 5 times to 1 time versus our Agency assets depending on which Agency assets they are so say it's 4 times. So if you were to buy $100 million CRTs, that would mean that would be $400 million less Agency bonds so that would reduce leverage appropriately. And one thing that nobody's asked is why aren't you buying more CRTs. When we started buying, they were in the low 600s to high 500s. We watched the whole shenanigans from late January and February when the markets were very volatile and unstable. We started to buy not too much longer after that when we announced the JAVELIN deal. So now that the CRTs are priced inside a [4.25%], they are not as perfect for our portfolio as they might be at [5.25%]. So, our reduction of leverage will be in sole response to our exposure increase in the Non-Agency area. Complete lower balances on the Agency side, that's as simple as that. But we've kept some of our exposure in the 10-year sector as we added the Fannie 3% dollar roll. So, we're right where we want to be with our hedges, very comfortable with it. We're not hedging our CRTs or most of our Non-Agency assets, they don't need to be hedged. They are either uncapped floating or the durations as a result of that are very, very low so we don't need. So as we increase if we are able to increase our exposure to the Non-Agency assets, you would see the hedge ratio versus the entire book go down. I might focus on as an analyst what the hedge ratio is versus the Agency portfolio and so that's kind of what we do. As I just said, $7.5 billion there and you have a good portion of that hedge about 75% of it. So, that's how I would look at it. I noticed in your comments that you put out this morning, we look at it a little differently. So, what we do is we look how much of our equity is tied up in haircuts and currently 19% of our equity is tied up in haircuts for Non-Agency assets and so that's how we look at the allocation. I'm looking at the monthly Company update, what page is it. That's a really good question and page 5 is accurate and the 19% is accurate. So, the 19% reflects all of our equity and the 37% represents the equities that's tied up in haircuts and excludes the liquidity position. So at the bottom of the page you can see we have $564 million in liquidity, that 37% excludes that. So to your point and this was brought up in another private call that we had recently, I think we'll be more explicit as we present that in the future. So a good pickup, <UNK>, thank you. So, the 19% represents all of our capital and includes the function of the fact that we have a lot of liquidity sitting on the balance sheet. So, I think for modeling purposes if you want to look at our income producing assets, maybe if you look at the 37.6% might be a simpler way to model that meaning that you're excluding the liquidity function. If you want to include the liquidity function, you got to put the 19%. And really anybody in this business is going to have to look at it both ways. We consider liquidity to be just as important if not more important than the assets that we're picking in some respects because if you look at all the volatility in the markets since January 3 or January 4, without that liquidity a lot of those assets might have to have been sold. So I'm giving you two answer to your question, but I hope you can choose one that fits your perspective best and choose it. We hope to take the 19% number up toward 25%. So, that's still our goal and a lot of it depends on where spreads are in the marketplace. I was pretty explicit a couple of minutes ago about how the CRTs have come in so much. The non-performers have come in almost 100 basis points as well. So at some point, and maybe this morning might be a good time to explain that, the Agency assets levered business model 8 times actually is going to produce a little bit more than the NPLs on a levered basis if you want to lever those 3.5 times to 4 times. So, for us to get to 19% to 25% is going to be dependent on the attractiveness of the spreads in the Non-Agency environment. Buybacks always have to be part of something that we discuss at every single Board meeting and we also have monthly Board calls and it's part of every single conversation. What we're looking at right now is the following. We're including our preferreds about $1.150 billion at market cap although if there weren't great opportunities to invest in, we might be considering more heavily buying back shares. However, the investment opportunities have been really, really good recently. Our returns in the second quarter, income returns with the book values returns because we were able to find assets that offered a lot of value. So the answer is if there is no longer assets that offer great value and we're still trading at a large discount, you would look to see us buy some more shares back. I'm going to let <UNK> give you a little color on that. The one thing I'll say before I hand it over to <UNK> is we like that asset class a lot and we purchased as much as we could when spreads were wide and they've come in so darn much that they just don't make sense anymore. But <UNK>, maybe you can be a little more definitive on what the percentage of NPLs is and RPLs in the portfolio and where we stand there. Mostly BOLTs. Thank you very much for tuning into our second quarter earnings call. Please feel free if you have questions at any point in time to call <UNK>, Jim <UNK>, <UNK>, or myself at the office and we'll get back to you immediately . Thank you very much and have a good day.

2016_ARR

2015

INCY

INCY #Thank you, Diego. Good morning, and welcome to Incyte's second-quarter 2015 results conference call and webcast. The slides in today's presentation will be made available for download on the Investor section of Incyte.com after the call concludes. <UNK> <UNK>, our CEO, will begin with a few words summarizing the quarter, and then <UNK> <UNK>, who leads our US Organization, will provide a commercial update on Jakafi. <UNK> <UNK>, who is in charge of Incyte's drug development activities, will update you on our clinical portfolio, and <UNK> <UNK>, our CFO, will describe our second-quarter financial results. Then we will open up the call for Q&A, for which we will be joined by <UNK> <UNK>, our Chief Scientific Officer, and Kevin Harris, VP Global Product Strategy. On the call today, we will be discussing Jakafi, which is FDA approved for patients with intermediate or high-risk myelofibrosis, and for patients who have polycythemia vera who have had an inadequate response to, or are intolerant of, hydroxyurea. In addition, we would like to remind you that some of the statements made during the call today are forward-looking statements, including statements regarding our expectations for 2015 guidance, the commercialization of Jakafi, our development plans for Jakafi and other indications, and for other compounds in our pipeline. These forward-looking statements are subject to a number of risks and uncertainties that may cause our actual results to differ materially, including those described in our 10-Q for the quarter ended March 31, 2015, and from time to time in our other SEC documents. With that, I would now like to pass the call to <UNK> for some opening remarks. Thank you, Mike. Good morning, everyone. We have had a very successful quarter on both the commercial and the clinical development side; and as promised, today we are very pleased to include a more detailed review of the Jakafi launch to date in polycythemia vera. So, the commercialization of Jakafi continues with significant momentum, and the launch in PV has added to Jakafi's growth. Today we reported Q2 sales growth of 69% year over year, and we have raised full-year 2015 net product revenue guidance for Jakafi to a range of $560 million to $575 million from the $525 million to $565 million previously communicated. During Q2, we have also progressed as planned on the clinical front. We continue to recruit patients into the phase III Janus program and into the other solid tumor studies for both ruxolitinib and our JAK1 \u010f\u017c\u02dd39110. The PD-1 / PD-L1 combination trials with epacadostat, our IDO1 inhibitor, are all recruiting well, and the FGFR and BRD inhibitor programs are also recruiting patients. Phase III data from baricitinib was presented at the EULAR conference in June, and we also provided updates from the RESPONSE study of ruxolitinib in PV and data from the novel-novel combination of JAK1 plus PI3 Kinase Delta at ASCO. Before I close this short introduction, I want to emphasize how important and successful we believe this quarter was for Incyte. We expect the launch of Jakafi in PV to provide us with a new growth driver for the future, as our research and development team continues to rapidly broaden our product portfolio. And we also expect that our financial discipline and strength will continue to allow flexibility in our resource allocation process. I would now like to pass to <UNK> to give us details of our commercial performance in the quarter, as well as some greater insight into the progress of the launch of Jakafi in PV. Thank you, <UNK>. Good morning, everyone. I am looking forward to getting to know all of you better in the coming months, and I am also excited to begin my new role within Incyte leading our US Organization. The sales of Jakafi accelerated in the second quarter, driven by uptake of Jakafi in the treatment of patients with uncontrolled polycythemia vera, and continued growth in myelofibrosis. In the second quarter, we achieved $142 million in net sales of Jakafi. This represents a 69% increase over the same period last year, and a 23% increase over the first quarter. Demand grew by 19% quarter over quarter, and inventory remained stable. On the next few slides, we will review some of the key elements of the launch in polycythemia vera. This graph plots the total number of prescribers that are new to Jakafi in the last two years. In the first half of 2015, we can see that the PV launch has led to a jump in the number of prescribers who are new to Jakafi compared to previous periods. We have been consistently adding new prescribers for the MF indication through 2014; and since the launch in PV, this analysis reveals that the breadth of prescribers has increased. This is consistent with our expectations, because we expanded our targeting efforts to seek prescribers with high PV potential who may not be actively treating patients with myelofibrosis. On slide 9, we see a second piece of evidence that the Jakafi launch in polycythemia vera may have changed prescriber behavior. The PV launch has driven a shift in utilization of 10-milligram tablets as the starting dose. The use of 10 milligrams as the starting dose has increased from approximately 25% during 2014, which represented use in MF only, up to approximately 43% during the first half of 2015, illustrating the impact of the PV launch. As you know, there are five strengths of Jakafi tablets available, and the recommended starting dose of Jakafi for patients with polycythemia vera is 10 milligrams twice daily. Recent market research is shown in the chart on slide 10, which shows the primary reasons that physicians gave for initiating therapy with Jakafi in patients with polycythemia vera. As you can see, 80% of patients are switching from hydroxyurea to Jakafi, based on an inadequate response to hydroxyurea, which might be needed to better control hematocrit, enlarged spleen or PV-related symptoms. The remainder of patients who have initiated Jakafi are either intolerant to hydroxyurea or who have specifically requested a change to Jakafi. Patient identification has been a key area of focus for our launch efforts, as we seek to educate healthcare professionals about the subset of patients who lack full disease control. As we stated on our Q1 call, the initial wave of PV patients taking Jakafi may have had, for example, elevated hematocrit and enlarged spleen and PV-related symptoms. Our challenge, and also our opportunity, is to help educate physicians about the need to also treat those patients who have elevated hematocrit or enlarged spleen or PV-related symptoms for whom hydroxyurea was inadequate. Moving now to a measure of physician satisfaction with Jakafi, we asked physicians who have used Jakafi for their measure of satisfaction with the drug, using a scale of 1 to 7, where 1 was not satisfied at all, and 7 was extremely satisfied. As you can see, the results of our recent market research are very positive, and are reflective of the feedback we are receiving directly from both physicians and patients. We continue to focus our efforts on educating healthcare professionals on the importance of maintaining hematocrit consistently at or below 45%, and the consequences of the lack of disease control. While most physicians are aware of 45% as a target level for hematocrit, the majority of physicians interviewed are willing to tolerate levels well above 45%, as shown in the chart on the right side of slide 12. This is a key educational opportunity as we move forward. We expect to build steady and consistent momentum within the PV indication over time, as we execute our launch plan, aiming to close educational gaps, clearly position Jakafi for patients with uncontrolled polycythemia vera, increase the breadth and depth of prescribing, and reinforce positive experiences with Jakafi. Slide 13 shows data that we have shared with you before, but with our indications for MF and PV combined. We have penetrated just over one-third of addressable myelofibrosis patients within our label, and we are just starting to serve the approximately 25,000 uncontrolled polycythemia vera patients that we continue to believe are addressable within our PV indication. We expect that Jakafi has a long life cycle ahead. Recall that we have a composition-of-matter patent on ruxolitinib until 2027. We are still at the beginning of our commercialization of Jakafi, and we believe that steady and consistent growth of Jakafi in PV, combined with continued successful growth in MF, has the potential to represent a significant long-term commercial opportunity for Incyte. We are confident, even with the expected level of future commercial competition, that this long-term opportunity may result in net product revenue reaching $1.5 billion for the US Jakafi franchise in MPNs alone. In summary, the ongoing launch of Jakafi in PV has accelerated our top line by adding significantly to ongoing growth from our MF indication. I will now hand the call over to <UNK> to give us a brief update on clinical progress in the quarter. Thanks, <UNK>. Beginning with our PV data from ASCO in June, we presented follow-up results from the pivotal RESPONSE trial of ruxolitinib in patients with uncontrolled polycythemia vera. The table on the left shows that 83% of the patients were still receiving ruxolitinib at a median exposure of 111 weeks. And the right panel highlights the probability of maintaining the primary response in the ruxolitinib arm for at least 80 weeks, starting from the time of initial response, was 92%. The second key data set we presented at ASCO were the initial results of the combination of '39110, our JAK1 selective inhibitor, plus '40093, our PI3K Delta inhibitor, in patients with B-cell malignancies. Slide 16 highlights aspects of the data from the Hodgkin's lymphoma cohort, which shows both deep, as displayed on the left, and durable, as displayed on the right, responses to the combination. I'd like to emphasize that this trial was run in heavily pre-treated patients. For example, 70% of these Hodgkin's lymphoma patients had received five or more prior lines of therapy. We're in the process of deciding on next steps for the combination, and we will provide more details when our plans are finalized. Moving now to baricitinib, our JAK1/JAK2 inhibitor that's partnered with Lilly: Results of the first two Phase III studies in patients with rheumatoid arthritis were presented at the recent EULAR conference. The BEACON trial was a study of baricitinib versus placebo on a background of traditional DMARDs, including Methotrexate, in patients who had already failed one or more TNF inhibitor-based regimens. The BUILD trial was a similar design in patients with RA who had failed prior DMARDs, but had not received TNF inhibitor-based therapy. Both BEACON and BUILD met their primary end points; and as an illustration, three of the BUILD slides from Lilly's webcast from EULAR are reproduced here. In terms of efficacy in the BUILD study, a significant effect of baricitinib versus placebo was seen across ACR20, 50 and 70 scores at both 12 and 24 weeks, and in the structural end points at 24 weeks. The BUILD study, although not powered for a structural end point, did include analysis of structure, and the results were sufficiently robust that the 4-milligram dose of baricitinib showed statistically positive effects on the modified total Sharp score, as well as to each of its two components: the erosion score and the joint narrowing score. The lower panel reviews the adverse events, and shows that the incidence of adverse events, including serious infections, with baricitinib was similar to placebo. Before the end of 2015, we and Lilly look forward to sharing data from the additional two Phase III studies of baricitinib in rheumatoid arthritis, including patients with early stage disease in the BEGIN trial, as well as the 1,300-patient BEAM study. BEAM includes a fully powered comparison to Humira, the market leading therapy for RA. Slide 18 summarizes our current portfolio, and I will just briefly touch on a couple of aspects. The Phase III Janus studies of ruxolitinib in pancreatic cancer are recruiting, and the results of Janus I are expected next year. We also have several proof-of-concept trials running for both ruxolitinib and our JAK1 inhibitor '39110. In the first quarter, we began dosing patients with our FGFR inhibitor; and in the second quarter, we began dosing patients with our BRD inhibitor, and both programs are making good progress. Additionally, all four of our epacadostat studies in combination with either anti PD-1 or anti PD-L1 are progressing very well. I will now turn the call over to <UNK> to give us the financial highlights of the quarter. <UNK>. Thanks, <UNK>. Good morning, everybody. We recorded $142 million of second-quarter net product revenues and $17 million of Jakavi royalties from Novartis for sales outside the United States. Our total revenue grew at 64% in the second quarter of 2015 over the second quarter of 2014, and reached $163 million. For the second quarter of 2015, R&D expense was $112 million, and SG&A expense was $52 million. We recorded an unrealized gain of $27 million from our investment in Agenus. We ended the quarter with $627 million of cash and cash equivalents on our balance sheet. Slide 21 shows our updated financial guidance for 2015. Given the strong performance of Jakafi in the first six months of the year, we are raising net product revenue guidance to a range of $560 million to $575 million. The previous range was $525 million to $565 million. As <UNK> detailed, our research and development activities are moving along as planned; and accordingly, we are tightening our R&D guidance, lifting the bottom end of the range to give a revised range of $475 million to $500 million for the full-year 2015. We are increasing our full-year SG&A guidance to a new range of $195 million to $210 million. This increase primarily reflects additional investments we are making in the commercialization of Jakafi. Operator, that concludes our formal remarks. Please open up the call for Q&A. Thanks for the question. On the first part of your question, I think the way you can look at the guidance is looking at the year-to-year growth rate that we are speaking about here which is in the high 50%s to 60% growth from 2014 to 2015. It's an acceleration of the growth, and I think it is reflecting the success of Jakafi in PV. Concerning the rate of discontinuation, maybe <UNK> if you want to speak to it. Sure. As the best data that we have as <UNK> just pointed out is from the 80-week RESPONSE data, looking at 83% of the patients still receiving therapy at 111 weeks. Now of course, we only have six months really of experience with the launch of PV indication, and we do see, begin to see, a separation just a little bit between the persistence on MF and PV, but you would expect that. We will have to see a lot more data, a lot more patients on Jakafi for PV to get a real understanding of the long-term persistence, but the clinical trial data gives us confidence. Yes, thanks, <UNK>. We are very excited about the launch in polycythemia vera. We've gotten great uptake we think from our physicians who have patients who have PV, who have prior hydroxyurea therapy, but I think as we pointed out in the past, it is patient by patient, physician by physician. One of the things I've learned from a meeting we had with a group of physicians recently who treat PV patients is they really only see their patients about six times per year, and that's to their office. So in fact, the physician may only see their patients a couple times a year, and mid-level providers are seeing patients the other time. So really they have to see the patient and then identify that they have symptoms or they're uncontrolled on their current therapy in order to make a treatment decision to switch that therapy. So it is gradual, but it's consistent and we are really excited about what we've accomplished so far. On the second part of the question for splitting sales between MF and PV, frankly we don't intend to do that. There are a number of reasons for it. One of them is that it is not absolutely clear that for some patients, if they have an actual diagnosis of MF or PV, because there are a number of cases where it is not easy to see. What we believe over the long term is the guidance we are giving of $1.5 billion is peak sales guidance. It's something that you should look at in the longer term in the life of the product. So we've never been particularly quantitative about what the actual median duration of treatment is in the marketplace in MF, but it clearly was shorter than we saw in the clinical trials where the median duration of treatment was about three years. So I wouldn't be surprised personally if in the marketplace PV is a little bit less or somewhat less than it is in the clinical trials, but I would also think that the relative duration of treatment in the clinical trials of PV to MF would likely be borne out in clinical practice as well. But I can't really get quantitative about it. So they're in the process of trying to finalize plans for a potential registration study that includes discussions with outside experts as well as regulators, and until such time as their decisions are made, then they will propose that to us as to whether or not we want to participate. We really can't say anything in specific other than the data from the phase II was unexpectedly strong and we believe that Lilly will go forward in some manner. So for the first question, the biggest part of our gross to net is really Medicare rebates, Medicaid rebates, VA, Department of Defense, and 340B. So the copay is really a minor part of it. The biggest ones are really the government rebates. So on epacadostat, our IDO1 inhibitor - all four of the trials are moving along well, and we're in discussions with each of our partners about the appropriate timing of potential abstract submissions to medical meetings as well as if the data are robust enough to move forward into registration trials. So we can't be specific. We have said in the past that certainly the latest we would have data in the public domain would be sometime next year. Sure. In terms of prescribers, as you can imagine, the vast majority of prescribers for both MF and PV are the same docs. It just so happens that we found a group of prescribers who hadn't experienced the use of Jakafi in MF. And once they start using the drug in PV, they may in fact have MF patients that they then prescribe for. The second question was ---+ Sorry. We continue to have a steady growth, a steady consistent growth in MF patients. We think the growth in MF is going to contribute well to the sales, full-year sales this year, and both MF and PV new patients continue to grow. Sure. So I will take the first question. In terms of payer mix specifically for PV, we think it's a slightly younger population. So you might see a little bit less Medicare patients, but it is pretty much consistently the same. In the terms of commercial payers, it's exactly the same and coverage really hasn't been an issue for PV. So on IDO progress, I mean, we have certain meetings that come up and they control the timing of when there is detailed presentations of the data, but that doesn't drive the timing around our decisions to move into registration trials. So if the data are sufficiently robust before then, we would not be waiting for ASCO to announce something. It could happen sooner. Not really. I mean there is quantity of data and then there is direction of data, and they're both important to being able to make those decisions. I really don't want to get into prognosticating when that might be. So the amount of money that we're spending is not what is controlling the time lines at this point. So first of all, if you look at the IDO studies that are being done with PD-1 inhibitors, you need to start at a relatively low dose and you need to wait certain amounts of time before you can go to the next dose level. And then you want to generate enough data within any particular tumor type to make a decision as to whether or not you are going to go forward or not. Each of those things are progressing as quickly as we had hoped. Throwing more money at it would not make it go any faster. What we are committed to is should data be robust enough, we are going to make a fast and large commitment to registration studies and remain well ahead of our closest competitors. Okay. So with respect to the JAK1 selective inhibitor where there is Phase II data out there. I mean, first of all we believe that the Phase II data are quite acceptable, but Phase III is really going to be key and let me tell you a couple of reasons why. So first of all, we have seen with our own JAK1 inhibitor and now it is confirmed also with the JAK1 inhibitor from Galapagos that in order to see the top range of efficacy, you really need to get to high levels of JAK1 inhibition compared to the levels of JAK1 and JAK2 inhibition that you need with balanced inhibitors. And that level of inhibition is quite high, and it's not to say there is a problem with that. It's just not been tested over the long term yet. So we need to see the Phase III safety data as much as anything else to see whether those levels of JAK1 inhibition are going to give you the type of safety profile that's needed to be successful in a drug program in arthritis. Other things that we would say are that even after you correct for trying to take out what the placebo response is, you are still in danger to trying to compare across studies, head to head are the gold standard of course. And then finally assuming that they are going to start Phase III studies approximately the beginning of 2016, that would put them a full three years behind where baricitinib started Phase III and we would expect a full three years behind in terms of time to launch. You had another question. Sure. So one of the big upside positives coming out of the data that's already been presented was the structure data coming out of a study that was about half the size of the BEAM trial. So I would expect that given the designs of this trial, that that would be fine. With respect to the expectations against Humira, again with the difficulty of comparing across trials, I think our results have been as good as, or numerically slightly better than, historical data with Humira. The study is adequately powered that it has the potential to show superiority if the results are consistent with some of the data that we've seen. But simply having noninferiority to Humira across the board for a drug that's an oral once a day treatment, we think would lead to a very attractive profile. So the way that it works and I can't get into all the details. First you look at superiority to negative control arm. Then you look at structure. And then you look at noninferiority to Humira I believe based on ACR20, but I am not 100% sure. Then you start to look at potential for superiority both based on DAS and ACR scores, and I just can't recall exactly what the order in which that is done. But certainly we expect to be able to get to those analyses while still preserving alpha to make a statistical comparison on efficacy. Okay. Thank you for your time today and for your questions. After a very successful Q2, we are looking forward to a series of very important and exciting events over the next several months and we look forward to talking to you again at our third-quarter conference call in early November. So thank you and good-bye.

2015_INCY

2017

GWW

GWW #Good morning everyone and thank you for joining us Even though our underlying operations performed is expected, given the number and the size of several fourth quarter adjustments, I thought the need to discuss them more in open detail As <UNK> mentioned, <UNK> will cover several of the accounting adjustments as well but before we do that, I would like to share my thoughts on the performance of the business for the quarter The fourth quarter was operationally in line with the expectations we shared in November at our Analyst Day, both from a sales and an earnings perspective Our US business performed slightly better than expected given stronger sales performance in December in solid expense management Our business in Canada was still underperforming is making progress and also met our expectations for the quarter with better than expected sales performance in the month of December Both the US and Canada exceeded our sales expectation in the month of December, which we partially attribute to the favorable timing of the year and holidays and some customer year-end spending Our single channel online business is primarily Zoro in the US and MonotaRO in Japan, continued to perform quite well, growing revenue and earning strongly in the quarter So far, in January we're seeing some softness which we believe is related to extend the vacations that occurred in early January due to the timing of the New Year's holiday In addition, January has a touch count both in the US and Canada And in Canada, especially why that's some prebind that occurred prior to the new system implementation of February 1st last year Now, this past year, we made strong progress towards positioning the business for better growth and performance in the future Several examples include further realignment of the large customer Salesforce to focus on specific end markets The launch of our inside sales team focused on medium-sized customers, the opening of our 1.4 million square foot new DC in the North East We made significant progress on e-commerce both with our www com and online model with the customer experience We continued previously announced restructuring in the US and Canada including the closure of 69 branches, and we also initiated new pricing in the US which provide a more relevant price for new and noncontract customers across all channels including the web Now, with that overview of the quarters of backdrop, I would like to now cover two of the adjustments that we reported today First, our decision to write down a portion roughly half of the goodwill associated with the Fabory business; which was acquired in August of 2011. The impact EPS was $0.79. For those of you not familiar with Fabory, it is a fastener specials primarily focused in the Netherlands and Belgium We have restructured this business on several occasions and we are seeing improved revenue and stable margins resulting from the current initiatives And while we believe that business has potential for growth in the future Our historical weak growth in margin performance caused us to revalue the long-term goodwill Secondly, we took at $0.08 EPS impairment charge for some intangible assets related to our business in Columbia Both Fabory and Columbia are fastener specials and outside of our broad line MRO portfolio We have been taking action in the last couple of years to make sure that we focus on our core broad line MRO markets in developed economies So, with that I would like to turn it over to <UNK> to discuss the remaining adjustments Thanks, <UNK> Well, I'm certainly not pleased with the need to make these adjustments in 2016. The underlying business generally met our expectations As a result, we reiterated our sales in EPS guidance for 2017. As I mentioned earlier, we made significant changes to the business over the last year and I am excited about the future prospects for growth and profitability for the business We are focused on our core businesses in North America, the online model in the UK We generated $1 billion in cash flow at 2017. We expect to see free cash flow continue to grow as we will not need to spend as much in the coming years on capital expenditures as we have in the recent past So, with that, I'd like to open the call for questions Question-and-Answer Session Yeah, go ahead, <UNK> Sure, <UNK> So, we are constantly in communication with our suppliers on price increases from our supplier community We had some pressure in some categories but overall the pressure's been relatively modest and we don’t expect to have significant price increases throughout this year So, we're expecting it to be relatively stable on that front In terms of Canada, as we went through the transition with the system last year, given some of the service challenges we did not pass through a price increase that otherwise we would have been passing through last year We have started that process now and through the first half of the year, we will be increasing prices in Canada to reflect the market So, given what we see and there is always a lag for us So, in terms of the commodities increasing, it takes a while for that to flow through the supplier base At some point of commodity stay at elevator levels for a longer period of time, we typically will see some supplier cost increases and we will then pass those through But it hasn’t been long enough yet to really force that to happen Thank you I'll turn that over to <UNK> Let me try to understand the question So, on the branch organization, is that what you are asking? So, we now have a little 252 branches in the US I'll focus in the US for this discussion We've gone from 420 to 250. We've actually seen stability and even some growth in branches with those existing buildings and the volume that goes through them is quite profitable So, we will always evaluate the branch and the branch footprint but right now we like what we are seeing out of the branches that remain open And so, we right now wouldn't make sense for us to take any additional restructuring given what we're seeing in terms of volume into those branches Oh, for oil and gas Question into direct is, US of oil and gas direct is 2 arguably oil and gas has a fairly significant impact on heavy manufacturing so I don't know that we fully know but I would say organizations that produce large machinery, given oil and gas have been very affected by that and so we have seen that heavy manufacturing getting hit in the US as a result probably less than 10% of our total US business and that probably is stabilizing now as well Probably just Canada, the timing of the recovery and margins in Canada like <UNK> said it's going to the pricing actions are going to be over the first six months and so that's going to ramp up over a longer period of time than you'd expect to see in the US from a pricing perspective Good morning Yeah So, that it would be more small projects rather than large projects, <UNK> It would still be MRO but if people are doing maintenance cleanup projects in a bigger way, sometimes will have somewhat larger orders The order pattern had some of that but it wasn't tremendously high volume Generally the volume was good across the broad in December and so I wouldn't read too much into the project business I think the government flow has been very, very consistent, we continue to do very well, the military with federal government and we saw some state government strength as well It is across the board, although the bigger head is in the energy and resource business given where volume is and that's been more challenged throughout the entire year last year I would say that's true Thank you, <UNK> This is an implication at the moment Good morning Good morning I think it's a little early to tell I think some of the points you make are certainly on point, I think on US a lot this may in fact be timing and seasonal I think in Canada there is a specific issue for us which is last January there was a lot of customer pre-buy before we went live with the system and so Canada will let goofy in both January and February February will be a very easy compare and January is a very hard compared given the flow of what happened around that Other than that I think we don't see any reason to think the underlying demand has changed dramatically Not materially A little bit better but not material Just because the thing is when you pre-buy, right, those rebates gets capitalized, you don't take those to the P&L So, just to give you a little bit of history that the thesis when we got that, that those are really two pieces of the thesis One was we could expand in Central Europe through a branch expansion strategy, the other was that we could diversify its product portfolio and make it a broad liner We really struggled with those two, the first couple of years we had the business We ended up having to reverse course, refocus it on fasteners, it is a fastener specialist I think there is benefits to having specials in the portfolio I think we understand how specialist compete Having Fabory in the portfolio and we certainly get benefits from faster buy, from the company But that said, it's not core to what we do Right now we need to get it performing We need to be performing better, we need to increase profitability, get it growing but we will always consider both term but what to do with the business but we are optimistic about the path it's on and we need to continue that path first before we consider alternatives Now, thanks I think that Zoro's business will be very close to MonotaRO's overtime And we continue to see expansion, we think it's going to be in the 8th this year in terms of operating margin and it will continue to get do that double digit number Really the difference is advertising spend as we grow, so we invest a bunch to grow the business in Zoro We are still acquiring customers that are really high rate And as that business becomes more modest in its growth, more like MonotaRO, we would expect them the margins to be pretty much the same overtime Good morning Well it's really a combination of both The fourth quarter was a easier comp and the first quarter is a tougher comp So, there is a couple of swings to account for but I would just reiterate that especially in Canada where we saw a real pressure on margins in this last year The challenge will be recovering that through pricing actions in the first half of the year Those won’t happen just in the first quarter Yeah, that's a big part of it And then the comps It's -1. Good morning We will trigger it by actively pursuing many customers and then states as well So, we have installed completely new processes over the last year at a new system support for sellers to help make them more productive On the inside sales team, we're giving them much more clarity on who to call on, how frequently to call, what the returns are on those calls, I think we have got a long path for improvement here since we are very early in that process and figuring it out but it's pretty exciting in terms of the data we have now and the ability to drive improvement going forward On the inside sales team in particular? Yeah, it's going to take probably 15 months to two years for any individual seller to get to full productivity typically So, great I think we ---+ okay So, thanks for the time, I really appreciate everybody being on the call I would just summarize it the quarter basically from an operating perspective was at or maybe slightly above expectations Hopefully, we helped to explain some of the unusual items that we had in the quarter and we are holding on guidance for 2017 and we are certainly excited about what we have done in 2016 to prepare ourselves to grow and gain profit going forward So, thanks for your time

2017_GWW

2017

VAC

VAC #Thank you, Rob, and welcome to the Marriott Vacations Worldwide First Quarter 2017 Earnings Conference Call. I am joined today by: Steve <UNK>, President and CEO; and <UNK> <UNK>, Executive Vice President and CFO. I do need to remind everyone that many of our comments today are not historical fact and are considered forward-looking statements under federal securities laws. These statements are subject to numerous risks and uncertainties, as described in our SEC filings, which could cause future results to differ materially from those expressed in or implied by our comments. Forward-looking statements in the press release that we issued this morning, along with our comments on this call, are effective only today, May 4, 2017, and will not be updated as actual events unfold. Throughout the call, we will make references to non-GAAP financial information. You can find a reconciliation of non-GAAP financial measures referred to in our remarks in the schedules attached to our press release, as well as the Investor Relations page on our website at ir. mvwc.com. I will now turn the call over to Steve <UNK>, President and CEO of Marriott Vacations Worldwide. Thanks, Jeff. Good morning, everyone, and thank you for joining our first quarter earnings call. This morning, I'll walk through our 2017 first quarter results, highlighted by our continued growth in contract sales and adjusted EBITD<UNK> I'll provide an update on growth from new sales distributions and new marketing programs, as well as some brief thoughts on our outlook for the full year. I'll then hand the call over to <UNK> to provide a more detailed view of our performance. In the first quarter, company contract sales were almost $194 million, up over 26% and adjusted EBITDA was over $62 million, up $10.5 million from the first quarter of 2016. Remember that with our change this year to a 12-month reporting calendar, the first 3 quarters will each include roughly 1 additional week, so our year-over-year growth will not be comparable as reported. Adjusting our prior year contract sales for the estimated impact of the additional week, contract sales were up nearly 16% in the quarter. This was driven by our North American segment which, on the same adjusted basis, was up almost 17% in the quarter, including a 6% improvement in VPG to $3,691. Staying in North America, nearly 7 percentage points of our strong growth was produced by our 5 new destinations. This was the first full quarter in which we had all of our new sales distributions open, including the larger sales location in New York City and our location in South Beach, which just opens its sales center at the end of 2016, and I'm very pleased with how these new centers have performed. We are particularly pleased with the VPG from our new destinations in the first quarter has reached a level similar to our other locations, a positive signal that they are already performing well. It is important to remember that our sales centers in North America normally take about 3 years to fully ramp up tour flow, and we are still in the first year at all of our new locations. Our same-store sales distributions drove over 10 percentage points of our growth in North America through VPG improvement as well as growth in tours. Both tour flow and VPG benefited from increased demand from our large base of owners. This demand was driven by excitement about our new destinations, in addition to our evolving marketing programs geared both toward new and existing buyers. All of this has helped us drive increased tour flow as well as improved closing efficiency by 50 basis points in the first quarter. As it relates to our call transfer and Encore programs, at the end of the first quarter, same year activations are up 28% over this time last year as the overall tour pipeline continues to grow. Longer term, we still have room to increase our pipeline of tours. Our call transfer program was recently expanded and is now on all 6 major Marriott-branded call centers in North America, and we are piloting programs internationally to continue this growth. We have also signed an agreement for a call transfer program with an airline partner, expanding our reach outside of the Marriott umbrella, providing opportunities for additional future tour growth. The performance from all of these programs has continued to propel our first-time buyer growth as contract sales to first-time buyers improved over 6% in the first quarter. As it relates to our capital-efficient inventory model, we have just acquired the first 36 2- and 3-bedroom units in the newly constructed tower at our property on Marco Island, with the remaining 112 units coming online later this year. We are contracted by the developer to manage the new units and will purchase them over the next few years, similar to our agreement at our property in Manhattan. We are also in the process of closing on 112 1- and 2-bedroom units at the Waikoloa Marriott on the Big Island of Hawaii. We agreed to purchase these units almost a year ago from the new owner of the hotel upon completion of the converted units. When we make our first installment payment in the next few days, we will take ownership of all the units, and will make the remaining payments over the next several years. This asset-light transaction has enabled us to begin sales, private completion of the units, and delay the timing of the capital payments over multiple years. In our Asia-Pacific segment, adjusting for the estimated impact of the financial reporting calendar change this year, contract sales grew $1.7 million or 16%. This growth was due to contract sales at our Surfers Paradise resort in Australia, which opened in late March of last year. Since this new destination is our first in Australia, sales have been heavily weighted towards first-time buyers, negatively impacting our VPG in the quarter. As we have just completed our first full year of sales at this location, we should point out that our ramp-up of sales has been slower than average when compared to our North America sales centers. Some of this stems from the new and unique selling environment in Australia, as well as the size of the segment itself, which currently lacks the scale of our North America marketing distributions. While the sales ramp up has been below our initial expectations, we are excited about the potential for continued growth from both our Surfers Paradise property this year, and our new Bali property, which we expect to open later in the fourth quarter. Before I turn to our outlook for the year, I'd like to take a moment to provide some thoughts about our industry in general, especially in light of the recent ARDA global timeshare conference, which was held in New Orleans at the end of March. As my 2-year term as Chairman of ARDA came to an end at this year's conference, I look back with the perspective that our industry has gone through many changes in its decades-long history, and through those changes, with the obvious exception of the Great Recession, we have always continued to grow and thrive. Industry contract sales in North America have grown almost 50% since 2009, topping $9 billion in 2016. And ARDA has continued to provide tremendous support to its members and to timeshare owners, to strengthen the environment in which we all operate. Hearing at the conference about all of the wonderful things happening throughout our industry, I feel confident that we are poised to do great things and our best days are still ahead. Now let me take a moment to provide my thoughts on our first quarter performance and the solid foundation it has provided for the rest of the year. We have performed very well the start of 2017, continuing the trend that began towards the end of the third quarter last year. Contract sales in the first quarter grew double digits, and adjusted EBITDA was right in line with our expectations to meet our full year target. We are reaffirming our 2017 guidance. However, if the trends that we have seen to date continue, we would expect to be towards the higher end of our guidance range for the full year. With that, I'll turn the call over to <UNK> to provide a more detailed look at our first quarter results. Thank you, Steve, and good morning, everyone. I am very pleased with our strong first quarter results. Contract sales, after adjusting for the estimated impact of the change in our financial reporting calendar, were up nearly 16% to almost $194 million, and adjusted EBITDA totaled $62.1 million, $10.5 million higher than the first quarter of 2016. While these results are not adjusted for the timing of revenue reportability, it is important to highlight that our adjusted EBITDA was unfavorably impacted in the quarter by roughly $3 million of revenue reportability. Without that reportability impact, our first quarter adjusted EBITDA would have approached $65 million. As expected, our development, resort management and financing businesses all contributed to our improvement in adjusted EBITD<UNK> With our strong contract sales performance, development margin grew $4.5 million. Our resort management business grew by $8.8 million, and financing margin was higher by $1.7 million. In our development business, company adjusted development margin increased 33% to $31.6 million, and adjusted development margin percentage grew 60 basis points to 17.9%. As a reminder, for the full year, we continue to expect company development margin of 21% or better. In our North America segment, adjusted development margin increased 30% to $33.3 million in the first quarter, and adjusted development margin percentage was 20.7%, slightly higher than the prior year first quarter. Development margin benefited from roughly 60 basis points of lower product cost, offset by just over 50 basis points of higher marketing and sales cost, as we continue to ramp up our new sales distributions. In our financing business, revenues were up $2.9 million or nearly 10% to $32.1 million in the first quarter of 2017. These results reflect $5.1 million from higher interest income from our growing notes receivable balance, partially offset by additional cost from our financing incentives. Our notes receivable portfolio continues to perform very well, as we have seen our financing propensity rise 8 points to 66% in the first quarter, with the average FICO scores of our buyers at 740 and delinquency rates remaining near historic lows. Financing revenues, net of related expenses, were up 9% to $21 million from the first quarter of last year. In our rental business, excluding the impact of the Surfers Paradise Hotel we sold last year, rental revenues increased $7 million to $85.3 million over the first quarter of 2016. Rental revenues, net of expenses, were $14.8 million, down slightly from the prior year. These results reflect nearly 12% increase in transient keys rented, which was offset by higher unsold maintenance fees from inventory at our new locations. Results also reflect a nearly 21% increase in preview room nights. Remember, as we utilize more of our rental availability for preview room nights to support our call transfer and universal encore tour arrivals, the revenue typically comes through at a lower rate than from our transient rentals. For our strategy, we expect higher preview keys to be a headwind to rental margins throughout the year, as we focus on driving contract sales growth. In our resort management and other services business, excluding the impact of the Surfers Paradise hotel, results improved $8.8 million or 37.1% to $32.5 million in the quarter. These results reflected higher fees for managing our portfolio of resorts and an improved exchange company activity from the addition of our new managed destinations, as well as a cumulative increase in owners enrolled in our points program. In addition, the first quarter benefited from approximately $2.2 million, mainly from favorable timing of refurbishment income and lean fee activity. General and administrative costs were up $2.2 million in the quarter. However, costs were relatively flat year-over-year, excluding the additional week of cost resulting from the change in our financial reporting calendar. Royalty fees were up $2.7 million from the prior year first quarter. This was driven primarily by higher contract sales, as well as the additional week from the change in our financial reporting calendar. Furthermore, as it relates to our insurance claim associated with Hurricane Matthew, we continue to work through the process with our insurance provider, and we will provide you further updates as we move through the year. Moving to our balance sheet. At the end of the quarter, cash and cash equivalents totaled $101.8 million. We also had approximately $201.5 million of gross vacation ownership notes receivable eligible for securitization and $199 million in available debt capacity under our $200 million revolving credit facility. Our total gross debt outstanding at the end of the quarter was $692.1 million, all but $8 million of which is nonrecourse debt associated with securitized notes. Now let me spend just a moment on the outlook for the year. As Steve mentioned, we are reaffirming our 2017 full year guidance. Speaking to our contract sales growth, even with a more difficult comparison in the second half of this year with respect to our new sales distributions, we do expect continued strong sales performance at our existing sites. This is primarily due to the increased tour flow we expect from our various marketing programs. And finally, we continue to focus on maximizing our adjusted free cash flow. Our capital efficient business model allows us to drive this top line growth while still delivering adjusted free cash flow between $160 million to $180 million. We started the year with a very strong first quarter, with our new sales distributions open and growing, and our marketing programs continuing to ramp up very nicely. VPG remains solid as we begin the year and tour activations are well ahead of the same point in 2016, all of which gives us confidence that 2017 will be a tremendous year for us. As always, we appreciate your interest in Marriott Vacations Worldwide. And with that, we'll open up the call for Q&<UNK> Rob. Sure, thanks, Chris. This is Jon. Look, in terms of buybacks, obviously, there's a lot of factors that go into when we're buying back shares in and out of the market. And I'm sure, as you can appreciate, we don't comment specifically on those factors. But what I will say is, our strategy to return capital to shareholders, including share repurchases has been a big part of what we do and continues to be a big part of our strategy going forward. So I would expect us to continue that strategy here in the future. And so in terms of the balance sheet, I agree, we have a lot of capacity on the balance sheet, and as we've said in the past, we'll continue to evaluate with our Board how we deploy that capital in the future. Yes, thank you, Chris. This is Steve. The simple answer is, we have a very active development group that is out looking for new sites. I mention, obviously, that we are going to be opening our new sales gallery, a new resort in Bali, here towards the end of the year. We continue to look for additional growth in the Asia Pacific region, and there are some specific areas that we are very focused on there. And also in North America, I mean, while we have great distribution in North America and many of the very popular vacation destinations, there are also some places where we don't have a significant presence. And so we continue to look there. So while not being able to disclose anything in particular to you right now, let me simply reiterate that we believe that we're going to be in a fairly consistent cadence of adding new resorts, new sales distributions in the years to come. So first, on the cost side, just related to the new sales centers. Can you just talk about how marketing and sales came in for the quarter versus your expectations. And then, how you're thinking about that line item going forward here, as you're comping there with some of the opening of the new sales centers. On the cost side, for the new sales centers, I would say, all in all, in line with our expectations. The key there is ramping those sales to leverage the fixed cost, obviously, in places like New York City. You have rent and other costs that are higher. And so as a percentage of sales, you start out, they're high. And as you get to a more normalized level, you start to get to more of that system wide average. So as we continue to ramp going through this year and into next year, we'll continue to get closer to that, which will help the overall margins as we go forward when you think about development. And <UNK>, if I might add, this is one of the things that we ---+ I spoke to in my remarks was, obviously, the VPG performance at these sales centers, which quite frankly, is pretty close to what we're running at a system wide average. Now admittedly, this is an average of 5 sales centers versus all the remaining in our system. But I would say to you that we are very pleased by what we've seen thus far in the first quarter. And we think it's ---+ it provides optimism for, as we continue to load more tours into these centers and how we'll be able to perform. Okay, great. And then on inventory, can you talk about how much inventory you have access to right now, and how much of that you would consider to be asset light. Sure. So rough numbers, I would say, we probably have about 1.5 year of completed inventory, given our sales base on our books today. And then through ---+ our asset-light deals, so this is inventory that we don't own, but are committed to. We probably got another 2 years there. And then, when you think about the amount of inventory that we have in land and infrastructure at existing resorts, that we could build out in that zoned ---+ that we can build out units there, that's probably another 4 years' worth of inventory. And then the other thing, which we don't necessarily control, but obviously part of our program is to repurchase weeks on the secondary market. And given the pace there, that's probably another couple of years' worth of inventory, just if you think about here over the next 3 or 4 years, that we'll be active buying back always a lever that we can increase or decrease as we need inventory. So you're probably talking ballpark, 8 to 10 years when you add up all that. Okay, that's great. And then last, can you comment on growth for reloads versus first-time buyers. I'm just wondering what you're seeing in those 2 segments. Yes. Actually, we have said all along that our goal is to add more first-time buyers. I think you heard me say that our first-time buyers were up 6% over the first quarter of last year. Having said that, we were very pleasantly surprised to see the amount of existing owner or reload growth in the quarter. And a lot of that's attributable to the fact that as we added new destinations to the portfolio last year, there were people that were excited about those locations and they've wanted to add to their amount of interest that they hold within our company. And so, we're at the luxury of being able to add first-time buyers for the long-term perspective of being able to get more referrals and all the other things that come along with those. But also enjoy adding more existing ownership to people that are already our members, and we're very pleased with how that works. Hey Brad, it's <UNK>. Yes, once again, we're not going to comment specifically on the factors that we may or may not be in the market for. So like I said in my previous answer, there's a lot of factors we consider. At any time we're repurchasing shares, so I'm not going to add any more color to that at this point. Well, it had a, kind of a 20,000-foot level. You look at this industry, which obviously because of the increased number of publicly companies in the space, I think has attracted more investor interest than say when we first became public 5.5 years ago. And typically, in any industry, when you see increased investor interest, then that rises to the occasion of increased levels of M&<UNK> And as you've seen, some companies have become public, some public companies have gone private. So I think that's a normal, logical iteration of how any industry moves. And I don't think the timeshare industry space is any different from that. Sure. Well, strategically, like we said, we're not trying to be at an investment-grade company in terms of our cost of capital. We like to play in that BB range, <UNK>. And within the BB, you're probably talking comfortably up to, call it, 3x leverage, so ---+ of EBITDA, excuse me. And so the question would be obviously, if you're acquiring a company, how much EBITDA is that bringing to your existing EBITDA, and you're probably in that 2.5 to 3x. Clearly, depending on the opportunity, there's ---+ we could go higher than that, and that would be something we'd have to talk to our Board about. But that's generally how we think about our long-term capital structure. Yes, I mean, generally, if you think about it, I mean, single largest cost in the timeshare business is in the sales and marketing arena. And then, obviously, to what degree by adding additional scale to the business allows you to leverage your fixed marketing and sales cost. Obviously, you get a nice gearing effect to the bottom line, in terms of your sales and marketing costs. There, I think, is a general misnomer, however, that some believe that if you add additional scale, all incremental sales and marketing costs go away, which certainly wouldn't be the case. You've still got to run a sales and marketing operation at existing resorts, which has its own inherent cost. So I think that's the biggest area, obviously, there other corporate fixed costs that we have in our overhead bases, that you'd get some leverage out of, which would obviously contribute to growth in your bottom line margins. But those are the 2 areas in particular that I think really kind of jump off the page at you. Basically, you probably have seen what we have seen in the public press, where Marriott has indicated a continuing desire to try to put the 2 programs together, but there's not been any real increase in dialogue between ourselves and Marriott in that regard. Thank you, Rob. We're off to a great start this year with contract sales growth exceeding our record fourth quarter and adjusted EBITDA, laying the foundation for a solid earnings year. I am excited about what our new destinations and enhanced marketing programs can do, and look forward to discussing our results with you on future calls. And finally, to everyone on the call and your families, enjoy your next vacation. Thank you.

2017_VAC

2016

NSP

NSP #Sure. Happy to do that. We have built into the model with such a great starting point, and also since we ramped up sales staff substantially last year, we are expecting trained sales BPAs to be up about 13% or 14% this year over last year although we expect total BP's hired will go up closer to the 10% level. So we're at that point where you have a bunch in the hopper that are coming into the trained count, and so as we go through this year, we are in really good shape on having the right number of BPAs with the rate efficiency level or tenure and what we call tiers in terms of performance tiers. We feel strong about our growth. We expect that growth in terms of looking at our growth model for this year, the way we have looked at it is because of the potential of the economic climate, we have built a range for the balance of the year once you get through this year-end transition for the new growth to be in the range of what it was last year from March through the end of the year to an increase of 300 or 400 employees per month based on the larger sales staff and their tenure. We are comfortable with that range, but we have used the low end to be the same as last year's number. And that's simply because you want to be cautious about the economic climate and the potential for weakness in the net gain and customer base between new hires and layoffs, although we also factored that number down in our model. Point is we are off to such a great start this year. We have been I believe reasonably conservative for the balance of the year, and I think our 13% to 15% unit growth number is a great place to start for the year. I think obviously our benefit program is always an important component of what we provide to customers, the administrative relief, the better benefits, reduced liability. And having a systematic way to improve productivity is why customers come to Insperity. But the benefit plan is always a part of that mix, and there's no question that was well received in this campaign. I mentioned it in my prepared remarks that we had a really great year in terms of managing the risk that we take. And <UNK> and his group, to have the benefit program going up at such a low trend rate, balancing all the factors that go into that definitely put us in the position to be very competitive and demonstrate what I think is a key value that we provide to customers, which is some cost ability in one of the most vulnerable cost areas for a small business to have to live with. That's always valuable. We have been in a period of relative stability in that area for quite some time, and it really is a value add for our customer. On the trained BPAs, that number is going up about 14%. We should be around the 350 level was where we ended up in the year. I think you will look at average for last year was below that. But the numbers are built off around a 370 or so trained reps for the 2016 full year. And we should end up with around 425 or 430, somewhere in that range at the end of the year in total reps. I guess you are referring to the Small Business Efficiency Act that was passed a year and a half ago for a little over a year ago. The impact of that is, when we bring new customers on through the year as soon as the act as implemented, we won't have to have a double taxation. And we will actually be able to pick the customer up with successor employer status for unemployment tax purposes, which will lower our price to the customer to transition to us. There is no question in my mind that's going to be favorable, but it has to be implemented first. The Internal Revenue Service was supposed to pass rules to certify PDOS to be able to take advantage of this new tax treatment, and they were supposed to pass those regulations in July of 2015. The latest from the Internal Revenue Service is they do expect to meet their new self-imposed deadline of July 1 of this year. Once that happens, then we will be able to actually submit our information to be certified and then begin to operate under those new rules. So we haven't built any of that into our model for this year. If that happens fast enough that we can do it, we certainly believe that is upside, but when you are waiting on the government to do something, I don't think it's wise to build it into your going forward plan. I will let give you some specific numbers on that. In terms of the backdrop, if you will, in Houston we say this is not our first rodeo. And we've gone through many cycles in the business community here around the oil prices, and it does have a significant effect. As you know from our business model, we are not ---+ we don't do a lot of business with the oil industry in terms of the ---+ over the hole or exploration because the risk is too high. So we don't have a lot of dependency there, but there is a ripple effect that goes out from there. The oil business provides a lot of great paying jobs, et cetera, so there is a ripple effect. We still have quite a bit of business in Texas. So we factored that in although because it's such a small part of our total business, we don't think it will have a dramatic effect. Doug, can you pass on some numbers in that regard. As far as ending 2015, Houston worksite employees were about 12% of the total. Obviously not all of Houston is energy, oil and gas related. When we look at oil and gas related and some even ancillary type services related to the oil and gas industry, it totals about 2% of our worksite employees, about 3500. Okay. It's a small number, and I think we've seen over the past month or so we've seen some clients take some initial steps. I wouldn't say anything significant as respect to net layoffs in those particular client spaces. But I think the takeaway is the oil and gas related worksite employees are only about 2% of the base. That's been happening throughout last year too. Once you got to about March of last year, companies began some serious restructuring. So a lot of that has already been taking place. We had our sales convention already this year. We actually moved it up and had it earlier in our cycle. In the third week of January, I guess we had our sales staff from all over the country. And when I was walking the halls and talking to folks, I was trying to get a feel for how much that was a factor. I would have to say it wasn't as much a factor as I thought it should have been. Certainly the complexity and compliance around healthcare reform and other things is always a backdrop, and the requirements for these customers with more than 50 employees was definitely on people's minds. But I would have thought it would have been more. Maybe <UNK> can comment a little bit on that as well. I was going to say the fact that we started early in building the infrastructure for the reporting that took place at the end of December of 2015 for the year, that had to be reported out in 2016 in January. What we saw is the very first day that the IRS report was required to be put out, we put it out online because we have been building this infrastructure platform for our clients, and we had over 1000 clients that morning come online and look at their data for the year. So our sales force is definitely using that information to communicate that we have a superior platform for giving clients the information that they need to do their own income tax return reporting. It was all for the large employers in a group of 100 or more, but a lot of them went online just to see the data even though they weren't required to report on it. But we had it available for all 6000 plus clients. I don't have the percentage in front of me, <UNK>. Maybe you could give Doug a call and he could look that up for you. I just don't recall off the top of my head In 2016 they are. It was over 100 for 2015, and it's 50 to 100 for 2016. That's correct. So let's talk about first of all the service fee component. It's going to be pretty close to flat from last year, maybe down a buck or so, and that's because of the continued mix of customers we have especially in the mid-market area that have gone to our newly created workforce synchronization offering which is obviously a lower-priced offering. When we look at our benefits cost, the trend across the board for 2016 over 2015 is going to be a whopping 2.5%. And we are excited about that because things we have been doing for the last couple of years continue to support a very low trend along with the migration of prospects and customers migrating to the lower cost, higher deductible plans throughout the year. And our strategic business unit operations, they are going to be growing gross profit about 17% or so in 2016. But because we are growing so much in the worksite employee base, it's going to look like only about a dollar per worksite employee per month, but it's serious money at the gross profit wide. The big picture there, <UNK>, is I think it was wise for us to look at gross profit per worksite employee to be about in the same range as it was last year. And as we always do, we try to start out somewhat conservatively and let the results in claims management and all the things ' group and our service team do to manage cost, claims cost, safety and all that kind of stuff, we let that emerge as the year goes on. That should give you the big picture on that. I would stop going that deep into the weeds on that because as you know, you have moving parts in there between the three direct cost items. But if you look at the total picture, we have provided it all the way down to the EBITDA line where you can see we are expecting 22% to 28% increase in adjusted EBITDA as our starting point for the year. I would say the most significant thing on that front from my view and talking with our sales team is what I mentioned in my prepared remarks about the value of the high touch services that we provide our customers. I mean, we are involved with our customers at a completely different level than others in our space. That makes it a differentiated product. And I described how that service dynamic, it is hard to do it well, and it's costly. You have to be able to charge more to do it. You have to have a higher-quality sales team that can sell value-added services, and you have to service teams that have a high level of expertise because they are talking straight to business owners about their real issues that are going on in their company. All that together is what I've always talked about as a premium service provider, positioning Insperity really as a category of one out there in terms of what we're really able to do to help small and midsize businesses to succeed. And there really isn't anyone else out there like that. And I think what someone would have to do to try to challenge us in that space is enormous, and I don't even see anybody really trying. That would be how I would frame it. I'm really happy about the industry as a whole relative to the Small Business Efficiency Act that was passed a year and a half ago. I said I thought that would really cause some momentum across the industry, and I believe it has. I think you we're seeing good growth and more customers and advisers to customers that are really open to co-employment as a way to solve their complexity and compliance and cost issues around being an employer. I do see some great macro trends that are good for us in our industry. What I really like about it is that in our target customer base, customers that would appreciate the value add that we can deliver, people that really want to take their business to the next level that have a definitive getting better agenda and understand the role people play to get there, that group is growing and we are a hand in glove fit for them. So I really see a lot of runway for the Company in front of us. Yes it is, and the transition expense is insignificant. They're not far from here. It's a matter of moving cost, and so it is factored into the guidance. It's not a significant cost. I don't have the exact numbers in front of me. The point I wanted to make is we were currently leasing the Houston service center, and when you compare a lease rate and paying the landlord, his share of things versus constructing the building here on campus where you have those savings and also with the campus land already being owned, we ran the numbers. And it was clearly more beneficial from an EBITDA perspective. And typically the way a shareholder would look at it would be more advantageous to consolidate them here money-wise, economic-wise but also in getting efficiencies by having personnel, service personnel here on campus and working together. I think that's a better move for the Company. We analyzed it quite a bit, and it will be beneficial to EBITDA numbers. The construction is not expected to get completed until the first quarter of 2017. And so you will have some of this interim construction cost going into the capital numbers throughout 2016, but it doesn't get put in place until 2017. No. As a matter fact, it was pretty flat this year. We had some going into the very beginning of 2015. We had some fairly large claims that are experienced throughout the remainder of 2015. Really created on environment that was pretty smooth in total. <UNK>, I think we historically talked about the reserve adjustments from prior periods as claims runoff. And there's only $1.3 million this year compared to about $3 million last year. So those numbers are much lower than they were earlier in the workers' compensation program quite a few years. Yes, we will continue to have a lot of growth in the time of the tenants business. We are doing well on our retirement services business. We actually have had, believe it or not, really good growth in our recruiting business even though you wouldn't think against the economic backdrop that your recruiting division would be doing well, but we are. And we have this young but growing payroll operation, payroll service that is starting to gain some steam, and we think that's really good long haul because obviously that's a beginner outsourcer service. Right. We think we can build a nice sized customer base that will be up sold over time similar to some other models that are out there in our business. We had a good year overall in mid-market, and as I mentioned in my remarks, we actually felt like we were far enough along in incubating that mid-market in operation that we brought it all together from under one ---+ into one division. And we think our plan for that going forward to me is very exciting, and we are off to a good start this year. Well in 2015, I think it was more associated with the corporate aircraft that we sold and then going through that process and carrying value versus what we ultimately sold it at. I think that was the only instance in 2015. It's broken out on the income statement obviously. When we look at our adjusted EBITDA number, the impact at EBITDA numbers that we report versus our target. Once again, thank you all so much for participating on today's call. We look forward to updating you as the year progresses. Thank you.

2016_NSP

2016

CHS

CHS #Thank you for the question. As I said in my intro, I have 25 years-plus of retail experience from food, grocery, specialty crafting and my last six years at Walmart both in Canada, Europe and Africa. Just that host of in many ways, some early blocking and tackling parts of understanding how data is used, understanding all of the metrics of SG&A. And then, in the European portion of Walmart, that is a ground-up design apparel business as well. Wanting to make sure that we have got full line of sight into production, into synergies, I'm very much into the shared services model and really believe in front of the house back of the house separation. The beautiful part to me about the opportunity of Chico's is the uniqueness of Soma, the uniqueness of White House and the uniqueness of Chico's and making sure the front of the house, what the customer sees, the essence of that brand, how we market to them, the uniqueness and style of that apparel that is customized for that specific group of targeted customers. But also, allowing that back of the house to be incredibly leveraged and that the way we go to market, the way source product, the way we utilize factories, the way we look at shipping cost, the way we build a single platform in [decom] that can be skimmed in three different ways, that we built one analytic and algorithmic-based system that can have copious amounts of data through it. Yet the answers can be specified for each of those brands are all experiences that I've had in my previous life that we can lay on top of this business. And as I was going through my own decision-making process and saw that, that skill set applied to this business gives me a lot of upside hope, and that was part of the decision-making for sure. Thanks, <UNK>. We are here, as we said, on day 86 or 87 ---+ we've lost count. I am still calling them key focus areas and I haven't put them in any prioritize group. Obviously, anything to do with customers comes first, comes for me for sure. We are doing that within the conjunction of our three-year planning cycle. What are we thinking about, what are we doing and when do expect those results and what are commensurate expenses and profits that we will expect from each one of these initiatives. We are building a strategy focused organization here. We are all 25,000 Associates at Chico's FAS will know what our move forward strategy is for the total Corporation and what their specific role in attaining our success is by brand. That is how I have worked in business in the past and had success in doing so. And so we're very much at the early stages and just sharing these focus areas with the way to allow you sort of an insight in to how we are grouping our priorities. That is absolutely the next step, is running the detailed analytics on what the benefit of each one of these will be, what our expense ratio will be around executing them and what our expected return is and when we will start to see that reflected into our sales and profits. And so we are right at that stage now. To your first question, I am just learning that piece and starting to understand our marketing mix and not applying some of the traditional science of marketing mix that I've learned in the past because it's very, very different here. And I will just give you one example, that I'm still working through during the learning phase. In the shop-along I did in Dallas with our customers, we have customers who keep the catalog and tape it up inside their closet so they know which necklace and scarf goes with which item. Before I start to get to analytic on you, what is the best marketing mix and how I can save money in print, I have a lot more to do about understanding how that catalog is used to drive inspiration and in some cases education to our customer. So I'm a ways away from making any decisions about that. Just a little more background, what line were you looking at in particular. Yes. In the release back on page 9 of the release, we actually give you what our consolidated results were and then break out what Boston Proper is which then gives you consolidated results excluding Boston Proper, our operating results. And those would exclude any strategic charges, restructuring charges, goodwill impairment and all that. That is much more your ongoing apples to apples. As we look back on Q4 it was clearly a very promotional environment and I think you've heard that from a lot of people. For us what that meant is we had to get in there in and be promotional at specific periods in time. The good news is we were able to ---+ as we stayed competitive and moved through and maintained a certain rate of sales. We were able to move through our inventories at a healthy pace. So really where you got the upside was not having as much inventory left to clear at the end of the day. And not having to have that access clearance inventory is really where we were able to drive a lot of that gross margin. As we look forward to next year, inventory is flat. We've talked a little bit about this in the past but a huge opportunity for us as much as anything on inventory management is around the allocation of where exactly our inventory goes and this goes back into the retail science that Shelly was talking about. It's better understanding what items are going to sell in a particular location, how we can distort the assortment that we are allocating so that we are maybe putting more particular styles that are going to sell in a particular store and less in others. And doing that in a way that ultimately means we have to be either less promotional or have less clearance inventory. The other thing we're doing a lot of right now is testing. We were joking that this is very much going to be the year of the test and that applies to inventory management as well. We are testing out different curing methodologies for allocating our inventory, testing out true profitability of different categories, going a lot of different directions to make sure the information we have is actionable and something that we can respond to very quickly. With flat inventory dollars you can basically make that inventory work harder for us. I think for this year, a lot of what we were talking about is getting better use out of the tools we have. Of course we will be looking at if there are more automated or efficient ways to do some of the things but it's probably early to get into that kind of detail. There is a lot of testing that we are going to do this year, to start there. I would expect as we get into 2017 we'll go into the year with more momentum. That's the plan. I would say if there's benefits to be gained, they will probably be more back end oriented. There are probably some things that will be quicker hits that may hit the back end. I would really look more towards 2017 and beyond for the majority of the benefits. No, we are finding in White House, and we can see it now with their positive comps, they have merchandise marketing that is resonating with the customer. The customer is coming in. We continue to work at White House on the rebranding and making sure that customers ---+ well that there is awareness of exactly who White House is, exactly what White House can offer and we're finding there is still lots of opportunity around that awareness which in the long-term is a great thing. How we get there is kind of what we are working on right now and that's part of what Shelly is bringing to the table with looking at the branding and some of the customer research. It's ongoing. In the shop-along that I did, I think these took place in Dallas. But the shop-alongs I did with non-customers, the non-White House customer, people who were in that demographic who of course should be a White House shopper but aren't. It was fascinating to understand their view of the brand and why they hadn't been in and opens up a tremendous opportunity for us on describing that brand and marketing that brand to a customer segmentation who is very much aligned to that merchandise but has a certain view of what's inside that is representative. And so, I get pretty excited about thinking about sharing the offering of White House with a wider base of customers and I think there is opportunity there. First on the quarter-to-date comp, what I can tell you is that other brands are performing roughly in line with the Q4 run rate. We typically don't go much beyond that so I have probably already broken my rule. Nothing I would call out that's been a major change in trend outside of the White House positive performance to date. In terms of margin opportunities, we really try not to get into that level of detail ---+ as much as anything, from a competitive perspective. We continue to look at opportunities really across the entire portfolio. I would say that is still the case for us that we do have opportunities across the Company. And probably as we get further into our planning, we will come back with a little more detail on that for you. I would say generally we are looking at very similar to past years. We have a certain amount of capital that we want to spend that we think is important to spend internally and generates a return. Beyond that to the extent that we have excess cash, we have a dividend that's in place that has a healthy yield right now. Share repurchases is really next in the priority list and I think we've shown our commitment to share repurchases and intend to continue to show that. That is probably about what we have for cash at this point. How are you doing, <UNK>. Thank you. Talking about Soma, we have 287 Soma stores today in what I think is just a tremendously un-crowded space in the market for customers who has aged out of some of the traditional retailers and isn't finding what they want in a department store setting. As far as being channel-agnostic, if you just look at the different types of product that are accelerating online you see across the board where intimates stack up in there. Intimate apparel is heavily penetrated online and our expectation of Soma will be the same. I do however, believe that bricks and mortar companion to that is incredibly important. And not just for the show roomy aspect of that, but for the tenants of that brand in comfort and fit, in every day sexiness, in things that look great and feel great and are appropriate for somebody living an active lifestyle. I certainly wouldn't say that I'm channel-agnostic and in order to continue to grow market share in intimate apparel you have got to be doing that by driving your online business. You are seeing now and you will see it with the launch of our new bra which I can't wait for Todd to explain to you next time. You will see a much more exciting, much more sensuous type of marketing and advertising of coming from Soma. And I continue to be very bullish on that positioning. I think it's one of the few spots left in retail where there is room to grow. Part of my own decision-making was the excitement of the growth of that brand. I don't know if it's really a big surprise or not, I did a lot of due diligence. It was a tough decision for me. I was having a terrific career where I was. I don't know if it was a surprise, I just had a real affinity for the people here and a real affinity for the customers. This is a unique, incredibly loyal and dedicated customer base at all three of our brands and they are advocates. When you find a Chico's customer who is a loyalist or a White House customer, and the same with the Soma. They are incredible advocates for our brand and the idea of unleashing that. And in some cases helping them unleash that. At Chico's as we move forward with more digital commerce, the excitement of our customers to become part of that interaction with digital was really, really fun for me. I think the excitement was I just have an incredible affinity for the brand, for the customers and for the associates and I think it is all leverageable and I'm excited. I'll start with the Chico's customer. The shop-along experiences that I've had have been terrific and I look forward to my week as a Chico's associate too. I've done this everywhere that I've worked. I just show up on a Sunday or Monday at an unannounced store and I work in that single store for six days straight as an Associate, running the register, wardrobing. And that is the best deep dive of any brand I think that you can do. You not only become completely aware of the associate experience and what torturous things from the corporate office we are sending down that we need to stop immediately. But also, you get a true sense of what is happening with our customers. So I look forward to that. During the shop-along I learned so much. One was what I shared with you about the customers who actually tapes up ---+ and this is not a single customer, by the way, who tapes up that magalog in her closet. There were several different types of Chico's customers I interacted with during that shop-along. One is a woman who loves fashion. I wouldn't say that our customers are fashion forward as much as they are fashionable. They don't want to be a victim of fashion in something that is not age-appropriate or in any way makes them look silly, but they want to be stylish and they want to be rocking it. What I learned from our customers in the shop-along is two very different camps. One who wants us to help her head to toe. She wants bottoms, tops, a scarf, an accent piece, maybe a sweater that can go over the top as well as jewelry, and she wants that in a very mix and match style and she will continue to build from that particular collection to build out that section of her wardrobe. Which I think is very exciting when we think about leveraging our online data. Remember we ---+ on our loyalty to those customers who are part of our passport program, we know all of the apparel she has and what she has purchased from us. And imagine being able to pair that digitally with our new items coming in for her to show her that wardrobing aspect that she has got in her own closet. That is the kind of digital customer facing science that Todd was referring to that we can look forward to in some of the out years. And then there is another type of customer who was part of the collecting of the individual items is part of the hunt. She doesn't want us to outfit her head to toe. She takes huge pride in being a bit of a fashionista and doing that herself. And so making sure that we are meeting the needs of both of those two different customer segmentations is great. The most exciting part to me at Chico's is five women will come into Chico's and each one of them will leave with their own look. It doesn't look like I know where you got that or that or that is cookie-cutter look from Chico's. The ability to wardrobe and changeup is an enormously aspirational and fun part of that brand and our customers love that aspect of it. And I'll take the brand profitability question. I will say good job in trying to take advantage [the new person] (laughter) ---+ we do not go into brand profitability. What I can say is yes, we did say merchandise margins were up in the quarter at Soma. I thought that was important context in relation to their comp because it really was about driving profitability. Soma is at the point, and we've said before, where they have a product that inherently should have a little bit higher merchandise margin and they passed the point of scale where that is in fact true. They're at the point where they are really growing the top-line is what will enable them to leverage SG&A and their other cost structure and continue to grow that profitability. But at this point as Shelly said, still seeing lots of opportunity and things are headed in the right direction. Sure. So first on transactions. We are in a unique environment where you do see traffic to malls generally being down. We get all of the shopper track information that you probably get and what I can tell you is generally our customer tends to love to come to the mall, touch it, try it on and feel the fabric. As a result, we end up seeing less negative traffic, than other retailers and to the extent there is net traffic that is down, we typically offset it at least with our conversion. And then the added bonus for us to the extent that online becomes more and more accessible and we are able to bridge that gap in the customer experience even better than we see transactions online continuing to grow. So all that ultimately leads improvements in transactions which is something we would hope to see going forward. And I'm sorry the second part of your question was. From a brand perspective the majority of those 25 openings would be Soma, actually about 15. The rest are evenly split between Chico's and White House. We are taking advantage of a new mall or a new location that is appropriate for us to be in. From a closure perspective, one thing if you look at timing that we had last year, the overall timing will be very consistent with 2015 on the closures so that probably helps in your modeling. Then from the brand by brand perspective, about half of the closures are slotted to be for Chico's and obviously very few in Soma. And White House, somewhere in between. Awesome. Thank you, Laura. That concludes our call for this morning. Thank you, all for joining us this morning and we appreciate your continued interest in Chico's FAS.

2016_CHS

2017

CBM

CBM #I think, <UNK> ---+ sorry, <UNK>, this is <UNK> ---+ <UNK> <UNK>, here, it's more to do with timing of when these projects fall. So you're right. If you take the $15 million out, move it out, you're at $55 million and then you allow for normal maintenance CapEx, and then the difference is really, yes, whatever we do spend at Pharma 4 during the year and then just the projects across all our sites. Yeah. No, <UNK>, we're not changing at all our commercial strategy to focus on late stage and already approved commercial products. That's really the base, the mainstream of our innovator strategy to grow that product category. But you're correct in characterizing Cambrex high point as what we hope will be a good pipeline by working on earlier stage projects that will then hopefully progress through to the point where we can do a tech transfer to our larger scale plant and scale them up. Definitely in addition to. Yeah. Right now I think our modus operandi there is to have a regular dialogue with the board about overall capital structure and how we want to spend that capital and we'll continue to have that dialogue. To date they prefer to keep as much dry powder available to go after M&A deals and we see it, obviously, we haven't done any big deals so we'll continue to revisit that with the board and, obviously, report publicly if our plans change. Well, the way we look at it, obviously, we'll produce as much product as our customer needs. We were able to grow our business non or x at large product double digit so we've put in place capacity that I think allows us to do that, <UNK>. But as we said based on the strength of the market, we're going to need to invest more organically going forward. <UNK>, this is <UNK>. Maybe just another angle on that. It's a big product and so when you refer to crowding out, I think you made comments over the past couple of years of not being able to as aggressively pursue some opportunities or actually win some opportunities that we felt would either our---+ or ours to lose. I think that through 2016, there was still an element of that with respect to our commercial opportunities and as we've commented in recent quarters we're trying to invest to get ahead of that curve while acknowledging the life cycle of the products that are already in our plants and kind of make sure we intelligently put capital in that reflects that. So I think the short answer to your question is yes there probably was a little bit of crowding out but we think it was starting to subside as we start to get ahead of the capacity curve here a little bit or plan to soon. Yeah, It's a variety of factors, <UNK>. The quarter definitely ended up a bit better than we thought with respect to costs. Manufacturing variances, FX, everything contributable to sales up a little bit production capacity was---+ actual production was up a little bit---+ and so there was no one factor and we were a bit pleasantly surprised by the outcome of the margins also. I think just I'd add 44% is exceptionally high. So we ---+ the year 42% is probably more representative of what we would expect going forward. Thank you Good morning <UNK>. Yeah. It's right now we're looking at that as mid-single digit billions in the nature of those revenues would be it's virtually all profit. Just by virtue of it falling into other revenue, meaning it's not a normal (inaudible) ---+ that we're manufacturing with costs of goods sold against it. It's some other kind of arrangement profit share take or pay or what not. So we have a couple of arrangements this year that we think will fall into that category and traditionally there's been a negligible ifference between the two but we thought it made sense to not ignore that, obviously,---+ potentially important revenue to us. So that's kind of the story line there. We would expect to see some revenues there going forward and I won't---+ obviously, we're not in a position to talk about what it's going to be in 2018 and beyond but we would expect to see some revenues there. Potentially, yes, and potentially yes to the second question also. No. <UNK>, I was specifically referring to the opiates market. And it was really more of a general macro comment about, there's a lot of attention in the United States today on the opiates market. And so I used the word really constrained in a macro sense. We'll continue to try to enter that market with the two products that we've introduced and we're sampling and we're looking at other products for that market as well. Well, historically is a big word, so let me narrow that down a bit. In the early 2000s there was dramatic price declines in the high single digits, some years in double digits. In recent years we've seen 1% to 3% price reduction there is so yes we think it's in line with recent history and will continue to be in line or at least that's our current expectations based on our discussions for pricing in 2017. So, this year as <UNK> said we are looking at 2% to 3% and its the usual mix of tiered pricing arrangement---+ contractual step downs and negotiated prices Yes. I think ---+ this is <UNK>, David. That's a good question. What we've seen over the years and I think some other API producers that we compete with have seen and talked about this a bit, occasionally we have an opportunity to make an API and perhaps it's there's not a high volume demand for it in return for manufacturing the product that at some scale you get the opportunity or you can take the opportunity to participate in the downstream profits on the product when it's commercialized. And so like some of our competitors and just naturally opportunistically will take a look at those opportunities when they arise and we have one of them on board now and we'll consider them in the future adding additional arrangements like that if they arise and make sense. Yeah. <UNK>---+ the only thing I would add is we're talking about generic APIs I would ---+ I would say that probably 80% or so are what we would characterize as late stage, something in that range. We are definitely aggressive about winning both the late stage and the commercial for obvious reasons. I would say in general, the industry data would show about 60% to 70% of the Phase 3s would carry through to get approved. If they're ---+ the drug goes into registration, it's quite a bit higher. If you ask me about Phase 2s, it's probably about 25%. So that's more or less the agreed upon industry data I don't know. Sometimes we get less lucky it seems. So maybe ---+ maybe the odds are with us going forward that it will be high. I'm kidding you. I think over a period of time it's about that. This is <UNK>, David. No. I don't think that's naturally the case. I think the larger they are, the more opportunity you have to improve the margin over time through manufacturing efficiencies and batch size adjustments and all those kinds of things that come with good manufacturing. But on a price per unit basis, our best customers tend to be the small to mid sized folks who are playing you off their own internal capacity. And so you sometimes don't need to be as aggressive to win those opportunities. But it vary from opportunity to opportunity, and ---+ but I would say that it's not necessarily true that the larger opportunities are more lucrative on a per unit basis Venture a guess can often be conflated with guidance. So let me just clarify that, it's my job to root out, analyze, and evaluate if there's something out there that we can do to strengthen the Cambrex brand and we want to make sure we had some dedicated, dare I say senior resources to do it and hopefully I'll bring some value there but I'm not going to go out on a limb and say that it's likely we'll do something, obviously, we'd love to do something if it made sense Thank you David. Ashley, If there's nobody in the queue I think we can wrap up the call and thank everybody for their call at this point and look forward to speaking to all of you next quarter. Thank you.

2017_CBM

2016

DKS

DKS #I don't think it was that. We've done a better job. Our team continues to get better. I'm sure we picked up some business from Sports Authority's online business. Our footwear and apparel business, we continue to be very aggressive in footwear and apparel around the online business. And the Penns and the Cavs winning was also helpful to that business, too. It's a little bit of everything. Mostly I think it's that we've done a better job marketing our online business and we've been much more aggressive with our online business, and expect to continue to do so. We'll stay right where we're at for right now. We're not going to provide anything. We clearly see it as a strategic asset for us and that's why we acquired it. And we're working through plans right now as to how we would deploy that, the intellectual property. As Ed mentioned earlier, the key element of that also was the customer names and the list and how we market to them and how we bring them over to become DICK'S customers. But we see that as very strategic for us. We're looking at a number of alternatives to how we might use that. We haven't landed on any particular strategy or tactic yet. But those are some of the things we're talking about. Well, we've got marketing plans going into the fall that will be inspirational, the same kind of thought, but they won't be exactly those Olympic spots. We'll be doing something different. But we'll be leveraging what we have always done, and that's focusing on that core true athlete. And whether that's the true athlete that is participating in the Olympics or that really true athlete who is out there running, playing baseball, basketball, doing yoga, we really focus on the authentic side of the business, and we'll continue to do so. I agree with you, our marketing team did a great job with those, the marketing plan around the Olympics and we've gotten great accolades for it. As we do more and more business online, the business gets to look more and more like what we're doing in the Company as a whole. As far as who's shopping there, we're getting new customers all the time. There's a combination of new customers and existing customers, customers who shop online, who shop in the store. It's kind of what you would expect of what's going on with our business online. And I think we continue to take market share online from a sports and fitness standpoint. We still definitely think that, and we're getting closer and closer to that every year. We continue to make improvements in that direction. We're being very thoughtful about that, whether it's external or internal. And we're talking with the Board. We're going through how best to position this. And it won't be long before we have a final decision. Thank you. I'd like to thank everyone for joining us on the call. And we look forward to talking with everyone about our third quarter in a few months. Thank you.

2016_DKS

2017

HFC

HFC #Sure. In the Permian, we are seeing the rig count in the production levels increasing. I don't think there's any secret there. A lot of that is in the counties that are right around our Artesia and Wilmington refineries. We are pleased to see that increased production. That presents opportunities for both our refinery in Artesia, New Mexico as well as HEP that participate in the midstream business around those assets. Having said that, there's a lot of pipeline capacity to the Permian to the Gulf Coast, where it's going to take a significant continued increase of production to fill up those pipelines to lead to widening crude differentials between Midland and say Cushing or the Gulf Coast. Sure. <UNK>, directionally, the incremental crudes from the shale production there are lighter, but one of the reasons why we are pleased with this project that we're going to be doing during the turnaround to emulate those recycle streams and allow us to increase our ability to run lighter crudes. There's no question there's going to be, need to be some solutions to placing these higher gravity crude into existing pipeline infrastructure, and again, this is one area where we hope that HEP will be actively participating. Anything else on the Permian, <UNK>, or is that good. Okay. Scoop and stack, we're not experts in that area. We see it secondarily to the movement of that crude to Cushing. From what we see and know, scoop and stack is another, much smaller, player in the Permian, but comparable to Permian, where, again, production is very active. And again, the incremental barrel tends to be lighter than your typical 42 gravity WTI. On the Uinta Basin, we're seeing some signs of production there by smaller producers. Larger producers like New Field have other plays they are focused on. But you see smaller producers picking up the slack and it's very early in that pickup. It's one of the last basins that we anticipate production increasing, but for producers that don't have positions in the other plays like the Permian and scoop and stack, we're seeing interest in producing those barrels. It's a much lower risk play in [ENO]. The crude is there. It is just a matter of financing the wells and having a market like us to produce it in. That project is on hold for now. We continue to work with engineering and cost estimate. We're still optimistic about that project. It's going to be a good one for potential octane and tier III solutions, but it's not something that we need for either. It's just an opportunity investment for us to further decrease our gasoline sulfur for TFC and make more octane. But again, we can lead tier III and produce our octane without that project. Sure. I think a couple things on that, <UNK>. We have some initiatives that are based on or driven towards the OpEx, just the dollars perspective. We have some fixed costs that we need to drop out of the system, maintenance being the biggest one, but we also have a series of other smaller targeted cost-reduction efforts, water consumption being one I can highlight. But the biggest opportunity we have in the Rockies is getting throughput up. That's been our biggest challenge in Cheyenne. That refinery is rated at 50,000 barrels per day. It's actually 52,000, but it's tough for us to run at that crude capacity. The downstream is not matched up to that rate. But there's no reason we shouldn't be able to run the facility in the high 40,000s: 47,000, 48,000. We have reliability initiatives in place to go get that and that constraints in coke handling and sulfur handling that we're addressing as well. The models not only increase the throughput, but also increase the percentage of WCS in front of that facility, which fits to your gross margin question. But when you look at gross margin, that is our biggest facility to influence it is on the fluid side of the equation. The product market is what the product market is. The big lever to increasing our WCS percentage in that fluid side, that's Cheyenne. Yes, we've guided 350,000 to 360,000 for the first quarter. Again, it's impacted by some turnaround, the biggest one being Navajo where we have a 45-day outage that looks like we need about every unit in the refinery down in various stages and then we have a 17-day outage at El Dorado, which will impact crude rates there appreciably. As far as builds, they're basically at the same level where they were last year. The good news is the build is less this year from last year, not significantly less, but less nonetheless. And on the build side, I think there's definitely some questions on demand. I don't think that demand has decreased as much as some of the reports would indicate. And when I see that demand decreasing 4%, that sounds very high to me. Which suggests there might be some weather issues in the data or perhaps some issues with export data and how that calculates into a demand number. I still think that the majority of the build in refined products, especially gasoline, is more supply driven. And I think we have more maintenance planned this year than perhaps last year and hopefully with this turnaround coming up, that will decrease inventory levels and some of the inventory level will go up in advance of those turnarounds so that and as we did it at Navajo, they're [dance] about turnaround there, we built inventory so that we could supply our customers during downtime. No, no. There is no economic run cuts. As you know, we have a pretty good product market location product but are net short product and with the incremental barrel coming from somewhere else. We typically run our plants full-out. The last time we got an economic run cut was about a year ago now, it was about 5,000 a day and it lasted for about a week. So, no harm in the increase. But again, the reason the numbers might be low is we have, again, the turnarounds at Navajo. It's 45 days, significantly half of the quarter, Navajo is going to be at significantly reduced rates. Again, El Dorado is going to down for 17 days. When the vacuum tower, the fluid tower goes down with it. And then we have the 12 to week former that we mentioned. That downtime occurred in the fourth quarter and still into the first quarter. And then one of the questions the <UNK> asked that I forgot to address was Woods Cross. There are issues with the Salt Lake City pipeline. That's the major supply pipeline into all the refineries in Salt Lake. So, we are running at reduced rates there, roughly in the ballpark of 30,000 to 31,000 barrels a day versus our high-30,000s that we've run since the turnaround. This was the Woods Cross expansion turnaround. Yes, <UNK>, on the first question, what I would tell you is that because this non-GAAP, non-audited results that we see in Suncor did not break the valve and we cannot give an exact number, but we will tell you that, yes, we are very comfortable with the previous guidance and the $150 million number you mentioned, again, on a non-GAAP, non-audited basis looks very close to exactly what we were expecting and what the actual results were. As to the margins, I'll let <UNK> or <UNK>, maybe Tom, comment. Hello, <UNK>. It's <UNK>. I think on the base oil side, the year started off a little bit soft, not unexpected seasonally and downstream of that, finished product margins remain strong. So we, again, to <UNK>'s point, feel very confident in our numbers and our guidance around PCLI. Yes, I think we're planning an analyst day meeting later this year, probably in December. I think 2017 is going to be very focused on integrating and making the improvements we anticipate and capturing the synergies with PCLI. We are still going to be looking for other opportunities, but our primary focus, again, is going to be on PCLI. That's obviously a huge acquisition for us. We think there's tremendous potential to integrate that with Tulsa and to use that platform for growth. There are other opportunities that we're looking at, both in refining and for HEP, especially in the Permian. But, by far and away, our biggest priority is PCLI this year. The biggest structural change in the Rockies is on the crude side again. It's a $50 crude, there's obviously more production. Then there's the $100 crude. You see that across the entire domestic sector, but you especially feel it in the Rockies. We've seen significant contractions or narrowing of crude differentials there and that's the biggest change in the second half of last year is that the crude that we've typically enjoyed at Cheyenne, especially at Woods Cross, has narrowed significantly in the last few months. I think that it will continue until, again, production increases. And that's going to be driven by crude price. I think we're on a day-to-day basis here, working to get the permits and permissions we need to get in there and do the work. I think the work is well-defined what needs to get done. But it's really just the upfront work that needs to get done to clear the way for the fix. Go ahead, Ed. I think the fee optimization is not exclusively the wax crude gas oil. I think there's also feedstock from Tulsa, since we're a third-party feedstock, it would all be conducive to making more group III versus group II. I think we should give us a little time and check about towards the end of the year to see some of that coming through. Again, putting odds on things like this is very difficult to do. I would put the odds are greater than 50% and less than 100%, so I think in the midpoint, 75%. I think there's no question there's a lot of people on the other side of this, but the people that are on the other side of this are frankly the people that are realizing unintended windfall profits from this. So, but we still believe we have right on our side, whatever the intents of the RFX to generate winners and losers to this magnitude. Again, to generate profit centers that were never intended to exist. And I would just add to that, Ed, that as <UNK> mentioned in the open, while the new chair of the EPA, Mr. Pruitt, is not likely to be a radical, our experience having worked with him as the Attorney General in Oklahoma with our ownership of the refinery there is that he is of sound mind and a critical thinker and one that is certainly at least willing to understand both sides and our view, as <UNK> said, is that there is a better than 50/50 chance that we get some movement there. Don't know until it's done, but again, our view is a better than average chance. I guess one last thought on this one, Ed. The flaws in the RFS could never be better illustrated than what we've seen since the election. We're infiltrating over dollar and right now, they're trading for less than $0.50. There is no fundamental change in supply/demand balance for RINs. So again, it just highlights the speculation and how subject to manipulation the RINs market is and how the misalignment between the points of obligation and the point of bonding is causing this market to be highly distorted and it needs to be fixed. That's one of the reasons why we like PCLI deal. That, again, in combination with Tulsa, it gives us scale to basically have a full third leg to our growth story here. We think there's opportunities in the M&A arena for lubes just like there are, again, like you said, on the refining MLP side. We're, again, very early in the stages of tapping into that deal flow, but we see deals of various sizes in the lubricant space that would be nice bolt-ons to PCLI. We don't have any specifics to share at this time, but we're encouraged by what we're seeing this early in the game and getting into that deal flow. I think, <UNK>, we'd prefer to think of it as changing the product plate rather than volume expansion. The facility makes 15,000 or 16,000 barrels per day of base oil. And right now, it's about 20% group III and 80% group II, so we're actually II plus type of material. Again, very early stages of what we could do with the feedstock optimization strategy. But, we think there's potential to increase group III production by a few thousand barrels per day, and again, every barrel that is converted from group II to group III has an $80 per barrel uplift. We think we can get this done with no to minimal investment. We might need to make some pre-treating type investments, but we're talking something in the order of $5 million to $10 million. But, again, very early stages of quantifying both the potential and any potential costs associated with doing that. Sure. Thanks. On the tax side, certainly prior to our PCLI acquisition, HollyFrontier is the definition of a full US taxpayer. We have been so and, certainly through the early part of this decade, paid a tremendous amount of US tax. If you get a reduction to 25% or 30% or 20% all of that would be incrementally very positive for us. On the PCLI side, we do have a few structures that does help us with taxes there, but for the most part, again, a huge gain to us if we do get a change and that would be great. But, again, much the same with our comments on border adjustment. I think our tax department view is that, even if you get the consensus of something that gets taxed, at the very, very earliest, we'd be talking about back half of 2018 and perhaps later before you see something that's implemented. But, we'll keep our fingers crossed, certainly, on that one. In terms of use of the free cash flow, we would love to have that problem and have it start as soon as the second quarter, but really no change there. I mean, we've deferred some discretionary opportunity growth CapEx projects that we think are very high return and I think that would be the first and those tend to be 1.5- to 2-year paybacks. Hopeful, look at, I think share repurchase would be the next leg we'd look at because that's really been a preferred method versus the special dividends or such that we looked at earlier just after our merger. I'm certain <UNK> looks forward to that problem and hope it begins the day that I leave. No, that's definitely something that we're looking at, <UNK>. We do have our hands a little bit busy like we've talked about right this minute with PCLI and closing the year's financial statements. But, we will definitely be looking at this. There's a lot of tax implications here that we need to really get into the details. As you know, the devil's in the details on that type of thing. But we think it is something that could be potentially be good for both HEP and HFC as the GP. I would not say that. I think if it's something that's going to be good, I think that's something we can figure out this year. If it is good for both sides, then I think it'll be something that potentially could be done this year. No guarantees, but again, I would think sooner rather than later on that. That is your third question, <UNK>. Just saying. Well I just saw your quarter side set here, so I wanted to let you know. Yes. I think the conversion to JV is it's not limited to us or to refining in general. As you know, the issue with JV is that if, even if both parties consensus is perfectly aligned at the beginning, over time, they can tend to drift and become misaligned. I think the Motiva venture is a good case study in that one. So again, initial alignment is difficult and then maintaining alignment over time is again difficult. But having said all that, <UNK>, never say never. If there are enough incentives to enter a JV, especially on a refining JV, where perhaps we'd bring something to the table from a marketing or supply perspective or operational perspective, gives us trading opportunities, sure, we would look at it. But going in, we would be with a very cautious eye. I think for the full year, <UNK>, it was about $90 million, $95 million. And for the fourth quarter, it was about $28 million. Sure. At the highest level, we agree with your statement. We are not pleased with where we are here. We are not meeting the objectives that we set up in our business improvement plan. But having said that, at the risk of sounding like I'm making excuses, extenuating circumstances on some of our downtime. For example, the Tulsa reformer that we highlighted in the prepared remarks, the issue with that downtime is primarily associated with the original conversion of that unit to a CCR that was done prior to HollyFrontier even taking ownership in that facility and it's taken basically 10 years for that design flaw to show up and it's basically some support rings and caps internal for the reactor that's failed and basically, the eternals to the reactor altered and move that point. But, having said that, we are fully focused on operational improvements, we've made significant investments in people and in our efforts to improve reliability, especially in utility systems. We have got a team of 10 to 15 people here in Dallas at the corporate level lending assistance to the plants to improve their reliability across the board. One of the best examples I think I can highlight is our BMI program, where we've identified various pieces of pipe that had it not been for this program could have failed and could've led not only to downtime, but significant safety events in that facility. I think we're not going to get into a whole lot of detail here. We'll start sharing more of that information as we report our financials. But at a high level, this is a very fixed cost driven business, as refining tends to be in general. Especially so in the differentiated high-margin business in that we have a lot of pretty big sales in R&D staff associated with PCLI. Beyond the plant level, there is also fixed cost associated with those capabilities. I think it's less sensitive to changes in crude price than refined products definitely are. It sensitive, but much less so, and I would say that also, it tends to be more lagged than we find products typically are. Hello, <UNK>. It's <UNK>. So, we've been on the ground for about three weeks now and credit to our accounting department, they've also been trying to wrap up a 10-K, so it's really premature to go there. We will have some detail and we will report this as a separate segment for the first quarter and I expect this will also evolve with time. PCLI costs are in corporate and RINs for the fourth quarter, <UNK>. $75 million. $75 million and the full-year was $240 million. All our refineries can meet the tier III requirements. We had our last plant was Navajo and we have our prime G units just completed there. And it is ready to start up if we need it. Those other two plants are the smaller plants, Woods Cross and Cheyenne, and both of those have small refinery exemptions to push out the compliance until 2020. Thanks, everyone. We appreciate you taking the time this morning to join us. If you have any follow-up questions, as always, Craig and I will be available all day. Thank you very much.

2017_HFC

2017

MTDR

MTDR #Thank you, <UNK>, and good morning to everyone on the line. I know this is a busy morning for you, but we really appreciate you're participating in today's call. Now, I would like to introduce you to the senior members of the operating staff, who joining me this morning, who are standing by for any questions. Matt <UNK>, President; <UNK> <UNK>, Executive Vice President and Chief Financial Officer; Craig Adams, Executive Vice President, Land, Legal and Administration; Van Singleton, Executive Vice President of Land; Billy Goodwin, Executive Vice President of Operations; Brad <UNK>, Senior Vice President of Reservoir Engineering and Chief Technology Officer; Gregg Krug, Senior Vice President, Marketing and Midstream; Rob <UNK>alik, our new Senior Vice President and Chief Accounting Officer, who was just promoted; Matt Spicer, Vice President and General Manager of Midstream; Kathy Wayne, Vice President, Controller and Treasurer; Brian Willey, Vice President and Co-General Counsel; Bryan Erman, Vice President and Co-General Counsel; <UNK> <UNK>, Vice President of Geoscience; Tom Elsener, Vice President, Engineering &amp; Asset Manager; and Jim Basich, who's just been promoted to Vice President and Managing Director, IT. I am pleased to announce another quarter of strong execution and better-than-expected operational and financial results by the Matador staff for its shareholders in the third quarter of 2017. I'd like to highlight a few quick key points before taking your questions. First thing I'd like to just say, as you read in your press release, this is the best quarter we have had in company history. And I'm pleased because we were dealing with $50 oil and not $100 oil. And through volume and execution in cutting costs, our teams really delivered. And it's a record quarter in terms of reserves and nearly every other category. Great work on reducing LO<UNK> And so you can say in midstream advance to plan that it was a total team effort. But I'd like to express particular appreciation to the field staff, who anticipated the Hurricane Harvey and had our field operations in good order so that Hurricane Harvey had minimal impact, and all the extra effort that they've done to hook up so we're not flaring any and that they have been very innovative on implementing artificial lift and improving our results there. So a special shout out to them. Second to the group in the office, I attribute a good part of the good results at our land midstream and E and P group have been quick to act on opportunities and that <UNK> <UNK> and Rob, our financial group, has had the financial flexibility to do so and the operational expertise to be quick on making changes and making improvements. Finally, I'd like to open the questions by just noting that this is our 13th consecutive quarter where we've met or exceeded guidance. All the areas of the company are working. All around the basin, each of our asset teams have delivered good results. And we've had good results coming out of our ancillary areas in the Haynesville and in the Eagle Ford. Just everything ---+ this was just one of those quarters where everything came together. We hope to continue it, and want to invite everybody on the call to come see us sometime and meet the whole staff. <UNK> and Matt and I try to get our on a regular basis, but would like for you to meet the actual guys on the front lines, who are really making it happen. And with that, I'd like to now open the call back to the operator for your questions. This is <UNK>. I'll start and let the other guys chime in. I think what we have tried to focus on, Jeff, is the opportunity set that we have and not focus so much on the out-spend but more on what we're spending the money for. And I think that we feel like that we spend our money primarily in 3 ways, or our shareholders' money primarily in 3 ways. One, by drilling good wells for less money, which I think we've done well in the past few years particularly out in the Delaware Basin, but also, prior to that, in the Eagle Ford. I think that we have demonstrated our ability to create value through our midstream opportunities and the midstream program that we've got going out in the Delaware particularly and have demonstrated that a couple of times with even a couple of monetization events so far. And I think that continues to grow well. And then the other thing is on the land side, I think we've demonstrated that we have put together an extremely high-quality land position at prices that have tended to be very attractive and below market. So we try to focus on the opportunities that are out there for us. And when we see them, we hope to be able to take advantage of them. And we obviously can't take advantage of all of them, but we try to focus in on the ones that are most important. With regard to the cash flow neutrality, it isn't something that we're averse to, obviously. And we run various different scenarios, as I'm sure other do too, as to how to achieve that. As you would know, it's probably a function of growth versus commodity price versus opportunity set that you have available. And we continue to look for the right mix of that. I think we expect that we'll outspend our cash flow a bit next year, but if commodity prices find themselves continuing to move forward and are up in the $60 range, well, that may get us there. So we certainly would be much close. So I hope that answers your question. Joe may want to add a little bit to that. But I think that's how we're looking at it. And again, I just want to emphasize that we feel like that we're trying to take advantage of what we consider to be very special opportunities that we see available to Matador. <UNK>, I think you did a really good in explaining. It's a very good question. It's something that we talk about every day. But one of the reasons when you're a company like ours that's starting off small and trying to get bigger, you can't do it like everybody else. You've got to be a little nimble and you've got to do things a little differently. And one of the things that we've always done differently in our 34-year history is that we plan for difficult times when prices are low and we make more ---+ as much or more progress in difficult times than we do in the more robust times. And you're like a farmer or a rancher, if you're a farmer or a rancher and you don't plan every 4 or 5 years to have a drought, you'll not be in business long. And when you're a small company like ours, if you're not prepared during the robust times that there will be a drought, you're not going to be around very long. And so we really try to be extra careful in those more robust times so that when the difficult times we have the borrowing capacity, we have the shareholders' support to take advantage of some of those special opportunities that come up in the more difficult times that are not around in the robust times. And that's we experienced this year and last year; that there was a number of opportunities that if we hadn't acted upon to buy land, for example, land or the midstream, they wouldn't have been around in a year or 2 or 3 from here. That when the land came up, you could buy it then or you'll never get it. And we were able to get it at such good prices, one average of about 6 to 8 weighted average, $6,000 to $8,000, and it's a nibble in there or there, you just couldn't pass it up. And when midstream came around, it was not only needed because you have to process your gas, but we saw that there was an absence and with our drilling plans, we knew we could be the anchor tenant and thought it was the right thing to do. And I think it's proving out that way. We went public 5 years ago. Our value prior to going public was about $300 million. And today it's over $3 billion. And shareholders have moved from $12 a share to approaching $30 a share even when oil prices as half of what they were 2 or 3 years ago. And I'm not saying that strategy will always work for us, but while we're small, we're adding value. But we've got to do things a little different and be a little more flexibly and on the technical side, a little more innovative and be among the first to do things rather than a company that has other advantages. We've got to be more nimble and more quick. And that's the way I look at it. I think <UNK>'s answer was very good. And when we sit down and talk about these things, we aim for ---+ we try to be very fiscally disciplined, but we don't - I think you hurt yourself either being too conservative or too aggressive. We just try to be middle of the fairway, but optimistic. Matt, do you want to add to that. Yes, I think <UNK> and Joe both said it very well. But when I think about it, Jeff, and you've heard us say this over and over and over, it's profitable growth at a measured pace. And a lot of times people think about that in different terms. The commodity prices are higher and people trying to figure out to grow and what the right rate to grow is. So when I think about this, I think, as <UNK> has said very well, it's how you invest those dollars. As long as you're creating value and you're consistent with how you're creating value and you're looking at things from an opportunity standpoint, for instance this midstream stuff that Joe was talking about, that's something I think that's been available to us as a result of low commodity prices. And I think we've been able to do a good job at exploiting that and again, getting back to profitable growth at a measured pace. This is <UNK> again. No we were real pleased with the results of the Wolf Camp B. It, as we mentioned in the earnings release, probably floated the highest pressure of any well that we've had out in the Delaware Basin. I feel that it's likely that if we had opened it up a little more it would have just coming on. Its results were excellent. I think they were quite comparable to the Wolf Camp B up in the Rustler Breaks area. It's a little deeper here. So I think the expectation that it might be a little bit gassier was sort of in line with what we thought, but still had nice oil production coming along with it. And I certainly think that we'll look to incorporate this zone going forward. I think we see it now as another very viable completion target for us at Wolf and I'm sure we'll have a couple of additional tests of that zone if we can get them worked into our plans for next year. And I think we'll probably want to test it to the west and maybe up to the north. We just got this one test kind of right on the east to begin with so we're going to want to validate it across the acreage position. But all in all, I would say that we were very happy with the results from that well and look forward to doing more tests on it. This is Matt. Just to add to what <UNK> has said there too. I think one of the other things that is encouraging about this, and it's a hats off to <UNK> and the Geoscience team, is it's about delineating yet another horizon and how that gives us confidence in our ability to go in and look at data and determine which of these zones may or may not be prospective and to go in and pick the right zone and drill it, and Billy and his Operations teams, about going in and staying in these zones and completing these zones and getting good wells. I think it just gives us confidence to try even more and more zones in the basin. Well, <UNK>, it isn't just buying isolated tracts. What we focus on is buying within our existing units, is one thing. So we're bolting on additional working interest to what we already have. So it doesn't add people. We know the property. It's already producing or about to drill. We have control over it. That's our main focus. Or on the adjacent acreage, where we'll soon be drilling. And when that acreage becomes available like that, you either take it or somebody else will snap it up and then the well produces and it won't be available again for years to come. So your good sense is you just need to find a way to make that work. The other things that we try to do is, as you remember, <UNK>, when we started in Rustler Breaks, we had a few scattered tracts and we filled in the gaps and now it's getting a little blockier. That's what we want to do. And then the third thing is our guys have done a good job with delineating acreage and we can see where the trends are going. And the last thing is, is the minerals. We've had some mineral opportunities become available to us and that fit in well with our drilling because they add to our net revenue interest and make it that much more valuable. So we're on the lookout for opportunities like that and work with people who are interested. And sometimes we have some creative deals where we give carry the interest for people who don't want to expend all their capital. They'll keep some and we'll carry them for some or make a deal of some sort. And that's worked out pretty favorably. And the other thing is the repeat business that we've had with people. So it's just one of those things that comes up. And at the prices we've been getting it, I think it's a value-add because in many cases, we're actually adding reserves with the purchase or adding production with the purchase. One example was at the federal sale where one tract already had 2 wells drilled on it by us. So that was money in the bank. And that's a good example of the opportunity. Once that was sold that lease wasn't going to come up again. But that completed our 640-acre section there. So did that answer your question. <UNK>, it's the full range of people out there. And our guys are just out there trying to cover everything. But we welcome people bringing deals to us. We've looked at some of the bigger deals, but they just haven't had the same fit as acquiring it a brick at a time, as <UNK> likes to say. I'd like to stress is that the way we do particularly land is a group effort that we get in here together with <UNK>, Geoscience and Brad on the Engineering and Matt <UNK> and <UNK>. And we talk about this. And we're not all of one opinion. And it just kind of works its way around. But I think the first option is to stay with the Delaware, but we always try to look down the road a little bit for what's next. I still think that Twin Lakes has a lot of promise. The Culbertson well has performed well. It came on. It's the best Wolf Camp D well we've drilled up there. And even though we can see a lot of room for improvement, it came on for over 600 barrels a day and it's leveled off and been very, very flat, better than expected flat. We had predicted it would level off and be very a steady performer and that's what it's developed, which has given us encouragement. We're drilling with Cimarex out there and seeing what it is over to the west. But we've been approached by another operator to drill a well with them in the east. So we're starting to get data points and the results that we've had have gotten, it looks like, some other people interested. And we still plan to drill a well in the Kemnitz area. But that's an example of some we're still looking at what next, but the opportunities in the Delaware have been strong enough that we've had a pretty full plate down there. But always ready to add to it under the right circumstances. I don't know if I said that well. Matt, would you add. Yes, <UNK>. This is Matt. And I think just to build on that, one of the things I think that's very favorable to us is you mentioned appetite based on returns and a lot of these acreage adds were able to put together our on blocks, as Joe said, that either have wells drilled on them or were proposing to drill wells on them. So we were very comfortable with economics on those acreage adds. And it's very easy for us to slide that into the inventory. And we do. We all are of separate minds and we sit down and we talk about this. But a lot of these things, like I said, in blocks where we're proposing wells or have drilled wells or will be drilling wells, that's a pretty easy add. And the thing that's to our advantage there, a lot of times maybe it's not 500 acres; maybe it's 5 acres and maybe it's 10 acres or whatever it is. But Van and his team, they are able to go in there and negotiate these purchases at very favorable prices. So it's a great way to slowly build on to our acreage position. Well, <UNK>, that's kind of almost a do you beat your wife type of question or how hard ---+ how many times do you expect to beat her up into next year. But the spending you take what is assumed that you're spending on capital spending will achieve the same kind of returns that you had this year. Well, if you cut that back, you're going to ultimately cut back your production growth in the ride. And I think Matt had said it very well that we try to do profitable growth at a measured pace. And tell us what price is. It's not a one-variable thing. That tell us what price is and we'll give you a better idea what CapEx is going to be. And what the economics are. I just ---+ we want to grow, but we want profitable growth at that measured pace and you're not going to see us throw 5 extra rigs out there because you lose innovation and you lose progress. You're going to see us kind of go ---+ we're more of a tortoise than a hare. And we want that profitable growth. <UNK>. Well maybe, Joe, I'd just say, <UNK>, I think as we tried to lay out in the earnings release, obviously we're well into the process of deciding on our plans for 2018. We're going to wait until after the first of the year to roll those out. I think we have stated we'll most likely be in that 5 to 6 rig range and I think that's where we'll end up. And I think at this point in year, you're at the point of negotiating new agreements for services and things going into the next year, which certainly informs what your capital plan is going to be. But I'm excited going into next year because I am very pleased with the lineup of wells that we have to drill. And I know that our Operations team will do everything they can to keep the capital spending as low as they can. I think they've done a very nice job this year of innovating in certain ways to be able to mitigate what service cost increases we did see. And obviously that will be something that we pay a lot of attention to going into next year. So we'll be pleased to share all that with everybody after the 1st of the year, but obviously we're looking to continue to drill great wells as cheap as we possibly can. Yes. So, Ben, I think if in fact we elect to keep the sixth rig ---+ as we pointed out, we have a sixth rig. It is currently pretty well dedicated to drilling saltwater disposal wells. San Mateo would like to see 5 saltwater disposal wells up in the Rustler Breaks area. And we've got a couple now that are drilled and completed and disposing of water, 1/3 that's been drilled and likely 2 more that are going to come over the next few months. So once we've completed that program, then we will be making the decision as to whether to hang onto that sixth rig or stay at the 5. So I don't think that in any case it's going to be a full 6 rigs for next year. I mean it may be like 5 3/4 or 5 2/3 or something like that because I don't think we would have even in the scenario where we kept it that sixth rig working all year drilling oil and gas wells. So that's one point I would make. Certainly as we get to, if we do go to the sixth rig, I think that will lend itself more to the 2 crews that are probably pretty close to full-time dedicated to Matador. And you're correct; right now, we're using primarily one dedicated crew and kind of spot uses as we need it. But I have to give a shout out to our completions guys. I think they've done a terrific job in 2017 of getting our wells fracked in really much right on schedule with what we had planned for the year. And so I give them a lot of credit even though it hasn't been 2 dedicated crews, they've been able to work successfully with the service companies to achieve what we needed them to do. So my compliments to them. And Matt, you may have something else you want to add on that. Yes, Ben, just to kind of build on what <UNK> is saying. Just getting back to starting with the drilling rigs, as you know, we've got 3 of these rigs that we have under a longer-term contract and they're kind of towards the end of those contracts. But even there, a year, 1.5 years on those rigs. The other 3 we've got on shorter contracts, which gives us a lot of optionality for us to go down or for us to even go up if we wanted to. And I think it speaks to the strength of the relationship we have with Patterson. They've been very good to work with and very receptive to what we need. So in regards to the rigs that we're using, all 6 of them are these high-tech that we've been talking about. We've got the one that's drilling the saltwater disposal wells is kind of the biggest and baddest one we have. So it's great to have that rig drilling saltwater disposal wells. If you decide you want to move that over and start drilling E-and-P wells, that's very easy for us to do and we're very comfortable doing that. As far as the frack crews, you're right; we do have one that's just fully dedicated. Our contract right now is with Haliburton. They've done a great job for us. And as we've talked about throughout the course of the year, the way we plan our business where we're able to get well out in front to get the second crew that you mentioned onboard on a spot basis. So even as far as going into Q1 of 2018, where we need that second crew, we've already got that secured with our vendor. So going into the end of 2017, we will be negotiating service company pricing with our frack vendors, and we will in all likelihood, take the same approach where we'll have some optionality within that contract. If we need to go outside the contract to get our wells fracked, we will. But very comfortable with both the drilling rigs and the frack crews that we have onsite right now. <UNK>, a couple of other subtle points just to keep in mind is that as you move north in the basin, you run into more fractionated leases and it's harder to have a pure 100% lease. And so you're going to normally pick up some working interest partners. That means you don't have 100% of the rig and so having a sixth rig doesn't mean you have one full net rig. The second major difference is whether we're drilling Bone Springs or the deeper Wolfcamp wells because if you're drilling a deeper well, you won't drill as many wells as you might on the Bone Springs. So come of that depends on what we think is the optimal well count for next year between Bone Springs and Wolfcamp. Those are just a couple of the subtleties. But you can expect us to be probably 20 to 5 in the sixth rig, watching whether this current surge in price is a spike an actual turnaround in the forward look on oil and we're watching that very closely. But I think it's safe to say that we'll have at least 5 rigs running and we hope that circumstances will, and cash flow, will be such that we can add that sixth rig at an appropriate time during the year. But it will be based on economics and return on capital and those things and not just growth for growth's sake. We are seeking the profitable growth and that's what we're going to achieve. Yes. I think that's right, Ben. Again, the completion guys have done a great job there. I think they've probably been somewhere in the 6 to 8 on average as far as stages go this year. So that's been terrific. I know on one Eagle Ford wells I think they even got 10 a day in one of those wells. So that was probably the top end of it for 2017. But I think by doing so many of our jobs in pairs this year and kind of doing these simultaneous operations where we've been perfing and prepping one while we're fracking a zone in the other and back and forth; that's been very effective. The increase in the number of stages has been great. And all those things have helped us to reduce cost. The other thing I think in terms of just the efficiency of the operation, I think that's also been helpful in terms of when we needed a second crew from time to time. The fact that we can typically on and off these wells very efficiently from a frack standpoint is also a positive when we're trying to fill in some of those gaps. Well, thanks. It's a team effort. Van's done a good job of bringing his team along to assist him in that. And again, we send an invitation to all of you out there listening to come see us and meet these guys. You're hearing from Matt and <UNK> and me, but we're happy for you to meet the whole team because everybody has done their part this quarter and the other quarters. Mike, I'm going to jump in here real quick and then turn it over to the technical guys. But of course, we haven't seen the end. We've got a 5,000-6,000 foot column. And yes, some of these others have come to the forefront, but there's others down the road. We're looking at them. We can't identify all of them because that affects acreage acquisition and other factors. But we see ---+ continue to see a lot of opportunity out here in the Delaware and in the Twin Lakes area. And we've seen where just moving your landing target a relatively few feet really adds to the productivity and the recovery of the well. So we haven't reached the limit of the number of zones that I think are very prospective. And we have drilled a number and hopefully we're not going to be in full development, 100% development, for a time to come. But we'll continue to turn up some exploration ideas that may want to be tested so that you keep your acreage fresh. There are some zones that obviously are coming out to be concentrated on as very proven at this point. But you know how we say around here, we reserve the right to get smarter. We reserve the right to keep coming up with new ideas and new concepts. <UNK> or <UNK> do you want to want to respond. This is Matt. Just to add to what <UNK> had said there. Finding these new zones and exploring new zones is fantastic. But in regards to maturation, as you mentioned, we're going to continue to evolve on the zones that we're drilling in the development phase. I'm not going to say we're anywhere close to the end of the line and where we're going to go with completion is on targeting intervals and things like that. So we've still got improvements that we think we can make in regards to the ones that we would consider more at the developmental stage as well. And not to overly pile on. This is <UNK>. But I will just say I just want to emphasize what <UNK> said about Antelope Ridge because it was something I was going bring up too. And that is the fact that we haven't tested anything there as yet, Mike. I think we are very optimistic given what others in the industry have been doing. But I think we're looking at first, second, third Bone Spring and at least one target in the Wolfcamp if not more And the Brushy Canyon on top of that. So there's lots of opportunities for us over there. And we were tickled to see EOG's announcement about the first Bone Spring because we actually have a well just sort of in an offsetting section that we've already got teed up to drill in 2018. So looking forward to being able to take advantage of all of those opportunities. And that's in early 2018. I think like Matt was saying, I think when you look at an area like Rustler Breaks where we're running rigs, we'll be moving on out in the northwestern part of that acreage. But there's a lot of that acreage where I would consider we already are pretty solidly in development mode and are drilling 2s and 3s and may have plans to drill more per single pads next Down in Wolf, a lot of what we're doing right now I would say is very much in development mode at the moment, with ---+ we spent a fair amount of time this year kind of delineating out the second Bone Spring, testing the Avalon, testing the Wolfcamp B. We'll do that again next year, as far as some of the new zones go. But mostly, we're planning to drill XY wells because we have the opportunity to drill a lot of longer laterals laterals on that acreage. And so we're going to be sort of focusing right in and through the heart of that acreage and drilling predominantly Wolfcamp X and Y wells next year. I think the great thing, Mike, about the asset base is you can do both on the same pad where we're able to go in and to drill development wells like <UNK>'s talking about and then also like we did down at Wolf, drill a Wolfcamp B exploratory test. So you're able to do both and mix them in there and still see the efficiencies for batch drilling and things like that. Mike, this is Matt. I wouldn't say in any means that we're done with the Avalon there. I think it's early on. The well is making more water than we thought it might. So initially we went in knowing that this well was probably something we were going to have to put on ESP, which we did. And we sought the ESP for what we thought was going to be the right size. It turns out we need a slightly larger capacity on that pump, which we just recently installed it. So it's been producing for a few days here and it's going to take a while for us to get the fluid level drawn down on that (inaudible) where we can actually see what it's going to make. But as far as being encouraged by the Avalon, we still like the Avalon a lot from what we saw when we drilled through it and while we initially drilled this initial well. Yes. And I would just point out, too, Mike, that just remind everybody the Avalon is a 800-900 foot section here and we've drilled one target. We had at least 3 targets that we thought looked very viable here. So by no means are we done. I mean we'll continue working with this well. But there will be other concepts that are put together for the Wolfcamp here. Well, Gabe, we think about those things on every well. What's the best way to do that. And it's just a complex calculus of which way you do that. And you watch what others are doing and what seems to have success. And it varies from area to area depending on what zones are most viable, also what your lease terms are because one well hold all rights all depths or is there pew clauses that limit it. So I mean it's just a lot of factors that go into it. And I don't think we're ---+ we're typically not a company that gets to a point that says one size fits all and that we're going to do all these like this or all these like that. We really try to tailor the drilling, the batch drilling or anything else, to tailoring it to the individual property. One consideration, of course, is that if we were to go out there and leave rig, which you could do potentially, drill on one location all year, but you couldn't complete them until all were drilled, then you'd have a big timing difference on production. So there is another factor in there; that you want to work on making sure you don't ---+ that you keep them all timely and not too much of one or the other. And we have a sizeable acreage position and it's important to work all areas of that because the nice thing is we've been having success in different areas, all these different areas, different zones, different areas, but having that success. So <UNK>, I thought, phrased it pretty well. In some areas we're pretty much in full development mode. And in other areas that we have zones that we could be in full development, but there are some interesting target intervals we want to test so it's in common. And then those you have a mix of development of some zones, but you're doing some exploratory or delineation on a third zone. So it's across the board there. We're trying to optimize the economics of it and be sure it tailors to the property and that we have the infrastructure ready to support it too. What am I leaving out. <UNK>, Brad, anything. I don't think you're leaving out anything, Joe. I think you handled that very well. I thought you did a really good job. And you hit the nail on the head. It really depends on the quality of the reservoirs and the reservoir properties in each of the different layers. And part of that delineation process is evaluating those reservoirs and how far out they can drain and both laterally away from the well bore and vertically up and down. And that dictates how you stack those wells in, the distance vertically between the wells, as well as laterally away from each other. So it's a learning process. We're gathering that data with each new well we drill. And where we are comfortable with certain well spacings and vertical spacings and so forth, Wolf is a good example, we're going to be going in and drilling those wells. And in other areas, we're still learning. So it's a fairly timely process. I mean, Gabe, your question is a good one that we talk about nearly every day around here. What do we want to do here or there. But one thing we did do in anticipation is the rigs that we have have been specially built to allow joint operations off of the same pad. And so we've done that with anticipation that we would do more and more of this batch drilling as we firm this up. And then the last thing that I would mention about this whole sequence of the batch drilling and development and everything else is that you need data is real important. Because when you first ---+ if you're spacing them too closely, I may be getting it a little bit in the weeds, you won't notice that at first when those wells first come on. It's generally about a year before you really start to see the interference. So taking your time. You think maybe I'm ready for the full development, but you sometimes need to wait a year or so to be sure the interference isn't going on. That's just one more factor that goes into the calculus in the puzzle. But I think our deal teams have been very pragmatic. And some of the early drilling we did in the Eagle Ford has made us a little more cautious here in the future development so that you make sure you've got optimal spacing and you understand not only the way the oil and gas flows horizontally, but also potentially vertically into other zones so that you don't over-drill the sections, that you make the maximum use of your capital. <UNK>, I ---+ No. I think you did well again. I do ---+ These guys are giving me way too much credit. OR I'm spending way too much time. Thank you again. I know it's a busy morning, that you've got a lot of different calls to take. We appreciate you listening in. And again, want to extend the invitation to come see us so that you're not scheduled on a call, but you have more time for your questions and meet more of the staff and see the depth that we're trying to develop around here. But thanks again. Thanks again to the staff for such a special quarter, to our vendors for working so much with us and, of course, to our shareholders and other supporters who really helped us with the offering and taking a long-term view and allowing us to grow and to reach this point. And we're excited about the outlook going forward. And with that, we'll sign off.

2017_MTDR

2016

IOSP

IOSP #No. I think from what we've seen probably in the last month of Q1, <UNK>, was a positive trend upwards in not only revenue, but in profit. And I think what you're going to see in Q2 is starting to get back to a positive profit trend holding the GPs at a pretty fairly good state as well. It was a little bit of both. You did see some destocking going from Q4 into Q1 and it continued until about March. But ---+ so combined with the one customer that we mentioned that has now resumed their regular order patterns, it was a combination of both that really hit that business in Q1. But we see quite positive signs moving forward in Q2 and Q3 just from what's on the docket that we've set down with the customers. I think we've done really what we should have done. I think that now it's really just driving that revenue line. And again, as I said, I think you'll see the positive outcome of that in Q2. We took a lot of those costs out in Q1, but really, you're right. It's been primarily the SGA (sic) line. Yes, it was a little bit of everything. You had exchange headwinds; you had some destocking, as you just mentioned. You have ---+ when you take Bakken crude out, it's a much higher cetane crude that gets refined. So when it comes out to a finished fuel, you don't need as much cetane, and we saw that effect of it. So really, the combination of a warm winter, a higher volume of sweet crude going into the refinery, along with exchange headwinds, and I think with AvTel, it's always a little bit lumpy. That's coming back to some normalcy and you will see in Q2 that AvTel will come back into a nice order pattern. So I think you'll see some positive trends moving forward in Q2 as well. You're exactly right. You know, I think that the raw materials are in a fairly stable state right now, <UNK>. And for us, it's just maintaining really our cost infrastructure. So I think you'll see ---+ you could see margins dip down a little from where it was in Q1, but I still think you're going to have a strong margin profile in fuel additives. I would probably keep oilfield margins where they are. I think you'll see a higher revenue in oilfield in Q2 and I'd keep the margins where they are. Yes, <UNK>, we certainly expect our personal care business to continue growing nicely. We've done a good job so far and certainly through 2015 as well. We're targeting high-single-digit sales growth in personal care. And there is some offset with polymers ---+ that's a commodity business mainly in Europe and volumes were down quite substantially in Q1. A part of that was due to some manufacturing issues and we do expect it to improve in Q2. What will be the core focus in that business is going to be on personal care. As we said earlier, when we split this business out from Q2 onwards, you will be able to see the personal care business as a standalone with higher margins and great growth rates as well. We are going to fold polymers into fuel specialties, where we can optimize the asset as part of the fuel specialties business as well. I think to add to <UNK>'s comment, <UNK>, we did have ---+ we will have some volume fall over into Q2 that should have been in Q1 on personal care as well. So as <UNK> said, personal care is really ---+ the business is reacting and performing exactly as we anticipated. You saw a little leakage from the first order that leaked into April. That has now been shipped. The new order, we're trying to balance that ---+ obviously the AvTel and the Mogas orders. You could see a little bit of that leak into the third quarter ---+ sorry, the second quarter ---+ the third quarter. So you could see some leakage into the third quarter. But we are obviously going to try to get as much out as we can in Q2. We're still looking at personal care. We've looked at quite a few deals. We are in the process of speaking to quite a few people. We are just ---+ I think the multiples are starting to come down, which is advantageous. We've steered away from the oilfield for now until some of the better assets come on the market. You've obviously seen 51 bankruptcies alone in the oilfield services sectors, so it's a highly levered market. So we're watching that very closely. You saw that we increased our dividend again 10%, and we've continued to do that on year-on-year basis. And we are very optimistic in the buybacks and we've taken advantage of the market when we feel it's a good time to buy back. And we will continue to do that. And we have the balance sheet to do all three of those. And as we've stated all along, our preference is organic growth, but obviously to balance out our portfolios to continue to look at the personal care market. Yes, when you take ---+ a Bakken crude is a very sweet crude. And when you have a very sweet crude and typically as you refine the crude, it puts out a higher cetane fuel. And obviously, cetane is a large product line for our Company. And so it requires less cetane in some of that fuel. It primary hit the Gulf Coast and West Coast. Now, we see that starting to normalize because they are starting to blend heavy crude with sweet. So we're starting to see some normalize in the market, which should benefit us in Q2 and Q3. Sure. We saw the hit in cetane even in 2014 and 2015. But you got to remember: we had a very cold winter in 2015 and we had a very strong first quarter in 2015. And so when you look at a like-for-like quarter, your big negative impact was that cetane business with the warm winter as well as as we said just earlier in the conversation, customer order patterns ---+ specific customers. And one quite significant order as well. That's correct. We can't talk specific customer, but we can talk specific application. It's in oilfield application that's basically an asphalting dispersant. And the customer just ---+ they destocked in Q1, and so now it's just restocking back up in Q2. That is correct. It varies from business to business. Our main target in fuel specialties is around about 35% of products ---+ of sales from new products in the last five years. Oilfield is different again, and personal care is a lot higher. But our main field specialties business we target over 35%. That's a little bit higher. That's more like 40% to 45%. Yes. Diesel volumes are off. If you look at ---+ It's about 2% to 3%. If you look at the overall market, obviously diesel sales going into the energy sector, which is extremely high usage for diesel. Diesel sales into the mining market is quite significantly down. So in this general market conditions, you saw diesel sales decline a tad. Now, not necessarily in passenger vehicles and not necessarily in over-the-road vehicles from a transportation standpoint. It was more direct towards the oil and gas business and the mining business. And the hope is that you start seeing that trend come back up, and I think we're starting to see that trend come back up latter part of the Q1 and starting into Q2. We don't break it down that way, unfortunately, <UNK>, but you can just tell by the sales pattern that it affected us. You might be talking about ECOCLEAN. Strong sales. You've got higher pressure, higher temperature engines. You've got obviously a lot of the Clean Air acts and CARB. So ECOCLEAN has continued to surge forward. As a matter of fact, we've got trials going on with the railroads. As in any process with fuel additives and new technology and new engine technology, it's continuous. And so we have multiple trials and we have multiple applications that are in play. Great product and we will continue to push forward. You know, we have such a diverse portfolio, <UNK>. It's not like if ECOCLEAN went way that it would kill our portfolio. It's still a very small portion because we are so evenly dispersed with all of our product lines. But it's obviously very key to customers. It's very key to showing off our technology. It's probably about in that same area. It might be a little bit higher, but it's all about in that same area. They are starting to get more pressure. And I think it's ---+ just watching the news, you just have to watch ---+ look at China and look at India and the pressure that's come about from all the other national countries about having a Clean Air Act ---+ a CARB-type diesel or a Euro-type or LSD standardized diesel. It's going to come, <UNK>; it's just a matter of time. I think every quarter, we have a discussion about this at some point in time. We will hopefully have good news and say it's started. We're well positioned when the turn does happen. Still working on it. I would probably say we are still a ways off. I wouldn't say years, but I would say that it's probably something we need to discuss within the next six months. It's going to be around about $20 million, <UNK>. What we actually saw ---+ we expected it to increase over Q1. If you look back at the year end, we finished at a little bit lower than we expect did. So we expected some build. Perhaps not as much as we would have expected, given the slowdown in oilfield. But I think as oilfield starts to come back and we see a higher demand in fuels, you would expect a little bit more of an expansion. And as always dependent on how the order patterns go in octane additives will depend on how we finish each quarter because that can have quite a large swing in working capital. That will stay where it is. Thank you all for joining us today. And thanks to all our shareholders, customers, and Innospec employees for your interest and support. If you have any further questions about Innospec or matters discussed on this call, please give us a call at any time. We look forward to meeting with you again to discuss our Q2 results in August. Thanks again.

2016_IOSP

2015

CNK

CNK #Well we can let our numbers speak for themselves. Obviously, we've had a record-setting attendance increases in quarter. When you look at us, our global platform, I don't think there is any public theater in the marketplace that can say that their attendance increased 6.2 million patrons. And that was driven both in Latin America and also in the US. Although they are doing ---+ and have their strategies to the markets. Cinemark has its strategies, and we think it is reflective in our results. And we continue to perform very highly in every market that we compete. And we applaud again our competitors. And the kind of quality of experience that patrons have access in the ---+ throughout the theatrical experience. Because we think it is good for the overall industry, because we have never seen them as direct competition to us. We've always seen that our competition is to get people to the out-of-home experience. So whether they are going to Cinemark or AMC or Regal, if they have a great experience, that's good for the entire industry. I didn't answer the M&A question you had, and are some really high quality potential acquisitions in Latin America. Whether they would be available or not is another question. There's some really high concepts down there. Thank you. Okay. Well thank you very much for joining us this morning. We look forward to speaking with you again following our third quarter. Thank you.

2015_CNK

2015

ECHO

ECHO #Sure. We're expecting fourth quarter commission expense to be in the range of 30.0% to 31.0% of net revenue. So your math is right, the midpoint is down about $25 million for the full second half of the year and about half of that comes from continued fuel decline and the re-signing of those contracts to fee-based and the rest are really market conditions. It's really more of a change in the way the revenue is recognized in the accounting for that and still a great customer and still a really good partnership and profitable for Echo. <UNK>, this is <UNK>. There's nothing to expect there in the short-term. There's certainly a process to go through to execute on an expansion like that and get everyone under one roof. So those costs will be incurred and start to work their way into the income statement [and] CapEx second half of 2016 most likely. So as we go into the next call and start giving you guidance on what we see for 2016, we'll make sure that's very clear, the cadence and the magnitude of any changes related to that initiative. Hey, <UNK>. I'll jump on this one. So I think one thing to consider is that as we grow to $3 billion, a large portion of that growth will be in truckload and truckload does traditionally have a lower margin percentage. So as we think about our EBITDA margin it's really over the net revenue dollars that we generate. I know your comment relates to that EBITDA margin relative to gross revenue, but we do expect to continue to expand the EBITDA margin as a percentage of net revenue over these coming years as we get leverage over the fixed costs and infrastructure that we've built out, the synergies that we were expecting from the Command integration and so we do definitely expect those to expand over that period of time. So I think the uniqueness of our business model is we can adapt. So in a soft market, the cost of transportation drops and we've got great sourcing capabilities in both companies. When we combine them and when we combine the technology, we'll have even better sourcing capabilities and we'll have better density from a broader network of carriers. So, I think we'll be able to do just fine in a soft market on the buy side. When things tighten up and we know that's going to happen with the future of regulations and electronic recorders and driver shortages and everything else that's looming somewhere in the future, it comes down to being able to find capacity in a tight market and both Echo and Command are known for being good spot market brokers and being able to find that capacity when shippers really need it and so, you sort of adjust your resources on the sell side or the sourcing side depending on market conditions but we've got a very flexible model that I think will be successful in either condition. I think there's competing forces right now. You've got shippers that recognize that the market is soft and trying to get a better price but they are also concerned about locking in capacity and so I'm not quite sure how that's going to play out yet, but you know the market will dictate it and the competitive forces will dictate it. I didn't quite hear that <UNK>, are you talking about the uberization of truckload. Well look, first of all, we consider ourselves a strong technology company and we invest heavily in it and we keep our eye on the trends in the emerging technologies and the emerging players. That being said, it is a market where having customers matters, having capacity matters, having relationship matters, having working capital matters, and so we have all those things and we have the technology, and whether or not a new entrant can make a new marketplace I think remains to be same because you've got to have those other ingredients that I already mentioned, but we're keeping an eye on it. We intend to look around the corner at every bend and we're continuing to invest in our new technology and I think we'll be fine. That's certainly the way we'd view it. All the guidance that we talked about and the analysts who built their models, best of my understanding, that built them around the other guidance that we had given for the second half of the year including that G&A, and we had called out separately some integration costs that obviously we incurred. So we certainly view it as $0.37 number. Thanks. Thanks Nate. Well, I think that you know on these calls in this industry we talk a lot about spot business and contract business really as it pertains to routing guide, but I also consider there's a third category of business, which I would consider transactional relationship business and it is spot market business because you get it every day and it's not contracted to you, but it's based on relationships with carriers and relationships with shippers and doing a good job and servicing them and having them come back repeatedly to do business with you. So, I think both Command and Echo excel at serving our customers and having great relationships with them and if they're not big enough to run a routing guide, it probably doesn't get categorized by those previous two classifications. Well, I mean I would say that if you look at the big routing guides right now, the freight is getting easily covered by the top carrier broker and it's not going very deep into the routing guide. So that essentially means there is no spot rate. On the other hand, I think the distance between a loose market and a tight market is a lot narrower than it used to be. So I can't predict when we go from loose to right, but I think that you know bad weather, disruption in the national network of transportation capacity isn't always that far away and we saw that happen in the first half of 2014. Well, it's a huge market. We've always been true to our strategy of not getting distracted by going too far out of the guard rails. So we want to continue to build scale and density in our chosen markets, but I go back to <UNK>'s question, I do think there is a role for technology both on the shipper side and on the carrier side to increase our productivity, and to increase the value that we provide to customers. So, we're going to continue to look at technology as a differentiator. I just want to ---+ so you can't underestimate the network effect of combining our complementary networks and how that makes us both stronger with our carriers and with our shippers. Well, first of all, I grew up in the asset-based trucking business for many years and I can tell you, it's very hard business. And the beauty of this business is that we essentially outsource that part of it. We buy the capacity from other people that are running the trucks, they're managing labor and dealing with fuel and maintenance and accidents and all of those things that asset-based companies have to do. That's a huge distraction for us that we don't want to deal with. We want to focus on sales, we want to focus on sourcing, we want to focus on maximizing our margins, and delivering shareholder value and we don't want to have to re-invest our EBITDA on replacing aging assets. That is correct. Well, it comes from a variety of sources. First of all, we ---+ in our managed transportation business, most of the time we're taking small companies that have never outsourced transportation before and for the first time are using a third party logistics company to manage their transportation for them. So, that's one source. We don't really measure who the business comes from. We've had success this last year in routing guides getting a more contract rate. When the capacity was tight last year, we had a lot of success in the spot market. So, I would really sum it up by saying we're an aggressive sales organization and we try to have a multi-channel, multi-modal strategy. We think about the market segmented by size of customers and the size of customers essentially correlates to their complexity and the needs that they have and I think our sales strategy has been proven to be successful. Probably haven't given that a lot of thought at this point. First of all, I'll leave the ELDs when I see them. I know they're coming, but that seems to keep getting postponed, but we do have good compliance processes in place today, and of course ELD is not part of that, but once it becomes the law, we'll figure out a way to include it. I'm saying that it has a ---+ since their seasonality is a little different than ours that it will have a bigger impact on our total growth in Q4 than it might otherwise. In my opinion, the problem that you have with Uber strategy is a couple of things, one, truck drivers don't pick their next load, their dispatchers do, unless of course, they're an owner-operator, but owner-operators comprise a fairly small portion of the capacity market. So, the real audience is dispatchers not truck drivers. Certain convenience items that the truck driver would enjoy. Our interest in mobile app has more to do with tracking and productivity documents. That sort of thing. The ability to make a marketplace using a Uber app I think really requires that you control customers and so if you are a start-up tech firm with a slick mobile app, you've got to get enough shippers and you have to get enough carriers to get to critical mass and make a marketplace and it's a big market and I think there are some of these apps, I keep an eye on them, that are having some success, limited success getting a market of capacity but shippers are price sensitive. So, any day I [can] beat that price, the shippers going to rather go with us and I think you have to have a lot of scale, size, and density in truckload brokerage to command the best prices and be competitive and I just can't see a startup doing it. What we're talking about the integration being in middle of 2016. On the headcount, we would likely on the sales side, you'd probably see a modest decline in Q4. We've typically seen that historically because that's not a big hiring quarter for us. So it would be normal to get a slight decline in Q4 and then that would probably translate through to total headcount as well I would say. Well, we don't really worry about it. The market is what the market is and we get up every day and we go find as much freight as we can and then we cover it. If the market is soft, we can cover it at better prices and get better margins and when the market tightens, we find capacity when our customers can't. So if you look back at the history of Echo, we really came into being during the great recession and of course we were much smaller then, but we had no difficulty growing in 2008 and 2009 and you know there was slight bump in the road but we recovered within a quarter or two and resumed our trajectory and I think that's kind of in our DNA. We'd like to think that we're fast on our feet and agile and we'll adapt to any market condition. Sure <UNK>, this is <UNK>. We probably expect a similar amount of integration costs in Q4 that we had in Q3 and that put us right in the middle of the range that we previewed on our last call which was $2 million to $4 million in the back half of 2015. Then as we go through the integration process through the next quarter, we'll offer some more color on the next call about the cost that we'll incur up to the completion of the integration in the middle of next year. Yes. Absolutely. We're going to teach the Command sales reps how to sell it to their customers. Yes <UNK>, we're continually looking at our capital allocation in terms of our M&A pipeline as well as investing in our own stock or convertible debt. We think there are opportunities, we're looking at it and as that develops we'll make sure that you are informed. We think that marketing works. We have a lot of audiences that we need to market to and tell them our story. We market ourselves to our shippers obviously but we market ourselves to carriers. We work hard at managing the morale of our employees and there's a marketing component to that. We brought a fellow in that's got great marketing leadership experience outside the industry and we think that those marketing concepts can apply within Echo, not just for a [mark comm], but from a market research, and analytics standpoint and the market segmentation and strategy. Thank you. I would like to take a moment just to acknowledge the efforts of our team. I think the employees of both Echo and Command have delivered outstanding results despite a tough market and with the added duties associated with integration. So hats off to everybody and I appreciate your efforts and look forward to the coming quarters. And finally, thanks to everybody on the call. We appreciate you listening in and hearing our Q3 results and we will talk to you later.

2015_ECHO

2017

DHX

DHX #Good morning, everyone. With me on the call today is Mike <UNK>, President and Chief Executive Officer of DHI Group, Inc. ; and <UNK> <UNK>, Chief Financial Officer. This morning, we issued a press release describing the company's results for the third quarter of 2017. A copy of that release can be reviewed on the company's website at dhigroupinc.com. Before I turn the call over to Mike, I'd like to note that today's call includes certain forward-looking statements, particularly statements regarding future financial and operating results of the company and its businesses. These statements are based on management's current expectations or beliefs and are subject to uncertainty and changes in circumstances. Actual results may vary materially from those expressed or implied in the statements here due to changes in economics, business, competitive, technological and/or regulatory factors and the planned divestitures of our non-tech businesses and the possibility that such divestiture does not occur. The principal risks that could cause our results to differ materially from our current expectations are detailed in the company's SEC filings, including our Annual Report on Form 10-K and Quarterly Report on Form 10-Q, in the sections entitled Risk Factors, Forward-looking Statements and Management's Discussion & Analysis of financial conditions and results of our operations. The company is under no obligation to update any forward-looking statements except where it is required by federal security laws. Today's call also includes certain non-GAAP financial measures, including adjusted EBITDA and adjusted EBITDA margin. For details on these measures, including why we use them and reconciliations to the most comparable GAAP measures, please refer to our earnings release and our Form 8-K that has been furnished to the SEC, both of which are available on our website. With that, I'll turn the call over to Mike. Great. Thanks, <UNK>, and hi, everyone, and thanks for joining us this morning. I'm going to spend some time today recapping the key initiatives that we commenced to move our tech-focused strategy forward and our progress against them in the third quarter. I'll also discuss the market dynamics that are impacting our business today as well as our view for what will move the dial in 2018. Then I'll turn it over to <UNK>, who'll provide an update on our financials. And before we open it up to questions, I'll talk briefly about the CEO succession plan that we announced this morning. During our last update, we outlined strategic objectives for the second half of 2017 that we believe are paramount to us being successful. We certainly made progress on many of these and we're transitioning from the implementation stage to the execution stage now. We've got most of the people and resources in place and now we're focusing on executing initiatives, evaluating feedback and making adjustments accordingly. It's an iterative process and with our product initiatives and refined value proposition, we expect it'd take some time before the impact is realized in our financial results. The first goal we highlighted last quarter is returning the Dice business to growth. We've done a number of things to organize around this objective and we're focused on improving our sales execution as well as evaluating our product offering. To carry this out, we believe having a fully dedicated tech-focused sales organization in North America will drive a growth agenda for indirect and direct sales. We hired an EVP of sales late in the quarter and expect to see improved performance from that area in the near term. In evaluating our services, we must focus our efforts on the core of what we do best so we've refocused resources from products like getTalent to accelerate results in the Dice service. For example, getTalent is no longer offered as a stand-alone service, however, elements of it including shifting some of the talent who worked on the product, are benefiting Dice. We also began serving the Mainland China market from our Hong Kong office, which created a more efficient cost structure for us going forward. These are just 2 examples of how we're continuing to look at how we serve our markets and best deploy our resources. Other factors we're addressing to return to growth is making adjustments in our go-to-market strategy through our bucket deal approach, mobilizing our enterprise sales force and offering more flexible payment options like pay-for-performance and monthly billing to better meet the needs of our customers. We've certainly had success in pay-for-performance at ClearanceJobs and some early wins at Dice with monthly billing yielding incremental sales, but there's more to be done here. Our second goal was repositioning the tech-focused franchise as the go-to resource to find and connect the best talent. On Dice, we've increased investment into product development around our core offering. Our solutions approach remains, and we see focusing on branding, and product improvements will boost efficiency and deliver highly-skilled candidates to our clients. The number of Dice recruitment package customers with Open Web access rose 7% in the quarter and the penetration among Dice recruit package customers rose to 37%. These are small signals of the power of Open Web and validation that it's proving valuable to customers who are recruiting for hard-to-find tech professionals in a market where specific skill sets are scarce. The usage rate among customers is still pretty low as they continue to adapt to accessing talent through the traditional Dice database and through Open Web profiles. In the next few months, we'll release our Talent Search 4.0, which will improve the integrated search process for both Dice and Open Web. Improving the search experience for our clients is a key to saving time while sourcing. A solution we rolled out at ClearanceJobs will be further joined into our integrated search in the months ahead. This product feature, which we call IntelliSearch, cuts search time from minutes to seconds. IntelliSearch essentially takes the job description and uses that as the search mechanism. By using skills and job-specific words from the full job description, this feature populates best match candidates. Gone are the days of long and complicated boolean strings to attempt to find the right candidate. The deep machine learning in this and our contextual search makes a painful and not very efficient process more manageable, especially for generalist recruiters who have trouble with very specific tech or security-cleared searches. Developing effective APIs for our clients continues to be a strategic priority for us. We've added more partners and advanced discussion with some key players to move this initiative further ahead. This is an important component of demonstrating ROI for clients and solving the attribution issue so many of us in the employment industry face today. We're seeing subtle improvements and today, about half of the customers integrated with our APIs are actively using them. One of the important KPIs related to these tools is the renewal rate of customers with API integrations, which today outpaces our overall renewal rate. This reinforces (inaudible) as customers become more familiar with the various tools and as we continue to make them easier to access, they have a better experience recruiting tech professionals. Improvements to our talent search, including better location functionality, enhanced user interface with filters, managed alerts and advance search, has been rolled out to new business customers and certain enterprise customers. A lot of these features boost our search tool and ultimately help recruiters be more efficient and effective while sourcing. Last quarter, we mentioned the rollout of ClearanceJobs Voice, a new tool, which leverages voice over IP technology, to offer live on-demand voice chat between employers and professionals. Voice lets employers talk directly to candidates logged into ClearanceJobs in real time so they can connect, talk about job opportunity and gain each other's trust. There are no apps to download or plug-ins to install, ClearanceJobs Voice works directly through the user's web browsers. ClearanceJobs is the first online career site to offer live voice over IP communication between employers and candidates. The backlog, today, has reached over 700,000 people waiting for security clearance, and the processing time for a top-secret clearance is now over 500 days. The demand for security-cleared talent so greatly outstrips supply that defense contractors hiring security-cleared talent have reached a roadblock. ClearanceJobs Voice solves the major pain point of connecting the right talent at the right time and we'll be releasing a deeper integration of Voice in 2018. The market to source and recruit tech talent continues to be a challenge. The unemployment rate for tech professionals remains incredibly low and with employment today considered nearly full, recruiters are tasked with offering unique perks and relevant job opportunities. One of the ways we stand apart from competitors is our focus on skills. Our search is tailored to skills, not job titles. Our resume database and Open Web profiles are centered around skill sets and the combination of those skills, which are a tremendous value to employers. We began to see progress from our incremental marketing spend and holistic marketing approach, aligning professional-facing initiatives with customer-facing campaigns. Part of this included partnerships with online news site, Bustle, which culminated with a co-branded study reporting on career and pay gap for women in technology and us sponsoring their Annual Upstart awards, honoring entrepreneurial millennial women. If you check out the Bustle-Tech channel in the month of November, Dice has exclusive positioning to this incredibly important audience. We're also targeting spend on increasing awareness among professionals and employers in secondary tech markets. Our Dice local campaign, which includes radio spots, events and advertising today in Atlanta, Salt Lake City and Charlotte is in its early days, but so far has seen an uptick in page visits, driven by radio and banner ads in those markets. Our third goal is deepening professional engagement through the products, services and insights we deliver. Because the market to recruit tech talent is so heated, highly-skilled candidates are in the driver's seat with choosing ideal job opportunities, yet have a lack of resources to inform their career decisions. One of the tools we use is Dice Careers mobile app, which delivers tailored salary, job recommendations and carrier-pathing data, based on tech pros information. The app accounts for about 20% of our unique visitor traffic today and has had over 500,000 downloads to date. The average number of monthly unique visitors continues to grow from a year ago. There are variety of salary calculators like this in the market, but our focus on skills instead of titles sets us apart. We compete on skills and the content career mapping and search we provide is all based on this concept. The app experience is also available on desktop, in beta, and we'll have a lot more to say about that in the future. Dice has a unique voice in the tech community with our combination of skill expertise and employer insights. We launched the first ever Dice ideal employer survey where tech pros choose their top companies based on a series of attributes and strengths. The study creates a lively discussion and reveals how tech pros feel about places they may be looking to work. The content has been some of the most commented on stories on social to date, and also serves as a valuable lead generation tool for clients. We launched Ideal Employer, originally with eFinancialCareers and received positive reaction for the in-depth analysis, career data it provides on Wall Street employers. Content has been a central part of the eFinancialCareers platform and continues to be an area of focus as we think about how we attract professionals to the product and move them through the funnel to relevant jobs. In fact, we surpassed 2 million unique content users in the quarter, further highlighting the demand among financial services and fintech professionals for this specific information. We also launched a new eFinancialCareers homepage to provide a more personalized user experience based on end users' behavior and usage of the site. So far, we've seen a lift in visits to content and rise in applications to jobs with this approach. The redesign improves relevancy by showing financial professionals the right content at the right time. So that we're with professionals every step of the way of their careers. As we position ourselves for future success, creating an efficient organizational structure to serve the changing needs of our customers is important. It's our fourth goal and we've already laid the groundwork here to propel us in the short term and in the long term. For example, we've migrated many of our services to a cloud-based platform, which reduces downtime in the event of an outage and also creates a simplified infrastructure for our brands. While many of these are happening behind the scenes and not necessarily customer facing, we're seeing the benefit in some ways through cost savings and <UNK> will discuss cost structure later on. This is a pivotal time for DHI. The competitive market is as fierce as ever and the broader recruitment environment is a challenge as employers are inundated with tools and solutions from every direction. When I was at the HR Technology Conference, a few weeks ago, I was impressed by the growth of players in our industry, including Google, who is pushing forward its jobs widget and testing along the way. These new large generalists are reinforced but DHI serves a specialized slice of the recruitment industry. Our value proposition of delivering relevant tech, fintech and security-cleared talent to companies today through our targeted knowledge of skill sets is really unmatched. The onus is on us to continue to improve the quality of our products, offer tailored insights and serve the employer and the professional communities with the best experience. Our evolution to a functional organization is largely complete and with the addition of our new EVP of sales, we've got all the players to executing against our strategy and drive performance. Our people are our most valuable asset and a good team makes all the difference in our success. The next phase for our company is an exciting one, including further investing in the solutions we provide, focusing on resources behind our core brands and discovering new areas we can grow. And with that, I'll turn it over to <UNK>. Thank you, Mike, and good morning, everyone. Today I'll review the key points of our third quarter 2017 financial performance. I'll address our fourth quarter outlook and discuss the financial aspects of our tech-focused strategy. Before I begin, let me explain our new segmentation. Effective in the third quarter, the company organized its leadership around its tech-focused strategy. As a result, the company is now reporting 2 segments: our tech-focused; and our Health eCareers segments. The tech-focused segment consists of Dice, ClearanceJobs and eFinancialCareers. Our other businesses, Hospitality, Rigzone and BioSpace, have been included in corporate and other. We've provided a supplement in the appendix of today's presentation materials that recasts our segmented results in prior periods. Now on to the review. Third quarter results were consistent with our expectations that the rate of decline in revenue would start abating, helped by exchange comps becoming easier with the British pound fallout in mid-2016 that followed the Brexit vote. Revenue for the quarter declined 7% with the tech-focused segment down 7% and the non-tech businesses down 5% year-on-year. Exchange was not a factor this quarter. Drilling down on the key components of our tech-focused business, Dice U.S. revenue declined 10%, with recruitment package customers at 6,600, down 9% year-on-year. Customer renewal rates have stabilized in the mid-60%. Average monthly revenue continues to hold around $1,110 per customer and 95% of our contracts are 11 months or longer. However, what we're not seeing yet is the uplift in net new and win-back customers, which we expect should occur as we gain more traction with our enhanced product features, we extend the more flexible terms to meet the needs of different types of customers and fully execute on our sales and marking strategies. Moving on to eFinancialCareers. Revenue declined 6% and was impacted mostly by persistent Brexit-related concerns. While sentiment on Brexit seems to be improving, customers remain hesitant regarding the long-term hiring plans. For ClearanceJobs, revenues grew 23%, although billings grew at a lower rate of 10% due to the continued tight labor supply of security-cleared professionals. For our non-tech businesses, which comprise Health eCareers, Hospitality, BioSpace and Rigzone, total revenue was down 5% for the quarter compared to declines of 12% in the first half in ---+ of this year, due mainly to easier comps, particularly in energy. Third-party operating expenses before depreciation, amortization, stock-based compensation and disposition related and other costs, increased 2% over year ---+ year-over-year. With higher tech-focused marketing and product development expenses, partly offset by lower cost of revenue and sales expense, with general and administrative cost being flat. We continue to carefully manage expenses, particularly in areas that have a less meaningful contribution to our tech-focused business. Our headcount, so far this year, is 6.5% down and the rationalization of resources, such as discontinuing getTalent and servicing China from Hong Kong enable us to achieve savings to help mitigate the impact of lower revenue and redirect resources to product and marketing efforts. Adjusted EBITDA for the quarter was $10 million, including $900,000 for disposition-related costs. Our adjusted EBITDA margin, excluding this impact, was 21%. Depreciation and amortization expense declined $900,000 from last year, mainly due to energy-related impairment charges that were taken in 2016. Stock-based compensation was down 28% due to forfeitures and lower grant-date values. The interest expense increase was due to a write-down of $410,000 in deferred financing costs, related to the reduction of our credit line, which will save us $400,000 in annual commitment fees. Excluding this charge, interest decreased from lower average borrowings. Our effective tax rate of 22% benefited from a discrete tax credit realized this quarter. Net income for the quarter was $1.1 million, or $0.02 a share. This quarter net income was impacted by a number of items, many of which are the result of initiatives we're pursuing to move the company forward. These include discontinuing getTalent, which caused a $2.2 million fixed asset write-off. However, this enables us to save or redeploy the $3 million in expense and capital incurred on getTalent this year. Costs related to planned divestitures and the realignment of our tech-focused organization of $1 million, mostly for termination and retention costs. And the write-down in deferred financing cost of $410,000, that I already described. We also incurred significant cost in this and prior quarters for (inaudible) and legal matters. However, on October 24, we received $3.3 million in restitution, which will be accounted for in the fourth quarter. Cumulatively, these unusual expenses impacted earnings per share by $0.05 for the third quarter. We generated $3.5 million of operating cash flow in the third quarter, compared to $12 million last year. The decrease is mainly due to lower cash earnings and billings as well as a cash benefit in the prior year period from improved receivables collections. Net outstanding on our revolver was $69 million at the end of the quarter, down $23 million year-over-year. Deferred revenue was $81.8 million, slightly below the prior year balance as lowered billings were partly offset by an increase in the average contract length. Looking at the rest of the year, we don't see a significant change in our tech-focused business trends as it's taking longer to acquire and win back Dice customers in the current competitive environment. In that context, we would expect the modest improvement in the rates of revenue decline, helped by ClearanceJobs' continued growth and better change comps for our finance business. Typical environmental factors are not expected to change materially. The trends in our non-tech-focused businesses should also continue for the rest of the year. Fourth quarter spending growth will be slightly higher than the third quarter due to increased marking efforts with candidates and recruiters. Our ongoing rationalization effort should enable us to make that investment and maintain ---+ and still maintain an adjusted EBITDA margin after disposition and related costs of approximately 20% for the full year, continue to invest in key product and marketing initiatives. As we've discussed before, the benefit to our top line from the various initiatives can have a delayed effect, so we expect the current level of margin to persist for some time. But we don't view this as our normal run rate. For other items in the fourth quarter, depreciation, amortization, stock compensation, those should be consistent with third quarter run rates in total. The LIBOR spread on our loan will increase 25 basis points. The tax rate should be our normal, 38%, and the diluted share count should be approximately 50 million. Given the inherent uncertainty of such processes, we're not assuming for the fourth quarter any proceeds from the divestiture of our non-tech-focused businesses. We've experienced a considerable amount of activity and interest since we began the process, and we continue to be engaged with a number of potential acquirers across all the businesses, but there can be no assurance that any of these will result in a fourth-quarter transaction. We believe our non-tech businesses are valuable and it's important to note that they performed above our expectations during this current process. Regarding our near-term capital allocation policy, as we've indicated before, we remain focused on preserving liquidity to ensure we can adequately fund our growth initiatives, namely investing in our tech-focused business and making opportunistic bolt acquisitions. Therefore, free cash flow generation will be applied against our revolving line. Once we gain a more definitive view of the divestitures outcome, we can then reevaluate our current capital allocation policy, which in the past, included returning capital to shareholders. So to recap, the topline results are taking longer than expected to improve but we feel we're making progress on multiple fronts in our tech-focused strategy while continuing to rationalize our resources carefully. This should position us well to leverage our unique skills-based capabilities and meet the needs of the growing tech professional recruitment market. As always, I thank you for your interest and I'll now turn the call back to Mike. Okay. Thanks, <UNK>. So before we turn it over to Q&A, I just want to address the announcement we made today that the Board of Directors and I have initiated a CEO transition plan. The company continues to make progress on our single tech-focused organization and as we continue this transition and now have a full management team in place, the Board and I believe it's the right time for the company's evolution to now implement the plan. So the board has commenced a search and we've hired Heidrick & Struggles to lead that search. So I'll continue to be the CEO until March 31, or until a successor is found. If earlier, then I'll help provide transition in that process and if it takes a little while longer then I'll stay a little longer until we find that person. I think all of the people who work in the organization are absolutely focused on moving forward with our strategy and executing on our product roadmap and our strategic plan, we're all in it together. There's great opportunity for this business. We need to execute on that and everybody here is focused on it and the Board and the management team are all confident that we have the right strategy and we have to execute on it. So that is the focus of the company. It has been and will continue to be for the foreseeable future. And so with that, I'll turn it over to questions. Operator. So I think, when we look at customers who don't renew and I know we say this all the time but I'll just remind everybody. When we talk about renewal rates of mid-to-higher 60%, that is measured in the month that they are up for renewal. So we get some number of those back over time, which is roughly a third to a half over time, whether it's the following month or 2 months or 3 months or 6 months later. So just by way of background and as a reminder, that's how we measure retention rate. So with that, the most popular response we get is no need. Now no need comes in a variety of forms. It could be somebody had a number of positions, they filled them and they don't have a need and when they come back they come back as shorter-term customers, may have been somebody building out tech organization, they finish that and off they go. Competitive environment, there are generalists who get a bulk of the spend whether it's LinkedIn or Indeed, where customers allocate a fair amount of their spend across those generalists because they serve the needs in sales, in marketing, in accounting, in admin and in operations, customers will go to them. That is ---+ those are the two biggest points of feedback we get. Occasionally, we don't find the person or the tech pro that they're looking for because they're very hard to find in geographic markets that are tough to fill or in specific skill sets that are tough and they come to us thinking as a specialist we will find them and occasionally we can't because those people don't exist. So that's another reason but that ---+ those reasons generally haven't really changed materially over the years. That has been the pattern of responses when we talk about why people don't renew when they're up for renewal. So the ---+ I'll answer the second piece. Yes, there is some component of the Dice recruitment package customer world that Open Web probably wouldn't be appropriate. We like to think it's appropriate for everybody but there are some customers who like to post jobs and not search a database whether it's the proprietary Dice database with resumes and profiles or whether it's the Open Web-generated database with publicly-available information used to create an aggregated profile. One of the things we find and I referred to this earlier, and talk about usage is, yes, we're really trying to push Open Web as a way for customers to find both active- and passive-tech professionals, we generally don't like to use active and passive, but the world does so we refer to them as such. One of the things we find with Open Web is customers that are used to Dice who are used to interacting with tech professionals who have a resume or have a structured profile tend to be more responsive, I think it's obvious, than somebody accessed through Open Web who doesn't have their profile or their resume in a place but we've gotten information about that person that we're able to provide, the response rates are lower and similar to, let's say, somebody like LinkedIn. So certain customers really want to address the active database much more than they do the passive. So we've never thought that Open Web would have anywhere near full penetration of our customer base but we're working on improving the search technology and how the search of the Dice database and the Open Web database interact, which we think will make it more attractive to a greater customer base. But to answer your little question is that we believe there's a limit on the number of Dice recruitment package customers that would find Open Web useful just by the nature of the way they search. So yes, I ---+ the primary focus has been on existing Dice users as we've rolled out the features and functionality. Over time, we'll do more of a marketing push and product distribution push, so that we're reaching tech professionals that aren't current users of Dice because our strategy is to go find tech professionals wherever they are, whenever a customer needs them, not purely rely on bringing them to our site or to the mobile app. The monetization from that will come from increased usage and activity levels and engagement from the professionals, which will monetize through clients, customers, recruiters, not for the foreseeable future, through the app itself. So it is a way to reach tech professionals. It's a way for tech professionals to engage with us and ultimately, see career opportunities for which we monetize in the way we always have. Wondering if you can just flush out your sales and marketing investments a bit more. Any changes to your marketing strategy. Sure. So if I break that into sales and marketing, our sales go-to-market strategy is similar to what it's been, but we are quite excited now about having organized the North America team around the 3 brands that we have as part of our tech-focused strategy, Dice, ClearanceJobs and eFinancialCareers, and expanding the opportunity to penetrate the market with each of those 3. So having a new leader over those 3, which is a position we've never had before in our old structure, I think we're quite excited about and that person will bring some historical knowledge, and experience into the market ---+ from the market ---+ to us, that will increase our sales performance, I believe. But no real great change from a sales standpoint. From a marketing standpoint, the strategy continues to be to push into the market with our offerings to engage tech professionals. That will come through a variety of ways, one is increases in product, one is social distribution and engagement techniques that aren't, what I would call traditional marketing. But from a more traditional marketing standpoint, it's going to further distribute our offerings to places where tech professionals are, and bring opportunities to those professionals, again, wherever they are, not purely focused on trying to attract people to the site and engage on the site. Thank you Steve. We appreciate everyone's interest in DHI Group. If you have any follow-up questions, you can call Investor Relations at (212) 448-4181 or e-mail [email protected].

2017_DHX

2016

VAR

VAR #Well, yes. You always, every year if you go back, you see seasonality. Q4 is always our largest quarter with the highest operating margin typically. So it's not uncommon for the operating margin to step down from Q4 to Q1. When you run your model through, what I am showing at the midpoint is that we will increase our operating margin by about 1 point to 18% on a non-GAAP basis. Again, oncology's gross margin will be between 44%, 45%; imaging components in the low 40%s. So it looks closer to an 18% operating margin. And again, <UNK>, that does include ---+ I want to make sure everyone understands, it includes some duplicative costs in Varex, as we're hiring people to gear up for this spin. We cannot take those costs out to be non-GAAP, and it's between $0.01 and $0.02 in Q1 for those duplicative costs. Yes. Thank you. That's a good question. I'd say from a very high level, we've got about 1,500 TrueBeams in the installed base of, I'll call it 7,500 machines. Now when you look at some of the capabilities, the interesting thing and when you talk about HyperArc, it's ---+ HyperArc is available on every one of those TrueBeams. So this is our first, really ---+ we've had some other smaller upgrades that we've offered on TrueBeam, like some imaging improvements and some other things over the last few years. But the HyperArc, for some of the stereotactic radiosurgery applications that Dr. Khuntia talked about at ASTRO will be available on the Edge and TrueBeam only, so very excited about that. I think that will probably drive some of the other install base to trade out to TrueBeam as well, so very encouraged about that. We're ---+ I'd say when you look at the past quarter, Americas was almost virtually 100% TrueBeam, VitalBeam. Might have been one or two that weren't, but pretty much everything in the Americas, well North America for sure, was TrueBeam, VitalBeam. In rest of the ---+ and I'd say of those, in terms of the capabilities they had in the fourth quarter, maybe halfish had SRS/SBRT capability. When you look at the installed base, big opportunity there. Most of them do not have that capability. And so I think this bodes well for us next year in two ways. One, it's an upgrade opportunity and two, it's going to help us on pricing on TrueBeam. It's going to ---+ we're going to be able to maintain or grow price on TrueBeam, and I think that it's a little bit of the ---+ we're doing very well on the cost side. Where is this margin rate improvement coming from. We're doing very well on the cost side. The operational team has done a fabulous job getting costs down on TrueBeam. But then as well, we're seeing a really nice mix of these advanced capabilities that are giving us some price support on the pricing side. I think, if anything, it will be a little faster because of some of the reimbursement pressure. Having said that, clinicians are going to want to make sure there's a really responsible clinical comparison done, so our customers are sensitive about that. I think one of the exciting things to us is in some applications, the hypo-fractionation trend is going to bring more patients back to us. So for example, in prostate cancer, over the last half dozen years, we've lost a little bit of share to robotic surgery. But I think now as those start to go hypo-fractionated, we get a lot of those patients back. The results are as good or better than surgery, and that's well documented. And then as well, I think the other big opportunity from a clinical growth perspective here is metastatic disease. This capability really enables a very precise dose deposition, and we think that there are, in the US alone, 300,000 patients that we could have opportunity to go after with this capability and bring some new folks into the radiation therapy paradigm. So we're excited about the capability that this opens up. Let me just say for year-to-date 2016, service was just low 40%s, so it was about 42% of the total revenue for oncology. So call it 60/40. And clearly, as both service and software grow faster than the hardware, it does have an upward bias on gross margin. And in fact, that has been helping us the last couple of quarters. Software is roughly 10% of total oncology revenue. Our revenues in service were up 7%, revenues in software were around the same. I think the ---+ as we look forward in the service funnel, I'd say it looks very good. We had a little bit of currency last year. We had a little bit of timing. I think on the year, we would like to see that number be a little bit north of 7%, and that's what we are stretching the team for, but service business continues to be solid growth for us. Software, we had a very good year in treatment planning, and again, we talked about that in the script with all of the RapidPlan orders. I think this next year with the improvements that we have with our InSightive analytics and with our 360 Oncology product, that's going to be very exciting. We're curious a little bit to see how that goes, because 360 Oncology is going to be cloud-based. So the financial impact is going to be a little more back-end loaded as we accumulate sites, do the billing, and collect the orders on that basis. I think it's going to be a little ---+ it is a little bit of a transition as we go from an annual license model to a software-as-a-service model. So having said that, one of the really cool things about the 360 Oncology product is it can play not just in ARIA Varian sites, it can play in every radiation oncology site in the world. And just really a great opportunity for us to get some penetration in sites that we don't have today. So I'll answer the first part of that question, <UNK>, as it came up earlier on the call. Our cash flow from operations was down year over year. We ended both Q3 and Q4 on a strong note, but we were in a hole in the first half of the fiscal year on collections of AR for a couple of reasons: moved the collection staff, we had an IT implementation, et cetera. So we're very focused on cash flow, particularly AR, as we move into FY17. And on a consolidated basis, our expectation would be that we could get back to around the $400 million level in cash flow from operations. CapEx has always been relatively stable. And then in terms of share repurchase versus M&A, I think we would always love to prioritize M&A if the right targets come along, and that's the beauty of our share repurchase program, we can turn it on and off and at various levels, depending on what activity in M&A that's there. Just as a comment, it's going to be strategically driven. How can we strengthen our oncology franchise. I don't see us going way out on the edge and doing something, for example, maybe in chemotherapy, to pick one. But are there image guidance technologies, are there radiation technologies, are there software technologies that can reinforce our core and give us some higher growth segments to participate in. That's what we'll look at. In terms of revenue. Very little. It would just be service revenue, so about $1 million or so. It was small. Yes, it's somewhere between an annualized $14 million to $16 million market for us, and it's a growing market. So we feel very good about Poland over the next several years, and one of the reasons that the timing was right to make the acquisition and go direct. Thank you. Thank you for participating. A replay of the call can be heard on Varian's investor site at www.Varian.com/investor where it will be archived for a year. To hear a telephone replay, please dial 1-877-660-6853 from inside the US, or 201-612-7415 from outside the US and entering confirmation code 13647671. The telephone replay will be available through 5 pm this Friday October 28. Thanks very much.

2016_VAR

2015

CAKE

CAKE #Yes. In the third quarter, I talked about 70 to 90 basis points higher in G&A, which is obviously pretty significant. And the third-quarter G&A is very heavily influenced by a bigger expected bonus accrual than 2015 ---+ in 2015, excuse me. In 2014 in the third quarter, we really ramped down the bonus accrual last year when dairy hit that all-time high and our results fell short of our plan. This year, we are tracking above our plan, so there's a big gap to make up. I've heard it referred to as the bonus reload. So the bonus reload in the third quarter is a significant portion of that expected 70 to 90 basis point increase. And there will be something similar that happens in the fourth quarter because we have ---+ we expect to have higher G&A for the year that's pretty significantly higher than the previous year, and a big part of it is that. I'll answer the modeling question and then <UNK> or <UNK> can answer what the guest acceptance has been. I would say that we would look at those restaurants in a similar way that we would look at restaurants that we have, which is there's a honeymoon period, and after the honeymoon period, there is a stabilization of sales at a certain level, and then we would expect them to stay at that level or grow from there. That's the assumptions we would make with respect to how much royalty we would be expecting looking forward. We have a list of other potential restaurants that they are thinking of opening in Mexico, so I think that bodes well that they are happy and we are happy and that we will move forward in that part of the world. I think we can't hear <UNK>. The legal accrual is one-time until we have the next legal accrual, so I will say that about that. I would say that once we reload the bonus in 2015, all else being equal, we shouldn't have any deleveraging from reloading bonuses anymore. So I would say that we are not expecting to have big G&A deleveraging going forward. Our intent would be to try to keep G&A in future years as flat as possible and to grow it at less than revenue growth, and maybe be able to leverage it a little bit. But I wouldn't count on that. I would just sort of look at it as being flat going forward. Absent any future legal accruals. Turnover rates are actually very strong so far this year. Our management turnover is less than it was last year and comparable to 2013. And at the staff level, we are holding where we were last year. So it hasn't increased. I think a lot of what we're doing is working to keep the people that we need to keep, and some of that may be making sure that those pay rates are the correct pay rates in each of the markets we are in. But as far as retention goes, it stayed pretty stable this year. I think what we did, just to remind you, is that we enabled all of our ADOs and area kitchen operations managers and now our restaurants, we arm them with reporting that would show them what the market was paying in each one of the surrounding restaurants in each geography. That's now rolled out everywhere. So, I think that has enabled us to make sure that we are paying appropriately in those markets, which may be part of the reason that retention is where it is today versus where it was last year. So that tool and that initiative actually has fully rolled out now, and I think we are seeing some benefit from it.

2015_CAKE

2016

GTY

GTY #Thank you, operator. I would like to thank you all for joining us for Getty Realty's quarterly earnings conference call. Yesterday afternoon, the Company released its financial results for the quarter ended March 31, 2016. The Form 8-K and earnings release are available in the Investor Relations section of our website at gettyrealty.com. Certain statements made in the course of this call are not based on historical information and may constitute forward-looking statements. These statements are based on management's current expectations and beliefs and are subject to trends, events and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Examples of forward-looking statements include our 2016 guidance and they also include statements made by management in their remarks and in response to questions, including regarding lease restructurings, future Company operations, future financial performance and the Company's acquisition or redevelopment plans and opportunities. We caution you that such statements reflect our best judgments based on factors currently known to us and that actual results could differ materially. I refer you to the Company's annual report on Form 10-K for the fiscal year ended December 31, 2015 as well as our quarterly reports on Form 10-Q and our other filings with the SEC for a more detailed discussion of the risks and other factors that could cause actual results to differ from those expressed or implied in any forward-looking statements made today. You should not place undue reliance on forward-looking statements, which reflect our view only as of the date hereof. The Company undertakes no duty to update any forward-looking statements that may be made in the course of this call. Also, please refer to our earnings release for a discussion of our use of non-GAAP financial measures including our revised definition of AFFO and our reconciliation of those measures to net earnings. With that, let me turn the call over to <UNK> <UNK>, our Chief Executive Officer. Thank you, Josh. Good morning, everyone, and welcome to our call for the first quarter of 2016. With Josh and me on the call today, are <UNK> <UNK>, our Chief Operating Officer and <UNK> <UNK>, our Chief Financial Officer. I'll begin today's call by reviewing our performance for the first quarter of 2016 and then pass the call to <UNK> to discuss our portfolio in more detail and after <UNK>, <UNK> will discuss our financial results. The first quarter of 2016 was another productive quarter for the Company, which continues to demonstrate the strength of our core net leased portfolio. For the quarter, our AFFO per share was $0.39, which represented growth of 18% over the prior year's quarter. The quarter benefited primarily from the embedded growth from our 2015 mid-year acquisition and our ongoing efforts to control overhead costs. During the quarter, we continued to make progress on our remaining transitional properties as <UNK> will discuss, we ended the quarter with 38 remaining sites, an improvement up 17% from year-end and approximately 75% from where we were at the same time last year. We now have a portfolio of well-located properties and with our triple net leased structures, which have favorable attributes, we are able to enjoy a consistent cash flows. In the broader picture, we remain committed to our growth strategy, which combines steady NOI growth from our core net leased portfolio, redevelopment of select properties for higher and better uses and pursuing acquisitions of properties in the convenience and gas sector. We are continuing to evaluate opportunities and we remained disciplined and selective on what we are pursuing. This includes continued internal analysis of our portfolio to determine the potential for high return redevelopment prospects along with potential acquisitions. We are being systematic in our approach and are confident that this approach to our investment strategy will contribute to our performance as we move ahead. As we look forward, we are energized and encouraged by the results from our net lease portfolio, our emerging pipeline of redevelopment opportunities, which are unlocking the value embedded in the portfolio and the steady progress we are making on our asset repositioning activities. The net result of which is that we continue to improve the quality of our portfolio, while maintaining a watchful eye on our balance sheet and our cost of capital. With that, I will turn the call over to <UNK> <UNK> to discuss the portfolio and investment activities. Thank you, <UNK>. Turning to our results, as Chris mentioned we had a productive quarter and delivered strong operational results. For the first quarter, our total revenues from continuing operations increased by 15% to $28.4 million compared to the same period last year and our contractual due rental income, which excludes tenant reimbursements increased by 18% to $24.3 million. Rental income growth for the quarter was driven primarily by the impact of our mid-year 2015 acquisitions. On the expense front, property costs excluding tenant reimbursements improved by 11% for the quarter. This reduction can be attributed to declines in rent expense and maintenance expenses. Our environmental expense improved by $1.1 million for the quarter relative to the same period last year. The reduction was due to a $0.3 million decrease in litigation losses and legal and professional fees and $0.8 million of decreases in environmental remediation costs. It is worth noting that are several non-cash items flowing through this line, which cause the reported amounts to vary from quarter-to-quarter. For the quarter, G&A was fairly flat after adjusting for $200,000 of one-time employee related expenses. As a result for the quarter, our FFO was $14.1 million or $0.42 per share, which represented an increase of 35% and AFFO was $13.2 million or $0.39 per share, which represented an increase of 18%. Turning to the balance sheet, we ended the quarter with $323 million of borrowings, $148 million on our credit agreement and $135 million of long-term fixed rate debt. Our debt to total capitalization currently stands at approximately 32% and our net debt to EBITDA at quarter end was 4.7 times. Our weighted average borrowing costs was 4.6% at quarter end and the weighted average maturity of our debt is approximately 4.5 years, with 54% of our debt being fixed rate. Our environmental liability ended the quarter at $82.7 million, down $1.6 million so far this year. For the quarter ended March 31, 2016, the Company's environmental remediation spending was approximately $3.6 million. It is important to note that the net number on our balance sheet is also impacted by additions to the principal amount of the liability and accretion since GAAP requires us to book the liability on a present value basis. Subsequent to quarter end, we received payment for the entire outstanding balance of $13.9 million of seller financing mortgage from our former tenant [Ramco]. This payment will result in an approximately $0.01 impact to the FFO per quarter. Finally, we are reiterating our 2016 AFFO per share guidance at a range of $1.40 to $1.45 per share. Note that our guidance does not assume any acquisition or capital markets activities, although it does reflect our expectation that we will continue to execute on our leasing and disposition activities. It also assumes, we continue to execute on our existing redevelopment pipeline. That concludes our prepared remarks. So let me ask the operator to open the call for questions. Thank you everyone for joining us this morning. We look forward to speaking with you again when we report our second quarter and we appreciate your interest in the Company.

2016_GTY

2017

CAT

CAT #Yes, I'd say, <UNK>, actually I think not. Because this time ---+ I've been in a career here at Cat a long time ---+ typically we have reductions in areas that are easy to find, so we reduce R&D or reduce other things. In this downturn, if you look at our cost reduction, it's been highly targeted to areas that are not future value. They are areas of efficiency and consolidation and support costs. We have really increased spending in many of the growth areas. We protected R&D, by and large, and we protected things like digital spending. So, we've taken an entirely different approach in this downturn in terms of where we took cost out and what cost we protected. So I'd say it's different than we would have historically done. This is <UNK> <UNK>. I think we're focused on expanding margins in the segments. And we have to be careful not to look at quarter-to-quarter margins in each of the segments, because they can fluctuate from time to time inside the quarter. But on an annual basis, we're committed to the improvement.

2017_CAT

2015

CBT

CBT #I'm going to ask <UNK> to take that question. Yes, I would say it's probably going to be in that range, <UNK>, based on when currency started to move last year. So you're talking about the fourth quarter now, <UNK>. I would say it's probably a similar impact based on when rates really started to move last year, which I think was at the end of September, and going into October. So probably in that range, depending on how, quite frankly, rates evolve between now and then, and specific rates. Yes, I would be happy to do so. And so this is the EPA action on the carbon black industry in the US. And we ---+ as you may remember, we entered into a consent decree last year. And as a result of that, decided that, because of the capital imposition that this consent decree required on us, we would have to apply an environmental surcharge starting in 2015. We have been implementing this surcharge. Of course, the success of the surcharge, and the reaction from the customers, is dependent on the whole industry proceeding with us. And we were pleased recently, a few weeks ago, to hear that one of our competitors had actually entered into the second consent decree. And we are also hearing that all the other players are engaged with the EPA, and hope that we will see the complete industry having adopted and agreed with the EPA on a path forward, in the coming months. Thank you. Thank you very much, and I thank everyone for joining us today. And we look forward to speaking with you again next quarter.

2015_CBT

2015

VICR

VICR #Well, I think what it comes down to is the fact that our ---+ VR 13 ---+ we have a VR 15 multiplier, if you will, at a level considerably above the VR 12.5, which in turn was above 12. But we expect with VR 15 to have a much more significant step up in revenues that are derived from powering rail that relate to a VR [13] type processor. Yes, I think we talked about this earlier. So it is a combination of customers and footprint within a customer expanding beyond particular rail. Well, so, as I look, for instance, at design wins we already have had for the [VR family] [discussion] that have been (inaudible) in recent times since the corresponding prior introduction. And (inaudible) have taken place with respect to the BCM products that have been released in chip form earlier this year. We are seeing these registrations adding up at a fast-paced from week to week, month to month. And it has been a couple of quarters but over the timeframe, it is the start of something that for that portion of our product line is very exciting because it suggests that, number one, the product is attractive to a range of customers and that they are in effect taking it to the next stage in terms of ordering sample (inaudible) and (inaudible), ordering initial small party production, which is stepping stone to larger (inaudible). We are in that phase and with some of these products, the (inaudible) in particular in chip form we have already seen double-digit millions of dollars in the low teens worth of registrations that should lead to official business. Well, I think this has got, as discussed in the past, the (inaudible) cycle time, gestation time of the kinds of industrial products (inaudible) products that we make. So a typical lead time would be I would say 12 to 18 months. Now as discussed in the past, one of the differentiating attributes of a new VF products for which we have had some initial introductions that you might have seen announced in press releases, with respect to which you are going to see a lot more introductions coming in the weeks and months to come. Those products have a shorter time to fruition, because they don't require the customer to design the solution on their motherboard. It is a product that typically are used as front end component, you can mount it to a chassis. And because of that they tend to get designed in later in the cycle ---+ in the customer cycle. And occasionally there is an opportunity because of changing power requirements or issues the customer might have with the solutions that they currently use which may not work or may not have enough power capability, there is opportunity for in effect substituting something else. So the characteristic timescale for those kinds of products tends to be shorter. And they could provide a contribution on a shorter time scale than let's say PRM VTM point of load Factorized Power solution with digital designing cycle is all longer because the customer is (inaudible) adapting to a power distribution architecture that is unique, it is not (inaudible) a significant design [impact]. Communication [certifications] are a part of our target for these kinds of product. To your point, there is a lot of those boxes in communication systems. They tend to be relatively fragmented type of opportunities that with conventional approaches are challenged because of the lack of scalability and the box or boxes that you saw very likely were designed as traditional custom power supplies. Asian vendors that are challenged with respect to an ROI proposition on these kinds of boxes because (inaudible) any one of them. They may only be let's say $2 million and $5 million a year worth of business opportunity, which makes it difficult to justify developing the solution from the ground up with (inaudible) as to be focused on making the development happen on a timescale of 9 or 12 months. With our V approach we have a lot of scalability to address these kinds of needs that changes the ROI calculation and changes some of the basic criteria for success. And I think over time is going to give us a lot of traction in these kinds of applications. In the aggregate this is a very large market. If you look at an individual box, the revenue opportunity for any one individual box typically is not all that large, hence, the approach that in the long-term where really (inaudible) is one that doesn't go at it on a case-by-case basis with an army of engineers. That is not scalable. We have a scalable approach. In a much more efficient and reliable way, because part of the position, part of [the variable] position is that customers can in effect reuse proven building blocks. Well, our focus is going to be on addressing the power system requirement with solutions that, to the extent possible, are standard or [semi] custom type of solutions as opposed to a custom tailored solution which, for the reasons outlined a moment ago, tend to be very challenged. And you can't (multiple speakers), because of lack of space, because of the fact that they are squeezed in terms of their power needs and the volume that is available to address the power need, they are often tempted to want to have something designed to just fit in the left over space. But again, for the reasons that were quickly outlined a little while ago, that is not an attractive proposition either for the customers because of the [unit] cost, the various risks or even for their suppliers, because with the traditional way of doing that kind of solution from the ground up there is really no return investment. Well, if there is a last question, if not ---+ is there any other question, operator. My thinking is that we still need to stay focused on delivering the goods with respect to delivering the products and we have been doing a good job of that. And now delivering ---+ next delivering the revenues and, as you know from the early discussion, we still have a few quarters of work to do to be able to present to investors a very appealing success story. And there will be a better time to take our case to investors. Right now we need to stay focused on delivering the goods. You are welcome. And with that we will be set for the next quarterly call. Thank you.

2015_VICR

2017

ICUI

ICUI #Hi, Jason. No, that has that taken out for the intercompany between ICU and Hospira legacy. We had that eliminated. You're talking about what's posted on the website and supplementals, right. That should not have the contract in it. I think that's a great question. I think competitively, Jason, we don't want to get exactly into it, so could we talk a little bit rough numbers. First of all, the loss of that month is $80 million, so that's a big, that's one third of that gap. So the real year-over-year downdraft is more in the range of $150 million or so. And at least half of that was because of one specific contract. And I would say half of that was due to share erosion in other places. I'm not sure I'd want to be more specific than that. Okay, that's helpful. Then just as a follow-up, when we look at the four buckets of revenue for 2017, I'm guessing you don't want to give guidance on a line by line-item basis, but maybe can you give us an idea of which of the four segments will grow. And where do you see a little bit of pressure. The consumables segment will grow, but because our growth is being added to that. Otherwise, the legacy businesses, as we've said, that was part of the original purchase in October and even the revision was certainly the pump and dedicated sets. And the solutions businesses were going to be smaller in 2017 then they were in 2016. So I think it's a little bit of the question we just were talking about a second ago, which is, are we calling it right. Is this the right number. I don't think we've ever justified the transaction or the return saying we assumed growth in either one of those businesses. So certainly not in 2017 and certainly not in 2018 of the run rate number we showed. We were presuming the status quo. Okay. And <UNK>, you touched on it earlier, but and I realize you've only had the Business for a few weeks, but you still think the portfolio and the quality of the offering is what you thought it would be, right. I've looked at this as a little bit more of an execution issue versus a portfolio issue. Is that a fair understanding. Look, I think we have, just like when we got to ICU, we were very cautious on quality systems and making sure we delivered our end on that, and I think the same applies here. This Company is invested in quality systems a ton, but we have got to get through everything we need to get through there. And the team is really good and working on that hard. I would tell you the time we've spent with customers, people don't have an aversion to any of these products. People use these products and like them for many years. There's not a lot of flaws in them. Certainly on the consumables bucket, it's our product, so we know them very well and we believe in them. On the solutions bucket, that's essentially a generic drug-like item. It's about quality and reliability and service. And on pumps, it's more differentiated, but the legacy business here has invested a lot, but don't know that they've executed necessarily well and obviously had a lot of issues with the remediation stuff. So I don't that we come into this and say we need a whole bunch of new stuff that hasn't been contemplated or that where partnerships aren't in place or heavy bets haven't been made on next-gen technology already. I think the chips are in on that. I think it really has been, certainly in two out of the three lines, very much about commercial execution, and in one of the lines, it's a little bit more about technology. Right. So as far as the balance sheet goes, it's no secret we're totally under levered here and that was for the reasons that <UNK> spoke about. I think for us going forward, as time goes by this year and we get our arms wrapped a little bit more around some of the CapEx expenditures and the timing of some of the stand-up costs, we'll be able to give better guidance around expectations in CapEx and free cash flow. Until we get there, I would just say that we wanted a conservative balance sheet for a reason in this market, in this industry, and we did that on purpose. My view, <UNK>, is there is like four pieces out there that are a little bit up in the air right now. We got a lot of inventory with this transaction. What is the rate that we're able to monetize that and turn it into cash. It hurts our P&L as we slow down production, but it helps cash if we move that stuff out the door. How much stand-up cost do we have to put in. And we have an idea of that. And how much CapEx do you have to put in. And then where is the baseline of sales relative to synergies and cost we can take out. And when we see the whole picture, then I think we have a different confidence interval to address the balance sheet. It's a little tongue-in-cheek, we were irrationally over-capitalizing [red] legacy ICU. By our standard, we're in a better place. Once we know those four pieces, we know the cash coming out, then we can decide, can you do something and where the relative valuation of the Company as. You have seen the way we've acted when we thought our own security was mispriced historically. So we don't want those opportunities to pass us by. It's nice to hear from you, <UNK>. I think culturally there are spots where it is not the different; where there's a lot of people who care about the customer. And the best people often are the ones who rise to the occasion on that, and I think there's a lot of people here who share that value. And so I don't think there is some culture clash going on. I think we have to make and have made and implemented some tough choices around where there was duplication, not to have that duplication. And I think that also helps culture when there is some clarity around that. Because we had some uncertainty and there was literally 17 business days into this thing, and we've addressed it; it's done for the US market. And I think that goes along way. That hasn't been rolled out yet. This is all happening real-time; we're actually here in Chicago working on such things. That hasn't happened real-time yet to the customer face, or that changes made it's way to an actual customer. But I think again, you've seen ICU or in our previous experiences, do some of these things before. They take time to gel; they take time to heal. But I think we're ---+ we worked really hard to try to make sure we get the right people on the right seats in the right place, and that's an ongoing process. The word cross-selling is always an interesting word to me. We're buying into businesses that we weren't in, so it's not necessarily cross-selling; it's just selling what they had. And at some level, they were selling the things that we were the manufacturer for. So I don't think there's a lot of cross-selling in the classical sense. Internationally, I think there's certain markets that we want to invest in and want to invest in aggressively, where we can justify the investment now, where we couldn't as ICU. But I also think there's some markets that we need to really think through, can we drive good returns there and what's the right way to participate in them in a way that this Company wasn't forced necessarily to think before. And right now, the value is much more at stake in the US, so we're more focused on that. Over the next couple of quarters, we'll turn our attention to some of those deeper international questions. But there are absolutely some high-value markets that we need to place bets in. It looks like that's the end of the call. We look forward to answering any of the questions investors have. As our first call owning this new part of our business we are very excited, we're excited for new colleagues, we're excited for our investors to watch us go to work on this thing. So we look forward to everybody joining our next conference call. I assume just like this one, it will be late in the reporting season. There's a lot of work going on; I just want to warn everybody about that, and we look forward to speaking with everybody then. Thanks for your support.

2017_ICUI

2017

GEOS

GEOS #Good morning, and welcome to Geospace Technologies' conference call for the second quarter of fiscal year 2017, and thanks for listening. I'm Rick <UNK>, the company's President and Chief Executive Officer, and I'm here with Tom <UNK>, the company's Vice President and Chief Financial Officer. I'll start the call with a prepared overview of the quarter, then Tom will follow that with an in-depth review and commentary of our financial performance. I'll then close out the prepared portion of the call with some final remarks, and we'll open the line for questions. As mentioned, for convenience, we will place a replay of this conference call in the Investor Relations section of our website at www.geospace.com. As a standard caution, the information we discuss this morning is time-sensitive and might not be accurate on the date one listens to the replay. Also, many statements made today can be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. This includes comments about the market for our products, revenue recognition, planned operations and capital expenditures. Such statements are based on our present knowledge and perception, while actual outcomes are influenced by uncertainties and other factors that we are unable to control or predict. Related risks, both known and unknown, can lead to undesirable results or cause our performance to materially differ from what we may express or imply. These risks and uncertainties include those discussed in our SEC Form 10-K and Form 10-Q filings. After the market closed yesterday, the company released its financial results for the second quarter of fiscal year 2017, which ended March 31, 2017. As indicated, our revenue in the second quarter reflected a sequential improvement of 35% over the first quarter. And from an expanded perspective, the 3-month and 6-month periods ended March 31 observed revenue increases of 38% and 28%, respectively, when compared to the same periods last year. In both of these periods, the increases resulted from higher demand for our wireless seismic products, reflecting revenue in particular from rental contracts for our OBX marine systems. These comparative improvements are certainly well received, and while they may offer cautious optimism for an improving seismic industry, we don't believe they constitute a pervasive trend. Our seismic revenue has long been known to exhibit volatility when comparing one specific period to another. And in our opinion, there is significant recovery left to be accomplished before the seismic equipment market returns to stability. In the meantime, our revenue will continue to fluctuate and our operations and profits will continue to be burdened with unabsorbed factory overhead, rental fleet depreciation and inventory obsolescence expenses. In our efforts to adapt to these industry conditions, we are pleased to have reduced our operating expenses for the 3-month and 6-month periods ending March 31, 2017, by almost 10% and 7%, respectively, compared to last year. The lower operating expenses for both periods largely resulted from the cost-reduction efforts we implemented in last year's second fiscal quarter. Our traditional seismic products generated $3.6 million of revenue in the second quarter, an increase of $0.4 million over last year's second quarter. This increase is primarily attributable to specific sales occurring within the period of certain specialized sensors. Such sales demonstrate the lumps that often occur in the demand for some of our products, which can be particularly noticeable in depressed market conditions. In contrast to the quarter, the first 6 months of fiscal year 2017 saw a decrease in traditional product revenue of $2 million compared to last year, producing only $6.2 million. The reduction from previous 6-month period definitively highlights the lower overall demand experienced for these products in light of curtailed seismic exploration by oil and gas companies. Revenue from our wireless seismic products totaled $9.6 million in the 3 months ended March 31, 2017, more than double the amount for the same 3 months of 2016. Likewise, revenue from these products over the 6 months ended March 31, rose to $15.9 million from last year's reported amount of $6.6 million for the equivalent 6 months. The higher revenue in both periods was predominantly driven by increased rental activity for our OBX marine nodal systems. Both periods saw the benefit of a longer-term rental contract, utilizing a large number of our shallow water OBX units as well as several shorter-term contracts for deep and shallow water stations. These contracts came to an end in our second quarter, and with no similar contracts subsequently scheduled, we expect considerably lower rental revenue from these products going forward. Our reservoir seismic product revenue increased to $0.7 million in the second fiscal quarter compared to last year's second quarter. However, revenue for this segment declined by almost 5% in the first 6 months of the fiscal year compared to the same 6-month period 1 year ago. Revenue contributions in this segment for the most recent 3- and 6-month periods were essentially a combination of sales, rentals and repairs of our borehole seismic products, in conjunction with support services we performed for our permanent reservoir monitoring, or PRM, system customers. We do not expect the relatively low level of revenue in this product category to change anytime soon. Only if we were awarded a contract for the manufacture and delivery of a PRM system, would we expect to see a substantial increase in revenue for this segment. However, with that being said, there are no such awards or commercial tenders pending at the present time, and none are anticipated in the fiscal year remaining. Revenue from our non-seismic products was $6.5 million for the 3 months ended March 31, 2017, an increase of $0.2 million over the same 3 months last year. The increase was driven by higher sales of our imaging products, although offset by a slight reduction in sales of our industrial products. For the full 6 months ended March 31, revenue in this segment increased $0.5 million over last year to reach $12.2 million. An improvement in sales of both our imaging and industrial products contributed to the increase over the prior 6-month period. We note that sales for any particular portion of this segment can regularly vary from one period to another. And based on recent order flow for our industrial products, we expect revenue in this segment to remain relatively flat for the remainder of the year. However, we still foresee the opportunity for long-term growth and demand for these products. I will now turn the call over to Tom <UNK>, our CFO, who will provide additional detailed commentary and insight on the company's second quarter financial performance. Thanks, Rick. And good morning, everyone. Before I begin, I'd like to remind everyone that we will not provide any specific revenue or earnings guidance during this call. In yesterday's press release for our second quarter ended March 31, 2017, we reported revenue of $21 million compared to last year's revenue of $15 million. Our net loss for the quarter was $11.5 million or $0.88 per diluted share compared to last year's net loss of $11 million or $0.84 per diluted share. For the 6 months ended March 31, 2017, we reported revenue of $36 million compared to revenue of $28 million last year. Our net loss for the 6-month period was $23 million or a loss of $1.77 per diluted share compared to last year's net loss of $22 million or a loss of $1.69 per diluted share. For each of the current year periods, we were unable to recognize any income tax benefits related to our pretax loss, which affects the comparability of the fiscal year 2017 results with those of fiscal year 2016. A breakdown of our seismic product revenue is as follows: our traditional product revenue for the second quarter was $3.6 million, an increase of 13% compared to revenue of $3.2 million last year. The increase reflects the resumption of demand for certain specialty sensor products in our second quarter. Revenue for the 6 months was $6.2 million, a decrease of 24% compared to revenue of $8.2 million last year. The revenue decline reflects lower demand for a broader range of our sensor products due to lower seismic crew activities. Our GSX and OBX wireless product revenue for the quarter was $9.6 million, an increase of 104% compared to revenue of $4.7 million last year. Revenue for the 6 months was $15.9 million, an increase of 141% compared to 9 ---+ I'm sorry, $6.6 million last year. The increase in both periods primarily resulted from a large OBX rental contract, which began in February of last year, along with another shorter-term OBX rental contract, both of which concluded during the second quarter. Although delivery of more OBX rental equipment is expected later in our third quarter, we expect lower levels of OBX rental income in future quarters. Reservoir product revenue for the second quarter was $700,000, an increase of 21% compared to revenue of $600,000 last year. The revenue increase was primarily due to an increase in reservoir monitoring service revenue earned in the current quarter. Revenue for the 6 months was $1.2 million, a decrease of 5% compared to $1.3 million last year. The revenue decline primarily resulted from lower borehole product rentals. We believe our seismic reservoir product segment will continue to contribute insignificant levels of revenue until we are engaged in a contract to deliver a PRM system. Moving on to our non-seismic products. A breakdown of revenue is as follows: our industrial product revenue for the second quarter was $3.3 million, a decrease of 2% compared to revenue of $3.4 million last year. We do not believe this small decrease in quarterly revenue is indicative of any particular trend in our industrial product demand. Our industrial product revenue for the 6 months was $6.4 million, an increase of 5% compared to $6.1 million last year. This increase was primarily attributable to higher demand for our contract manufacturing services. Image product ---+ imaging product revenue for the second quarter was $3.2 million, an increase of 9% compared to revenue of $2.9 million last year. Revenue for the 6 months was $5.8 million, an increase of 4% compared to $5.6 million last year. These increases reflect higher demand for our printhead and other ---+ and our film products as well. Our consolidated gross profit margins in our seismic business segment continue to be under significant pressure due to several factors, including unabsorbed fixed manufacturing cost due to low factory utilization, inventory obsolescence expenses and depreciation on underutilized rental equipment. Until we see significantly improving seismic product demand, we expect our seismic product gross profit margins to be challenged throughout fiscal year 2017 and beyond. Our second quarter and year-to-date operating expenses declined 10% and 7%, respectively, from last year. These declines reflect savings we realized from our cost-reduction program implemented back in the second quarter of fiscal year 2016. Cash investments into our property, plant and equipment and rental equipment now stand at $500,000 through the second quarter. Our total fiscal year 2017 cash investments in capital equipment could be as high as $3.5 million with very limited amounts allocated towards new seismic rental equipment, unless precipitated by increased customer demand for our OBX equipment. In the event OBX rental orders require us to add new OBX units to our rental fleet, we would expect a majority of any rental equipment additions to be of a noncash nature, since these additions would likely be derived from our existing inventory stocks. At March 31, 2017, our balance sheet reflected $48 million of cash and short-term investments. We had no long-term debt outstanding and borrowing availability under our credit agreement was almost $30 million, resulting in $78 million of total liquidity. While cash flows are expected to be lumpy throughout fiscal year 2017 and revenue visibility remains limited, we believe our total cash flows for fiscal year 2017 will be positive, primarily due to the receipt of $13 million of income tax refunds, most of which was received in our second quarter. We remain committed to cash preservation, while we endure this market downturn. That concludes my prepared remarks. And I'll turn the call back over to Rick. Thanks, Tom. The first half of fiscal year 2017 has now come to an end. And it is very evident that market demand for our seismic products still remains at historic lows. This is a direct consequence of vastly reduced seismic exploration by oil and gas companies. While the price of oil seems stabilized around its trailing 6-month average of $50 per barrel or so, capital allocations have yet to be earmarked for exploration in any meaningful way. As reported by the International Energy Agency just last week, conventional oil discoveries in 2016 totaled only 2.4 billion barrels globally. This is roughly 1/4 of what's been averaged over the last 15 years. Compounding this, the amount of resources sanctioned for development reached its lowest point in over 70 years and exploration spending in 2017 is expected to again fall for the third year in a row. We expect these conditions to pose a continued challenge to our future financial performance. Despite these circumstances, seismic imaging is the defining fundamental science necessary to find and optimally exploit oil and gas reserves. To this end, we believe our seismic products represent the most technically advanced and cost-effective tools available to the industry for acquiring such images. We are resolved to maintain this advantage and leadership through our ongoing cost management and disciplined engineering. As of March 31, 2017, our balance sheet reflected no debt, as Tom mentioned, and $78 million of total liquidity consisting of $19 million of cash and cash equivalents, $29 million in short-term investments and an untapped credit limit of $30 million. This puts us in a good position to benefit from the eventual recovery of the seismic market. Now this concludes our prepared remarks. And I'll turn the call back over to Robbie, the moderator, for questions. I actually have a group of questions. But first of all, if I understood your comments in the December quarter 10-Q correctly, you expected that there would be lower rental income in the March quarter. And it appears as though you had higher rental income in the March quarter than the December quarter. And I'd be curious, what changed that led to that better-than-anticipated result. Bill, that was primarily due to a contract extension from one of our customers where the contract went longer than we originally anticipated. And, Tom, was that the longer ---+ or pardon me, was that the larger long-term OBX contract. It was. And did that extension take place because your customer found additional work. Or was the scope of a particular project just increased. It was additional work. And that customer, they finished their rental, they no longer have work on the docket, is that correct. Yes, that customer has concluded that contract, and so it's done. Let me shift, if I may, to GSX. What are you all hearing about prospective rentals or customers expressing an interest in renting the equipment, whether that be on a short- or long-term basis. Well, there is some demand for that. But as you might well expect and as we've mentioned before, there is already a considerable amount of equipment available in the contractors' hands. Their crews are reduced. So as a general rule, they have as much equipment as they might need. Interestingly enough, Bill, we had a situation this rental season in Canada where we ran out of a certain type of GSX equipment in our rental fleet, and we had to move some inventory into our rental fleet in order to fulfill the demand. So it's still in demand. It's still being used. But as Rick says, there is an ample amount of supply in the current pipeline with our customers. Fascinating. And what type of equipment was it, that you ran out of and had to add some. It was GSX 3 channel stations. Well, I guess, congratulations. That's better than not running out, right. Sure. So let me shift to the one area that there does seem to be a fair amount of drilling activity, and that's in the Permian. What's happening with crew counts over there and the general need or desire or interest in additional seismic work. And what I'm really trying to gauge is, with all that activity, are they just drilling prospects that they've already known about. Or is there some interest in doing some additional seismic work. Well, we're not the best people to be asking that question of. You really should be asking that of the contractors. We know that their crew counts are reduced. We hear that there are seismic programs that are being desired to be performed in these same areas to get better understanding of where drilling should occur. But I'm sure there is some ongoing drilling of ---+ that is based on previous seismic data as well. But again, we're not in the best position to give you the answer to that. Yes. Well, I mean there is a portion of it that we expect based on our current visibility to maybe remain somewhat flat. What we're aware of is that these seasonal aspects sort of shift from time to time with respect to the contracts for particularly some of these industrial water meter cables and things of that nature that we have. And so it's really an issue that we expect growth in general. But for the period that we can foresee, it looks like it's likely going to be flat. Yes, and some of the demand last year, we understand, was driven by customers that needed to fill their shelves with this new product. And they ordered a lot of stock, more than what they just needed at that time. So their shelves are full of stock, or it's probably coming down a little bit. And they're now getting into more of a reorder cycle. So last year, we filled the shelves. And this year, it's just ongoing demand. It's a broad set of customers. The municipalities are certainly part of that customer base, but so are the instrument makers that provide actual hardware to those entities. You should expect it to fluctuate quarter to quarter. It's based on activity within all of our product lines. And as product lines move and we have activity, we need less obsolescence. And those that continue to sit idle, we need more. So it's very difficult for us to predict. So you should expect it to be a little bit more volatile. So would you please pontificate for a moment about where we're at in this cycle relative to the last meaningful downturn. I just don't have a lot of perspective. And I guess, what I'm wondering is, the fits and starts that you're seeing now, is this normal, where, yes, there are some signs of green shoots, but they don't at all seem to be sustainable or the beginning of a trend, it's just individual data points. Is this normal. As much commentary and pontificating as you like would be appreciated. I don't know if there is a normal per se. I think the last downturn was a little bit more spiked and recovered more quickly. I think when things stay depressed for the length of time they are, you're going to see the sort of sputtering effects that occur as [little lumps] of commerce take place. As far as the sustainability of green shoots or improvements, that's just something that you can't really predict at this point, because there is a lot of debate over the supply and demand balance. That's going to drive things in terms of what the long-term will hold. It's certainly the case that if exploration is necessary to find more oil and gas reserves, you're going to need to have seismic equipment to go do that. Right now, as ---+ if you look at these reports, the amount of resources being put towards that end are at historic lows. So is that sustainable. I don't really think so. But it's hard to predict how things might change. This question, I think, is in the same vein, as Bill's question. Only more speculative because it involves government. We are hearing from the Trump administration that it intends to open up offshore exploration in a number of areas, and also that it intends to revisit prior presidential decisions designating certain areas as monuments and possibly permitting business activity in some of those areas for the first time. And it also appears that a lot of this can be done by presidential edict rather than having to go through Congress. To what extent might this involve activities which had been off-limits before and might not have been explored much or might not have been explored with usable technology or data. Well, actually, <UNK>, that's an excellent question, but I really don't know. It depends on where these areas are. If they have not been explored, then you'll absolutely need some fresh seismic data to get any kind of idea about what geology you're going to deal with and what sort of resources might be available there. In the offshore side, that would be certainly a boon for the marine side of things, which has been pretty much decimated across the industry. It would help there. And then, it sounds like some of these sort of national monument areas might represent some land areas that similarly might benefit if they haven't been explored before. But it's hard to tell until those are actually nominated in terms of their... (technical difficulty) Well, I'll let you know what he tweets me. All right. Well, thanks, Robbie. And we thank everyone that joined our call today. And we look forward to speaking with you during our third quarter conference call, sometime in August. So thanks, and goodbye.

2017_GEOS

2017

LMT

LMT #Thanks, <UNK> Good morning, everyone And thank you for joining us on the call today All of here, hope your New Year is off to a good start Let me begin by saying that I am extraordinarily proud of our Lockheed Martin team Their dedication and focus enabled us to achieve outstanding program and financial performance during a dynamic year of transition and I want to thank them for their efforts Our performance as a corporation allowed us to exceed all of our full year goals and has positioned us for future growth and to continue to deliver value to customers and stockholders in 2017. While <UNK> will cover the financial results in detail a little later, I want to highlight a few noteworthy 2016 financial accomplishments from my perspective 2016 was an exceptional year of achievement, with all of our financial metrics exceeding our expectations and in the case of sales, earnings per share and cash from operations exceeding our previous historical high watermarks I was especially pleased with our performance in maintaining our focus on new business wins and building backlog We received almost $19 billion in order bookings in the fourth quarter, which resulted in our achieving a quarterly book-to-bill ratio of 1.4 and a year-end backlog of over $96 billion This represents over $1 billion increase from 2015 year-end level and reflects the broad demand for our products from both domestic and international customers Significant awards included $7.2 billion for our F-35 LRIP 10 and definitized contract action agreement, a $1.5 billion award for PAC-3 missiles defense capabilities for United States and allied military forces and $1.2 billion from the Republic of Korea Air Force to upgrade 134 of their F-16 aircraft Our strong and growing backlog has positioned us [Technical Difficulty] Sorry for the interruption there [inaudible] (03:57) Our strong and growing backlog has positioned us to deliver expanding sales level and outstanding financial results as we move forward Another area where we are, it sounds like somebody is not on mute Let me just continue Another area where we were successful with our strategic focus on cash and cash deployment, in 2016 we generated nearly $5.2 billion in cash from operations, reflecting the commitment focus of our team in executing on contracts for our customers on a daily basis and we expect to exceed our initial three-year $15 billion commitment we originally laid out in October of 2014 by $1 billion This strong cash generation also enabled us to continue our longstanding cash deployment strategy In 2016, we returned 100% of our free cash flow to stockholders through our competitive dividend and ongoing share repurchase activity Keeping with cash deployment our 2016 share repurchases exceeded $2 billion and coupled with the shares retired earlier in the year as part of our divestiture of the IS&GS business allowed us to reduce our year-end outstanding share count to below our target one full year ahead of our stated goal These achievements reflect our ongoing commitment to perform with excellence for our customers and stockholders Looking beyond 2016, our 2017 guidance outlined today shows that we are expecting solid organic growth and continued strong cash generation, and <UNK>, will provide a detailed review of the guidance and assumptions in his comments and webcharts I'd like to turn now to the status of DOD budget Currently, the DOD is operating under a continuing resolution through April 28th for fiscal year 2017 with funding constrained to prior FY16 levels While this will cause funds to be limited for certain DOD programs and likely delay expansion in others, we do not believe our 2017 sales, earnings or cash flows will be affected by this delay in receiving the full appropriations bill We forecast that prior year's appropriation levels will support our current plans as our broad portfolio of long cycle programs remains well-aligned with our customers’ needs Further support for this conclusion is that the continuing resolution also allows for a limited set of exceptions, which include the ability to additionally fund two of our programs, advanced procurement for new multiyear Black Hawk helicopter contract and sufficient funding to maintain the Orion Multi-Purpose Crew Vehicle program launch capability and schedule While we believe the possibility of a full-year CR still exist and would not be in the nation's best interest, we are hopeful that a resolution can be reached to maintain our country's readiness and strength Separately, the 2017 National Defense Authorization Act was signed into law last month and reflected bipartisan agreement that defense budgets should not return to amounts defined by the Budget Control Act or sequestration levels I am personally encouraged by that fact, but there is recognition from both parties that global security threats are not decreasing and that in fact we do need to continue to put resources toward our national security and our interoperability with our allies around the world We look forward to the upcoming submission of the new administration's budget proposal and continued congressional support for a strong defense and future recapitalization actions both in FY 2017 and beyond We look forward to working with the new Pentagon team as we collectively look to provide our armed forces with the capabilities needed to perform their crucial missions I would like to continue my remarks with a few highlights from the fourth quarter that illustrate the continued upward momentum we have in our operational performance as we delivered daily on the commitments to our customers Starting with the F-35 Joint Strike Fighter, we delivered 16 aircraft in the fourth quarter, including the first planes for customers beyond our original eight partnered nations, Japan and Israel These countries represent our ninth and 10th international customers, and along with South Korea show building international interest and the capabilities of this remarkable plane In November, Luke Air Force Base welcome the arrival of its first Foreign Military Sales or FMS aircraft as Japan took ownership of its first F-35, where it will be used to train an elite cadre of Japanese air self-defense pilots and maintainers In December I traveled to Israel to attend the delivery ceremony for the first pair of Adir F-35 stealth fighters for the Israeli Air Force The IAF has embraced the technologies and capabilities of this fifth-generation fighter and believe it will become a powerful accelerator for their entire air force Also during the fourth quarter our F-35 backlog grew as we received an undefinitized contract for LRIP 10, which added 90 planes to our flow This brings our total F-35 orders to-date up to 373 planes Just as significantly, our 2016 deliveries of 46 jets brought our total deliveries to 200 aircraft at the end of 2016. We expect 2017 to be another inflection point in our production cycle as we now anticipate delivering 66 planes, an increase of over 40% from our 2016 level As many of you know, I have the opportunity to meet with President Trump on two occasions prior to his inauguration to discuss our F-35 Joint Strike Fighter program We along with our partners share his strong interest in producing this unparalleled aircraft at affordable prices for our warfighters and taxpayers We believe we are on this path and I'd like to take a moment to give you a quick status of the program At this time, I'll ask you to turn to the third page in the webcharts that we have provided This chart depicts the F-35A model per unit price, which is the Conventional Takeoff and Landing or CTOL variant The chart also depicts the F-35 program order quantities The bar graph portion of the chart shows our historical and projected orders You will also observe a dark descending line on the graph, which shows the per unit price of our CTOL variant in each LRIP as notated by the axis on the right You can see from our latest status on our LRIP 9, our current F-35A is now around $100 million apiece and drops below $100 million for LRIP 10. The LRIP 10 price is currently proposed with represented reduction of over 60% from the first LRIP 1 aircraft and this demonstrates a learning curve as efficient as any achieved on any modern tactical fighter aircraft The chart also includes a red dotted line, which represents the government program offices annual budget estimate to Congress of the F-35A unit price This selected acquisition report or SAR is submitted annually to Congress as part of the yearly budgeting process in advance of our contract negotiations for each lot As you can see we have had eight consecutive years of achieving settlement unit prices below the internal government expectations, showing our ongoing commitment to producing this aircraft with increasing affordability You will also see the rapid ascent and quantities on the chart It is with this anticipated trajectory and production that we can continue to see the efficiencies in touch labor, manufacturing techniques and supply chain operations that we project will allow us to meet our stated goal of offering the CTOL version for $85 million by 2019. We believe this will result in the best combination of capability and price of any aircraft ever offered, while at the same time growing valuable job opportunities for our American workforce Turning to our Space Systems business area, I'd like to highlight another example of one of our innovative products and the benefits that can be derived from our long-term commitment to technology, our customers and their missions In November, we successfully delivered the Lockheed Martin built GOES-R satellite to Cape Canaveral Air Force Station in Florida The spacecraft was launched on a United Launch Alliance Atlas V rocket and placed into geostationary orbit 22,000 miles above the earth as the first of four in a next-generation weather satellite constellation We are excited to be leading the GOES-R program, a collaborative mission between NASA and NOVA, which will provide major improvements to quality, quantity and timeliness of critical weather data This constellation will improve the detection and observations of meteorological events that directly affect public safety, protection of property and ultimately economic health I'm especially pleased that the company's Advanced Technology Center in Palo Alto, California contributed key instrumentation that will fly aboard each spacecraft, including the Geostationary Lightning Mapper or GLM The GLM will take hundreds of images every second, mapping lightning activity on the earth surface and in the atmosphere Scientists are hoping to use data from the GLM and GOES-R satellites to provide citizens and public safety officials early warning of severe storms and tornado activity Finally, I'd like to take a moment to congratulate our Sikorsky team for delivering the 1,000th H-60M Black Hawk helicopter this past quarter at a ceremony in our Connecticut facility This version of the Black Hawk dating back to 2007 has been consistently enhanced with more powerful engine, improved airframe and modern avionics, and it is a key element of the Army Aviation Modernization Plan The Black Hawk has been noted as the workhorse of army aviation and including the entire Black Hawk family, Sikorsky has delivered over 4,000 Black Hawk helicopters, which have blown over 9 million flight hours We are honored to be part of this heritage and look forward to continuing this proud legacy In closing as I reflect back on our accomplishments over the past year, we completed our strategic actions to better align the business for operational and financial success, and long-term value creation We increase sales, grew our backlog and had strong cash generation, while continuing to perform with excellence for our customer Looking to the future, I am enthusiastic about our corporation’s broad portfolio and the growth opportunities that it provides both domestically and internationally I'll now turn the call over to <UNK> to review our financial performance in more detail, outline our 2017 financial guidance and then we'll open up the line for your questions Thanks for the question <UNK> I will take that on and <UNK> do you have anything to add you’re certainly welcome On LRIP 10 we are very close to a deal as some of may have seen in the media I expressed that after my discussions with President Trump recently We are very close to a deal that would allow us to close LRIP 10 in the near-term and so I expect that will be very soon On LRIP 9, basically we are not under any pressure to do anything further on LRIP 9 at this point We are just going to continue to look at our options on LRIP 9. Anything do you want to add <UNK>? Thank you Thanks for your question <UNK> I will just start with Brexit question and in terms of U.K defense spending, I haven't had any impact and input from the U.K MOD that they're going to move off of their strategic defense plan, they have a strategy and their normal review that they will continue to spend on their defense spending So we haven't seen any impact from that No indication that that’s going to change I think just like most countries their national security is first and foremost for them and so they are going to continue to focus on that In terms of other international customers and any reaction to the change administration I frankly haven’t had any dialogue back from that as well We ---+ as we bring in ---+ as we have an orderly transition of power in the United States of America, we have new leaders in the administration, they each ---+ they have different policies they might put forward, but it hasn’t impacted our demand for our international products, a lot of our growth on international ---+ in the international marketplaces in the F-35, it’s in missile defense, it’s an opportunity for F-16 and C-130J, opportunities for C4ISR, Space awareness, things of that nature and that continue ---+ there continues to be a demand for those And I ---+ as I ---+ as we continue to move forward in dealing with our international customers we’re not seeing any retrenchment at all Good morning Let me take that on since I have been a lot of discussions with President Trump I only just going to frame it for you, I tried to express after those meetings, some overview of the meetings themselves, but I’ll just give you a little bit more color on it Basically President Trump recognizes that the F-35 is a very large program, its largest program in the Department of Defense He wants to make sure that that the American taxpayer is getting the lowest possible costs on the program and we share, we understand his concerns about affordability, we certainly share that The meetings that we've had have been very productive, with very good dialogue He asked excellent questions and he is really focused on making sure that that the cost comes down on the program and it is not about slashing our profit, it's not about our margins when we have those discussions about how we get the cost of the aircraft down today and in the future So I have welcome the opportunity to talk to him, because it gives me an opportunity to share with him what we have been doing in terms of bringing the cost down as you saw on the chart that we put in our deck today that we have been driving the cost down on the program that we have invested as ourselves and our industry partners in what’s called blueprint for affordability and we're moving forward on sustainment cost reduction initiatives, so that we can continue to take cost out of the supply chain, to take cost out of our manufacturing and produce ability and materials we use as we’ve moved along on this program And as we've done that we’ve ---+ I’ve also have the opportunity to share with him things that the Department of Defense can do and how they might buy the aircraft differently in the future that would help continue to drive the cost down, he open that discussion The other thing is very important that I'm happy to have the opportunity to chat with him about is the capabilities of the F-35 brings to our minimum and uniform, I mean, it’s basically a game changer, it brings for our country, for our military, as well as for our allies around the world unmatched capability, absolutely unmatched And recognizing that his focus is on how do we drive the cost down aggressively and we ---+ I think we are ---+ us along with our industry partners are right in line with him on doing that, we’ve got a lot of ideas on how we can do that in the future In the meantime, we will continue on the current negotiations to come down that curve that you saw on the chart that we shared with you to continue to drive the cost down Well, first of all, what I was discussing was the sustainment cost reduction initiatives, just like on blueprint for affordability which was focused on production costs, we along with Northrop Grumman and BAE committed some investment up front to help with getting projects underway that will continue to drive the cost down and production We have similarly invested upfront to support the U.S Government in driving sustainment costs down in the near-term over the next five years to drive that cost down So that was what I was referring to Now your question about sustainment itself, I mean, we do look at these programs in terms of their overall lifecycle costs, which is not just the development and production but it’s also sustainment and our goal is that the overall cost for the program would continue to come down Thanks for the question, <UNK> As I said in my prepared remarks on the front end, I think, we're extremely well-positioned for long-term success Yes, last year was a challenging year in terms of transitioning the divestiture of IS&GS and really moving very far along in our integration with Sikorsky and that I would say a great tribute to the team is that despite those major efforts that we had going on in the business we exceeded all of our financial commitments, as well as actually hit some new records, I mean, I think, that's a true measure and our operational performance was outstanding in terms of how we are performing for our customer, so I'm extremely pleased with that In terms of strategically as we look forward, having Sikorsky as part of our company now, it opens up a lot of opportunities for us, we are currently in the development phase for a number of helicopter program, so we are going to move into production, so as you look at the CH-53K at the Presidential Helicopter, the work we've been doing on the Canadian Maritime Helicopter program, the combat rescue helicopter that we’re working, all of those programs, as well as what <UNK> mentioned, we continuing on with the Black Hawk and getting into the next year multiyear Black Hawk is excellent growth area for us that will continue to bring good cash generation and continued growth for us as the company And then we do expect at some point the commercial business will come back, we are at a lull right now with the oil and gas prices, but it’s another opportunity for growth for us and one of the elements of the company that we’ll look forward to continuing to grow And so, Sikorsky has been a great asset that we brought into the company and I see great growth opportunities We’ve talked about 35 at length, you can see, certainly it is a growth engine for our company and we continue to see growing international demand for it, so it’s not just a program of record that we have with the U.S Government on the services that are buying the aircraft, but and the international partners that have already signed up, but many other countries are showing interest in the program And then across the portfolio from our missile defense to the work we are doing in mission systems and training to all the elements of our fire control capability, our space systems and satellite and spacecraft I think if you look holistically at our portfolio we are very strong in all of those areas and represent a leader in and virtually every one of those markets So from a competitive advantage standpoint I think our goal is to continue to perform with excellence on the programs that we have today and to continue to look for opportunities to keep our portfolio relevant to continue to invest in research and development and innovation so that we stay on the forefront I think innovation for us is the lifeline of this company What we’re doing in our independent research and development, what we’re providing to our current customers and what we’re looking at and providing for long-term investments for the long-term and things like hypersonic and directed energy and other things And then as you're probably aware we set up a venture fund where we’re also taking positions in companies that we see is another seeding of our innovation into our company I would lastly say that from a competitive advantage standpoint my view is that that it is the talent in this company that is the competitive advantage We have the best talent in the industry in my view from and that in my view sets us apart So that couple with the technology and the outstanding portfolio, I think, sets us up very well for continued success and continued growth Thanks for the question, <UNK> And I guess, I would step back from his yesterday and what you’ve heard from him in his campaign is that his focus is on not having work go offshore to be produced and then brought back into the United States that are ---+ and have the company have the advantage of producing it elsewhere So if you take the Lockheed Martin, I mean, we are not, we produce our products in the U.S , predominantly of our roughly [ph] 98,000 (48:04) employees over 90,000 are here in the U.S This is where we produce our products and then we deliver them around the world And those that are producing another parts of the world whether it’s in the U.K or in Canada or Australia, the work that we might be doing there is not being imported back into the U.S So I don't see that this border taxation issue affects us as a company and I think it’s more geared toward commercial companies that might decide to do the production offshore and then sell their products back into the U.S Good morning Thanks for the question, <UNK> I guess, I will just give you my opinion because that's really all I can do at this point is pretty unpredictable as we go forward and as you indicated My opinion is though that there's appears to be bipartisan support for eliminating sequestration As I’ve said in the past, we have a lot of independent dialogues with various members of Congress, every one I've ever spoken to [Technical Difficulty] they don't think it's good policy and they want to get rid of it So I think now with the current Congress and the new administration that it probably opens up the opportunity for really getting that done and I'm very encouraged that the dialogue has been around eliminating the defense sequester, just removing it altogether and there's also a strong discussion around increasing defense spending, because we have for the last few years allowed our ---+ with that budget caps et cetera, we have not been investing like we need to in recapitalization and then and readiness and a lot of things that you hit directly from our customers, our services telling Congress and telling the new administration that they need So we are very supportive of our defense customers and being a voice around that, because we do think it's important to eliminate the sequester and the budget caps associated with it to allow them to do, to address the national security strategies and to provide a right capability for minimum and uniform In terms of where it might come into play, I mean, I ---+ again, I'm encouraged by the fact that there is some discussions around supplemental to the FY17 budget, there's some discussions around getting after this whole issue of sequester and eliminating the budget caps So whether it’s in ’18 request or in the early ’17, it’s hard for me to predict, but I think it will be near-term and longer term, because everyone that I speak to has recognized and certainly President Trump has recognized that it's something that needs to go away and we need to get on with spending the appropriate amount, having adequate budgets to support our national security Let ---+ <UNK> why don’t you walk through and then if I have anything to add on Thanks for the question, Rob I guess, the first question on sustainment, sustainment is a separate contract from the LRIP 10, so it isn’t part of the discussion at all in LRIP 10 negotiations nor would be the upgrade work for Block 4 going forward… Actually no we treat them separately as separate contracts, we look at what the sustainment contract is versus the LRIP 10, I mean, there are just, the separate LRIP 10 is pretty straightforward, as we look at our assessment of the costs associated with LRIP 10 and offer that we put forward based on the cost of the aircraft and the terms and conditions associated with that contract It doesn't include sustainment So with that ---+ with our last question let me conclude the call today I want to end up the call by just reiterating that 2016 was truly an extraordinary year of transition and success, and our team performed exceptionally well in all phases, strategically, operationally and financially As we look into 2017, our strong backlog and solid portfolio have the corporation positioned for bright future of topline growth and increasing cash flows Thank you again for joining us on the call today We look forward to speaking you at our next earnings call in April Stephanie, that concludes our call today

2017_LMT

2015

FLR

FLR #Okay, on the ---+ this is <UNK>. On the first question of government margins, the Afghanistan work was higher-margin business. That got converted to a fixed-rate basis several quarters back. That reduced some of the fluctuation that had occurred over time in that business. The other thing is it creates some fluctuation in that business, as there's always a set of issues to be resolved with respect to regulatory matters on the government side. We've been very successful with respect to those, but those create blips in time that we have to talk about from quarter to quarter periodically. From a going-forward basis then, yes the margin rates right now I think over the near term are going to be lower than what they had been on average historically, because the Afghanistan work has come out. Then it varies a lot based upon the mix and whether or not we have joint ventures, whether we're sharing the profit, whether it's all flowing through for us or not. It ends up being a little bit complex to dive into. I'd just say generally we expect them to be at the kind of level you're seeing in that 2% to 3% range here over the near term, and then we'll see after that as so many new projects come in and others mature. The construction work as we expand that effort could produce higher margins going forward. Was there a second part of that I need to answer. Well, obviously the three biggest things we've got are the big ethylene complexes. Two of them are well under way on the construction side, and one of them is really just starting. Those are big long projects. When you think about the revenue flow, really the big revenue hasn't started to flow. We're finishing PDH at Dow. We're starting with the crackered layer. CP Chem is well under way. Sacyr is just starting. We've got ---+ those are three very large projects that are really in the early stages of the revenue burn, and obviously the profitability that goes with that. CP Chem has been converted to lump sum, so it has a little bit of a back-end loading in terms of profitability, just because it's a lump-sum project. I think that when you look at those projects, and you say that next wave I mentioned before that will probably start to occur in terms of feed work next year, you can see we've got a long journey ahead of us relative to those projects, and the earnings power of those over the longer term. Embedded in those projects are also some derivative programs that are there. PDH ---+ there's several of those kind of projects that we're pursuing. But it's a pretty robust list of petrochemicals that we're pursuing. Again, we're either doing the feed on some of them, or in a pretty good position to take those projects. I'd say ---+ I don't know that exactly, but I think the petrochemical side is about 20% ---+ right around 20%. Well we're in the normal ---+ like I mentioned, on two of the gas-fired power plants, we're really only going to the field now. You're in the early stages of those projects, but you'll start to see them grow over the next few quarters. Clearly, they're lump-sum projects, as well. You'll see a little back-end loading in terms of drop in profit to the bottom line on those. Thank you. No, we're still on ---+ if I understand your question right ---+ we're still on the path to complete the $1-billion share repurchase program that we announced the fourth quarter of last year. There's about $300 million left on that to be executed over the third and fourth quarter. That's correct. Well, the big oil and gas stuff in Australia is out of backlog. The stuff we're working on in Canada is all refining and upgrading stuff. It's not a real significant piece of backlog, but it's not at risk. I think you read that incorrectly. Specifically, there's nothing in there relative to Canada or Australia that would impact that. I'm afraid you misread that. Well I think buying backlog is a bad business. I think that what we're going to focus on is the same sort of capital deployment strategy that we've communicated before. I think that with the markets the way they are, there probably are some opportunities we're going to look at in terms of adding to the capabilities we've already mentioned in terms of construction, fabrication, and supply chain. We'll be looking at some things as we go forward, but without a really good eye towards that, we're going to continue to provide a robust dividend to our shareholders, and we're going to continue to buy back shares as cash is available to us ---+ excess cash is available to us. Bottom line is no change. Yes. Well, I'd prefer not to talk about those. I will say that we stay pretty close to Exxon Mobil and their capital, and they've got I think some robust plans ahead of them that we'll participate in. As I said in a previous answer, I think there's the next wave of petrochemical facilities. I think we'll participate in most of those, as well, in some form or fashion. We're not giving guidance on earnings on 2016. It's even harder to talk about timing of cash flows on work that might be won in the future. But generally speaking, we don't see any big shifts occurring in relationship of working capital for revenue, which is what I've been saying for a few quarters, and I think is still true. Thank you, operator. Also, thank you to all the participants for being with us today. As I said, while I'm pleased with what our oil and gas group has done from a performance standpoint, I'm disappointed in the current end market realities of the non-oil and gas markets that we serve. The challenges these groups are experiencing, especially mining and metals as an example, is a reflection of the commodity pricing, and the related capital spending in those markets. In prior calls, we mentioned the actions that we took last year to strengthen our competitiveness. I'm really pleased with that, because this includes reducing our overhead, refining the business model we provide to our customers, providing a much more capital-efficient solution for our customers, and strengthening our cash discipline throughout the Company. We've made those changes proactively last year, and I think they positioned us extremely well for future growth. With that, I greatly appreciate your interest in our Company, and your confidence that you show in Fluor. Thank you very much, and good day.

2015_FLR

2016

EHTH

EHTH #Thank you. I'll take that. This is <UNK>. In terms of the amount of QHPs, it was a little bit more than 50% of our submits in the last open enrollment period. If you look at our total membership as we sit here today, it's approximately a quarter of our membership, just to give you a size of the QHP component there. The changes to the pathway with the government were made after the open enrollment period was over, so that's been a ---+ we definitely saw the impacts after the end of the open enrollment period. It has clearly reduced our volumes and had an impact on our conversion you can see with the 59% drop in our individual and family application volumes year-over-year. We have been talking with the government for quite a while about improvements that they're going to make. They've made some promises early on that there were going to improvements. To date we really have not seen anything material from them at this stage. I'd say that, from a unit economics standpoint, our unit economics in the off season here are worse than they would be a year ago just given the low volumes that we're bringing in. And that's mainly our agent cost per unit are now higher. We have greatly reduced our cost of acquisition. That piece is well below what it was a year ago, but the agent cost per unit are impacted by the lower number of units. So overall, it is profitable per member on a lifetime basis if you include all the ancillary products that come along with an individual family, but the economics are definitely down in the soft season but we're running pretty low volumes in the off season. The open enrollment periods are really when the volumes come. I don't know if that can be quantified at this point. Carriers are still making their decisions as we speak on this matter, so it's been a handful of carriers at this point, granted that they're large carriers. The plans for their members vary, and so it really depends market by market, state by state, as to what will happen there. We will be very focused on finding homes for those people. We have product in the states that carriers are pulling out of to move people to. We will zero in on those members that are being moved and be very aggressively looking to place those members. Yes, we absolutely are looking at the small business market. To date we do sell small business product. We have for a long time. It's not been a huge emphasis historically, although we do sell a lot of individual plans to small business owners and to employees of small businesses, so we're familiar with the market space. It's absolutely something that we will consider and look as a strategic area for us. I think it's becoming more and more attractive to the carriers themselves and we like markets where carriers are excited about selling the product, and that's one of them. Right, so this is <UNK>. We would like to have a cooperative and collaborative partnership with the [FSN] and we believe that we can significantly enhance their mission, which is to obtain more enrollment into QHP plans. We would seek for this year just a restoration of the seamless enrollment path that we had in 2015 to OEP. Longer term, we'd like to be more of a strategic partner. It's our thesis that the private sector has competencies in consumer acquisition and activation that the government's not likely to ever possess. And so from our perspective, we think we are good at this and we would like to play a more significant role with both the state and Federal Exchanges. Right. The concerns that were raised is that our enrollment process might not have been complete enough in terms of providing for every possible scenario of QHP applicant. And so we have undertaken a process to address those issues, but as I said in my prepared remarks, the CMS had committed to making enhancements that we have seen no material improvement against as we've been in the non-OEP period here, and that has impacted conversion rates at a level that causes us to think that the federal objectives are not going to be met in terms of enrollment as they head into this OEP period. We don't think it's a big ask, it's more of a change of policy that needs to be made at the CMS level. Some carriers may pursue that strategy. We have a point of view that commission reductions are likely to be largely offset by premium increases, but it's early for us to know what the strategy is for each individual carrier. <UNK>, did you want to add anything. No, that hits it. Well, the path to profitability is really getting the membership levels for that business to be above the fixed cost structure. I think a couple calls ago we mentioned that on a variable cost basis, we are covering our variable costs with the revenue that we're generating, so at this point it's really [fueling] up our membership to a level that will cover the fixed costs as well. We're focused on continuous improvements in unit economics into the future. It's really what kind of growth will we experience as we move forward, and we're going to aggressively go after growth. We've also alluded to the fact that we're more and more focused over time here on Medicare supplement market and layering that into it. We feel that we've led with Medicare Advantage and now is the time for us to pull Medicare supplement along with that given the fact that it's a major market size wise. Medicare Advantage is about 19 million people in the market for Medicare Advantage. Medicare supplement is about 12 million, so it's a nice market to penetrate alongside of that. Were we to get more aggressive in Medicare supplement in the short run, just so you know, just the timing of when we recognize revenue and when we recognize our expense, it could string out our path to profitability a little bit longer. The lifetime revenue of a Medicare supplement is we believe about equal to a Medicare Advantage, so it's a good lifetime revenue product. But just from a GAAP perspective, we take all the marketing and advertising and agent costs upfront, just like we do with Medicare Advantage. But with Medicare supplement, we recognize revenue monthly rather than the first year upfront, and then when it renews another year, and then when it renews again another year for Medicare Advantage. So it takes a little longer on the path of profitability for Medicare supplement. <UNK>, it's <UNK> <UNK>. If I could just add real quick that as part of this operational strategic review that we're undertaking, keeping in the context that despite the growth that the company has had in the Medicare market, we're still under 1% penetration across the board. We're actively looking at the different sub-segments of the marketplace that we can lever relative to our current technology and customer footprint to identify those areas that might be growing a little bit more faster than others and do so on a cost of acquisition basis. It's advantageous to us from a bottom line perspective. So all of that is on the table with a focus on the Medicare market channel. Yes, 76 percent for all products combined, 82% for Medicare Advantage. It does, yes. So the membership is really a function of our growth rates for the past 12 months. So that would be all ---+ you know the four quarters combined of our growth in applications over the base. Whereas our current ---+ this is just our current application growth rates for these current quarters, so we're looking at two quarters, whereas for membership you're looking at a four quarter span. So that's to get our run rate for tax provision for the year to be basically half of what it will be for the full year. We're basically in a AMT, altered minimum tax position, and a little bit of foreign tax. So it's essentially kind of a fixed amount of tax provision for this year. So you saw us book a large expense when we had a large amount of income in Q1, and this essentially, this benefit basically offsets, for the most part, the provision we took in Q1 to get us to a small resulting provision year-to-date at the end of Q2. That's right. Of our membership, about 25% are estimated to be QHP members. I think there is an auto enrollment of them that would keep them in those plans such that we would theoretically be able to retain them. Right. No, the only other way would be for if they're going to go out and shop was for us to get in front of them and hopefully they loved our service the first time and we can get them back reenrolled again, albeit in a less efficient manner. It means that the questions that people were going through in the process of applying, you know we were hitting let's say the 80% rule in terms of the people that were shopping. We had the questions for them to go through and shop based on those questions, and if they were an [edge] case which had a more complicated background, they would need to go through to the Exchange itself to get a complete application to go through those additional questions. Correct. I mean we were streamlining the process for people, the solid 80% of people out shopping. We didn't have a streamlined process for 100% of the people. It's not an eHealth specific issue, it's across the WV community. ^<UNK> <UNK> <UNK>^ <UNK>, this is a total web-based entity issue that CMS has kind of hit across the board rather than being an eHealth specific issue. And as <UNK> said earlier, they had told us that there were going to be changes to the process as the year went on and we've just not seen any of that as yet. But this isn't a company specific issue and we're making every effort possible to kind of bring the influence to get them to see the benefits of going back to where we were the last year. I can't say that it necessarily does, that the two aren't necessarily correlated because we would like to have as much profitable IFP business as is possible. And we believe that the web-based exchanges, including us as the largest, have an important role to play there. And that the government, the CMS, will come around in the fullness of time to seeing the benefit that we bring. And so we believe that we should be in that business. The Medicare business is highly profitable, 50% contribution margins, average revenues over five years of almost $1,500. Frontloaded customer acquisition costs obviously by the way we account and the way the cash flows. But getting in front of that wave where we have 10,000 agents to over 65 every single day, cresting at 20,000 per day in a few short years, we feel like we should be growing that business as rapidly as we possibly can. And hopefully that the business gets bigger faster because IFP stabilizes and then grows again. We think that should happen. But whether it does or it doesn't, the Medicare business standalone is one of the most attractive growth opportunities I've seen in my business career, and we want to go after it. <UNK> made a very important point on the Med supp business, which we significantly under-index in terms of our share in Med supp. I believe we've missed an opportunity in focusing almost solely on Medicare Advantage and selling Med supp almost as a throw in for those who specifically request it. Those enrollments are very profitable, similar lifetime value, and we're looking very hard right now at what we can do to capture as much market share in Med supp as we do in Med Advantage. I mean, I guess I'd say, you know we saw an opportunity to outgrow Q1 and we were able to step that up from being in the 50% to the 80% growth level for [MAs]. Came at somewhat higher marginal cost on cost acquisition. You know cost acquisition grew a little bit more than 100% versus the 82% MA growth. We felt that that was still well within where the lifetime revenue is. Great margins on that. Didn't say it in our script, our comments here, but with that volume we were able to bring down our cost per unit for our agent costs, so we saw more efficiency year-over-year there, which almost offset the cost of acquisition increase. So overall, our unit economics were pretty close to what we had in the past. So if we see the opportunity to continue to drive down our cost per agent and trade that off against higher cost of acquisition and still have a very good return on investment, we'll continue to do that. That's just how we look at it. Thank you, everyone, for participating. We are available for conversations with you at your convenience.

2016_EHTH

2016

MDSO

MDSO #Yes. Thanks, <UNK> for your question. On BI I think as it is typical for the large platform customers and it's a transformational type deal. And BI will adopt our platform and transition more and more of the current studies on to our platform. So is it 2017, 2018. I think our job is to make this deal bigger than it is actually contracted today. So it's hard to answer the question whether 2017 is the peak or 2018 or 2016. I think our job is to make that bigger of what it is today and it's growing over time. And as we innovate and give new solutions, we have opportunity to cross-sell. And I think that's the way to ensure that we can grow these deals even bigger and as to the 3x growth opportunity we have with those platform deals. As it relates to Intelemage, the business model is consumption based. So what the company's core business is to transact images and it's a transaction fee per image. And it enhances significantly our capabilities. It opens, it makes us more competitive in the area of medical device companies in our overall space. So I think it's giving us more relevance and better access to these customers, which will allow us to grow our business and footprint with these companies in our industry. And we will monetize it on a consumption basis. Just to add on to what <UNK> was saying about BI, just a general statement. Most of our large enterprise deals like that tend to be closer to five year duration and anywhere in the third to fifth year is where you sort of a peak revenue exit run rate, if you will. And that's really what he was referring to in terms of where we can layer on top of that additional revenues from upsells. It's been a little bit of both actually. The transformations are typically focused on either wanting to innovate faster to better science or to drive efficiencies. There are often a large number of different consultants that are involved. A partner like Accenture maybe involved in the actual transformation work and process change work that happens. But we have been the tip of the spear before and we have been asked to work with one of the other consultants early in the process. So again there is not a clear pattern there. I would say that, I think you can see in larger clients that we have, kind of a range of interest in doing things that they are doing now more efficiently. And if anything, I think that's where you probably would see numbers in front of you lean towards, okay, we need to do process reengineering, we need the technology that's going to support it. Then you also have people saying, there is things I need to do which I could never do before, and frankly, we are inventing a lot of those things. And so in that case I really think it is that kind of reputation for and continuous delivery of innovation which is driving a very specific preference for Medidata. And I think the data science component of our business is part and parcel for that. There is things that frankly I don't think you could have ever done in our industry which now, because of what we are able to both see from a breadth perspective and deliver from a scientific and product perspective, it puts us in a unique position to create things that just, like I said, didn't exist. And obviously in those cases the customer is saying I want Medidata but I do need somebody to come in and help me figure out how to get it implemented across my whole organization. Yes, of course. I think the investments that we are taking into building additional capabilities around our platform and creating new markets. I think we have been very consistent today and in previous calls that in many ways we are driving the transformation that it's reflected also in our growing pipeline. And as we have made changes and improved the organization across our company from an operations perspective, R&D as well as go-to-market, marketing, we are getting better in driving momentum in the market and converting that over time that innovation. <UNK>, what's your take. Yes. I am not sure what the dimension of the question is trying to get you from a pipeline perspective. When we are looking at our targets for the remainder of the year, we are looking at things that we have built and delivered product around or have things that, to <UNK>'s point around confidence, we know that there are certain enhancements related to clients that we are going to pick them up. But it's not like we need to invent something new to make our 2016 real. Absolutely. I think that's the right takeaway. Each one of these incremental wins in the top 25 does a number of things. It strengthens our overall competitive position. It creates, I think, a lot of interesting dynamics in the ones who haven't moved yet. It adds significantly to the overall value of our data assets. But then when you look at the breadth of the solution that we have today, the overall platform, I think that we are in a very good position, very strong position to keep driving the upsell opportunity and drive greater adoption. And <UNK> shared some metrics with you around how Balance is doing. We mentioned Risk Based Monitoring and CSA, we are now adding Intelemage. So are feeling good about our overall solution set and how we can sustain, I think what is very healthy growth in a customer base that's more and more moving in our direction and is looking for the kind of innovation that we are bringing to market. Sure. We added 36 new customers in the quarter. We had some fall off. The vast majority of those were study ends. So healthy trend there. Correct. So it is a, for the most part it's competitive displacement. For us, as I said, it gives us access to 14 of the top 15 med device companies. But there is also an aspect to it that is greenfield. As you know, Intelemage sells to the commercial side as well as to the drug development side. Both of those, I think we see as opportunities for greater adoption. So there is an aspect of greenfield to it. Thank you.

2016_MDSO

2015

SRE

SRE #Okay. See if you can explain it better than I did. No. You explained it well. I think that the proposal suggested that we took the 2011 to 2014 savings. That added up to $185 million on a Sempra-wide basis, roughly split between the two utilities. That would be what they suggested should be reduced from rate base going forward. So you can do the math and figure out what that would mean to a revenue requirement. Again, we don't believe that's going to be sustained. The memorandum account really dealt with 2015. They treated that separately. They are trying to get around retroactive rate making, as <UNK> suggested. So the sum of the two numbers that she gave you and they were in my remarks as well, totaled $80 million on a pretax basis through September, less than $50 million after-tax. That would be a 2015 impact that wouldn't go to rate base. It would just be a direct impact that they were requesting. This is what they requested as a way to get around the retroactive rate making. We don't think they will be able to sustain it. But that's the way it would work. So the rate base is only that $92 million and $93 million. Yes. Let me further say though who the they is, because what I want to stress is that we don't have a proposed decision that does this. The they is [TURN], one of the interveners in the case. This is their proposal in the case. So we have not yet received a proposed decision. We will make a very strong case that the record was closed ---+ officially closed by the ALJ before we even filed with the IRS to make these changes. So I just want to be sure that the facts are really clear on this. No. That was ---+ it was a good question. I'm glad you clarified. Yes. I'll start a little bit and then I'm going to ask <UNK> to add to that. I think that one of the things that became apparent was that there's limited liquidity in that market and that the effects were great when people needed to change portfolios and clear out of that market. That creates a sense of discomfort for us because that's not what we see in the Sempra stock. So what we want to be able to see is that there's the ability to have ---+ and that you can differentiate. I think you still do see that in a market. You can differentiate quality from things that are not quality. Quality continues to trade well even if that whole market segment is not trading as well. Because ---+ that's always been what we've been after is, if we're going to do this, it's going to be all about quality. That, if we can't get the value for that quality then it doesn't make sense for us to go forward. So <UNK>, do you want to add. Yes. I guess my only add to that would be is, I think when we looked at this, we ---+ in the beginning, we ---+ I think, we had some skepticism. Then as we watched these things progress over the last few years, it was clear to us that there was a cost to capital advantage to these entities. That was worth taking advantage of. We had ideal assets and we still do have ideal assets for that kind of vehicle, that was valuing cash flows at very high multiples or very low yields. But I think to your point, <UNK>, and it's a very good one, which is, does this disruption in the market give us some pause to think that this was something like a passing fad. I think at the end of the day, I think there's a high probability that these long, sustainable cash flows will continue to garner a yield that makes the capital look really ---+ that makes the capital ---+ the cost of the capital look really attractive. But I do think that we have to kind of think ---+ make sure that we're in a market that supports that for the long haul and that there's enough liquidity in that market that, as <UNK> said, the ones that have that truly aren't tainted by underlying commodity prices can shine and can still garner that low cost. We haven't ---+ that's got to be proven. Whether that can happen in the next six months or a year, we don't know. But I think we're going to keep our options open and look at it and take advantage of it if it makes sense. If it doesn't, we're perfectly okay to keep ---+ just to do the course that we're on, which is just as a C Corp. We have ---+ I think we can be very competitive with cost to capital. We've got a great business here. So it's ---+ the good news is our underlying assets and business are super ---+ are just really sound. We don't have to do, we don't have to do ---+ avail ourselves of any one particular mechanism to raise capital. We have lots of opportunities for that. We can meet our capital needs without any ---+ really problem. Let me just add-on one more thing. <UNK> just alluded to it. But you guys may or may not have seen this, but in the last several months including last week, we got an affirmation of our credit ratings. S&P just moved us to a stronger business risk profile from strong to excellent. We have a very strong business. We can finance our growth. This was an opportunity to maybe do something that was really cheap and good. So to everything <UNK> and <UNK> said, I just want to add that. We have very strong credit ratings. We don't need it. Thank you, <UNK>. <UNK>, do you want to take that. Or <UNK>. Yes. I'll speak first. Then I'll let <UNK> go through all of the numbers of the net exposure and so forth. But as you know, we have kind of a natural hedge here because we have ---+ when the dollar strengthens on all three of the currencies in Chile and Peru, we have a reduction of our growth because of the translation of the two currencies in South America to the dollar. But offsetting that is the fact that we do have dollar functional currency in Mexico, because fundamentally most of the business is all in dollars. But we pay our taxes in Pesos. We have some other adjustments in the income tax expense as a function of their income tax rules that impact us in the opposite direction when all three currencies decline. So that's what we've seen over time. So I'll let <UNK> walk through what the numbers were for the quarter and year-to-date maybe. <UNK>, let me just add to, that in South America, you're on-pointe. In fact, we do get adjustments in our tariff, primarily from inflation but also FX too. But what we have seen in South America this year, which is a little bit unusual. We've seen currency devaluation without underlying inflation in those countries. So we're not getting the inflation adjustment to our tariff. So it's not ---+ it's really not putting as much rate pressure on as you might expect. I'm not sure that's a good thing. We would like to get the adjustment, but we're not ---+ we're just not seeing high inflation in those countries. What we are seeing is just strengthening of the dollar. It's probably more has to do with more US policy and the strength of the dollar worldwide than it has to do with really underlying weakness in those economies. Yes. What we will do and why we don't give you numbers until February is, we look at the forwards at that time for currency and natural gas prices and we adjust our plans for those things, as well as the additional growth that we've had in our businesses, outcomes like the GRC and all. So that's why we wait to give you our 2016 forecast in February. Then at the analyst meeting in March, we'll give you additional information for the next five years. Well, we wouldn't ---+ based upon what we see in currencies now, we wouldn't see that. Then gas prices are so low now, they've already been reflected to a great degree in this year's performance. So I guess they can always go lower. You can never say they won't go lower, but we have pretty low gas prices now. So ---+ Thanks, <UNK>. Sure. No, you heard it correctly, that with the ORA, the Office of Rate Payer Advocates, we have a settlement for a fourth year that would give us a 4.3% attrition for that fourth year. That will be looked at by the Commission separate from our other settlement. So we have a settlement with eight parties for the three years and then we have a settlement with one party for the fourth year. That party being the Office of Rate Payer Advocates. Thank you. Well, thank you all for your great questions. You kept us really busy this morning. We appreciate that. If you have any follow-up, please contact our Investor Relations team. Have a great day.

2015_SRE

2016

SAH

SAH #Yes, sure. We've been telling you since late fourth quarter, October and November of fourth quarter last year, that we expected to see an uptick in new car inventory; just because all the inventories that are out there, and we want to work with our manufacturer partners to help relieve those inventories. But we began, February, March, really tightening down new car inventory levels in particular brands. And as a result, our inventory is dropping, and we can ---+ we expect it to continue to drop. And as your inventory gets in better shape, your margins go up. I don't see any major shifts in where our margin is today versus what it should be in Q3. A lot of it depends on our BMW/Honda mix and how that plays out overall, and what kind of volume we do with those brands. So, we'll see as we move forward, but certainly it has stabilized. All right. Well, ladies and gentlemen, thank you so much for joining us today. We look forward to speaking with you on our next earnings call. Have a great day.

2016_SAH

2017

NUE

NUE #Thanks <UNK> Nucor reported third quarter of 2017 earnings of $0.83 per diluted share Nucor's third quarter performance represents a decrease compared to second quarter of 2017 earnings of $1 per diluted share and year ago third quarter earnings of $0.95 per diluted share Our earnings for the first nine months of 2017 of $2.94 per diluted share compared to $1.99 per share for the first nine months of 2016. The first nine months of 2017 earnings actually exceed annual earnings achieved every year since 2008, a cyclical peak year Nucor's disciplined strategy for profitable growth is working During the steel industry's protracted downturn, we have invested aggressively to increase our capabilities for delivering value to our customers and profitable growth for our shareholders We're achieving these improved results when large parts of our business including rebar, merchant bar, special bar quality steel, plate steel, structural steel, and DRI are operating well below peak performance Our team is encouraged but not satisfied by the initial returns we have realized this year Compared to second quarter 2017, our third quarter earnings decline were largely reflected lower capacity utilization rates and metal margins at our steel mills segment, as well as the impact of an unplanned outage at our Louisiana direct reduced iron ore DRI plant The facility stopped production in late July, and resumed operations in early October Third quarter earnings before income taxes and noncontrolling interests in the raw material segment declined approximately $56 million compared to the second quarter The vast majority of this decline was driven by the unplanned outage at Nucor Steel Louisiana, the last of the majority of the third quarter The profitability of our steel products segment improved in the third quarter from the second quarter Our comment about our tax rate as it can be confusing due to the impact of profits from noncontrolling interests Excluding profits belonging to our business partners, the effective tax rate was 29.3% for the third quarter and 32.1% for year-to-date 2017. Third quarter of 2017 results included a benefit totaling $0.04 per diluted share related to tax return true-ups and state tax credits This benefit was incorporated in our guidance issued in mid-September Nucor's financial position remains strong With total debt outstanding of $4.4 billion our gross debt to capital ratio was 33% at the end of the third quarter Cash and short-term investments totaled over $1.6 billion Nucor's strong liquidity position also includes our $1.5 billion unsecured revolving credit facility which remains undrawn The facility does not mature until April 2021. For 2017 we estimate capital spending of approximately $500 million and depreciation and amortization of about $730 million During the third quarter of 2017, Nucor repurchased 1,591,000 shares of its common stock at a cost of about $90 million or just under $57 per share Nucor's capital allocation priorities are clear and they have been consistently practiced over many years Our first priority is to invest for profitable long-term growth Nucor's growth investment strategy is simple and flexible We are leveraging our five drivers to profitable growth Our second priority is to pay cash dividends consistent with our success in delivering long-term earnings growth Nucor has increased its space dividend for 44 consecutive years We believe that record is strong evidence of both the sustainability of our business and our disciplined approach to capital allocation Our third priority is to opportunistically repurchase our stock when our cash position is strong and our shares are attractively priced From 2004 to the just completed quarter, Nucor has cumulatively returned $8.3 billion to our shareholders via regular dividends, supplemental dividends and share repurchases These returns to shareholders represent approximately 39% of Nucor's cash from operations generated over that period We are confident that Nucor's significant competitive advantages, highly adaptable business model, and proven strategies will allow our team to continue to deliver profitable long-term growth and attractive returns to Nucor's shareholders Approaching the end of 2017, we are encouraged by number of positive factors impacting our markets going into 2018. We see generally stable or improving conditions for our most important end markets including nonresidential construction, automotive, energy, heavy equipment and agriculture Although illegally traded imports remain at unacceptable levels, we are encouraged by the cumulative benefits of the U.S steel industry's successful trade cases We expect fourth quarter earnings to be similar to slightly decreased from the third quarter exclusive of the previously mentioned tax benefit recognized in the third quarter The raw materials segment's performance should improve significantly driven by more consistent DRI production The steel products segment is likely to benefit from margin improvement The steel mills segment will see some decline largely due to weakness in plate and typical seasonality Thank you for your interest in our company <UNK>? Let me start by saying that we do not buy our electrodes on spot markets We have long established contractual relationship with our suppliers and as a result we feel pretty good about our position First, the most important thing we think a look at it as our availability, we make sure that we do have electrodes and we have right now we think our inventory will get us through the first quarter of next year, so we're feeling very confident about that and we have letters of intent from our suppliers to be able to supply us with electrodes for the rest of 2018. So for us supply is really not an issue and because of the contractual arrangements - all the hype that you’re reading about the spot price increases really doesn’t pertain to us and we have pricing through the first half of next year And we expect to see increases in the second half of next year in pricing but again availability is really not an issue for us We buy, we buy almost all of our electrodes domestically and well rather, let me rephrase that we buy none of them from China And so we don’t see any issue with the Chinese issue of supply The other thing that I would point out that gives me quite a little bit of advantage on this is our DRI usage Through our DRI we’re able to accomplish what we call single charging and that reduces our power on times that our EAF - and reduces this is the energy consumption that we have as well as the electrode consumption by about 10% which is pretty significant And a result of us not requiring us to swing the roof off as a result of using the DRI and the feeding of the DRI through the roof of a furnace So all those reasons we feel pretty good about where we are both on availability and where we are on pricing and frankly our position on terms of consumption of electrodes as a result of our DRI usage Since we pack on plate, I might just make an additional comment that when I look at the work we’re doing on grades at our Tuscaloosa facility, as well as our Hertford facility we are now qualified and in some cases in the process of being qualified to be able to supply most of the plates that goes into the large pipe and transmission lines and that's very exciting One more point on this because I hear this all the time about the U.S industry as a whole and that is that we’re not able to produce all of the products necessary to appease the tight market in the United States While Nucor cannot supply all the grades, they’re all available within the U.S market and there is no reason therefore to have any exceptions on the trade cases relative to pipe So now while we move on to your final question was on Louisiana, okay and I’ll make some comments on that and Jim you can jump in if there is anything you’d like to add to it One of the things as we said in the script while we’re looking to accomplish with the modifications that we have to our long-term process that we have been using what we call HYL the new process, we were looking to accomplish improvements in our quality and at the same time decrease the amount of issues of missions and therefore improve the environmental friendliness of the process And in those two metrics, we’ve been very successful We’ve been very pleased with the quality of the product that's come out of Louisiana and we’ve been very pleased with the reduction and emissions by using this technology The challenge of course is mainly liability and we recognize that and we are now in the process of taking time to look at the entire - the engineering of the entire process, making the necessary adjustments as we referred to and taking a holistic approach to the entire process from beginning to end and making the changes that we believe are necessary to improve reliability And as we go forward in that study we of course will be tapping in for the talent and the lessons that we learnt in our Trinidad facility which is frankly world known for its reliability, as well as quality but particularly its reliability So that process we expect to take the next couple of months at the end of that period we’ll be able to give you a better explanation of the time that would be involved to make any repairs that we feel are required That’s a good point Jim because I should have pointed out we might go through this process in segue and reengineering it taking a hard look at from a holistic engineering perspective and come to the conclusion that the improvements that we have made to the process to-date both in the process gas heater and in the furnace itself have rectified the issues I mentioned several times on this call and I’ll repeat it, the technology itself doesn’t seem to be the issue, it's the equipment that has enabled the technology to result in less emissions in particular that’s been a major change that has given us the most heartburn with the facilities So we’ve taken a hard look at that we want to find a solution that allows us to continue the improved environmental aspects of producing DRI while still having the improved reliability There is a big logistics play and we always approach these markets regionally and we feel that this technology that's proven will allow us to expand on that on that regional approach and focusing where we have scrap available to us and where there are markets already existing I guess on the brighter side we look forward going into the end of the fourth quarter, end of the year and into next year because of the decrease in imports now it’s going to take a while for that surge to work its way through the system no doubt about that But we will continue to see and we believe we will continue to see imports will lower and that excess demand has been holding steady and possibly maybe improving a little bit again if we see that infrastructure build and other things that are happening, some of the results frankly said it was the devastation from the hurricanes that might though result in a little bit more demand on rebars like we build parts of areas devastated So all said we think it will pick up a little bit and we love to continue to keep the imports down, you asked a question about 232, so I think so I can take just a minute of your time and I will share with you my thought, you summed it up well I said this many time, I’m getting a little concerned about the length of time and taking for this to be implemented and I’m concerned about the surge of illegally traded imports that are coming in as a result of the delays With that said, I’m still confident that President Trump will fulfill his commitments to our industry and that we will see 232 hopefully early part of next year absolutely may be there will be a nice Christmas gift to the industry and we will see at the end of this year But certainly needed and it has been, we have a commitment to get it and I think as you look at some of the things that are happening even outside of our industry, for example with the Whirlpool 201, which is a different action of course but still points to severity of the imports and the type of holistic remedies that can be offered by Washington and we’re counting on getting one from the steel industry I probably should have said easier about just saying we want the same rules applied to 232 that do exist for critical circumstances And I got to tell you this is critical circumstances, I mean you even the G-20 has come out and they called the crisis in steel today a crisis, okay that needs immediate action that’s the G-20. And the OECD that’s made a very similar comment and I’ll just point out this is that the United States are suffering through this surge and results follow the capacity in China It’s Europe and Europe is quietly quickly taking action then we are then moving much quicker on to get relief for their steel industry, as well as other regions India just recently a few months ago put tariffs on all of the Chinese products that come into the country so it’s a global problem other regions are reacting much quicker than the United States sadly which means that we remain the market that they can get in to while our government is dealing more slowly with the issues that other government have dealt with more quickly

2017_NUE

2017

MMSI

MMSI #Thank you, and good afternoon, ladies and gentlemen. Thank you for joining us on a very busy reporting day. Some of you are listening to this live, others will listen to it via recording. We appreciate your interest in the company and taking a few moments to hear the Merit story. As you can see from our report, we reported record sales and record earnings. We are also here today to talk about a guidance adjustment to the upside and a discussion about our 2018 and 2019 preliminary thoughts. So what I'll do right now is turn some time over to <UNK> <UNK>, our General Counsel, for our safe harbor provision. <UNK>. Thank you, <UNK>. And again, welcome, ladies and gentlemen. Today's a delight to report what we believe is a reaffirmation of our plan, as we continue to deliver on our 3-year plan, both in terms of areas of sales growth, gross margin and earnings growth. So I'm going to now ask <UNK> <UNK>, our Chief Financial Officer, to go over the numbers on the revenues, gross margins and earnings side. And I'll be back again in just a minute. <UNK>. Thank you, <UNK>. We're pleased to report our Q2 results, which continued to deliver on consistent growth and revenues, where we've seen revenues grow by 24.9% on a constant currency basis to $188.7 million and by 23.5% on a reported basis to $186.5 million. Organic growth was 10.4% on a constant currency basis in the quarter. And we've seen sales growth in all product portfolios and across all our markets in the second quarter. Gross margin was 8.3% on a non-GAAP basis, up from 46.4% in Q2 2016. Margin improvement has been accomplished by delivering on our objectives, changes in our product mix and improvements in efficiency, cost management and increased utilization of our facilities. And earnings improvement continues on a non-GAAP basis. For the quarter, earnings were $0.36 versus $0.26 in Q2 '16. We just want to highlight that $0.02 of the earnings achieved in the second quarter of '17 relates to a tax credit adjustment for options exercised in the second quarter. <UNK>, thank you. And just a reminder that these earnings are based on a higher number of shares, almost a 10% increase, because of an offering we did in the late first quarter. And they still, I think, exceed essentially what we had talked about and had guided to. Even with that $0.02 adjustment, I think we are still beat on consensus earnings by about $0.05. And so, I mean, I think that, that is an extraordinary effort. I'm very pleased with it ---+ of the efforts. The other thing that I think is important to note is the gross margin of 48.3%. Now we had mentioned that, during the first quarter, that we thought we could see a slight adjustment because we would have a full quarter of the Argon acquisition as well as the Catheter Connections. But as it all turned out, it was the same as the first quarter and I'm very pleased with that. It goes to what <UNK> talked about and that is the utilization, the mix, which means really that the business is really performing, from our point of view, in a number of areas. So I'm very excited and pleased with our efforts. Now what I'd like to do is, based on where we are, it's clear to us that we need to do some adjustments. And so, <UNK>, you're the star of the show today. I'm going to let you talk about our guidance and some upticks also for '18, '19 on a preliminary basis. <UNK>. Thanks, <UNK>. So update to guidance for 2017 based on the results that we've achieved through the first half of the year. We're increasing our revenue guidance to a range of $722 million to $727 million, up from $713 million to $723 million. Margin guidance remains the same between 48% and 48.5%. And we increased our non-GAAP EPS guidance to a range of $1.23 to $1.28, up from $1.15 to $1.20. And GAAP guidance remains the same. For 2018 and 2019, we're giving preliminary guidance based on what we see,and the market trends and how we believe our business can perform. And we're forecasting top line growth of approximately 8% for 2018 and 2019. This will be supported by: an introduction of new products through R&D; the integration of M&A completed in 2017, primarily on Argon and CCI; continued development of our international sales organization; and changes to sales force structure and compensation. Gross margin, we forecast to expand by 100 to 150 basis points each year. Again, this is supported by: opportunities with mix; focus from our sales force restructure and compensation; new product launches with higher margin profile; improvements in utilization and efficiency in our manufacturing facilities; and focus on discipline in managing our cost base. And EPS growth is ---+ we forecast to be in the range of 13% to 15% in 2018 and the same in 2019. Again, this will come through, through a combination of a sustained organic sales growth and margin improvement and, again, disciplined and focused management of OpEx. And on that particular issue, I think one of the things that you'll see, as you look into the second quarter, is really how we controlled our expenses. And we think that this 3-year plan that we introduced 2.5 years ago, it has really been helpful to the management team. And it helps us to focus in on everything that we do as to whether it meets those objectives. And so it's our view that by adding these additional couple of years that it is helpful for the entire business to keep focused on getting the results that we all want. There are a lot of other things going on. I think, <UNK> mentioned, and I mentioned as well, the business, just about all of its areas is kind of hitting on all cylinders. In the business world that doesn't happen very often. Whether it be our sensors business, our coatings, our OEM, the International market, things have been performing very nicely. And we expect that, that will continue. There's been a couple of, I think, interesting developments. You're all aware of them. PAE is a very interesting market for us and ---+ but it's still very early. And you're not seeing any results from PAE at this point and you likely won't until next year. There's a couple of initiatives that Merit's involved in that will help to organize and to grow that business. First of all, one of the things that we'll be initiating next month is the ThinkPAE. We've been very successful with our HeRO product line, which continues to grow, I think, at about the 20%-plus range, give or take, in our radial programs by bringing skilled physicians in and they train other physicians. So we've, just in the last week or so, opened up a training course for prostatic artery embolization. Those are held here in South Jordan. And also we do them in Europe and the response has been overwhelming. So what we thought would be 1 course and then maybe 1 later on in the year has now turned into essentially 4 courses that are already planned and they're all fully subscribed. Which means that you're going to have somewhere, by the end of this year, about 100 additional physicians that have been trained and starting to do these procedures. And it's not just the embolics because that's actually a small part of it but it's all of the other parts that go on, the vascular access, products like the SwiftNinja. And just this week, we received approval for our True Form guide wire. And this is a very exciting product that sells for in excess of $200. And this product allows us to have that interventional guide wire but it also helps us with all of our microcatheter products to combine this. So with, for instance, the Maestro, we've been at a disadvantage and we haven't really had a wire that you could package and our competitors did. So now we have that full package. And so we think having that wire, along with the new Amplatz wire and other products, are going to help to fuel our growth. The pipeline is full with lots of new products like it always is. And so, again, as we look out into the future, we're confident that with the controls that we put into place, with the focus on the objectives that we have, I think, clearly spelled out to you, that we're confident in the growth of the business from this point on. So you want to make any other additional comments, <UNK>. I think it pretty well covers and the guidance is clear. How we're going to achieve that is also clear: supported by PAE, supported by robust R&D. Nothing further to add. Now there are some more things to do. For instance, in our Singapore plant, Jim, we are going live with Oracle starting next week so we have a team over there. And there's still work to do. It's only been a few months and there's a lot of training and a lot of just things where we have to become disconnected from the prior host and then integrate and train. So there's still work to be done. But I think, maybe more importantly is, we've been pleased that the revenues have maintained themselves and in fact grown more than we thought they would. And I think we've just been pleased very much. The Catheter Connections, we just had a record month in revenues there. Our tooling is completed. Our costs are going to be coming down. We're opening up new accounts every day. We've gone now and gone off the dealer thing into the direct. So all of those things are like kind of all taking place. There's work to be done. But I mean, I think, the integration risk, I mean just the general business and that sort of thing, all of those things have worked out I think much better than some of our others in the past. They've worked very, very nicely. So I think we're very pleased with it. You have to remember, Jim, with DFINE that there are over 100 people let go. We had to shut down distribution, so I said we're okay with it. But let me go to another point that hits all 3 of these and that is one of the things that we always do is to start a research and development project. And we have 3 research and development products ---+ we have a new product, for instance, the Catheter Connections, Argon and DFINE, all coming some time probably in the first quarter, these things that have been developed. And this is part of that integration where it teaches people the process that we go through to bring a product to market. So I think all of them are moving just fine. We're very excited about the DFINE product and a number of other things going on there. So I think we're fine with all of these, Jim. There's still work to be done, though, but we're fine with them. Yes, the interesting thing about PAE is we really didn't have any R&D expenses. What we had was approval of an existing embolic product and an indication. And since it's not been here there was no product and device, the de novo route was the route that we had to take. But I think the important thing is, Jim, is that we have ---+ we're the only company that has approval for embolic for that procedure in the United States. And as I tried to mention in my initial comments, it's the SwiftNinja, it's the vascular access, it's the radial pro, it's closure, it's all those other things that go on that are all high-margin products supporting PAE and really, very candidly, Merit's presence, our ---+ we're having people call us, physicians, we're the only game in town right now in that area. We expect to be for some time. But the money to be made, from a shareholder's point of view, and building the business really comes from those other products where we have very high margins. But there's no R&D expense. We did that a long time ago. Well, as you know, I can't comment other than to say that it goes on and on. It's slow, the wheels of justice move slowly and they're expensive. But I don't ---+ I can't comment on it, Jim, other than we're engaged in the process. We're providing the information that was asked of us. That's the essence of it. That's all I can say about it. We think it will decline. A little bit of time here because that\ I think you pretty much hit it. Okay. So those are just some but I think between now and the end of the year with our new [Izod] syringe ---+ which one. What, I'm sorry. (inaudible) Our new vascular access product, there's a whole bunch of it. One of the things that's always interesting about Merit, and kind of difficult for analysts, is we have a lot of products. I mean, I've always said this, if we were a baseball player, I mean, we would have the highest batting average in history because we hit a lot of singles and we hit ---+ a double from time-to-time. So there's a full basket of that. And then remember I'm going to say this to you now because it's not ---+ it's coming around the corner, Merit has a new CVO, this is a central venous obstruction stent, fully covered that's going to start showing up in Europe in about 18 months from now. So that, overall down the road, could generate $100 million a year for Merit. So the pipeline is full, vascular access. And then you've got these just these initiatives that we talked about. Radial, PAE, all of these sorts of things and all the accessory products that go with them. So they're all ---+ I don't want to say singles. Some of this might be long singles. We might make it to second base on these but there are several of them. It\ No, we're going to stay focused. We're going to ---+ we're not looking for traditional spine and orthopedic guys. That's not our market. We would look for things that might fit into the IR. We have to stay focused. We have limited resources to do all of these sorts of things. And to be very candid, we have a couple of other products on the embolic side that will be coming into the IOS and a couple of other products in that area. So we're comfortable in that space. We think we can grow that business nicely. But we want to be ---+ we don't want to be distracted by having these more orthopedic types of issues. And with traditional spine, that's not our cup of tea. So we're going to stick to the knitting. Well, <UNK>, <UNK>, <UNK>. Those are our numbers. Our goal is to meet those and those are essentially the minimums. Our goal and our compensation is based on us beating those numbers. But we\ I think, <UNK>, it goes back. Our primary focus on where we get the greatest leverage right now is on expanding gross margin. And I think the ---+ what we've outlined is fairly ---+ the positive outlook for the next 2 years. There's still a lot of work to be done. We've got some of the low-hanging fruit already and capitalized on that. That is a big area that we're focusing on. But we also commit to managing the OpEx line and making sure that, that stays under control. And I think if you look over the last 3 to 4 quarters, you can see that our OpEx is growing slower than revenues, and that's being ---+ hasn't always been the case in the past. And that's where we're focusing on that as well. So I think the guidance is ---+ it's aggressive. In some ways 13% to 15% growth on earnings is aggressive. But we're confident we can deliver on that. That's ---+ as I said the focus is on managing costs and improving gross margin. And let me add just a little bit on that. I mean, I mentioned earlier in a question about market development and the cost, I said that we originally thought we might do maybe 2 of these PAE courses this year. And then it looks like it's going to be 4 or 5, just in the U.S. alone. That costs money to do that. So the reason we've kind of stuck with these numbers is because it would give us that top line and those higher margins which give us, as <UNK> pointed out, as we all know, the biggest bank. What we don't want to do is say, oh yes, we can get you to 20% to 30% and then we stick with this and we miss it. So that's just not what we feel comfortable with. And we want to have a little bit of room particularly when we see the demand and the opportunities to spend the money that will give is the best returns, <UNK>. So <UNK>, can you comment. It's just as well on R&D. To grow at the rates that we forecast, we've got to continue to invest in R&D. And that's a big part of our business, making sure that we have that pipeline of new products coming out. So we want to control the expenditure in those areas but we still need to invest for growth. This has been the same story we've been telling and the same story that we've been performing on and the same story that, I think, has garnered attention to our company and our stock. So we're going to stick with the story and we're going to stick with those efforts. <UNK>, I think, they've served the company well. Like as <UNK> pointed out, in this quarter we've got a little bit better on that OpEx side. Good for us, isn't that nice. But if I miss it, you guys are going to kill me. And I'm not going to miss it. So our plan is as advertised. And something else that <UNK> just mentioned to me is one of the other things we\ Okay. I'll accept that. We've got 10 more years as a company, so. One of the areas is more salespeople. And now we don't ever want to do a bolus but what we want to do is we want to stay within the parameters that we've guided to, but yet you're growing and you have to have people. Our products are more complex. So where in the past Merit has been essentially an accessory company, that started changing 5 or 6 years ago as we've moved into more therapeutics. So it requires more clinical support. It requires ---+ on the R&D side, our products ---+ in order to get a product that's going to be that double, triple or home run. These are now 5-year projects. They're not 18 months, they take more time and more money. And so we just believe ---+ and by the way, this is not a change in what we've been saying for 2 years. I find these questions very interesting. We've said we're going to keep that SG&A line and that R&D because those were the investments have to be made, whether it be in going direct in Canada, Australia, building out those infrastructures now in Japan, and with those kinds of things that allow us then to get the higher margins of growth, they have to be made. And so to ---+ I am not going to ---+ and please don't take this personally, I am steadfast and sturdy that we will grow it at those numbers we said. We'll get those gross margins and then we will go ahead and manage those expenses but it's really difficult to do all of these things and make everybody happy and make more and more money and then you find out that you're Shallow Hal. You just don't have enough legs to hold up the building. So we've got to invest in these sales forces, clinical training, national accounts and in these countries that require us, in order to go direct, you've got to put infrastructure in place. They all fall in those categories, Matt. And so again, I'm not offended by the questions but I'm surprised that what we've been telling everybody we're going to do and we've done is now being questioned, why don't you do it differently. We're sticking with our model of success. We're extending out what we think we can do in the expansion of gross margins. And if we're lucky, maybe we'll get a break and we'll be able to reduce those expenses and get more of the bottom line. But as <UNK> points out and as we all know, it's upstairs that you make your money, in mix and gross margins. And that's where you're going to get the big bang. And that's where we've been concentrating and that's where we've been getting the results while maintaining ---+ in this particular quarter by the way, it was lower. So I mean I thought we did a pretty good job on the expense line for the second quarter. But that being said, that's my best answer. <UNK>, do you want to add any salt and pepper to that. No, I think you covered it pretty well. You thought I did okay. On the cash flow, it will be more steady improvements. We have a lot of focus on working capital management. And again, I think it'll be steady. Let me go to your question. So I answered that question initially based on what do we see for the future and our confidence in our growth and so on and so forth. On the CVO stent, we think we're about 18 months, I think, maybe it might be 16 months now before we introduce this product in Europe. And it's going to be a couple of years, maybe as many as 3 after that before it hits the U.S. market. That's just the regulatory requirement. But I'm not going to talk really anymore about that until we get ---+ when we're prepared to launch it because I don't want to tip off my competitors there to our features and benefits and advantages. But I will say that we have a full capability in-house of making the stent doing the PTFE, the delivery system that Merit is fully self-contained in this particular area and we're excited about it, phenomenally this product, but several others that are in the queue behind it. So that's the best ---+ again, not to offend you, Matt, but I don't want to be talking too much about things because I've got competitors on the phone here listening in. And I can give you your names, if you want me to. I could call them out but I called one out and they sent me a note. And I decided I won't call them out anymore. But I can see their names on my call sheet. So we're not going to talk about it until we get a little bit closer to launch in Europe. And then we'll go ahead and we'll start talking about why we think that there's $100 million market out there available to Merit alone. So that's the best I can do today. Reimbursement is established. It's a good question. I'm going to let <UNK> <UNK> answer that question. <UNK>. So we're seeing strong performance on the inflation device plan in the United States where we have a pretty significant market share predominantly because of the strategic and national account work that we've done over the last couple of years. And that's just starting to come to fruition. We had some key contracts kick in, in I think, the early first quarter. And those are just starting to materialize now. So I would expect continued performance of that base business on the inflation products to continue. So no onetime transaction. But I will point one thing out, Matt, just for you to write down. It's a codename. It's called basics Tau, T-A-U. The 19th letter in the Greek alphabet. Write it down. The CapEx was $6 million in the quarter and operating cash flow, $17.8 million. I think I'm going to take the word material out because that's a big ---+ and it has a lot of legal implications. Let me just say that the SwiftNinja is contributing and is accelerating. And so ---+ and we're excited about that because of its margin contribution and the uniqueness of the product. So it's doing well and we're pleased with it. Let me go to the Cook issue. When that deal took place on April 5, I think when we first became aware of it, 2016, early in that second quarter of last year, there was an awful lot of pipeline filling. I mean everybody would do anything they could to get a catheter. Remember people walking in, taking everything off the shelf and walking out the door. And so everybody would order and everything we had was going out the door. We were working weekends, holidays to meet that need because our customers needed it. So we are seeing a drop-off in that catheter area. But remember there's a couple of other things, too, that it costs us 30 basis points to be in that business because our approach was not to gouge but to match their prices and meet their needs in a time of need. We did exactly that. I think that it built huge amounts of goodwill. And I also said that I thought we'd do $10 million to $12 million. We did that, I think, in that full 12-month period. We had some you'd seen ---+ some of that fall off but it's not because we're losing customers as much as it is that bolus that went through. So if you look at our MAK-NV, if you look at our marker band catheters, if you look at our diagnostic catheters, our Impress catheters, all of those have done very, very well. But they're ---+ you're not getting that bolus again, so on a percentage basis, starting to fall off a little bit. But we kept a lot of that business. The catheter business is still growing. It was 10.8% growth in the quarter. So overall, our catheter business is still growing. So Cook is only a small part of it. Yes, Cook is a very, very small part. But again, I think, we gained more by the goodwill that we created by helping customers, so. But the Ninja is, and will continue to be, a big deal. While he's calculating that, let me go through a few things to give him a little bit of time. I'll stall for him. First of all, as I mentioned, the OEM started in July. Starting in September, just, what, 30 days away, a little longer than that, but we will be in a consolidated warehouse. We would have consolidated all of the Argon business and all of the Merit business and that will be ready so that when those products come over at the end of the year, the space, the customer service, all of those things are in place a full 90 to 120 days before it's required. It will all be in place and all exercised. So that's what's going on structurally. We have the question about what about SG&A. Well, we've got to go ---+ we've put that warehouse in place. We've done that but we still have to maintain that SG&A line. So that would generally be an extra expense but because of the absorption, the products that we can ship there from Argon, OEM and the Merit products that will be in place to meet those orders, that costs a little extra money. But you won't see it. Because we already had planned that it will be within those SG&A parameters that we've set forth. Are you ready, Bernie. And I want to come back and make one last comment about Japan. We have a great reputation in Japan. A lot of these products that you know, like the SwiftNinja, are things that we distribute on a long-term, global basis. But I think as a market, aside from essentially going from wholesale to retail, I think what this opportunity is in restructuring of that marketplace is it gives us a great opportunity for growth going forward in Japan. There are products that Merit's been making for many years that we haven't been able to compete with because we had a distributor who had ---+ and who is a great distributor and we have a long-term relationship with, who were essentially locked out of those markets. There are many, many, many products that Merit hasn't been selling in Japan and many new products that we will be able to sell in Japan. So I would like to think, and I know I'm looking at Joe Wright at the end of the table here, (foreign language) that I would like to see those growth rates approximate what we've been doing over in China and Southeast Asia. So that's 20%. That's ---+ I'm asking Joe, he's looking at me, he hasn't responded yet. But my point is, it gives us a lot more opportunity for growth in that marketplace with products that have been well accepted all over the world but was not consistent with the distribution system we have in place. So we're, I think, very excited about the opportunity there. Yes, there's a number of them. From our operations point of view, we're not solely reliant on Tijuana to deliver on that gross margin improvement. So I will be looking probably for 10 to 20 basis points from Mexico. And ---+ but we're seeing improvements across all our facilities. And so our focus just isn't in one area. It's kind of spread across ---+ it's spread across all of our facilities but we're looking at improvements. So Mexico is a part of this. But I ---+ it's not ---+ we're not fully reliant on that. Yes, yes. I don't think we gave $1 million for the first quarter because we just launched it. But I can just simply say without revealing ---+ because I mean ---+ some of those things I don't want to talk about. It is accelerating. This PAE approval will continue to do that. But it's not just in the U.S. We're seeing it in Europe. We're seeing it in Australia. I'm seeing stuff in Hong Kong, I'm seeing it in China. So we have it approved in a number of places and it's growing in all of those areas. I think that's the best way for me to answer that question. No, they were actually fairly close to what we achieved in the first quarter. And as we progressed through the second quarter, we actually saw those revenues improve. Yes. Well, ladies and gentlemen, thank you for the questions. Thank you for ---+ I know it's a busy day, a lot of other companies out there reporting today, and I thank you for taking the time. We're excited. We like laying these plans out. We have found, as I mentioned, that they've helped us. They've helped us to stay focused. And there's a marker out there that everybody can measure us against and we're committed to making this work and doing our best to exceed. So let me just again thank you for your support. I know that we have a number of conferences coming up. I will tell you that those conferences are filled. Every slot from 7 in the morning till 6 at night is filled. So we're looking forward to meeting with the investors that are on the phone. And we thank those who have invited us. And at this time, there's still work to be done here this evening. Bernie and I will be here for the next hour or 2. Thank you again for your interest in the company. And signing off from Salt Lake City and wishing you all a very pleasant evening. Good night.

2017_MMSI

2017

REGN

REGN #Thank you, Len, and a very good morning to everyone who has joined us today We believe Regeneron is a very different type of company, in that it was founded by and is led by physicians and scientists dedicated to a science-first approach to bringing new medicines that can make important difference in patients' lives This commitment, supported by a talented and longstanding team of scientists and strategic investments in internal technology development, has today produced what many believe is one of the best pipelines in the industry And as Len mentioned, all of our approved and investigational therapies were discovered in our own labs by our own people I will provide a general update on our R&D progress today and highlight two Phase 3 programs, for which we expect to have data readouts in the second half of this year These are dupilumab in asthma and REGN2810, our PD-1 antibody in cutaneous squamous cell carcinoma I'd like to begin with one of our most exciting late-stage program, Dupixent, also known as dupilumab, our interleukin-4 and interleukin-13 blocker, which was approved in March by the FDA for the treatment of moderate-to-severe atopic dermatitis in adult patients whose disease is not adequately controlled with topical prescription therapies or when these therapies are not advisable In addition to the FDA approval, we have recently granted a positive opinion by the European Medicines Agency's Committee for Medicinal Products for Human Use, or the CHMP for the treatment of moderate-to-severe atopic dermatitis in adults who are candidates for systemic therapy We expect to receive EU approval in the third quarter of 2017. In the pediatric atopic dermatitis setting, we are currently enrolling a Phase 3 study of dupilumab in patients 12 to 17 years of age In the second half of the year, we expect to initiate two additional studies in the younger atopic dermatitis patients; the first in children between the ages of 6 and 11, and the second in children between the ages of six months and five years We believe that dupilumab has potential to benefit a variety of allergic or atopic conditions And we are investigating the use of dupilumab in several of these, including asthma, eosinophilic esophagitis, and nasal polyps Today, I'd like to focus on the potential opportunity in our most advanced indication, asthma, where we expect top-line data later this quarter from our pivotal Phase 3 study LIBERTY ASTHMA QUEST Data from our previously reported positive Phase 2 study are considered pivotal and will support our regular submission, which we anticipate in the fourth quarter of 2017. The Phase 3 LIBERTY ASTHMA QUEST study enrolled approximately 1,800 adult and adolescent patients with persistent uncontrolled asthma In this study, patients will randomize to one of two dupilumab arms, 200 milligrams every other week or 300 milligrams every other week, or placebo; patients who are on background therapy of medium to high-dose inhaled corticosteroids plus a second-controller medication, such as a long-acting beta-agonist or a leukotriene receptor antagonist The study has two primary endpoints, the annualized rate of asthma attacks or exacerbations over the 52-week treatment period and the absolute change from baseline in FEV1 at week 12, a measure of lung function, both of which will be assessed in the overall patient population I'd like to remind you of data from our previously reported positive Phase 2b study, which was conducted in a patient population similar to the one we are studying in Phase 3. This Phase 2b study randomized 769 patients with moderate-to-severe asthma, who were uncontrolled despite treatment with inhaled corticosteroids and long-acting beta-agonist The results from this study demonstrate that dupilumab administered at 200-milligram every other week or 300-milligram every other week, in combination with standard-of-care therapy, demonstrated a significant 12% to 15% improvement in FEV1 at week 12 over the standard-of-care alone, as well as there is a significant 64% to 75% reduction in exacerbations over standard-of-care alone Importantly, these positive response were seen in both the patient population with high blood eosinophils, believed to be a marker of the allergic disease patients, as well as the overall study population The most common adverse event in the study was injection site reaction, which was more frequent in dupilumab dose group at 13% to 25% compared to 12% in the placebo group The incidence of infections was balanced across treatment groups, as was the incidence of serious adverse events We believe that if the Phase 3 LIBERTY ASTHMA QUEST data demonstrate efficacy both in terms of reduction in exacerbations and an improvement in lung function in all comers, including the subset of patients with high eosinophil count, as well as the subset of patients with low eosinophil counts, it would be an important differentiating factor No approved biologic has demonstrated robust improvement in lung function, as well as profound reduction in exacerbations, in the overall asthma population, including both these important subsets of patients In addition to the LIBERTY ASTHMA QUEST study, we're also conducting another Phase 3 study, LIBERTY ASTHMA VENTURE, which is designed to determine the efficacy and safety of dupilumab, while reducing the use of oral corticosteroid in patients with severe oral steroid dependent asthma Top-line results from this study will be reported by the end of 2017 and are anticipated to be part of our regulatory commission We are also investigating the use of dupilumab in younger patients with asthma, with an ongoing Phase 3 study in children ages 6 to 11 years old Turning now to other potential and important indications where we are investigating dupilumab We currently have two Phase 3 studies ongoing in patients with nasal polyps We're also planning a Phase 3 study in patients with eosinophilic esophagitis, following recent positive results from a Phase 2 proof-of-concept study These results will be presented in detail at an upcoming medical conference We're also planning studies of dupilumab in patients with food allergies According to data from the Centers for Disease Control, or the CDC, allergic diseases are the sixth leading cause of chronic illness in the United States and have reached epidemic proportion There is a tremendous amount of scientific debate on the drivers behind this increased incidence and prevalence Our collective data from the dupilumab clinical studies suggest that deviation of the immune system triggered by over-activity of the IL-4/IL-13 axis may be the key driver of many, if not most, allergic conditions So-called allergic patients with an overactive IL-4/IL-13 pathway often suffer from more than one manifestation at a given time For example, patients with asthma or atopic dermatitis often also suffer from severe respiratory or food allergies, and the combination of multiple allergic conditions can be quite devastating for an allergic individual The possibility that a single biologic may simultaneously help many of these related allergic conditions would be very exciting and important to many patients Just as important, it would be ideal if such a correction of allergic disease could occur without inducing concurrent immunosuppression All our studies to-date indicate that unlike many other biologics that target the immune system which often produces immunosuppression and side-effects such as infections, dupilumab does not appear to be an immunosuppressant Rather dupilumab appears to be an immunomodulatory agent that blocks the pathologic overactivity of IL-4/IL-13 driven allergic responses I would now like to talk about another important area of research for us at Regeneron, and that is the field of immuno-oncology Despite all the early successes and excitement in the field, cancer remains a challenging area, and there have been a recent string of disappointments with several development programs Just last week, another highly anticipated trial exploiting a PD-L1 antibody alone and in combination with the CTLA-4 antibody yielded disappointing data These developments underscore that the field is still in the very early stages of fully understanding how to exploit and optimize the power of immuno-oncology In contrast to some of the recent disappointing results elsewhere, recent developments with our PD-1 antibody have been positive The ASCO conference in June this year was an exciting time for us We presented important data with REGN2810, our PD-1 antibody, in cutaneous squamous cell carcinoma, or CSCC, which is the second most common skin cancer after basal cell carcinoma and the second deadliest skin cancer after melanoma It is estimated that there are approximately 4,000 to 8,000 deaths annually in the United States from CSCC For patients with advanced CSCC, there are limited treatment options and no standard of care The data that we presented at the ASCO conference were the pooled results from two expansion arms in metastatic or inoperable locally or regionally advanced CSCC from 26 patients in our 392-patient Phase 1 trial These CSCC data demonstrated that treatment with REGN2810 led to an overall response rate of 46%, including two complete responses according to investigator's assessment and a disease control rate of 69% The median progression-free and overall survival were not reached at the data cutoff date, with a median follow-up of 6.9 months The adverse event profile was generally consistent with agents in this class Based on these encouraging results, we are conducting larger efforts in metastatic and locally advanced cutaneous squamous cell carcinoma Recent discussions with the FDA indicate that if these data are robust, they could form the basis of a regulatory submission in the first quarter of 2018. Work on developing REGN2810 in other indications continues, where we are currently enrolling a Phase 3 study in our non-small cell lung cancer indication, a Phase 2 study in basal cell carcinoma and additional earlier studies in other indications as well We're also exploring the use of our PD-1 antibody in combination with novel vaccines in oncolytic viruses Our second checkpoint inhibitor, REGN3767, an antibody LAG-3, is currently enrolling patients in two studies; one in monotherapy and one in combination with our PD-1 antibody Additionally, our bispecific CD20/CD3 antibody, REGN1979, is also being studied in the clinic as both a monotherapy and in combination with our PD-1 antibody In the second quarter, we were granted orphan drug designation from the FDA for REGN1979 for the treatment of diffuse large B-cell lymphoma, or DLBCL Our EYLEA business continues to be strong and we remain committed to maintaining our leadership position Part of this commitment is to help educate the community on the importance of regular dosing with anti-VEGF therapies Real world evidence indicates that many patients receiving anti-VEGF therapies are not being optimally treated, resulting in more widespread vision loss than is necessary This decreases patients' quality of life and results in substantial cost to society, particularly when leading to blindness and disability There has even been a bias that chronic sustained VEGF inhibition may account for the inability of most patients to maintain their vision over the long-term Our long-term data with the VIEW extension study, which followed wet AMD patients treated for approximately four years using EYLEA in a standardized and fixed regimen, show that for the first time the initial gain seen with any anti-VEGF agent can be largely maintained for the long-term This was the first time that such data have been demonstrated with any anti-VEGF agent This is in contrast to long-term studies with other anti-VEGF agents using flexible dosing regimens, such as the CATT study, which resulted in loss of the early visual acuity gains that were achieved with monthly dosing Taken together with additional real-world data, this suggests that under-treatment with anti-VEGF agent is a serious disservice to patients and a major public health issue We believe the overall data in this felid indicate that the treatment goal of anti-VEGF therapy should be chronic, sustained, and potent VEGF inhibition Many elderly people are needlessly losing vision and going blind We are committed to doing a better job to address this issue In the second half of this year, we expect to report top line data from two Phase 2 studies; one in wet age-related macular degeneration, or wet AMD, and another in diabetic macular edema, or DME, of EYLEA in combination with nesvacumab, an antibody to angiopoietin 2. The primary endpoint in these studies will be assessed at 36 weeks, and we expect top-line results from these studies in the fourth quarter of 2017. These results will help us understand with a combination of EYLEA with an antibody to angiopoietin 2 can improve upon the already high bar that has been set by EYLEA PANORAMA, our Phase 3 study of EYLEA in patients with non-proliferative diabetic retinopathy without diabetic macular edema continues to enroll patients The primary endpoints of this study will be assessed at week 24 and at week 52. A separate Phase 3 study in this indication, PROTOCOL-W, which is being conducted by the Diabetic Retinopathy Clinical Research Network, or the DRCR, continues to enroll patients This study will explore every 16 week dosing of EYLEA, which is the only anti-VEGF treatment being investigated in this study We plan to submit our supplemental BLA for EYLEA dosed every 12 weeks by the end of the year Moving on to Praluent, our PCSK9 inhibitor antibody for lowering LDL cholesterol, we expect in the first quarter of 2018 top-line data from the ongoing 18,000-patient ODYSSEY OUTCOMES study If these results are positive and recognized in formal treatment guidelines, we believe this would allow for greater uptake of drugs in this important class In addition to our efforts with Praluent in cardiovascular disease, we are also developing evinacumab, our antibody to angiopoietin-like 3, for the treatment of Homozygous Familial Hypercholesterolemia, or Homozygous FH, in severe forms of hyperlipidemia Following positive data from a Phase 2 proof-of-concept study in patients with Homozygous FH, we plan to advance evinacumab into a Phase 3 trial in Homozygous FH Additional studies in hypertriglyceridemia and heterozygous familial hypercholesterolemia are also being planned As a reminder, evinacumab has been granted both orphan drug as well as breakthrough destination by the FDA for the treatment of Homozygous FH In May of this year, we published data in the New England Journal of Medicine showing that people with inactivating mutations of angiopoietin-like 3 have an approximately 40% reduced risk of coronary artery disease and significantly lower levels of key blood lipids, including triglycerides and LDL cholesterol We were able to identify these mutations through our genetics efforts at the Regeneron Genetics Center Furthermore, we published Phase 2 clinical data that demonstrate that blocking angiopoietin-like 3 with evinacumab in patients with Homozygous FH who are in lipid-lowering therapies resulted in an additional 49% reduction from baseline in LDL cholesterol at week four A reduction in other key lipid parameters, including Lp(a) and triglycerides, was also observed Kevzara, or sarilumab, our interleukin-6 receptor antibody for rheumatoid arthritis, has received regulatory approval in Canada, the United States, and the EU. In terms of clinical development for sarilumab, we are currently enrolling patients in a Phase 2 study in Polyarticular-course Juvenile Idiopathic Arthritis, or pJIA We are also advancing our Phase 3 program for fasinumab, our Nerve Growth Factor antibody for pain, where we dosed the first patient in our Phase 3 efficacy study in osteoarthritis pain We remain on track to initiate a Phase 3 efficacy study in chronic lower back pain in the second half and we continue to enroll our long-term safety study In the second half of the year, we expect to report top-line data from our Phase 3 program with REGN2222, also known as suptavumab, a wholly-owned antibody that we are investigating for prophylaxis of respiratory syncytial virus, or RSV RSV infections represent a substantial burden and is estimated that over 20% of infants under the age of six months require medical attention for RSV annually This study explores two dosing regimens; suptavumab administered either once or twice during RSV season in preterm infants Development in other parts of our early-stage pipeline continue to advance and I would like to highlight a few of the programs Our Activin A antibody, REGN2477, is in clinical development for the treatment of the rare disease Fibrodysplasia Ossificans Progressiva, or FOP In the second quarter of 2017, we received Fast Track designation from the FDA and we anticipate initiating a Phase 2 clinical study in the second half of 2017. We're also studying our Activin A antibody in combination with our GDF8 antibody in settings where there may be benefit to promoting muscle growth REGN3500, our interleukin-33 antibody, is in Phase 1 clinical studies in patients with asthma and REGN3918, our wholly-owned C5 antibody, has now entered clinical development Before I conclude, I want to say a few words about the ending of our Antibody Discovery Agreement with Sanofi, which Bob <UNK> will discuss in more detail Praluent, Dupixent, Kevzara, REGN2810 are our anti-PD-1 antibody REGN3500, our anti-IL-33 antibody, and REGN3767, our anti-LAG-3 antibody, were all discovered and initially developed under this Antibody Discovery Agreement Praluent, Dupixent, Kevzara, and REGN3500 will continue to be developed and commercialized, as applicable, with Sanofi under the Antibody License and Collaboration Agreement REGN2810 and REGN3767 will continue to be developed with Sanofi under the immuno-oncology collaboration We believe that our collaboration with Sanofi is one of the most productive arrangements in the history of the biotechnology industry and we look forward to continued collaborative efforts with Sanofi in the future With that, I would like to turn the call over to Bob <UNK> Yeah, I just wanted – this is <UNK> I want to point out a couple things Despite the mechanics of the healthcare system and reimbursement and rebates and all this, I'd like to think that physicians and patients are still driven quite a bit by how the drugs are actually performing and making a difference in their lives So I'd like to think that one of the reasons that EYLEA is growing in market share is because of the recognition by physicians and patients of what a difference it's making in their experiences And I think as Bob points out, we hope to see that the same will continue to be true as we're seeing from the early reports on Dupixent And I think another very important thing to realize about Dupixent is also the long view As I noticed in my remarks, we are developing this for a very large number of allergic indications The data right now, the early data and including pivotal study data is all very promising, so long-term growth in dupilumab is going to be by the recognition that it may be an important drug for many different allergic conditions, starting with asthma and going onward, and moreover that in a single-patient, hopefully, we'll be able to show in convincing way that in single patient it will able to simultaneously benefit multiple of their allergic conditions And so we think that if the medicine is doing and bringing the sort of benefit that we think it's doing to the patients that that recognition will drive, of course, use because of the benefit it provides I was going to actually bring up a lot of the same examples as Len just did In terms of pointing out how really difficult this business is, how it really is so challenging, and it's really such a industry of failure, because the bar is rightfully set so high I mean, we want to be bringing forward important, effective, and safe medicines to patients, and that, frankly, is probably the single hardest thing that we as a society actually do in terms of discovering and developing products And while I was reading my comments, I have to say I was shocked and stunned at how productive our people have been over so many years to produce so many product candidates and, as Len said, I'm a big track record guy Over and over again, we've made the right decisions about which targets, about picking and selecting the right – out of many candidates, the right candidates to bring forward And over and over again, we more likely than not have been proven right And I think that this is something that is incredibly vastly underappreciated in this industry, how much of a role institutional knowledge plays and having a senior experienced leadership team that has the capability to over and over again make these decisions and pull on their collective memories to help make these sort of decisions And if you go anywhere else and you look how long the people who are making these decisions have been around at that particular place, and it's just a couple of years Here, our senior management team at all levels – I'm not just talking about me and Len and the other most senior people, but we have in general people 15, 20 years who have been leading various efforts and we have enormous collective memory and institutional memory here And it's only with that then you can have that sort of track record that can lead to the discovery of dozens and dozens of product candidates and be moving them forward, and in more cases than not be making the right decisions and making your bets And whether it's picking PD-1 as opposed to PD-L1 and picking the right PD-1 antibody or picking IL-6 receptor versus IL-6 and picking the right IL-6 receptor antibody, or picking the right antibody for PCSK9 or picking the right target in the field of allergy, which nobody else happened to have picked in the entire world This all comes from incredible internal genius and institutional memory that is very rare and, as I said, represents one of the hardest things we do as a society The track record in the rest of the world is overwhelmingly one of failure And, no, not everything we do will work, not anything we do will succeed We have an amazing track record because of this institutional memory and the genius that we have here Yeah, I think that, as I described in my comments, the populations are actually very similar Obviously, when you have such a successful study, you do your best to reproduce it with the least number of modifications and changes I mean, our first study was rather standard It wasn't that we did anything so special, other than that we studied both the all-comer population, and then we looked in both the high and the low Eo subset We designed our study to look in the all-comer population, but we also designed to look in the high Eo population If our data is limited to the high Eos, it would be a little less differentiating perhaps than we think it might be compared to other agents that are out there in development right now But as you know, the real excitement is if it's positive in the all-comer population, nobody else has data that shows that a biologic can really affect the all-comer population

2017_REGN

2017

WMT

WMT #Good morning, and thank you for joining us to review Walmart's First Quarter Fiscal 2018 Results. This is <UNK> <UNK>, Vice President of Investor Relations at Wal-Mart Stores, Inc. The date of this call is May 18, 2017. On today's call, you will hear from Doug <UNK>, President and CEO; and <UNK> <UNK>, CFO. This call contains statements that Walmart believes are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, and are intended to enjoy the protection of the safe harbor for forward-looking information provided by that act. A cautionary statement regarding forward-looking statements is at the end of this call. As a reminder, our earnings materials include the press release, transcript and accompanying slide presentation, which are intended to be used together. All of this information, along with our fiscal 2018 earnings release dates, store counts, square footage, interactive earnings site and other materials, are available on the Investors portion of our corporate website, stock. walmart.com. For our U.S. comp sales reporting in fiscal 2018, we utilize a 52-week calendar. Our Q1 reporting period ran from Saturday, January 28, 2017, through Friday, April 28, 2017. Before we get started, I'd like to remind you of a few upcoming dates. Our annual shareholders' meeting will be held Friday, June 2, on the University of Arkansas campus in Fayetteville. This meeting starts at 8 a. m. Central Time and is also available for viewing via webcast through our website, stock. walmart.com, or via Walmart's Investor Relations app. We will release second quarter earnings on Thursday, August 17. Also, please save the date for our Investment Community Meeting, which will be held in Northwest Arkansas on October 9 and 10. Now I'd like to turn it over to Walmart's CEO, Doug <UNK>. Good morning, everyone. As you may have seen this morning, we delivered a solid first quarter, and we're encouraged with our start to the year. From my view, I'd say that Walmart U.S. highlights were the 1.5% growth in comp traffic, comp store inventory being down over 7%, improved expense performance in our stores versus last year and the acceleration of e-commerce GMV growth to 69%. There were some other highlights outside the Walmart U.S. business that we'll touch on later. Inside the company, we can see that we're moving faster to combine our digital and physical assets to make shopping easier and more enjoyable for customers, but we can also see plenty of room to improve. We need to scale our e-commerce business further and see some additional strength in our store comps to deliver the results we know we're capable of. So that's where we're focused on. I'm really encouraged by how our store and club associates are embracing change. We're creating new solutions to help us run the business better in addition to creating a better experience for the customer in stores and online. Let me give you a few examples. A few weeks ago, while visiting stores in Oklahoma City, I saw firsthand how the combination of some new in-store apps and mobile handhelds are improving our in-store processes and making life easier for associates. A grocery department manager in one store showed us how she now ensures side counter modular accuracy and in-stock with a new app we developed for our mobile handhelds. With this new app, the time to complete her work has now been reduced, improving her productivity and giving her more time to interact with customers. I saw it again last week in Omaha, Nebraska. I saw another example in Canada in April. There, we have an improved process at store level that is reducing inventory levels in the back room in a meaningful way. Our team is building better tools. Our associates are embracing them and the results are improving. This is important because it's our key to winning starts with how we work inside the company. We're transforming to become more of a digital enterprise. The change is starting to be visible to our customers as they use Online Grocery, Walmart Pay, Scan & Go in Sam's Club and our Walmart app to skip the line when using our pharmacies and financial services in our U.S. stores. Online Grocery also continues to perform well, and we're on track to scale the offering to more stores this year in several countries, including the U.S. We're taking steps to save customers time as well as money. <UNK> is going to take you through the financials, but before he does, I'll talk briefly about each area. Let me start with our Walmart U.S. business. Comp store sales grew 1.4% and comp store traffic improved 1.5%. We got off to a slower start than expected due in part to delayed federal tax refund checks but saw sales strengthen throughout the quarter. We also continued to manage the business well from an inventory and availability standpoint. I recently attended the grand opening of our 100th training academy in Edmond, Oklahoma. I met associates there who were new to Walmart and were quickly learning about our business. I also met associates who have been with us for 30, 35 and even 40 years, and they were learning about new processes and tools. I'm proud that we have lifelong learners at Walmart, and I'm excited about the training we're providing. We plan to graduate approximately 225,000 associates from our U.S. academies this year. Remember, 75% of our Walmart U.S. store management teams started as hourly associates, so it's critical we provide effective training for our associates as they take on more responsibility in our company. Overall, the store business is getting stronger, and I'm thankful to Greg Foran and the team for a thoughtful plan and the energy they're investing to lead the improvement. Greg, Marc Lore and the team continue to partner closely to serve our customers and figure out how to invent a seamless shopping experience for customers across our apps, sites and stores. They are plowing new territory, and I'm excited about what's to come. In U.S. e-commerce, we like the traction, and we're working hard to make even more improvements. Walmart.com launched 2 new initiatives in the quarter. First, we made a change to shipping terms at the beginning of the quarter. Customers don't have to pay a membership fee to get 2-day shipping on millions of items. Second, we recently began offering customers pickup discounts on nonstore items. Our stores are located within 10 miles of nearly 90% of the U.S. population, so this is convenient for many of our customers and also saves them money when they order online and pick it up during their visit to our stores. Walmart.com now has 50 million first- and third-party items to choose from compared to 10 million at this time last year. So our assortment continues to ramp. We also made a few small but strategic e-commerce acquisitions to further improve our assortment while gaining critical category expertise in higher-margin categories like shoes and apparel. The acquisitions have received a lot of attention, but our plan in e-commerce is not to buy our way to success. The majority of our growth is and will be organic. The acquisitions are helping us speed some things up. So overall, we're making progress in providing the seamless shopping experience our customers desire, and we will keep moving along this journey. Staying in the U.S., let talk about Sam's Club. John Furner and the team have hit the ground running. They're focused on members, merchandise and our associates. They achieved comp sales growth of 1.6% in the quarter, led by a 1.1% comp traffic growth, and e-commerce GMV increased 21%. I'm excited about how we're ramping up our product brand offering with improved quality and compelling new items. We've streamlined 20 private brands into 1, and we'll be introducing 300 new items this year that are branded Member's Mark. The team at Sam's Club is also taking important steps to simplify the business and give club managers more time on the floor to serve members. Outside the U.S., Dave Cheesewright and the team continued to deliver solid results. Overall, constant currency sales growth of less than 1% was negatively impacted by a couple of timing and divestiture-related issues that <UNK> will discuss, but our underlying business continues to perform well. At Walmex, we continued to see strong momentum in the business across formats and countries. Comp store sales growth was nearly 4% this year and 12% on a 2-year stack. In April, I visited our businesses in China and Japan. China continues to be on fast forward as it relates to all things digital, including e-commerce. Operationally, our stores continued to improve and Sam's Clubs are doing well, working with JD.com and New Dada, China's largest local on-demand logistics and grocery O2O, short for online to off-line, delivery platform. We now offer 1-hour delivery service from 80 stores. This is an improvement from the 2-hour service we launched last year. We can see the benefits of omnichannel retail even more clearly in China than any other country where we operate. Given their urban density and automobile traffic challenges, stores serve the triple purpose of in-store shopping, pickup and delivery most effectively. I saw some similarities in Japan, where stores were serving more than one purpose. In both markets, we're piloting the use of the stores as shipping locations, and we're learning what works best from a financial point of view in different types of store trade areas given how customer densities and travel distance can vary. Moving on to Canada. Our business continues to perform well, delivering 12 consecutive quarters of positive comp sales. We've made some progress in the U.K., and the team is executing their plan. We're navigating our way back to a position of strength in that highly competitive market. When normalizing comp sales for the later Easter and Leap Day, we continued to see sequential improvement in the business, including customer traffic and ticket. For the overall segment, International had another solid, predictable quarter. The team has done a nice job of growing profit faster than sales as they simultaneously shift our positioning in terms of store formats, Online Grocery and e-commerce. In conclusion, we're encouraged with our start to the year. We have a clear strategy we're executing against. We're uniquely positioned to deliver value through both our physical and digital assets. We have momentum across the business. We're making progress, and we know we're on the right track as we work to become the most trusted retailer for our customers, provide ongoing opportunity for our associates and deliver results for our shareholders. We look forward to seeing many of you next month at our Annual Shareholders' Meeting here in Northwest Arkansas. Thanks for being interested in our business. Now I'll hand it over to <UNK>. Good morning, and thanks for joining us today. As I've been saying over the past few quarters, this is an exciting time to be at Walmart, and we are delivering solid results. In the U.S., important initiatives are under way both to accelerate growth in e-commerce and drive traffic to our stores. Most of our key international markets continue to perform well, and top line performance at Sam's Club remains solid. On today's call, I'm going to cover our consolidated results from the first quarter, talk about e-commerce in the U.S. and then provide details on our operating segments. We'll discuss the consolidated results in the context of our financial framework of strong, efficient growth, operating discipline and strategic capital allocation. Let's start with our consolidated results. EPS was $1, which is at the top end our guidance of $0.90 to $1 and 2% higher than last year. This marks the first quarterly EPS increase in more than 2 years on an underlying basis. On a constant currency basis, total revenue increased 2.5% to $118.8 billion as we saw solid top line performance across the business. Walmart U.S. continued its momentum with comps of 1.4%, while Sam's Club posted comp sales, without fuel, of 1.6%. In Walmart International, 7 of our 11 markets reported positive comps even as the timing of Easter and last year's Leap Day negatively impacted results. The U.S. e-commerce GMV growth accelerated significantly, up approximately 69%. Through the lens of strong, efficient growth, I'm pleased with the results. Gross profit margin increased 1 basis point during the quarter. The rate for Walmart U.S. was flat while Walmart International was up slightly. In regard to operating discipline, while we didn't leverage expenses on a consolidated level primarily due to investments in e-commerce and technology, I'm pleased that we leveraged in our U.S. stores. We're making progress towards our objective of slightly leveraging expenses on a consolidated basis for the year. We continued to generate strong operating and free cash flow in the quarter, $5.4 billion and $3.4 billion, respectively. Cash flow was down year-on-year primarily due to an increase in incentive payments as well as a comparison against significant working capital improvements last year. As we strategically allocate capital, our first priority is to invest in improving and growing the business. In the quarter, we completed remodels of 95 stores globally; and in the U.S., we continued to expand our Online Grocery service to include nearly 670 locations. We also added a limited number of new stores and made 2 relatively small acquisitions in the e-commerce space, Moosejaw and ModCloth, to expand our online selection and improve our category expertise in important areas like apparel and outdoor gear. In addition to investing in the business, we returned $3.7 billion to shareholders through dividends and share buybacks. Before I get into our operating segments, I'll talk about Walmart U.S. e-commerce. As a reminder, the results include all web-initiated transactions, including those through walmart.com, such as Ship to Home, Ship To Store, Pick Up Today and Online Grocery, as well as transactions through Jet.com and other sites in our family of brands. Year-over-year growth in GMV was approximately 69%, including acquisitions. The majority of this growth was organic through walmart.com. This was extraordinary growth, and we're pleased with the traction we're generating across our e-commerce offerings. We've recently introduced free 2-day shipping with a basket size of $35 or more on select items and launched a new service called Pickup Discount, where customers can order nonstore products online and receive a discount for picking these items up in our stores. This is a service that's convenient for customers and saves them money. Let's now discuss the results for each operating segment in more detail, starting with Walmart U.S. You will recall in our fourth quarter comments that the first quarter started out slower than anticipated from a sales standpoint, due in part to the delayed issuance of federal income tax refund checks. As anticipated, our sales strengthened as the quarter progressed, delivering comp sales growth of 1.4%, led by an increase in customer traffic of 1.5%. This marks the 10th consecutive quarter of positive comp traffic. On a 2-year stack basis, comp traffic is up 3%. Average ticket declined slightly primarily due to lower sales of higher-ticket items at the bringing of the quarter, as well as continued price investment. Additionally, the grocery business continued to improve with food categories delivering the strongest quarterly comp sales performance in more than 3 years, due in part to a lack of market deflation in food, excluding price investments. All store formats had positive comp sales, and e-commerce contributed approximately 80 basis points to the segment. We were really pleased with our results for the Easter holiday period as both food and general merchandise performed well. Gross margin rate was flat in the quarter. Savings from procuring merchandise and the acceleration of post-holiday markdowns taken in the fourth quarter benefited the margin rate, but this was offset by investments in price and the mix effects from our growing e-commerce business. Operating expenses as a percentage of net sales increased 14 basis points primarily due to investments in e-commerce and technology. While we didn't leverage expenses for the overall segment, I'm pleased that we leveraged in the stores. Operating income increased 0.9%, which is the first increase in more than 3 years. The team continues to do a fantastic job managing inventory. During the quarter, inventory at comp store fell 7.3% while in-stock levels remained high. We're pleased with the continued momentum in Walmart U.S. in both the digital and physical space. For the 13-week period ending July 28, 2017, we expect comp sales to increase between 1.5% and 2%. Now let's move on to Walmart International. International business continues to execute against its strategic priorities and delivered a solid start to the year. As I mentioned earlier, International performance was negatively impacted by 1 less operating day this year due to Leap Day last year, as well as the later timing of Easter this year. Before we get into the results, let me discuss the financial impact, beginning in the first quarter, from strategic decisions we made previously to divest 2 businesses, Yihaodian in China and Suburbia in Mexico. In the second quarter of last year, as part of the announced alliance with JD.com, we divested our e-commerce business in China, Yihaodian, except for the first-party piece of that business. Beginning in the fourth quarter of last year, we began to wind down the first-party business, with only a small amount of sales remaining at the end of the first quarter of this year. This created a sales headwind versus last year of $385 million in the quarter, and we expect a similar impact in each of the next couple of quarters until we lap the unwinding of the business. Additionally, last month, Walmex announced it completed the sale of its apparel format, Suburbia. The gain from the sale of this business will be recorded in the second quarter of this year, and as a result, we expect a net benefit to EPS of approximately $0.05 in the quarter. Beginning in the second quarter and continuing throughout the remainder of this year, International's results will be negatively impacted by the operating profit lost due to sale of the business. We expect a negative impact to EPS of approximately $0.01 for the third and fourth quarters. We also expect a full year impact to sales of approximately $600 million. We'll continue to detail the impacts of these transactions as we go through the year. Now let's move on to the overall International results. On a constant currency basis, net sales increased 0.8%. And excluding Yihaodian, net sales increased 2.2%. Reported net sales declined 3.5%, impacted by a $1.2 billion currency headwind. From a profitability standpoint, first quarter operating income increased 9% on a constant currency basis and declined 0.1% on a reported basis. During the quarter, a benefit to operating income of approximately $47 million from a land sale was recorded in one of our markets. Excluding this item, operating income would have increased 5% on a constant currency basis. Let's now turn to some brief highlights of key markets. Please note that the accompanying financial presentation includes detailed information on our 4 major markets. The results discussed below are on a constant currency basis. Let's begin with Walmex, where sales momentum continued across all countries and regions. Total sales increased 5.2% and comp sales growth was 3.7%. In Mexico specifically, comp sales increased over 13% on a 2-year stack basis, and each of our merchandise divisions outpaced ANTAD self-service. In Canada, net sales increased 2.7% and comp sales increased 1.5%. During the quarter, we reduced inventory levels even as sales increased. And according to Nielsen, we continued to gain market share in key traffic-driving categories like food and consumables and health and wellness. Continued planned investments in price and in-store efficiency initiatives are being supported by progress with our cost analytics program. In China, net sales increased 0.7% and comp sales decreased 1.3%. In addition to the impact of 1 less day in the quarter due to Leap Day last year, sales were impacted by our strategic decision to reduce low-margin bulk sales. During the quarter, we continued to expand our e-commerce offering by entering new cities through our crowd-sourced delivery partnership with New Dada and now offer 1-hour delivery from 80 stores. We also launched new product categories, such as produce and frozen items, on our Sam's Club flagship store on the JD.com platform. Turning to the U.K. Net sales increased 0.9. % while comp sales declined 2.8%. When normalizing for Leap Day last year and a later Easter this year, we continued to see sequential improvement in the underlying business, including customer traffic and ticket. We're confident we're on the right track. So overall, our International strategy continues to produce consistent results, and we are pleased with the solid start to the year. Let's turn to Sam's Club. At Sam's Club, comp sales, without fuel, increased 1.6% as traffic grew by 1.1%. We had good results across many of our categories and comps have been positive for 5 consecutive quarters. We're also pleased with our digital growth as Club Pickup increased nearly 30%. The team at Sam's is taking steps to simplify the business and give club managers more time on the floor to serve members. The initiatives under way at Sam's are designed to grow membership and sales, and we know it all starts with member experience. We'll deliver for them through our efforts to lead in digital and provide unmatched value on great merchandise. For the 13-week period ending July 28,2017, we expect comp sales, without fuel, to increase between 1% and 1.5%. With that, let's discuss total company EPS guidance. We feel good about the momentum across the business and expect progress to continue. For the second quarter of fiscal year 2018, we expect EPS, excluding the gain from the sale of Suburbia, to be between $1 and $1.08. In closing, I want to say thank you to all of our associates around the world for the important work you do every day. As a company, we're moving with speed and executing against the strategy we've outlined, and it's all happening through the lens of our financial framework. I look forward to seeing many of you at our Annual Shareholders' Meeting in a few weeks. This call includes certain forward-looking statements intended to enjoy the safe harbor protections of the Private Securities Litigation Reform Act of 1995, as amended. Such forward-looking statements relate to management's guidance and forecasts as to, and expectations for, Walmart's earnings per share for the 3 months ending July 31, 2017; comparable store and club sales for the Walmart U.S. and Sam's Club segments, excluding fuel, for the 13-week period ending July 28, 2017; the net earnings per share benefit of the sale of Suburbia business in the 3 months ending July, 31, 2017; the financial impact of the Suburbia and Yihaodian divestitures in the year ending January 31, 2018; levering expenses for the year ending January, 31, 2018; the level of future organic growth; and new product offering at Sam's Club. Assumptions on which any guidance or forecasts are based are considered forward-looking statements. Walmart's actual results may differ materially from the guidance provided, or the goals, expectations or forecasts discussed, in such forward-looking statements as a result of changes in facts, assumptions not being realized or other risks, uncertainties and factors, including: economic, geopolitical, capital markets and business conditions, trends and events around the world and in the markets in which Walmart operates; currency exchange rate fluctuations, changes in market interest rates and commodity prices; unemployment levels; competitive pressures; inflation or deflation generally and in particular product categories; consumer confidence, disposable income, credit availability, spending levels, shopping patterns, debt levels and demand for certain merchandise; consumer enrollment in health and drug insurance programs and such programs' reimbursement rates; the amount of Walmart's net sales denominated in the U.S. dollar and various foreign currencies; the financial performance of Walmart in each of its segments; Walmart's ability to be successfully integrate acquired business, including in the e-commerce space; Walmart's effective tax rate and the factors affecting Walmart's effective tax rate, including assessments of certain tax contingencies, valuation allowances, changes in law, administrative audit outcomes, impact of discrete items and the mix of earnings between the U.S. and Walmart's International operations; customer traffic and average ticket in Walmart's stores and clubs and on its e-commerce websites; the mix of merchandise Walmart sells, the cost of goods it sells and the shrinkage it experiences; the amount of Walmart's total sales and operating expenses in the various markets in which it operates; transportation, energy and utility costs and the selling prices of gasoline and diesel fuel; supply chain disruptions and disruptions in seasonal buying patterns; consumer acceptance of and response to Walmart's stores, clubs, e-commerce websites, mobile apps, initiatives, programs and merchandise offerings; cyber security events affecting Walmart and related costs; developments in, outcomes of and costs incurred in legal or regulatory proceedings to which Walmart is a party; casualty and accident-related costs and insurance costs; the turnover in Walmart's workforce and labor costs, including health care and other benefit costs; changes in accounting estimates or judgments; changes in existing tax, labor and other laws and regulations and changes in tax rates, trade agreements, trade restrictions and tariff rates; the level of public assistance payments; natural disasters, public health emergencies, civil disturbances and terrorist attacks; and Walmart's expenditures for FCPA and other compliance-related costs. Such risks, uncertainties and factors also include the risks relating to Walmart's strategy, operations and performance and the financial, legal, tax, regulatory, compliance, reputational and other risks discussed in Walmart's most recent annual report on Form 10-K filed with the SE<UNK> You should the forward-looking statements in this call in conjunction with that annual report on Form 10-K and Walmart's and current reports on Form 8-K filed with the SE<UNK> Walmart urges you to consider all of the risks, uncertainties and factors identified above or discussed in such reports carefully in evaluating the forward-looking statements in this call. Walmart cannot assure you that the results reflected or implied by any forward-looking statement will be realized or, even if substantially realized, that those results will have the forecasted or expected consequences and effects for or on Walmart's operations or financial performance. The forward-looking statements made in this call are as of the date of this call. Walmart undertakes no obligation to update these forward-looking statements to reflect subsequent events or circumstances.

2017_WMT

2016

TTC

TTC #Thank you, <UNK>, and good morning to all of our listeners. We were pleased to announce this morning that we delivered record sales and earnings results for the second quarter. Net sales increased 1.2% to $836.4 million and net earnings per share grew 15.2% to $1.89. Strong sales of our landscape contractor and golf products, along with positive momentum in our specialty construction business helped drive professional segment growth of 7.7% for the quarter. A cold snap late in the quarter interrupted favorable spring weather conditions and caused a slowdown of residential sales. The negative impact was further exacerbated by accelerated first-quarter channel demand for riding products this year, fueled by our supply issues last year. This led to an 11% decline in residential sales in the quarter. Following a brief commentary on the state of our businesses through the first half of the fiscal year, <UNK> will discuss our financial and operating results in more detail and <UNK> will share our outlook now that we're a little over halfway through our year. We begin with our professional segment where our landscape contractor businesses led the way in the quarter, driven by strong market acceptance of recently launched new innovations. Contractors and acreage owners alike are being drawn to the productivity and comfort of our professional zero-turn riders equipped with our new suspension systems. Likewise, our new generation stand-on mowers are performing well due to the productivity and ease-of-use they provide. Similarly, the momentum we reported on our last call of our golf equipment business continued into the second quarter, fueled by strong retail demand. The warmer early spring weather got the golf industry off to an encouraging start. Golf rounds played are up year-to-date. The positive opening of the golf season was also good news for our second-quarter golf irrigation sales. We continue to benefit from our leadership position and from courses' increased investments in large renovation projects and new system installations. Like golf sales, sales of our sports fields and grounds equipment grew well in the quarter as the business has benefited from valuable government contracts at both the states and local level. Next, solid channel and retail demand continued to drive growth in our rental and specialty construction businesses. The American Rental Show in February, where customers actually place orders, was our most successful one yet. Our compact utility loaders, UltraMix motor mixers, and our walk trenchers are all gaining ground and helping us sign new accounts. Another example of the rental and specialty construction momentum is we recently began shipments to a promising new underground equipment customer, a large multistate equipment rental organization. Moving to the agricultural market, favorable specialty crop pricing and the ever-growing need for efficient irrigation and disease control helped our micro-irrigation business post strong second-quarter results in North America. Toro Aqua Traxx tape is the preferred choice of specialty crop growers. In spite of the moderate snowfall this past winter, shipments of our BOSS line of snow and ice management product were essentially flat for the quarter. However, the winter's overall mild conditions reduced the number of plowable snowstorms, which will likely slow pre-season demand later in the year. As <UNK> will cover in his outlook remarks, BOSS did unveil a number of new innovative products during the National Truck Equipment Show in March that will position our channel partners to capture additional share as we approach the next selling season. Turning to our residential equipment business. Although shipments of riders declined in the quarter due to the pull up to the first quarter, retail sales were up. Our walk power mowers also enjoyed strong early retail results, led by two of our most recent innovations, our space-saving SmartStow Toro mower and the hard-charging Toro and Lawn-Boy all-wheel-drive models. Space-starved homeowners value the fact that SmartStow mowers take up less than 70% of the storage space of traditional mowers, which in a cramped garage makes a big difference. Customers with hilly landscapes are recognizing that Toro and our brand-new Lawn-Boy all-wheel-drive mowers help them power through their mowing challenges more quickly and with less effort. Our walk-power mower and handheld product lines once again received industry best performance and value ratings in the leading consumer magazine's 2016 power equipment review. Finally, sales in our international business experienced mixed results and posted a modest gain for the quarter from increased sales of golf and grounds equipment, micro-irrigation, and other irrigation products. These gains were somewhat offset by unfavorable currency rates and weather challenges. I will now turn the call over to <UNK> for a more detailed discussion of our financial results. Thank you, <UNK>, and good morning, everyone. As we reported earlier this morning, net sales for the quarter were a record $836.4 million, compared to $826.2 million for the same period a year ago. We also delivered net earnings of $105.7 million, or $1.89 per share, compared to $1.64 in the second quarter of fiscal 2015. Year-to-date net sales were up 1.7% to $1.32 billion. We achieved net earnings of $144.9 million for the first six months, or $2.58 per share, compared to $2.18 per share a year ago. Unfavorable currency exchange rates had a negative impact on sales results for both the quarter and year-to-date. Unfavorable currency exchange rates negatively impacted year-to-date sales by 180 basis points. Professional segment sales were up 7.7% for the quarter to $595.2 million, due largely to increased demand for landscape contractor, golf, and specialty construction product. Year-to-date professional sales were up 4.7% to $934 million, led by sales of landscape contractor and specialty construction equipment. Professional net earnings for the quarter totaled $141.6 million, up 17.2% from $120.8 million in the same period last year. For the first six months, professional segment earnings were $203.2 million, a 15.2% increase compared to the same period last year. Second-quarter residential segment sales decreased 11.1% to $238.2 million. The decline is primarily due to lower channel demand for zero-turn riders, somewhat offset by increased demand for walk-power mowers, driven by new products. Year-to-date residential sales were down 5% to $382.5 million. Residential segment earnings in the quarter totaled $35 million, up 0.4% from last year. Year-to-date earnings were $51.7 million, a 6.5% increase compared to the first six months of fiscal 2015. Now to our key operating results. Second-quarter gross margin was 36.2%, an increase of 210 basis points. Favorable commodity costs, increased productivity, and product mix favoring our professional segment all contributed to this improvement. Gross margin increased year-to-date by 200 basis points to 36.7% for the same reasons as the quarter, plus a one-time effect from the BOSS acquisition in fiscal 2015. We now anticipate an increase in gross margin for the year of about 100 basis points due to the impact from lower second-half manufacturing volumes. SG&A expense as a percent of sales increased by 40 basis points for the quarter to 17.7% and to 20.9% year-to-date from 20.6% a year ago. The change for the quarter and the year is related to slight increases across various categories, including warehousing and healthcare, along with the impact of lower sales volume. Operating earnings as a percent of sales for the quarter were 18.5%, an increase of 170 basis points, and 15.8% year-to-date, also an increase of 170 basis points. Interest expense remained flat for the quarter and was down slightly year-to-date. Our effective tax rate for the quarter was 31.5% compared to 31.1% a year ago. For the first six months, the tax rate increased to 30.3% compared to 30% for the same period in 2015. We now expect our tax rate for fiscal 2016 to be about 30%. Turning to the balance sheet, accounts receivable for the quarter totaled $329.8 million, a decrease of 6.2% over the same period a year ago, due largely to accounts moved to our Red Iron joint venture. Net inventories for the quarter increased 8.1% to $369 million. The increase was primarily due to efforts to ensure we were a better supplier of residential riding products than we were in 2015 and lower demand for residential snowthrowers. At the end of the second quarter, the Company's 12-month average net working capital as a percent of sales was 16.6%, compared to 15.6% a year ago. We recognize the need to increase our efforts on those things within our control, including reducing inventory levels for the remainder of the year. Finally, on Tuesday the Board approved a regular quarterly dividend of $0.30 per share. This is the seventh consecutive year of annual dividend growth and the second quarter marks the Company's 128th consecutive quarterly dividend declaration. I will now turn the call over to <UNK> for his comments regarding our outlook. Thank you, <UNK>. Going forward, we will continue to focus on creating innovative new products that deliver real distinctive value, forging strong, lasting customer relationships, and as <UNK> suggested, increasing our emphasis on execution. We believe we are well-positioned to capitalize on both existing demand and new growth opportunities across the businesses in the second half of the year. Let's take a look at all the prospects for our complete business portfolio. We anticipate our landscape contractor business will continue its winning streak based on strong market acceptance and demand for our new zero-turn riding and stand-on mowers. The launch of our exciting new Multi-Force stand-on mower that we discussed in earlier calls occurs this month, bringing a unique level of versatility to the landscape contractors. The addition of the BOSS snow plow attachment empowers contractors to improve their return on equipment investment and enhances productivity by transforming their mower into a multi-season workhorse. This is a great example of synergies between our businesses that translates into increased value in a contractors' fleet. Our golf and grounds equipment business is similarly poised as recently-launched innovations that some of you saw in February during the Golf Industry Show make their way to the field. These include our next generation of precision Flex Series walk greensmowers that offer all the proven benefits of earlier models along with new ease-of-use and performance advancements. For budget-conscious courses we also offer the new entry-priced Greensmaster 3120 that will help smaller clubs stretch their dollars and enhance their fleet. Furthermore, we have expanded our industry-leading line of lightweight, yet powerful, fairway mowers with the introduction of new Toro Reelmaster models featuring innovations that optimize the power needed to drive the units and traction system, maximizing efficiency and performance. These new Reelmasters are also noticeably quieter than typical fairway mowers. Next, our new line of gas and electric powered Workman GTX utility vehicles are the most versatile, practical, and comfortable vehicles in their class. We have a strong distributor order position for the GTX, backed by confirmed retail orders. Finally, our new EdgeSeries cutting units featured on our Greensmaster and Reelmaster mower lines hold their sharpness longer, providing a superior cut and less maintenance. These new products provide the performance, productivity, and value golf and grounds customers expect from a leader. We believe these latest innovations will help our golf and grounds equipment team perform favorably in the second half, even when compared to their very strong fall and summer results from a year ago. Golf irrigation should benefit from ongoing renovation and installation projects into the second half of the year. Our team and distributor partners are closely tracking new project opportunities. Next, rental and construction markets are expected to remain strong through the year and our rental and specialty construction businesses have a strong order base heading into the third quarter. Demand for the new TX 1000 compact utility loader should continue at its hardy pace as more potential buyers are exposed to its innovative design. Innovation is also the key to momentum developing behind our micro-irrigation business, particularly in North America. The need for food and the efficient use of scarce water resources will only accelerate. Like other businesses, our micro-irrigation third-quarter position remains solid. Our residential and commercial irrigation business mirrors the industry's overall performance. The general industry slowdown has contractors closely monitoring their purchases and inventory. The launch of our new Unique Lighting System 150 watt LED transformer was very successful and our innovative Light Logic wireless controller has generated considerable interest among outdoor lighting contractors. Similarly, the latest BOSS snow and ice management innovations have been received very favorably ---+ have received very positive feedback from customers to date. Limited snowfall kept snowfall operators out of action much of last winter and will likely delay some purchase decisions for the next season. However, eventually the snow will return and BOSS is well prepared with several exciting new products. The list of BOSS product innovations includes: a new V-plow for half-ton trucks, a new straight blade that can be extended from 8 to 10 feet, a 9-foot municipal grade plow, a UTV and small vehicle spreader, an ATV plow, and our industry-leading SL3 LED lights are now standard on all truck plows. So when winter returns, BOSS is ready to help customers handle the worst that winter can deliver. Preliminary long-range weather forecasts predict above-average snowfall beginning in November in most significant snow markets. If these forecasts hold true, we should see solid sales early this winter. The outlook for our residential business for the year remains positive. We have experienced good retail activity year-to-date and anticipate positive results based on our strong walk-power lineup as well as the ongoing industry-wide growth for zero-turn riders. Customers have embraced the time-saving benefits these mowers deliver. Innovative features like SmartSpeed and the performance of our V-Twin engine have helped Toro succeed. Like BOSS, our residential snow business will likely experience sluggish pre-season demand this fall. Our leadership in the snowthrower industry and unsurpassed innovation will favorably position our retailers. As I mentioned, winter forecasts are positive. Finally, products across our international business, like our new flail mower, are creating strong demand. While we will face and deal with currency exchange rates and other regional challenges, our international team will aggressively pursue sales opportunities wherever they arise. I will now turn it back to <UNK> for his concluding comments. Thank you, <UNK>. I never like to close a call without recognizing and thanking our employees and all of our channel partners for their steadfast commitment and hard work. We have a lot left to accomplish for the year. I know we can count on all members of our team to stay focused on our goals and enable us to exceed our end-user customers' needs, to drive share, and to deliver on our shareholders' expectations. In conclusion, we anticipate delivering another successful year. We are fully aware of the global challenges and the uncertain economic conditions and unpredictable weather patterns that may pose challenges to our plans. As always, we are prepared to respond. The Company now expects revenue growth for fiscal 2016 to be flat to up 2% with an increase in net earnings of about $3.90 to $4 per share. For the third quarter, the Company expects net earnings per share of about $0.95. This concludes our formal remarks and we'll take your questions at this time. So, Karen, back to you. It's a good question, <UNK>. I think as we were talking about the business in February, things had started to warm up. In some ways I think we were more hopeful that the stronger spring results would more than offset the snow headwinds. I think what has happened is the spring results have been okay. Actually retail sales, as I've said, on riders and walkers are ahead, but not to the degree to make up for the snow headwinds. We've talked with you in the past that snow, even with the acquisition of BOSS, is roughly 10% of the Company and that's the most variable piece of our business. If we look back to FY15, we had a very, very strong snow business. If we look at FY16, we knew the pre-season was going to be good; there were questions around the in-season. As you know, the in-season didn't pan out anywhere near what we had hoped and, as a result, next year's pre-season, so this fall ---+ remember our year ends in October, so we won't ---+ the in-season actually starts later ---+ will be at best fair. So as we got to the end of the February time period, we started looking and then saying, okay, what is the field inventory like. Since that time we have obviously taken the book of business with our channel partners. We've tried to project retail for the upcoming fall time period. And the net is the bulk of that decline from about 4% to zero to 2% ---+ and that's the range right now ---+ is the result of snow. The snow pre-season will be, at best, okay. We're still working hard on the spring and summer products to drive those results and, as I say, the retail there is still sound, but we've got a lot of that business in front of us. Then the in-season snow piece will take place in fiscal 2017; that will start in November. The good news, as <UNK> commented, is that the weather prognosticators, the forecasters are saying good things about snow across some of our key markets, particularly in the Midwest and the Northeast. So it's mostly the snow headwind and we've talked in the past about that being variable. It is, but I think the point here is that the rest of the core businesses are actually in really good shape across our portfolio. They are doing what we expect them to do and we have been able to, I guess with some other things below the sales line, make up that snow headwind and still deliver more than we expected or guided to the last time. So the Company is very healthy in that regard. So year-to-date on core businesses, like walkers and riders, retail is ahead. And that's always the question when you look at our ---+ are we talking about our shipments or are we talking about retail. We're a company that puts a strong focus on retail, and if you take care of that, everything else will, ultimately, take care of itself. So retail is good through the middle of May, even with some of the more challenging weather conditions that we've faced through April and the first couple of weeks of May. We got off to a really strong start and some of that went back as Mother Nature didn't cooperate, particularly in key selling markets. It has been ---+ have had good moisture, but it has been relatively cooler. In fact, a major retailer, I was reading the paper this morning, talked about some of the challenges of the cool weather out in the Northeast. March was beautiful; April, May not so much. But we have every reason to believe that our comps on the spring and summer products are in good shape and that will continue. We did get a little bit ahead of ourselves on some of the riding products that we've manufactured, and that's going to be the headwind on the manufacturing side in the second half. But retail-wise it's very healthy. The biggest portion of inventory reduction as we look in the second half relates to riders. As we talked about, we were not the best supplier last year and so we intentionally brought in more inventory related to riders. As <UNK> said, retail has been up for the year, but we will, as we go into the second half, focus on bringing down that inventory level. We recognize our goal is to provide improved fill rates for our customers while we are reducing our inventory and so we will focus on that in the second half. That will create a headwind for us on the gross margin side related to manufacturing variances, but we think it's the right thing to do as we close of the year and we go into next year. I'd add to that, <UNK>, that to your question, field inventory is in good shape. It's a little bit higher, but the combination of that coupled with the riders that we have made here, will go across the portfolio. We're going to work very systematically to make sure that's healthy or healthier at year-end as we set the stage for the next season. So our focus will be on driving retail, managing the production levels, but there's going to be some, as <UNK> said, some headwind on the manufacturing reduction in the second half. I'm sure you got a sense at the golf show for the level of excitement for that product with the market. I am pleased to say that we are now shipping the product and the projections for the year are well above our expectations so far. That's still early in the process, but very positive results so far. Good question. I think it is the one business we probably would bundle it, new home construction and commercial construction, as we talk about the residential and commercial irrigation part of the business. So that is more tied to those starts and that is ---+ you're right; that's a strong positive. So when we look at that business ---+ now it's just a piece of the landscaping grounds portfolio. But when we look at that business you take the growth of housing and improvement in commercial construction, add to that the innovation that that team and our Riverside team has been driving and are taking some share, that's why we look at that business saying we expect that to be an upper single-digit driver of growth for us. And it is performing well, looking forward kind of strategically for a number of years. Assuming we don't head into a downturn. And so that is tracking well. Now short term you can get into some ups and downs and so ---+ when we get a lot of wet weather, it slows down the installation of some of those. But we want you to look at this over the full fiscal year, healthy business moving in the right direction and the market forces are positive. The product is, by no means, maxed out in penetration. The continued shift between traditional lawn tractors and zero-turn riders with sticks continues, and so that will continue to be a growth driver for us. As I said earlier, retail sales of those residential riders, for us, or the zero-turn riders, are actually tracking nicely ahead of last year. And we worked really hard to sustain that. Now as things flow in and out, to the channel that could be much ---+ some of that got pulled forward into the first half, as was talked about earlier. And then we have seen a little bit of a slowdown because it's been cool. That's eventually going to warm up and we think that retail will continue and we will comp nicely ---+ we're counting on that ---+ against last year's results. So healthy business moving in the right direction. I don't know that we are going to give a lot of precision around that. I think what we will say is that when we were going through the month of March ---+ and we're talking particularly residential here is going to be more impacted near-term by Mother Nature ---+ we were ---+ retail was very robust. We headed into April and things got cooler. We had snowfalls in some of our markets that shouldn't be getting snow in April and even as recently as May. And so that slowed things down. But we just finished up Toro Days in partnership with our dealers and The Home Depot and a large retailer and those were very sound. It's still been, at best, still just okay, warmth-wise, across the nation. We're counting on things heating up as summer gets here. The predictions are for good moisture, and if we get good moisture and good temperatures, then that will drive our business well. But we are in good shape as we sit here today year-to-date. That's really important as we talk about retail sales. They are a good partner, as our dealers are good partners, and we have a good line up there. Now we have kind of a strengthened position with walk-power mowers there this year. On the other hand, we lost a couple of units that didn't perform as well as they hoped or we hoped last year. One of the things that we work very collaboratively on is the SKU we are putting in there a high-performance SKU. If it is, we will sustain it. If it's not, it's not doing particularly what they want and/or what we want. And so, all-in, I think our growth there is sound and we're working very well with them as a big retailer, as well as our dealers. I will start with the second question first. We're not anticipating having higher inventory levels in the first half on a regular basis. We did err on the side of having higher inventory levels going into this year, and we talked about it previously as well, because we thought it was important to ensure that we were ready for the season. That we could supply our partners in the way that they would expect from us. We know and are working very diligently on ways to become more flexible, more nimble to be able to improve our fill rate and to lower our inventory levels. So we know we need to do both. It's power of and. As far as year-end, we do anticipate bringing down our year-end inventory level to a level below last year. Consistent ---+ we haven't changed our free cash flow forecast. We're still looking at the same, about $200 million. And so, consistent with that, we are looking at reducing our inventory levels as we go through the second half of the year. And as we talked about earlier, that does create then that headwind for us on gross margin as we layer in those lower production levels for the remainder of the second half. Okay. So when we look at year-to-date gross margin, some of the things that benefited us were certainly commodities similar to what you are seeing across the board. We saw favorable commodities. We did have in the first half productivity related to running our plants very efficiently, and our ongoing focus on cost reductions. We did capture some price as we look at it. And then when we look at the other side of the equation, we would have ---+ and I should remember the BOSS purchase accounting also was a benefit for us because it happened the prior year, the prior year in Q1 of 2015. So that would be a benefit for us. The headwind working against us would be FX. So we saw more FX in the first half of the year than we will see in the second half of the year. And then as we look throughout the total year, what we would say is again pretty much the same factors for the total year, other than the fact that we would have less manufacturing volume in the second half of the year. I think commodities and productivity probably are the more significant. Product mix, which I didn't mention earlier, also certainly in the first half of the year where we had residential sales down 5%, professional up 5%, would be a benefit for us. And then the other one is probably pretty much offset. Price and FX pretty much offset each other. BOSS purchase accounting is fairly ---+ less significant for the total year. Yes, we spoke about that FX year-to-date had been about 180 basis points. As we look at the second half of the year, you're correct, <UNK>, it's going to ramp down from a year-over-year comparison perspective. We would have built in ---+assuming that FX rates stay the same, about 1.5 points of impact from a sales perspective. And consistent with what we said in the past, roughly about half of that winds up hitting our bottom line. Most of that in the gross margin area. So I would say that the BOSS acquisition, it's sound. We still feel very, very good about it. As I said previously, probably better about it today than when we did it. We are dealing with some of the variability there. I think that BOSS is working systematically across all their geography to drive share. As <UNK> commented, we went to the truck show in March and had many new products, exciting new products. And BOSS is an innovator. They are coming up with new ways to serve customers, to help customers drive productivity, create safer environments like these new SL3 lights. Much of this plowing is done at night and they have come up with a great lighting system that really is almost transformational from the old-technology lights to the new. So they are doing a lot of things right. We continue to work on the channel, kind of to your comment on the channel part of it, in different geographies, probably more opportunity in the Northeast. Although, as we commented earlier, the Northeast had a terrific snow season in 2014-2015. 2015-2016 not as much. In fact, some of the snows in Boston came in April, which is not when we want them. And so we will look forward to that fall preseason and working with our respective channel partners to drive more opportunity there, if you will. Competition is going to work hard at that as well. But we are on strategy. BOSS is in, like I say, really good shape. It's terrific to have it as part of the portfolio. Nothing has changed there, <UNK>. We continue to have capacity, both in financial capacity and people capacity. We (technical difficulty) across the portfolio. And so could we create somewhat more leverage if we found the right opportunity or a large opportunity. The answer is of course we could. That's been consistent kind of through the years. You asked what the pipeline is like. It isn't like there's a step change in that and so there are fewer larger deals and more medium-sized deals. And as we've shared many, many times, most of the deals we're going to look at, end up looking at, will be private companies given our relative size. And until mom or dad is ready to sell it's hard to cause that to happen. We just hope that when it does happen, we can have a relationship with them and move the deal forward, like the BOSS deal, as opposed to an auction. An auction is, for us, always more challenging. We will look at them, but it's a question of value creation. Can we find the right formula to do that where one and one is equal to something more than 2. So not a lot has changed in the past: our financial position, our ability to do that as well as, kind of to your question, the pipeline of deals. We will keep looking. That is correct. Obviously that's the overall international picture and, yes, Europe has not had terrific weather, by any means. What you have to remember is our residential business in Europe is a relatively small part of the portfolio. When you think about The Toro Company, we're 70% pro, 30% residential, approximately. And when we get to the European ---+ get to the international environment, it's even more weighted to professional. So around the world we are more professional weighted and that business around the world is sound. Yes, we did have some headwind as a result of the European weather, but that doesn't move the needle as much as the pro business. Their end-markets, as you say ---+ so for example, golf around the world is sound. We do see certain markets where golf is ---+ new courses are being developed, which involve new irrigation systems, large packages of equipment. And that's a significant part of the professional portfolio, as well as some of the other businesses in the commercial grounds and other irrigation business. Micro-irrigation outside the US is an important business for us and growing. So it's a number of pieces. The residential part of the international business is, like you say, it was a bit of a headwind; it's just not as large a part of the portfolio as some others. And when you look at that you also have to add in Canada, right. Canada has had some pretty challenging exchange rates that have made that a bit more of a headwind. So all-in international is healthy and is something really important to our long-term growth.

2016_TTC

2017

ANSS

ANSS #<UNK>, I don't have that off the ---+ currently off the top of my head. I would suggest that this year, given the number of enterprise agreements it is probably slightly higher than it was a year ago, given that last year at this time we had only closed a handful of those. I would suggest the duration is slightly up from a year ago. Thank you. So, I see ---+ when I look at the market, I think there are probably three legs, is the way I'm thing about it, to the stool. One is the traditional use of simulation by engineers, by analysts and we see an enormous amount of opportunity there as we start to talk about things like ADAS. We look at our semiconductor business and so on and so forth, there is enormous opportunities there and we talked about some of that. We see as purely incremental to our current business, we see as opportunity of moving upstream, to address a new audience which is essentially the designer market. We see that as incremental upside. We have invested in the space. We are now with ANSYS 18, we have a third generation of a product in the space called AIM and it takes time to mature a product. I think at this point we have a product that meets the needs for a simulation market that is upstream of our existing installed base. Then, of course, as you look downstream, I see the opportunities around Digital Twin that we have already articulated. So, absolutely it is an opportunity and we have activities underway there. We see that as incremental. We see the downstream opportunities around Digital Twin as being incremental and we see our core business as being ---+ with all of the changes taking place in the industry, we see our core business as being stronger than ever. So, current bookings growth was around 12%, 13% in constant currency. Probably for full year 2016, bookings growth was 6%. I would anticipate for 2017 based on everything that we are modeling right now, it will be slightly higher than that. Yes, I can tell you that there actually were two of those customers who had previously signed deals who either decided to extend the initial deal or have added incremental technology to their deployment. So, it's still early in the game but we are very excited about the opportunity that engaging with our customers at this level provides us relative to insight and also I will call it knowledge relative to other customers that, as they work their way through tool consolidation and some of the challenges they have around their new growth initiatives relative to taking our story, our broad portfolio to help them through those transitions that they are going through. And to add to what <UNK> is saying, our strategy for enterprise agreement is not just simply a fire and forget where we consummate a deal, complete a deal and then move on. It's really building an ongoing relationship with the customer and this obviously, as <UNK> pointed to, with the couple of deals that we've talked about, this translates into a long-term relationship that they feel like we are a partner and we are able to work with them. I think that is very helpful. In some cases we have people on site and in some cases we have ongoing business reviews so there are a number of different mechanisms that we use to make sure that we have that ongoing relationship, both at the strategic level as well as the operational level, with the people who are using our technology. We've had tremendous feedback on the product and obviously we have customers who have been using it. It continues to be an area that I think is still developing and, you know, we will be in a position to share more strategy around our cloud and the cloud direction when we get together in the September time frame. So, what we have right now, this is not our multi-tenant product that is still under development and, that is an area frankly where I plan to spend more time with the development organizations to go through the cloud plans in some detail. As you know, I have a pretty strong background in that space. I think that the cloud is going to be very important for us in a number of different dimensions, both from a licensing perspective as well as from a business model perspective. I think that there is some usability and scalability challenges that we can address. So, I feel pretty good about the strategic direction. But, again, as I said, this is an area where as we make this transition to multi-tenant, this is an area where we are doing more work and I will be in a position to share more details with you guys when we talk about this at Investor Day in September. So, I would say it's early and we sat down with Rick and his team and reviewed the health of the pipeline. Currently I would say a good target would be somewhere in the similar to this year, $18 million, perhaps $20 million at the high-end range. And we believe that those will grow, at least on a bookings basis, overtime in double digits just given the extreme opportunity to not only increase the number of users but also to deploy increased applications of our technology across a broader base, across those enterprise customers. Obviously we are going to look at all opportunities that are available to us and your point about M&A, M&A is certainly one of the opportunities that is ahead of us. As you may know, I've had some experience in driving M&A and I have seen the transformative opportunities that can be created by doing the right M&A. But I want to be thoughtful and make sure that we do the right M&A. But obviously as you know, the wrong deal can have a very negative impact on an organization. Absolutely M&A is something that we continue to look at and we will continue to look at. We see some opportunities and we will keep you posted as we think this through. That would be our number one preference. However, to <UNK>'s point, as you highlighted earlier, we have been extremely successful in creating long-term shareholder value because we were selective relative to how the M&A targets that we added to our portfolio really aligned with the future needs and directions of our customers. So, we are continuing to solicit inputs from not only our field and our customers around which would be the appropriate assets that would continue to differentiate us and in the short term, in the absence of significant M&A, we will continue to redeploy capital back to the shareholders through our share repurchase activity. We are committed to continue to take a look at opportunities for M&A that we can ---+ we will continue to distinguish our portfolio from other offerings. So, <UNK>, one of our problems is not our operating profit margins relative to trying to expand them. We have taken a step back as part of our annual planning process, and with <UNK> coming in and having perhaps some different perspectives from his experience at other enterprise providers. And we made a conscious decision this year when we went out with the early outlook in November to at least reduce the margin by a point to 46% and then to also take on the realignment in recognition that we needed to make some improvements in our own business to allow us to fund areas that we believe are higher growth opportunities or have, unfortunately, been perhaps impediments to our growth. So, as I said, we are looking to maintain our industry-leading margins. For this year we are guiding for the full year to 46% and our ability to stay at 46% is going to be dependent on really the pace of hiring in the remaining quarters and some of the initiatives that we currently have underway that we've already redeployed some of those dollars to. Well, I think, right now we have no increases that are assumed in our plan for this year as far as maintenance is concerned. So, it's pretty much what we have been doing in the past is what we will continue to do. So there's no change in the business model assumed in this year's guidance. So, we are around 20% maintenance. We think that in the short term, that is what we have been finding for this year. Obviously as we start to think about different offerings and different capabilities that we are planning that might have an impact, but that is in the future as we think about the nature of our portfolio going forward. Again, I think we will be in a position to share some more insight into strategically where we are going and that might have some more context in the September timeframe. Thank you, Andrea. So, I believe that ANSYS has a huge opportunity ahead. With ANSYS 18, our next step in making pervasive engineering simulation a reality, we've brought to market a feature-rich release that continues a long track record of providing the best simulation solutions in the market. I'm excited by our performance in Q4. I'm excited by our momentum early in 2017 and I'm looking forward to seeing the impact of the operational changes that we have made and that we will continue to make. With that, I would like to close by saying thank you to our customers, my ANSYS colleagues and our long-standing partners and I want to thank you for listening in today. I look forward to our next call. Enjoy the rest of your day. Thank you.

2017_ANSS

2015

LOGM

LOGM #Thank you. Yes, we can, <UNK>. Hi, <UNK>. This is <UNK>. Thanks for your question. It really has to do with the fact that our service cloud Rescue and Bold have the kind of highest non-US customer base compared to all our other products, so the FX impact is a little more pronounced in that cloud. Hello, <UNK>. This is <UNK>. No seasonality, and with regard to ---+ I'm sorry, with regard to margins, no, so fully ---+ we're going to make some investments into that business and even with those investments, there will be no impact on our margin, our overall margin. Okay. Thanks, <UNK>. This is <UNK>. Yes, join. me is continuing to grow very strongly, as you said. It really, for join. me, it's all about engagement as it is for any premium product that has a viral component. And video has really contributed to that in a couple of ways. One, it's leading the larger meetings with more participants, which means more people get exposed to join. me. Secondly, on a month-to-month basis, we've seen double-digit increase in the usage of video in the join. me base. And while we don't disclose specific numbers, we've also seen some acceleration in the top of funnel metrics. So we do feel in addition to those, it's making us more competitive in sales situations where video is a requirement. So I think it's still early days, but we have been pleased with the impact of video has had, and puts us in a good competitive position. <UNK>, we'll include that in the ITM management cloud. You're welcome. Thanks, <UNK>. Thank you for your questions tonight. LogMeIn had another very good quarter in Q3, and we believe we made significant progress on our three key strategic growth initiatives. join. me's growth continues to drive Company growth while opening the door to a broader collaboration opportunity. LastPass gives us a leading position in a high-growth market while accelerating our identity and access management strategy. And Xively's increasingly high profile and early traction have positioned us well to capitalize on our longer term IoT opportunity. The team looks forward to sharing our continued progress when we report our Q4 and full-year results in February 2016. Thank you, again, for your time this evening.

2015_LOGM

2015

NTRS

NTRS #Thanks. Our ---+ if you look at our business and our asset management business globally in the US, it has a strong balance between our asset ---+ our wealth management business and our corporate institutional businesses. Outside of the US, that becomes largely an institutional base for our AUM. And it has a significant position in our passive products, if you will, and particularly to large sovereign wealth funds. Those are meaningful clients across the globe outside the US. So there's obviously substantial pools of assets there, and they need those kinds of index products. In the US, in the domestic market, we have a wide array of suite of products in our asset management that are attractive to our clients from alternatives to ETFs to mutual funds to cash products to active equity, et cetera. So it's a much broader spectrum. Institutionally in the US, we also have a broader array. It's still has a heavily cash and index component on the institutional side, but we do have an array. But on the wealth side, it's a much broader mix of product capabilities. Tremendous synergies. And if you think of it from a ---+ we may be providing the custodial services, and as part of a solution set to that client they need help or they are seeking help or they are seeking to outsource some of the pension responsibilities or the investment responsibilities. We become a fairly natural solution for them. And there is synergies in the ability to bundle that product and service together. Yes, so we do have several markets. You are correct where we have a negative rate environment. We have the euro. We have the Danish kroner. We have the Swiss franc. Our three areas where we have gone negative, if you will, with our clients. In terms of the spread, if you will, on that, it's interesting. In some cases, it depends on the reinvestment possibilities that we have in those. So in some cases we have seen the spread erosion occur where the spread has narrowed, and in others we've been able to maintain that spread even with negative rates. I will say that we ---+ on a continuous and an active basis, we monitor the markets. We understand where we are able to reinvest. And we have active dialogues with our clients about, in some cases, perhaps the need to press further negative into the rate environment where central banks continue to take more aggressive negative rate stances. <UNK>, one thing that I would add to that is that of the three currencies where we are currently charging negative rates, the one that is really the most significant for us from a client balance perspective is the euro. And I think we had mentioned last quarter that while we had seen a run-up in our euro balances when our rate was not negative, we did see that come down. We went from about $4 billion yearly to about $3 billion. Kind of stabilized at that level in line with what our expectations had been. And I guess after that initial response, we have seen those balances drift up but just modestly. In terms of the Swiss franc and the Danish kroner, the balance is there from clients that are really quite small. The vast majority, I believe. The vast majority. Yes. We don't as of our last asset and liability committee meeting because we walked through this scenario. But we keep our eyes very closely peeled to ---+ I know what you're describing, and to date we don't have that situation, but we are continuing to stay close with the negative movements in the rates. Most of our lending is domestic, so it's dollar based. In fact, I believe all of our lending is dollar based. Yes, thank you. There are some, but they are relatively modest level of expenses. There is compensation-related expenses that would move with that success in the foreign exchange trading market. But there is not much else in the way of incremental expense that moves with that. I would take a step back and say that our East region is very broad geographically. It goes from Miami, Florida, to Boston. So I think you need to sort of peel back into market-by-market type analysis, which we don't have in here. So we've got markets within there that have stronger growth trajectories than what you see here overall. We are and continue to have very large market share and meaningful presence in the Florida coast, and we're building out that presence from what I would say the Washington, DC, corner. We have meaningful presence in New York but continue to work on increasing our presence and penetration in that market and all the way up to Boston. So I don't know that I can specifically make a comment generically about the East because it's made up of so many markets along the eastern seaboard. So some with great growth dynamics and some where we are continuing to invest and want to deliver more. It continues to be a growth initiative for our wealth management area, and we continue to invest both marketing and, probably more important, talent dollars into the region to facilitate that growth. I'll answer that with a few points. One is, we have had success in regions where we've grown quickly. So let me highlight Australia. And we highlighted an Australian win, so there is an example where the regionality and our strength in that region has helped drive that market share growth. That's one area where we've seen that growth. Most notably has been our success in our servicing asset managers or our global fund services business. We've seen really substantial double-digit growth in that business over the last three or four years. And our ability to compete against our primary competitors in there and be successful has grown markedly over the time. And then I would end with product and capabilities. Technologies like what we have from in our hedge fund services, the Omnium acquisition and other elements of technology. The combination of technology, regional strength, and growth, particularly in our GFS business, have allowed for market share gains. In some cases it's geographic markets; in some cases it's product and capability. So it's a combination of both. And then, the scale that we've achieved in that business makes us a competitive force. Thank you, Priscilla, and thank you, everyone, for joining us today. Allison and I would be happy to take additional questions as the rest of this week unfolds. And we look forward to speaking with you on our second-quarter call in July. Have a good day. Thank you.

2015_NTRS

2016

BAX

BAX #Thank you. We are very happy with our progress on free cash flow. And we see, with better management of our capital, we'll see probably a better performance that we have spoken to our investors back in May. With that said, it gives us a good ability to deploy this capital in acquisitions. So we will have not a timeline fixed to get to a 2.0; we will get there when we get there. And it can be in one shot, it can be in several shots. But we are really focused in bringing our balance sheet to a place that we can either do two things ---+ choose to deliver capital to our shareholders in the form of buyback, and I think that is a very possible avenue, combined with a healthy M&A strategy. Because we are very happy with how our free cash flow and our capital spending is progressing.

2016_BAX

2016

RJF

RJF #Sure, <UNK>. The outstanding balance of March 31 in the energy portfolio is $451 million. That's, once again, 32 borrowers. Our total commitments came down by $28 million on the quarter, and now the total commitments is $742 million. So the difference there is the amount of unfunded commitments. I don't think anyone is fully reserved if oil stays low for a long period of time. There are certainly companies that are leveraged or asset-rich, who are using cash or other things, are going to struggle. I'd say if we have sustained oil prices at this level, there will be additions to reserves. First, you are allowed to pitch for 401(k) rollover business. You fall into the BIC and you enter into a [fiduciary] position that you have to be giving that advice to roll over in the best interest of the clients. If you look at most of the standards, it says, you about can do anything as long as it is in the best of the clients. And be ready to prove you did. That's really what the rule over-boiled-down says. Certainly it has been an area of 401(k)s because people do retire and want it managed and roll over. I don't know if it is a huge percentage of our business ---+ I could not give a percentage, but certainly it has been a part of everybody's business. I don't think it will go away if the standard is raised. The standard is to make sure what is good for the client is fine. There's nothing wrong with that. That should be the standard. I think the DOL, in their historic position, had, had a bias saying that it generally was not the best interest of the client. I think the new rule basically says, we're not trying to force the lowest fee platforms, but just make sure you're recommending what's in their best interest. So any time a person goes from not having a fee to having a fee, you can argue, they are biased. I just think you have to prove that it's a reasonable recommendation in looking at the client. And so it will continue. I think there may be more liability associated with it. Certainly more documentation, which a lot of these costs are going to be in process and documentation. I think that's the potential outcome. And frankly, we like that there are independent firms in the industry. We don't want to be the only non-big bank-owned firm. We look at our cost, and certainly any type of layer of layer of regulation really increases costs, especially if you cross $1 billion. And then you cross $50 billion, you get another level. Certainly, it's tough on the industry and tough on players when you have this much regulatory costs. We feel it, and I'm sure our friends and competitors, but friendly competitors in the other firms who share our similar values, it's got to be tougher on them. We're not hoping regulation drives them out of business. But if they make the determination that it's too costly and they want to join someone who is of like-minded culture for those firms, we would welcome them. I'm not sure that's a good result for the industry. We actually expect ours to be slightly down from where they are. The mega banks are going to be the ones that feel it a little more than us. We will get the full step down, then partially back up because of our size. So we actually expect ours to drop, but not materially. It will be a small number. A basis point or fraction thereof. Correct. Great. Thank you all very much. I know you had a lot of questions so we wanted to allow the time. Most importantly, last quarter, I know people thought was a little weaker and this quarter a little stronger. But what we focus on is long term. And as I said the end of last quarter, that all of the indicators and recruitment assets were positive. I feel the same thing about this quarter. I'm not going to take [over believe] this is a long-term business, and the good news is our forward indicators are positive. We have a great team of people here working hard and we have to earn it every quarter. I appreciate your time and interest this morning. We will talk in three months. Thank you.

2016_RJF

2015

FDS

FDS #That's really not a metric that we track. We have a big variety of clients that pay us different price points for different types of users. So it's really not one that we pay attention to. I think it's pretty evenly split down the middle, to be honest with you. Particularly on the buy side. This is <UNK>. The $3.2 million is predominantly in the SG&A line. That's a great question. This is <UNK> <UNK>. I would say, if I had to guess, I would probably say half and half. I think half of it is probably pure market health and the other half of it when we look at our win loss, I think it's definitely coming from market share gains from others. This is <UNK> <UNK> again. I think it's pretty consistent over the last few years. It is something we focus on trying to understand, whether our ASV is coming from what we think of as alpha or beta, meaning clients are adding more users and we're not really gaining share. But I think it's been pretty consistent through time, as half and half would be the way I think about it. The fixed income product continues to do exceptionally well in a few different dimensions. We have through our portfolio analytics products selling fixed income in PA is doing well. We have a fixed income analytical services product that has a high growth rate and we're also doing well and selling credit workstations. I think it's pretty consistent with prior quarters. We're not seeing any meaningful change there. I don't think we're seeing the impact of that yet. I think that will be coming in future quarters. Yes. Correct. Over 95% of our invoices are in US dollars. Sounds like an interview question. We've always looked at our opportunity at FactSet through multiple lenses. We'll look at the opportunity geographically, we'll look at it by the types of firms that we're selling to, the different sites of users or workflows within those firms, lots of different ways of looking at it. One area that I think you'll see increased focus from at FactSet is specifically around that end-user work flow. So I'm going to be obsessed with making sure that we're providing different types of users the content and analytics that each of them wants and delivering it the way that they want. We've done that in past. We're just going to raise the priority or sort on that particular lens that we look through. I think going forward our capital allocation will still be very similar to what it has been in past. We look at share repurchase, dividend and M&A and we try to find the best areas and the best [R] funds to get the highest return on capital at the end of the day. Thanks. Hi Patrick, it's <UNK> <UNK>. Our policy, as <UNK> said, has always been to look at those three categories: dividend, share repurchase and M&A. We've looked at many deals that are much larger than we've actually accomplished, so we've always been open to it. It just has to be strategically the right thing to do. I think the actual $300 million facility was one that Bank of America offered us at no cost, so we took it, but I don't think it's really a change in policy. No. Zero. Thank you, everyone. Thanks, everyone. See you next quarter.

2015_FDS

2017

INCY

INCY #Hi, <UNK>. This is <UNK>. I will take your first two questions, and then I will turn it over to <UNK>. In terms of the AACR abstract, obviously we will have to wait until those data are presented to discuss them in more detail. But suffice it to say, that as two costimulatory receptors that can have activity at the level of a T cell, it is an interesting scientific concept to be able to use OX40 and GITR agonism in concert with checkpoint blockade such as PD-1 or PD-L1 inhibition or with IDO1 inhibition. And so there has been an area of active research that we have had over the past year, and we're excited to be able to share those data. In terms of the other question, on paired biopsies, this is an active effort of research in our translational sciences and <UNK>'s clinical group. We now have trials ongoing that we call platform trials where the PD-1 antagonist is dosed either with JAK1 or PI3 kinase delta inhibition, and similarly all oral doublets on the backbone of JAK1 inhibition to study exactly what you alluded to, which were paired biopsies where the on-treatment biopsy is really designed to tell us how we may be affecting the quality and the quantity of the immune cell infiltrate. So these are clinical studies and translational studies that are ongoing as we speak. <UNK>. So, <UNK>, I think you asked the average dose in MF and PV. So, for the entire brand, the average dose is 10 mg. The average bottles that we ship is 10 milligrams. It's about 60% of the bottles shipped. That is mostly because of PV. MF patients on average, it is more than 10 milligrams BIP. But that's ---+ for the brand, it is 10 milligrams BIP. Okay. No, I think as we've said, the sequence of available data is different for each of the partners. So, if you assume that the viability of data is raising their excitement about the potential of the combination, it is also coming with time and depending on when the data is available. So I would not characterize any their interest as being different. It's true that with Genentech Roche, we started a little bit later with a narrower program. So that's the only thing I would say related to that. But there is certainly a lot of interest, as you know, in the target and in ---+ certainly also in working with us for some of these programs. Regarding dermatology, I must say, there is no strategic great vision about moving Incyte into dermatology. As we've said multiple times, we are ---+ the products are leading us in different therapeutic areas. It is not really us trying to drive them into one place or another. It just happens that obviously with JAK inhibition, we have a number of indications in dermatology. The Lilly programs would be done independently by Lilly, and we are not involved more than the cofunding that we discussed and the ability to receive royalties or milestones. On the topical side, we have decided now it was a little bit more than a year ago to go through the programs. If there's two programs, we established the right dose and find where it works, where it doesn't work. There are a number of indications now where we are doing some level of Phase 2 studies, and obviously we will see after that where we go with that. There is no decision that has been made yet. It is <UNK> <UNK>. So you are correct that the study is most likely to be in a post hydroxyurea setting and with the endpoints I discussed. What we do know at a very high level is that it is smaller than MF and PV in terms of the opportunity. Beyond that, it's hard to say anything more at this stage to you in terms of its size. So capmatinib is licensed to ---+ <UNK> here ---+ it is licensed to Novartis. It is basically ---+ the very traditional kind of deal where there are milestones which I don't think we have disclosed precisely and the royalties. And the royalties have been disclosed, and they are 12% to 14% depending on the cumulative sales barrier. Hi, <UNK>. It's <UNK>. Just trying to understand your question. So inventory in Q1, our inventory has been relatively consistent between 2.8 and 3 weeks of inventory on hand. I don't see any change in Q1 for inventory, but, of course, we do know that the gross to net is impacted by our ability for all-oral oncology drugs because of closing the doughnut hole. But inventory is not going to affect that. Hi, it's Dave. I will try to attempt to answer the question on the milestones. We announced today that, obviously with the approval of baricitinib in Europe, we will get a $65 million milestone. That will come through in Q1, and Lilly has stated on US approval once you look to that in terms of the Q2 timeframe. So it's safe to say that there will be at least a good amount of milestones in Q2. But Q1, there is just one so far in that, as a result of that, plus with the additional programs we talked about, collaborations between Agenus, Merus and Calithera, there will be a loss in Q1 because the milestones ---+ there won't be enough milestones to offset those one-time R&D costs. And after that in Q2, there will be substantial ---+ another substantial milestone and some smaller ones that carry in Q3 and Q4. Hi, <UNK>. It is <UNK> <UNK>. I will address your first question and a little bit of your second, but <UNK> will take the backend piece. In terms of our PD-1 program and the '1210 compound, we are this quarter looking through the data we gathered through dose escalation last year and completed and trying to understand the product's profile in terms of its PK, etc. We will point you towards the meeting we submit an abstract to and when we present it for any further detail on that. But we're in the midst of doing that exercise right now. In terms of the baricitinib negotiations of the Food and Drug Administration and what is going on, I will just have to refer you to Lilly on that. But Lilly did say in their public remarks that they expect to get to a good point with the FDA sometime soon, and I will leave it at that. Regarding the economics of baricitinib, obviously for us it's very important because ---+ so there's the milestone which we expect ---+ in fact, in what we described today, we expect that to reach us this year. And then there are royalties in the 20% to 29% range that will be coming over the next 10 plus years. So it's going to 2030 for the first patent expiration. So we look at it as a product that can become very significant for us over the years. We are very happy to see Lilly moving into a number of new indications where obviously ---+ and that's why we are also opting in for these programs because it will obviously grow the top-line potential and, therefore, the royalty potential for this product over the years. In terms of calibration in each of these indications, frankly, we need to see the guidance from Lilly, and I would not comment more than what they have said about the fact that it is a very promising and very important product for patients with rheumatoid arthritis. So the way we look at it is that we look at the US and that is what you are describing, and then we look at the rest of the world and they are fairly different situations there. In fact, the markets if you think of it that way for these type of products are not very homogenous worldwide. So you have to take that into account. If you look at the profile of the product, what we think is that in the JAK1, JAK2 category, baricitinib is fairly unique. Xeljanz has a different profile, including the JAK3. We also see in the US that there is an anti-TNF situation that is totally unique in the world, and it has a huge impact on the way these patients are treated. So all of that can lead to the right position for baricitinib. There will be fairly significant changes in this market over the next years with availability of different types of products on top of the existing ones. So I really think there is a huge opportunity. The clinical profile that came out of the Phase 3 studies is really ---+ was really better than expected from a lot of standpoints, and we are ---+ I am personally very confident that there is a lot of room to make it a big success. But don't think that the US picture is the same everywhere in the world. In fact, you see very different types of who is the market leader by country, and the potential to outsell the US on top of the US potential is certainly important also for baricitinib. Okay. <UNK> here, so. I think our priorities are our own internal discovery programs. So that is something that is the core of what we do at Incyte. So we are not in a mode of changing that in a way that would be dilutive in any way. We have protected that team very much in a way where the partnerships we did ---+ were in technologies that were different. So that was Agenus and Merus antibodies where we didn't have the internal capabilities. And what we plan is to continue to rely on our internal discovery capabilities and just complement them in the technologies where we are not pregnant. Concerning Asia, frankly, when I look back at 2016, we can see a number of things that were very successful, including the approval of baricitinib just yesterday, which is the second product from Incyte being approved after ruxolitinib. So it tells you something about our discovery capabilities. But when I look back, there's one thing that has been also very successful is the expansion in Europe through the acquisition of the ARIAD team, and it was done in a very economically reasonable way for us. So we are ---+ we would love to have a similar situation in Asia. We have not found it yet. So what we're doing now is starting the planning again in a careful way where we would be establishing a team in Japan to start with to take care of the pipeline ---+ the late-stage pipeline and make sure that we are putting that on a ramp to approval in Japan. If there were an opportunity to do it through a small transaction, I wouldn't be against it, but we have not found that yet. Thank you for the time today and for your questions. And as I said, I look back at 2016 in a way ---+ with a lot of pride because we spoke about the geography. I think baricitinib moving forward is an important milestone. We are a company that has discovered two new products that have been approved by health authorities, and obviously the fact that we, for the first time, crossed the revenue line of $1 billion is also symbolically an important milestone. So we look forward to seeing some of you at the coming investor and medical conferences. And for now, I will thank you again for your participation in the call today. Thank you, bye-bye, and happy Valentine's Day.

2017_INCY

2017

NBHC

NBHC #Thank you, Lisa. Well, good morning, and thank you for joining National Bank Holdings Second Quarter Earnings Call. I have with me our Chief Financial Officer, <UNK> <UNK>; and Rick <UNK>, our Chief Risk Management Officer. We continue to be very pleased with the progress and pace of our organic growth. Our teammates delivered another quarter of strong loan growth, deposit growth, banking fee income growth and solid expense control. Credit trends are in line with our plan, and trends are, in fact, very positive across our diverse portfolio. We're also pleased with the response to our recently announced planned merger with Peoples. I look forward to our associates coming together, continuing to build quality relationships with our clients and delivering greater returns for our shareholders. To that end, this quarter marked another milestone as our Board of Directors declared a $0.09 per share dividend on May 3, 2017, which represented a 29% increase from the previous dividend of $0.07 per share. The increase demonstrates the continued confidence of our Board of Directors and management team that our company is in the financial position to provide very strong future growth opportunities. We feel very good about our accomplishments during the second quarter. And equally important, we are pleased with the outlook for the rest of the year. And on that note, Rick, I'll turn the call over to you. Thank you, Rick, and good morning, everyone. As you saw in yesterday's release, we delivered $0.33 earnings per share, with return on tangible assets of 87 basis points and a return on tangible equity of 8.2%. All of these results compared favorably on a linked-quarter and year-over-year basis. In fact, it could be argued that the second quarter was one of the best in our company's relatively short history. In my following comments, I will touch on the results of the quarter and update our guidance. Led by strong commercial loan growth of 33.7% annualized, the total originated loans outstanding grew 22.7% annualized. After factoring in the acquired loans, the total loan book grew at an annualized rate of 18.2%. For the first 6 months, total loans have grown 16% annualized on the strength of the originated book growing 20.3%. We are also very pleased that the new loan pricing has reflected the benefit of recent increases in short-term rates. For the quarter, the total fundings of $270 million had a weighted average yield of 4.1%, with about 2/3 being variable rate. Recall that at this time last year, we were discussing mid-3% for new loan rates. For the last 6 months of 2017, we continue to see good commercial loan demand driving the total originated loan outstanding to above 20% growth for the year. Offsetting the originated loan growth is the normal pay downs in the acquired loans, plus we expect to realize a few large paid-offs in our 310-30 book. As a result, we are resetting the full year total loan growth guidance to 15% to 20%. Turning to deposits. We completed the sale of 4 banking centers and realized a $2.9 million gain. Adjusting for the sale, total average deposits grew a nice 4.9% annualized. More importantly, the growth was driven by increasing noninterest-bearing demand deposits as our relationship banking model continues to build our small and midsized business client base. The cost of total deposits was 40 basis points in the second quarter, an increase of 1 basis point linked quarter and just 5 basis points on a year-over-year basis. We are reiterating our prior guidance of delivering average total deposit growth for the year, led by mid-single-digit average transaction deposit growth, while keeping time deposits flat after the reductions for banking center sales. Due to the timing of the banking center sales and the impact on the quarterly averages, we would expect the third quarter averages to be closer to the second quarter. Fully taxable equivalent net interest income totaled $83.3 million, increasing $2.3 million, on the strength of growing earning assets and an 11 basis points widening on the fully taxable equivalent net interest margin to 3.55%. We are clearly benefiting from our emphasis over the years on the variable rate pricing in the commercial loan portfolio. We also benefited from higher levels of 310-30 accretion income, which we've calculated the benefit to be approximately 5 basis points on the margin and $500,000 of additional accretion income in the second quarter. For the second half of 2017, we are not including any increase in short-term rates, and are therefore forecasting a fully taxable equipment net interest margin at the higher end of our prior guidance of 3.4% to 3.5%. We are also forecasting an accelerated reduction in the 310-30 accretion income given the paydowns that we expect. The accretion income for the third and fourth quarters are targeted at $5.5 million and $4.5 million, respectively. Adding a flat to slightly increasing earning asset base and the net interest income is forecasted to increase slightly from the second quarter's strong level. Rick provided the credit quality overview and our outlook for the rest of the year. Adding in our loan growth guidance, we expect the full year provision for loan losses to be towards the lower end of our prior guidance of $10 million to $13 million for the year. Noninterest income totaled $12 million or $9 million, excluding the $2.9 million pretax gain on the banking center sales. It compares favorably to the $8.7 million recorded in the first quarter. We reiterated our guidance of mid-single-digit growth collectively for banking fees and expect to end the year with total non-interest income in the range of $39 million to $41 million. We continued good trends in noninterest expenses as they totaled $33.4 million, improving from $34.6 million in the first quarter. The second quarter included Peoples' merger-related expenses of $298,000 as well as the nice gains in OREO. For the first 6 months and as we guided, OREO gains have offset the expenses of OREO and problem asset workouts. We reiterate our full year expense guidance of $136 million, including a net 0 impact, if not better, from net OREO and problem asset workout expenses. Additionally, we currently see less OREO gains potential in the third quarter versus some nice pickups in the fourth quarter. As additional guidance, we will incur integration expenses related to the People's acquisition over the next few quarters. We are forecasting nominal expenses in the third quarter with $3 million after tax in the fourth, and $5.6 million after tax in the first quarter of 2018. You will note that these add up to $8.8 million after tax and are less than the $13 million we shared with the merger announcement. The remaining $4.2 million will be incurred by Peoples prior to the merger closing and are included in the tangible book value targets to be delivered at closing. Regarding taxes, the tax rates came in consistent with our prior guidance when adjusting for the $548,000 tax benefit realized on previously issued performance-based equity awards. For the last 2 quarters of 2017, we're expecting an effective tax rate in the range of 20% to 22%. Of course, this is before any additional tax benefits realized in the coming quarters on previously issued performance-based equity awards. When using the fully taxable equivalent net interest income amounts, our guidance is unchanged for a fully taxable equivalent tax rate in the range of 29% to 31%. Capital ratios remain strong, with $55 million in excess capital at quarter end using the 9% leverage ratio. Tim, that concludes my comments. Thanks, <UNK>. Well, I'm very proud of the collective achievements of all of our teammates as we continue to build a leading community bank franchise. It's not lost on us if we'd benefit from doing business in attractive markets that continue to perform better than the national averages on virtually every economic metric. We believe that the combination of strong talent and great markets will continue to translate into growing returns for our investors. Finally, I want to share how pleased I am that the Winter family and their teammates at Peoples chose to partner with NBH. We could not be happier with the prospects of this combination. Again, thanks for calling in today and for your interest in our company. And Lisa, I would ask you to please open up the line for questions. Sure. A couple of pieces to that. Maybe the context of the acquisition is, for a start, that their loan-to-deposit ratio. Peoples' loan-to-deposit ratio was in the mid-70s, which is similar to ours. So we're creating some liquidity and additional headrooms, which is exciting for us. We're very comfortable taking our loan-to-deposit ratio up much higher than the 80% that we have and it would feel that our banking centers' ability to produce deposits as well as the commercial relationship model that we have can produce more deposits. So as deposits are growing, that's running with the loan-to-deposit ratio, and you've taken that above 90%. 90-plus percent is fine. On the other side of it, you take the investment portfolio, which currently runs about 20%. We're very comfortable at taking that down, 10% to 15%. We haven't really focused on a number, but what you need for liquidity and a little bit of a collateral pledging is all we need. And we see that as more of the end state is where we'll be, and the investment portfolio is running down at about $300 million a year at the current run rate. So that kind of gives you some of the feel of the balance sheet dynamics. Turning to the deposit beta. We consistently modeled the beta in the mid-30s, kind of low 30%, all weighted in. And obviously, we've all seen much less than that and enjoying that in the margin expansion and certainly feel that, that's going to be there for the short term. Our markets have been very reasonable, haven't seen any large breakouts by anybody in particular. So in energy, look at our 5 basis points increase year-over-year for our total deposit cost versus arguably, 75 basis points movement in the short-term rates. Now we are in our (inaudible) and I'm sure other banks are talking about the acceleration that could happen. So as we model going forward, it's nice to just, kind of in a static way, think about that 30s percent range for beta. But there could be a catch up. And so we're certainly making sure that we're prepared for that and making sense of it as we go forward. Chris, it's important to look at the math, but it's also important to look at the strategy and tactics. From day 1, we've talked about building a company that doesn't operate with singularly-focused lenders. We have bankers, whether they're a small-business bankers or commercial bankers, focused on treasury management, capturing the core operating accounts of our clients. Where you find yourself most immediately vulnerable in rising interest rate markets is, of course, with money markets, CDs, the various time instruments. Holding on and growing those core operating accounts is, in my mind, the strongest business hedge against that price inflation. And one thing we're particularly excited about is the growth we're seeing in our operating balances with small businesses. That's been a focus that we've talked about. We're seeing results there. We expect it to continue. All of our bankers have balanced scorecards. They cannot optimize their compensation without capturing those operating accounts, that deposit business with clients. And we believe that's a real key to growing a quality franchise. So that may be a little more info than you were looking for, but I think that ties the strategy to the math. <UNK>, I wanted to clarify the margin a little bit. Just the 3.55% reported included 5 basis point benefit from accretion. What was that in Q1. The accretion benefit. It really didn't have any specific pickup in Q1. So you saw ---+ and as you looked at our trend, Jeff, it's a little unusual for us to have 310-30 income higher in subsequent quarters. So as you look at the $6.2 million in total that we recorded in the second quarter versus the below $6 million in the first quarter, that tells you that we've got a little bit of benefit. And it's not just one ---+ it wasn't one credit, we actually picked up several broad-based in the number of the resets that we do every quarter. So it was nice to get. That's why I gave this specific guidance in the coming quarter so ---+ that drop into our target level ---+ not target level, but our best estimate right now is 5.5 in the third quarter and 4.5 in the fourth quarter. And that's an accelerated decrease. But as I mentioned, we expect some larger payouts in the 310-30 book. Okay. So if I were just to point-to-point, if your 3 ---+ 11 basis points of sequential increase, 5 basis points of that was on accretion, the other 6 was sort of a core margin increase. So then the guidance on the 3.4% to 3.5% and saying that the high end, that includes any accretion. So if you're at 3.55% effectively, sort of treading ---+ and I guess the 5.5% that you identified in Q3, you're essentially saying the core could be coming in, in Q3. No, no. The core is going to be increased, depending on how you define core for a while. But in our balance sheet, we're always working against that 310-30 coming down. And it's hard to replace 17% earners. And so there's a little bit of a trade and it's always happening, it happens through the margin. Fair enough. Okay. And then maybe a broader question, maybe for Tim. Just on the M&A side. Would you be entertaining additional deals at this point. Or are you kind of focused on the closure of Peoples and integrating that down the road. It's an interesting question, Jeff. We're actually seeing an inflow of interesting opportunities as we speak. But our focus is on a successful closure and integration of Peoples and maintaining our organic growth. We, as I think we demonstrated with Peoples, are going to be extremely smart about the kind of partners that we work with. In the case of the Winter family, they genuinely believed in the long-term play in our company, essentially investing in our company. And it allowed us to put together a transaction that we felt made great sense for everybody involved. So that may be a long way, Jeff, of saying I think those opportunities actually come along few and far between. Yes, that would be true. Not only do we, but we continue to strive to not allow our business bankers with our smaller clients to fall into the LIBOR trap. A lot of our small business clients understand prime, relate to it better. And oftentimes, I find if you're not careful, a banker will lead the client to LIBOR versus leaving them at prime where they're more comfortable. So it's actually a really intriguing question, Tim, it's something that we're focused on delivering as an important option to our clients, particularly small business clients. Yes, perfect. Thank you for asking. It's a profit center we spent a great deal of time talking about. Rick, you really ought to back up. And again, just talk about, even on a macro level, where we are with the remainder of our acquired loans portfolio, where we are on OREO and how we think about it not just in the coming quarter but through the rest of this year and then beyond and then you could get into some of Matt's other detailed questions. In fact, I would suggest fourth quarter should be very nice. And do you want to talk about kind of historical returns out of that OREO portfolio or is that something you're comfortable talking about. Yes. Because what happens is, as you know, Matt, is the acquired problem loans, you really ---+ you pick up that gain, so to speak, through the accretable yield that gets flushed through. And that's why even that accretable yield, when Jeff was asking about first quarter versus second quarter why that accretable yield can tend to be a bit lumpy, right. I do think what's interesting as we talk about not to confuse matters, but the remaining acquired problem loans of 310-30 pull. If you look at all of that kind of collectively outside of the organic book is to think about getting to a point where I would say now over the next 9 to 12 months, we'll burn through the vast majority of those OREO gains and should see nice pickups again, somewhat lumpy. But we do view that OREO booked. The way we're working it, it's nothing but a profit center. And then what will be interesting as we work down through the remaining of these acquired loans. I think what will be interesting is we will eventually get to a core, and we think we're getting very close to a core portfolio that will just be naturally amortizing and yet maintain a very high yield over the remaining life of that loan. we won't see as much acceleration. We won't see as much lumpiness. It will just be a very attractive annuity while it lasts. Anything you would add. And is that a fair characterization, <UNK>. Yes, yes, perfect. All right. Thank you, Lisa. I want to thank Chris, Jeff, Tim and Matt for their questions this morning. All right on the mark. And thank you all, again, for your interest in our company. Have a good day and a good weekend.

2017_NBHC

2018

EXTN

EXTN #Good morning, and welcome to the Exterran Corporation's Fourth Quarter 2017 Earnings Call. With me today are Exterran's President and CEO, <UNK> <UNK>; and CFO, <UNK> <UNK>. During this call, management may make statements regarding future expectations about the company's business, management's plans for future operations or similar matters. These statements are considered forward-looking statements within the meaning of U.S. security laws and speak only as of the date of this call. The company's actual results could differ materially due to several important factors, including the risk factors and other trends and uncertainties described in the company's filings with the Securities and Exchange Commission. Management may refer to non-GAAP financial measures during this call. In accordance with Regulation G, the company provides a reconciliation of these measures in its earnings press release issued yesterday and available on the company's website. With that, I'll now turn it over to <UNK> <UNK>. Thanks, <UNK>. The fourth quarter was an excellent finish to a terrific year for Exterran. EBITDA, as adjusted, was $51 million on revenue of $338 million, with each segment recording higher sequential revenue and gross margin. In our contract operations segment, we signed more than $45 million of new contract awards during the quarter. For the year, this business added backlog that was 1.4x '17's segment revenue through renewals and new project awards. The higher backlog addition versus revenue was a reverse of the trend over the past couple of years. Simultaneously, we also achieved a higher gross margin percentage in this segment over '16 as a result of cost productivity and project rescoping. I'm also pleased to announce that 2 of the 3 previously announced Middle East project awards are now fully operational. In our product sales segment, gross margins were at their highest level since the fourth quarter of '15. Improved execution through initiatives outlined in early '17 continue to drive better productivity improvements. For the year, we achieved a double-digit gross margin percentage in our product sales segment of 10%. Our fourth quarter '17 gross margin percent of 12% compares favorably with the 3% margin posted in the fourth quarter of '16. Bookings of $113 million were approximately 50% of product sales revenue in the quarter, which is consistent with the lower bookings reported across the industry at year-end. Customers pulled back following a strong order flow during the first 9 months of the year; however, we believe this is transitory as customers spent their budgets during these first 3 quarters of '17 and took a pause to absorb capacity additions. Inquiries and activity to start '18 would suggest a higher bookings total in the first quarter. Customer focus on building out the main ---+ midstream infrastructure in the Permian and Marcellus continues to drive orders in North America. In fact, it was a record year for processing and treatment plan orders. And when you combine this with the contract operation project awards internationally, which were primarily processing and treatment plants as well, the secular trend for gas plant demand is truly a global in scale. In our aftermarket services segment, I continue to be pleased with the progress we're making. Our fourth quarter AMS revenue was 5% higher than where it was in the prior year, and I'm encouraged about our strategic direction, inquiries and global activity levels. In '17, we made strides in evolving the aftermarket business model to one that drives commercial focus on leveraging each service event to seek recurring revenue streams. This model is showing some signs of paying off with some critical and important wins. We had several other noteworthy accomplishments in '17. We started the year by completing our financial restatement; we continued to improve our global safety performance; strengthened our capital structure with a high yield offering; increased cash and liquidity through our relentless focus on cash management; and invested a significant amount of new resources in several operational, commercial and internal areas. Additionally, we developed our strategic growth plan with a regional operating model, which will allow us to deliver customer solutions at a local level. We also took steps to focus on our core business and enhance returns by making changes to our product portfolio by substantially completing the exit from our remaining noncore Belleli EPC product sales business in the Middle East and moving certain production-related products to assets-held-for-sale classification as we seek to exit product families which do not fit our longer-term strategic direction. After Dave discusses our fourth quarter financial results, the impact of some of our strategic decisions on our first quarter '18 outlook, I'll provide some additional commentary on what we see for '18 from both an operational and strategic lens. I'll now turn the call over to Dave. All right. Thanks, <UNK>. As I discuss our segment results, I will, again, make comparisons to sequential quarterly performance. Starting with the contract operations segment, revenue increased 3% to $95 million, and gross margin increased to $61 million as we maintained a gross margin percent of 64%. Revenue and gross margin were higher, reflecting the ongoing dynamics of new contracts coming online with simultaneous scope changes on other contracts and contractual recoveries. In the aftermarket segment, revenue was 2% higher at $30 million. Our gross margin was $8 million, which was also a 2% increase. This resulted in a flat gross margin percentage of 26%. The increase in revenue and gross margin was due to increased services and parts activity in Latin America. Revenue in the product sales segment was $212 million or 10% higher, while gross margins improved 20% to $24 million, resulting in a gross margin percent of 12% or 100 basis points higher than Q3. Productivity and mix continued to drive rate improvement. I will add the revenue from processing and treating orders was at its highest of the year, in Q4 in terms of dollars and percentage of the segment in total. Geographically, revenue split was 92% from North America and 8% from international markets. Product sales bookings were $113 million, translating to book-to-bill ratio of 53%. <UNK> cited the front-end loaded budget spend from our customer base as the primary reason for lower orders. As he noted, we also have a line of sight to a higher range for Q1. Our product sales backlog was $461 million at the end of Q4 compared to $560 million at the end of Q3. SG&A expense was $44 million in the fourth quarter, up from $43 million in the third quarter. Now shifting gears a bit. Throughout 2017, <UNK> has discussed our strategic planning initiatives, including optimizing our product portfolio to maximize returns on core product lines. Going back as far as the first quarter of 2016, we announced our intent to exit the Belleli EPC business. In the fourth quarter of 2017, we reached mechanical completion on all remaining contracts, and as such, have presented current and reclassified prior period financial results as discontinued operations. Furthermore, as part of our plan to optimize our business structure and the product and service solutions we offer to our customers, we classified certain assets within our product sales business line as assets held for sale on our balance sheet in the fourth quarter of '17. In 2017, those assets, that are now held for sale, did not make a material contribution to our margin, nor are they expected to in 2018. We also took a noncash pretax impairment of $5.7 million related to those assets. Turning to capital expenditures, in the fourth quarter total CapEx was $53 million, with most going towards previously announced awarded projects in the Middle East. For 2017, capital expenditures were $132 million, which was below our prior guidance, primarily due to productivity gains and timing of project awards. We currently plan to spend approximately $240 million to $300 million in capital expenditures during 2018, including approximately $200 million to $250 million on contract operations' growth capital expenditures and approximately $20 million to $40 million on equipment maintenance capital. However, we do anticipate up to $75 million of the growth CapEx will be reimbursed during the year, resulting in a lower net CapEx number. This reimbursement would be treated as deferred revenue. As in the past, growth CapEx is variable and is contingent upon the timing of contract operations' project awards. Included in the 2018 plan, for example, there's approximately $60 million of carryover spending. As we noted on our last call, we are working on a project pipeline of about $2 billion. Looking at the balance sheet. Total debt at the end of the year was $368 million, with undrawn and available credit of $585 million. Our year-end leverage ratio, which is net debt to adjusted EBITDA as defined in our credit agreement, was 1.7x as compared to 2x at the end of Q3. Our net debt stood at $319 million, up from the $297 million at the end of the third quarter, but down from the $322 million at the end of Q2 and $313 million at the end of 2016. Our provision from income taxes for the fourth quarter of 2017 included a net provisional benefit of $5.6 million resulting from the Tax Cuts and Jobs Act enacted into U.S. law on December 22. I refer you to our 10-K, which will be filed soon, for a more detailed discussion regarding the impact of U.S. tax reform. Now I'll turn to the 2018 outlook. For the first quarter of '18, we expect contract operations' Q1 revenues would remain in the mid-90s, with gross margins flat to Q4. Project starts in the Middle East are expected to be partially offset by project stops in Latin America. We should continue to see the benefit of the new project starts in our revenue and margins as the year progresses. For our aftermarket services business, revenue should be in the mid-20s and gross margin percentage flat to Q4. The anticipated decline in sequential revenue is primarily related to seasonal factors in Latin America. In our product sales segment, revenue should be in the range of $210 million to $220 million and our margins should be sequentially higher versus Q4. SG&A should be in the range of $46 million to $48 million. Depreciation in the first quarter will be in the low $30 million range, and interest expense should be approximately $9 million. We anticipate cash taxes for the year 2019 (sic) [2018] to be in the range of $27 million to $30 million, which is significant savings from 2017. And before I turn it back to <UNK>, I'll just mention the new revenue recognition standards go into effect in 2018. Our Q1 2018 guidance reflects our preliminary estimate of the potential impact of the implementation of this new guidance. At this time, we do not believe the standards will materially impact our results. And now I'll turn it back to <UNK>. Thanks, Dave. I want to follow Dave's remarks by sharing our thoughts on the market for '18 and then giving you a broader view of Exterran beyond this year. From a market outlook standpoint, we expect to see strong markets for our products and services, with regional drivers influencing different products and services. Drivers of incremental growth in the North American natural gas market will continue to be liquid natural gas exports, petrochem growth and exports to Mexico. Takeaway capacity is increasing in the Northeast and West Texas, making more product available to multiple regions. Service will become an increasingly important part of the midstream infrastructure market as cost efficiency and emissions will demand technical innovation. And Latin America remains our largest international region, increase in natural gas production is expected from the Vaca Muerta Shale play in Argentina, which should allow us to grow our presence and expand our customer base. Reforms and growth in Brazil and Mexico could drive additional partnerships and renew demand for gas processing and treating plants. And in Bolivia, we see opportunities driven by the country's infrastructure growth and desire to provide power using local resources. In the Middle East and Africa region, we see a strong pipeline of opportunities to offer customers our full complement of midstream solutions, both on a service and equipment sales basis. The inquiry-to-order cycle time can be lengthy and lumpy, but we have a line of sight into significant opportunities to help customers monetize their hydrocarbons quicker than they could with larger plants that take years to build and install. The Asia-Pacific region is in need of midstream technical expertise, which should drive penetration of our aftermarket service business. We see opportunities to develop and leverage strategic relationships in several areas in the region. Local capability is often required, and we believe our refocused manufacturing facility in the region provides us with a competitive advantage. For Exterran, 2018 is a year of positioning, winning and evolving for a new era. In our Exterran contract operations segment, or ECO, as we now call it, we must continue to execute on several fronts. First, delivering the critical projects we have previously announced on with budget, that's on time with flawless data. Second, continuing to position the business to win, drive CapEx efficiency, lower cost and speed-to-market. Being best-in-class will position us to win several large awards this year. And third, scaling our complete capabilities in the Middle East. We have made an excellent start in '17, and are excited about the future. In January of this year, we completed a milestone of recording over 100,000 manufacturing hours at our newly repurposed Exterran facility in Hamriyah. As I said earlier, we anticipate larger awards, which should drive growth for new and existing customers around the world. We continue to be excited about the project pipeline as global markets remain supportive of our growth investment opportunities and strategic direction. We also look forward to laying the foundation to offer service solutions in the U.S, which is a major market opportunity for us to help customers maximize productivity and efficiency. With over 450 plants sold, of which more than 100 are cryos, the U.S. market has the largest installed base of Exterran gas plants and other midstream infrastructure. In product sales, operational execution will be key to maximizing productivity of existing backlog. We'll continue to drive differentiation through lead times, design and delivery to win new orders. Our AMS business continues to make strides in new markets with its service model, and we anticipate winning new projects to reflect our approach and develop a foundational backlog of recurring revenue as we build out scale. As we move into the new era for Exterran, our focus pivots to growth and better returns. We're evolving into a systems and process company, focused on oil, gas, water and power. We intend to win through differentiated products with services pull-through. We plan to infuse technology and innovation into our existing midstream product families while developing new offerings in water and integrated power generation. Our go-to market strategy will be executed by our regional operating model and supported by our global centers of excellence. We recognize that Exterran's new growth focus will evolve. Markets will continue to change, customer demands will change, competition will change, and so the only thing that's a constant in the markets that we operate is change. We will be ready to adapt, as we believe the future is all about differentiated products with services pull-through. Technology infusion and new offerings may involve both organic and inorganic paths to add to the capabilities of our core mission to become a systems and process company. We will enter new markets with a new focus ---+ focused by 4 regions, with global teams empowered to enable closer interaction with our customers. Those are the pillars of our strategy. And as the year progresses, we'll give you updates and progress reports on 3 key focus points: our products upgrades; our new product development; and our service model penetration. In summary, we expect revenue and profit growth as measured by EBITDA, as adjusted, to grow this year at a pace similar to The Street's existing expectations. Beyond the numbers, however, is where the real story of Exterran will be told in '18. The year of positioning, winning and evolving will be reflected in the pace of our capital investments and new project wins, execution of existing orders and implementation of the strategy I outlined earlier. Thank you, again, to all of our employees for a great 2017 and to our shareholders and lenders for their support. Together, we'll continue our value-creating focus in '18 and beyond. I would now like to open up the line for Q&<UNK> Thank you, operator. Yes. So, Joe, we're still seeing a lot of activity throughout North America. Strong demand still from the Permian Delaware. Also, in the Appalachian the Marcella Shale continues to create opportunities for us, specifically Eastern Pennsylvania and Northwest Virginia. So we're still seeing a tremendous opportunity on inbounds. I'd say, the fourth quarter pause was pretty consistent with what we expected coming into the fourth quarter, so we were not surprised. We have already seen quarter-to-date orders that have commitments that's greater than what we saw in the fourth quarter with another month or so to go. So I don't think, at this stage, we would say things are back to the full run rate of our highest quarter in 2017, but the leading indicator, which is demand and inquiries, both here in North America and overseas, are still strong. And so we're hopeful that the year will shape up to be another great year for us on product bookings. Yes, it's accurate. One small update, the $45 million was actually all new contract awards split between the Middle East, actually our first one in Asia for a little while, and also LatAm. So they will come on sometime in the fourth quarter and beyond this year. So relatively small in value, but nevertheless, encouraged by the activity. We're still seeing large opportunities through both the Middle East and LatAm. We've adjusted our CapEx number for the year. And as you rightly pointed out, it's encouraging because we only put CapEx to work when we see opportunities to book new contracts. And so we still see a very balanced opportunity. We're hopeful here in the next few months that we'll have some awards. We've already released engineering and prefeed and feed studies on a lot of these awards, and so we're already actively working internally and very excited about the facilities that we've developed both in the Middle East and also elsewhere to help with that workload. And so it is a timing topic. We still have the same visibility, we're encouraged by the activity. And since our last earnings call, we've seen even additional inquiries coming through the funnel, which is in the very, very early stage. So we, obviously, handicapped the balance of the total portfolio. We see a very solid $2 billion of revenue in our line of sight over the next 12, 18 months. But our internal inquiries have picked up significantly, and so we're very encouraged by that. Yes, I think there are a couple of things that we've already seen with some of the wins that we announced last year. First is our ability to put the integrated project together. And so we have the ability to operate both on the processing side, the treating side and the compression side. And the work that we've done over the past 12 months to really focus on a modular system to be able to take product to the market and build it faster than what the traditional means would be, has been impressive. And so that's certainly one area. The other thing I would say on the water side is that we have been ---+ we've been in the water space for some time, albeit very small, and we've been pretty excited about the opportunities that we've been developing. We were in the process of finishing a large water project in the Middle East that has really the capabilities to expand and be able to put that into the same segment as we offer from a services to have our first Exterran contract operations in a water segment. In North America, we've picked up the pace in the last 6 months also and have some technology that we've been focused on. And we now have our first 6 or 7 units rented in North America, which is a new segment for us, too. So we've been focused on productivity and efficiency, making sure that we can help our customers to drive more out of the nameplates. I mentioned already, <UNK>, that we have a significant installed base in the U.S. And when you think about the capacity on a lot of those nameplates, we have been working hard at debottlenecking and spent a lot of time trying to repurpose those assets so our customers can get more out of the units without really having to spend a lot of CapEx. And so those are things that we've been spending our time on. We have some additional technology areas that we are working on right now from both an adjacency that we'll share with you when we get further down that road. Yes. So I think there's a couple of things I'd like to mention on this topic that I think is relevant for those listening today. First of all, in the last 12 months, we have dramatically changed the way that we think about launching product into our manufacturing facilities. We've introduced slot planning to really maximize our efficiency internally. Very hard to run a business in the time frame that we've had over the last few years when you have dramatic order drops and dramatic order increases in an environment that you have a variable workforce. So we have, kind of, moved from the order meets the slot as opposed to the slot meets the order. So we launch slot in advance. We allocate the slots to customers in the commercial ITO phase. We forward by engines. And right now, we've got forward engines bought up to a year out. So orders that will be delivered in the first quarter 2019. I'd say the major supply chain bottleneck that we've had certainly has stabilized. For sure, it's the Cat engines. And some of the lead times continue to be as long as 52 weeks, but we've ---+ we have a stabilized delivery time frame. And so we anticipate that, that will improve throughout the year. But I think it's a mixture of us and Caterpillar working together to understand those lead times and making sure that we've bought in advance, so that we don't bring that pain to our customers. And so I think that's been a critical relationship that we've been able to develop together over the last 9 to 12 months. So we celebrated a few weeks ago, our first AMS win in North America for processing and treating, and so ---+ albeit very small. I think today, it's a space that we have been talking to more of our customers over the last 12 months. And part of the challenge is the infrastructure build-out has been so rapid that, as well as the quantity of plants that we've sold, there are a lot of plants operating in different regions that, when we sold that plant, let's say, to a 200 million standard cubic feet gas output, that plant probably has more of a demand of sort of 250-plus. And so our nameplates today are operating in a certain configuration. With some adjustments to hardware and some software, we're working through some opportunities to help our customers upgrade. So for the equipment that we have installed, as I mentioned, we have a lot of plants, I think that's a terrific opportunity and we already have started that effort today. For sure, our customers will have a wide variety of capabilities from some of the large integrateds that have their own maintenance teams to others that require help from small regional players and others. And of course, the ---+ some of the OEMs that are providing equipment as part of the processing and treating facilities can have some spare parts, if you want. I think the advantage for Exterran is that we already own and operate plants all around the world, and we know what it takes to drive efficiency and reliability to the level that's world-class. And so we have maintenance schedules. We have our own internal analytics that really helps us to think about preventative maintenance and the kinds of changes and when. And so I'd say, we're trying to take an approach more from selling parts to selling an assurance of a certain outcome. And that's where we're seeing some real interest right now in the different place. So at this time, it's an upgrade focus. And then as we move forward, we'll start to work through how do we help our customers to drive more efficiency in their plants based on leveraging what we do internationally. No, it's additional opportunities. And so we've been ---+ the third opportunity that we described last year that we announced in the Middle East is significantly well on with the building, albeit in the facility ---+ the equipments at the facilities. So we're through a lot of the initial milestones on that project. But no, we have new opportunities that we are building in. And as Dave mentioned in his script, there's a net impact as some of this will be reimbursable. So we see new opportunities and that's why we've raised the CapEx for this year. I ---+ well, first of all, we did have the supply agreement, as you know, from Archrock kind of roll over in November. Archrock continues to be an important customer for Exterran, and we're continuing to enjoy orders from Exterran ---+ from Archrock. When I look at the overall inbounds for the fourth quarter, it was mostly the PNT slowdown that really impacted us, I mean, dramatically from what we saw on our run rate. So compression was still pretty solid in the fourth quarter. PNT really took a dip, and that's where we've seen the rebound in Q1. So we're competing now with others for Archrock's business. And we're enjoying orders from Archrock, and we hope to continue to be an important supplier to Archrock. On rental compression across the industry, this is a bit of a crystal ball question, but do you have a guess as to how much horsepower you expect to build this year. I do not have that in front of me. I think we have been listening, as no doubt you, that a lot of the compression companies are talking about a demand that's still continuing, and we've seen that demand in inquiries. And so I would say, right now, it's in the higher horsepower, which is consistent with what we saw all of last year. And so if that demand continues, I think we're very well positioned to enjoy that volume. But I couldn't tell you from a absolute horsepower what our capacity is that we've got planned for North America this year. Not in front of me. Okay, no problem. Has there been any uptick in demand for smaller horsepower units. I know it's predominantly larger horsepower, but anything on the smaller horsepower side to report. Yes, there has been a little bit of an uptick. We've seen kind of more of an ---+ more balanced, whilst the higher horsepowers continued at the same kind of pace of inquiries that we saw last year. There has been a smaller horsepower uptick, and we are seeing that in a number of basins, so the 1,000- to 2000-horsepower range. And we're also seeing in other regions around the world some more of the kind of wellhead gas opportunities' compression. So I think the good news on the smaller horsepower is the lead times are a lot better and are more consistent, and so I think that's easier for people to plan. The challenge that we've really given the industry, which I think is unique, is that we're asking customers to make decisions on their requirements over a year out, and that's not something that we've had to do before. So everyone is having to learn how to plan more efficiently from where they were in the past when there were ---+ may have been more readily available inventory and lead times were half what they are today. But we're working hard with everyone to make sure that we understand that. And so we're continuing to see that inbound inquiries today. Thanks, everyone, for dialing in today. We look forward to updating you throughout the year as we continue to execute on our strategy. And thanks, again. Do appreciate it.

2018_EXTN

2015

JCOM

JCOM #there will be more of EBITDA, just to clarify. That represents an even higher amount of total EBITDA for the year for media. So, if you're 30% plus in revs, it's even higher share of EBITDA. No. It should go up because as I said through the call we are consolidating newly acquired companies in the Nordic, newly acquired company in the backup and newly acquired company in FuseMail. All of those companies in the beginning tend to deliver weaker EBITDA, and they continue to improve as we continue to consolidate. I think on a more longer term arc, I think, with the exception of web hosting, which still remains an asset that we are incubating in the Australian markets, the Web24 assets, I think each of the core business elements that we are in or business services that we are in, when they reach scale, will be 50% or better EBITDA margin businesses. In fact, in some cases we're already honing in on that. In other cases the revenue stream is just not large enough today. It probably needs to be, in our judgment, for most of these services $100 million of revenue or more. You know, in general, we just made a focused theme on Cloud Connect, which is $340 million. And we have a focused theme on media which is north of $200 million. My job and focus now, including everything, is also to take those other division and help them and aid them and bring them to the scale of $100 million plus, where they can really reach EBITDAs of 50% on the cloud side. This is what is our new focus now. Yes. I think that of the nine, most were in March. One was in February. The largest one, which as you know, tailing everything around it, is SugarSync and they were end of quarter. It's the largest of them. You're welcome. Jim, nice name, Walter. All right. Go ahead. Alright. Go ahead. I don't have it. Gross as to what. Yes. Of the total ---+ of the total adds, units. Units. Right. The 240,000 units that I said. Those are the net adds. Those are the net adds. Not the gross adds. So 240 are net. And you can calculate that the churn is 2.3%. I mean, it's hard for me to do it on the fly. But you can basically reverse engineer it to the gross adds. I can tell you that our marketing and cost per acquisitions are all same or better. I also indicated that we get some new boost to our sales through lead generation, which was not something that we have seen so well in the past. Our Google search and everything is optimized and j2 is very disciplined. So if we don't get what we want, we are not trying to climb the glass wall. If it doesn't work, we look for another alternative, not to keep the money in the bank. So costs of acquisition are managed well. We are seeing more lead generation, we're seeing some affiliates coming in, in Japan and we have more reseller than we ever had before, selling on three or four, almost all of our products now have some level of reseller. Some the resellers are very high, like the Backup and the fax is low. But basically those are new channels that you pay only for success. Yes. At a high level, if you go back actually now, a couple of years ago, shortly after we acquired Ziff Davis, we had an Analyst Day in New York in July of 2013. I believe that ---+ it's not on our website anymore. But I believe that that presentation is still available through SEC. gov because I think it was filed. But I'd say the key to our Digital Media strategy is multiple streams of monetization of the traffic and marrying that traffic with data analytics to get premium pricing. In a nutshell, that's really what's going on. So we have the content that is ---+ for the most part are owned and operated across a variety of web properties in the tech games and men's lifestyle area. Traffic is showing up basically on an organic basis. So we don't have large, if any really, traffic acquisition costs. They're nil. They're nonexistent. And then we have to monetize that traffic. So, there's different theories and methods of how you do it. We have straight display monetization, we have performance-based marketing. We have high-quality leads we call it, which is our B2B program for basically medium to large enterprise and we have licensing programs. <UNK> mentioned at the end of the prepared remarks about taking some of the intellectual property and content and in non-English speaking countries releasing those websites for which we receive certain fees. Also I used or we used to mention last year in the earning calls the position of Ziff Davis and IGN as being number one or number two, most of the time number one player in the place. So if you're number one in tech and you're number one in video ---+ In games. Sorry, in games, people have to come to you. You don't have to spend so much money like the others and the margins are higher. Everybody with number one just sits there and waits for people to come to him, because nobody can just go and launch a campaign, ignoring the number one or the number two. So that's also a big contributor to our position and profitability. And j2 all the time is trying to become the lead brand in its space or one of them, which always, always drives to higher EBITDA. I hope I answered you. Yes. We don't want to disclose what exactly. But we are looking into additional verticals all the time. We have an internal scale of what we like and what we don't. You know, like sports, we think is less attractive to us than other verticals. We are looking and, with our discipline, once we find the right one, we will take it. If you look at the core of the content that we have today, and particularly this hones in on the tech and games area, it is content that aids in decision making for a purchase. So, people are coming because they want to find out about the latest games, platforms, tech gear, software services. And so that engagement is important because there is, in many instances, an intent to want to own whatever it is that they are researching and investigating. And that's why, like as <UNK> mentioned, in the sports category, although there are some that do it very well and make a lot of money, that doesn't fit as well into our overall philosophy. Yes. And Ookla, on the other side, a decision to potentially move to another provider, which is the name of the game there. You know, you want to make a purchase decision, it's a long-term commitment, subscription. Those that are trying to move subscribers to their network are willing to pay to justify the fact that Ookla is number one in the space in the world. All the best. Thanks, Jim. Thank you very much. We appreciate your time and attention today for listening to our Q1 earnings call. Tomorrow or Monday we'll be putting out a press release regarding the upcoming conferences, at which we'll be presenting over the next couple of months. And we look forward to seeing you at one of those conferences or if you have follow-up questions, just reach out and contact us. Otherwise our next regularly scheduled call will be in early August to report Q2 results. Thank you. Thank you, everybody. And bye-bye.

2015_JCOM

2015

HBAN

HBAN #Hi, <UNK>. I don't think that there's anything you should really read into that. I think we continue to see very positive growth on both consumer households and on the commercial side of the business, some really good growth on the commercial side. So, I really don't think there's anything you should read into that. Thanks <UNK>. Hearing no further questions ---+ this is <UNK>. I wanted just to ---+ The operating lease income will attrite over time along with the operating lease expense. So we're not going to do operating leases going forward. As we renew that business or bring additional leases on they will all end up in the margin going forward. You will see both the income and the expense related operating leases attrite over time. Any other questions, operator. We're pleased with our third-quarter results. Our strategies are working, our investments are positively contributing to results and our execution is focused and strong. We continue to gain market share and improve share of wallet. We produced 5% year-over-year revenue growth in a challenging environment, and we remain focused on pricing and underwriting discipline. We continue to invest in our businesses, but we've paced those investments to assure positive operative leverage. We continue to work toward our long-term corporate goals, including becoming more efficient and boosting returns. Finally, I want to close by reiterating that our Board and this management team are all long-term shareholders. Our top priorities include managing risk, reducing volatility, achieving positive operating leverage and driving solid, consistent long-term performance. We are well aligned on these priorities. So thank you for your interested in Huntington. We appreciate you joining us today. Have a great day.

2015_HBAN

2017

ACN

ACN #I would say really no notable change in the competitive landscape in outsourcing. If you're asking specifically about the application maintenance piece of our application services, that continues to be a very, very competitive pricing environment. So that is more of the same. And I would say if you look at BPO as another big piece of outsourcing, I would say no notable change. No notable change but some at Accenture, again because if there is something we hate in our Company, it's commercialization of services. So we're fighting against commercialization always to move and to rotate to higher-value services. The business you're mentioning is subject to commercialization at great pace. Our answer to fight against commercialization has been to infuse, as I mentioned before, through Bhaskar Ghosh and Debbie Polishook, leading Accenture Technology and Accenture Operations. But a lot of robotics, a lot of automation, less labor arbitrage, more technology, more intelligence. And so indeed, we want to make these activities more tech-automated-led, less labor-intensive like many of our competitors been doing. And we are following a very different trajectory. Okay, it's time to wrap up. Thanks a lot to have been so patient with us. Thanks again for joining us on the call today. As you can tell, and have heard from <UNK> and I, we are very confident in our ability to deliver another strong year in FY17, to continue gaining significant market share as we do, to even further accelerate our rotation to new and innovative services. And at the same time as we are investing significantly for the future, continuing delivering value for our clients, our people, and our shareholders. At the same time, we transform Accenture to be even more successful. We look forward to talking with you again next quarter. In the meantime, if you have any questions, please feel free to call <UNK>. All the best and talk to you very soon.

2017_ACN

2016

LEG

LEG #<UNK>, good morning. It's pretty broad-based. There's some softness in residential that continues. Feels a little bit more like home furniture than bedding at this point. The strength continues to be automotive but it's more of a step function change down from a macro perspective that we perceive to be impacting us. From a forecast standpoint, there's some softness in our European forecast that has yet to be seen as to what the Brexit impact will have. Maybe we're a little pessimistic, I don't know. So, that's a change from the previous forecast. But I certainly can't isolate it to any one business unit. A little bit in that if we look at second-quarter to first-quarter scrap, it was up in excess of $50 a ton, which is about 30%. So, as the quarter continued we continue to see scrap inflation that will manifest itself into, on the flat products side. US steel cost inflation in the third quarter the forecast is about a 30% level. And we are now passing through pricing on the long products, the rod and wire. That impact we told you about last quarter, that we had launched some of those increases. We continue to implement increases. There's not real good visibility as to how scrap is going to move in the back half of the year. It traded down slightly in July. We think August may be flat to a slightly up bias. We will see. Really, what's happened, the way to think about it, <UNK>, is that commodities deflation was a tailwind and now inflation has turned into a bit of a headwind. Remembering that we have about a 90-day lag of pass-through time. That's correct. Absolutely. Dan, I think it's more of a tough comp issue in that our adjustables in 2Q 2015 were up 70%. And the fallback actually in this quarter was very much early quarter weighted. April was tough and then we saw a recovery as the quarter progressed. We expect units to be positive in the back half of the year, in part because of the significant rollout of a new retail program. And, frankly, the fourth-quarter comps are very, very easy. I don't think it's a step function change at all. Consumer demand is real. I think it's just a byproduct of a tough comp. The forecast now ---+ by the way, the CVP business is just one single location after the series of divestitures that we've gone through. That is an Atlanta-based facility. It was actually the largest of the CVP businesses, at least in recent years. Their volume had really been good. They had a very good first quarter, as well. So we see some pickup in demand but I'm not willing to claim victory yet. That business is inherently choppy. Our current forecasts show a little bit softer demand in the back half, which is typical that we will see some choppiness in that business. But everything said, it is performing much better than it had in the past. <UNK>, this is <UNK>. Although we don't really provide color now on a period-by-period basis because it's so confusing with the different period ends amongst our customers and some of the information that's out there from an industry standpoint, but we did find it pretty choppy throughout the quarter. We had demand that was well below where we had earlier thought we would be. However, if you look at the quarter overall, in 2015 in innerspring volume we were up 17% last year, year on year. So, this year being down about 4%, if you took the two years and put them together it would be a 13% rise over 2014. If somebody had told me that two years ago I would've been tickled. <UNK>, we did have some small benefit last year in the second quarter still pertaining to the port situation. But there have been some shifts within the market. We are seeing right now raw material, primarily steel, a delta in US versus China pricing at the highest level I have seen. It's north of 40%, in some cases, on the flat steel we're using in mechanisms we produce both here in the US and in China obviously. But what that has caused is a shift of product being sourced out of China over the last three or four months. We've seen a significant shift. Along with that, we've seen some down specking by some of the manufacturers and retailers, that they will take a product that may not be quite as high of quality as they had before but it's still acceptable to them, with that big delta in steel pricing. And we consistently are seeing business volumes that are generating below last year's numbers and it's been that way pretty much for the full year. No, <UNK>, it's very much in line with what our prior guidance would've suggested, if we would've then been guiding for volume growth to have been mid single digits instead of mid to high single digits. <UNK>, we booked a little over $7 million of LIFO expense in the second quarter, which was basically a first-half catch-up given where quantities have moved during the course of the second quarter. Our current best view of the LIFO scenario would put us at a little over $14 million for the full year. But as you well know, that has a tendency to move around and we'll continue to revisit that estimate each quarter. <UNK>, this is <UNK>. It's basically reflecting inflation that has occurred from the beginning of the year to where we find ourselves now. It gets a little confusing when you think about last year and all the deflation that was happening. LIFO is a calendar quarter phenomenon. And, so, sure enough, just like <UNK> said, it was $7 million recorded in the second quarter. Full-year expectation as we sit here today is $14 million. So that means that in the next two quarters that that turns out to be exactly right. You'd see another $3.5 million of LIFO expense in 3Q and then in 4Q, as well. Correct. Herb, this is Dave. We're not forecasting any change in our mix. In the frozen plans, we're roughly 60% bond, 40% stock, and we feel pretty good about that. If you could tell me when interest rates were going to move, we would be able to forecast better what we should do with pension. But we feel pretty good with the mix we've got and we're pretty well-balanced obligations versus asset mix. I will have to get that, Herb. I don't recall off-hand. No. You can see a line item in our cash flow statement that actually isn't in investing activities. Because it was a JV before, it lands down in the financing section. I want to say $35 million or something, in that ballpark, for what we spent. We were already consolidating all of it, sales and EBIT, under the accounting rules for treating the positions in businesses where we had the majority ownership already. So, all that's really changing from our financials relative to the earnings profile is that the next to last line on our income statement that used to back out the noncontrolling interest is no longer going to exist. That's really the extent of the disclosures that we'll make around this. Pretty small, but it has been a really important part of that profile for the business unit and one we're happy to have full ownership of. Dan, this is <UNK>. Thanks for the question. A combination of things, really. First of all, the market is quite receptive, as you well know. And we decided it was a good time to go ahead and extend our facility, the additional two years out to May of 2021. We have done so much divesture work, as everyone is well aware of, over the last several years. And, so, we do believe that we're basically largely done with that effort, so there's an opportunity to continue. And this has always been the case, to be mindful of any attractive growth opportunities that are coming through the M&A pipeline. Certainly <UNK> can comment how he views the pipeline looking right now. We just wanted to take advantage of the market as it currently resides to make sure we have plenty of flexibility. And that really is the number one driver behind that. And, sure enough, we do anticipate that we will have perhaps a bit more opportunity to look at some growth prospects. Not that we haven't been looking at them all along, but since so much of the divesture work has now been done, it's a natural opportunity, it appears, for the next 12 to 24 months. And of course that credit goes out five years. So it's a nice position to be in. <UNK>, you are right, it has not been done in the past. It actually was up greater than double digits into 2Q 2015, so that's what the comp was out there. The newly acquired or more recently acquired businesses are performing very well. Those are the more value-added businesses. I will say the French operation continues to exceed all expectations. Our people in France are doing a great job. The softness that we experienced was just some demand choppiness. And it's back at the original Western Pneumatic investment that we made in the first quarter of 2012. You remember, that's just a straight tube business. It's just aerospace demand is inherently choppy. Yes. There were a lot of sales and not much EBIT. The return profile wasn't acceptable. We were pleased with that divestiture that we received a long-term supply agreement with the acquirer of that business. So it was originally purchased many years ago to be a wire play. So from a future standpoint, will still have those wire tons to run through our operation, we just won't have the low-margin sales associated with the value-added product. This is steeped in basically the current guidance, I would say, midpoint, but we've got an approximate revenue guidance down 3.9%. At this point we would assume full-year residential sales volume that would be down probably low single digit. We will have some volume growth, we think, in the segment but we also have some first-half deflation. Not sure that that deflation is going to be completely overcome with price increases in the back half of the year. Commercial would be looking at up high single digits, a combination of acquisition and some volume growth. Industrial is still looking to be down quite notably, and, in fact, mid 20%s is where it would be. But keep in mind that they are taking the largest hit from divestitures. So, simple math would say 15%, 16% off just because of the divestitures and maybe 8% to 10% down organic, which is also a major reflection of steel deflation. And then specialized up high single digits with continued good growth across most of that segment. The margin profiles, interestingly enough, and it's similar to what we said before, those don't really look very different from what we said last time. In fact, residential is still 10% to 11% range, up slightly from where they were last year. Commercial up 50 to 100 basis points from last year, which would put them in the 7% to 8% range. Industrial 10% to 11% or so, which is up a lot from last year. We mentioned structurally a lot of improvement because of the divestitures. And then specialized up 100 basis points from where they were last year, which puts them in the high teens, as well. So, when you blend all that together you're still closing in on about somewhere close to a 13% blended margin for overall. We'll just say thank you for your participation. We do appreciate your time and we will talk to you next quarter.

2016_LEG

2016

POST

POST #You are. For the cereal business, we previously commented that on a 2015 to 2016 basis, that our basket of commodities was a modest unfavorable. As the year has progressed that modest unfavorable has turned into a slight favorable. So it would be fair to say that the commodity impact in the second half of the year should be slightly favorable to the first half of the year. The other pocket of commodity that falls to the bottom line significantly is in our Active Nutrition business, where on the Premier side, we are benefiting from lower milk protein. That, we expect to continue through the remainder of 2016. On the Dymatize side, we are not benefiting because we are working through a contract that was at higher prices that had long volumes on it. In terms of 2017, although it's early, we ---+ our current view, which is always subject to change as you know, but our current view is that the grain outlook is benign, so we would expect that the low commodity environment we are currently in will continue. Same would be true for energy and to a lesser extent but into the beginning of 2017, we also see the low milk protein continuing as well. Yes. So tree nuts, the biggest fall through benefit for us is on the cereal side, because of the significant almond buy that we do. So that gives a favorable component in the outlook into 2017. It's about 50/50 in terms of the benefit on the nut butter business because there's quite a bit of pass-through of pricing in that business. We talk to the agencies on a regular basis. I would describe their view as, they are pleased with the improvement in the credit profile, but are hesitant to make any ratings changes because they understand that part of our strategy is ongoing M&A and to flex our leverage as we do M&A. So they're hesitant to make an upgrade only to be followed by a downgrade as we go through that M&A cycle. But they certainly are viewing the current trends favorably. The heavily promoted period should cycle through this quarter. This quarter being the ---+ our third fiscal quarter. Yes. It absorbs some fixed costs. I think you should think about it more in a holistic sense that, as we have increased state-of-the-art biosecurity and we have that as a competitive advantage given the size of the business and the reliability of the supply, that suggests that there will be potential opportunities to earn from that increased value proposition. Not specifically that it's like a cost-plus pricing. Well, certainly, the only way that we will ever know that with certainty is if there is a significant outbreak and then to test how we are impacted by it. I think if we all have our druthers, we will never have good insights into that answer. The diversification of flock is something that we have somewhat tiptoed into because diversification also has a costing implication that is negative. So we are regularly reviewing that very question, not only in the context of biosecurity but in the context of this ongoing migration to cage free. So it's a little bit of both in that, it's business that we have but to say we have won anything is not realistic because we haven't had supply ---+ the whole industry hasn't had supply. So, it's the residual business shrunken from pre-AI levels and the anticipated re-emergence in a somewhat different mix construct. Thank you. Thank you, everyone, again. We look forward to talking to you in August. Have a nice weekend.

2016_POST

2015

CMC

CMC #Thank you, <UNK>. There are lots of different incentives offered to us by the state. That's one of the reasons why we located in Oklahoma. Rather than getting into all of the details, I'll let them keep reporting on it. They can work through the paperwork. To me that's not useful good use of time for us. On the billets. To my knowledge, we haven't seen much in the way of billet imports here in North America but certainly it's had a huge impact on southeast Asia. Really throughout the region, most electric arc furnace producers are relying on billets from China because they're priced so attractively. Electric arc furnace production in southeast Asia has been severely impacted by the availability of cheap imported Chinese billets. If you look to your numbers, you might want to look that way, Chuck, and nearby regions have been particularly impacted by billet exports from China. At this point, Chuck, we haven't seen any offers. I'm not aware of any of that. It really has been more isolated. It's hard to me to rationalize how that makes sense against our overall cost structure. We have a lot of mouths to feed. I think we're very competitive with the metallic price that we have. I think we're very competitive in our conversion costs on each of our melt shops and I would suspect that it would quickly be found that there's dumping associated with that kind of activity. And you know as well as us the overall cost structure in China is highly subsidized. So to try to make a living off of a subsidized source, while it might have short-term benefit and impact, long term really isn't a viable strategy. Okay. Thanks, Chuck. Well, thank you, I appreciate that. Thank you all for joining us on today's conference call. We appreciate it very much and we look forward to speaking with many of you during our investor visits in the coming days and weeks. Thanks, all, and have a good day.

2015_CMC

2017

AIV

AIV #Thank you for the question, <UNK>. Our expectations for dispositions next year, is actually very much back-end loaded. And, so in our earnings release we provided a walk of our 2016 FFO to 2017 FFO. And in that walk, we showed $0.09 loss in FFO from the impact of property sales. And $0.08 of that $0.09, is due to dilution from our sales in 2016, and $0.01 is due to expected dilution for our 2017 sales. And so, the quarter-over-quarter mid-point projected decline from fourth-quarter FFO to the first-quarter mid-point, is really being driven by ---+ it's seasonality factors, if you think about it. It is the impact of coming off a fourth quarter, where typically we have lower turn-costs, because we have fairly low lease expirations ---+ lease expirations are lower in the first quarter, as well, but still higher than the fourth quarter, generally. But more impactful, is the impact of utility costs, both in the general sense in that our utility costs are lower in the fourth quarter than in the first. But specifically, in 2017, it's a bigger impact because we expect in 2017 a return to normalized weather and there for normalized utility costs in Q1. Recurring but non-revenue producing. We expect to spend about $1100 per unit, on our capital replacement spending which falls into that category. Yes, just so everybody is on the same page, when we set our 2017 same-store expectations it's based upon our portfolio at the end of the year. And so, as we look out into 2017 we are adding to the same-store population, Lincoln Place, Ocean House, Preserve at Marin, the three stabilized redevelopments that <UNK> mentioned, as well as Mezzo, which was an acquisition we made in 2015 in Atlanta. We also expect to remove, say, three, to four, to five properties, due to the redevelopment, and one potential conventional property due to sale. And so, if you look at those eight properties in aggregate, we expect about a 20 basis point impact to our same-store growth rate. <UNK>, this is <UNK>. I'll start by talking about the dollars involved on the dispositions, and maybe I'll turn it over to <UNK> to comment on, potentially, the environment. In the third-quarter call, we talked about the fact that we're increasing our 2016 disposition guidance, to get a little bit of a head start on our needs for 2017. And, <UNK> and the team were very successful in accomplishing that. So if you were to normalize our expected dispositions by pulling the year-end ---+ a portion of the year-end 2016 sales, put those back into 2017, as we originally expected a year ago, there would be no change from our expectations for sales in 2017 versus 2018. Thanks, <UNK>, for the question. For the refinancing activity we completed in the fourth quarter, those were deals that we rate locked in the October time frame, and so, if I'm thinking back to rates at that time, we were probably at the 180 to 220 type of ---+ 200 type of point. As we think about our expectations for 2017, the indications we have seen, as we've been talking with our partners in the secured debt world, is that spreads have remained about the same. There's always a little bit of a range depending on the location and quality of the asset, and the need for our partner to allocate capital to that particular market. And so, I think, broadly, we would say that our spreads for 2017 are expected to be between the about the 130 and 150 range. <UNK>. It's <UNK>. I'll walk through that. There's definitely the opportunities to go both ways on that. And, so, what we will do is, we will manage it market-by-market. And so, if we are in a market that we're seeing acceleration in new lease rates and getting stronger, we may be more comfortable that the occupancy could dip a little bit in trade for higher new rents. In markets that we're seeing deceleration, or we're seeing more pressures, we may make a decision that says, listen, let's moderate a little bit on the renewal side, let's retain customers, and that may ultimately, in turn, turn into a higher ADO. So, we won't manage it globally as a macro decision but we'll manage it building-by-building and market-by-market. <UNK> this is <UNK>. And our exit point at the end of 2017 will be in our 2017 guidance. That reflects our judgment, our opinion. 2018 is based on third-party providers, who, at least right now, have been seen as perhaps too optimistic. I've read your material with interest, and I recognize your concern about caution about what lies ahead and I don't think it's clear that you're wrong. You may well be right. But what I would ask you to consider is that we aren't passive takers of what the market provides. We're not ants on a log drifting downstream. We are an active hands-on Management team, and we believe that we can absorb what variance there may be in the market, and continue to produce the kind of returns we've discussed. I think that, what's implicit ---+ or what's explicit in a net asset value calculation, is the price at which properties would trade in the broad real estate market. And those prices can certainly change. Some of the factors that will increase factors going forward, might be rising incomes. Some of the factors that might depress valuations going forward might be changes in the risk free rate. Those are obviously factors that can go in both directions. And so we aren't trying to say that net asset value is a guaranteed number which will never change. That's not at all the case. We're trying to connect it to the value of the private real estate markets. Is that responsive. Hey, <UNK>, this is <UNK>. Just to add a little bit more color on the impact of Lincoln Place coming into the same-store pool. As we look at our prospects for Lincoln Place, in particular, relative to the LA market as a whole, and translating that impact to the entire portfolio, we're not getting neither a lift nor a detriment from the addition of Lincoln Place to the same-store pool. No. I think all four of those deals ---+ the four properties that closed were really two transactions. Three were adjoining properties in Atlanta, that we operated as a single property and went to a single buyer. Those transactions were cut, kind of mid-year, and we did not see retrade activity of any significant sort on either one of them. The fourth asset there was one in suburban Philadelphia. In terms of the market overall, I would say ---+ you were at NMAC last week. I think there's caution there. I think the bid pools ---+ and in our discussions with brokers out there last week, bid pools are a little thinner. I think they are particularly thinner at the A price point. There is still a lot of interest and a lot of capital out there chasing deals, but a lot of that capital is focused on value add and the B, C price point today. Well I'd qualify, one, the assumption you want to buy more A property. Let's start there. So, an essential element in the paired trade, is certainly higher rent. And as we have been very successful over the last several years in selling out of the bottom of our portfolio, our bottom 10% rents have moved up. And so, it's tough to find a property in our portfolio today that's got rents under $1100 a month. So the trade-up math there, in our free cash flow analysis ---+ and that's the primary metric in that fair trade analysis, is the free cash flow generated on both sides of the trade, the sell and the buy. That math gets tighter ---+ or that math gets harder, the tighter that spread is. So I would close the loop, maybe, by saying that we are not particularly interested buying top-of-the-market in terms of top price point, today. We are very cautious, as we look at trade opportunities, and I think that's manifest in the fact that other than closing Indigo, that we tied up a year and a half ago, we haven't done a new acquisition deal in 18 months, or more. And so, we're cautious, and I think that that is somewhat reflected in the general market as a whole. I think as we look at it today, we're pretty comfortable in that 50/50 mix. If anything, we see a little more opportunity right now, on the B side for revenue growth, in the coming year as we've laid out in our guidance. There may be a little drift down from the A price point, but our focus is really going to be on B, C product as we look at potential acquisitions. And you'll see some drift that comes from redevelopments as they earn-in, and other things that push our average rate up. You're going to see that continue to move. I'll start and maybe <UNK>, or somebody else, would like to jump in. Those big four lease-ups, the easy ones let's go to Indigo, which is in downtown Redwood City, with a limited amount of new supply around it. There is some, that South San Mateo market is getting new supply, but it's not downtown San Francisco. And so, we are not seeing the concession activity, and in fact, yesterday, we were on one of our lease-up and revenue calls relating to Indigo. It's primary competitor property is putting out renewal notices at $500 to $800 increases to their residents. And so we feel pretty comfortable about our rate and our lease-up pace there. At One Canal we continue to see good pace there. It's winter, and so pace has certainly slowed from the summer last year, but we're over 90% leased. And we're right on track with our underwriting and feel very good about One Canal. Yes, there is some new supply. There's a new Avalon Tower just a few blocks away that's in lease-up. But we have not seen major pushes there in terms of additional concessions or anything else at One Canal. If anything they are tighter today than they were before. And the Philadelphia properties, we're going to watch Park Towne, and be cautious about it, and go from there as we look at that fourth tower. But we've got a third tower coming on, and the first two have gone great. Well, thank you all for your interest in Aimco. If we've left you with a question or two, feel comfortable contacting me or <UNK> <UNK>, our Chief Financial Officer; or Lynn Stanfield, Head of Investor Relations in FP&A; or her trusted right hand, Elizabeth Coalson. We would be glad to answer them as best we can. And for those of you that will be headed to Florida in about six weeks, we look forward to seeing you there. Thank you so much.

2017_AIV

2017

MOS

MOS #Thank you, Joc, and good morning to you all As Joc noted, our business performed well in the third quarter I'll start with the Phosphate segment Global demand remains strong as farmers seek to replace nutrients removed from the soil by large crops in most of the key growing regions of the world Margins have been stable with the expectation of additional supply, healthy mead high demand As we previously announced, Hurricane Irma impacted our phosphate operations in Florida The combined effect of lost production time and damaged product resulted in approximately 220,000 tonnes of lost sales during the quarter The storm tempered what was otherwise a very strong operating quarter for that business unit In fact, for the first two months of the quarter, as you can see on the slide, the business operated at a gross margin rate of approximately 12% The cost impact from the hurricane during the month of September was approximately $35 million with $26 million being realized in the third quarter bringing down our gross margin rate for the quarter to 9% I would note that our phosphates team did a heck of a job in preparing for and dealing with the challenges that presented themselves during this period, which resulted in about a week's worth of downtime in our plants I want to highlight the performance of our premium MicroEssentials product Our MicroEssentials sales volumes are expected to reach another record this year, approximately 3 million tonnes and the margin compression we saw earlier in the year as expected, proved to be transitory So with respect to phosphates, we are seeing improvements and we expect the actions, Joc described to drive further margin improvements in the future, keeping in mind some of the near-term expenses that need to be incurred to effect these changes Turning to the fourth quarter, we expect phosphate shipping volumes to be in the range of 2.3 million tonnes to 2.6 million tonnes and we expect prices to be in the range of $320 to $350 per tonne Our gross margin rate for the business is expected to be in the upper single-digits, including the estimated $9 million negative impact from Hurricane Irma, which will flow through inventory costs in the fourth quarter During our last quarterly call, we reminded you that our ammonia supply contract with CF Industries takes effect this year At the current market price of natural gas, we expect to pay approximately $330 per tonne FOB Louisiana and we plan to take about 200,000 tonnes of ammonia in the fourth quarter of 2017. These purchases will flow through our reported gross margins with about a one quarter delay, just like our other ammonia purchases While the contract is underwater now, it was intended to generate shared producer economics over time, which remains our expectation The contract provides us with reliable ammonia supply and protects us from volatility in nitrogen prices Turning to the Potash segment We continue to generate respectable margins as a result of well managed costs and improving price realization Global potash demand remains strong as evidenced by the fact that many of the world's largest suppliers, including Canpotex are essentially sold out through the remainder of 2017 according to published reports For the quarter, our sales volumes and prices came in near the top end of our guidance ranges and the business generated a gross margin rate of 21% I want to emphasize the tremendous progress we have made on costs in this business We took down higher cost production several years ago and to be sure this has had a real impact But we have also made a wide range of innovative operational improvements and that is a testament to the hard work and creative thinking across our potash team We look forward to applying a similar playbook to our phosphates business During the quarter, we also recorded a $10 million charge comprised of a $40 million royalty expense, partially offset by a $30 million Canadian resource tax benefit, highlighted in the notable items table, related to an expected Canadian royalty resolution The net cash impact is positive since we overpaid the province to avoid penalties and we will be collecting approximately $20 million in refunds in connection with the resolution of the matter MOP cash cost per tonne were $101 and included $21 per tonne of expense for the royalty resolution and $15 per tonne of cash brine management expenses For the fourth quarter, we expect potash sales volumes to be in the range of 1.9 million to 2.2 million tonnes and we expect prices to be in the range of $175 to $195 per tonne The gross margin rate is expected to decline to the upper teens as a result of a higher proportion of higher cost Colonsay product flowing through the P&L during the quarter And as a reminder, we made the decision to push out our Esterhazy turnaround to the fourth quarter earlier this year In the International Distribution segment, our volumes and margins were at or above the high end of our guidance range, with third quarter being the seasonal peak for Brazil We expect good performance in the fourth quarter in line with normal seasonal patterns Sales volumes are expected to be in the range of 1.5 million to 1.8 million tonnes and we expect a gross margin per tonne of approximately $20. Moving on to full year guidance We are further reducing SG&A and brine management expenses as a result of our ongoing focus on cost management Other changes to full year estimates can be seen on the slide In addition, after quarter end, we completed a lease finance transaction for the ammonia barge which resulted in a cash benefit of approximately $200 million I also wanted to specifically address the underperformance of Vale Fertilizantes for the first nine months of 2017 and how Mosaic is viewing this challenge Clearly, neither Mosaic nor Vale is happy with the reported results for an operation which historically has delivered significantly better performance While there has been some turbulence in the phosphate sector in 2017, we absolutely believe that this business is strategically core to Mosaic and we are optimistic about its future, especially when viewed through the medium to long-term lens We engage in a business that has been and likely will always be subject to cyclicality and we don't believe that 2017 should be viewed as an indicative year for this business I can provide some examples For instance, there are several unusual items impacting Vale Fertilizantes results, including major movement in the Brazilian reais, flooding at Miski Mayo, a plant fire at Uberaba, incentive compensation expenses tied to the iron ore performance, which obviously is faring better than fertilizer and operational costs that have been materially higher this year that should be transitory in nature We believe that this base business being acquired should generate approximately $300 million in annual EBITDA when viewed on a through cycle basis prior to synergy capture and operational savings The fact of the matter is that Mosaic is in the business of producing and selling fertilizer and Vale is in the business of running a successful iron ore business We intend to approach the integration and roll-up of Vale Fertilizantes with an appropriate sense of urgency and apply Mosaic's operational model to accelerate business performance Since we announced this transaction in December, we have been working diligently with world-class integration and consulting firms to identify and prioritize actions that can be implemented that are expected to drive significant positive financial improvements through this acquired business Finally, I would like to reiterate Joc's message regarding the strategic moves we announced today We are making these difficult decisions that have real impacts on many of our employees to make Mosaic as competitive as it can be regardless of where we are at in the cycle and part of that is improving our cash flow and reducing leverage These moves will lead us to meaningful improvements in our financial performance and cash flow, which in turn will help us achieve our long-term capital management objectives With that, I'll turn the call back over to Joc for his closing thoughts Joc? Thanks, Joc, and happy Halloween, <UNK> I think, Joc covered it I would simply add, I think it's comparing us to today versus April I would say, it's been a market leader and been proactive and responding to the current market environment And so, I think that Mosaic has had a track record of taking tough decisions when needed and we believe that the transformational actions that we're talking about today are going to have a very positive impact in the marketplace Right, and <UNK>, I think you're asking a very good question for context And so when you set these synergy targets, you're doing it with a limited amount of due diligence that as you're signing up the transaction And what's happened during the course of 2017 is we have had an ability to have hands on access to a lot of additional information particularly after we got antitrust approval which was only in August And so we've had some very in-depth work with consulting firms that have identified the operational transformation that Joc highlighted And obviously there is a lot of opportunity on the external spend amount And so you're right, normally you would close the transaction and come out with numbers, but with the underperformance of this business in 2017, we thought it was important to try to put a little bit of context on how we're viewing it for today's call <UNK>, we would expect – there's a number of different benefits that come as a result of the idling of Plant City In the short-term in the fourth quarter, we'll have a severance charge of somewhere in the vicinity of $20 million and then we would expect that we will see cash savings in 2018 of roughly $40 million to $50 million and that's comprised of capital, less capital spend and it's also comprised of working our best assets in Florida harder and reducing our conversion costs And, Jeff, I guess I would just add We will provide more detail once we get the deal closed with respect to Vale Fertilizantes on a little bit more of a deep dive into some of the expense categories and numbers and costs to achieve But as Joc noted, I think the vast proportion of the targeted $275 million savings by 2020 are going to relate to things that don't require a lot of investment I mean certainly there will be severance costs related to any people impacts that could be associated with that But when you start talking about the external spend categories, raw materials, chemicals, MRO supplies, logistics, energy those are just aggregating our purchasing power along with what is currently maintained by Vale Fertilizantes and harvesting a lot of savings that don't require any upfront capital or expenses associated with it And then similarly, when you start talking about the bottlenecking operations or increasing wrench time, better asset utilization, again this is operating philosophy and maximizing your per unit costs as much as possible And there will be some small capital expenditures that will be associated with that, but we do not believe that it's going to be significant So, more details to come in a few months Yeah, <UNK>, it's going to – it really depends what spot ammonia prices were there at and as they fluctuate in the money or out of the money calculation is going to move And so I would think of it as shared producer economics, not solely producer economics and it's really tied to the movement in natural gas prices plus what spot ammonia prices are And today, yes, it's underwater less so with some of the most recent ammonia price increases that we've seen in the last couple of weeks But over time, we expect that there will be periods where we are in the money and there will be will be periods where we're slightly out of the money So, <UNK> just some context I would give, 2017 has not been a good year at Vale Fertilizantes This is an asset being held for sale, their leadership, their principal leader and their financial executive, I think were gone in the April or May time horizon And if you take a look at it historically, it's have a lot of volatility, there's no doubt about that, there have been years in the last five or six years, a couple of years north of $500 million of EBITDA contribution, the low watermark in that period of time was probably in the $150 million or so range and only one year that we see any sort of performance below $200 million in EBITDA We do not believe that there is anything structurally wrong, at least as best that we can tell from our vantage point today And we have had a number of kind of interesting issues in 2017. FX is one, we can't control FX and by the way our numbers on the $275 million do not include any improvement from a financial perspective in terms of foreign currency, so we're not banking on that But Joc noted, I think the principal ones, they've had a number of production challenges both on the chemical side of it and also on the mining side Miski Mayo, we know that that has flooded, that's a multiple millions of dollars There is incentive compensation based at this subsidiary – based on the parent company's performance which is tied to iron ore, that's a significant chunk of money that is influencing their financial performance this year They've had a couple of fires that have had some downtime with respect to their operations and Joc talked about the transition from mining operations which are inherently inefficient And so, our base would be, we would say $300 million and normalized annual EBITDA should be what you see on a through cycle basis, some years higher, some years lower And the actions that we're taking, the Mosaic imprint on it should be on top of that base I hope that's responsive to your question

2017_MOS

2016

GTY

GTY #Thank you. I would like to thank you all for joining us for Getty Realty's quarterly earnings conference call. Yesterday afternoon, the Company released its financial results for the quarter ended September 30, 2016. Form 8-K and earnings release are available in the Investor Relations section of our website at gettyrealty.com. Certain statements made in the course of this call are not based on historical information and may constitute forward-looking statements. These statements are based on management's current expectations and beliefs and are subject to trends, events and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Examples of forward-looking statements include our 2016 guidance, and may also include statements made by management in their remarks and in response to questions including regarding lease restructurings, future Company operations, future financial performance and the Company's acquisition or redevelopment plans and opportunities. We caution you that such statements reflect our best judgment based on factors currently known to us and that actual events or results could differ materially. I refer you to the Company's annual report on Form 10-K for the fiscal year ended December 31, 2015, as well as our quarterly reports on Form 10-Q and our other filings with the SEC for a more detailed discussion of the risks and other factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. You should not place undue reliance on forward-looking statements which reflect our view only as of the date hereof. The Company undertakes no duty to update any forward-looking statements that may be made in the course of this call. Also, please refer to our earnings release for a discussion of our use of non-GAAP financial measures including FFO and AFFO and our reconciliation of those measures to net earnings. With that, let me turn the call over to <UNK> <UNK>, our Chief Executive Officer. Thank you, <UNK>. Now turning to our results. For the quarter, our total revenues from continuing operations and revenues from rental properties, which exclude tenant reimbursements and interest income, were $28.5 million and $24.3 million, respectively. Our rental income for the quarter was in line with the same period in 2015. On the expense front, property costs excluding tenant reimbursements improved by 14% for the quarter to $1.8 million from $2.1 million. This reduction can be attributed to declines in rent and maintenance expenses. Our environmental expense decreased by $700,000 for the quarter relative to the same period last year. The reduction was primarily due to $700,000 of decreases in environmental remediation costs. It is worth noting that there are several non-cash items flowing through this line which caused the reported amounts to vary from quarter-to-quarter. For the quarter, G&A was down by $900,000. The decrease was primarily due to decreases in legal and professional fees and employee-related expenses. As Chris mentioned earlier, our results for the quarter ended September 30, 2016, were impacted by several notable items which cause our reported amounts to differ from recurring operations. Results for the quarter ended September 30, 2016 included environmental insurance reimbursements, recoveries of uncollectible accounts and other non-recurring income, which resulted in a net benefit to the Company of $800,000 or $0.02 per share in the aggregate. Our reported FFO for the quarter was $16.2 million or $0.47 per share as compared to $14.2 million or $0.42 per share for the same period last year. After taking the notable items into account, our normalized FFO for the quarter was $15.5 million or $0.45 per share, which represents an increase of 7% from the prior quarter. Our reported AFFO for the quarter was $15.4 million or $0.45 per share as compared to $12.8 million or $0.38 per share for the same period last year. After taking the notable items into account, our normalized AFFO for the quarter was $14.7 million or $0.43 per share, an increase of 13% from the prior year's quarter. Turning to the balance sheet, we ended the quarter with $300 million of borrowing, $125 million on our credit agreement and $175 million of long-term fixed rate debt. Our debt to total capitalization currently stands at approximately 29% and our net debt to EBITDA ratio, as defined in our loan agreements, was four times at quarter-end. Our weighted average borrowing costs was 4.7% at quarter-end and the weighted average maturity of our debt is approximately 4.1 years, with 58% of our debt being fixed rate. We also judiciously used our ATM program during the quarter and sold 122,000 shares at an average price of $23.80 per share. Our environmental liability ended the quarter at $78.5 million, down $5.8 million so far this year. For the quarter ended September 30, 2016, the Company's net environmental remediation spending was approximately $3.3 million. It is important to note that the net number on our balance sheet is also impacted by additions to the principal amount of the liability and accretion, since GAAP requires us to book the liability on its present value basis. Finally, as a result of the notable items I previously discussed and our strong operating performance year-to-date, we are raising our 2016 AFFO per share guidance at the range of $1.55 to $1.60 per share. Note that our guidance includes the net benefits of $0.04 per share from notable items year-to-date, which we do not expect to reoccur on a regular basis. Additionally, in the fourth quarter, we anticipate incurring [sudden] one-time maintenance costs at one of our remaining transitional properties and we expect to begin to feel the impact of taking properties [off the line] for redevelopment projects. While the loss of income from certain properties will be felt in the near term, it would subsequently be highly accretive upon project completion. Furthermore, the guidance does not assume any acquisition or capital market activities, although it does reflect our expectations that we will continue to execute on our leasing and disposition activities. That concludes our prepared remarks, so let me ask the operator to open the call for questions. Thank you. Well, thank you everybody for joining us for the third quarter. We look forward to talking to everyone again in 2017 where we will report our results for the fourth quarter and year-end of 2016.

2016_GTY

2017

FCX

FCX #Good morning, everyone I'll refer you first to slide 3, where we have a picture of the cover of this year's annual report, the title is Driven by Value, which highlights our resolve to deliver value to shareholders Last year, our annual report was entitled Prove Our Mettle, and in 2016 we did successfully address our excessive debt level going into the year and we're in the homestretch of reaching a target that we set at the beginning of 2016, that was a two year target to cut our debt in half We have a clear path to doing that now, and our focus is now generating long-term shareholder value We strengthened our balance sheet and our liquidity We executed our operating plans We successfully completed the major development project at Cerro Verde, which was a significant accomplishment for our company and part of this long-term value proposition that we have before us We refocused our business to be a leader in the global copper industry We set out with the intent of reducing our debt but leaving ourselves a set of assets that would provide the basis for future profitability and profitable growth The asset valuations that we were able to achieve in our property sales in a very tough market were attractive And recent market developments reinforce our optimism about the long-term fundamentals for the copper markets and reinforce our focus on what we're doing So we are – going into this year, we're focused on Indonesia I'll be talking about that That's clearly a challenge for us, has been for some time, and I want to make sure I address all of your questions about it and let you know what we're doing about facing that challenge With respect to copper markets, page 5, beginning in second half of 2016, we saw copper prices rebound to higher levels and many in the industry and observers of the industry expected That reflected improved market fundamentals, driven by Chinese demand, improvement in North America and Europe and supply side issues returned to focus We'd had a period of time before the current period of where supply side disruptions had been less than the historical experiences and we had several situations involving important mines including our Grasberg mine, but also Escondida, the world's largest copper mine, which faced a lengthy labor strike, and these disruptions are a feature of our business and they will be issues that the industry will face going forward Underlying that is a real absence now of major new projects for the industry After the recovery from the 2008, 2009 recession, a number of projects were initiated, most of those have now been completed, and people in the industry, including ourselves, have deferred spending on new projects because of uncertainties in the global marketplace Adding all of that together, you end up seeing a near-term situations where the market is balanced at best, and over time, without new projects coming on stream, and the falling grades of existing producing mines, a significant require – for new copper Wood Mackenzie estimated that 5 million tons of new projects will be required in the near-term future – medium-term future at least These new projects require greater than $3 a pound for copper to make them economic I'll just note that the top 10 producing mines today only produce 5 million tons a year So that puts parameters around the extent of this shortfall Projects require 6, 7 to 10 year lead times The new greenfield projects are particularly scarce, and so we have a looming significant deficit in this business and the question is the timing for that deficit, which will be dependent on events in China and the global marketplace Now, where we are situated is that our company has significant strengths in facing a market that's going to require new copper We'll talk about our business in two basic segments now One is our mining operations and resources in the Americas, in North and South America, and we'll address Indonesia separately But looking at the Americas, we have a set of mines that have significant current production and long-term growth with long-term established proved and probable reserves and incremental resources of real significance We have a lot of flexibility in the way we manage our operations and also in the way that we approach future development All of these mines are operated by our company and that gives us significant synergies in the way we manage the business and develop the resources The investment opportunities that we see are competitive in looking at the marketplace We have a flexible and skilled workforce , we have no unions We have accesses to abundant sources of energy Again, energy cost in the U.S have dropped dramatically in recent years with the shale oil and gas development We can leverage our existing infrastructure These future development projects will have a relatively low risk associated with them So we get strong cash flow generators In the U.S , we have a very large $12 billion approximately NOL to shelter us from future income taxes And so on this chart on page 6, you can see the very significant reserves that we have available to us and also the significant generation of cash flow that we have from our properties with very low capital requirements because our assets today are fully developed These opportunities that we have before us are significant sulfide projects that's shown on slide 7. We are doing planning activities We won't commit capital to these projects until we have clarity on the global economy and direction, but we're preparing ourselves to take steps They're listed in alphabetical order here The first project that we will start on is the Lone Star resource that's adjacent to our existing producing Safford mine We're planning a project to mine an oxide cover over a very significant sulfide resource at Lone Star That will allow us to extend the production facilities at Safford at the same time we're in effect stripping for the – to expose the sulfide opportunity which would require significantly more capital All these are projects that I believe will be required by the industry over time They're in our inventory, and how we approach them will depend on market conditions The next major project is likely to be either Bagdad or El Abra The Bagdad has the benefits of the factors about the U.S competitives that I mentioned earlier El Abra has turned out to be a very significant resource, and we are addressing it with our partner CODELCO And Chino is a opportunity that we're developing and we're getting more information on as very old mine in New Mexico And Morenci and Sierrita are long-term projects for us So we have internal development projects for a very long time horizon in the future Now turning to our important asset in Indonesia, the Grasberg mine in Papua, it's been a difficult year for us In January, the Government of Indonesia issued new mining regulations that have caused us significant concerns The impact of these mining regulations would be to require us to give up our contract work in return for our right to export The government through the 2009 mining law and these new regulations say that you could only export if you have a license, a special license called an IUPK And the regulations said to get the IUPK, you had to give up the contract We weren't willing to do that and we advised the government immediately after that gross regulations were issued that we would not be willing to do that, and we entered into a series of discussions trying to find a way to open up a opportunity to have discussions, negotiations with the government to resolve this dispute By mid-February, we had reached an impasse, and at that point, we began actions to adjust our operations, our capital spending to reflect a business that could only shift domestically And on February 17, we issued a formal notification under the dispute resolution mechanisms of our contract of a series of actions that the government has taken to breach our Contract of Work That triggered a 120-day notice period, which extends to mid-June After June, we as well as the government would have the right to submit this dispute to an arbitration process that's specified by the contract We continued discussions with the government and by the end of March, the government through its Energy and Mineral Resources Ministry amended certain of the regulations that were issued in January to enable us to retain our COW to return to exports and to receive a temporary IUPK that would provide through October 10 an ability to have negotiations, continued export and leave our COW in place We, last week, signed a memorandum of understanding confirming all of this and exports are now, we're now loading ships to return to exports and we will immediately begin negotiations with the government and each of us, the government as well as our company, have expressed a commitment to reaching agreement on the long-term solution Those discussions will involve some very important issues They will involve our objective of getting assurance of our ability to operate beyond 2021 to 2041 as provided by our contract on terms that provide stability and assurance on legal matters and on fiscal matters The government wants to talk with us about divestment Their regulations in January provide for divestment of 51% Our contract has no divestment obligations We have communicated that any divestment would have to be at fair market value We've previously indicated that we would agree to divesting from the current 9.36% up to 30% and so we will have discussions with the government on the divestment percentage, the process, and valuation In addition, the government regulations require in-country processing of copper concentrates We developed Indonesia's, with our partners developed Indonesia's only copper smelter in the mid-1990s, the PT Smelting facility at Gresik, a large world-class copper smelter It currently processes about 40% of our copper concentrate production, the remainder is exported and we will have discussions with the government about developing new smelter facility So all of these things will be addressed as a package and we will approach this in good faith I'm convinced the government will too and the objective will be to find a mutual agreement that each others can accept We call it a win-win objective and that's what we're going into to achieve and that process starts right now What we did in the first quarter? We began a reduction in our workforce We have, going into the quarter, roughly 32,000 workers That includes employees and contractors That includes people involved in operations, logistic support and capital projects To-date, we have reduced that workforce for about 10% We've implemented efficiency programs for cost and capital spending We slowed investments in the Grasberg underground by about a third We're spending currently about $40 million a month on the Grasberg Block Cave And we're prepared to suspend that if we have to Doing that has some long-term consequences that are negative for all of the stakeholders, because it would delay – the resource remains there, but it would delay the ramp-up period And that involves cost and economic consequences for everybody It would affect the workers, because if we totally suspend that, we've got about 5,000 workers that would be out of work It affects the local Papuan communities, because in the Mimika Regency, we represent over 90% of the GNP It affects a large number of Indonesian suppliers, not only in Papua, but throughout the country The government has lost almost $500 million in taxes and royalties for the three months or so that the exports were suspended during the first quarter of 2017. And, of course, it affects Freeport and our partner, Rio Tinto With all this going on, though, because of our efforts to constrain spending and capital spending, we generated positive cash flow at PT-FI during the first quarter So, we have an ability to do that going forward, even if we're suspended from exporting, but it's in all of our interest to get this long-term solution And as I said, we're approaching it with an objective and with confidence that that will be achieved, but it will be complicated discussions that start right now Looking at the Grasberg Block Cave, this is a remarkable opportunity for us The Grasberg district has been one of the mining industry's great mining discoveries, operations, development in the history of mining But just focusing on the extension of the resource that we've been mining and are mining from the open pit to its extension at depths where we mine in this massive block-cave operations, it is a tremendous resource It's got 964 million tons of over 1% copper and with 0.78 grams per ton of gold The reserves themselves and the copper metal that we produce, for example, are about 50% larger than out of Morenci and then in addition, you have this enormous gold component To date, we've spent about $3 billion on the development of the Grasberg Block Cave and the common infrastructure to allow its production We're just over halfway through the initial development for that resource This transformation is a state-of-the-art underground development and it's a source of pride not only for our company, but for our workforce and for the country of Indonesia High-grade, low life, low cost and it's an important part of our future and we are working to find a way to make it, so that all of us benefit from it, including the government Under our contract, the government of Indonesia has a very attractive current proposition for participating in the operations Our company just celebrated the 50th year of its doing business in Indonesia Since 1992, when we signed – after signing this current contract, we've contributed $60 billion to the national GNP (sic) [GDP] (24:51) By far the largest private employer in Papua and one of the largest taxpayers in all of Indonesia We've contributed voluntarily, this is not an obligation, but 1% of our revenues to the local community through our Freeport Partnership Fund for Community Development Over the past 11 years, that's generally almost $700 million of voluntary contributions to the local community If we look at the contract, the government receives a majority of the cash benefits from the operations, more than any other government in the world receives from mining operations Over the last 10 years, the government has got 62% of the direct financial benefits of this business and that doesn't include the multiplier indirect effects on the Indonesian economy And when we look at the existing contract, future taxes and royalties and dividends through 2041, the term of our contract, are expected to exceed $40 billion So, this is a big asset not only for our company, but for the government and particularly important for the province of Papua So, turning to our outlook, we've adjusted our 2017 projections We've had to take into account the suspension of exports in Indonesia, it's had an impact In Peru at Cerro Verde, we've had to face an incredible weather situation This is one of the driest places in the world and they've had three, four, five times annual rainfall and it's caused a lot of damage, injuries, deaths, and damage to the infrastructure throughout the country and we had a strike, which did not have a material impact on first quarter production, but it affected our mining rate and will have an impact on productions for the year So, we've dropped our outlook for 2017 from 4.1 billion to 3.9 billion pounds The gold reflects the situation in Indonesia at 1.9 million ounces Molybdenum at 93 million pounds is roughly what we've guided towards previously Our expected site production and delivery cost at $155 is up slightly Our after by-product net unit cost at $1.08, it was previously $1.06. Provided we're able to operate throughout the year in a normal fashion in Indonesia at $2.50 copper, we are looking at $4 billion of operating cash flows for the year, each $0.10 would be a delta of $275 million Our capital expenditures have been reduced from $1.8 billion to $1.6 billion And this is $700 million on sustaining capital in the Americas and some in Indonesia, but $900 million on the major projects, including $700 million in Indonesia, which is down $200 million from our previous guidance You can see our outlook on slide 13 for 2016, 2017 and 2018, as well as our gold and molybdenum outlook And on slide 14, we show our EBITDA as an average of 2017 and 2018. At copper prices ranging from $2.50 to $3, EBITDA goes during that period from $5.6 billion to $7.4 billion over that price range, and operating cash flows would vary from $3.4 billion to $4.7 billion, from $2.50 to $3. Our sensitivities for copper, molybdenum and gold and currencies is shown on page 15 to help you with your modeling Capital expenditures on page 16 show that what we incurred in 2016, which included $1.2 billion of oil and gas and then looking forward, spending that would be incurred with continued Grasberg underground development and continuation of the current positive market conditions that we have The big issue in this is assessing the Grasberg blockade, and it is totally dependent on our progress we make in our discussions with Indonesia And if we are successful, as we are working to achieve, then we would continue that project, because it's important to all the stakeholders If not, we have prepared contingency plans to defer that project and that would have a significant impact on capital spending and employment, and also future revenues Page 17 shows the progress we made with our balance sheet that I've referred to in my initial comments The net debt going into 2016 was over $20 billion, going into 2017 it was down to $12 billion, and as we look forward to the end of the year, you can see it drops below $10 billion depending on prices Our objective is to achieve further debt reduction to get our balance sheet to a position that as market conditions improve in the future, we can then look at resources to invest in growth projects at that time depending on market conditions, and we look forward to the time with this set of assets to be able to return to the Freeport tradition of returning cash to shareholders through dividends and potentially stock buybacks Our near-term debt situation is very manageable You can see we reduced gross debt by $500 million during the year We have over $4 billion of cash and our maturity schedule is attractive and we have access to capital So, we're continuing to look to opportunities to improve our long-term liquidity situation by managing our debt schedules So, we are very pleased with the progress We've got a lot of work to do and we're going to prove our mettle again this year by addressing the issues that we have We went through all this that we've experienced over the last three years We've maintained an industry-leader copper position, couldn't be more prouder of our team for the way they operate and develop the business As I've said many times, we can do any copper project anywhere in the world And we've got this long-lived, geographically diverse portfolio of assets, and we're financially stronger today after what we did last year and we're going to be focused on maintaining financial strength and flexibility as we go forward So, with that, <UNK>, let's open the line for questions Question-and-Answer Session Well, there is a – in general, that's true There is a ramp-up that we have to go through And we also have to coordinate shipments with our customers who had to make other arrangements for supply when we were shut down from exports But we do have a series of ships, ones having loading completed as we speak, to – we had close to 100,000 tons of copper concentrate at our port site and storage facilities These ships are 20,000 tons, 25,000 tons And so we'll have a series of ships to reduce that inventory We're beginning to ramp up We have plans to ramp up our mine rate and to return our mill to full production Now, there is labor issues that we are facing in Indonesia at job site The leader of the union that represents PT-FI's employees, which is about 12,000 of our 30-plus thousand workforce, our employees, is undergoing a trial for corruption allegations in Timika and there have been demonstrations by workers in support of their leaders There was an incident with the police in which some rubber bullets were fired and some people were injured in the last three days That has resulted in absenteeism at our workplace And then overlying that are concerns by the union of our plans to – that we put in place to reduce employment, and they're concerned as we are about the long-term impact of that And so we are engaged with the union in an effort to get them to return to work and we're getting support from the government and from the local police During all this quarter, the social situation and security situation at job site, which was a concern when we suspend operations, has been relatively peaceful, but we do have this current unusual situation with the demonstrations and the absenteeism All of our projections are predicated on getting that resolved and getting people back to work So <UNK>, our long-term plan for several years had been to complete mining the pit in 2016, in early 2016. And now with the issues we faced over the last five years, in terms of the issues with the government and the strikes and so forth, that has been pushed out to 2018. The ramp-up of the Grasberg Block Cave is a six-year plus event So the more this thing is delayed, the longer that ramp-up occurs, and that's what I was saying, it's so important that we reach an agreement with the government so that we can move forward, complete mining the resources and the pit We haven't lost any resources throughout all of these deferrals But it's an – economically, the sooner we can begin completing the Grasberg Block Cave development, begin ramping it up, the better off we all are No CapEx are included Our plans are to finance this on a project basis There would be other partners involved in our plans, and we would get project type financing for it, which requires that we have a contract for PT-FI's operations, because that's the source of the plot for the smelter $2.5 billion, there is working capital requirements and so forth, so it would be somewhere between $2.5 billion and $3 billion, depending on that We've done a lot of preliminary engineering work with the Japanese construction firm that designed our initial smelter We've done site studies and site analysis, but we have not entered into contracts on the timing of spending new capital and that's dependent on reaching this long-term agreement with the government And the government has agreed on the MoU that we signed in 2014, has recognized that there would have to be certain financial incentives provided by the government because of the poor economics of this investment Thanks, <UNK> My direct discussions with senior government officials I mean, I have been in continual conversation with people and they've made public decision out The Indonesia is a country that has a democracy, it has freedom of press, and for those of you who read the media in Indonesia, you know that there are a lot of comments made by many different people Some informed, some less so, but in terms of my direct discussions with the government officials, we have committed with them to approach this in a good fair basis to reach a resolution And in fact, we are beginning those discussions immediately and I'll be spending a good bit of time in Jakarta in those engagements There was a visit to Jakarta last week by Vice President, Michael Pence on his tour of countries in Asia He met with the President and spoke with him about our situation and it was a positive conversation according to the reports that I've received We have had tremendous support from others in the U.S government in the State Department, the Commerce Department and in business groups that deal with Indonesia, U.S bilateral relationships So, it's in everyone's interest at the end of the day It's been a complicated situation politically in Indonesia, but that's the basis for my comments Well, having said all that, we're not underestimating the challenges, because these are issues where we have significant disagreements on Now, we have triggered the 120-day notice required by the contract and that notice period continues to run And so after mid-June, we and the government would each have the ability to commence arbitration proceedings We hope not to do that And – but we have that, as a right of ours under the contract, that process requires a significant amount of time, procedurally to put in place So that is, let me see, some of this running in parallel, it's a fallback that each of us will assess after mid-June to see where we are in the discussions, and whether or not to proceed with arbitration is my hope that we do not have to take that step, but if we have to, we'll be prepared to do it You potentially could see in 2017. I mean, it's a step, the next major step we would have would be to suspend the Grasberg Block Cave spending, which we're spending roughly $40 million a month on, and that involves a set of workers, principally contractors of about 5,000 people So, we are continuing that We had plans to suspend it Those plans were averted by this recent agreement that we reached with the government for this temporary IUPK and so all of that is – we still have those plans ready to execute if we have to Very little in that timeframe That's right And as I said, let's say, roughly six-year plus ramp-up So, we are about just over half way through the initial development We'd be mining the open pit into 2018. We can't start that ramp-up until mining in the pit is completed because it's directly underneath the pit and you have subsidence, so we have to complete the pit and then begin the ramp-up of production and that goes out for six-plus years from whenever we start So it's not much impact on production during that timeframe you referenced There is the capital that would be spent, which we'll have to adjust that capital if we have to live within lower cash flows, but not being able to export No, this is all net to PT-FI, and let me just – I think everybody understands this While we operate broadly with Indonesia under the name PT-FI, the operation is a joint venture between Freeport subsidiary PT-FI and a Rio Tinto subsidiary in Indonesia, and all the numbers that we show financially in our presentation are Freeport's subsidiary numbers, and currently that subsidiary is owned 9.36% by the government with the remainder owned by FCX So all of that just reflects PT-FI's net interest Last year in January, when we filed the valuation of PT-FI with the government that showed a $16 billion valuation at that time That was strictly PT-FI Freeport's net interest and excluded any values for the Rio Tinto or the values for Rio Tinto's interest in the joint venture That's correct Right now that was originally and this was an agreement that was signed in 1995. And it was structured around that all reserves at 12/31/94 will be retained by Freeport PT-FI and they were scheduled to be produced by 2021, and Rio Tinto was scheduled to come in for 40% beyond 2021. Well, because of the delays and strikes and export suspensions, that 2021 date now goes out to roughly 2023. So Rio Tinto's 40% kicks in In 2023, sometime during the year 2023 and, of course, that's going to be dependent on our resolving all these issues I mean, they are very attractive The rate of return, and when you say it shifts over, I mean we still own 60% of this business and I mentioned just how large the resource is So I haven't seen every economic analysis for future development in our industry, but my sense is this is perhaps – this is probably the most attractive rate of return investment in the mining industry today And, <UNK>, I understand all this has been a moving target and change and what we would plan to do as we – when we complete our long-term agreement with the government is have a face-to-face session with analysts and investors and walk through this in some detail so that we make sure that there is a clear understanding of the value of this business And we haven't done that to date, because we've been so focused on trying to resolve the issue with the government and all of these values are dependent on getting that resolved Thanks for your questions, <UNK> So, Chris, the way this works is, capital expenditures are divided on the basis of whether they're replacement capital or expansion capital The Grasberg Block Cave is deemed to be replacement capital And so Rio Tinto share of those costs are relatively small They pay the same percentage of that, that they would pay as determined by their share of revenues and how much operating costs they pay, and that has been relatively small to date The Deep MLZ project is a growth project, and they pay 40% of that And we years ago entered into an agreement that the common infrastructure that's used to develop both of those resources, and ultimately the Kucing Liar resource is shared 50:50. So they are making some capital commitments, and they've made those consistently all along The bulk of the capital is funded by Freeport under the current situation And I will say, we have an excellent working relationship with Rio Tinto, and have had from the start They're engaged in what we do We're transparent about everything, they have the input There is one contract that's shared by Freeport and Rio Tinto and they have the right to approve any changes to that contract that has an adverse impact on their company, so it's important that we are aligned and to date we are aligned We're all concerned – we are both concerned about the future and recognize the importance, particularly important for Rio Tinto because without getting this extension, they actually have no value to speak of in the business And the agreement has a kind of do-right provision and over the years each of us have approached it in that standpoint It's a complicated agreement Doesn't spend any time, and wish you've done it different way back in the mid-1990s, but we are where we are and they are very good partners And we feel a very strong responsibility to represent their interest in the right way and we'll do that It'll vary somewhat, but it's roughly $200 million a year Red Conger runs our operations in the Americas And I don't want to drag this out too long, but that's been a strength of our business I mean, we go back years – through the years as Phelps Dodge was the leader in SX/EW, but it was also active in developing mills over time, at Candelaria for example And PT-FI was a real leader in developing large-scale SAG mills and then high-pressure grinding rolls And we've taken that experience and brought it forward to the expansion project that we had in Morenci where we had a new mill design, the recent expansion at Cerro Verde with new mill technology And now we want to keep building on that and working with our suppliers and contractors, as Kathleen said, to have these opportunities with much improved economics and energy efficiency and so forth Well, I'd say yes to both questions The Minister of Energy and Mines is taking the lead and has been authorized by the President to represent the government So, he is the point person in these negotiations, and he's a guy with a good business background and we can talk with each other in a very straightforward, candid way The Minister of Finance is also involved in a significant way But there's – in a country like Indonesia, there are divergent views and so our challenge will be to find a way to reach an agreement that is acceptable to the Minister and to the President and works for us No, it's six months I mean, this temporary IUPK lasts until October and so we need to get a long-term resolution during that timeframe Yes Yes, and the MoU makes that clear The issue is, we would then fall back with their regulations, which would restrict our rights to export, but the timeframe – and this was a – we had suggested this back in January – was to give us a period of time to negotiate a long-term solution and during that period allow us to export and allow our contract – recognize that our contract stays in place, and that's what the MoU does, and this MoU will be filed publicly The MoU doesn't address arbitration, but the notice period has been initiated and that will run through the end of June And under the terms of the contract which remains in place, either party has the right to move to arbitration after mid-June And we manage our business on the basis of metal output as opposed to mill rates I mean, and the mill rates will vary, as Mark says, depending on the nature of the rock and we are in really high-grade material now, so we need to And that again is the quality of the ore we had over 92% on copper And that's very much driven by the high-grade portion of the Grasberg, which we'll be mining consistently to the end of the pit What you have to take into account is that we sell a significant portion of our molybdenum output in a chemical form as opposed to looking the quoted price is for molybdenum metal and the chemical product is a much higher valued product This is – we're able to do this as a result of investments that were made over many years And then we enter into supply contracts to refiners and others who use this chemical-grade molybdenum and its realizations are significantly higher than metallic molybdenum It's a really good point and that's what has led us to be reluctant to turn it off, because this is a highly skilled group of workers that are involved in this block-cave development And if we demobilize that group, then we would be faced with a period of time to remobilize them and get them back to work And it's not a matter of weeks, but it's a significant operational issue for us to disperse that team and there are other major block-cave operations going on around the world And then to bring them back together would be a period of time measured in months rather than weeks Well, I was just down in Chile at the Cesco Group and saw a number of my associates in the industry And we were all talking about that versus a correlation between copper prices and labor problems And so, as the copper prices increase, that's heightened the aspirations of labor for better deals, and then I always say that labor problems are contagious disease that once someone experienced one, they tend to happen in other places and we've certainly seen that with Escondida, ours, the Southern Copper situation and unions are talking everywhere about the situation Yeah There was some impact in Cerro Verde from the weather and the strike situation The principal impact of that's going to be longer term than I mentioned because we kept our mill basically running during the quarter, but our mine rate was – in the month of March, we have about half of what it has been in the first two months Now, we returned that to that level, but that's going to have some ongoing impact The rest of it, John, is just normal issues you face in running a business like ours Well, that was in the – that was the subject to one of the new regulations that was adopted in January, and that regulation is still in place And that's going to be one of the issues under discussion as we enter into these negotiations And the more significant issue we're working on to manage is the abandonment costs that we faced as a result of this business So, that's something that's getting a lot of attention, and we're continuing to unwind some commitments on cost that is a carry-over for certain facilities and office space and so forth, but we've made a lot of progress with that Evan, the worst thing I could do is, get out in front of the negotiations and discussions in answering a question like that As I mentioned, the issue of divestment is on the table And that's going to cover the range of issues, including the percentage of the investment, the process for divesting, the valuation for divesting and the carry-on issues related to operatorship and governance of PT-FI So, I think, at this point, the only thing I can say is that those are on the table Our broad objectives, as we go into the negotiations, are going to be to protect the value of this asset for our shareholders and to find a way to reduce the risk that's overhanging the situation now and provide a stability for the long term And we need to have that stability to warrant these investments I mean we've been running this business for years and the government has been cooperating with us on it by making investment for production that's to be received beyond 2021. So, we have to get that situation clarified and de-risked The one thing that we will insist on that any divestment to be made on the basis of the fair value of the assets That has not happened and with the dramatic change in the cobalt market, that's occurred since we closed our deal with China Moly That matter is under discussion, so it is – let me just leave it at that It hasn't happened, it's under discussion No, we didn't commit to sell it, we committed to give them an opportunity to negotiate with us for it But we didn't agree – it wasn't a price that was agreed to, and there was no firm commitment on either party to close the transaction Okay Thanks, everyone We look forward to reporting further progress

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